Document:

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                                                                Exhibit 10(x)(3)

                                                                  LOAN NO. 58036

                                                           SERVICING NO. 3180114

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                                 LOAN AGREEMENT

                            Dated as of April 2, 2004

                                     Between

                         ASHWORTH EDC, LLC, as grantor,
                                   as Borrower

                                       and

                             BANK OF AMERICA, N.A.,
                                    as Lender

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                                TABLE OF CONTENTS

<TABLE>
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<S>                                                                                           <C>
ARTICLE 1 DEFINITIONS; PRINCIPLES OF CONSTRUCTION........................................       1
   Section 1.1.   Definitions............................................................       1
   Section 1.2.   Principles of Construction.............................................      11

ARTICLE 2 GENERAL TERMS..................................................................      11
   Section 2.1.   The Loan...............................................................      11
   Section 2.2.   Disbursement to Borrower...............................................      11
   Section 2.3.   The Note, Mortgage and Loan Documents..................................      12
   Section 2.4.   Loan Payments..........................................................      12
   Section 2.5.   Loan Prepayments.......................................................      12

ARTICLE 3 CONDITIONS PRECEDENT...........................................................      12
   Section 3.1.   Conditions Precedent...................................................      12

ARTICLE 4 REPRESENTATIONS AND WARRANTIES.................................................      12
   Section 4.1.   Organization...........................................................      12
   Section 4.2.   Status of Borrower.....................................................      12
   Section 4.3.   Validity of Documents..................................................      13
   Section 4.4.   No Conflicts...........................................................      13
   Section 4.5.   Litigation.............................................................      13
   Section 4.6.   Agreements.............................................................      14
   Section 4.7.   Solvency...............................................................      14
   Section 4.8.   Full and Accurate Disclosure...........................................      14
   Section 4.9.   No Plan Assets.........................................................      15
   Section 4.10.  Not a Foreign Person...................................................      15
   Section 4.11.  Enforceability.........................................................      15
   Section 4.12.  Business Purposes......................................................      15
   Section 4.13.  Compliance.............................................................      15
   Section 4.14.  Financial Information..................................................      16
   Section 4.15.  Condemnation...........................................................      16
   Section 4.16.  Utilities and Public Access; Parking...................................      16
   Section 4.17.  Separate Lots..........................................................      16
   Section 4.18.  Assessments............................................................      16
   Section 4.19.  Insurance..............................................................      17
   Section 4.20.  Use of Property........................................................      17
   Section 4.21.  Certificate of Occupancy; Licenses.....................................      17
   Section 4.22.  Flood Zone.............................................................      17
   Section 4.23.  Physical Condition.....................................................      17
   Section 4.24.  Boundaries.............................................................      18
   Section 4.25.  The Ashworth Lease.....................................................      18
   Section 4.26.  Filing and Recording Taxes.............................................      18
   Section 4.27.  Intentionally Deleted..................................................      19
   Section 4.28.  Illegal Activity.......................................................      19
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<TABLE>
<S>                                                                                            <C>
   Section 4.29.  Construction Expenses..................................................      19
   Section 4.30.  Personal Property......................................................      19
   Section 4.31.  Taxes..................................................................      19
   Section 4.32.  Permitted Encumbrances.................................................      19
   Section 4.33.  Federal Reserve Regulations............................................      19
   Section 4.34.  Investment Company Act.................................................      20
   Section 4.35.  Reciprocal Easement Agreements.........................................      20
   Section 4.36.  No Change in Facts or Circumstances; Disclosure........................      20
   Section 4.37.  Intellectual Property..................................................      21
   Section 4.38.  Compliance with Anti-Terrorism Laws....................................      21
   Section 4.39.  Patriot Act............................................................      21
   Section 4.40.  Survival...............................................................      22

ARTICLE 5 BORROWER COVENANTS.............................................................      22
   Section 5.1.   Existence; Compliance with Legal Requirements..........................      22
   Section 5.2.   Maintenance and Use of Property........................................      23
   Section 5.3.   Waste..................................................................      23
   Section 5.4.   Taxes and Other Charges................................................      23
   Section 5.5.   Litigation.............................................................      24
   Section 5.6.   Access to Property.....................................................      24
   Section 5.7.   Notice of Default......................................................      24
   Section 5.8.   Cooperate in Legal Proceedings.........................................      24
   Section 5.9.   Performance by Borrower................................................      24
   Section 5.10.  Awards; Insurance Proceeds.............................................      25
   Section 5.11.  Financial Reporting....................................................      25
   Section 5.12.  Estoppel Statement.....................................................      26
   Section 5.13.  Leasing Matters........................................................      27
   Section 5.14.  Property Management....................................................      29
   Section 5.15.  Liens..................................................................      30
   Section 5.16.  Debt Cancellation......................................................      30
   Section 5.17.  Zoning.................................................................      30
   Section 5.18.  ERISA..................................................................      30
   Section 5.19.  No Joint Assessment....................................................      31
   Section 5.20.  Reciprocal Easement Agreements.........................................      31

ARTICLE 6 ENTITY COVENANTS...............................................................      31
   Section 6.1.   Single Purpose Entity/Separateness.....................................      31
   Section 6.2.   Change of Name, Identity or Structure..................................      35
   Section 6.3.   Business and Operations................................................      35

ARTICLE 7 NO SALE OR ENCUMBRANCE.........................................................      35
   Section 7.1.   Transfer Definitions...................................................      35
   Section 7.2.   No Sale/Encumbrance....................................................      36
   Section 7.3.   Permitted Transfers....................................................      36
   Section 7.4.   Lender's Rights........................................................      37
   Section 7.5.   Assumption.............................................................      37
</TABLE>

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<TABLE>
<S>                                                                                            <C>
   Section 7.6.   Release Parcel.........................................................      39

ARTICLE 8 INSURANCE; CASUALTY; CONDEMNATION; RESTORATION.................................      43
   Section 8.1.   Insurance..............................................................      43
   Section 8.2.   Casualty...............................................................      46
   Section 8.3.   Condemnation...........................................................      46
   Section 8.4.   Restoration............................................................      47

ARTICLE 9 RESERVE FUNDS..................................................................      51
   Section 9.1.   Intentionally Deleted..................................................      51
   Section 9.2.   Replacements...........................................................      51
   Section 9.3.   Tenant Improvements and Leasing Commissions............................      52
   Section 9.4.   Required Work..........................................................      52
   Section 9.5.   Release of Reserve Funds...............................................      54
   Section 9.6.   Tax and Insurance Reserve Funds........................................      57
   Section 9.7.   Reserve Funds Generally................................................      58

ARTICLE 10 CASH MANAGEMENT...............................................................      61
   Section 10.1.  Intentionally Deleted..................................................      61

ARTICLE 11 EVENTS OF DEFAULT; REMEDIES...................................................      61
   Section 11.1.  Event of Default.......................................................      61
   Section 11.2.  Remedies...............................................................      63

ARTICLE 12 ENVIRONMENTAL PROVISIONS......................................................      63
   Section 12.1.  Environmental Representations and Warranties...........................      63
   Section 12.2.  Environmental Covenants................................................      64
   Section 12.3.  Lender's Rights........................................................      65
   Section 12.4.  Operations and Maintenance Programs....................................      65
   Section 12.5.  Environmental Definitions..............................................      65

ARTICLE 13 SECONDARY MARKET..............................................................      66
   Section 13.1.  Transfer of Loan.......................................................      66
   Section 13.2.  Delegation of Servicing................................................      66
   Section 13.3.  Dissemination of Information...........................................      66
   Section 13.4.  Cooperation............................................................      67

ARTICLE 14 INDEMNIFICATIONS..............................................................      67
   Section 14.1.  General Indemnification................................................      67
   Section 14.2.  Mortgage and Intangible Tax Indemnification............................      68
   Section 14.3.  ERISA Indemnification..................................................      68
   Section 14.4.  Survival...............................................................      68

ARTICLE 15 EXCULPATION...................................................................      68
   Section 15.1.  Exculpation............................................................      68
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<TABLE>
<S>                                                                                            <C>
ARTICLE 16 NOTICES.......................................................................      71
   Section 16.1.  Notices................................................................      71

ARTICLE 17 FURTHER ASSURANCES............................................................      72
   Section 17.1.  Replacement Documents..................................................      72
   Section 17.2.  Recording of Mortgage, etc.............................................      73
   Section 17.3.  Further Acts, etc......................................................      73
   Section 17.4.  Changes in Tax, Debt, Credit and Documentary Stamp Laws................      73
   Section 17.5.  Expenses...............................................................      74

ARTICLE 18 WAIVERS.......................................................................      75
   Section 18.1.  Remedies Cumulative; Waivers...........................................      75
   Section 18.2.  Modification, Waiver in Writing........................................      75
   Section 18.3.  Delay Not a Waiver.....................................................      75
   Section 18.4.  Trial by Jury..........................................................      75
   Section 18.5.  Waiver of Notice.......................................................      76
   Section 18.6.  Remedies of Borrower...................................................      76
   Section 18.7.  Waiver of Marshalling of Assets........................................      76
   Section 18.8.  Waiver of Statute of Limitations.......................................      77
   Section 18.9.  Waiver of Counterclaim.................................................      77
   Section 18.10. Gradsky Waivers........................................................      77

ARTICLE 19 GOVERNING LAW.................................................................      78
   Section 19.1.  Choice of Law..........................................................      78
   Section 19.2.  Severability...........................................................      78
   Section 19.3.  Preferences............................................................      78

ARTICLE 20 MISCELLANEOUS.................................................................      78
   Section 20.1.  Survival...............................................................      78
   Section 20.2.  Lender's Discretion....................................................      79
   Section 20.3.  Headings...............................................................      79
   Section 20.4.  Cost of Enforcement....................................................      79
   Section 20.5.  Schedules Incorporated.................................................      79
   Section 20.6.  Offsets, Counterclaims and Defenses....................................      79
   Section 20.7.  No Joint Venture or Partnership; No Third Party Beneficiaries..........      80
   Section 20.8.  Publicity..............................................................      81
   Section 20.9.  Conflict; Construction of Documents; Reliance..........................      81
   Section 20.10. Entire Agreement.......................................................      81
</TABLE>

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<PAGE>

                                 LOAN AGREEMENT

         THIS LOAN AGREEMENT, dated as of April 2, 2004 (as amended, restated,
replaced, supplemented or otherwise modified from time to time, this
"AGREEMENT"), between BANK OF AMERICA, N.A., a national banking association,
having an address at 214 North Tryon Street, Charlotte, North Carolina 28255
(together with its successors and/or assigns, "LENDER") and ASHWORTH EDC, LLC, a
Delaware limited liability company having an address at 2765 Loker Avenue West,
Carlsbad, California 92008 (together with its successors and/or assigns,
"BORROWER").

                                    RECITALS:

         Borrower desires to obtain the Loan (defined below) from Lender.

         Lender is willing to make the Loan to Borrower, subject to and in
accordance with the terms of this Agreement and the other Loan Documents
(defined below).

         In consideration of the making of the Loan by Lender and the covenants,
agreements, representations and warranties set forth in this Agreement, the
parties hereto hereby covenant, agree, represent and warrant as follows:

                ARTICLE 1 DEFINITIONS; PRINCIPLES OF CONSTRUCTION

         SECTION 1.1. DEFINITIONS

         For all purposes of this Agreement, except as otherwise expressly
required or unless the context clearly indicates a contrary intent:

         "ADDITIONAL REPLACEMENT" shall have the meaning set forth in Section
9.5(g) hereof.

         "AFFILIATE" shall mean, as to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by or is under common
control with such Person or is a director or officer of such Person or of an
Affiliate of such Person.

         "AFFILIATED MANAGER" shall have the meaning set forth in Section 7.1
hereof.

         "ALTA" shall mean American Land Title Association, or any successor
thereto.

         "ASHWORTH LEASE" shall mean that certain lease dated April 1, 2004 by
and between Borrower and Ashworth Inc., as the same may be amended,
supplemented, restated or otherwise modified in accordance with the applicable
terms and conditions thereof and hereof and hereof.

         "ASSIGNMENT OF MANAGEMENT AGREEMENT" shall mean that certain Assignment
and Subordination of Management Agreement and Consent of Manager among Lender,
Borrower and Manager, if any, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.

<PAGE>

         "AWARD" shall mean any compensation paid by any Governmental Authority
in connection with a Condemnation in respect of all or any part of the Property.

         "BORROWER PRINCIPAL" shall mean, Ashworth Inc., a Delaware corporation.

         "BORROWER PRINCIPAL OBLIGATIONS" shall have the meaning set forth in
Section 18.10(c) hereof.

         "BUSINESS DAY" shall mean a day on which Lender is open for the conduct
of substantially all of its banking business at its office in the city in which
the Note is payable (excluding Saturdays and Sundays).

         "CASUALTY" shall have the meaning set forth in Section 8.2.

         "CLOSING DATE" shall mean the date of the funding of the Loan.

         "COLLECTION EVENT" shall have the meaning set forth in Section 9.6
hereof.

         "CONTROL" shall have the meaning set forth in Section 7.1 hereof.

         "CONDEMNATION" shall mean a temporary or permanent taking by any
Governmental Authority as the result, in lieu or in anticipation, of the
exercise of the right of condemnation or eminent domain, of all or any part of
the Property, or any interest therein or right accruing thereto, including any
right of access thereto or any change of grade affecting the Property or any
part thereof.

         "CREDITORS RIGHTS LAWS" shall mean with respect to any Person, any
existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, conservatorship, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to its debts or debtors.

         "DEBT" shall mean the outstanding principal amount set forth in, and
evidenced by, this Agreement and the Note together with all interest accrued and
unpaid thereon and all other sums due to Lender in respect of the Loan under the
Note, this Agreement, the Mortgage or any other Loan Document.

         "DEFAULT" shall mean the occurrence of any event hereunder or under any
other Loan Document which, but for the giving of notice or passage of time, or
both, would be an Event of Default.

         "DEFAULT RATE" shall have the meaning set forth in the Note.

         "ELIGIBLE ACCOUNT" shall mean a separate and identifiable account from
all other funds held by the holding institution that is either (a) an account or
accounts maintained with a federal or state chartered depository institution or
trust company which complies with the definition of Eligible Institution or (b)
a segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution or trust
company, is subject to regulations

                                      -2-
<PAGE>

substantially similar to 12 C.F.R. Section 9.10(b), having in either case a
combined capital and surplus of at least $50,000,000 and subject to supervision
or examination by federal and state authority. An Eligible Account will not be
evidenced by a certificate of deposit, passbook or other instrument.

         "ELIGIBLE INSTITUTION" shall mean a depository institution or trust
company insured by the Federal Deposit Insurance Corporation, the short term
unsecured debt obligations or commercial paper of which are rated at least
"A-1+" by S&P, "P-1" by Moody's and "F-1+" by Fitch in the case of accounts in
which funds are held for thirty (30) days or less (or, in the case of accounts
in which funds are held for more than thirty (30) days, the long term unsecured
debt obligations of which are rated at least "AA" by Fitch and S&P and "Aa2" by
Moody's). Notwithstanding the foregoing, prior to a Securitization, Bank of
America, N.A. shall be an Eligible Institution.

         "EMBARGOED PERSON" shall mean any person identified by OFAC or any
other Person with whom a U.S. person may not conduct business or transactions by
prohibition of Federal law or Executive Order of the President of the United
States of America.

         "ENVIRONMENTAL INDEMNITY" shall mean that certain Environmental
Indemnity Agreement, dated as of the date hereof, executed by Borrower and
Borrower Principal in connection with the Loan for the benefit of Lender, as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.

         "ENVIRONMENTAL LAW" shall have the meaning set forth in Section 12.5
hereof.

         "ENVIRONMENTAL LIENS" shall have the meaning set forth in Section 12.5
hereof.

         "ENVIRONMENTAL REPORT" shall have the meaning set forth in Section 12.5
hereof.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time and any successor statutes thereto and applicable
regulations issued pursuant thereto in temporary or final form.

         "EVENT OF DEFAULT" shall have the meaning set forth in Section 11.1
hereof.

         "EXPANSION" shall have the meaning set forth in Section 7.6 hereof.

         "FITCH" shall mean Fitch, Inc.

         "GAAP" shall mean generally accepted accounting principles in the
United States of America as of the date of the applicable financial report.

         "GOVERNMENTAL AUTHORITY" shall mean any court, board, agency,
department, commission, office or other authority of any nature whatsoever for
any governmental unit (federal, state, county, municipal, city, town, special
district or otherwise) whether now or hereafter in existence.

         "HAZARDOUS MATERIALS" shall have the meaning set forth in Section 12.5
hereof.

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         "IMPROVEMENTS" shall have the meaning set forth in the granting clause
of the Mortgage.

         "INDEMNIFIED PARTIES" shall mean (a) Lender, (b) any prior owner or
holder of the Loan or Participations in the Loan, (c) any servicer or prior
servicer of the Loan, (d) any Investor or any prior Investor in any Securities,
(e) any trustees, custodians or other fiduciaries who hold or who have held a
full or partial interest in the Loan for the benefit of any Investor or other
third party, (f) any receiver or other fiduciary appointed in a foreclosure or
other Creditors Rights Laws proceeding, (g) any officers, directors,
shareholders, partners, members, employees, agents, servants, representatives,
contractors, subcontractors, affiliates or subsidiaries of any and all of the
foregoing, and (h) the heirs, legal representatives, successors and assigns of
any and all of the foregoing (including, without limitation, any successors by
merger, consolidation or acquisition of all or a substantial portion of the
Indemnified Parties' assets and business) but specifically excluding (i) any
purchaser at a trustee's or foreclosure sale and (ii) any Person who acquires
all or any portion of the Property from Lender, in all cases whether during the
term of the Loan or as part of or following a foreclosure of the Mortgage.

         "INSURANCE PREMIUMS" shall have the meaning set forth in Section 8.1(b)
hereof.

         "INSURANCE PROCEEDS" shall have the meaning set forth in Section 8.4(b)
hereof.

         "INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, as it may be further amended from time to time, and any successor
statutes thereto, and applicable U.S. Department of Treasury regulations issued
pursuant thereto in temporary or final form.

         "INVESTOR" shall have the meaning set forth in Section 13.3 hereof.

         "LEASE" shall have the meaning set forth in the Mortgage.

         "LEASING RESERVE ACCOUNT" shall have the meaning set forth in Section
9.3(b) hereof.

         "LEASING RESERVE MONTHLY DEPOSIT" shall have the meaning set forth in
Section 9.3(b) hereof.

         "LEGAL REQUIREMENTS" shall mean all statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities affecting the Property or any part thereof, or the construction,
use, alteration or operation thereof, whether now or hereafter enacted and in
force, and all permits, licenses, authorizations and regulations relating
thereto, and all covenants, agreements, restrictions and encumbrances contained
in any instruments, either of record or known to Borrower, at any time in force
affecting the Property or any part thereof, including, without limitation, any
which may (a) require repairs, modifications or alterations in or to the
Property or any part thereof, or (b) in any way limit the use and enjoyment
thereof.

         "LIEN" shall mean any mortgage, deed of trust, lien, pledge,
hypothecation, assignment, security interest, or any other encumbrance, charge
or transfer of, on or affecting Borrower, the Property, any portion thereof or
any interest therein, including, without limitation, any conditional sale or
other title retention agreement, any financing lease having substantially the

                                      -4-
<PAGE>

same economic effect as any of the foregoing, the filing of any financing
statement, and mechanic's, materialmen's and other similar liens and
encumbrances.

         "LLC AGREEMENT" shall have the meaning set forth in Section 6.1(c).

         "LOAN" shall mean the loan made by Lender to Borrower pursuant to this
Agreement.

         "LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Note,
the Mortgage, the Environmental Indemnity, the Assignment of Management
Agreement, if applicable, and any and all other documents, agreements and
certificates executed and/or delivered in connection with the Loan, as the same
may be amended, restated, replaced, supplemented or otherwise modified from time
to time.

         "LOSSES" shall mean any and all claims, suits, liabilities (including,
without limitation, strict liabilities), actions, proceedings, obligations,
debts, damages, losses, costs, expenses, fines, penalties, charges, fees,
judgments, awards, amounts paid in settlement of whatever kind or nature
(including but not limited to legal fees and other costs of defense).

         "MAJOR LEASE" shall mean as to the Property (i) any Lease which,
individually or when aggregated with all other leases at the Property with the
same Tenant or its Affiliate, either (A) accounts for twenty percent (20%) or
more of the Property's rental income, or (B) demises 25,000 square feet or more
of the Property's gross leasable area, (ii) any Lease which contains any option,
offer, right of first refusal or other similar entitlement to acquire all or any
portion of the Property, or (iii) any instrument guaranteeing or providing
credit support for any Lease meeting the requirements of (i) or (ii) above.

         "MANAGEMENT AGREEMENT" shall mean the management agreement entered into
by and between Borrower and the Manager, if any, pursuant to which the Manager
is to provide management and other services with respect to the Property, as the
same may be amended, restated, replaced, supplemented or otherwise modified in
accordance with the terms of this Agreement.

         "MANAGER" shall mean an entity selected in the future as the manager of
the Property in accordance with the terms of this Agreement.

         "MATURITY DATE" shall have the meaning set forth in the Note.

         "MEMBER" shall have the meaning set forth in Section 6.1(c).

         "MOLD" shall have the meaning set forth in Section 12.5 hereof.

         "MOODY'S" shall mean Moody's Investors Service.

         "MORTGAGE" shall mean that certain first priority mortgage/deed of
trust/deed to secure debt and security agreement dated the date hereof, executed
and delivered by Borrower as security for the Loan and encumbering the Property,
as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time.

                                      -5-
<PAGE>

         "NET PROCEEDS" shall have the meaning set forth in Section 8.4(b)
hereof.

         "NET PROCEEDS DEFICIENCY" shall have the meaning set forth in Section
8.4(b)(vi) hereof.

         "NOTE" shall mean that certain promissory note of even date herewith in
the principal amount of $11,650,000, made by Borrower in favor of Lender, as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.

         "OFAC" shall have the meaning set forth in Section 4.38 hereof.

         "OTHER CHARGES" shall mean all ground rents, maintenance charges,
impositions other than Taxes, and any other charges, including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining the Property, now or hereafter levied or assessed or
imposed against the Property or any part thereof.

         "PARTIAL RELEASE DATE" shall have the meaning set forth in Section 7.6
hereof

         "PARTICIPATIONS" shall have the meaning set forth in Section 13.1
hereof.

         "PATRIOT ACT" shall have the meaning set forth in Section 4.38 hereof.

         "PERMITTED ENCUMBRANCES" shall mean collectively, (a) the Lien and
security interests created by the Loan Documents, (b) all Liens, encumbrances
and other matters disclosed in the Title Insurance Policy, (c) Liens, if any,
for Taxes imposed by any Governmental Authority not yet due or delinquent, and
(d) such other title and survey exceptions as Lender has approved or may approve
in writing in Lender's sole discretion.

         "PERMITTED INVESTMENTS" shall mean to the extent available from Lender
or Lender's servicer for deposits in the Reserve Accounts, any one or more of
the following obligations or securities acquired at a purchase price of not
greater than par, including those issued by a servicer of the Loan, the trustee
under any securitization or any of their respective Affiliates, payable on
demand or having a maturity date not later than the Business Day immediately
prior to the date on which the funds used to acquire such investment are
required to be used under this Agreement and meeting one of the appropriate
standards set forth below:

         (a)      obligations of, or obligations fully guaranteed as to payment
of principal and interest by, the United States or any agency or instrumentality
thereof provided such obligations are backed by the full faith and credit of the
United States of America including, without limitation, obligations of: the U.S.
Treasury (all direct or fully guaranteed obligations), the Farmers Home
Administration (certificates of beneficial ownership), the General Services
Administration (participation certificates), the U.S. Maritime Administration
(guaranteed Title XI financing), the Small Business Administration (guaranteed
participation certificates and guaranteed pool certificates), the U.S.
Department of Housing and Urban Development (local authority bonds) and the
Washington Metropolitan Area Transit Authority (guaranteed transit bonds);
provided, however, that the investments described in this clause must (i) have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change, (ii) be rated "AAA" or the equivalent by each of the Rating Agencies,
(iii) if rated by S&P, must not have an "r" highlighter affixed to their rating,
(iv) if such investments have a variable rate of interest,

                                      -6-
<PAGE>

such interest rate must be tied to a single interest rate index plus a fixed
spread (if any) and must move proportionately with that index, and (v) such
investments must not be subject to liquidation prior to their maturity;

         (b)      Federal Housing Administration debentures;

         (c)      obligations of the following United States government
sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations), the
Farm Credit System (consolidated systemwide bonds and notes), the Federal Home
Loan Banks (consolidated debt obligations), the Federal National Mortgage
Association (debt obligations), the Financing Corp. (debt obligations), and the
Resolution Funding Corp. (debt obligations); provided, however, that the
investments described in this clause must (i) have a predetermined fixed dollar
of principal due at maturity that cannot vary or change, (ii) if rated by S&P,
must not have an "r" highlighter affixed to their rating, (iii) if such
investments have a variable rate of interest, such interest rate must be tied to
a single interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (iv) such investments must not be subject
to liquidation prior to their maturity;

         (d)      federal funds, unsecured certificates of deposit, time
deposits, bankers' acceptances and repurchase agreements with maturities of not
more than 365 days of any bank, the short term obligations of which at all times
are rated in the highest short term rating category by each Rating Agency (or,
if not rated by all Rating Agencies, rated by at least one Rating Agency in the
highest short term rating category and otherwise acceptable to each other Rating
Agency, as confirmed in writing that such investment would not, in and of
itself, result in a downgrade, qualification or withdrawal of the initial, or,
if higher, then current ratings assigned to the Securities); provided, however,
that the investments described in this clause must (i) have a predetermined
fixed dollar of principal due at maturity that cannot vary or change, (ii) if
rated by S&P, must not have an "r" highlighter affixed to their rating, (iii) if
such investments have a variable rate of interest, such interest rate must be
tied to a single interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (iv) such investments must not be subject
to liquidation prior to their maturity;

         (e)      fully Federal Deposit Insurance Corporation-insured demand and
time deposits in, or certificates of deposit of, or bankers' acceptances with
maturities of not more than 365 days and issued by, any bank or trust company,
savings and loan association or savings bank, the short term obligations of
which at all times are rated in the highest short term rating category by each
Rating Agency (or, if not rated by all Rating Agencies, rated by at least one
Rating Agency in the highest short term rating category and otherwise acceptable
to each other Rating Agency, as confirmed in writing that such investment would
not, in and of itself, result in a downgrade, qualification or withdrawal of the
initial, or, if higher, then current ratings assigned to the Securities);
provided, however, that the investments described in this clause must (i) have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change, (ii) if rated by S&P, must not have an "r" highlighter affixed to their
rating, (iii) if such investments have a variable rate of interest, such
interest rate must be tied to a single interest rate index plus a fixed spread
(if any) and must move proportionately with that index, and (iv) such
investments must not be subject to liquidation prior to their maturity;

                                      -7-
<PAGE>

         (f)      debt obligations with maturities of not more than 365 days and
at all times rated by each Rating Agency (or, if not rated by all Rating
Agencies, rated by at least one Rating Agency and otherwise acceptable to each
other Rating Agency, as confirmed in writing that such investment would not, in
and of itself, result in a downgrade, qualification or withdrawal of the
initial, or, if higher, then current ratings assigned to the Securities) in its
highest long-term unsecured rating category; provided, however, that the
investments described in this clause must (i) have a predetermined fixed dollar
of principal due at maturity that cannot vary or change, (ii) if rated by S&P,
must not have an "r" highlighter affixed to their rating, (iii) if such
investments have a variable rate of interest, such interest rate must be tied to
a single interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (iv) such investments must not be subject
to liquidation prior to their maturity;

         (g)      commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand or on a specified
date not more than one year after the date of issuance thereof) with maturities
of not more than 365 days and that at all times is rated by each Rating Agency
(or, if not rated by all Rating Agencies, rated by at least one Rating Agency
and otherwise acceptable to each other Rating Agency, as confirmed in writing
that such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current ratings
assigned to the Securities) in its highest short-term unsecured debt rating;
provided, however, that the investments described in this clause must (i) have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change, (ii) if rated by S&P, must not have an "r" highlighter affixed to their
rating, (iii) if such investments have a variable rate of interest, such
interest rate must be tied to a single interest rate index plus a fixed spread
(if any) and must move proportionately with that index, and (iv) such
investments must not be subject to liquidation prior to their maturity;

         (h)      units of taxable money market funds, with maturities of not
more than 365 days and which funds are regulated investment companies, seek to
maintain a constant net asset value per share and invest solely in obligations
backed by the full faith and credit of the United States, which funds have the
highest rating available from each Rating Agency (or, if not rated by all Rating
Agencies, rated by at least one Rating Agency and otherwise acceptable to each
other Rating Agency, as confirmed in writing that such investment would not, in
and of itself, result in a downgrade, qualification or withdrawal of the
initial, or, if higher, then current ratings assigned to the Securities) for
money market funds; and

         (i)      any other security, obligation or investment which has been
approved as a Permitted Investment in writing by (i) Lender and (ii) each Rating
Agency, as evidenced by a written confirmation that the designation of such
security, obligation or investment as a Permitted Investment will not, in and of
itself, result in a downgrade, qualification or withdrawal of the initial, or,
if higher, then current ratings assigned to the Securities by such Rating
Agency;

         provided, however, that no obligation or security shall be a Permitted
Investment if (A) such obligation or security evidences a right to receive only
interest payments, (B) the right to receive principal and interest payments on
such obligation or security are derived from an underlying investment that
provides a yield to maturity in excess of one hundred twenty percent (120%) of
the yield to maturity at par of such underlying investment or (C) such
obligation or security has a remaining term to maturity in excess of one (1)
year.

                                      -8-
<PAGE>

         "PERSON" shall mean any individual, corporation, partnership, joint
venture, limited liability company, estate, trust, unincorporated association,
any federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.

         "PERSONAL PROPERTY" shall have the meaning set forth in the granting
clause of the Mortgage.

         "POLICIES" shall have the meaning specified in Section 8.1(b) hereof.

         "PROHIBITED TRANSFER" shall have the meaning set forth in Section 7.2
hereof.

         "PROPERTY" shall mean the parcel of real property, the Improvements
thereon and all Personal Property owned by Borrower and encumbered by the
Mortgage, together with all rights pertaining to such property and Improvements,
as more particularly described in the granting clause of the Mortgage and
referred to therein as the "PROPERTY".

         "PROPERTY CONDITION REPORT" shall mean a report prepared by a company
satisfactory to Lender regarding the physical condition of the Property,
satisfactory in form and substance to Lender in its reasonable discretion.

         "RATING AGENCIES" shall mean each of S&P, Moody's and Fitch, or any
other nationally-recognized statistical rating agency which has been approved by
Lender.

         "REA" shall mean any construction, operation and reciprocal easement
agreement or similar agreement (including any separate agreement or other
agreement between Borrower and one or more other parties to an REA with respect
to such REA) affecting the Property or portion thereof.

         "RELEASE" shall have the meaning set forth in Section 12.5 hereof.

         "RELEASE PARCEL" shall mean the unimproved parcel of land designated by
Borrower as set forth in Section 7.6 hereof.

         "RELEASE PARCEL REA" shall have the meaning set forth in Section 7.6
hereof.

         "REMAINING PROPERTY" shall have the meaning set forth in Section 7.6
hereof.

         "RENTS" shall have the meaning set forth in the Mortgage.

         "REPLACEMENT RESERVE ACCOUNT" shall have the meaning set forth in
Section 9.2(b) hereof.

         "REPLACEMENT RESERVE FUNDS" shall have the meaning set forth in Section
9.2(b) hereof.

         "REPLACEMENT RESERVE MONTHLY DEPOSIT" shall have the meaning set forth
in Section 9.2(b) hereof.

         "REPLACEMENTS" shall have the meaning set forth in Section 9.2(a)
hereof.

                                      -9-
<PAGE>

         "REQUIRED WORK" shall have the meaning set forth in Section 9.4 hereof.

         "RESERVE ACCOUNTS" shall mean the Tax and Insurance Reserve Account,
the Replacement Reserve Account, Leasing Reserve Account, or any other escrow
account established by the Loan Documents.

         "RESERVE FUNDS" shall mean the Tax and Insurance Reserve Funds, the
Replacement Reserve Funds, Leasing Reserve Funds, or any other escrow funds
established by the Loan Documents.

         "RESTORATION" shall mean, following the occurrence of a Casualty or a
Condemnation which is of a type necessitating the repair of the Property, the
completion of the repair and restoration of the Property as nearly as possible
to the condition the Property was in immediately prior to such Casualty or
Condemnation, with such alterations as may be reasonably approved by Lender.

         "RESTORATION CONSULTANT" shall have the meaning set forth in Section
8.4(b)(iii) hereof.

         "RESTORATION RETAINAGE" shall have the meaning set forth in Section
8.4(b)(iv) hereof.

         "RESTRICTED PARTY" shall have the meaning set forth in Section 7.1
hereof.

         "SALE OR PLEDGE" shall have the meaning set forth in Section 7.1
hereof.

         "SCHEDULED PAYMENT DATE" shall have the meaning set forth in the Note.

         "SECURITIES" shall have the meaning set forth in Section 13.1 hereof.

         "SECURITIZATION" shall have the meaning set forth in Section
13.1 hereof.

         "SPECIAL MEMBER" shall have the meaning set forth in Section 6.1(c).

         "SPE COMPONENT ENTITY" shall mean, if required by Lender under Article
6, each general partner if Borrower is a partnership, or the managing member if
Borrower is a limited liability company, which entity shall be a corporation
whose sole asset is its interest in Borrower.

         "S&P" shall mean Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.

         "STATE" shall mean the state in which the Property or any part thereof
is located.

         "TAX AND INSURANCE RESERVE FUNDS" shall have the meaning set forth in
Section 9.6 hereof.

         "TAX AND INSURANCE RESERVE ACCOUNT" shall have the meaning set forth in
Section 9.6 hereof.

                                      -10-
<PAGE>

         "TAXES" shall mean all real estate and personal property taxes,
assessments, water rates or sewer rents, now or hereafter levied or assessed or
imposed against the Property or part thereof.

         "TENANT" shall mean Ashworth Inc., a Delaware corporation or any other
Person leasing, subleasing or otherwise occupying any portion of the Property
under a Lease or other occupancy agreement with Borrower.

         "TERMINATION FEE DEPOSIT" shall have the meaning set forth in Section
9.3(b).

         "TRIGGER PERIOD" shall mean (i) a period commencing upon the occurrence
    of Borrower Principal's net worth falling below $50,000,000 and ending on
    the date that Borrower Principal's net worth exceeds $50,000,000 for two (2)
    consecutive quarters (based on the financial statements delivered to Lender
    pursuant to Section 5.11 hereof), or (ii) any time at which an Event of
    Default exists.

         "TITLE INSURANCE POLICY" shall mean that certain ALTA (or its
equivalent) mortgagee title insurance policy issued with respect to the Property
and insuring the lien of the Mortgage.

         "TRANSFEREE" shall have the meaning set forth in Section 7.5 hereof.

         "UCC" or "UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial
Code as in effect in the State where the applicable Property is located.

         SECTION 1.2. PRINCIPLES OF CONSTRUCTION

         All references to sections and schedules are to sections and schedules
in or to this Agreement unless otherwise specified. All uses of the word
"including" shall mean "including, without limitation" unless the context shall
indicate otherwise. Unless otherwise specified, the words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise specified, all meanings attributed to defined terms
herein shall be equally applicable to both the singular and plural forms of the
terms so defined.

                                    ARTICLE 2
                                  GENERAL TERMS

         SECTION 2.1. THE LOAN

         Subject to and upon the terms and conditions set forth herein, Lender
hereby agrees to make and Borrower hereby agrees to accept the Loan on the
Closing Date.

         SECTION 2.2. DISBURSEMENT TO BORROWER

         Borrower may request and receive only one borrowing in respect of the
Loan and any amount borrowed and repaid in respect of the Loan may not be
reborrowed.

                                      -11-
<PAGE>

         SECTION 2.3. THE NOTE, MORTGAGE AND LOAN DOCUMENTS

         The Loan shall be evidenced by the Note and secured by the Mortgage and
the other Loan Documents.

         SECTION 2.4. LOAN PAYMENTS

         The Loan and interest thereon shall be payable pursuant to the terms of
the Note.

         SECTION 2.5. LOAN PREPAYMENTS

         The Loan may not be prepaid, in whole or in part, except in strict
accordance with the express terms and conditions of the Note.

                                    ARTICLE 3
                              CONDITIONS PRECEDENT

         SECTION 3.1. CONDITIONS PRECEDENT

         The obligation of Lender to make the Loan hereunder is subject to the
fulfillment by Borrower or waiver by Lender of all of the conditions precedent
to closing set forth in the application or term sheet for the Loan delivered by
Borrower to Lender and the commitment or commitment rider, if any, to the
application for the Loan issued by Lender.

                                    ARTICLE 4
                         REPRESENTATIONS AND WARRANTIES

         Borrower and, where specifically indicated, each Borrower Principal,
represents and warrants to Lender as of the Closing Date that:

         SECTION 4.1. ORGANIZATION

         Borrower and each Borrower Principal (when not an individual) (a) has
been duly organized and is validly existing and in good standing with requisite
power and authority to own its properties and to transact the businesses in
which it is now engaged, (b) is duly qualified to do business and is in good
standing in each jurisdiction where it is required to be so qualified in
connection with its properties, businesses and operations, (c) possesses all
rights, licenses, permits and authorizations, governmental or otherwise,
necessary to entitle it to own its properties and to transact the businesses in
which it is now engaged, and the sole business of Borrower is the ownership,
management and operation of the Property, and (d) in the case of Borrower, has
full power, authority and legal right to mortgage, grant, bargain, sell, pledge,
assign, warrant, transfer and convey the Property pursuant to the terms of the
Loan Documents, and in the case of Borrower and each Borrower Principal, has
full power, authority and legal right to keep and observe all of the terms of
the Loan Documents to which it is a party. Borrower represents and warrants that
the chart attached hereto as Exhibit A sets forth an accurate listing of the
direct and indirect owners of the equity interests in Borrower.

         SECTION 4.2. STATUS OF BORROWER

                                      -12-
<PAGE>

         Borrower's exact legal name is correctly set forth on the first page of
this Agreement, on the Mortgage and on any UCC-1 Financing Statements reviewed
and approved by Borrower and filed in connection with the Loan. Borrower is an
organization of the type specified on the first page of this Agreement. Borrower
is incorporated in or organized under the laws of the state of Delaware.
Borrower's principal place of business and chief executive office, and the place
where Borrower keeps its books and records, including recorded data of any kind
or nature, regardless of the medium of recording, including software, writings,
plans, specifications and schematics, has been for the preceding four months
(or, if less, the entire period of the existence of Borrower) the address of
Borrower set forth on the first page of this Agreement. Borrower's
organizational identification number, if any, assigned by the state of
incorporation is 3777319.

         SECTION 4.3. VALIDITY OF DOCUMENTS

         Borrower and each Borrower Principal have taken all necessary action to
authorize the execution, delivery and performance of this Agreement and the
other Loan Documents to which they are parties. This Agreement and such other
Loan Documents have been duly executed and delivered by or on behalf of Borrower
and each Borrower Principal and constitute the legal, valid and binding
obligations of Borrower and each Borrower Principal enforceable against Borrower
and each Borrower Principal in accordance with their respective terms, subject
only to applicable bankruptcy, insolvency and similar laws affecting rights of
creditors generally, and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law).

         SECTION 4.4. NO CONFLICTS

         The execution, delivery and performance of this Agreement and the other
Loan Documents by Borrower and each Borrower Principal will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance (other than pursuant to the Loan Documents) upon any of the property
or assets of Borrower or any Borrower Principal pursuant to the terms of any
agreement or instrument to which Borrower or any Borrower Principal is a party
or by which any of Borrower's or Borrower Principal's property or assets is
subject, nor will such action result in any violation of the provisions of any
statute or any order, rule or regulation of any Governmental Authority having
jurisdiction over Borrower or any Borrower Principal or any of Borrower's or
Borrower Principal's properties or assets, and any consent, approval,
authorization, order, registration or qualification of or with any Governmental
Authority required for the execution, delivery and performance by Borrower or
Borrower Principal of this Agreement or any of the other Loan Documents has been
obtained and is in full force and effect.

         SECTION 4.5. LITIGATION

         Except as indicated in Schedule 4.5 attached hereto, there are no
actions, suits or proceedings at law or in equity by or before any Governmental
Authority or other agency now pending or, to Borrower's or Borrower Principal's
knowledge, threatened against or affecting Borrower, any Borrower Principal, or
the Property, which actions, suits or proceedings, if determined against
Borrower, any Borrower Principal or the Property, would materially adversely
affect the condition (financial or otherwise) or business of Borrower or any
Borrower

                                      -13-
<PAGE>

Principal or the condition or ownership of the Property. Additionally, Borrower
or Borrower Principal has not received any notice from any of its insurers of
the possible denial of coverage relating the consolidated class action suit
listed in Schedule 4.5.

         SECTION 4.6. AGREEMENTS

         Borrower is not a party to any agreement or instrument or subject to
any restriction which would materially and adversely affect Borrower or the
Property, or Borrower's business, properties or assets, operations or condition,
financial or otherwise. Borrower is not in default in any material respect in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any agreement or instrument to which it is a party or
by which Borrower or the Property is bound. Borrower has no material financial
obligation under any agreement or instrument to which Borrower is a party or by
which Borrower or the Property is otherwise bound, other than (a) obligations
incurred in the ordinary course of the operation of the Property and (b)
obligations under the Loan Documents.

         SECTION 4.7. SOLVENCY

         Borrower and each Borrower Principal have (a) not entered into the
transaction or executed the Note, this Agreement or any other Loan Documents
with the actual intent to hinder, delay or defraud any creditor and (b) received
reasonably equivalent value in exchange for their obligations under such Loan
Documents. Giving effect to the Loan, the fair saleable value of the assets of
Borrower and each Borrower Principal exceeds and will, immediately following the
making of the Loan, exceed the total liabilities of Borrower and each Borrower
Principal, including, without limitation, subordinated, unliquidated, disputed
and contingent liabilities. No petition in bankruptcy has been filed against
Borrower, any Borrower Principal, any SPE Component Entity (if any) or
Affiliated Manager in the last ten (10) years, and neither Borrower nor any
Borrower Principal, any SPE Component Entity (if any) or Affiliated Manager in
the last ten (10) years has made an assignment for the benefit of creditors or
taken advantage of any Creditors Rights Laws. Neither Borrower nor any Borrower
Principal, any SPE Component Entity (if any) or Affiliated Manager is
contemplating either the filing of a petition by it under any Creditors Rights
Laws or the liquidation of all or a major portion of Borrower's assets or
property, and Borrower has no knowledge of any Person contemplating the filing
of any such petition against Borrower or any Borrower Principal, any SPE
Component Entity (if any) or Affiliated Manager.

         SECTION 4.8. FULL AND ACCURATE DISCLOSURE

         No statement of fact made by or on behalf of Borrower or any Borrower
Principal in this Agreement or in any of the other Loan Documents or in any
other document or certificate delivered by or on behalf of Borrower or any
Borrower Principal contains any untrue statement of a material fact or omits to
state any material fact necessary to make statements contained herein or therein
not misleading in any material respect. There is no material fact presently
known to Borrower or any Borrower Principal which has not been disclosed to
Lender which adversely affects, nor as far as Borrower or any Borrower Principal
can reasonably foresee, might adversely affect, the Property or the business,
operations or condition (financial or otherwise) of Borrower or any Borrower
Principal in any material respect.

                                      -14-
<PAGE>

         SECTION 4.9. NO PLAN ASSETS

         Borrower is not an "employee benefit plan," as defined in Section 3(3)
of ERISA, subject to Title I of ERISA, and none of the assets of Borrower
constitutes or will constitute "plan assets" of one or more such plans within
the meaning of 29 C.F.R. Section 2510.3-101. In addition, (a) Borrower is not a
"governmental plan" within the meaning of Section 3(32) of ERISA and (b)
transactions by or with Borrower are not subject to state statutes regulating
investment of, and fiduciary obligations with respect to, governmental plans
similar to the provisions of Section 406 of ERISA or Section 4975 of the
Internal Revenue Code currently in effect, which prohibit or otherwise restrict
the transactions contemplated by this Agreement.

         SECTION 4.10. NOT A FOREIGN PERSON

         Neither Borrower nor Borrower Principal is a foreign corporation,
foreign partnership, foreign trust, foreign estate or nonresident alien or a
disregarded entity owned by any of them (as those terms are defined in the
Internal Revenue Code of 1986, as amended to date, and the regulations
thereunder), and if requested by Lender, Borrower or Borrower Principal will so
certify (or in the case of a disregarded entity, its owner will certify) to
Lender or a person designated by Lender under penalties of perjury to the
accuracy of this representation, and will provide in such certification such
additional information as Lender may reasonably request.

         SECTION 4.11. ENFORCEABILITY

         The Loan Documents are currently not subject to any right of
rescission, set-off, counterclaim or defense by Borrower, including the defense
of usury and neither Borrower nor Borrower Principal has asserted any right of
rescission, set-off, counterclaim or defense with respect thereto. No Default or
Event of Default exists under or with respect to any Loan Document.

         SECTION 4.12. BUSINESS PURPOSES

         The Loan is solely for the business purpose of Borrower, and is not for
personal, family, household, or agricultural purposes.

         SECTION 4.13. COMPLIANCE

         Except as expressly disclosed by Borrower to Lender in writing in
connection with the closing of the Loan, to Borrower's knowledge Borrower and
the Property, and the use and operation thereof, comply in all material respects
with all Legal Requirements, including, without limitation, building and zoning
ordinances and codes and the Americans with Disabilities Act. To Borrower's
knowledge, Borrower is not in default or violation of any order, writ,
injunction, decree or demand of any Governmental Authority and Borrower has
received no written notice of any such default or violation. There has not been
committed by Borrower or, to Borrower's knowledge, any other Person in occupancy
of or involved with the operation or use of the Property any act or omission
affording any Governmental Authority the right of forfeiture as against the
Property or any part thereof or any monies paid in performance of Borrower's
obligations under any of the Loan Documents.

                                      -15-
<PAGE>

         SECTION 4.14. FINANCIAL INFORMATION

         All financial data, including, without limitation, the balance sheets,
statements of cash flow, statements of income and operating expense and rent
rolls, that have been delivered to Lender in respect of Borrower, any Borrower
Principal and/or the Property (a) are true, complete and correct in all material
respects, (b) accurately represent the financial condition of Borrower, Borrower
Principal or the Property, as applicable, as of the date of such reports, and
(c) to the extent prepared or audited by an independent certified public
accounting firm, have been prepared in accordance with GAAP throughout the
periods covered, except as disclosed therein. Borrower does not have any
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable commitments
that are known to Borrower and reasonably likely to have a material adverse
effect on the Property or the current and/or intended operation thereof, except
as referred to or reflected in said financial statements. Since the date of such
financial statements, there has been no materially adverse change in the
financial condition, operations or business of Borrower or Borrower Principal
from that set forth in said financial statements.

         SECTION 4.15. CONDEMNATION

         No Condemnation or other proceeding has been commenced or, to
Borrower's best knowledge, is threatened or contemplated with respect to all or
any portion of the Property or for the relocation of roadways providing access
to the Property.

         SECTION 4.16. UTILITIES AND PUBLIC ACCESS; PARKING

         To Borrower's knowledge after due inquiry, the Property has adequate
rights of access to public ways and is served by water, sewer, sanitary sewer
and storm drain facilities adequate to service the Property for full utilization
of the Property for its intended uses. To Borrower's knowledge after due
inquiry, all public utilities necessary to the full use and enjoyment of the
Property as currently used and enjoyed are located either in the public
right-of-way abutting the Property (which are connected so as to serve the
Property without passing over other property) or in recorded easements serving
the Property and such easements are set forth in and insured by the Title
Insurance Policy. To Borrower's knowledge after due inquiry, all roads necessary
for the use of the Property for its current purposes have been completed and
dedicated to public use and accepted by all Governmental Authorities. To
Borrower's knowledge, the Property has, or is served by, parking to the extent
required to comply with all Legal Requirements.

         SECTION 4.17. SEPARATE LOTS

         The Property is assessed for real estate tax purposes as one or more
wholly independent tax lot or lots, separate from any adjoining land or
improvements not constituting a part of such lot or lots, and no other land or
improvements is assessed and taxed together with the Property or any portion
thereof.

         SECTION 4.18. ASSESSMENTS

         To Borrower's knowledge, and except as disclosed by the title report
and related materials delivered by Borrower to Lender, there are no pending or
proposed special or other

                                      -16-
<PAGE>

assessments for public improvements or otherwise affecting the Property, nor are
there any contemplated improvements to the Property that may result in such
special or other assessments.

         SECTION 4.19. INSURANCE

         Borrower has obtained and has delivered to Lender certified copies of
all Policies or, to the extent such Policies are not available as of the Closing
Date, certificates of insurance with respect to all such Policies reflecting the
insurance coverages, amounts and other requirements set forth in this Agreement.
No claims have been made under any of the Policies, and to Borrower's knowledge,
no Person, including Borrower, has done, by act or omission, anything which
would impair the coverage of any of the Policies.

         SECTION 4.20. USE OF PROPERTY

         The Property is used exclusively for manufacturing, distribution,
office, warehouse operations and other appurtenant and related uses.

         SECTION 4.21. CERTIFICATE OF OCCUPANCY; LICENSES

         Except for the business use permit/business license as disclosed to
Lender, all certifications, permits, licenses and approvals, including, without
limitation, certificates of completion or occupancy and any applicable liquor
license required for the legal use, occupancy and operation of the Property for
the purpose intended herein, have been obtained and are valid and in full force
and effect. Borrower shall keep and maintain (or cause to be kept and
maintained) all licenses necessary for the operation of the Property for the
purpose intended herein. The use being made of the Property is in conformity
with the final certificate of occupancy (or compliance, if applicable) and any
other permits or licenses issued for the Property.

         SECTION 4.22. FLOOD ZONE

         None of the Improvements on the Property are located in an area
identified by the Federal Emergency Management Agency as an area having special
flood hazards, or, if any portion of the Improvements is located within such
area, Borrower has obtained the insurance prescribed in Section 8.1(a)(i).

         SECTION 4.23. PHYSICAL CONDITION

         Except as set forth in the Property Condition Report and subject to any
"punch list" items to be completed by the general contractor that constructed
the Improvements, to Borrower's knowledge, the Property, including, without
limitation, all buildings, improvements, parking facilities, sidewalks, storm
drainage systems, roofs, plumbing systems, HVAC systems, fire protection
systems, electrical systems, equipment, elevators, exterior sidings and doors,
landscaping, irrigation systems and all structural components, are in good
condition, order and repair in all material respects. Except as set forth in the
Property Condition Report, to Borrower's knowledge after due inquiry, there
exists no structural or other material defects or damages in the Property, as a
result of a Casualty or otherwise, and whether latent or otherwise. Borrower has
not received notice from any insurance company or bonding company of any

                                      -17-
<PAGE>

defects or inadequacies in the Property, or any part thereof, which would
adversely affect the insurability of the same or cause the imposition of
extraordinary premiums or charges thereon or of any termination or threatened
termination of any policy of insurance or bond.

         SECTION 4.24. BOUNDARIES

         (a)      None of the Improvements which were included in determining
the appraised value of the Property lie outside the boundaries and building
restriction lines of the Property to any material extent, and (b) no
improvements on adjoining properties encroach upon the Property and no easements
or other encumbrances upon the Property encroach upon any of the Improvements so
as to materially affect the value or marketability of the Property.

         SECTION 4.25. THE ASHWORTH LEASE

         Borrower has delivered to Lender a true, correct and complete copy of
the Ashworth Lease and the following statements are true as of the date hereof:
(a) the Ashworth Lease is in full force and effect; (b) the premises demised
under the Leases have been completed and the Tenant under the Ashworth Lease has
accepted possession of and are in occupancy of all of their respective demised
premises; (c) the Tenant under the Ashworth Lease has commenced the payment of
rent under the Ashworth Lease, there are no offsets, claims or defenses to the
enforcement thereof, and Borrower has no monetary obligations to any Tenant
under the Ashworth Lease; (d) all Rents due and payable under the Ashworth Lease
have been paid and no portion thereof has been paid for any period more than
thirty (30) days in advance; (e) the rent payable under the Ashworth Lease is
the amount of fixed rent set forth therein, and there is no claim or basis for a
claim by the Tenant thereunder for an offset or adjustment to the rent; (f) the
Tenant has not made any written claim of a material default against the landlord
which remains outstanding nor has Borrower or Manager received, by telephonic,
in-person, e-mail or other communication, any notice of a material default under
any Lease; (g) to Borrower's knowledge there is no present material default by
the Tenant under the Ashworth Lease; (h) all security deposits under the
Ashworth Lease have been collected by Borrower; (i) Borrower is the sole owner
of the entire landlord's interest in the Ashworth Lease; (j) the Ashworth Lease
is the valid, binding and enforceable obligation of Borrower and the Tenant
thereunder and there are no agreements with the Tenant under the Ashworth Lease
other than as expressly set forth in the Ashworth Lease; (k) no Person, other
than the Tenant under the Ashworth Lease has any possessory interest in, or
right to occupy, the Property or any portion thereof; (l) the Ashworth Lease
does not contain any option or offer to purchase or right of first refusal to
purchase the Property or any part thereof; (m) neither the Ashworth Lease nor
the Rents have been assigned, pledged or hypothecated except to Lender, and no
other Person has any interest therein except the Tenant thereunder; (n) no
conditions exist which now give the Tenant the right to "go dark" pursuant to
the provision of the Ashworth Lease and/or the REA and (o) as of the date of
this Agreement there are no Leases affecting the Property other than the
Ashworth Lease.

         SECTION 4.26. FILING AND RECORDING TAXES

         All mortgage, mortgage recording, stamp, intangible or other similar
tax required to be paid by any Person under applicable Legal Requirements
currently in effect in connection with the execution, delivery, recordation,
filing, registration, perfection or enforcement of any of the

                                      -18-
<PAGE>

Loan Documents, including, without limitation, the Mortgage, have been paid or
will be paid, and, under current Legal Requirements, the Mortgage is enforceable
in accordance with its terms by Lender (or any subsequent holder thereof).

         SECTION 4.27. INTENTIONALLY DELETED

         SECTION 4.28. ILLEGAL ACTIVITY

         No portion of the Property has been or will be purchased, improved,
equipped or fixtured with proceeds of any illegal activity, and no part of the
proceeds of the Loan will be used in connection with any illegal activity.

         SECTION 4.29. CONSTRUCTION EXPENSES

         All costs and expenses of any and all labor, materials, supplies and
equipment used in the construction maintenance or repair of the Improvements
have been paid in full. To Borrower's knowledge after due inquiry, and except as
indicated in Schedule 4.29 attached hereto, there are no claims for payment for
work, labor or materials affecting the Property which are or may become a lien
prior to, or of equal priority with, the Liens created by the Loan Documents.

         SECTION 4.30. PERSONAL PROPERTY

         Borrower has paid in full for, and is the owner of, all Personal
Property (other than tenants' property) used in connection with the operation of
the Property, free and clear of any and all security interests, liens or
encumbrances, except for Permitted Encumbrances and the Lien and security
interest created by the Loan Documents.

         SECTION 4.31. TAXES

         Borrower and Borrower Principal have filed all federal, state, county,
municipal, and city income, personal property and other tax returns required to
have been filed by them and have paid all taxes and related liabilities which
have become due pursuant to such returns or pursuant to any assessments received
by them. Neither Borrower nor Borrower Principal knows of any basis for any
additional assessment in respect of any such taxes and related liabilities for
prior years.

         SECTION 4.32. PERMITTED ENCUMBRANCES

         None of the Permitted Encumbrances, individually or in the aggregate,
materially interferes with the benefits of the security intended to be provided
by the Loan Documents, materially and adversely affects the value of the
Property, impairs the use or the operation of the Property or impairs Borrower's
ability to pay its obligations in a timely manner.

         SECTION 4.33. FEDERAL RESERVE REGULATIONS

         No part of the proceeds of the Loan will be used for the purpose of
purchasing or acquiring any "margin stock" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System or for any other purpose
which would be inconsistent with such

                                      -19-
<PAGE>

Regulation U or any other Regulations of such Board of Governors, or for any
purposes prohibited by Legal Requirements or prohibited by the terms and
conditions of this Agreement or the other Loan Documents.

         SECTION 4.34. INVESTMENT COMPANY ACT

         Borrower is not (a) an "investment company" or a company "controlled"
by an "investment company," within the meaning of the Investment Company Act of
1940, as amended; (b) a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of either a "holding company" or a
"subsidiary company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended; or (c) subject to any other federal or state law or
regulation which purports to restrict or regulate its ability to borrow money.

         SECTION 4.35. RECIPROCAL EASEMENT AGREEMENTS.

         (a)      Neither Borrower, nor any other party is currently in default
(nor has any notice been given or received with respect to an alleged or current
default) under any of the terms and conditions of the REA, and the REA remains
unmodified and in full force and effect;

         (b)      All easements granted pursuant to the REA which were to have
survived the site preparation and completion of construction (to the extent that
the same has been completed), remain in full force and effect and have not been
released, terminated, extinguished or discharged by agreement or otherwise;

         (c)      All sums due and owing by Borrower to the other parties to the
REA (or by the other parties to the REA to the Borrower) pursuant to the terms
of the REA, including without limitation, all sums, charges, fees, assessments,
costs, and expenses in connection with any taxes, site preparation and
construction, non-shareholder contributions, and common area and other property
management activities have been paid, are current, and no lien has attached on
the Property (or threat thereof been made) for failure to pay any of the
foregoing;

         (d)      The terms, conditions, covenants, uses and restrictions
contained in the REA do not conflict in any manner with any terms, conditions,
covenants, uses and restrictions contained in any Lease or in any agreement
between Borrower and occupant of any peripheral parcel, including without
limitation, conditions and restrictions with respect to kiosk placement, tenant
restrictions (type, location or exclusivity), sale of certain goods or services,
and/or other use restrictions; and

         (e)      The terms, conditions, covenants, uses and restrictions
contained in each Lease do not conflict in any manner with any terms,
conditions, covenants, uses and restrictions contained in the REA, any other
Lease or in any agreement between Borrower and occupant of any peripheral
parcel, including without limitation, conditions and restrictions with respect
to kiosk placement, tenant restrictions (type, location or exclusivity), sale of
certain goods or services, and/or other use restrictions.

         SECTION 4.36. NO CHANGE IN FACTS OR CIRCUMSTANCES; DISCLOSURE

                                      -20-
<PAGE>

         All information submitted to Lender by Borrower, the Tenant under the
Ashworth Lease or their respective agents and in all financial statements, rent
rolls, reports, certificates and other documents submitted by or on behalf of
Borrower or Borrower Principal in connection with the Loan or in satisfaction of
the terms thereof or otherwise and all statements of fact made by Borrower in
this Agreement or in any other Loan Document, are accurate, complete and correct
in all material respects. There has been no material adverse change in any
condition, fact, circumstance or event that would make any such information
inaccurate, incomplete or otherwise misleading in any material respect or that
otherwise materially and adversely affects or might materially and adversely
affect the Property or the business operations or the financial condition of
Borrower or the Tenant under the Ashworth Lease. Borrower has disclosed to
Lender all material facts (after due inquiry) and has not failed to disclose any
material fact known by Borrower (after due inquiry) that could cause any
representation or warranty made herein to be materially misleading.

         SECTION 4.37. INTELLECTUAL PROPERTY

         All trademarks, trade names and service marks necessary to the business
of Borrower as presently conducted or as Borrower contemplates conducting its
business are in good standing and, to the extent of Borrower's knowledge,
uncontested. Borrower has not infringed, is not infringing, and has not received
notice of infringement with respect to asserted trademarks, trade names and
service marks of others. To Borrower's knowledge, there is no infringement by
others of trademarks, trade names and service marks of Borrower.

         SECTION 4.38. COMPLIANCE WITH ANTI-TERRORISM LAWS

         (i)      None of Borrower, Borrower Principal or any Person who
Controls Borrower, or Borrower Principal currently is identified by the Office
of Foreign Assets Control, Department of the Treasury ("OFAC") or otherwise
qualifies as a Embargoed Person, and Borrower had implemented procedures to
ensure that no Person who now or hereafter owns a direct or indirect equity
interest in Borrower is an Embargoed Person or is Controlled by an Embargoed
Person, and (ii) none of Borrower or Borrower Principal is in violation of any
applicable law relating to anti-money laundering or anti-terrorism, including,
without limitation, Legal Requirements related to transacting business with
Embargoed Persons or the requirements of the Uniting and Strengthening America
by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act
of 2001, U.S. Public Law 107-56, and the related regulations issued thereunder,
including temporary regulations (collectively, as the same may be amended from
time to time, the "PATRIOT ACT"). To the best of Borrower's knowledge, no tenant
at the Property is currently is identified by OFAC or otherwise qualifies as an
Embargoed Person, or is owned or Controlled by an Embargoed Person.
Notwithstanding the above, Borrower makes no representations as to the
shareholders of Ashworth Inc., a publicly traded company.

         SECTION 4.39. PATRIOT ACT

         Neither Borrower nor Borrower Principal shall (a) be or become subject
at any time to any law, regulation, or list of any government agency (including,
without limitation, the list maintained by OFAC and accessible through the OFAC
website) that prohibits or limits any Lender from making any advance or
extension of credit to Borrower or from otherwise

                                      -21-
<PAGE>

conducting business with Borrower and Borrower Principal due to criminal or
terrorist acts, or (b) fail to provide documentary and other evidence of
Borrower's identity as may be requested by any Lender at any time to enable any
Lender to verify Borrower's identity or to comply with any applicable law or
regulation, including, without limitation, the Patriot Act. In addition,
Borrower hereby agrees to provide to Lender with any additional information that
Lender reasonably deems necessary from time to time in order to ensure
compliance with all applicable laws concerning money laundering and similar
activities.

         SECTION 4.40. SURVIVAL

         Borrower agrees that, unless expressly provided otherwise, all of the
representations and warranties of Borrower set forth in this Article 4 and
elsewhere in this Agreement and in the other Loan Documents shall survive for so
long as any portion of the Debt remains owing to Lender. All representations,
warranties, covenants and agreements made in this Agreement or in the other Loan
Documents by Borrower shall be deemed to have been relied upon by Lender
notwithstanding any investigation heretofore or hereafter made by Lender or on
its behalf.

                                   ARTICLE 5
                               BORROWER COVENANTS

         From the date hereof and until repayment of the Debt in full and
performance in full of all obligations of Borrower under the Loan Documents or
the earlier release of the Lien of the Mortgage (and all related obligations) in
accordance with the terms of this Agreement and the other Loan Documents,
Borrower hereby covenants and agrees with Lender that:

         SECTION 5.1. EXISTENCE; COMPLIANCE WITH LEGAL REQUIREMENTS

         (a)      Borrower shall do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its existence, rights,
licenses, permits and franchises and comply with all Legal Requirements
applicable to it and the Property. Borrower hereby covenants and agrees not to
commit, permit or suffer to exist any act or omission affording any Governmental
Authority the right of forfeiture as against the Property or any part thereof or
any monies paid in performance of Borrower's obligations under any of the Loan
Documents. Borrower shall at all times maintain, preserve and protect all
franchises and trade names used in connection with the operation of the
Property.

         (b)      After prior written notice to Lender, Borrower, at its own
expense, may contest by appropriate legal proceeding, promptly initiated and
conducted in good faith and with due diligence, the Legal Requirements affecting
the Property, provided that (i) no Event of Default has occurred and is
continuing; (ii) such proceeding shall be permitted under and be conducted in
accordance with the provisions of any other instrument to which Borrower or the
Property is subject and shall not constitute a default thereunder; (iii) neither
the Property, any part thereof or interest therein, any of the tenants or
occupants thereof, nor Borrower shall be affected in any material adverse way as
a result of such proceeding; (iv) non-compliance with the Legal Requirements
shall not impose civil or criminal liability on Borrower or Lender; (v) Borrower
shall have furnished the security as may be required in the proceeding by
applicable law or

                                      -22-
<PAGE>

reasonably required by Lender to ensure compliance by Borrower with the Legal
Requirements; and (vi) Borrower shall have furnished to Lender all other items
reasonably requested by Lender.

         SECTION 5.2. MAINTENANCE AND USE OF PROPERTY

         So long as Borrower owns the Property, Borrower shall cause the
Property to be maintained in a good and safe condition and repair. The
Improvements and the Personal Property shall not be removed, demolished or
materially altered (except for normal replacement of the Personal Property)
without the consent of Lender. If under applicable zoning provisions the use of
all or any portion of the Property is or shall become a nonconforming use,
Borrower will not cause or permit the nonconforming use to be discontinued or
the nonconforming Improvement to be abandoned without the express written
consent of Lender.

         SECTION 5.3. WASTE

         So long as Borrower owns the Property, Borrower shall not knowingly
commit (or permit to be committed) or suffer (or permit to be suffered) any
waste of the Property or make any change in the use of the Property which will
in any way materially increase the risk of fire or other hazard arising out of
the operation of the Property, or take (or permit to be taken) any action that
might invalidate or give cause for cancellation of any Policy, or do or permit
to be done thereon anything that may in any way impair the value of the Property
or the security for the Loan. Borrower will not, without the prior written
consent of Lender, permit any drilling or exploration for or extraction,
removal, or production of any minerals from the surface or the subsurface of the
Property, regardless of the depth thereof or the method of mining or extraction
thereof.

         SECTION 5.4. TAXES AND OTHER CHARGES

         (a)      So long as Borrower owns the Property, Borrower shall pay all
Taxes and Other Charges now or hereafter levied or assessed or imposed against
the Property or any part thereof as the same become due and payable; provided,
however, Borrower's obligation to directly pay Taxes shall be suspended for so
long as Borrower complies with the terms and provisions of Section 9.6 hereof.
Borrower shall furnish to Lender receipts for the payment of the Taxes and the
Other Charges prior to the date the same shall become delinquent (provided,
however, that Borrower is not required to furnish such receipts for payment of
Taxes in the event that such Taxes have been paid by Lender pursuant to Section
9.6 hereof). Borrower shall not suffer and shall promptly cause to be paid and
discharged any Lien or charge whatsoever which may be or become a Lien or charge
against the Property, and shall promptly pay for all utility services provided
to the Property.

         (b)      After prior written notice to Lender, Borrower, at its own
expense, may contest by appropriate legal proceeding, promptly initiated and
conducted in good faith and with due diligence, the amount or validity or
application in whole or in part of any Taxes or Other Charges, provided that (i)
no Event of Default has occurred and remains uncured; (ii) such proceeding shall
be permitted under and be conducted in accordance with the provisions of any
other instrument to which Borrower is subject and shall not constitute a default
thereunder and such proceeding shall be conducted in accordance with all
applicable Legal Requirements; (iii)

                                      -23-
<PAGE>

neither the Property nor any part thereof or interest therein will be in danger
of being sold, forfeited, terminated, canceled or lost; (iv) Borrower shall
promptly upon final determination thereof pay the amount of any such Taxes or
Other Charges, together with all costs, interest and penalties which may be
payable in connection therewith; (v) such proceeding shall suspend the
collection of such contested Taxes or Other Charges from the Property; and (vi)
Borrower shall furnish such security as may be required in the proceeding by
applicable law, or deliver to Lender such reserve deposits as may be requested
by Lender, to insure the payment of any such Taxes or Other Charges, together
with all interest and penalties thereon (unless Borrower has paid all of the
Taxes or Other Charges under protest). Lender may pay over any such cash deposit
or part thereof held by Lender to the claimant entitled thereto at any time
when, in the judgment of Lender, the entitlement of such claimant is established
by final order of a court of competent jurisdiction which is no longer subject
to appeal, or the Property (or part thereof or interest therein) shall be
reasonably likely to be in danger of being sold, forfeited, terminated, canceled
or lost or there shall be any reasonable danger of the Lien of the Mortgage
being primed by any related Lien.

         SECTION 5.5. LITIGATION

         Borrower shall give prompt written notice to Lender of any litigation
or governmental proceedings pending or threatened in writing against Borrower
which might materially adversely affect Borrower's condition (financial or
otherwise) or business or the Property.

         SECTION 5.6. ACCESS TO PROPERTY

         Subject to the rights of Tenants under Leases, Borrower shall permit
agents, representatives and employees of Lender to inspect the Property or any
part thereof at reasonable hours upon reasonable advance notice.

         SECTION 5.7. NOTICE OF DEFAULT

         Borrower shall promptly advise Lender of any material adverse change in
the condition (financial or otherwise) of Borrower, any Borrower Principal or
the Property or of the occurrence of any Default or Event of Default of which
Borrower has knowledge.

         SECTION 5.8. COOPERATE IN LEGAL PROCEEDINGS

         Borrower shall at Borrower's expense cooperate fully with Lender with
respect to any proceedings before any court, board or other Governmental
Authority which may materially and adversely in any way affect the rights of
Lender hereunder or any rights obtained by Lender under any of the other Loan
Documents and, in connection therewith, permit Lender, at its election, to
participate in any such proceedings.

         SECTION 5.9. PERFORMANCE BY BORROWER

         Borrower shall in a timely manner observe, perform and fulfill each and
every covenant, term and provision to be observed and performed by Borrower
under this Agreement and the other Loan Documents and in all material respects,
any other agreement or instrument affecting or pertaining to the Property and
any amendments, modifications or changes thereto.

                                      -24-
<PAGE>

         SECTION 5.10. AWARDS; INSURANCE PROCEEDS

         Borrower shall cooperate with Lender in obtaining for Lender the
benefits of any Awards or Insurance Proceeds lawfully or equitably payable in
connection with the Property, and Lender shall be reimbursed for any expenses
reasonably incurred in connection therewith (including reasonable, actual
attorneys' fees and disbursements, and the payment by Borrower of the expense of
an appraisal on behalf of Lender in case of a Casualty or Condemnation affecting
the Property or any part thereof) out of such Awards or Insurance Proceeds.

         SECTION 5.11. FINANCIAL REPORTING.

         (a)      Borrower and Borrower Principal shall keep adequate books and
records of account in accordance with GAAP, or in accordance with other methods
acceptable to Lender in its sole discretion (for the purposes of this Subsection
5.11(a), Lender accepts Borrower and Borrower Principal's method of accounting
contained in the books, record and statements delivered to and approved by
Lender in connection with the closing of this Loan), consistently applied and
shall furnish to Lender:

                  (i)      quarterly and annual (and prior to a Securitization,
         if requested by Lender, monthly) certified rent rolls signed and dated
         by Borrower, detailing the names of all Tenants of the Improvements,
         the portion of Improvements (in terms of square footage) occupied by
         each Tenant, the base rent, additional rent and any other charges
         payable under each Lease (including annual store sales required to be
         reported by Tenant under any Lease), and the term of each Lease,
         including the commencement and expiration dates and any tenant
         extension, expansion or renewal options, the extent to which any Tenant
         is in default under any Lease, and any other information as is
         reasonably required by Lender, within twenty (20) days after the end of
         each calendar month, thirty (30) days after the end of each fiscal
         quarter or sixty (60) days after the close of each fiscal year of
         Borrower, as applicable;

                  (ii)     quarterly and annual (and prior to a Securitization,
         if requested by Lender, monthly) operating statements of the Property,
         prepared and certified by Borrower in the form reasonably acceptable to
         Lender, detailing the revenues received, the expenses incurred and the
         net operating income before and after debt service (principal and
         interest) and major capital improvements for the period of calculation
         and containing appropriate year-to-date information, within twenty (20)
         days after the end of each calendar month, thirty (30) days after the
         end of each fiscal quarter or sixty (60) days after the close of each
         fiscal year of Borrower, as applicable; and

                  (iii)    annual balance sheets, profit and loss statements,
         statements of cash flows, and statements of change in financial
         position of Borrower and Borrower Principal in the form required by
         Lender, prepared and certified by Borrower and Borrower Principal
         (Lender acknowledges that Borrower Principal's filed 10Q and 10K
         statement shall satisfy this requirement), within ninety (90) days
         after the close of each fiscal year of Borrower and Borrower Principal,
         as the case may be;

         (b)      Upon request from Lender, Borrower shall promptly furnish to
Lender:

                                      -25-
<PAGE>

                  (i)      a property management report for the Property,
         showing the number of inquiries made and/or rental applications
         received from tenants or prospective tenants and deposits received from
         tenants and any other information requested by Lender, in reasonable
         detail and certified by Borrower under penalty of perjury to be true
         and complete, but no more frequently than quarterly;

                  (ii)     an accounting of all security deposits held in
         connection with any Lease of any part of the Property, including the
         name and identification number of the accounts in which such security
         deposits are held, the name and address of the financial institutions
         in which such security deposits are held and the name of the Person to
         contact at such financial institution, along with any authority or
         release necessary for Lender to obtain information regarding such
         accounts directly from such financial institutions; and

                  (iii)    a report of all letters of credit provided by any
         Tenant in connection with any Lease of any part of the Property,
         including the account numbers of such letters of credit, the names and
         addresses of the financial institutions that issued such letters of
         credit and the names of the Persons to contact at such financial
         institutions, along with any authority or release necessary for Lender
         to obtain information regarding such letters of credit directly from
         such financial institutions.

         (c)      Borrower and Borrower Principal shall furnish Lender with such
other additional financial or management information (including state and
federal tax returns) as may, from time to time, be reasonably required by Lender
in form and substance reasonably satisfactory to Lender (including, without
limitation, any financial reports required to be delivered by any Tenant or any
guarantor of any Lease pursuant to the terms of such Lease).

         (d)      All items requiring the certification of Borrower shall,
except where Borrower is an individual, require a certificate executed by the
general partner, managing member, chief executive officer or chief financial
officer of Borrower or Borrower Principal, as applicable (and the same rules
shall apply to any sole shareholder, general partner or managing member which is
not an individual).

         (e)      Without limiting any other rights available to Lender under
this Loan Agreement or any of the other Loan Documents, in the event Borrower
shall fail to timely furnish Lender any financial document or statement in
accordance with this Section 5.11, Borrower shall promptly pay to Lender a
non-refundable charge in the amount of $500 for each such failure. The payment
of such amount shall not be construed to relieve Borrower of any Event of
Default hereunder arising from such failure. Notwithstanding the above, Lender
shall give Borrower a fourteen-day (14-day) notice and cure periods for such
reporting failure which is not to occur more than twice during the term of the
Loan.

         SECTION 5.12. ESTOPPEL STATEMENT

         (a)      After request by Lender, Borrower shall within ten (10)
Business Days furnish Lender with a statement, duly acknowledged and certified,
setting forth to Borrower's knowledge (i) the amount of the original principal
amount of the Note, (ii) the rate of interest on the Note, (iii) the unpaid
principal amount of the Note, (iv) the date installments of interest

                                      -26-
<PAGE>

and/or principal were last paid, (v) any offsets or defenses to the payment of
the Debt, if any, and (vi) that the Note, this Agreement, the Mortgage and the
other Loan Documents are valid, legal and binding obligations and have not been
modified or if modified, giving particulars of such modification.

         (b)      Borrower shall use commercially reasonable efforts to deliver
to Lender, promptly upon request, duly executed estoppel certificates from any
one or more Tenants as required by Lender attesting to such facts regarding the
related Lease as Lender may reasonably require, including, but not limited to
attestations that each Lease covered thereby is in full force and effect with no
defaults thereunder on the part of any party, that none of the Rents have been
paid more than one month in advance, except as security, and that the Tenant
claims no defense or offset against the full and timely performance of its
obligations under the Lease.

         SECTION 5.13. LEASING MATTERS.

         (a)      As long as the Ashworth Lease is in full force and effect, the
following provision shall apply: Notwithstanding anything contained herein to
the contrary, Borrower shall not, without the prior written consent of Lender,
grant any approval under (or permit any approval to be deemed granted under),
enter into any agreement with respect to (including, without limitation, any
non-disturbance agreement), renew, extend, amend, modify, permit any assignment
of, waive any provisions of, terminate, accept the surrender or shorten the term
of, exercise any recapture or enforcement rights with respect to (including,
without limitation, any exercise of rights after a Tenant default), or reduce
Rents, under the Ashworth Lease.

         (b)      If the Ashworth Lease is no longer in full force or effect the
following provisions shall apply:

                  (i)      Borrower may enter into a proposed Lease (including
         the renewal or extension of an existing Lease (a "RENEWAL LEASE"))
         without the prior written consent of Lender, provided such proposed
         Lease or Renewal Lease (1) provides for rental rates and terms
         comparable to existing local market rates and terms (taking into
         account the type and quality of the tenant) as of the date such Lease
         is executed by Borrower (unless, in the case of a Renewal Lease, the
         rent payable during such renewal, or a formula or other method to
         compute such rent, is provided for in the original Lease), (2) is an
         arm's-length transaction with a bona fide, independent third party
         tenant, (3) does not have a materially adverse effect on the value of
         the Property taken as a whole, (4) is subject and subordinate to the
         Mortgage and the Tenant thereunder agrees to attorn to Lender, (5) does
         not contain any option, offer, right of first refusal, or other similar
         right to acquire all or any portion of the Property, (6) has a base
         term of less than fifteen (15) years including options to renew, (7)
         has no rent, credits, free rents or concessions granted thereunder
         (other than those granted generally in accordance with the then current
         market standards for Leases similar to the proposed Lease leasing space
         in properties similar to the Property), and (8) is written on the
         standard form of lease approved by Lender, as such form may be modified
         to incorporate (I) economic terms consistent with the provisions of
         this Section and (II) such other reasonable and customary changes to
         said form which are consist with the provisions of this Section and
         would not, in Borrower's reasonable judgment, have a material adverse
         effect on the value or quality of the

                                      -27-
<PAGE>

         Property or Borrower's ability to repay the Loan. All proposed Leases
         which do not satisfy the requirements set forth in this subsection
         shall be subject to the prior approval of Lender and its counsel, at
         Borrower's expense. Borrower shall promptly deliver to Lender copies of
         all Leases which are entered into pursuant to this subsection together
         with Borrower's certification that it has satisfied all of the
         conditions of this Section.

                  (ii)     Borrower (1) shall observe and perform all the
         obligations imposed upon the landlord under the Leases and shall not do
         or permit to be done anything to impair the value of any of the Leases
         as security for the Debt; (2) shall promptly send copies to Lender of
         all notices of default which Borrower shall send or receive thereunder;
         (3) shall in a commercially reasonable manner enforce all of the
         material terms, covenants and conditions contained in the Leases upon
         the part of the tenant thereunder to be observed or performed; (4)
         shall not collect any of the Rents more than one (1) month in advance
         (except security deposits shall not be deemed Rents collected in
         advance); (5) shall not execute any other assignment of the landlord's
         interest in any of the Leases or the Rents not made in accordance with
         the terms of such Leases; and (6) shall not consent to any assignment
         of or subletting under any Major Leases not in accordance with their
         terms, without the prior written consent of Lender.

                  (iii)    Borrower may, without the prior written consent of
         Lender, amend, modify or waive the provisions of any Lease or
         terminate, reduce Rents under, accept a surrender of space under, or
         shorten the term of, any Lease (including any guaranty, letter of
         credit or other credit support with respect thereto) provided that such
         action (taking into account, in the case of a termination, reduction in
         rent, surrender of space or shortening of term, the planned alternative
         use of the affected space) does not have a materially adverse effect on
         the value of the Property taken as a whole, and provided that such
         Lease, as amended, modified or waived, is otherwise in compliance with
         the requirements of this Agreement and any subordination agreement
         binding upon Lender with respect to such Lease. A termination of a
         Lease with a tenant who is in default beyond applicable notice and
         grace periods shall not be considered an action which has a materially
         adverse effect on the value of the Property taken as a whole. Any
         amendment, modification, waiver, termination, rent reduction, space
         surrender or term shortening which does not satisfy the requirements
         set forth in this subsection shall be subject to the prior approval of
         Lender (not to be unreasonably withheld or delayed) and its counsel, at
         Borrower's expense. Borrower shall promptly deliver to Lender copies of
         amendments, modifications and waivers which are entered into pursuant
         to this subsection together with Borrower's certification that it has
         satisfied all of the conditions of this subsection.

                  (iv)     Notwithstanding anything contained herein to the
         contrary, Borrower shall not, without the prior written consent of
         Lender, enter into, renew, extend, amend, modify, waive any provisions
         of, terminate, reduce Rents under, accept a surrender of space under,
         or shorten the term of any Major Lease.

         (c)      Notwithstanding anything to the contrary contained herein, to
the extent Lender's prior approval is required for any leasing matters set forth
in this Section 5.13, Lender shall have fifteen (15) Business Days from receipt
of written request and all required information and documentation relating
thereto in which to approve or disapprove such matter, provided that such

                                      -28-
<PAGE>

request to Lender is marked in bold lettering with the following language:
"LENDER'S RESPONSE IS REQUIRED WITHIN FIFTEEN (15) BUSINESS DAYS OF RECEIPT OF
THIS NOTICE PURSUANT TO THE TERMS OF A LOAN AGREEMENT BETWEEN THE UNDERSIGNED
AND LENDER" and the envelope containing the request must be marked "PRIORITY-
LENDER'S RESPONSE REQUIRED IN FIFTEEN (15) BUSINESS DAYS". In the event that
Lender fails to respond to the leasing matter in question within such time,
Lender's approval shall be deemed given for all purposes. Borrower shall provide
Lender with such information and documentation as may be reasonably required by
Lender, including, without limitation, lease comparables and other market
information as required by Lender. In the event that Lender does not consent to
any leasing matters set forth in this Section 5.13, Lender shall provide
Borrower with a written explanation for the reason of such denial.

         SECTION 5.14. PROPERTY MANAGEMENT.

         (a)      Borrower shall (i) promptly perform and observe all of the
covenants required to be performed and observed by it under any Management
Agreement entered into during the term of the Loan with lender's prior consent
and do all things necessary to preserve and to keep unimpaired its material
rights thereunder; (ii) promptly notify Lender of any default under the
Management Agreement of which it is aware; (iii) promptly deliver to Lender a
copy of any notice of default or other material notice received by Borrower
under the Management Agreement; (iv) promptly give notice to Lender of any
notice or information that Borrower receives which indicates that the Manager is
terminating the Management Agreement or that the Manager is otherwise
discontinuing its management of the Property; and (v) promptly enforce the
performance and observance of all of the covenants required to be performed and
observed by Manager under the Management Agreement. Any Management Agreement
entered into by Borrower shall be assigned to Lender by an Assignment of
Management Agreement acceptable to Lender and Lender's counsel as additional
collateral for the Loan.

         (b)      If at any time, (i) the Manager shall become insolvent or a
debtor in a bankruptcy proceeding; (ii) an Event of Default has occurred and is
continuing; or (iii) a default has occurred and is continuing under the
Management Agreement, Borrower shall, at the request of Lender, terminate the
Management Agreement upon thirty (30) days prior notice to Manager and replace
Manager with a manager approved by Lender on terms and conditions satisfactory
to Lender, it being understood and agreed that the management fee for the
Manager and any replacement manager shall not exceed then prevailing market
rates.

         (c)      In addition to the foregoing, in the event that Lender, in
Lender's reasonable discretion, at any time prior to the termination of the
Assignment of Management Agreement, determines that the Property is not being
managed in accordance with generally accepted management practices for projects
similarly situated, Lender may deliver written notice thereof to Borrower and
the Manager, which notice shall specify with particularity the grounds for
Lender's determination. If Lender reasonably determines that the conditions
specified in Lender's notice are not remedied to Lender's reasonable
satisfaction by Borrower or the Manager within thirty (30) days from the date of
such notice or that Borrower or the Manager have failed to diligently undertake
correcting such conditions within such thirty (30) day period,

                                      -29-
<PAGE>

Lender may direct Borrower to terminate the Management Agreement and to replace
the Manager with a manager approved by Lender on terms and conditions
satisfactory to Lender, it being understood and agreed that the management fee
for such replacement manager shall not exceed then prevailing market rates.

         (d)      Borrower shall not, without the prior written consent of
Lender (which consent shall not be unreasonably withheld, conditioned or
delayed): (i) surrender, terminate or cancel the Management Agreement or
otherwise replace Manager or enter into any other management agreement with
respect to the Property; (ii) reduce or consent to the reduction of the term of
the Management Agreement; (iii) increase or consent to the increase of the
amount of any charges under the Management Agreement; or (iv) otherwise modify,
change, supplement, alter or amend, or waive or release any of its rights and
remedies under, the Management Agreement in any material respect.

         SECTION 5.15. LIENS

         Subject to Borrower's right to contest same pursuant to the terms of
the Mortgage, Borrower shall not, without the prior written consent of Lender,
create, incur, assume or suffer to exist any Lien on any portion of the Property
or permit any such action to be taken, except Permitted Encumbrances.

         SECTION 5.16. DEBT CANCELLATION

         Borrower shall not cancel or otherwise forgive or release any claim or
debt (other than termination of Leases in accordance herewith) owed to Borrower
by any Person, except for adequate consideration and in the ordinary course of
Borrower's business.

         SECTION 5.17. ZONING

         Subject to Section 7.6, Borrower shall not initiate or consent to any
zoning reclassification of any portion of the Property or seek any variance
under any existing zoning ordinance or use or permit the use of any portion of
the Property in any manner that could result in such use becoming a
non-conforming use under any zoning ordinance or any other applicable land use
law, rule or regulation, without the prior consent of Lender.

         SECTION 5.18. ERISA

         Borrower shall not engage in any transaction which would cause any
obligation, or action taken or to be taken, hereunder (or the exercise by Lender
of any of its rights under the Note, this Agreement or the other Loan Documents)
to be a non-exempt (under a statutory or administrative class exemption)
prohibited transaction under ERISA.

         (a)      Borrower further covenants and agrees to deliver to Lender
such certifications or other evidence from time to time throughout the term of
the Loan, as requested by Lender in its sole discretion, that (i) Borrower is
not and does not maintain an "employee benefit plan" as defined in Section 3(3)
of ERISA, which is subject to Title I of ERISA, or a "governmental plan" within
the meaning of Section 3(3) of ERISA; (ii) Borrower is not subject to state
statutes

                                      -30-
<PAGE>

regulating investments and fiduciary obligations with respect to governmental
plans; and (iii) one or more of the following circumstances is true:

                           (A)      Equity interests in Borrower are publicly
                  offered securities, within the meaning of 29 C.F.R.
                  Section 2510.3-101(b)(2);

                           (B)      Less than twenty-five percent (25%) of each
                  outstanding class of equity interests in Borrower are held by
                  "benefit plan investors" within the meaning of 29 C.F.R.
                  Section 2510.3-101(f)(2); or

                           (C)      Borrower qualifies as an "operating company"
                  or a "real estate operating company" within the meaning of 29
                  C.F.R. Section 2510.3-101(c) or (e).

         SECTION 5.19. NO JOINT ASSESSMENT

         Borrower shall not suffer, permit or initiate the joint assessment of
the Property with (a) any other real property constituting a tax lot separate
from the Property, or (b) any portion of the Property which may be deemed to
constitute personal property, or any other procedure whereby the Lien of any
taxes which may be levied against such personal property shall be assessed or
levied or charged to the Property.

         SECTION 5.20. RECIPROCAL EASEMENT AGREEMENTS

         Except as provided is Section 7.6, Borrower shall not enter into,
terminate or modify any REA without Lender's prior written consent, which
consent shall not be unreasonably withheld, conditioned or delayed. Borrower
shall enforce in a commercially reasonable manner, comply with, and cause each
of the parties to the REA to comply with all of the material economic terms and
conditions contained in the REA.

                                    ARTICLE 6
                                ENTITY COVENANTS

         SECTION 6.1. SINGLE PURPOSE ENTITY/SEPARATENESS

         Until the Debt has been paid in full, Borrower represents, warrants and
covenants as follows:

         (a)      Borrower has not and will not:

                  (i)      engage in any business or activity other than the
         ownership, operation and maintenance of the Property, and activities
         incidental thereto;

                  (ii)     acquire or own any assets other than (A) the
         Property, and (B) such incidental Personal Property as may be necessary
         for the operation of the Property;

                                      -31-
<PAGE>

                  (iii)    merge into or consolidate with any Person, or
         dissolve, terminate, liquidate in whole or in part, transfer or
         otherwise dispose of all or substantially all of its assets or change
         its legal structure;

                  (iv)     fail to observe all Delaware limited liability
         company formalities, or fail to preserve its existence as an entity
         duly organized, validly existing and in good standing (if applicable)
         under the applicable Legal Requirements of the jurisdiction of its
         organization or formation, or amend, modify, terminate or fail to
         comply with the provisions of its organizational documents;

                  (v)      own any subsidiary, or make any investment in, any
         Person;

                  (vi)     commingle its assets with the assets of any other
         Person, or permit any Affiliate or constituent party independent access
         to its bank accounts;

                  (vii)    incur any debt, secured or unsecured, direct or
         contingent (including guaranteeing any obligation), other than (A) the
         Debt, (B) trade and operational indebtedness incurred in the ordinary
         course of business with trade creditors, provided such indebtedness is
         (1) unsecured, (2) not evidenced by a note, (3) on commercially
         reasonable terms and conditions, and (4) due not more than sixty (60)
         days past the date incurred and paid on or prior to such date, and/or
         (C) financing leases and purchase money indebtedness incurred in the
         ordinary course of business relating to Personal Property on
         commercially reasonable terms and conditions; provided however, the
         aggregate amount of the indebtedness described in (B) and (C) shall not
         exceed at any time three percent (3%) of the outstanding principal
         amount of the Note;

                  (viii)   fail to maintain its records, books of account, bank
         accounts, financial statements, accounting records and other entity
         documents separate and apart from those of any other Person; except
         that Borrower's financial position, assets, liabilities, net worth and
         operating results may be included in the consolidated financial
         statements of an Affiliate, provided that such consolidated financial
         statements contain a footnote indicating that Borrower is a separate
         legal entity and that it maintains separate books and records;

                  (ix)     enter into any contract or agreement with any member,
         shareholder, principal, guarantor of the obligations of Borrower, or
         any Affiliate of the foregoing, except upon terms and conditions that
         are intrinsically fair, commercially reasonable and substantially
         similar to those that would be available on an arm's-length basis with
         unaffiliated third parties;

                  (x)      maintain its assets in such a manner that it will be
         costly or difficult to segregate, ascertain or identify its individual
         assets from those of any other Person;

                  (xi)     assume or guaranty the debts of any other Person,
         hold itself out to be responsible for the debts of any other Person, or
         otherwise pledge its assets for the benefit of any other Person or hold
         out its credit as being available to satisfy the obligations of any
         other Person;

                                      -32-
<PAGE>

                  (xii)    make any loans or advances to any Person;

                  (xiii)   if legally required, fail to file its own tax
         returns, or files a consolidated federal income tax return with any
         Person (unless prohibited or required, as the case may be, by
         applicable Legal Requirements);

                  (xiv)    fail either to hold itself out to the public as a
         legal entity separate and distinct from any other Person or to conduct
         its business solely in its own name or fail to correct any known
         misunderstanding regarding its separate identity;

                  (xv)     fail to maintain adequate capital for the normal
         obligations reasonably foreseeable in a business of its size and
         character and in light of its contemplated business operations,
         provided, however, nothing contained in this paragraph (xv) shall
         require the Member (as defined in the Borrower's operating
         agreement)(or any other individual, trust, or entity that may hold a
         direct and/or indirect ownership interest in the Borrower) to
         contribute additional capital or otherwise advance funds to the
         Borrower;

                  (xvi)    if it is a partnership or limited liability company,
         without the unanimous written consent of all of its partners or
         members, as applicable, (a) file or consent to the filing of any
         petition, either voluntary or involuntary, to take advantage of any
         Creditors Rights Laws, (b) seek or consent to the appointment of a
         receiver, liquidator or any similar official, (c) take any action that
         might cause such entity to become insolvent, or (d) make an assignment
         for the benefit of creditors;

                  (xvii)   fail to allocate shared expenses (including, without
         limitation, shared office space and services performed by an employee
         of an Affiliate) among the Persons sharing such expenses and to use
         separate stationery, invoices and checks;

                  (xviii)  fail to remain solvent or pay its own liabilities
         (including, without limitation, salaries of its own employees) only
         from its own funds, provided that there are sufficient funds from the
         operation of the Property to do so to the extent there is sufficient
         cash flow from the operation of the Property;

                  (xix)    acquire obligations or securities of its partners,
         members, shareholders or other affiliates, as applicable; or

                  (xx)     fail to maintain a sufficient number of employees in
         light of its contemplated business operations.

         (b)      If Borrower is a limited partnership or limited liability
company (that is not a Delaware single member limited liability company), each
general partner in the case of a limited partnership, or the managing member in
the case of a limited liability company (each an "SPE COMPONENT ENTITY") of
Borrower, as applicable, shall be a corporation whose sole asset is its interest
in Borrower. Each SPE Component Entity (i) will at all times comply with each of
the covenants, terms and provisions contained in Section 6.1(a)(iii) - (vi) and
(viii) - (xxi), as if such representation, warranty or covenant was made
directly by such SPE Component Entity; (ii) will not engage in any business or
activity other than owning an interest in

                                      -33-
<PAGE>

Borrower; (iii) will not acquire or own any assets other than its partnership,
membership, or other equity interest in Borrower; (iv) will not incur any debt,
secured or unsecured, direct or contingent (including guaranteeing any
obligation); and (v) will cause Borrower to comply with the provisions of this
Section 6.1. Prior to the withdrawal or the disassociation of any SPE Component
Entity from Borrower, Borrower shall immediately appoint a new general partner
or managing member whose articles of incorporation are substantially similar to
those of such SPE Component Entity. Notwithstanding the foregoing, to the extent
Borrower is a single member Delaware limited liability company, so long as
Borrower maintains such formation status, no SPE Component Entity shall be
required.

         (c)      In the event Borrower is a single member Delaware limited
liability company, the limited liability company agreement of Borrower (the "LLC
AGREEMENT") shall provide that (i) upon the occurrence of any event that causes
the sole member of Borrower ("MEMBER") to cease to be the member of Borrower
(other than (A) upon an assignment by Member of all of its limited liability
company interest in Borrower and the admission of the transferee, or (B) the
resignation of Member and the admission of an additional member, in either case
in accordance with the terms of the Loan Documents and the LLC Agreement), the
person executing the LLC Agreement as a "Special Member" (as such term is
defined in the LLC Agreement) ("SPECIAL MEMBER") shall, without any action of
any other Person and simultaneously with the Member ceasing to be the member of
Borrower, automatically be admitted to Borrower and shall continue Borrower
without dissolution and (ii) Special Member may not resign from Borrower or
transfer its rights as Special Member unless a successor Special Member has been
admitted to Borrower as Special Member in accordance with requirements of
Delaware law. The LLC Agreement shall further provide that (i) Special Member
shall automatically cease to be a member of Borrower upon the admission to
Borrower of a substitute Member, (ii) Special Member shall be a member of
Borrower that has no interest in the profits, losses and capital of Borrower and
has no right to receive any distributions of Borrower assets, (iii) pursuant to
Section 18-301 of the Delaware Limited Liability Company Act (the "ACT"),
Special Member shall not be required to make any capital contributions to
Borrower and shall not receive a limited liability company interest in Borrower,
(iv) Special Member, in its capacity as Special Member, may not bind Borrower
and (v) except as required by any mandatory provision of the Act, Special
Member, in its capacity as Special Member, shall have no right to vote on,
approve or otherwise consent to any action by, or matter relating to, Borrower,
including, without limitation, the merger, consolidation or conversion of
Borrower. In order to implement the admission to Borrower of Special Member,
Special Member shall execute a counterpart to the LLC Agreement. Prior to its
admission to Borrower as Special Member, Special Member shall not be a member of
Borrower.

         Upon the occurrence of any event that causes the Member to cease to be
a member of Borrower, to the fullest extent permitted by law, the personal
representative of Member shall, within ninety (90) days after the occurrence of
the event that terminated the continued membership of Member in Borrower, agree
in writing (i) to continue Borrower and (ii) to the admission of the personal
representative or its nominee or designee, as the case may be, as a substitute
member of Borrower, effective as of the occurrence of the event that terminated
the continued membership of Member of Borrower in Borrower. Any action initiated
by or brought against Member or Special Member under any Creditors Rights Laws
shall not cause Member or Special Member to cease to be a member of Borrower and
upon the occurrence of such an event, the business of Borrower shall continue
without dissolution. The LLC Agreement shall provide that each of Member and
Special Member waives any right it might have to agree in writing to

                                      -34-
<PAGE>

dissolve Borrower upon the occurrence of any action initiated by or brought
against Member or Special Member under any Creditors Rights Laws, or the
occurrence of an event that causes Member or Special Member to cease to be a
member of Borrower.

         SECTION 6.2. CHANGE OF NAME, IDENTITY OR STRUCTURE

         Borrower shall not change or permit to be changed (a) Borrower's name,
(b) Borrower's identity (including its trade name or names), (c) Borrower's
principal place of business set forth on the first page of this Agreement, (d)
the corporate, partnership or other organizational structure of Borrower, each
SPE Component Entity (if any), or Borrower Principal, (e) Borrower's state of
organization, or (f) Borrower's organizational identification number, without in
each case notifying Lender of such change in writing at least thirty (30) days
prior to the effective date of such change and, in the case of a change in
Borrower's structure, without first obtaining the prior written consent of
Lender. In addition, Borrower shall not change or permit to be changed any
organizational documents of Borrower or any SPE Component Entity (if any) if
such change would adversely impact the covenants set forth in Section 6.1
hereof. Borrower authorizes Lender to file any financing statement or financing
statement amendment required by Lender to establish or maintain the validity,
perfection and priority of the security interest granted herein. At the request
of Lender, Borrower shall execute a certificate in form satisfactory to Lender
listing the trade names under which Borrower intends to operate the Property,
and representing and warranting that Borrower does business under no other trade
name with respect to the Property. If Borrower does not now have an
organizational identification number and later obtains one, or if the
organizational identification number assigned to Borrower subsequently changes,
Borrower shall promptly notify Lender of such organizational identification
number or change.

         SECTION 6.3. BUSINESS AND OPERATIONS

         Borrower will qualify to do business and will remain in good standing
under the laws of the State as and to the extent the same are legally required
for the ownership, maintenance, management and operation of the Property.

                                    ARTICLE 7
                             NO SALE OR ENCUMBRANCE

         SECTION 7.1. TRANSFER DEFINITIONS

         For purposes of this Article 7 an "AFFILIATED MANAGER" shall mean any
managing agent in which Borrower, Borrower Principal, any SPE Component Entity
(if any) or any affiliate of such entities has, directly or indirectly, any
legal, beneficial or economic interest; "CONTROL" shall mean the power to direct
the management and policies of a Restricted Party, directly or indirectly,
whether through the ownership of voting securities or other beneficial
interests, by contract or otherwise; "RESTRICTED PARTY" shall mean Borrower,
Borrower Principal, any SPE Component Entity (if any), any Affiliated Manager,
or any shareholder, partner, member or non-member manager, or any direct or
indirect legal or beneficial owner of Borrower, Borrower Principal, any SPE
Component Entity (if any), any Affiliated Manager or any non-member manager; and
a "SALE OR PLEDGE" shall mean a voluntary or involuntary sale, conveyance,

                                      -35-
<PAGE>

mortgage, grant, bargain, encumbrance, pledge, assignment, grant of any options
with respect to, or any other transfer or disposition of (directly or
indirectly, voluntarily or involuntarily, by operation of law or otherwise, and
whether or not for consideration or of record) a legal or beneficial interest.

         SECTION 7.2. NO SALE/ENCUMBRANCE

         (a)      Borrower shall not cause or permit a Sale or Pledge of the
Property or any part thereof or any legal or beneficial interest therein nor
permit a Sale or Pledge of an interest in any Restricted Party (in each case, a
"PROHIBITED TRANSFER"), other than pursuant to Leases of space in the
Improvements to Tenants in accordance with the provisions of Section 5.13,
without the prior written consent of Lender.

         (b)      A Prohibited Transfer shall include, but not be limited to,
(i) an installment sales agreement wherein Borrower agrees to sell the Property
or any part thereof for a price to be paid in installments; (ii) an agreement by
Borrower leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Borrower's right, title and interest
in and to any Leases or any Rents; (iii) if a Restricted Party is a corporation,
any merger, consolidation or Sale or Pledge of such corporation's stock or the
creation or issuance of new stock in one or a series of transactions; (iv) if a
Restricted Party is a limited or general partnership or joint venture, any
merger or consolidation or the change, removal, resignation or addition of a
general partner or the Sale or Pledge of the partnership interest of any general
or limited partner or any profits or proceeds relating to such partnership
interests or the creation or issuance of new partnership interests; (v) if a
Restricted Party is a limited liability company, any merger or consolidation or
the change, removal, resignation or addition of a managing member or non-member
manager (or if no managing member, any member) or the Sale or Pledge of the
membership interest of any member or any profits or proceeds relating to such
membership interest; (vi) if a Restricted Party is a trust or nominee trust, any
merger, consolidation or the Sale or Pledge of the legal or beneficial interest
in a Restricted Party or the creation or issuance of new legal or beneficial
interests; or (vii) the removal or the resignation of the Manager (including,
without limitation, an Affiliated Manager) other than in accordance with Section
5.14.

         SECTION 7.3. PERMITTED TRANSFERS

         Notwithstanding the provisions of Section 7.2, the following transfers
shall not be deemed to be a Prohibited Transfer: (a) a transfer by devise or
descent or by operation of law upon the death of a member, partner or
shareholder of a Restricted Party, so long as Borrower delivers notice to Lender
as soon as practicable thereafter and that such Restricted Party is promptly
reconstituted, if applicable, following the death of such member, partner or
shareholder; (b) transfers for estate planning purposes of an individual's
interests in any Restricted Party to the spouse or any lineal descendant of such
individual, or to a trust for the benefit of any one or more of such individual,
spouse or lineal descendant, so long as such Restricted Party is reconstituted,
if applicable, following such transfer so long as there is no change in Control
of such Restricted Party as a result of such transfer; (c) the Sale or Pledge,
in one or a series of transactions, of not more than forty-nine percent (49%) of
the stock, limited partnership interests or non-managing membership interests
(as the case may be) in a Restricted

                                      -36-
<PAGE>

Party; provided, however, no such transfers shall result in a change in Control
in the Restricted Party or change in control of the Property, and as a condition
to each such transfer, Lender shall receive not less than thirty (30) days prior
written notice of such proposed transfer or (d) the sale, transfer or issuance
of stock in Ashworth Inc. or any owner of the stock of Ashworth Inc., provided
such stock is listed on the New York Stock Exchange or such other nationally
recognized stock exchange.

         SECTION 7.4. LENDER'S RIGHTS

         Lender reserves the right to condition the consent to a Prohibited
Transfer requested hereunder upon (a) a modification of the terms hereof and an
assumption of the Note and the other Loan Documents as so modified by the
proposed Prohibited Transfer, (b) receipt of payment of a transfer fee equal to
one-half percent (0.5%) of the outstanding principal balance of the Loan and all
of Lender's reasonable out-of-pocket expenses incurred in connection with such
Prohibited Transfer, (c) receipt of written confirmation from the Rating
Agencies that the Prohibited Transfer will not result in a downgrade, withdrawal
or qualification of the initial, or if higher, then current ratings issued in
connection with a Securitization, or if a Securitization has not occurred, any
ratings to be assigned in connection with an impending Securitization, (d) the
proposed transferee's continued compliance with the covenants set forth in this
Agreement (including, without limitation, the covenants in Article 6) and the
other Loan Documents, (e) a new manager for the Property and a new management
agreement satisfactory to Lender, if applicable, and (f) the satisfaction of
such other conditions and/or legal opinions as Lender may reasonably request.
All expenses incurred by Lender shall be payable by Borrower whether or not
Lender consents to the Prohibited Transfer. Lender shall not be required to
demonstrate any actual impairment of its security or any increased risk of
default hereunder in order to declare the Debt immediately due and payable upon
a Prohibited Transfer made without Lender's consent. This provision shall apply
to each and every Prohibited Transfer, whether or not Lender has consented to
any previous Prohibited Transfer.

         SECTION 7.5. ASSUMPTION

         Notwithstanding the foregoing provisions of this Article 7, following
the date which is six (6) months from the Closing Date, Lender shall not
unreasonably withhold consent to a transfer of the Property in its entirety to,
and the related assumption of the Loan by, any Person (a "TRANSFEREE") provided
that each of the following terms and conditions are satisfied:

         (a)      no Event of Default has occurred and is continuing;

         (b)      Borrower shall have (i) delivered written notice to Lender of
the terms of such prospective transfer not less than sixty (60) days before the
date on which such transfer is scheduled to close and, concurrently therewith,
all such information concerning the proposed Transferee as Lender shall
reasonably require and (ii) paid to Lender a non-refundable processing fee in
the amount of $5,000. Lender shall have the right to approve or disapprove the
proposed transfer based on its then current underwriting and credit requirements
for similar loans secured by similar properties which loans are sold in the
secondary market, such approval not to be unreasonably withheld. In determining
whether to give or withhold its approval of the proposed transfer, Lender shall
consider the experience and track record of Transferee and its

                                      -37-
<PAGE>

principals in owning and operating facilities similar to the Property, the
financial strength of Transferee and its principals, the general business
standing of Transferee and its principals and Transferee's and its principals'
relationships and experience with contractors, vendors, tenants, lenders and
other business entities; provided, however, that, notwithstanding Lender's
agreement to consider the foregoing factors in determining whether to give or
withhold such approval, such approval shall be given or withheld based on what
Lender determines to be commercially reasonable and, if given, may be given
subject to such conditions as Lender may deem reasonably appropriate;

         (c)      Borrower shall have paid to Lender, concurrently with the
closing of such transfer, (i) a non-refundable assumption fee in an amount equal
to one-half percent (0.5%) of the then outstanding principal balance of the
Note, and (ii) all reasonable out-of-pocket costs and expenses, including
reasonable attorneys' fees, incurred by Lender in connection with the transfer;

         (d)      (i) Transferee shall have assumed and agreed to pay the Debt
as and when due subject to the provisions of Article 15 hereof and, prior to or
concurrently with the closing of such transfer, Transferee and its constituent
partners, members or shareholders as Lender may require, shall have executed,
without any cost or expense to Lender, such documents and agreements as Lender
shall reasonably require to evidence and effectuate said assumption and (ii) a
Person affiliated with Transferee and acceptable to Lender shall have assumed
the obligations of Borrower Principal under the Loan Documents with respect to
all acts and events occurring or arising after the transfer of the Property
pursuant to this Section 7.5;

         (e)      Borrower and Transferee, without any cost to Lender, shall
furnish any information reasonably requested by Lender for the preparation of,
and shall authorize Lender to file, new financing statements and financing
statement amendments and other documents to the fullest extent permitted by
applicable law, and shall execute any additional documents reasonably requested
by Lender;

         (f)      Borrower shall have delivered to Lender, without any cost or
expense to Lender, such endorsements to Lender's Title Insurance Policy insuring
that fee simple or leasehold title to the Property, as applicable, is vested in
Transferee (subject to Permitted Encumbrances), hazard insurance endorsements or
certificates and other similar materials as Lender reasonably may deem necessary
at the time of the transfer, all in form and substance reasonably satisfactory
to Lender;

         (g)      Transferee shall have furnished to Lender, if Transferee is a
corporation, partnership, limited liability company or other entity, all
appropriate papers evidencing Transferee's organization and good standing, and
the qualification of the signers to execute the assumption of the Debt, which
papers shall include certified copies of all documents relating to the
organization and formation of Transferee and of the entities, if any, which are
partners or members of Transferee. Transferee and such constituent partners,
members or shareholders of Transferee (as the case may be), as Lender shall
require, shall comply with the covenants set forth in Article 6 hereof;

                                      -38-
<PAGE>

         (h)      if applicable, Transferee shall assume the obligations of
Borrower under any Management Agreement or provide a new management agreement
with a new manager which meets with the requirements of Section 5.14 hereof and
assign to Lender as additional security such new management agreement;

         (i)      Transferee shall furnish an opinion of counsel satisfactory to
Lender and its counsel (A) that Transferee's formation documents provide for the
matters described in subparagraph (g) above, (B) that the assumption of the Debt
has been duly authorized, executed and delivered, and that the Note, the
Mortgage, this Agreement, the assumption agreement and the other Loan Documents
are valid, binding and enforceable against Transferee in accordance with their
terms, (C) that Transferee and any entity which is a controlling stockholder,
member or general partner of Transferee, have been duly organized, and are in
existence and good standing, and (D) with respect to such other matters as
Lender may reasonably request;

         (j)      if required by Lender, Lender shall have received confirmation
in writing from the Rating Agencies that rate the Securities to the effect that
the transfer will not result in a qualification, downgrade or withdrawal of any
rating initially assigned or to be assigned to the Securities if a
Securitization is pending; and

         (k)      Borrower's obligations under the contract of sale pursuant to
which the transfer is proposed to occur shall expressly be subject to the
satisfaction of the terms and conditions of this Section 7.5.

A consent by Lender with respect to a transfer of the Property in its entirety
to, and the related assumption of the Loan by, a Transferee pursuant to this
Section 7.5 shall not be construed to be a waiver of the right of Lender to
consent to any subsequent Sale or Pledge of the Property. Upon the transfer of
the Property pursuant to this Section 7.5, Borrower and Borrower Principal shall
be relieved all of liability under the Loan Documents for acts, events or
circumstances occurring or arising after the date of such transfer, except to
the extent that such acts, events or circumstances are the proximate result of
acts, events or circumstances that existed prior to the date of such transfer.

         SECTION 7.6. RELEASE PARCEL.

         (a)      In the event Borrower desires to obtain a partial release of
the Lien of the Mortgage from a Release Parcel, Lender shall release the Lien of
the Mortgage (and related Loan Documents) from such Release Parcel upon
satisfaction of the following conditions precedent:

                  (i)      Borrower shall provide Lender not less than thirty
(30) days notice (or a shorter period of time if permitted by Lender in its sole
discretion) specifying a date which date shall not be earlier than October 1,
2005 (the "PARTIAL RELEASE DATE") on which the partial release is to occur,
provided, however, that Borrower may postpone the Partial Release Date from time
to time as long as the extended date is at least five (5) Business Days after
notice of such extension;

                  (ii)     Borrower shall have delivered to Lender at Borrower's
option, (A) an endorsement to the Title Insurance Policy (which would be
satisfied by an acceptable CLTA 116.7 and 123.1 or 123.2 (as applicable, with
parking) endorsements to title), (B) an opinion of

                                      -39-
<PAGE>

counsel (from counsel reasonably acceptable to Lender), (C) a certificate of an
architect (from an architect reasonably acceptable to Lender and licensed to
practice in the State) or (D) a letter from the appropriate Governmental
Authority indicating that the Release Parcel has been legally subdivided for
zoning lot purposes from the portion of the Property that would remain
encumbered by the Lien of the Mortgage after the release of the Release Parcel
(the "REMAINING PROPERTY") pursuant to a zoning lot subdivision in accordance
with applicable Legal Requirements and that the Release Parcel and Remaining
Property are each otherwise in compliance with all applicable zoning Legal
Requirements;

                  (iii)    Borrower shall have delivered to Lender, at
Borrower's option, (A) an endorsement to the Title Insurance Policy, (B) an
opinion of counsel (from counsel reasonably acceptable to Lender); or (C) a
certificate of an architect (from an architect reasonably acceptable to Lender
and licensed to practice in the State), indicating that the Remaining Property
separately conforms to and is in material compliance with all applicable Legal
Requirements and constitutes a separate tax lot(s), provided, however, that if
the Remaining Property and the Release Parcel have not been assessed as separate
tax lots on or before the Partial Release Date, then the conditions of this
subsection (v) relating to separate tax lot(s) shall be satisfied if (X)
(1)Borrower delivers to Lender an opinion of counsel (from counsel reasonably
acceptable to Lender); (2) a letter from the appropriate Governmental Authority,
(3) an endorsement to the Title Insurance Policy or (4) any other letter or
certification that Lender deems acceptable to conclude that Borrower has
performed all actions and obtained all consents necessary in order for the
Remaining Property and the Release Parcel to be assessed as separate tax lots
and that the only actions required in order for separate tax lots to be created
are purely ministerial acts by the applicable taxing authority (such as
assigning tax parcel identification numbers) and that separate tax lots will be
created in the ordinary course no later than six (6) months after the Partial
Release Date, (Y) Borrower delivers to Lender evidence that the transferee of
the Release Parcel has agreed to pay its pro rata share of Taxes allocable to
the Release Parcel until such parcel is separately assessed (and thereafter is
responsible for all Taxes assessed against the Release Parcel) and (Z) the
amount of funds held in the Tax and Insurance Account, if any, on account of the
Remaining Property shall be determined based upon the Taxes due on both the
Remaining Property and the Release Parcel and deposits in such amounts into the
Tax and Insurance Account shall continue, until the Remaining Property and the
Release Parcel are assessed as separate tax lots and Borrower delivers one of
the items described in (A) through (C) above (in which event, Lender shall use
only the Taxes due in connection with the Remaining Property as a basis for
determining deposits into the Tax Account on account of the Remaining Property);

                  (iv)     Borrower shall have delivered to Lender a certificate
from an architect or engineer (from an architect or engineer reasonably
acceptable to Lender and licensed to practice in the State), a Title Policy
Endorsement or other evidence reasonably satisfactory to Lender and an Officer's
Certificate with supporting documentation indicating that (A) the Release Parcel
is not necessary for the uses of the Remaining Property, including, without
limitation, for support, access, driveways, parking, utilities, drainage flows
or any other purpose, (after giving effect to any easements therefore reserved
over the Release Parcel for the benefit of the Remaining Property) and (B)
sufficient parking remains on the Remaining Property to comply with the Ashworth
Lease, with any applicable REA and all applicable Legal Requirements, and which
is adequate for the proper use and enjoyment of the Remaining Property;

                                      -40-
<PAGE>

                  (v)      if required to do so in order to satisfy applicable
Legal Requirements, Borrower shall have delivered to Lender evidence that
Borrower and other parties to the Release Parcel REA have signed the Release
Parcel REA substantially in the form attached hereto as Exhibit B and have
complied with all requirements of and obtained all approvals required under the
Release Parcel REA;

                  (vi)     Borrower shall have delivered a survey of the Release
Parcel and the Remaining Property prepared by a surveyor licensed in the State
which conforms to the metes and bounds description attached as Exhibit C-1.
Lender shall have the right to use its reasonable discretion to approve any
variation to the attached metes and bounds description;

                  (vii)    Borrower shall have delivered to Lender on the date
of the release an endorsement to the Title Insurance Policy insuring the
Mortgage reflecting the partial release and (A) insuring Lender's interest in
any easements created in connection with the partial release, (B) extending the
effective date of such Title Insurance Policy to the effective date of the
partial release, and (C) confirming no change in the priority of the Mortgage on
the Remaining Property or in the amount of the insurance or the coverage under
such Title Insurance Policy;

                  (viii)   Borrower shall deliver to Lender an Officer's
Certificate certifying that the requirements set forth in this Section 7.6 have
been satisfied;

                  (ix)     if the Loan is part of a Securitization, Lender shall
have received confirmation in writing from the Rating Agencies to the effect
that the partial release and the anticipated improvements to be placed on the
Release Parcel will not result in a withdrawal, qualification or downgrade of
the respective ratings in effect immediately prior to such partial release for
the Securities issued in connection with the Securitization that are then
outstanding;

                  (x)      if the Loan is part of a Securitization, Borrower
shall deliver to Lender an opinion of counsel acceptable to Lender and the
Rating Agencies (issued by counsel acceptable to Lender and the Rating Agencies)
that the consummation of the transactions contemplated under this Section 7.6
would not constitute a "significant modification" of the Loan under Section 1001
of the IRS Code or otherwise cause a tax to be imposed on a "prohibited
transaction" by any REMIC Trust;

                  (xi)     No Event of Default shall exist hereunder;

                  (xii)    Borrower shall deliver to Lender such other
certificates, documents or instruments as Lender may reasonably request; and

                  (xiii)   Borrower shall pay all costs and expenses of Lender
incurred in connection with the partial release, including Lender's reasonable
attorneys' fees and expenses.

         (b)      In addition to requirements set forth in subsection (a) above
(with the exception of the requirement set forth under (a)(iv), and (a)(v) which
shall not be applicable), if Borrower desires to obtain a parcel release of the
Lien of the Mortgage from the Release Parcel in order to facilitate the addition
or expansion of improvements on the Property for retail, office or warehouse
purposes, which addition or expansion shall be compatible with the use and
operation of the Property as a warehouse/distribution center (the "EXPANSION")
Lender shall release the

                                      -41-
<PAGE>

Lien of the Mortgage (and the Related Loan Documents) from such Release Parcel
upon satisfaction of the following conditions precedent:

                  (i)      Borrower shall have delivered to Lender preliminary
plans and drawings for the improvements to be built on the Release Parcel
together with a certificate from an architect (licensed to practice in the State
in which the Property is located and reasonably acceptable to Lender) certifying
that such plans and drawings and the improvements to be constructed pursuant
thereto will comply with all Legal Requirements, including that Borrower shall
be able to obtain a new or amended certificate of occupancy for the improvements
upon completion of the improvements (to the extent that a determination of
compliance can be made generally on the basis of preliminary plans and
drawings), and Lender shall have approved such plans and drawings, which
approval shall be reasonable to an institutional lender and not be unreasonably
conditioned, withheld or delayed;

                  (ii)     Borrower shall have delivered to Lender a certificate
from an architect or engineer (licensed to practice in the State in which the
Property is located and reasonably acceptable to Lender) to the effect that any
improvements proposed to be built on the Release Parcel will not adversely
affect the structural integrity of the Remaining Property;

                  (iii)    Borrower shall have delivered to Lender an Officer's
Certificate as to the proposed use of such Release Parcel, its compatibility
with a warehouse/distribution center and its effects on the operation and use of
the Remaining Property;

                  (iv)     In place of the metes and bounds description attached
as Exhibit C-1, Borrower shall have delivered a survey of the Release Parcel and
the Remaining Property prepared by a surveyor licensed in the State which
conforms to the metes and bounds description attached as Exhibit C-2. Lender
shall have the right to use its reasonable discretion to approve any variation
to the attached metes and bounds description;

                  (v)      Borrower shall have delivered to Lender evidence that
Borrower and other parties to the Release Parcel REA have signed the Release
Parcel REA substantially in the form attached hereto as Exhibit B and have
complied with all requirements of and obtained all approvals required under the
Release Parcel REA

                  (vi)     The transferee of the Release Parcel shall be
responsible for all costs and expenses associated with the design, construction,
maintenance and repair of all improvements associated with the Expansion; and

                  (vii)    Borrower Principal shall provide Lender with a
completion guaranty for the benefit of Borrower and its successors and/or
assigns in a form that is satisfactory to Lender with respect to any demolition,
construction, or other work done or proposed to be done on or affecting the
Remaining Property in connection with the Expansion;

(c)      If Borrower has elected to obtain a partial release of the Release
Parcel from the Lien of the Mortgage and the requirements of this Section 7.6
have been satisfied, the Release Parcel shall be released from the Lien of the
Mortgage and other related Loan Documents, and Lender shall consent to, and
subordinate the Lien of the Mortgage encumbering the Remaining Property to, the
Release Parcel REA delivered in connection with such partial release. In
connection

                                      -42-
<PAGE>

therewith, Borrower shall submit to Lender, not less than thirty (30) days prior
to the Partial Release Date (or such shorter time as is acceptable to Lender in
its sole discretion), a partial release of Lien of the Mortgage and other
applicable, related Loan Documents for execution by Lender and a consent and
subordination to the REA for execution by Lender. Such partial release and
consent and subordination shall be in a form appropriate in the jurisdiction in
which the Remaining Property and the Release Parcel are located and shall
contain standard provisions protecting the rights of a releasing lender with
respect to the Remaining Property. In addition, Borrower shall provide all other
documentation Lender reasonably requires to be delivered by Borrower in
connection with such partial release, together with an Officer's Certificate
certifying that such documentation (i) is in compliance with all Legal
Requirements, and (ii) will effect such partial release in accordance with the
terms of this Agreement. Borrower shall pay all reasonable costs, taxes and
expenses associated with the partial release of the Lien of the Mortgage,
including Lender's reasonable attorneys' fees. Borrower shall cause title to the
Release Parcel to be transferred to and held by a Person other than Borrower.
Lender's release of the Release Parcel shall be deemed to mean that Borrower has
satisfied or that Lender has waived any of the required conditions set forth
within this Section 7.6.

                                    ARTICLE 8
                 INSURANCE; CASUALTY; CONDEMNATION; RESTORATION

         SECTION 8.1. INSURANCE.

         (a)      Borrower shall obtain and maintain, or cause to be maintained,
at all times insurance for Borrower and the Property providing at least the
following coverages:

                  (i)      comprehensive "special causes of loss" insurance on
         the Improvements and the Personal Property, in each case (A) in an
         amount equal to not less than one hundred percent (100%) of the "Full
         Replacement Cost," which for purposes of this Agreement shall mean
         actual replacement value (exclusive of costs of excavations,
         foundations, underground utilities and footings); (B) containing an
         agreed amount endorsement with respect to the Improvements and Personal
         Property or a waiver of all co-insurance provisions; (C) providing for
         no deductible in excess of $10,000 for all such insurance coverage; and
         (D) if any of the Improvements or the use of the Property shall at any
         time constitute legal non-conforming structures or uses, providing
         coverage for contingent liability from Operation of Building Laws,
         Demolition Costs and Increased Cost of Construction Endorsements and
         containing an "Ordinance or Law Coverage" or "Enforcement" endorsement.
         In addition, Borrower shall obtain: (y) if any portion of the
         Improvements is currently or at any time in the future located in a
         "special flood hazard area" designated by the Federal Emergency
         Management Agency, flood hazard insurance in an amount equal to the
         maximum amount of such insurance available under the National Flood
         Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the
         National Flood Insurance Reform Act of 1994, as each may be amended;
         and (z) earthquake insurance in amounts and in form and substance
         reasonably satisfactory to Lender in the event the Property is located
         in an area with a high degree of seismic risk, provided that the
         insurance pursuant to clauses (y) and (z) hereof shall be on terms
         consistent with the comprehensive special causes of loss insurance
         policy required under this subsection (i);

                                      -43-
<PAGE>

                  (ii)     Commercial General Liability insurance against claims
         for personal injury, bodily injury, death or property damage occurring
         upon, in or about the Property, with such insurance (A) to be on a per
         occurrence basis with a general aggregate limit of not less than
         $2,000,000 and a per occurrence limit of not less than $1,000,000; and
         (B) to continue at not less than the aforesaid limit until required to
         be changed by Lender in writing by reason of changed economic
         conditions making such protection inadequate;

                  (iii)    loss of rents insurance or business income insurance,
         as applicable, (A) with loss payable to Lender; (B) covering all risks
         required to be covered by the insurance provided for in subsection (i)
         above; and (C) which provides that after the physical loss to the
         Improvements and Personal Property occurs, the loss of rents or income,
         as applicable, will be insured until completion of Restoration or the
         expiration of twelve (12) months, whichever first occurs, and
         notwithstanding that the policy may expire prior to the end of such
         period; and (D) which contains an extended period of indemnity
         endorsement which provides that after the physical loss to the
         Improvements and Personal Property has been repaired, the continued
         loss of income will be insured until such income either returns to the
         same level it was at prior to the loss, or the expiration of twelve
         (12) months from the date that the Property is repaired or replaced and
         operations are resumed, whichever first occurs, and notwithstanding
         that the policy may expire prior to the end of such period. For hotels,
         motels, health care, and other property types without a standard rent
         roll, the amount of business income insurance required shall be not
         less than eighteen (18) months of debt service, taxes, insurance, and
         other fixed expenses. The amount of such loss of rents or business
         income insurance, as applicable, shall be determined prior to the date
         hereof and at least once each year thereafter based on Borrower's
         reasonable estimate of the gross income from the Property for the
         succeeding period of coverage as required above. All proceeds payable
         to Lender pursuant to this subsection shall be held by Lender and shall
         be applied to the obligations secured by the Loan Documents from time
         to time due and payable hereunder and under the Note; provided,
         however, that nothing herein contained shall be deemed to relieve
         Borrower of its obligations to pay the obligations secured by the Loan
         Documents on the respective dates of payment provided for in the Note,
         this Agreement and the other Loan Documents except to the extent such
         amounts are actually paid out of the proceeds of such loss of rents or
         business income insurance, as applicable;

                  (iv)     at all times during which structural construction,
         repairs or alterations are being made with respect to the Improvements,
         and only if the Property coverage form does not otherwise apply, (A)
         owner's contingent or protective liability insurance covering claims
         not covered by or under the terms or provisions of the above mentioned
         commercial general liability insurance policy; and (B) the insurance
         provided for in subsection (i) above written in a so-called Builder's
         Risk Completed Value form (1) on a non-reporting basis, (2) against
         "special causes of loss" insured against pursuant to subsection (i)
         above, (3) including permission to occupy the Property, and (4) with an
         agreed amount endorsement waiving co-insurance provisions;

                  (v)      workers' compensation, subject to the statutory
         limits of the State, and employer's liability insurance in respect of
         any work or operations on or about the Property, or in connection with
         the Property or its operation (if applicable);

                                      -44-
<PAGE>

                  (vi)     comprehensive boiler and machinery insurance, if
         applicable, in amounts as shall be reasonably required by Lender on
         terms consistent with the commercial property insurance policy required
         under subsection (i) above;

                  (vii)    excess liability insurance in an amount not less than
         $5,000,000 per occurrence on terms consistent with the commercial
         general liability insurance required under subsection (ii) above; and

                  (viii)   upon sixty (60) days' written notice, such other
         reasonable insurance and in such reasonable amounts as Lender from time
         to time may reasonably request against such other insurable hazards
         which at the time are commonly insured against for property similar to
         the Property located in or around the region in which the Property is
         located.

         With respect to the Policies required to be maintained pursuant to
clauses (i) through (viii) above, Borrower shall maintain insurance coverage
against Losses resulting from acts of terrorism, provided that such insurance is
available at commercially reasonable rates.

         (b)      All insurance provided for in Section 8.1(a) shall be obtained
under valid and enforceable policies (collectively, the "POLICIES" or in the
singular, the "POLICY"), and shall be subject to the approval of Lender as to
insurance companies, amounts, deductibles, loss payees and insureds. The
Policies shall be issued by financially sound and responsible insurance
companies authorized to do business in the State and having a claims paying
ability rating of "BBB" or better by S&P and "Baa2" by Moody's (or such other
ratings promulgated from time to time by S&P and Moody's for properties and
transactions similar in type and size to the Property and the Loan) and/or a
general policy rating of "A" or better and a financial class of VIII or better
by A.M. Best Company, Inc. The Policies described in Section 8.1(a) shall
designate Lender and its successors and assigns as additional insureds,
mortgagees and/or loss payee as deemed appropriate by Lender. To the extent such
Policies are not available as of the Closing Date, Borrower shall deliver to
Lender prior to the Closing Date an Accord 28 (or similar) certificate and, as
soon as available after the Closing Date, certified copies of all Policies. Not
less than ten (10) days prior to the expiration dates of any insurance coverage
in place with respect to the Property, Borrower shall deliver to Lender an
Accord 28 (or similar) certificate, accompanied by evidence satisfactory to
Lender of payment of the premiums due in connection therewith (the "INSURANCE
PREMIUMS"), and, as soon as available thereafter, certified copies of all
renewal Policies.

         (c)      Any blanket insurance Policy shall specifically allocate to
the Property the amount of coverage from time to time required hereunder and
shall otherwise provide the same protection as would a separate Policy insuring
only the Property in compliance with the provisions of Section 8.1(a).

         (d)      All Policies provided for or contemplated by Section 8.1(a),
except for the Policy referenced in Section 8.1(a)(v), shall name Borrower as
the insured and Lender as the additional insured, as its interests may appear,
and in the case of property damage, boiler and machinery, flood and earthquake
insurance, shall contain a standard non-contributing mortgagee clause in favor
of Lender providing that the loss thereunder shall be payable to Lender.

                                      -45-
<PAGE>

         (e)      All Policies provided for in Section 8.1(a) shall contain
clauses or endorsements to the effect that:

                  (i)      no act or negligence of Borrower, or anyone acting
         for Borrower, or of any Tenant or other occupant, or failure to comply
         with the provisions of any Policy, which might otherwise result in a
         forfeiture of the insurance or any part thereof, shall in any way
         affect the validity or enforceability of the insurance insofar as
         Lender is concerned;

                  (ii)     the Policies shall not be materially changed (other
         than to increase the coverage provided thereby) or canceled without at
         least thirty (30) days' prior written notice to Lender and any other
         party named therein as an additional insured;

                  (iii)    the issuers thereof shall give written notice to
         Lender if the Policies have not been renewed thirty (30) days prior to
         its expiration;

                  (iv)     Lender shall not be liable for any Insurance Premiums
         thereon or subject to any assessments thereunder; and

                  (v)      the Policies do not contain an exclusion for acts of
         terrorism.

         (f)      If at any time Lender is not in receipt of written evidence
that all insurance required hereunder is in full force and effect, Lender shall
have the right, without notice to Borrower, to take such action as Lender deems
necessary to protect its interest in the Property, including, without
limitation, obtaining such insurance coverage as Lender in its sole discretion
deems appropriate. All premiums incurred by Lender in connection with such
action or in obtaining such insurance and keeping it in effect shall be paid by
Borrower to Lender upon demand and, until paid, shall be secured by the Mortgage
and shall bear interest at the Default Rate.

         SECTION 8.2. CASUALTY

         If the Property shall be damaged or destroyed, in whole or in part, by
fire or other casualty (a "CASUALTY"), Borrower shall give prompt notice of such
damage to Lender and provided all insurance proceeds are made available to
Borrower shall promptly commence and diligently prosecute the Restoration of the
Property in accordance with Section 8.4. Subject to the preceding sentence,
Borrower shall pay all costs of such Restoration whether or not such costs are
covered by insurance. Lender may, but shall not be obligated to make proof of
loss if not made promptly by Borrower. Borrower shall adjust all claims for
Insurance Proceeds in consultation with, and approval of, Lender not to be
unreasonably withheld; provided, however, if an Event of Default has occurred
and is continuing, Lender shall have the exclusive right to participate in the
adjustment of all claims for Insurance Proceeds.

         SECTION 8.3. CONDEMNATION

         Borrower shall promptly give Lender notice of the actual or threatened
commencement of any proceeding for the Condemnation of the Property of which
Borrower has knowledge and shall deliver to Lender copies of any and all papers
served in connection with such proceedings.

                                      -46-
<PAGE>

Lender may participate in any such proceedings, and Borrower shall from time to
time deliver to Lender all instruments requested by it to permit such
participation. Borrower shall, at its expense, diligently prosecute any such
proceedings, and shall consult with Lender, its attorneys and experts, and
cooperate with them in the carrying on or defense of any such proceedings.
Notwithstanding any taking by any public or quasi-public authority through
Condemnation or otherwise (including but not limited to any transfer made in
lieu of or in anticipation of the exercise of such taking), Borrower shall
continue to pay the Debt at the time and in the manner provided for its payment
in the Note and in this Agreement and the Debt shall not be reduced until any
Award shall have been actually received and applied by Lender, after the
deduction of reasonable out-of-pocket expenses of collection, to the reduction
or discharge of the Debt. Lender shall not be limited to the interest paid on
the Award by the condemning authority but shall be entitled to receive out of
the Award interest at the rate or rates provided herein or in the Note. If the
Property or any portion thereof is taken by a condemning authority, Borrower
shall promptly commence and diligently prosecute the Restoration of the Property
and otherwise comply with the provisions of Section 8.4, provided that Lender
makes any Net Proceeds available pursuant to Section 8.4. If the Property is
sold, through foreclosure or otherwise, prior to the receipt by Lender of the
Award, Lender shall have the right, whether or not a deficiency judgment on the
Note shall have been sought, recovered or denied, to receive the Award, or a
portion thereof sufficient to pay the Debt.

         SECTION 8.4. RESTORATION

         The following provisions shall apply in connection with the Restoration
of the Property:

         (a)      If the Net Proceeds shall be less than $250,000 and the costs
of completing the Restoration shall be less than $250,000, the Net Proceeds will
be disbursed by Lender to Borrower upon receipt, provided that all of the
conditions set forth in Section 8.4(b)(i) are met and Borrower delivers to
Lender a written undertaking to expeditiously commence and to satisfactorily
complete with due diligence the Restoration in accordance with the terms of this
Agreement.

         (b)      If the Net Proceeds are equal to or greater than $250,000 or
the costs of completing the Restoration are equal to or greater than $250,000,
Lender shall make the Net Proceeds available for the Restoration in accordance
with the provisions of this Section 8.4. The term "NET PROCEEDS" for purposes of
this Section 8.4 shall mean: (i) the net amount of all insurance proceeds
received by Lender pursuant to Section 8.1 (a)(i), (iv), (vi) and (viii) as a
result of a Casualty, after deduction of its reasonable out-of-pocket costs and
expenses (including, but not limited to, reasonable outside counsel fees), if
any, in collecting the same ("INSURANCE PROCEEDS"), or (ii) the net amount of
the Award as a result of a Condemnation, after deduction of its reasonable
out-of-pocket costs and expenses (including, but not limited to, reasonable
outside counsel fees), if any, in collecting the same ("CONDEMNATION PROCEEDS"),
whichever the case may be.

                  (i)      The Net Proceeds shall be made available to Borrower
         for Restoration provided that each of the following conditions are met:

                           (A)      no Event of Default shall have occurred and
                  be continuing;

                                      -47-
<PAGE>

                           (B)      (1) in the event the Net Proceeds are
                  Insurance Proceeds, less than thirty percent (30%) of the
                  total floor area of the Improvements on the Property has been
                  damaged, destroyed or rendered unusable as a result of a
                  Casualty and the amount of damage does not exceed thirty
                  percent (30%) of the Property's fair market value immediately
                  prior to the occurrence of such Casualty, or (2) in the event
                  the Net Proceeds are Condemnation Proceeds, less than ten
                  percent (10%) of the land constituting the Property is taken,
                  such land is located along the perimeter or periphery of the
                  Property, and less than fifteen percent (15%) of the aggregate
                  floor area of the Improvements is taken and the taking does
                  not exceed fifteen percent (15%) of the Property's fair market
                  value immediately prior to the occurrence of such taking;

                           (C)      The Ashworth Lease (or if the Ashworth Lease
                  shall not be in effect Leases covering in the aggregate at
                  least seventy-five percent (75%) of the total rentable space
                  in the Property which has been demised under executed and
                  delivered Leases in effect as of the date of the occurrence of
                  such Casualty or Condemnation, whichever the case may be), and
                  each Major Lease in effect as of such date shall remain in
                  full force and effect during and after the completion of the
                  Restoration without abatement of rent beyond the time required
                  for Restoration;

                           (D)      Borrower shall commence the Restoration as
                  soon as reasonably practicable (but in no event later than
                  ninety (90) days after such Casualty or Condemnation,
                  whichever the case may be, occurs) and shall diligently pursue
                  the same to satisfactory completion (for the purposes of this
                  subsection the filing for all appropriate building permits
                  shall constitute commencement of Restoration);

                           (E)      Lender shall be satisfied that any operating
                  deficits, including all scheduled payments of principal and
                  interest under the Note, which will be incurred with respect
                  to the Property as a result of the occurrence of any such
                  Casualty or Condemnation, whichever the case may be, will be
                  covered out of the insurance coverage referred to in Section
                  8.1(a)(iii) above;

                           (F)      Lender shall be satisfied that the
                  Restoration will be completed on or before the earliest to
                  occur of (1) six (6) months prior to the Maturity Date, (2)
                  the earliest date required for such completion under the terms
                  of any Major Lease or material agreements affecting the
                  Property, (3) such time as may be required under applicable
                  zoning law, ordinance, rule or regulation, or (4) the
                  expiration of the insurance coverage referred to in Section
                  8.1(a)(iii) unless Borrower or Borrower Principal have
                  deposited with Lender the amount (as determined by Lender)
                  necessary to cover any shortfall;

                           (G)      the Property and the use thereof after the
                  Restoration will be in compliance with and permitted under all
                  Legal Requirements;

                                      -48-
<PAGE>

                           (H)      the Restoration shall be done and completed
                  by Borrower in an expeditious and diligent fashion and in
                  compliance with all applicable Legal Requirements;

                           (I)      such Casualty or Condemnation, as
                  applicable, does not result in the loss of permanent access to
                  the Property or the Improvements;

                           (J)      Borrower shall deliver, or cause to be
                  delivered, to Lender a signed detailed budget approved in
                  writing by Borrower's architect or engineer stating the entire
                  cost of completing the Restoration, which budget shall be
                  reasonably acceptable to Lender; and

                           (K)      the Net Proceeds together with any cash or
                  cash equivalent deposited by Borrower with Lender are
                  sufficient in Lender's reasonable judgment to cover the cost
                  of the Restoration.

                  (ii)     The Net Proceeds shall be held by Lender until
         disbursements commence, and, until disbursed in accordance with the
         provisions of this Section 8.4(b), shall constitute additional security
         for the Debt and other obligations under the Loan Documents. The Net
         Proceeds shall be disbursed by Lender to, or as directed by, Borrower
         from time to time during the course of the Restoration, upon receipt of
         evidence satisfactory to Lender that (A) all the conditions precedent
         to such advance, including those set forth in Section 8.4(b)(i), have
         been satisfied, (B) all materials installed and work and labor
         performed (except to the extent that they are to be paid for out of the
         requested disbursement) in connection with the related Restoration item
         have been paid for in full, and (C) there exist no notices of pendency,
         stop orders, mechanic's or materialman's liens or notices of intention
         to file same, or any other liens or encumbrances of any nature
         whatsoever on the Property which have not either been fully bonded to
         the satisfaction of Lender and discharged of record or in the
         alternative fully insured to the satisfaction of Lender by the title
         company issuing the Title Insurance Policy. Notwithstanding the
         foregoing, Insurance Proceeds from the Policies required to be
         maintained by Borrower pursuant to Section 8.1(a)(iii) shall be
         controlled by Lender at all times, shall not be subject to the
         provisions of this Section 8.4 and shall be used solely for the payment
         of the obligations under the Loan Documents and Operating Expenses.

                  (iii)    All plans and specifications required in connection
         with the Restoration shall be subject to prior review and acceptance in
         all respects by Lender and by an independent consulting engineer
         selected by Lender (the "RESTORATION CONSULTANT"). Lender shall have
         the use of the plans and specifications and all permits, licenses and
         approvals required or obtained in connection with the Restoration. The
         identity of the contractors, subcontractors and materialmen engaged in
         the Restoration, as well as the contracts in excess of $100,000 under
         which they have been engaged, shall be subject to prior review and
         acceptance by Lender and the Restoration Consultant. All reasonable,
         out-of-pocket costs and expenses incurred by Lender in connection with
         making the Net Proceeds available for the Restoration, including,
         without limitation, reasonable outside counsel fees and disbursements
         and the Restoration Consultant's reasonable fees, shall be paid by
         Borrower.

                                      -49-
<PAGE>

                  (iv)     In no event shall Lender be obligated to make
         disbursements of the Net Proceeds in excess of an amount equal to the
         costs actually incurred from time to time for work in place as part of
         the Restoration, as certified by the Restoration Consultant, minus the
         Restoration Retainage. The term "RESTORATION RETAINAGE" shall mean an
         amount equal to ten percent (10%) of the hard costs actually incurred
         for work in place as part of the Restoration, as certified by the
         Restoration Consultant, until the Restoration has been completed. The
         Restoration Retainage shall be reduced to five percent (5%) of the hard
         costs incurred upon receipt by Lender of satisfactory evidence that
         fifty percent (50%) of the Restoration has been completed. The final
         Restoration Retainage shall in no event, and notwithstanding anything
         to the contrary set forth above in this Section 8.4(b), be less than
         the amount actually held back by Borrower from contractors,
         subcontractors and materialmen engaged in the Restoration. The
         Restoration Retainage shall not be released until the Restoration
         Consultant certifies to Lender that the Restoration has been completed
         in accordance with the provisions of this Section 8.4(b) and that all
         approvals necessary for the re-occupancy and use of the Property have
         been obtained from all appropriate Governmental Authorities, and Lender
         receives evidence satisfactory to Lender that the costs of the
         Restoration have been paid in full or will be paid in full out of the
         Restoration Retainage; provided, however, that Lender will release the
         portion of the Restoration Retainage being held with respect to any
         contractor, subcontractor or materialman engaged in the Restoration as
         of the date upon which the Restoration Consultant certifies to Lender
         that the contractor, subcontractor or materialman has satisfactorily
         completed all work and has supplied all materials in accordance with
         the provisions of the contractor's, subcontractor's or materialman's
         contract, the contractor, subcontractor or materialman delivers the
         conditional lien waivers and evidence of payment in full (or that the
         retainage will be used to paid in full) of all sums due to the
         contractor, subcontractor or materialman as may be reasonably requested
         by Lender or by the title company issuing the Title Insurance Policy,
         and Lender receives an endorsement to the Title Insurance Policy
         insuring the continued priority of the lien of the Mortgage and
         evidence of payment of any premium payable for such endorsement. If
         required by Lender, the release of any such portion of the Restoration
         Retainage shall be approved by the surety company, if any, which has
         issued a payment or performance bond with respect to the contractor,
         subcontractor or materialman.

                  (v)      Lender shall not be obligated to make disbursements
         of the Net Proceeds more frequently than once every calendar month.

                  (vi)     If at any time the Net Proceeds or the undisbursed
         balance thereof shall not, in the reasonable opinion of Lender in
         consultation with the Restoration Consultant, be sufficient to pay in
         full the balance of the construction costs which are estimated by the
         Restoration Consultant to be incurred in connection with the completion
         of the Restoration, Borrower shall deposit the deficiency (the "NET
         PROCEEDS DEFICIENCY") with Lender before any further disbursement of
         the Net Proceeds shall be made. The Net Proceeds Deficiency deposited
         with Lender shall be held by Lender and shall be disbursed for
         construction costs actually incurred in connection with the Restoration
         on the same conditions applicable to the disbursement of the Net
         Proceeds, and until so disbursed pursuant to this Section 8.4(b) shall
         constitute additional security for the Debt and other obligations under
         the Loan Documents.

                                      -50-
<PAGE>

                  (vii)    The excess, if any, of the Net Proceeds and the
         remaining balance, if any, of the Net Proceeds Deficiency deposited
         with Lender after the Restoration Consultant certifies to Lender that
         the Restoration has been completed in accordance with the provisions of
         this Section 8.4(b), and the receipt by Lender of evidence satisfactory
         to Lender that all costs incurred in connection with the Restoration
         have been paid in full, shall be remitted by Lender to Borrower,
         provided no Event of Default shall have occurred and shall be
         continuing under the Note, this Agreement or any of the other Loan
         Documents.

         (c)      All Net Proceeds not required (i) to be made available for the
Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant
to Section 8.4(b)(vii) may (x) be retained and applied by Lender toward the
payment of the Debt whether or not then due and payable in such order, priority
and proportions as Lender in its sole discretion shall deem proper, or, (y) at
the sole discretion of Lender, the same may be paid, either in whole or in part,
to Borrower for such purposes and upon such conditions as Lender shall
designate. If, pursuant to this Section 8.4, Lender shall receive and retain Net
Proceeds, (i) the lien of the Mortgage shall be reduced only by the amount
thereof received and retained by Lender and actually applied by Lender in
reduction of the Debt; and (ii) notwithstanding any other provisions hereof,
Borrower shall not be required to repair or restore the portion of the Property
affected by such Casualty or Condemnation to the condition or character the
Property was in immediately prior to such Casualty or Condemnation so long as no
Event of Default exists, but Borrower shall be required to remove all debris
with respect to the portion of the Property not required to be restored in a
manner that is safe and is not dangerous to health or other property and is in
compliance with all applicable laws.

         (d)      In the event of foreclosure of the Mortgage, or other transfer
of title to the Property in extinguishment in whole or in part of the Debt, all
right, title and interest of Borrower in and to the Policies then in force
concerning the Property and all proceeds payable thereunder shall thereupon vest
in the purchaser at such foreclosure, Lender or other transferee in the event of
such other transfer of title.

                                    ARTICLE 9
                                  RESERVE FUNDS

         SECTION 9.1. INTENTIONALLY DELETED.

         SECTION 9.2. REPLACEMENTS.

         (a)      On an ongoing basis throughout the term of the Loan, Borrower
shall make capital repairs, replacements and improvements necessary to keep the
Property in good order and repair and in a good marketable condition or prevent
deterioration of the Property, including, but not limited to, those repairs,
replacements and improvements more particularly described in the Property
Condition Report prepared in connection with the closing of the Loan
(collectively, the "REPLACEMENTS"). Borrower shall complete all Replacements in
a good and workmanlike manner as soon as commercially reasonable after
commencing to make each such Replacement.

                                      -51-
<PAGE>

         (b)      Borrower shall establish on the date hereof an Eligible
Account with Lender or Lender's agent to fund the Replacements (the "REPLACEMENT
RESERVE ACCOUNT"). Upon the occurrence and during the continuance of a Trigger
Period, Borrower shall deposit $4,075.58 (the "REPLACEMENT RESERVE MONTHLY
DEPOSIT") into the Replacement Reserve Account on each Scheduled Payment Date,
provided, however, Borrower shall not be obligated to make such Replacement
Reserve Monthly Deposits on any Scheduled Payment Date if funds in the
Replacement Reserve Account equals or exceeds $40,775. Amounts so deposited
shall hereinafter be referred to as "REPLACEMENT RESERVE FUNDS." Lender may, in
its reasonable discretion, adjust the Replacement Reserve Monthly Deposit from
time to time to an amount sufficient to maintain the proper maintenance and
operation of the Property. In the event Lender shall at any time increase the
Replacement Reserve Monthly Deposit, Borrower may, at its election, request that
Lender obtain, at the sole cost and expense of Borrower, a Property Condition
Report prepared by an engineer selected by Lender in its reasonable discretion,
in which case the Replacement Reserve Monthly Deposit shall be adjusted by
Lender based on the results of such report, provided that in no event shall such
amounts be reduced below the initial amount of the Replacement Reserve Monthly
Deposit set forth in herein.

         SECTION 9.3. TENANT IMPROVEMENTS AND LEASING COMMISSIONS.

         (a)      Borrower hereby agrees to (a) perform, or cause to be
performed, tenant improvements required under any Lease entered into in
accordance with the provisions of Section 5.13 of this Agreement (collectively,
the "TENANT IMPROVEMENTS"), and (b) pay the costs of leasing commissions
incurred by Borrower in connection with the leasing of the Property or a portion
thereof (collectively, "LEASING COMMISSIONS").

         (b)      Borrower shall establish on the date hereof an Eligible
Account with Lender or Lender's agent to fund Tenant Improvements and Leasing
Commissions (the "LEASING RESERVE ACCOUNT"). Upon the occurrence and during the
continuance of a Trigger Period, Borrower shall deposit with Lender into the
Leasing Reserve Account (i) the sum of $4,245 (the "LEASING RESERVE MONTHLY
DEPOSIT") on each Scheduled Payment Date and (ii) any sum or termination fee
payable to Borrower in connection with any Tenant's election to exercise any
early termination option contained in its respective lease of space at the
Property (the "TERMINATION FEE DEPOSIT") on the date of Borrower's receipt
thereof. Amounts so deposited shall hereinafter be referred to as the "LEASING
RESERVE FUNDS."

         SECTION 9.4. REQUIRED WORK.

         Borrower shall diligently pursue all Replacements and Tenant
Improvements (collectively, the "REQUIRED WORK") to completion in accordance
with the following requirements:

         (a)      Lender reserves the right, at its option, to approve all
contracts or work orders with materialmen, mechanics, suppliers, subcontractors,
contractors or other parties providing labor or materials in connection with the
Required Work to the extent such contracts or work orders exceed $100,000. Upon
Lender's request, Borrower shall assign any contract or subcontract to Lender.

                                      -52-
<PAGE>

         (b)      In the event Lender determines in its reasonable discretion
that any Required Work is not being or has not been performed in a workmanlike
or timely manner, Lender shall have the option to withhold disbursement for such
unsatisfactory Required Work upon fifteen (15) days prior written notice to
Borrower (unless there exists a threat to health or safety, in which case no
such notice shall be required) and to proceed under existing contracts or to
contract with third parties to complete such Required Work and to apply the
Replacement Reserve Funds, toward the labor and materials necessary to complete
such Required Work, and to exercise any and all other remedies available to
Lender upon an Event of Default hereunder.

         (c)      In order to facilitate Lender's completion of the Required
Work pursuant to Section 9.4(b), Borrower grants Lender the right to enter onto
the Property and perform any and all work and labor necessary to complete the
Required Work and/or employ watchmen to protect the Property from damage. All
sums so expended by Lender, to the extent not from the Reserve Funds, shall be
deemed to have been advanced under the Loan to Borrower and secured by the
Mortgage. For this purpose Borrower constitutes and appoints Lender its true and
lawful attorney-in-fact with full power of substitution to complete or undertake
the Required Work in the name of Borrower upon Borrower's failure to do so in a
workmanlike and timely manner. Such power of attorney shall be deemed to be a
power coupled with an interest and cannot be revoked. Borrower empowers said
attorney-in-fact as follows: (i) to use any of the Reserve Funds for the purpose
of making or completing the Required Work; (ii) to make such additions, changes
and corrections to the Required Work as shall be reasonably necessary or
desirable to complete the Required Work; (iii) to employ such contractors,
subcontractors, agents, architects and inspectors as shall be required for such
purposes; (iv) to pay, settle or compromise all existing bills and claims which
are or may become Liens against the Property, or as may be necessary or
desirable for the completion of the Required Work, or for clearance of title;
(v) to execute all applications and certificates in the name of Borrower which
may be required by any of the contract documents; (vi) to prosecute and defend
all actions or proceedings in connection with the Property or the rehabilitation
and repair of the Property except to the extent arising from Lender's gross
negligence or willful misconduct; and (vii) to do any and every act which
Borrower might do on its own behalf to fulfill the terms of this Agreement with
regards to Lender's performance of the Required Work.

         (d)      Nothing in this Section 9.4 shall: (i) make Lender responsible
for making or completing the Required Work; (ii) require Lender to expend funds
in addition to the Reserve Funds to make or complete any Required Work; (iii)
obligate Lender to proceed with the Required Work; or (iv) obligate Lender to
demand from Borrower additional sums to make or complete any Required Work.

         (e)      Borrower shall permit Lender and Lender's agents and
representatives (including, without limitation, Lender's engineer, architect, or
inspector) or third parties performing Required Work pursuant to this Section
9.4 to enter onto the Property during normal business hours (subject to the
rights of tenants under their Leases) to inspect the progress of any Required
Work and all materials being used in connection therewith, to examine all plans
and shop drawings relating to such Required Work which are or may be kept at the
Property, and to complete any Required Work made pursuant to this Section 9.4.
Borrower shall cause all contractors and subcontractors to cooperate with Lender
and Lender's representatives or such

                                      -53-
<PAGE>

other persons described above in connection with inspections described in this
Section 9.4 or the completion of Required Work pursuant to this Section 9.4.

         (f)      Lender may, to the extent any Required Work would reasonably
require an inspection of the Property, inspect the Property at Borrower's
expense prior to making a disbursement of the Reserve Funds in excess of $50,000
in order to verify completion of the Required Work for which reimbursement is
sought. Borrower shall pay Lender a reasonable inspection fee not exceeding $500
for each such inspection. Lender may require that such inspection be conducted
by an appropriate independent qualified professional selected by Lender and/or
may require a copy of a certificate of completion by an independent qualified
professional acceptable to Lender prior to the disbursement of the Reserve
Funds. Borrower shall pay the expense of the inspection as required hereunder,
whether such inspection is conducted by Lender or by an independent qualified
professional.

         (g)      The Required Work and all materials, equipment, fixtures, or
any other item comprising a part of any Required Work shall be constructed,
installed or completed, as applicable, free and clear of all mechanic's,
materialman's or other Liens (except for Permitted Encumbrances).

         (h)      Before each disbursement of the Reserve Funds in excess of
$50,000 (if any), Lender may require Borrower to provide Lender with a search of
title to the Property effective to the date of the disbursement, which search
shows that no mechanic's or materialmen's or other Liens of any nature have been
placed against the Property since the date of recordation of the Mortgage and
that title to the Property is free and clear of all Liens (except for Permitted
Encumbrances).

         (i)      All Required Work shall comply with all Legal Requirements and
applicable insurance requirements including, without limitation, applicable
building codes, special use permits, environmental regulations, and requirements
of insurance underwriters.

         (j)      Borrower hereby assigns to Lender all rights and claims
Borrower may have against all Persons supplying labor or materials in connection
with the Required Work; provided, however, that Lender may not pursue any such
rights or claims unless an Event of Default has occurred and remains uncured.

         SECTION 9.5. RELEASE OF RESERVE FUNDS.

         (a)      Upon written request from Borrower and satisfaction of the
requirements set forth in this Section 9.5, Lender shall disburse to Borrower
amounts from (i) the Replacement Reserve Account to the extent necessary to
reimburse Borrower for the actual costs of any approved Replacements, or (ii)
the Leasing Reserve Account to the extent necessary to reimburse Borrower for
the actual costs of Tenant Improvements and/or Leasing Commissions incurred in
connection with Leases entered into in accordance with the Loan Documents
provided that (A) such Leasing Commissions are reasonable and customary for
properties similar to the Property and the portion of the Property leased for
which such Leasing Commissions are due, and (B) the amount of such Leasing
Commissions are determined pursuant to arm's-length transactions between
Borrower and any leasing agent to which a Leasing Commission is due, and
excluding

                                      -54-
<PAGE>

any Leasing Commissions which shall be due any member, general partner or
shareholder of Borrower or any affiliate of Borrower. Notwithstanding the
preceding sentence, in no event shall Lender be required to (x) disburse funds
from any of the Reserve Accounts if an Event of Default exists, or (y) disburse
funds from the Replacement Reserve Account to reimburse Borrower for the costs
of routine repairs or maintenance to the Property or for Tenant Improvements and
Leasing Commissions.

         (b)      Each request for disbursement in excess of $25,000 from any of
the Reserve Accounts shall be on a form provided or approved by Lender and shall
(i) include copies of invoices for all items or materials purchased and all
labor or services provided and (ii) specify (A) the Required Work for which the
disbursement is requested, (B) the quantity and price of each item purchased, if
the Required Work includes the purchase or replacement of specific items, (C)
the price of all materials (grouped by type or category) used in any Required
Work other than the purchase or replacement of specific items, and (D) the cost
of all contracted labor or other services applicable to each Required Work for
which such request for disbursement is made, and (iii) include, if such request
for disbursement is in connection with Tenant Improvements, a certificate from
the Tenant(s) for which the Tenant Improvements have been performed stating that
such Tenant Improvements have been completed in a manner satisfactory and
acceptable to such Tenant(s) and (unless disbursement is requested pursuant to
Section 9.5(d)), such Tenant(s) has accepted the premises demised under the
applicable Lease(s), and containing such other information as Lender may
require, in form and substance reasonably satisfactory to Lender, and/or if such
request for disbursement is in connection with Leasing Commissions, a
certificate from the leasing agent that no further sums are due to it in
connection with the applicable Lease. With each request Borrower shall certify
in writing to Lender that all Required Work has been performed in accordance
with all Legal Requirements and, with respect to each request less than or equal
to $25,000, that all such Required Work has been completed lien free and paid
for in full. Except as provided in Section 9.5(d), each request for disbursement
shall be made only after completion of the Replacement or Tenant Improvement (or
the portion thereof completed in accordance with Section 9.5(d)), or the full
performance by the leasing agent of its obligations (in the case of Leasing
Commissions), as applicable, for which disbursement is requested. Borrower shall
provide Lender evidence satisfactory to Lender in its reasonable judgment of
such completion or performance.

         (c)      Borrower shall pay all invoices in connection with the
Required Work with respect to which a disbursement is requested prior to
submitting such request for disbursement from the Reserve Accounts or, at the
request of Borrower, Lender will issue joint checks, payable to Borrower and the
contractor, supplier, materialman, mechanic, subcontractor or other party to
whom payment is due in connection with the Required Work. In the case of
payments made by joint check, Lender may require a waiver of lien from each
Person receiving payment prior to Lender's disbursement of the Reserve Funds. In
addition, as a condition to any disbursement in excess of $50,000, Lender may
require Borrower to obtain conditional lien waivers from each contractor,
supplier, materialman, mechanic or subcontractor with respect to the completion
of its work or delivery of its materials. Any conditional lien waiver delivered
hereunder shall conform to all Legal Requirements and shall cover all work
performed and materials supplied (including equipment and fixtures) for the
Property by that contractor, supplier, subcontractor, mechanic or materialman
through the date covered by the current disbursement request (or, in the event
that payment to such contractor, supplier, subcontractor,

                                      -55-
<PAGE>

mechanic or materialmen is to be made by a joint check, the release of lien
shall be effective through the date covered by the previous release of funds
request). In the case of Leasing Commissions, payment shall be made to any
leasing agent to which a Leasing Commission is due in the amount of invoices
submitted by such leasing agent, provided all of the other conditions for
disbursements for such Leasing Commissions are satisfied in the judgment of
Lender.

         (d)      If (i) the cost of any item of Required Work exceeds $50,000,
(ii) the contractor performing such Required Work requires periodic payments
pursuant to terms of a written contract, and (iii) Lender has approved in
writing in advance such periodic payments, a request for disbursement from the
Reserve Accounts may be made after completion of a portion of the work under
such contract, provided (A) such contract requires payment upon completion of
such portion of work, (B) the materials for which the request is made are on
site at the Property and are properly secured or have been installed in the
Property or are appropriately stored off-site, (C) all other conditions in this
Agreement for disbursement have been satisfied, and (D) in the case of a
Replacement, funds remaining in the Replacement Reserve Account are, in Lender's
judgment, sufficient to complete such Replacement and other Replacements when
required.

         (e)      Borrower shall not make a request for, nor shall Lender have
any obligation to make, any disbursement from any Reserve Account more
frequently than once in any calendar month and (except in connection with the
final disbursement) in any amount less than the lesser of (i) $10,000 or (ii)
the total cost of the Required Work or Leasing Commission for which the
disbursement is requested.

         (f)      Intentionally Deleted.

         (g)      In the event any Borrower requests a disbursement from the
Replacement Reserve Account to reimburse Borrower for the actual cost of labor
or materials used in connection with repairs or improvements other than the
Replacements specified in the Property Condition Report prepared in connection
with the closing of the Loan (an "ADDITIONAL REPLACEMENT"), Borrower shall
disclose in writing to Lender the reason why funds in the Replacement Reserve
Account should be used to pay for such Additional Replacement. If Lender
determines that (i) such Additional Replacement is of the type intended to be
covered by the Replacement Reserve Account, (ii) costs for such Additional
Replacement are reasonable, (iii) the funds in the Replacement Reserve Account
are sufficient to pay for such Additional Replacement and all other Replacements
for the Property specified in the Property Condition Report, and (iv) all other
conditions for disbursement under this Agreement have been met, Lender may
disburse funds from the Replacement Reserve Account.

         (h)      Lender's disbursement of any Reserve Funds or other
acknowledgment of completion of any Required Work in a manner satisfactory to
Lender shall not be deemed a certification or warranty by Lender to any Person
that the Required Work has been completed in accordance with Legal Requirements.

         (i)      If the funds in any Reserve Account should exceed the amount
of payments actually applied by Lender for the purposes of the account, Lender
shall either return any excess to Borrower or at the written request of Borrower
credit such excess against future payments to

                                      -56-
<PAGE>

be made to that Reserve Account. In allocating any such excess, Lender may deal
with the Person shown on Lender's records as being the owner of the Property. If
at any time Lender reasonably determines that the Reserve Funds are not or will
not be sufficient to make the required payments, Lender shall notify Borrower of
such determination and Borrower shall pay to Lender any amount necessary to make
up the deficiency within ten (10) days after notice from Lender to Borrower
requesting payment thereof.

         (j)      The insufficiency of any balance in any of the Reserve
Accounts shall not relieve Borrower from its obligation to fulfill all
preservation and maintenance covenants in the Loan Documents.

         (k)      Intentionally Deleted.

         (l)      Upon payment in full of the Debt, all amounts remaining on
deposit, if any, in the Replacement Reserve Account shall be returned to
Borrower or the Person shown on Lender's records as being the owner of the
Property and no other party shall have any right or claim thereto.

         (m)      Upon the earlier to occur of (i) the completion of all Tenant
Improvements and the full performance by the leasing agent of its obligations
with respect to any Leasing Commissions, as verified by Lender in its reasonable
discretion, or (ii) the payment in full of the Debt, all amounts remaining on
deposit, if any, in the Leasing Reserve Account shall be returned to Borrower or
the Person shown on Lender's records as being the owner of the Property and no
other party shall have any right or claim thereto.

         SECTION 9.6. TAX AND INSURANCE RESERVE FUNDS.

         Borrower shall establish on the date hereof an Eligible Account with
Lender or Lender's agent sufficient to discharge Borrower's obligations for the
payment of Taxes and Insurance Premiums pursuant to Section 5.4 and Section 8.1
hereof (the "TAX AND INSURANCE RESERVE ACCOUNT"). Upon and during the
continuance of (i) an Event of Default by Borrower under the Loan Documents,
(ii) an default by Tenant under the Ashworth Lease, or (iii) a Trigger Period
(collectively "COLLECTION EVENTS"), Borrower shall deposit with Lender an amount
which when added to the required monthly deposits set forth in the next
sentence, is sufficient to make the payments of Taxes and Insurance Premiums as
required herein. Borrower shall deposit into the Tax and Insurance Reserve
Account on each Scheduled Payment Date (a) upon a Collection Event, one-twelfth
of the Taxes that Lender estimates will be payable during the next ensuing
twelve (12) months or such higher amount necessary to accumulate with Lender
sufficient funds to pay all such Taxes at least thirty (30) days prior to the
earlier of (i) the date that the same will become delinquent and (ii) the date
that additional charges or interest will accrue due to the non-payment thereof,
and (b) except to the extent Lender has waived the insurance escrow because the
insurance required hereunder is maintained under a blanket insurance Policy
acceptable to Lender in accordance with Section 8.1(c), one-twelfth of the
Insurance Premiums that Lender estimates will be payable during the next ensuing
twelve (12) months for the renewal of the coverage afforded by the Policies upon
the expiration thereof or such higher amount necessary to accumulate with Lender
sufficient funds to pay all such Insurance Premiums at least thirty (30) days
prior to the expiration of the Policies (said amounts in (a) and (b) above
hereinafter called

                                      -57-
<PAGE>

the "TAX AND INSURANCE RESERVE FUNDS"). Lender will apply the Tax and Insurance
Reserve Funds to payments of Taxes and Insurance Premiums required to be made by
Borrower pursuant to Section 5.4 and Section 8.1 hereof. In making any
disbursement from the Tax and Insurance Reserve Account, Lender may do so
according to any bill, statement or estimate procured from the appropriate
public office or tax lien service (with respect to Taxes) or insurer or agent
(with respect to Insurance Premiums), without inquiry into the accuracy of such
bill, statement or estimate or into the validity of any tax, assessment, sale,
forfeiture, tax lien or title or claim thereof. If the amount of the Tax and
Insurance Reserve Funds shall exceed the amounts due for Taxes and Insurance
Premiums pursuant to Section 5.4 and Section 8.1 hereof, Lender shall, in its
sole discretion, return any excess to Borrower or credit such excess against
future payments to be made to the Tax and Insurance Reserve Account. In
allocating any such excess, Lender may deal with the person shown on Lender's
records as being the owner of the Property. Any amount remaining in the Tax and
Insurance Reserve Account after the Debt has been paid in full shall be returned
to Borrower or the person shown on Lender's records as being the owner of the
Property and no other party shall have any right or claim thereto. If at any
time Lender reasonably determines that the Tax and Insurance Reserve Funds are
not or will not be sufficient to pay Taxes and Insurance Premiums by the dates
set forth in (a) and (b) above, Lender shall notify Borrower of such
determination and Borrower shall pay to Lender any amount necessary to make up
the deficiency within ten (10) days after notice from Lender to Borrower
requesting payment thereof.

         SECTION 9.7. RESERVE FUNDS GENERALLY.

         (a)      (i)      Except for the Replacement Reserve Account and the
Leasing Reserve Account, no earnings or interest on the Reserve Accounts shall
be payable to Borrower. Neither Lender nor any loan servicer that at any time
holds or maintains such non-interest-bearing Reserve Accounts shall have any
obligation to keep or maintain such Reserve Accounts or any funds deposited
therein in interest-bearing accounts. If Lender or any such loan servicer elects
in its sole and absolute discretion to keep or maintain any non-interest-bearing
Reserve Account or any funds deposited therein in an interest-bearing account,
the account shall be an Eligible Account and (A) such funds shall not be
invested except in Permitted Investments, and (B) all interest earned or accrued
thereon shall be for the account of and be retained by Lender or such loan
servicer.

                  (ii)     Funds deposited in the Replacement Reserve Account
         and the Leasing Reserve Account shall be held in an interest-bearing
         business savings account and interest shall be credited to Borrower. In
         no event shall Lender or any loan servicer that at any time holds or
         maintains the Replacement Reserve Account be required to select any
         particular interest-bearing account or the account that yields the
         highest rate of interest, provided that selection of the account shall
         be consistent with the general standards at the time being utilized by
         Lender or the loan servicer, as applicable, in establishing similar
         accounts for loans of comparable type. All such interest shall be and
         become part of the Replacement Reserve Account and shall be disbursed
         in accordance with Section 9.5 above; provided, however, that Lender
         may, at its election, retain any such interest for its own account
         during the occurrence and continuance of an Event of Default. Borrower
         agrees that it shall include all interest on Replacement Reserve Funds
         as the income of Borrower (and, if Borrower is a partnership or other
         pass-through entity,

                                      -58-
<PAGE>

         the partners, members or beneficiaries of Borrower, as the case may
         be), and shall be the owner of the Replacement Reserve Funds for
         federal and applicable state and local tax purposes, except to the
         extent that Lender retains any interest for its own account during the
         occurrence and continuance of an Event of Default as provided herein.

         (b)      Borrower grants to Lender a first-priority perfected security
interest in, and assigns and pledges to Lender, each of the Reserve Accounts and
any and all Reserve Funds now or hereafter deposited in the Reserve Accounts as
additional security for payment of the Debt. Until expended or applied in
accordance herewith, the Reserve Accounts and the Reserve Funds shall constitute
additional security for the Debt. The provisions of this Section 9.7 are
intended to give Lender or any subsequent holder of the Loan "control" of the
Reserve Accounts within the meaning of the UCC.

         (c)      The Reserve Accounts and any and all Reserve Funds now or
hereafter deposited in the Reserve Accounts shall be subject to the exclusive
dominion and control of Lender, which shall hold the Reserve Accounts and any or
all Reserve Funds now or hereafter deposited in the Reserve Accounts subject to
the terms and conditions of this Agreement. Borrower shall have no right of
withdrawal from the Reserve Accounts or any other right or power with respect to
the Reserve Accounts or any or all of the Reserve Funds now or hereafter
deposited in the Reserve Accounts, except as expressly provided in this
Agreement.

         (d)      Lender shall furnish or cause to be furnished to Borrower,
without charge, an annual accounting of each Reserve Account in the normal
format of Lender or its loan servicer, showing credits and debits to such
Reserve Account and the purpose for which each debit to each Reserve Account was
made.

         (e)      As long as no Event of Default has occurred and is continuing,
Lender shall make disbursements from the Reserve Accounts in accordance with
this Agreement. All such disbursements shall be deemed to have been expressly
pre-authorized by Borrower, and shall not be deemed to constitute the exercise
by Lender of any remedies against Borrower unless an Event of Default has
occurred and is continuing and Lender has expressly stated in writing its intent
to proceed to exercise its remedies as a secured party, pledgee or lienholder
with respect to the Reserve Accounts.

         (f)      If any Event of Default occurs, Borrower shall immediately
lose all of its rights to receive disbursements from the Reserve Accounts until
the earlier to occur of (i) the date on which such Event of Default is cured to
Lender's satisfaction, or (ii) the payment in full of the Debt. Upon the
occurrence and during the continuance of any Event of Default, Lender may
exercise any or all of its rights and remedies as a secured party, pledgee and
lienholder with respect to the Reserve Accounts. Without limitation of the
foregoing, upon the occurrence and during the continuance of any Event of
Default, Lender may use and disburse the Reserve Funds (or any portion thereof)
for any of the following purposes: (A) repayment of the Debt, including, but not
limited to, principal prepayments and the prepayment premium applicable to such
full or partial prepayment (as applicable); (B) reimbursement of Lender for all
losses, fees, costs and expenses (including, without limitation, reasonable
legal fees) suffered or incurred by Lender as a result of such Event of Default;
(C) payment of any amount expended in exercising any or all rights and remedies
available to Lender at law or in equity or under this Agreement or under any

                                      -59-
<PAGE>

of the other Loan Documents; (D) payment of any item from any of the Reserve
Accounts as required or permitted under this Agreement; or (E) any other purpose
permitted by applicable law; provided, however, that any such application of
funds shall not cure or be deemed to cure any Event of Default. Without limiting
any other provisions hereof, each of the remedial actions described in the
immediately preceding sentence shall be deemed to be a commercially reasonable
exercise of Lender's rights and remedies as a secured party with respect to the
Reserve Funds and shall not in any event be deemed to constitute a setoff or a
foreclosure of a statutory banker's lien. Nothing in this Agreement shall
obligate Lender to apply all or any portion of the Reserve Funds to effect a
cure of any Event of Default, or to pay the Debt, or in any specific order of
priority. The exercise of any or all of Lender's rights and remedies under this
Agreement or under any of the other Loan Documents shall not in any way
prejudice or affect Lender's right to initiate and complete a foreclosure under
the Mortgage.

         (g)      The Reserve Funds shall not constitute escrow or trust funds
and may be commingled with other monies held by Lender. Notwithstanding anything
else herein to the contrary, Lender may commingle in one or more Eligible
Accounts any and all funds controlled by Lender, including, without limitation,
funds pledged in favor of Lender by other borrowers, whether for the same
purposes as the Reserve Accounts or otherwise. Without limiting any other
provisions of this Agreement or any other Loan Document, the Reserve Accounts
may be established and held in such name or names as Lender or its loan
servicer, as agent for Lender, shall deem appropriate, including, without
limitation, in the name of Lender or such loan servicer as agent for Lender. In
the case of any Reserve Account which is held in a commingled account, Lender or
its loan servicer, as applicable, shall maintain records sufficient to enable it
to determine at all times which portion of such account is related to the Loan.
The Reserve Accounts are solely for the protection of Lender. With respect to
the Reserve Accounts, Lender shall have no responsibility beyond the allowance
of due credit for the sums actually received by Lender or beyond the
reimbursement or payment of the costs and expenses for which such accounts were
established in accordance with their terms. Upon assignment of the Loan by
Lender, any Reserve Funds shall be turned over to the assignee and any
responsibility of Lender as assignor shall terminate. The requirements of this
Agreement concerning Reserve Accounts in no way supersede, limit or waive any
other rights or obligations of the parties under any of the Loan Documents or
under applicable law.

         (h)      Borrower shall not, without obtaining the prior written
consent of Lender, further pledge, assign or grant any security interest in the
Reserve Accounts or the Reserve Funds deposited therein or permit any Lien to
attach thereto, except for the security interest granted in this Section 9.7, or
any levy to be made thereon, or any UCC Financing Statements, except those
naming Lender as the secured party, to be filed with respect thereto.

         (i)      Borrower will maintain the security interest created by this
Section 9.7 as a first priority perfected security interest and will defend the
right, title and interest of Lender in and to the Reserve Accounts and the
Reserve Funds against the claims and demands of all Persons whomsoever. At any
time and from time to time, upon the written request of Lender, and at the sole
expense of Borrower, Borrower will promptly and duly execute and deliver such
further instruments and documents and will take such further actions as Lender
reasonably may request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted.

                                      -60-
<PAGE>

                           ARTICLE 10 CASH MANAGEMENT

         SECTION 10.1. INTENTIONALLY DELETED

                     ARTICLE 11 EVENTS OF DEFAULT; REMEDIES

         SECTION 11.1. EVENT OF DEFAULT.

         The occurrence of any one or more of the following events shall
constitute an "EVENT OF DEFAULT":

         (a)      if any portion of the Debt is not paid prior to the fifth day
following the date the same is due or if the entire Debt is not paid on or
before the Maturity Date;

         (b)      except as otherwise expressly provided in the Loan Documents,
if any of the Taxes or Other Charges are not paid when the same are due and
payable (or with respect to Taxes, prior to the date on which Taxes would be
delinquent), unless there is sufficient money in the Tax and Insurance Reserve
Account for payment of amounts then due and payable and Lender's access to such
money has not been constrained or restricted in any manner;

         (c)      if (i) the Policies are not kept in full force and effect,
(ii) the Accord 28 certificates (or similar certificates) are not delivered to
Lender in accordance with Section 8.1 or (iii) certified copies of the Policies
are not delivered to Lender upon request, provided such copies are available;

         (d)      if Borrower breaches any covenant with respect to itself or
any SPE Component Entity (if any) contained in Article 6 or any covenant
contained in Article 7 hereof;

         (e)      if any representation or warranty of, or with respect to,
Borrower, Borrower Principal, any SPE Component Entity, or any member, general
partner, principal or beneficial owner of any of the foregoing, made herein, in
any other Loan Document, or in any certificate, report, financial statement or
other instrument or document furnished to Lender at the time of the closing of
the Loan or during the term of the Loan shall have been false or misleading in
any material respect when made;

         (f)      if (i) Borrower, or any managing member or general partner of
Borrower, Borrower Principal, or any SPE Component Entity (if any) shall
commence any case, proceeding or other action (A) under any Creditors Rights
Laws, seeking to have an order for relief entered with respect to it, or seeking
to adjudicate it a bankrupt or insolvent, or seeking reorganization, or (B)
seeking appointment of a receiver, trustee, custodian, conservator or other
similar official for it or for all or any substantial part of its assets, or
Borrower, any managing member or general partner of Borrower, Borrower
Principal, or any SPE Component Entity (if any) shall make a general assignment
for the benefit of its creditors; or (ii) there shall be commenced against
Borrower, any managing member or general partner of Borrower, Borrower
Principal, or any SPE Component Entity (if any) any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of sixty (60) days;
or (iii) there shall be commenced against Borrower, any managing member or
general

                                      -61-
<PAGE>

partner of Borrower, Borrower Principal, or any SPE Component Entity (if any)
any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of any order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within sixty (60) days from the entry thereof; or (iv) Borrower,
any managing member or general partner of Borrower, Borrower Principal, or any
SPE Component Entity (if any) shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clause (i), (ii), or (iii) above; or (v) Borrower, any managing member
or general partner of Borrower, Borrower Principal, or any SPE Component Entity
(if any) shall generally not, or shall be unable to, or shall admit in writing
its inability to, pay its debts as they become due;

         (g)      if Borrower shall be in default beyond applicable notice and
grace periods under any other mortgage, deed of trust, deed to secure debt or
other security agreement covering any part of the Property, whether it be
superior or junior in lien to the Mortgage;

         (h)      if the Property becomes subject to any mechanic's,
materialman's or other Lien other than a Lien for any Taxes or Other Charges not
then due and payable and the Lien shall remain undischarged of record (by
payment, bonding or otherwise) for a period of sixty (60) days;

         (i)      if any federal tax lien is filed against Borrower, any member
or general partner of Borrower, Borrower Principal, or any SPE Component Entity
(if any) or the Property and same is not discharged of record or bonded to
Lender's reasonable satisfaction within sixty (60) days after same is filed;

         (j)      if a judgment is filed against the Borrower in excess of
$50,000 which is not vacated, or stayed on appeal or discharged within 30 days;

         (k)      if any default occurs under any guaranty or indemnity executed
in connection herewith and such default continues after the expiration of
applicable grace periods, if any;

         (l)      if Borrower shall permit any event within its control to occur
that would cause any REA to terminate without notice or action by any party
thereto or would entitle any party to terminate any REA and the term thereof by
giving notice to Borrower; or any REA shall be surrendered, terminated or
canceled for any reason or under any circumstance whatsoever except as provided
for in such REA; or any term of any REA shall be modified or supplemented
without Lender's consent; or Borrower shall fail, within ten (10) Business Days
after demand by Lender, to exercise its option to renew or extend the term of
any REA or shall fail or neglect to pursue diligently all actions necessary to
exercise such renewal rights pursuant to such REA except as provided for in such
REA; or

         (m)      if Borrower shall continue to be in default under any other
term, covenant or condition of this Agreement or any of the Loan Documents for
more than ten (10) days after notice from Lender in the case of any default
which can be cured by the payment of a sum of money or for thirty (30) days
after notice from Lender in the case of any other default, provided that if such
default cannot reasonably be cured within such thirty (30) day period and
Borrower

                                      -62-
<PAGE>

shall have commenced to cure such default within such thirty (30) day period and
thereafter diligently and expeditiously proceeds to cure the same, such thirty
(30) day period shall be extended for so long as it shall require Borrower in
the exercise of due diligence to cure such default, it being agreed that no such
extension shall be for a period in excess of ninety (90) days.

         SECTION 11.2. REMEDIES.

         (a)      Upon the occurrence and during the continuance of an Event of
Default (other than an Event of Default described in Section 11.1(f) above) and
at any time thereafter Lender may, in addition to any other rights or remedies
available to it pursuant to this Agreement and the other Loan Documents or at
law or in equity, take such action, without notice or demand, that Lender deems
advisable to protect and enforce its rights against Borrower and in the
Property, including, without limitation, declaring the Debt to be immediately
due and payable, and Lender may enforce or avail itself of any or all rights or
remedies provided in the Loan Documents against Borrower and the Property,
including, without limitation, all rights or remedies available at law or in
equity; and upon any Event of Default described in Section 11.1(f) above, the
Debt and all other obligations of Borrower hereunder and under the other Loan
Documents shall immediately and automatically become due and payable, without
notice or demand, and Borrower hereby expressly waives any such notice or
demand, anything contained herein or in any other Loan Document to the contrary
notwithstanding.

         (b)      Upon the occurrence and during the continuance of an Event of
Default, all or any one or more of the rights, powers, privileges and other
remedies available to Lender against Borrower under this Agreement or any of the
other Loan Documents executed and delivered by, or applicable to, Borrower or at
law or in equity may be exercised by Lender at any time and from time to time,
whether or not all or any of the Debt shall be declared due and payable, and
whether or not Lender shall have commenced any foreclosure proceeding or other
action for the enforcement of its rights and remedies under any of the Loan
Documents with respect to the Property. Any such actions taken by Lender shall
be cumulative and concurrent and may be pursued independently, singularly,
successively, together or otherwise, at such time and in such order as Lender
may determine in its sole discretion, to the fullest extent permitted by law,
without impairing or otherwise affecting the other rights and remedies of Lender
permitted by law, equity or contract or as set forth herein or in the other Loan
Documents.

                                   ARTICLE 12
                            ENVIRONMENTAL PROVISIONS

         SECTION 12.1. ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES.

         Borrower represents and warrants, based upon an Environmental Report of
the Property and information that Borrower knows or should reasonably have
known, that: (a) there are no Hazardous Materials or underground storage tanks
in, on, or under the Property, except those that are both (i) in compliance with
Environmental Laws and with permits issued pursuant thereto (if such permits are
required), if any, and (ii) either (A) in the case of Hazardous Materials, in
amounts not in excess of that necessary to operate the Property for the purposes
set forth herein or (B) fully disclosed to Lender in writing pursuant to an
Environmental Report; (b) there are no past, present or threatened Releases of
Hazardous Materials in violation of any

                                      -63-
<PAGE>

Environmental Law or which would require remediation by a Governmental Authority
in, on, under or from the Property except as described in the Environmental
Report; (c) there is no threat of any Release of Hazardous Materials migrating
to the Property except as described in the Environmental Report; (d) there is no
past or present non-compliance with Environmental Laws, or with permits issued
pursuant thereto, in connection with the Property except as described in the
Environmental Report; (e) Borrower does not know of, and has not received, any
written or oral notice or other communication from any Person relating to
Hazardous Materials in, on, under or from the Property; (f) the Property is free
of Mold; and (g) Borrower has truthfully and fully provided to Lender, in
writing, any and all information relating to environmental conditions in, on,
under or from the Property known to Borrower or contained in Borrower's files
and records, including but not limited to any reports relating to Hazardous
Materials in, on, under or migrating to or from the Property and/or to the
environmental condition of or the presence of Mold at the Property.

         SECTION 12.2. ENVIRONMENTAL COVENANTS.

         Borrower covenants and agrees that so long as Borrower owns, manages,
is in possession of, or otherwise controls the operation of the Property: (a)
all uses and operations on or of the Property, whether by Borrower or any other
Person, shall be in compliance with all Environmental Laws and permits issued
pursuant thereto; (b) there shall be no Releases of Hazardous Materials in, on,
under or from the Property; (c) there shall be no Hazardous Materials in, on, or
under the Property, except those that are both (i) in compliance with all
Environmental Laws and with permits issued pursuant thereto, if and to the
extent required, and (ii) (A) in amounts not in excess of that necessary to
operate the Property for the purposes set forth herein or (B) fully disclosed to
and approved by Lender in writing or (C) with respect to Mold, not in a
condition, location, or of a type which may pose a risk to human health or
safety or the environment or which may result in damage to or would adversely
affect or impair the value or marketability of the Property; (d) Borrower shall
keep the Property free and clear of all Environmental Liens; (e) Borrower shall,
at its sole cost and expense, fully and expeditiously cooperate in all
activities pursuant to Section 12.4 below, including but not limited to
providing all relevant information and making knowledgeable persons available
for interviews; (f) Borrower shall, at its sole cost and expense, perform any
environmental site assessment or other investigation of environmental conditions
in connection with the Property, pursuant to any reasonable written request of
Lender, upon Lender's reasonable belief that the Property is not in full
compliance with all Environmental Laws, and share with Lender the reports and
other results thereof, and Lender and other Indemnified Parties shall be
entitled to rely on such reports and other results thereof; (g) Borrower shall
keep the Property free of Mold; and (h) Borrower shall, at its sole cost and
expense, comply with all reasonable written requests of Lender to (A) reasonably
effectuate remediation of any Hazardous Materials in, on, under or from the
Property; and (B) comply with any Environmental Law; (i) Borrower shall not
allow any tenant or other user of the Property to violate any Environmental Law;
and (j) Borrower shall immediately notify Lender in writing after it has become
aware of (A) any presence or Release or threatened Release of Hazardous
Materials in, on, under, from or migrating towards the Property; (B) any
non-compliance with any Environmental Laws related in any way to the Property;
(C) any actual or potential Environmental Lien against the Property; (D) any
required or proposed remediation of environmental conditions relating to the
Property; and (E) any written or oral notice or other communication of which
Borrower becomes aware from any source whatsoever (including but

                                      -64-
<PAGE>

not limited to a Governmental Authority) relating in any way to Hazardous
Materials. Any intentional failure of Borrower to perform its obligations
pursuant to this Section 12.2 shall constitute bad faith waste with respect to
the Property.

         SECTION 12.3. LENDER'S RIGHTS.

         Lender and any other Person designated by Lender, including but not
limited to any representative of a Governmental Authority, and any environmental
consultant, and any receiver appointed by any court of competent jurisdiction,
shall have the right, but not the obligation, to enter upon the Property at all
reasonable times to assess any and all aspects of the environmental condition of
the Property and its use, including but not limited to conducting any
environmental assessment or audit (the scope of which shall be determined in
Lender's sole discretion) and taking samples of soil, groundwater or other
water, air, or building materials, and conducting other invasive testing.
Borrower shall cooperate with and provide access to Lender and any such person
or entity designated by Lender.

         SECTION 12.4. OPERATIONS AND MAINTENANCE PROGRAMS.

         If reasonably recommended by the Environmental Report or any other
environmental assessment or audit of the Property, Borrower shall establish and
comply with an operations and maintenance program with respect to the Property,
in form and substance reasonably acceptable to Lender, prepared by an
environmental consultant reasonably acceptable to Lender, which program shall
address any asbestos-containing material or lead based paint or Mold that may
now or in the future be detected at or on the Property. Without limiting the
generality of the preceding sentence, Lender may require (a) periodic notices or
reports to Lender in form, substance and at such intervals as Lender may
reasonably specify, (b) a reasonable amendment to such operations and
maintenance program to address changing circumstances, laws or other matters,
(c) at Borrower's sole expense, supplemental examination of the Property by
consultants specified by Lender if Lender reasonably believes that the same is
warranted due to the environmental condition at the Property, (d) access to the
Property by Lender, its agents or servicer, to review and assess the
environmental condition of the Property and Borrower's compliance with any
operations and maintenance program, and (e) variation of the operations and
maintenance program in response to the reports provided by any such consultants.

         SECTION 12.5. ENVIRONMENTAL DEFINITIONS.

         "ENVIRONMENTAL LAW" means any present and future federal, state and
local laws, statutes, ordinances, rules, regulations, standards, policies and
other government directives or requirements, as well as common law, including
but not limited to the Comprehensive Environmental Response, Compensation and
Liability Act and the Resource Conservation and Recovery Act, that apply to
Borrower or the Property and relate to Hazardous Materials or protection of
human health or the environment. "ENVIRONMENTAL LIENS" means all Liens and other
encumbrances imposed pursuant to any Environmental Law, whether due to any act
or omission of Borrower or any other Person. "ENVIRONMENTAL REPORT" means the
written reports resulting from the environmental site assessments of the
Property delivered to Lender in connection with the Loan. "HAZARDOUS MATERIALS"
shall mean petroleum and petroleum products and compounds containing them,
including gasoline, diesel fuel and oil; explosives,

                                      -65-
<PAGE>

flammable materials; radioactive materials; polychlorinated biphenyls and
compounds containing them; lead and lead-based paint; asbestos or
asbestos-containing materials in any form that is or could become friable;
underground or above-ground storage tanks, whether empty or containing any
substance; any substance the presence of which on the Property is prohibited by
any federal, state or local authority; any substance that requires special
handling; and any other material or substance now or in the future defined as a
"hazardous substance," "hazardous material", "hazardous waste", "toxic
substance", "toxic pollutant", "contaminant", or "pollutant" within the meaning
of any Environmental Law. "MOLD" shall mean any mold, fungi, bacterial or
microbial matter present at or in the Property, including, without limitation,
building materials which is in a condition, location or a type which may pose a
risk to human health or safety or the environment, may result in damage to or
would adversely affect or impair the value or marketability of the Property.
"RELEASE" of any Hazardous Materials includes but is not limited to any release,
deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting,
pumping, pouring, emptying, escaping, dumping, disposing or other movement of
Hazardous Materials.

                                   ARTICLE 13
                                SECONDARY MARKET

         SECTION 13.1. TRANSFER OF LOAN

         Lender may, at any time, sell, transfer or assign the Loan Documents,
or grant participations therein ("PARTICIPATIONS") or syndicate the Loan
("SYNDICATION") or issue mortgage pass-through certificates or other securities
evidencing a beneficial interest in a rated or unrated public offering or
private placement ("SECURITIES") (a Syndication or the issuance of
Participations and/or Securities, a "SECURITIZATION").

         SECTION 13.2. DELEGATION OF SERVICING

         At the option of Lender, the Loan may be serviced by a servicer/trustee
selected by LENDER and Lender may delegate all or any portion of its
responsibilities under this Agreement and the other Loan Documents to such
servicer/trustee pursuant to a servicing agreement between Lender and such
servicer/trustee.

         SECTION 13.3. DISSEMINATION OF INFORMATION

         Lender may forward to each purchaser, transferee, assignee, or servicer
of, and each participant, or investor in, the Loan, or any Participations and/or
Securities or any of their respective successors (collectively, the "INVESTOR")
or any Rating Agency rating the Loan, or any Participations and/or Securities,
each prospective Investor, and any organization maintaining databases on the
underwriting and performance of commercial mortgage loans, all documents and
information which Lender now has or may hereafter acquire relating to the Debt
and to Borrower, any managing member or general partner thereof, Borrower
Principal, any SPE Component Entity (if any) and the Property, including
financial statements, whether furnished by Borrower or otherwise, as Lender
determines necessary or desirable. Borrower irrevocably waives any and all
rights it may have under applicable Legal Requirements to prohibit such
disclosure, including but not limited to any right of privacy.

                                      -66-
<PAGE>

         SECTION 13.4. COOPERATION

         Borrower and Borrower Principal agree to reasonably cooperate with
Lender in connection with any sale or transfer of the Loan or any Participation
and/or Securities created pursuant to this Article 13, including, without
limitation, (a) the delivery of an estoppel certificate required in accordance
with Section 5.12(a) and such other documents as may be reasonably requested by
Lender, (b) the execution of such amendments to the Loan Documents as may be
requested by the holder of the Note or the Rating Agency that shall issue a
rating on the Loan or otherwise to effect the Securitization including, without
limitation, bifurcation of the Loan into two or more separate notes; provided,
however, that Borrower shall not be required to modify or amend any Loan
Document if such modification or amendment would (i) change the interest rate,
the stated maturity or the amortization of principal set forth in the Note,
except in connection with a bifurcation of the Loan which may result in varying
fixed interest rates and amortization schedules, but which shall have the same
initial weighted average coupon of the original Note, or (ii) in the reasonable
judgment of Borrower, modify or amend any other material economic term of the
Loan, or (iii) in the reasonable judgment of Borrower, materially increase
Borrower's obligations and liabilities under the Loan Documents, and (c) make
changes to the organizational documents of Borrower and its principals and/or
use its best efforts to cause changes to the legal opinions delivered by
Borrower in connection with the Loan, provided, that such changes shall not
result in a material adverse economic effect to Borrower. Borrower shall also
furnish and Borrower and Borrower Principal consent to Lender furnishing to such
Investors or such prospective Investors or such Rating Agency any and all
information concerning the Property, the Leases, the financial condition of
Borrower or Borrower Principal as may be reasonably requested by Lender, any
Investor, any prospective Investor or any Rating Agency in connection with any
sale or transfer of the Loan or any Participations or Securities. All reasonable
third party costs and expenses incurred by Borrower in connection with
Borrower's complying with requests made under the foregoing provisions of this
Section 13.4 shall be paid by Borrower. Lender shall be responsible for all of
its out-of-pocket costs in connection with a Securitization.

                                   ARTICLE 14
                                INDEMNIFICATIONS

         SECTION 14.1. GENERAL INDEMNIFICATION

         Borrower shall indemnify, defend and hold harmless the Indemnified
Parties from and against any and all Losses imposed upon or incurred by or
asserted against any Indemnified Parties and directly or indirectly arising out
of or in any way relating to any one or more of the following to the extent the
event occurred during the period that Borrower owns the Property: (a) any
accident, injury to or death of persons or loss of or damage to property
occurring in, on or about the Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(b) any use, nonuse or condition in, on or about the Property or any part
thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent
parking areas, streets or ways; (c) performance of any labor or services or the
furnishing of any materials or other property in respect of the Property or any
part thereof; (d) any failure of the Property to be in compliance with any
applicable Legal Requirements; (e) any and all claims and demands whatsoever
which may be asserted against Lender by reason of any alleged obligations

                                      -67-
<PAGE>

or undertakings on its part to perform or discharge any of the terms, covenants,
or agreements contained in any Lease; (f) the holding or investing of the
Reserve Accounts or the performance of the Required Work, or Additional
Replacements, or (g) the payment of any commission, charge or brokerage fee to
anyone claiming to be paid by or through Borrower and which may be payable in
connection with the funding of the Loan (collectively, the "INDEMNIFIED
LIABILITIES"); provided, however, that Borrower shall not have any obligation to
Lender hereunder to the extent that such Indemnified Liabilities arise from the
gross negligence, illegal acts, fraud or willful misconduct of Lender. To the
extent that the undertaking to indemnify, defend and hold harmless set forth in
the preceding sentence may be unenforceable because it violates any law or
public policy, Borrower shall pay the maximum portion that it is permitted to
pay and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by Lender.

         SECTION 14.2. MORTGAGE AND INTANGIBLE TAX INDEMNIFICATION

         Borrower shall, at its sole cost and expense, protect, defend,
indemnify, release and hold harmless the Indemnified Parties from and against
any and all Losses imposed upon or incurred by or asserted against any
Indemnified Parties and directly or indirectly arising out of or in any way
relating to any tax on the making and/or recording of the Mortgage, the Note or
any of the other Loan Documents, but excluding any income, franchise or other
similar taxes.

         SECTION 14.3. ERISA INDEMNIFICATION

         Borrower shall, at its sole cost and expense, protect, defend,
indemnify, release and hold harmless the Indemnified Parties from and against
any and all Losses (including, without limitation, reasonable attorneys' fees
and costs incurred in the investigation, defense, and settlement of Losses
incurred in correcting any prohibited transaction or in the sale of a prohibited
loan, and in obtaining any individual prohibited transaction exemption under
ERISA that may be required, in Lender's sole discretion) that Lender may incur,
directly or indirectly, as a result of a default under Section 4.9 or Section
5.18 of this Agreement.

         SECTION 14.4. SURVIVAL

         The obligations and liabilities of Borrower under this Article 14 shall
fully survive indefinitely notwithstanding any termination, satisfaction,
assignment, entry of a judgment of foreclosure, exercise of any power of sale,
or delivery of a deed in lieu of foreclosure of the Mortgage.

                                   ARTICLE 15
                                   EXCULPATION

         SECTION 15.1. EXCULPATION.

         (a)      Except as otherwise provided herein or in the other Loan
Documents, Lender shall not enforce the liability and obligation of Borrower or
Borrower Principal, as applicable, to perform and observe the obligations
contained herein or in the other Loan Documents by any action or proceeding
wherein a money judgment shall be sought against Borrower or Borrower Principal,
except that Lender may bring a foreclosure action, action for specific
performance or

                                      -68-
<PAGE>

other appropriate action or proceeding to enable Lender to enforce and realize
upon this Agreement, the Note, the Mortgage and the other Loan Documents, and
the interest in the Property, the Rents and any other collateral given to Lender
created by this Agreement, the Note, the Mortgage and the other Loan Documents;
provided, however, that any judgment in any such action or proceeding shall be
enforceable against Borrower or Borrower Principal, as applicable, only to the
extent of Borrower's or Borrower Principal's interest in the Property, in the
Rents and in any other collateral given to Lender. Lender, by accepting this
Agreement, the Note, the Mortgage and the other Loan Documents, agrees that it
shall not, except as otherwise provided in this Section 15.1, sue for, seek or
demand any deficiency judgment against Borrower or Borrower Principal in any
such action or proceeding, under or by reason of or under or in connection with
this Agreement, the Note, the Mortgage or the other Loan Documents. The
provisions of this Section 15.1 shall not, however, (i) constitute a waiver,
release or impairment of any obligation evidenced or secured by this Agreement,
the Note, the Mortgage or the other Loan Documents; (ii) impair the right of
Lender to name Borrower or Borrower Principal as a party defendant in any action
or suit for judicial foreclosure and sale under this Agreement and the Mortgage;
(iii) affect the validity or enforceability of any indemnity (including, without
limitation, those contained in the Environmental Indemnity and Article 14 of
this Agreement), guaranty, master lease or similar instrument made in connection
with this Agreement, the Note, the Mortgage and the other Loan Documents; (iv)
impair the right of Lender to obtain the appointment of a receiver; (v) impair
the enforcement of the assignment of leases provisions contained in the
Mortgage; or (vi) impair the right of Lender to obtain a deficiency judgment or
other judgment on the Note against Borrower or Borrower Principal if necessary
to obtain any Insurance Proceeds or Awards to which Lender would otherwise be
entitled under this Agreement; provided however, Lender shall only enforce such
judgment to the extent of the Insurance Proceeds and/or Awards.

         (b)      Notwithstanding the provisions of this Section 15.1 to the
contrary, Borrower and Borrower Principal shall be personally liable to Lender
on a joint and several basis for Losses due to:

                  (i)      fraud or intentional misrepresentation by Borrower or
         Borrower Principal in connection with the execution and the delivery of
         this Agreement, the Note, the Mortgage, any of the other Loan
         Documents, or any certificate, report, financial statement or other
         instrument or document furnished to Lender by or on behalf of Borrower
         or Borrower Principal at the time of the closing of the Loan or during
         the term of the Loan;

                  (ii)     Borrower's misapplication or misappropriation of
         Rents received by Borrower after the occurrence and during the
         continuance of an Event of Default;

                  (iii)    Borrower's misapplication or misappropriation of
         tenant security deposits or Rents collected in advance;

                  (iv)     the misapplication or the misappropriation of
         Insurance Proceeds or Awards;

                                      -69-
<PAGE>

                  (v)      Borrower's failure to pay Taxes, Other Charges,
         charges for labor or materials or other charges that can create liens
         on the Property beyond any applicable notice and cure periods specified
         herein (except to the extent that (A) sums sufficient to pay such
         amounts have been deposited in escrow with Lender pursuant to the terms
         hereof and there exists no impediment to Lender's utilization thereof
         or (B) there is insufficient cash flow from the operation of the
         Property);

                  (vi)     Borrower's failure to return or to reimburse Lender
         for all Personal Property taken from the Property by or on behalf of
         Borrower and not replaced with Personal Property of the same utility
         and of the same or greater value;

                  (vii)    any act of actual waste or arson by Borrower, any
         principal, Affiliate, member or general partner thereof or by Borrower
         Principal, any principal, Affiliate, member or general partner thereof;
         or

                  (viii)   Borrower's failure following any Event of Default to
         deliver to Lender upon demand all Rents and books and records relating
         to the Property.

         (c)      Notwithstanding the foregoing, the agreement of Lender not to
pursue recourse liability as set forth in subsection (a) above SHALL BECOME NULL
AND VOID and shall be of no further force and effect and the Debt shall be fully
recourse to Borrower and Borrower Principal on a joint and several basis in the
event (i) of a breach by Borrower, Borrower Principal or any SPE Component
Entity (if any) of any of the covenants set forth in Article 6 hereof, to the
extent that such breach is (A) material and (B) is not cured within fifteen (15)
days of the earlier to occur of notice from Lender or Borrower's knowledge of
such breach, (ii) of a breach of any of the covenants set forth in Article 7
hereof, (iii) the Property or any part thereof shall become an asset in a
voluntary bankruptcy or insolvency proceeding filed by or on behalf of Borrower,
(iv) Borrower, Borrower Principal or any Affiliate, officer, director, or
representative which controls, directly or indirectly, Borrower or Borrower
Principal files, or joins in the filing of, an involuntary petition against
Borrower under any Creditors Rights Laws, or solicits or causes to be solicited
petitioning creditors for any involuntary petition against Borrower from any
Person; (v) Borrower files an answer consenting to or otherwise acquiescing in
or joining in any involuntary petition filed against it, by any other Person
under any Creditors Rights Laws, or solicits or causes to be solicited
petitioning creditors for any involuntary petition from any Person; or (vi) any
Affiliate, officer, director, or representative which controls Borrower
affirmatively consents to or acquiesces in or joins in an application for the
appointment of a custodian, receiver, trustee, or examiner for Borrower or any
portion of the Property.

         (d)      Nothing herein shall be deemed to be a waiver of any right
which Lender may have under Section 506(a), 506(b), 1111(b) or any other
provision of the U.S. Bankruptcy Code to file a claim for the full amount of the
indebtedness secured by the Mortgage or to require that all collateral shall
continue to secure all of the indebtedness owing to Lender in accordance with
this Agreement, the Note, the Mortgage or the other Loan Documents.

         (e)      Subject to the terms of Section 12.6, upon payment in full of
the Loan, Borrower Principal shall be relieved of its obligations under this
Article 15.

                                      -70-
<PAGE>

                                   ARTICLE 16
                                     NOTICES

         SECTION 16.1. NOTICES.

         All notices, consents, approvals and requests required or permitted
hereunder or under any other Loan Document shall be given in writing and shall
be effective for all purposes if hand delivered or sent by (a) certified or
registered United States mail, postage prepaid, return receipt requested, (b)
expedited prepaid overnight delivery service, either commercial or United States
Postal Service, with proof of attempted delivery, or by (c) telecopier (with
answer back acknowledged provided an additional notice is given pursuant to
subsection (b) above), addressed as follows (or at such other address and Person
as shall be designated from time to time by any party hereto, as the case may
be, in a written notice to the other parties hereto in the manner provided for
in this Section):

         If to Lender:              Bank of America, N.A.
                                    Capital Markets Servicing Group
                                    555 South Flower Street
                                    6th floor
                                    CA9-706-06-42
                                    Los Angeles, California  90071
                                    Attn: Servicing Manager
                                    Telephone No: (800) 462-0505
                                    Facsimile No.: (213) 345-6587

         With a copy to:            Dechert LLP
                                    30 Rockefeller Plaza
                                    New York, New York 10112
                                    Attention: Joseph Philip Forte
                                    Telephone No.: (212) 698-3500
                                    Facsimile No.: (212) 696-3599

         If to Borrower:            Ashworth EDC, LLC

                                    2765 Loker Avenue West
                                    Calsbad, California 92008
                                    Attention: Terence Tsang and
                                               Peter Case
                                    Telephone No.: (760) 438-6610
                                    Facsimile No.: (760) 476-8438

         With a copy to:            Allen Matkins Leck Gamble &
                                    Mallory LLP
                                    12348 High Bluff Drive, Suite
                                    100

                                      -71-
<PAGE>

                                    San Diego, California 92130
                                    Attention: Tom Crosbie, Esq.
                                    Telephone No.: (619) 233-1155
                                    Facsimile No.: (619) 233-1153

         If to Borrower             Ashworth Inc.
         Principal:                 2765 Loker Avenue West
                                    Calsbad, California 92008
                                    Attention: Terence Tsang and Peter Case
                                    Telephone No.: (760) 438-6610
                                    Facsimile No.: (760) 476-8438

         With a copy to:            Allen Matkins Leck Gamble &
                                    Mallory LLP
                                    12348 High Bluff Drive, Suite
                                    100
                                    San Diego, California 92130
                                    Attention: Tom Crosbie, Esq.
                                    Telephone No.: (619) 233-1155
                                    Facsimile No.: (619) 233-1153

A notice shall be deemed to have been given: in the case of hand delivery, at
the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case of
expedited prepaid delivery and telecopy, upon the first attempted delivery on a
Business Day.

                                   ARTICLE 17
                               FURTHER ASSURANCES

         SECTION 17.1. REPLACEMENT DOCUMENTS

         Upon receipt of an affidavit of an officer of Lender as to the loss,
theft, destruction or mutilation of the Note or any other Loan Document which is
not of public record: (i) with respect to any Loan Document other than the Note,
Borrower will issue, in lieu thereof, a replacement of such other Loan Document,
dated the date of such lost, stolen, destroyed or mutilated Loan Document in the
same principal amount thereof and otherwise of like tenor and (ii) with respect
to the Note, (a) Borrower will execute a reaffirmation of the Debt as evidenced
by such Note acknowledging that Lender has informed Borrower that the Note was
lost, stolen destroyed or mutilated and that such Debt continues to be an
obligation and liability of the Borrower as set forth in the Note, a copy of
which shall be attached to such reaffirmation and (b) if requested by Lender,
Borrower will execute a replacement note and Lender or Lender's custodian (at
Lender's option) shall provide to Borrower Lender's (or Lender's custodian's)
then standard form of lost note affidavit and indemnity, which such form shall
be reasonably acceptable to Borrower.

                                      -72-
<PAGE>

         SECTION 17.2. RECORDING OF MORTGAGE, ETC

         Borrower forthwith upon the execution and delivery of the Mortgage and
thereafter, from time to time, will cause the Mortgage and any of the other Loan
Documents creating a lien or security interest or evidencing the lien hereof
upon the Property and each instrument of further assurance to be filed,
registered or recorded in such manner and in such places as may be required by
any present or future law in order to publish notice of and fully to protect and
perfect the lien or security interest hereof upon, and the interest of Lender
in, the Property. Borrower will pay all taxes, filing, registration or recording
fees, and all reasonable expenses incident to the preparation, execution,
acknowledgment and/or recording of the Note, the Mortgage, the other Loan
Documents, any note, deed of trust or mortgage supplemental hereto, any Mortgage
with respect to the Property and any instrument of further assurance, and any
modification or amendment of the foregoing documents, and all federal, state,
county and municipal taxes, duties, imposts, assessments and charges arising out
of or in connection with the execution and delivery of the Mortgage, any deed of
trust or mortgage supplemental hereto, any Mortgage with respect to the Property
or any instrument of further assurance, and any modification or amendment of the
foregoing documents, except where prohibited by law so to do.

         SECTION 17.3. FURTHER ACTS, ETC

         Borrower will, at the cost of Borrower, and without expense to Lender,
do, execute, acknowledge and deliver all and every further acts, deeds,
conveyances, deeds of trust, mortgages, assignments, security agreements,
control agreements, notices of assignments, transfers and assurances as Lender
shall, from time to time, reasonably require, for the better assuring,
conveying, assigning, transferring, and confirming unto Lender the property and
rights hereby mortgaged, deeded, granted, bargained, sold, conveyed, confirmed,
pledged, assigned, warranted and transferred or intended now or hereafter so to
be, or which Borrower may be or may hereafter become bound to convey or assign
to Lender, or for carrying out the intention or facilitating the performance of
the terms of this Agreement or for filing, registering or recording the
Mortgage, or for complying with all Legal Requirements. Borrower, on demand,
will execute and deliver, and in the event it shall fail to so execute and
deliver, hereby authorizes Lender to execute in the name of Borrower or without
the signature of Borrower to the extent Lender may lawfully do so, one or more
financing statements and financing statement amendments to evidence more
effectively, perfect and maintain the priority of the security interest of
Lender in the Property. Borrower grants to Lender an irrevocable power of
attorney coupled with an interest for the purpose of exercising and perfecting
any and all rights and remedies available to Lender at law and in equity,
including without limitation, such rights and remedies available to Lender
pursuant to this Section 17.3.

         SECTION 17.4. CHANGES IN TAX, DEBT, CREDIT AND DOCUMENTARY STAMP LAWS

         (a)      If any law is enacted or adopted or amended after the date of
this Agreement which deducts the Debt from the value of the Property for the
purpose of taxation or which imposes a tax, either directly or indirectly, on
the Debt or Lender's interest in the Property, Borrower will pay the tax, with
interest and penalties thereon, if any. If Lender is advised by counsel chosen
by it that the payment of tax by Borrower would be unlawful or taxable to Lender
or unenforceable or provide the basis for a defense of usury then Lender shall
have the

                                      -73-
<PAGE>

option by written notice of not less than one hundred twenty (120) days to
declare the Debt immediately due and payable provided that no prepayment premium
shall be payable in connection therewith.

         (b)      Borrower will not claim or demand or be entitled to any credit
or credits on account of the Debt for any part of the Taxes or Other Charges
assessed against the Property, or any part thereof, and no deduction shall
otherwise be made or claimed from the assessed value of the Property, or any
part thereof, for real estate tax purposes by reason of the Mortgage or the
Debt. If such claim, credit or deduction shall be required by law, Lender shall
have the option, by written notice of not less than one hundred twenty (120)
days, to declare the Debt immediately due and payable.

         If at any time the United States of America, any State thereof or any
subdivision of any such State shall require revenue or other stamps to be
affixed to the Note, the Mortgage, or any of the other Loan Documents or impose
any other tax or charge on the same, Borrower will pay for the same, with
interest and penalties thereon, if any.

         SECTION 17.5. EXPENSES.

         Except as otherwise expressly provided in any of the Loan Documents,
Borrower covenants and agrees to pay or, if Borrower fails to pay, to reimburse,
Lender upon receipt of written notice from Lender for all reasonable
out-of-pocket costs and expenses (including reasonable, actual outside counsel
fees and disbursements) reasonably incurred by Lender in accordance with this
Agreement in connection with (a) the preparation, negotiation, execution and
delivery of this Agreement and the other Loan Documents and the consummation of
the transactions contemplated hereby and thereby and all the costs of furnishing
all opinions by counsel for Borrower (including without limitation any opinions
reasonably requested by Lender as to any legal matters arising under this
Agreement or the other Loan Documents with respect to the Property); (b)
Borrower's ongoing performance of and compliance with Borrower's respective
agreements and covenants contained in this Agreement and the other Loan
Documents on its part to be performed or complied with after the Closing Date,
including, without limitation, confirming compliance with environmental and
insurance requirements; (c) following a request by Borrower, Lender's ongoing
performance and compliance with all agreements and conditions contained in this
Agreement and the other Loan Documents on its part to be performed or complied
with after the Closing Date; (d) the negotiation, preparation, execution,
delivery and administration of any consents, amendments, waivers or other
modifications to this Agreement and the other Loan Documents and any other
documents or matters requested by Lender; (e) securing Borrower's compliance
with any requests made pursuant to the provisions of this Agreement; (f) the
filing and recording fees and expenses, title insurance and reasonable fees and
expenses of counsel for providing to Lender all required legal opinions, and
other similar expenses incurred in creating and perfecting the Lien in favor of
Lender pursuant to this Agreement and the other Loan Documents; (g) enforcing or
preserving any rights, in response to third party claims or the prosecuting or
defending of any action or proceeding or other litigation, in each case against,
under or affecting Borrower, this Agreement, the other Loan Documents, the
Property, or any other security given for the Loan; and (h) enforcing any
obligations of or collecting any payments due from Borrower under this
Agreement, the other Loan Documents or with respect to the Property or in
connection with any refinancing or restructuring of the credit

                                      -74-
<PAGE>

arrangements provided under this Agreement in the nature of a "work-out" or of
any insolvency or bankruptcy proceedings; provided, however, that Borrower shall
not be liable for the payment of any such costs and expenses to the extent the
same arise by reason of the gross negligence, illegal acts, fraud or willful
misconduct of Lender.

                                   ARTICLE 18
                                     WAIVERS

         SECTION 18.1. REMEDIES CUMULATIVE; WAIVERS.

         The rights, powers and remedies of Lender under this Agreement shall be
cumulative and not exclusive of any other right, power or remedy which Lender
may have against Borrower or Borrower Principal pursuant to this Agreement or
the other Loan Documents, or existing at law or in equity or otherwise. Lender's
rights, powers and remedies may be pursued singularly, concurrently or
otherwise, at such time and in such order as Lender may determine in Lender's
sole discretion. No delay or omission to exercise any remedy, right or power
accruing upon an Event of Default shall impair any such remedy, right or power
or shall be construed as a waiver thereof, but any such remedy, right or power
may be exercised from time to time and as often as may be deemed expedient. A
waiver of one Default or Event of Default with respect to Borrower shall not be
construed to be a waiver of any subsequent Default or Event of Default by
Borrower or to impair any remedy, right or power consequent thereon.

         SECTION 18.2. MODIFICATION, WAIVER IN WRITING.

         No modification, amendment, extension, discharge, termination or waiver
of any provision of this Agreement, or of the Note, or of any other Loan
Document, nor consent to any departure by Borrower therefrom, shall in any event
be effective unless the same shall be in a writing signed by the party against
whom enforcement is sought, and then such waiver or consent shall be effective
only in the specific instance, and for the purpose, for which given. Except as
otherwise expressly provided herein, no notice to, or demand on Borrower, shall
entitle Borrower to any other or future notice or demand in the same, similar or
other circumstances.

         SECTION 18.3. DELAY NOT A WAIVER.

         Neither any failure nor any delay on the part of Lender in insisting
upon strict performance of any term, condition, covenant or agreement, or
exercising any right, power, remedy or privilege hereunder, or under the Note or
under any other Loan Document, or any other instrument given as security
therefor, shall operate as or constitute a waiver thereof, nor shall a single or
partial exercise thereof preclude any other future exercise, or the exercise of
any other right, power, remedy or privilege. In particular, and not by way of
limitation, by accepting payment after the due date of any amount payable under
this Agreement, the Note or any other Loan Document, Lender shall not be deemed
to have waived any right either to require prompt payment when due of all other
amounts due under this Agreement, the Note or the other Loan Documents, or to
declare a default for failure to effect prompt payment of any such other amount.

         SECTION 18.4. TRIAL BY JURY.

                                      -75-
<PAGE>

         BORROWER, BORROWER PRINCIPAL AND LENDER EACH HEREBY AGREES NOT TO ELECT
A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO
TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER
ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER, BORROWER PRINCIPAL AND LENDER, AND
IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH
THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH OF LENDER, BORROWER
PRINCIPAL AND BORROWER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN
ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER, BORROWER
PRINCIPAL AND LENDER.

         SECTION 18.5. WAIVER OF NOTICE.

         Borrower shall not be entitled to any notices of any nature whatsoever
from Lender except with respect to matters for which this Agreement or the other
Loan Documents specifically and expressly provide for the giving of notice by
Lender to Borrower and except with respect to matters for which Borrower is not,
pursuant to applicable Legal Requirements, permitted to waive the giving of
notice. Borrower hereby expressly waives the right to receive any notice from
Lender with respect to any matter for which this Agreement or the other Loan
Documents do not specifically and expressly provide for the giving of notice by
Lender to Borrower.

         SECTION 18.6. REMEDIES OF BORROWER.

         In the event that a claim or adjudication is made that Lender or its
agents have acted unreasonably or unreasonably delayed acting in any case where
by law or under this Agreement or the other Loan Documents, Lender or such
agent, as the case may be, has an obligation to act reasonably or promptly,
Borrower agrees that neither Lender nor its agents shall be liable for any
monetary damages, and Borrower's sole remedies shall be limited to commencing an
action seeking injunctive relief or declaratory judgment. The parties hereto
agree that any action or proceeding to determine whether Lender has acted
reasonably shall be determined by an action seeking declaratory judgment. Lender
agrees that, in such event, it shall cooperate in expediting any action seeking
injunctive relief or declaratory judgment.

         SECTION 18.7. WAIVER OF MARSHALLING OF ASSETS.

         To the fullest extent permitted by law, Borrower, for itself and its
successors and assigns, waives all rights to a marshalling of the assets of
Borrower, Borrower's partners and others with interests in Borrower, and of the
Property, and agrees not to assert any right under any laws pertaining to the
marshalling of assets, the sale in inverse order of alienation, homestead
exemption, the administration of estates of decedents, or any other matters
whatsoever to defeat, reduce or affect the right of Lender under the Loan
Documents to a sale of the Property for the collection of the Debt without any
prior or different resort for collection or of the right of Lender

                                      -76-
<PAGE>

to the payment of the Debt out of the net proceeds of the Property in preference
to every other claimant whatsoever.

         SECTION 18.8. WAIVER OF STATUTE OF LIMITATIONS.

         Borrower hereby expressly waives and releases, to the fullest extent
permitted by law, the pleading of any statute of limitations as a defense to
payment of the Debt or performance of its Other Obligations.

         SECTION 18.9. WAIVER OF COUNTERCLAIM.

         Borrower hereby waives the right to assert a counterclaim, other than a
mandatory or compulsory counterclaim (or any other claim that must be raised at
the time of response to any claim by Lender in order not to be waived), in any
action or proceeding brought against it by Lender or its agents.

         SECTION 18.10. GRADSKY WAIVERS.

         Borrower and Borrower Principal hereby waive each of the following:

         (a)      Any rights of Borrower Principal of subrogation,
reimbursement, indemnification, and/or contribution against Borrower or any
other person or entity, and any other rights and defenses that are or may become
available to Borrower Principal or any other person or entity by reasons of
Sections 2787-2855, inclusive of the California Civil Code;

         (b)      Any rights or defenses that may be available by reason of any
election of remedies by Lender (including, without limitation, any such election
which in any manner impairs, effects, reduces, releases, destroys or
extinguishes Borrower Principal's subrogation rights, rights to proceed against
Borrower for reimbursement, or any other rights of Borrower Principal to proceed
against any other person, entity or security, including but not limited to any
defense based upon an election of remedies by Lender under the provisions of
Section 580(d) of the California Code of Civil Procedure or any similar law of
California or of any other State or of the United Sates); and

         (c)      Any rights or defenses Borrower Principal may have because its
obligations under this Agreement (the "BORROWER PRINCIPAL OBLIGATIONS") are
secured by real property or any estate for years. These rights or defenses
include, but are not limited to, any rights or defenses that are based upon,
directly or indirectly, the application of Section 580(a), Section 580(b),
Section 580(d) or Section 726 of the California Code of Civil Procedure to the
Borrower Principal Obligations.

         The provisions of this subsection (c) mean, among other things:

                  (y)      Lender may collect from Borrower Principal without
         first foreclosing on any real or personal property collateral pledged
         by Borrower for the Debt; and

                  (z)      If Lender forecloses on a real property pledged by
         Borrower:

                                      -77-
<PAGE>

                           (1)      The Borrower Principal Obligations shall be
                  reduced only by the price for which the collateral is sold at
                  the foreclosure sale even if the collateral is worth more at
                  the time of the sale.

                           (2)      Lender may collect from Borrower Principal
                  even if Lender, by foreclosing on the real property
                  collateral, has destroyed any right of Borrower Principal to
                  collect from Borrower. Further, the provisions of this
                  Agreement constitute an unconditional and irrevocable waiver
                  of any rights and defenses Borrower Principal may have because
                  Borrower's obligations are secured by real property. These
                  rights and defenses, include, but are not limited to, any
                  rights or defenses based upon Section 580(a), Section 580(b),
                  Section 580(d) or Section 726 of the California Code of Civil
                  Procedure.

                                   ARTICLE 19
                                  GOVERNING LAW

         SECTION 19.1. CHOICE OF LAW.

         This Agreement shall be governed, construed, applied and enforced in
accordance with the laws of the State and applicable laws of the United States
of America, except that, with respect to the security interest in the Reserve
Accounts, the laws of the state where the Reserve Accounts are located shall
apply.

         SECTION 19.2. SEVERABILITY.

         Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.

         SECTION 19.3. PREFERENCES.

         Lender shall have the continuing and exclusive right to apply or
reverse and reapply any and all payments by Borrower to any portion of the
obligations of Borrower hereunder. To the extent Borrower makes a payment or
payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
Creditors Rights Laws, state or federal law, common law or equitable cause,
then, to the extent of such payment or proceeds received, the obligations
hereunder or part thereof intended to be satisfied shall be revived and continue
in full force and effect, as if such payment or proceeds had not been received
by Lender.

                                   ARTICLE 20
                                  MISCELLANEOUS

         SECTION 20.1. SURVIVAL.

                                      -78-
<PAGE>

         (a)      This Agreement and all covenants, agreements, representations
and warranties made herein and in the certificates delivered pursuant hereto
shall survive the making by Lender of the Loan and the execution and delivery to
Lender of the Note, and shall continue in full force and effect so long as all
or any of the Debt is outstanding and unpaid unless a longer period is expressly
set forth herein or in the other Loan Documents. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the legal representatives, successors and assigns of such party. All covenants,
promises and agreements in this Agreement, by or on behalf of Borrower, shall
inure to the benefit of the legal representatives, successors and assigns of
Lender.

         (b)      References in the Loan Documents to the successors and/or
assigns of Lender shall mean any successor and/or assigns of Lender that is the
holder of the Note; provided however that this shall not be construed to
restrict Lender's ability to delegate the servicing rights with respect to the
Loan pursuant to Section 13.2 of this Agreement.

         SECTION 20.2. LENDER'S DISCRETION.

         Whenever pursuant to this Agreement, Lender exercises any right given
to it to approve or disapprove, or any arrangement or term is to be satisfactory
to Lender, the decision of Lender to approve or disapprove or to decide whether
arrangements or terms are satisfactory or not satisfactory shall (except as is
otherwise specifically herein provided) be in the sole discretion of Lender and
shall be final and conclusive.

         SECTION 20.3. HEADINGS.

         The Article and/or Section headings and the Table of Contents in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.

         SECTION 20.4. COST OF ENFORCEMENT.

         In the event (a) that the Mortgage is foreclosed in whole or in part,
(b) of the bankruptcy, insolvency, rehabilitation or other similar proceeding in
respect of Borrower or any of its constituent Persons or an assignment by
Borrower or any of its constituent Persons for the benefit of its creditors, or
(c) Lender exercises any of its other remedies under this Agreement or any of
the other Loan Documents, Borrower shall be chargeable with and agrees to pay
all costs of collection and defense, including attorneys' fees and costs,
incurred by Lender or Borrower in connection therewith and in connection with
any appellate proceeding or post-judgment action involved therein, together with
all required service or use taxes.

         SECTION 20.5. SCHEDULES INCORPORATED.

         The Schedules annexed hereto are hereby incorporated herein as a part
of this Agreement with the same effect as if set forth in the body hereof.

         SECTION 20.6. OFFSETS, COUNTERCLAIMS AND DEFENSES.

                                      -79-
<PAGE>

         Any assignee of Lender's interest in and to this Agreement, the Note
and the other Loan Documents shall take the same free and clear of all offsets,
counterclaims or defenses which are unrelated to such documents which Borrower
may otherwise have against any assignor of such documents, and no such unrelated
counterclaim or defense shall be interposed or asserted by Borrower in any
action or proceeding brought by any such assignee upon such documents and any
such right to interpose or assert any such unrelated offset, counterclaim or
defense in any such action or proceeding is hereby expressly waived by Borrower.

         SECTION 20.7. NO JOINT VENTURE OR PARTNERSHIP; NO THIRD PARTY
BENEFICIARIES.

         (a)      Borrower and Lender intend that the relationships created
hereunder and under the other Loan Documents be solely that of borrower and
lender. Nothing herein or therein is intended to create a joint venture,
partnership, tenancy-in-common, or joint tenancy relationship between Borrower
and Lender nor to grant Lender any interest in the Property other than that of
mortgagee, beneficiary or lender.

         (b)      This Agreement and the other Loan Documents are solely for the
benefit of Lender and Borrower and nothing contained in this Agreement or the
other Loan Documents shall be deemed to confer upon anyone other than Lender and
Borrower any right to insist upon or to enforce the performance or observance of
any of the obligations contained herein or therein. All conditions to the
obligations of Lender to make the Loan hereunder are imposed solely and
exclusively for the benefit of Lender and no other Person shall have standing to
require satisfaction of such conditions in accordance with their terms or be
entitled to assume that Lender will refuse to make the Loan in the absence of
strict compliance with any or all thereof and no other Person shall under any
circumstances be deemed to be a beneficiary of such conditions, any or all of
which may be freely waived in whole or in part by Lender if, in Lender's sole
discretion, Lender deems it advisable or desirable to do so.

         (c)      The general partners, members, principals and (if Borrower is
a trust) beneficial owners of Borrower are experienced in the ownership and
operation of properties similar to the Property, and Borrower and Lender are
relying solely upon such expertise and business plan in connection with the
ownership and operation of the Property. Borrower is not relying on Lender's
expertise, business acumen or advice in connection with the Property.

         (d)      Notwithstanding anything to the contrary contained herein,
Lender is not undertaking the performance of (i) any obligations under the
Leases; or (ii) any obligations with respect to such agreements, contracts,
certificates, instruments, franchises, permits, trademarks, licenses and other
documents.

         (e)      By accepting or approving anything required to be observed,
performed or fulfilled or to be given to Lender pursuant to this Agreement, the
Mortgage, the Note or the other Loan Documents, including, without limitation,
any officer's certificate, balance sheet, statement of profit and loss or other
financial statement, survey, appraisal, or insurance policy, Lender shall not be
deemed to have warranted, consented to, or affirmed the sufficiency, the
legality or effectiveness of same, and such acceptance or approval thereof shall
not constitute any warranty or affirmation with respect thereto by Lender.

                                      -80-
<PAGE>

         (f)      Borrower recognizes and acknowledges that in accepting this
Agreement, the Note, the Mortgage and the other Loan Documents, Lender is
expressly and primarily relying on the truth and accuracy of the representations
and warranties set forth in Article 4 of this Agreement without any obligation
to investigate the Property and notwithstanding any investigation of the
Property by Lender; that such reliance existed on the part of Lender prior to
the date hereof, that the warranties and representations are a material
inducement to Lender in making the Loan; and that Lender would not be willing to
make the Loan and accept this Agreement, the Note, the Mortgage and the other
Loan Documents in the absence of the warranties and representations as set forth
in Article 4 of this Agreement.

         SECTION 20.8. PUBLICITY.

         All news releases, publicity or advertising by Borrower or its
Affiliates through any media intended to reach the general public which refers
to the Loan, Lender, Banc of America Securities LLC, or any of their Affiliates
shall be subject to the prior written approval of Lender, not to be unreasonably
withheld. Lender shall be permitted to make any news, releases, publicity or
advertising by Lender or its Affiliates through any media intended to reach the
general public which refers to the Loan, the Property, Borrower, Borrower
Principal and their respective Affiliates without the approval of Borrower or
any such Persons. Borrower also agrees that Lender may share any information
pertaining to the Loan with Bank of America Corporation, including its bank
subsidiaries, Banc of America Securities LLC and any other Affiliates of the
foregoing, in connection with the sale or transfer of the Loan or any
Participations and/or Securities created.

         SECTION 20.9. CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE.

         In the event of any conflict between the provisions of this Agreement
and any of the other Loan Documents, the provisions of this Agreement shall
control. The parties hereto acknowledge that they were represented by competent
counsel in connection with the negotiation, drafting and execution of the Loan
Documents and that such Loan Documents shall not be subject to the principle of
construing their meaning against the party which drafted same. Borrower
acknowledges that, with respect to the Loan, Borrower shall rely solely on its
own judgment and advisors in entering into the Loan without relying in any
manner on any statements, representations or recommendations of Lender or any
parent, subsidiary or Affiliate of Lender. Lender shall not be subject to any
limitation whatsoever in the exercise of any rights or remedies available to it
under any of the Loan Documents or any other agreements or instruments which
govern the Loan by virtue of the ownership by it or any parent, subsidiary or
Affiliate of Lender of any equity interest any of them may acquire in Borrower,
and Borrower hereby irrevocably waives the right to raise any defense or take
any action on the basis of the foregoing with respect to Lender's exercise of
any such rights or remedies. Borrower acknowledges that Lender engages in the
business of real estate financings and other real estate transactions and
investments which may be viewed as adverse to or competitive with the business
of Borrower or its Affiliates.

         SECTION 20.10. ENTIRE AGREEMENT.

                                      -81-
<PAGE>

         This Agreement and the other Loan Documents contain the entire
agreement of the parties hereto and thereto in respect of the transactions
contemplated hereby and thereby, and all prior agreements among or between such
parties, whether oral or written between Borrower and Lender are superseded by
the terms of this Agreement and the other Loan Documents.

                                      -82-
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized representatives, all as of the day and
year first above written.

                                      BORROWER:

                                      ASHWORTH EDC, LLC, a Delaware limited
                                      liability company

                                      By: ASHWORTH INC., a Delaware corporation

                                          By: /s/ Terence Tsang
                                              Name: Terence Tsang
                                              Title: EVP, COO & CFO

                                      BORROWER PRINCIPAL:

                                      Acknowledged and agreed to
                                      with respect to its
                                      obligations set forth in
                                      Article 4, Section 7.6,
                                      Article 15 and Article 18
                                      hereof:

                                      ASHWORTH INC., a Delaware corporation

                                      By: /s/ Terence Tsang
                                          Name: Terence Tsang
                                          Title: EVP, COO & CFO

                                      LENDER:

                                      BANK OF AMERICA, N.A., a national
                                      banking association

                                      By: /s/ Steven Wasser
                                          Name: Steven Wasser
                                          Title: Principal<PAGE>

                                                                Exhibit 10(x)(4)

                                LOAN TERMS TABLE

Note Date: April 2, 2004
Borrower:  ASHWORTH EDC, LLC, a Delaware limited liability company
Original Principal Amount: $11,650,000          Loan No.: 58036
Note Rate: 5.00%                                Servicing No.: 3180114
Monthly Payment Amount:  $62,539.72             TIN: 84-1052000
Amortization Commencement Date: June 1, 2004    Maturity Date: May 1, 2014
Lockout Period: Beginning on the date of this Note and ending on March 1, 2014

                                 PROMISSORY NOTE

         FOR VALUE RECEIVED Borrower, having its principal place of business at
2765 Loker Avenue West, Carlsbad, California 92008, hereby unconditionally
promises to pay to the order of BANK OF AMERICA, N.A., a national banking
association, having an address at 214 North Tryon Street, Charlotte, North
Carolina 28255 ("LENDER"), the Original Principal Amount, in lawful money of the
United States of America with interest thereon to be computed from the date of
this Note at the Note Rate, and to be paid in accordance with the terms set
forth below. The Loan Terms Table set forth above is a part of this Note and all
terms used in this Note which are defined in the Loan Terms Table shall have the
meaning set forth therein. All capitalized terms not defined herein shall have
the respective meanings set forth in that certain Loan Agreement dated the date
hereof between Lender and Borrower (the "LOAN AGREEMENT").

                  ARTICLE 1 - PAYMENT TERMS; MANNER OF PAYMENT

         (a)      Borrower hereby agrees to pay sums due under this Note as
follows: an initial payment is due on the Closing Date for interest from the
Closing Date through and including the last day of the calendar month in which
the Closing Date occurs; and thereafter, except as may be adjusted in accordance
with the last sentence of Section 1(b), consecutive monthly installments of
principal and interest in an amount equal to the Monthly Payment Amount shall be
payable pursuant to the terms hereof on the first (1st) day of each month
beginning on the Amortization Commencement Date (each a "Scheduled Payment
Date") until the entire indebtedness evidenced hereby is fully paid, except that
any remaining indebtedness, if not sooner paid, shall be due and payable on the
Maturity Date.

         (b)      The Monthly Payment Amount is computed on the basis of an
amortization schedule for a loan having (i) a principal amount equal to the
Original Principal Amount of this Note, (ii) an amortization period of thirty
(30) years, and (iii) an annual interest rate equal to the Note Rate, computed
on the basis of a three hundred sixty (360) day year consisting of twelve (12)
months of thirty (30) days each. Borrower expressly understands and agrees that
such computation of interest based on a three hundred sixty (360) day year
consisting of twelve (12) months of thirty (30) days each is solely for the
purpose of determining the Monthly Payment Amount, and, notwithstanding such
computation, interest shall accrue on the outstanding

<PAGE>

principal amount of the Loan as provided in Article 2 below. Borrower
understands and acknowledges that such interest accrual requirement results in
more interest accruing on the Loan than if either a thirty (30) day month and a
three hundred sixty (360) day year or the actual number of days and a three
hundred sixty-five (365) day year were used to compute the accrual of interest
on the Loan. Borrower recognizes that such interest accrual requirement will not
fully amortize the Loan within the amortization period set forth above.
Following any partial prepayment occurring solely as a result of the application
of Insurance Proceeds or Awards pursuant to the terms of this Note and the other
Loan Documents, Lender may, in its sole and absolute discretion, adjust the
Monthly Payment Amount to give effect to any such partial prepayment, provided,
however, that in no event will any such adjustment result in any such
installment becoming due and payable on any date after the Maturity Date.

         (c)      Each payment by Borrower hereunder shall be made to P.O. Box
515228, Los Angeles, CA 90051-6528, or at such other place as Lender may
designate from time to time in writing. Whenever any payment hereunder shall be
stated to be due on a day which is not a Business Day, such payment shall be
made on the first Business Day preceding such scheduled due date. All payments
made by Borrower hereunder or under the other Loan Documents shall be made
irrespective of, and without any deduction for, any setoff, defense or
counterclaims.

         (d)      Prior to the occurrence of an Event of Default, all monthly
payments made as scheduled on this Note shall be applied first to the payment of
interest computed at the Note Rate, and the balance toward the reduction of the
principal amount of this Note. All voluntary and involuntary prepayments on this
Note shall be applied, to the extent thereof, to accrued but unpaid interest on
the amount prepaid, to the remaining Principal Amount, and any other sums due
and unpaid to the Lender in connection with the Loan, in such manner and order
as Lender may elect in its sole and absolute discretion, including, but not
limited to, application to principal installments in inverse order of maturity.
Following the occurrence and during the continuance of an Event of Default, any
payment made on this Note shall be applied to accrued but unpaid interest, late
charges, accrued fees, the unpaid principal amount of this Note, and any other
sums due and unpaid to Lender in connection with the Loan, in such manner and
order as Lender may elect in its sole and absolute discretion.

         (e)      Remittances in payment of any part of the indebtedness other
than in the required amount in immediately available U.S. funds shall not,
regardless of any receipt or credit issued therefor, constitute payment until
the required amount is actually received by the holder hereof in immediately
available U.S. funds and shall be made and accepted subject to the condition
that any check or draft may be handled for collection in accordance with the
practices of the collecting bank or banks.

                              ARTICLE 2 - INTEREST

         The Loan shall bear interest at a fixed rate per annum equal to the
Note Rate. Interest shall be computed based on the daily rate produced assuming
a three hundred sixty (360) day year, multiplied by the actual number of days
elapsed. Except as otherwise set forth herein or in the other Loan Documents,
interest shall be paid in arrears.

                                      -2-
<PAGE>

                      ARTICLE 3 - DEFAULT AND ACCELERATION

         The Debt shall without notice become immediately due and payable at the
option of Lender if any payment required in this Note is not paid prior to the
fifth day following the date when due or if not paid on the Maturity Date or
upon the occurrence and during the continuance of any other Event of Default.

                       ARTICLE 4 - PAYMENTS AFTER DEFAULT

         Upon the occurrence and during the continuance of an Event of Default,
interest on the outstanding principal balance of the Loan and, to the extent
permitted by law, overdue interest and other amounts due in respect of the Loan
shall accrue at a rate per annum equal to the lesser of (a) the maximum rate
permitted by applicable law, or (b) four percent (4%) above the Note Rate (such
rate, the "DEFAULT RATE"). Interest at the Default Rate shall be computed from
the occurrence of the Event of Default until the earlier of (i) the actual
receipt and collection of the Debt (or that portion thereof that is then due)
and (ii) the cure of such Event of Default. To the extent permitted by
applicable law, interest at the Default Rate shall be added to the Debt, shall
itself accrue interest at the same rate as the Loan and shall be secured by the
Mortgage. This Article shall not be construed as an agreement or privilege to
extend the date of the payment of the Debt, nor as a waiver of any other right
or remedy accruing to Lender by reason of the occurrence of any Event of
Default; the acceptance of any payment from Borrower shall not be deemed to cure
or constitute a waiver of any Event of Default; and Lender retains its rights
under this Note, the Loan Agreement and the other Loan Documents to accelerate
and to continue to demand payment of the Debt upon the happening of and during
the continuance of any Event of Default, despite any payment by Borrower to
Lender.

                       ARTICLE 5 - PREPAYMENT; DEFEASANCE

         Except as otherwise expressly permitted by this Article 5, no voluntary
prepayments, whether in whole or in part, of the Loan or any other amount at any
time due and owing under this Note can be made by Borrower or any other Person
without the express written consent of Lender.

         (a)      Lockout Period. Borrower shall have no right to make, and
Lender shall have no obligation to accept, any voluntary prepayment, whether in
whole or in part, of the Loan, or any other amount under this Note or the other
Loan Documents, at any time during the Lockout Period. Notwithstanding the
foregoing, if either (i) Lender, in its sole and absolute discretion, accepts a
full or partial voluntary prepayment during the Lockout Period or (ii) subject
to Section 5(c) below, there is an involuntary prepayment during the Lockout
Period, then, in either case, Borrower shall, in addition to any portion of the
Loan prepaid (together with all interest accrued and unpaid thereon), pay to
Lender a prepayment premium in an amount calculated in accordance with Section
5(c) below.

         (b)      Defeasance.

                  (i)      Notwithstanding any provisions of this Article 5 to
         the contrary, including, without limitation, subsection (a) of this
         Article 5, at any time other than during a REMIC Prohibition Period
         (defined below), Borrower may cause the release of the

                                      -3-
<PAGE>

         Property from the lien of the Mortgage and the other Loan Documents
         upon the satisfaction of the following conditions:

                           (A)      no Event of Default shall exist under any of
                  the Loan Documents;

                           (B)      not less than sixty (60) (but not more than
                  ninety (90)) days prior written notice shall be given to
                  Lender specifying a date on which the Defeasance Collateral
                  (as hereinafter defined) is to be delivered (the "RELEASE
                  DATE"), such date being on a Scheduled Payment Date; provided,
                  however, that Borrower shall have the right (i) to cancel such
                  notice by providing Lender with notice of cancellation ten
                  (10) days prior to the scheduled Release Date, or (ii) to
                  extend the scheduled Release Date until the next Scheduled
                  Payment Date; provided that in each case, Borrower shall pay
                  all of Lender's reasonable out-of-pocket costs and expenses
                  incurred as a result of such cancellation or extension;

                           (C)      all accrued and unpaid interest and all
                  other sums due under this Note and under the other Loan
                  Documents up to the Release Date, including, without
                  limitation, all reasonable out-of pocket fees, costs and
                  expenses incurred by Lender and its agents in connection with
                  such release (including, without limitation, reasonable legal
                  fees and expenses for the review and preparation of the
                  Defeasance Security Agreement (as hereinafter defined) and of
                  the other materials described in Section 5(b)(i)(D) below and
                  any related documentation, and any servicing fees, Rating
                  Agency fees or other costs related to such release), shall be
                  paid in full on or prior to the Release Date;

                           (D)      Borrower shall deliver to Lender on or prior
                  to the Release Date:

                                    (1)      a pledge and security agreement, in
                           form and substance which would be satisfactory to a
                           prudent lender, creating a first priority security
                           interest in favor of Lender in the Defeasance
                           Collateral, as defined herein (the "DEFEASANCE
                           SECURITY AGREEMENT"), which shall provide, among
                           other things, that any excess amounts received by
                           Lender from the Defeasance Collateral over the
                           amounts payable by Borrower on a given Scheduled
                           Payment Date, which excess amounts are not required
                           to cover all or any portion of amounts payable on a
                           future Scheduled Payment Date, shall be refunded to
                           Borrower promptly after each such Scheduled Payment
                           Date;

                                    (2)      Direct non-callable obligations of
                           the United States of America or, to the extent
                           acceptable to the applicable Rating Agencies, other
                           obligations which are "government securities" within
                           the meaning of Section 2(a)(16) of the Investment
                           Company Act of 1940 that provide for payments prior
                           and as close as possible to (but in no event later
                           than) all successive Scheduled Payment Dates
                           occurring after the Release Date, with each such
                           payment being equal to or greater than the amount of
                           the corresponding Monthly Payment Amount required to
                           be paid under this Note (including all amounts due on
                           the Maturity Date) for the balance of

                                      -4-
<PAGE>

                           the term hereof (the "DEFEASANCE Collateral"), each
                           of which shall be duly endorsed by the holder thereof
                           as directed by Lender or accompanied by a written
                           instrument of transfer in form and substance which
                           would be satisfactory to a prudent lender (including,
                           without limitation, such certificates, documents and
                           instruments as may be required by the depository
                           institution holding such securities or the issuer
                           thereof, as the case may be, to effectuate book-entry
                           transfers and pledges through the book-entry
                           facilities of such institution) in order to perfect
                           upon the delivery of the Defeasance Security
                           Agreement the first priority security interest
                           therein in favor of Lender in conformity with all
                           applicable state and federal laws governing granting
                           of such security interests;

                                    (3)      a certificate of Borrower
                           certifying that all of the requirements set forth in
                           this Section 5(b)(i) have been satisfied;

                                    (4)      one or more opinions of counsel for
                           Borrower in form and substance and delivered by
                           counsel which would be satisfactory to a prudent
                           lender stating, among other things, that (a) Lender
                           has a perfected first priority security interest in
                           the Defeasance Collateral and that the Defeasance
                           Security Agreement is enforceable against Borrower in
                           accordance with its terms, (b) in the event of a
                           bankruptcy proceeding or similar occurrence with
                           respect to Borrower, none of the Defeasance
                           Collateral nor any proceeds thereof will be property
                           of Borrower's estate under Section 541 of the U.S.
                           Bankruptcy Code or any similar statute and the grant
                           of security interest therein to Lender shall not
                           constitute an avoidable preference under Section 547
                           of the U.S. Bankruptcy Code or applicable state law,
                           (c) the release of the lien of the Mortgage and the
                           pledge of Defeasance Collateral will not directly or
                           indirectly result in or cause any "real estate
                           mortgage investment conduit" within the meaning of
                           Section 860D of the Internal Revenue Code that holds
                           this Note (a "REMIC TRUST") to fail to maintain its
                           status as a REMIC Trust and (d) the defeasance will
                           not cause any REMIC Trust to be an "investment
                           company" under the Investment Company Act of 1940;

                                    (5)      a certificate in form and scope
                           which would be satisfactory to a prudent lender from
                           an independent certified public accountant acceptable
                           to Lender certifying that the Defeasance Collateral
                           will generate amounts sufficient to make all payments
                           of principal and interest due under this Note
                           (including the scheduled outstanding principal
                           balance of the Loan due on the Maturity Date); and

                                    (6)      such other certificates, documents
                           and instruments as a prudent lender would require;
                           and

                                    (7)      in the event the Loan is held by a
                           REMIC Trust, Lender has received written confirmation
                           from any Rating Agency rating any Securities that
                           substitution of the Defeasance Collateral will not
                           result in a

                                      -5-
<PAGE>

                           downgrade, withdrawal, or qualification of the
                           ratings then assigned to any of the Securities.

                  (ii)     Upon compliance with the requirements of Section
         5(b)(i), the Property shall be released from the lien of the Mortgage
         and the other Loan Documents, and the Defeasance Collateral shall
         constitute collateral which shall secure this Note and all other
         obligations under the Loan Documents. Lender will, at Borrower's
         expense, execute and deliver any agreements reasonably requested by
         Borrower to release the lien of the Mortgage and the other Loan
         Documents from the Property.

                  (iii)    Upon the release of the Property in accordance with
         this Section 5(b), Borrower shall assign all its obligations and rights
         under this Note, together with the pledged Defeasance Collateral, to a
         successor entity designated and approved by Lender in its sole and
         absolute discretion ("SUCCESSOR BORROWER"). Successor Borrower shall
         execute an assignment and assumption agreement in form and substance
         which would be satisfactory to a prudent lender pursuant to which it
         shall assume Borrower's obligations under this Note and the Defeasance
         Security Agreement. As conditions to such assignment and assumption,
         Borrower shall (A) deliver to Lender one or more opinions of counsel in
         form and substance and delivered by counsel which would be satisfactory
         to a prudent lender stating, among other things, that such assignment
         and assumption agreement is enforceable against Borrower and the
         Successor Borrower in accordance with its terms and that this Note, the
         Defeasance Security Agreement and the other Loan Documents, as so
         assigned and assumed, are enforceable against the Successor Borrower in
         accordance with their respective terms, and opining to such other
         matters relating to Successor Borrower and its organizational structure
         as Lender may reasonably require, and (B) pay all reasonable
         out-of-pocket fees, costs and expenses incurred by Lender or its agents
         in connection with such assignment and assumption (including, without
         limitation, legal fees and expenses and for the review of the proposed
         transferee and the preparation of the assignment and assumption
         agreement and related certificates, documents and instruments and any
         fees payable to any Rating Agencies and their counsel in connection
         with the issuance of the confirmation referred to above). Upon such
         assignment and assumption, Borrower shall be relieved of its
         obligations hereunder, under this Note, under the other Loan Documents
         and under the Defeasance Security Agreement, except as expressly set
         forth in the assignment and assumption agreement.

                  (iv)     For purposes of this Article 5, "REMIC PROHIBITION
         PERIOD" means the two-year period commencing with the "startup day"
         within the meaning of Section 860G(a)(9) of the Internal Revenue Code
         of any REMIC Trust that holds this Note. In no event shall Lender have
         any obligation to notify Borrower that a REMIC Prohibition Period is in
         effect with respect to the Loan, except that Lender shall notify
         Borrower if any REMIC Prohibition Period is in effect with respect to
         the Loan after receiving any notice described in Section 5(b)(i)(B);
         provided, however, that the failure of Lender to so notify Borrower
         shall not impose any liability upon Lender or grant Borrower any right
         to defease the Loan during any such REMIC Prohibition Period.

         (c)      Involuntary Prepayment During the Lockout Period. During the
Lockout Period, in the event of any involuntary prepayment of the Loan or any
other amount under this Note,

                                      -6-
<PAGE>

whether in whole or in part, in connection with or following Lender's
acceleration of this Note or otherwise, and whether the Mortgage is satisfied or
released by foreclosure (whether by power of sale or judicial proceeding), deed
in lieu of foreclosure or by any other means, including, without limitation,
repayment of the Loan by Borrower or any other Person pursuant to any statutory
or common law right of redemption, Borrower shall, in addition to any portion of
the principal balance of the Loan prepaid (together with all interest accrued
and unpaid thereon and in the event the prepayment is made on a date other than
a Scheduled Payment Date, a sum equal to the amount of interest which would have
accrued under this Note on the amount of such prepayment if such prepayment had
occurred on the next Scheduled Payment Date), pay to Lender a prepayment premium
in an amount calculated in accordance with this Section 5(c). Such prepayment
premium shall be in an amount equal to the greater of:

                  (i)      1% of the portion of the Loan being prepaid; or

                  (ii)     the product obtained by multiplying:

                           (A)      the portion of the Loan being prepaid,
                  times;

                           (B)      the difference obtained by subtracting (I)
                  the Yield Rate from (II) the Note Rate, times;

                           (C)      the present value factor calculated using
                  the following formula:

                                    1-(1+r)(-n)
                                    -----------
                                         r

                                    r =     Yield Rate

                                    n =     the number of years and any
                                            fraction thereof, remaining between
                                            the date the prepayment is made and
                                            the Maturity Date of this Note.

         As used herein, "YIELD RATE" means the yield rate for the 4.00% U.S.
Treasury Security due February 15, 2014, as reported in The Wall Street Journal
on the fifth Business Day preceding the Prepayment Calculation Date. If the
Yield Rate is not published for such U.S. Treasury Security, then the "Yield
Rate" shall mean the yield rate for the nearest equivalent U.S. Treasury
Security (as selected at Lender's sole and absolute discretion) as reported in
The Wall Street Journal on the fifth Business Day preceding the Prepayment
Calculation Date. If the publication of such Yield Rate in The Wall Street
Journal is discontinued, Lender shall determine such Yield Rate from another
source selected by Lender in Lender's sole and absolute discretion. The
"PREPAYMENT CALCULATION DATE" shall mean, as applicable, the date on which (i)
Lender applies any prepayment to the reduction of the outstanding principal
amount this Note, (ii) Lender accelerates the Loan, in the case of a prepayment
resulting from acceleration, or (iii) Lender applies to the outstanding
principal amount of this Note funds held under any Reserve Account, in the case
of a prepayment resulting from such an application (other than in connection
with acceleration of the Loan).

                                      -7-
<PAGE>

         (d)      Insurance Proceeds and Awards; Excess Interest; Changes in
Tax, Debt, Credit and Documentary Stamp Laws. Notwithstanding any other
provision herein to the contrary, and provided no Event of Default exists,
Borrower shall not be required to pay any prepayment premium in connection with
any prepayment occurring solely as a result of (i) the application of Insurance
Proceeds or Awards pursuant to the terms of the Loan Documents, (ii) the
application of any interest in excess of the maximum rate permitted by
applicable law to the reduction of the Loan or (iii) changes in law in
connection with Section 17.4 of the Loan Agreement.

         (e)      After the Lockout Period. Commencing on the day after the
expiration of the Lockout Period, and upon giving Lender at least forty-five
(45) days (but not more than ninety (90) days) prior written notice, Borrower
may voluntarily prepay (without premium) this Note in whole (but not in part) on
a Scheduled Payment Date. Lender shall accept a prepayment pursuant to this
Section 5(e) on a day other than a Scheduled Payment Date provided that, in
addition to payment of the full outstanding principal balance of this Note,
Borrower pays to Lender a sum equal to the amount of interest which would have
accrued on this Note if such prepayment occurred on the next Scheduled Payment
Date.

         (f)      Limitation on Partial Prepayments. In no event shall Lender
have any obligation to accept a partial prepayment.

                              ARTICLE 6 - SECURITY

         This Note is secured by the Mortgage and the other Loan Documents. All
of the terms, covenants and conditions contained in the Loan Agreement, the
Mortgage and the other Loan Documents are hereby made part of this Note to the
same extent and with the same force as if they were fully set forth herein.

                           ARTICLE 7 - USURY SAVINGS

         This Note is subject to the express condition that at no time shall
Borrower be obligated or required to pay interest on the principal balance of
the Loan at a rate which could subject Lender to either civil or criminal
liability as a result of being in excess of the maximum nonusurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received on the indebtedness evidenced by this Note
and as provided for herein or in the other Loan Documents, under the laws of
such state or states whose laws are held by any court of competent jurisdiction
to govern the interest rate provisions of the Loan (such rate, the "MAXIMUM
LEGAL RATE"). If, by the terms of this Note or the other Loan Documents,
Borrower is at any time required or obligated to pay interest on the principal
balance due hereunder at a rate in excess of the Maximum Legal Rate, the Note
Rate or the Default Rate, as the case may be, shall be deemed to be immediately
reduced to the Maximum Legal Rate and all previous payments in excess of the
Maximum Legal Rate shall be deemed to have been payments in reduction of
principal and not on account of the interest due hereunder. All sums paid or
agreed to be paid to Lender for the use, forbearance, or detention of the sums
due under the Loan, shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full stated term of
the Loan until payment in full so that the rate or amount of interest on account
of the Loan does not exceed the Maximum Legal Rate of interest from time to time
in effect and applicable to the Loan for so long as the Loan is outstanding.

                                      -8-
<PAGE>

                        ARTICLE 8 - LATE PAYMENT CHARGE

         If any principal or interest payment is not paid by Borrower before the
tenth (10th) day after the date the same is due (or such greater period, if any,
required by applicable law), Borrower shall pay to Lender upon demand an amount
equal to the lesser of four percent (4%) of such unpaid sum or the maximum
amount permitted by applicable law in order to defray the expense incurred by
Lender in handling and processing such delinquent payment and to compensate
Lender for the loss of the use of such delinquent payment. Any such amount shall
be secured by the Mortgage and the other Loan Documents to the extent permitted
by applicable law.

                           ARTICLE 9 - NO ORAL CHANGE

         This Note may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Borrower or Lender, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.

                              ARTICLE 10 - WAIVERS

         Borrower and all others who may become liable for the payment of all or
any part of the Debt do hereby severally waive presentment and demand for
payment, notice of dishonor, notice of intention to accelerate, notice of
acceleration, protest and notice of protest and non-payment and all other
notices of any kind except as provided in the Loan Agreement. No release of any
security for the Debt or extension of time for payment of this Note or any
installment hereof, and no alteration, amendment or waiver of any provision of
this Note, the Loan Agreement or the other Loan Documents made by agreement
between Lender or any other Person shall release, modify, amend, waive, extend,
change, discharge, terminate or affect the liability of Borrower, and any other
Person who may become liable for the payment of all or any part of the Debt,
under this Note, the Loan Agreement or the other Loan Documents. No notice to or
demand on Borrower shall be deemed to be a waiver of the obligation of Borrower
or of the right of Lender to take further action without further notice or
demand as provided for in this Note, the Loan Agreement or the other Loan
Documents. If Borrower is a limited liability company, the agreements herein
contained shall remain in force and be applicable, notwithstanding any changes
in the individuals comprising the limited liability company, and the term
"Borrower," as used herein, shall include any alternate or successor limited
liability company, but any predecessor limited liability company and its members
shall not thereby be released from any liability. If Borrower is a partnership,
the agreements herein contained shall remain in force and be applicable,
notwithstanding any changes in the individuals comprising the partnership, and
the term "Borrower," as used herein, shall include any alternate or successor
partnership, but any predecessor partnership and their partners shall not
thereby be released from any liability. If Borrower is a corporation, the
agreements contained herein shall remain in full force and be applicable
notwithstanding any changes in the shareholders comprising, or the officers and
directors relating to, the corporation, and the term "Borrower" as used herein,
shall include any alternative or successor corporation, but any predecessor
corporation shall not be relieved of liability hereunder. (Nothing in the
foregoing sentence shall be construed as a consent to, or a waiver of, any
prohibition or restriction on transfers of interests in such borrowing entity
which

                                      -9-
<PAGE>

may be set forth in the Loan Agreement, the Mortgage or any other Loan
Documents.) If Borrower consists of more than one person or party, the
obligations and liabilities of each person or party shall be joint and several.

                           ARTICLE 11 - TRIAL BY JURY

         BORROWER AND LENDER EACH HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY
TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO
THIS NOTE, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION
THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY BORROWER AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY
EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD
OTHERWISE ACCRUE. EACH OF LENDER AND BORROWER IS HEREBY AUTHORIZED TO FILE A
COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER
BY BORROWER AND LENDER.

                             ARTICLE 12 - TRANSFER

         Upon the transfer of this Note, Borrower hereby waiving notice of any
such transfer, Lender may deliver all the collateral mortgaged, granted, pledged
or assigned pursuant to the Loan Documents, or any part thereof, to the
transferee who shall thereupon become vested with all the rights herein or under
applicable law given to Lender with respect thereto, and Lender shall thereafter
forever be relieved and fully discharged from any liability or responsibility in
the matter arising from events thereafter occurring; but Lender shall retain all
rights hereby given to it with respect to any liabilities and the collateral not
so transferred.

                            ARTICLE 13 - EXCULPATION

         The provisions of Article 15 of the Loan Agreement are hereby
incorporated by reference into this Note to the same extent and with the same
force as if fully set forth herein.

                           ARTICLE 14 - GOVERNING LAW

         This Note shall be governed, construed, applied and enforced in
accordance with the laws of the state in which the Property is located and
applicable federal laws of the United States of America.

                              ARTICLE 15 - NOTICES

         All notices or other written communications hereunder shall be
delivered in accordance with Article 16 of the Loan Agreement.

                                      -10-
<PAGE>

                  ARTICLE 16 - TAXPAYER IDENTIFICATION NUMBER

         This Note provides for the Borrower's federal taxpayer identification
number to be inserted in the Loan Terms Table on the first page of this Note. If
such number is not available at the time of execution of this Note or is not
inserted by the Borrower, the Borrower hereby authorizes and directs the Lender
to fill in such number on the first page of this Note when the Borrower provides
to Lender, advises the Lender of, or the Lender otherwise obtains, such number.

                         [NO FURTHER TEXT ON THIS PAGE]

                                      -11-
<PAGE>

         IN WITNESS WHEREOF, Borrower has duly executed this Note as of the day
and year first above written.

                                      ASHWORTH EDC, LLC, a Delaware limited
                                      liability company

                                      By: ASHWORTH INC., a Delaware corporation

                                          By: /s/ Terence Tsang
                                             ------------------
                                              Name: Terence Tsang
                                              Title: EVP, COO &CFO

<PAGE>

                                ADDENDUM TO NOTE

         BY SIGNING BELOW, BORROWER EXPRESSLY ACKNOWLEDGES AND UNDERSTANDS THAT,
PURSUANT TO THE TERMS OF THIS NOTE, BORROWER HAS AGREED THAT IT HAS NO RIGHT TO
PREPAY THIS NOTE PRIOR TO THE END OF THE LOCKOUT PERIOD AND THAT IT SHALL BE
LIABLE FOR THE PAYMENT OF THE PREPAYMENT PREMIUM FOR PREPAYMENT OF THIS NOTE
UPON ACCELERATION OF THIS NOTE IN ACCORDANCE WITH ITS TERMS. FURTHER, BY
INITIALING BELOW, BORROWER WAIVES ANY RIGHTS IT MAY HAVE UNDER SECTION 2954.10
OF THE CALIFORNIA CIVIL CODE, OR ANY SUCCESSOR STATUTE, AND EXPRESSLY
ACKNOWLEDGES AND UNDERSTANDS THAT LENDER HAS MADE THE LOAN IN RELIANCE ON THE
AGREEMENTS AND WAIVER OF BORROWER AND THAT LENDER WOULD NOT HAVE MADE THE LOAN
WITHOUT SUCH AGREEMENTS AND WAIVER OF BORROWER.

                                      ASHWORTH EDC, LLC, a Delaware limited
                                      liability company

                                      By: ASHWORTH INC., a Delaware corporation

                                            By: /s/ Terence Tsang
                                               ------------------
                                                 Name: Terence Tsang
                                                 Title: EVP, COO & CFO

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