Environmental Indemnity Agreement

Exhibit 10(x)(6)


Loan Number: 58036
Servicing Number: 3180114


ENVIRONMENTAL INDEMNITY AGREEMENT


This Environmental Indemnity Agreement (this "AGREEMENT") is made as of the 2nd day of April, 2004, by ASHWORTH EDC, LLC, a Delaware limited liability company, having an office at 2765 Loker Avenue West, Carlsbad, California 92008 (the "BORROWER"), and ASHWORTH INC., a Delaware corporation having an office at 2765 Loker Avenue West, Carlsbad, California 92008 (the "BORROWER PRINCIPAL"), in favor of BANK OF AMERICA, N.A., a national banking association, whose address is 214 North Tryon Street, Charlotte, North Carolina 28255, (together with its successors and/or assigns, "INDEMNITEE"), and the other Indemnified Parties. The Borrower and the Borrower Principal may be referred to herein individually and collectively as the "INDEMNITOR."


RECITALS:


The Borrower is the fee owner of that certain real property more particularly described in Exhibit A attached hereto (said real property, together with any real property hereafter encumbered by the lien of the Mortgage, being herein collectively referred to as the "LAND"; the Land, together with all structures, buildings and improvements now or hereafter located on the Land, being collectively referred to as the "PROPERTY"). The Indemnitee is prepared to make a loan (the "LOAN") to the Borrower in the principal amount of $11,650,000, to be evidenced by the Note and a certain Loan Agreement of even date herewith (the "LOAN AGREEMENT") and secured by, among other things, the Mortgage which will encumber the Property. This Agreement is not secured by the Mortgage or any other Loan Document (as defined in the Loan Agreement).


The Indemnitee is unwilling to make the Loan unless the Indemnitor agrees to provide the indemnification, representations, warranties, and covenants and other matters described in this Agreement for the benefit of the Indemnified Parties.


AGREEMENT:


In order to induce the Indemnitee to make the Loan to the Borrower, and in consideration of the substantial benefit the Indemnitor will derive from the Loan, the Indemnitor agrees as follows:


ARTICLE 1


DEFINITIONS


Capitalized terms used herein and not specifically defined herein shall have the respective meanings ascribed to such terms in the Loan Agreement. As used in this Agreement, the following terms shall have the following meanings:


The term "LEGAL ACTION" means any claim, suit or proceeding, whether administrative or judicial in nature.


The term "REMEDIATION" includes but is not limited to any response, remedial, removal, or corrective action; any activity to clean up, detoxify, decontaminate, contain or otherwise remediate any Hazardous Materials; any actions to prevent, cure or mitigate any Release of any Hazardous Materials; any action to comply with any Environmental Laws or with any permits issued pursuant thereto; any inspection, investigation, study, monitoring, assessment, audit, sampling and testing, laboratory or other analysis, or evaluation relating to any Hazardous Materials or to anything referred to herein.


ARTICLE 2


INDEMNIFICATION


2.1 Indemnification. The Indemnitor covenants and agrees at the Indemnitor's sole cost and expense, to protect, defend, indemnify, release and hold the Indemnified Parties harmless from and against any and all Losses imposed upon or incurred by or asserted against any Indemnified Parties and arising out of or relating to any one or more of the following: (a) any presence of any Hazardous Materials in, on, above, or under the Property; (b) any past, present or threatened Release of any Hazardous Materials in, on, above, under or from the Property; (c) any activity by the Indemnitor, any person or entity affiliated with the Indemnitor, and any tenant or other user of the Property in connection with any actual, proposed or threatened use, treatment, storage, holding, existence, disposition or other Release, generation, production, manufacturing, processing, refining, control, management, abatement, removal, handling, transfer or transportation to or from the Property of any Hazardous Materials at any time located in, under, on or above the Property, or any actual or proposed remediation of any Hazardous Materials at any time located in, under, on or above the Property, whether or not such remediation is voluntary or pursuant to court or administrative order, including but not limited to any removal, remedial or corrective action; (d) any past, present or threatened non-compliance or violations of any Environmental Law (or permits issued pursuant to any Environmental Law) in connection with the Property or operations thereon, including but not limited to any failure by the Indemnitor, any person or entity affiliated with the Indemnitor, and any tenant or other user of the Property to comply with any order of any governmental authority in connection with any Environmental Law; (e) the imposition, recording or filing or the threatened imposition, recording or filing of any lien with regard to any Hazardous Materials or pursuant to any Environmental Law encumbering the Property; (f) any acts of the Indemnitor, any person or entity controlled by the Indemnitor, and any tenant or other user of the Property in (i) arranging for disposal or treatment, or arranging with a transporter for transport for disposal or treatment, of any Hazardous Materials at any facility or incineration vessel containing any such or similar Hazardous Materials or (ii) accepting any Hazardous Materials for transport to disposal or treatment facilities, incineration vessels or sites from which there is a Release, or a threatened Release of any Hazardous Materials which causes the incurrence of costs for remediation; and (g) a material breach by Borrower of (i) the representations and warranties contained in Section 12.1 of the Loan Agreement or (ii) the covenants contained in Section 12.2 of the Loan Agreement.


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2.2 Duty To Defend and Attorneys' and Other Fee and Expenses. Upon written request by any Indemnified Party, the Indemnitor shall defend same (if requested by any Indemnified Party, in the name of the Indemnified Party) with attorneys and other professionals approved by the Indemnified Parties in their sole discretion. Notwithstanding the foregoing, any Indemnified Parties may, in their sole discretion and at their sole cost and expense, engage their own attorneys and other professionals to defend or assist them, and their attorneys shall control the resolution of any claim or proceeding, which resolution shall be on a reasonable basis, if, in the reasonable good faith determination of the Indemnified Parties, such action is necessary to protect the interests of the Indemnified Parties. In such case, the Indemnified Parties shall keep the Indemnitor advised on a periodic basis of the progress toward such resolution.


2.3 Subrogation. The Indemnitor shall take any and all reasonable actions, including institution of legal action against third-parties, necessary or appropriate to obtain reimbursement, payment or compensation from such persons responsible for the presence of any Hazardous Materials at, in, on, under or near the Property or otherwise obligated by law to bear the cost thereof. The Indemnified Parties shall be and hereby are subrogated to all of the Indemnitor's rights now or hereafter in such claims.


2.4 Interest. Any amounts payable to any Indemnified Parties under this Agreement shall become immediately due and payable on demand and, if not paid within thirty (30) days of such demand therefor, shall bear interest at a per annum rate equal to the lesser of (a) four percent (4%) plus the Note Rate or (b) the maximum interest rate which the Indemnitor may by law pay or the Indemnified Parties may charge and collect, from the date payment was due.


2.5 Survival; Release. The obligations and liabilities of the Indemnitor under this Agreement 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. Notwithstanding the provisions of this Agreement to the contrary, the liabilities and obligations of Indemnitor hereunder shall not apply to the extent that Indemnitor can prove that such liabilities and obligations arose solely from Hazardous Materials that (i) were not present at the Property or were not in violation of Environmental Law prior to the date that (A) Indemnitee or its nominee acquired title to the Property (whether by foreclosure, exercise of power of sale or otherwise), (B) a receiver was appointed by a court of competent jurisdiction for the benefit of Lender or (C) Lender becomes a mortgagee-in-possession, and (ii) were not the result of any act or negligence of Indemnitor or any of Indemnitor's affiliates, agents or contractors. In the event of the satisfaction of the Mortgage upon payment in full of the Debt, Indemnitee shall release Indemnitor of its liability hereunder upon the delivery to Indemnitee of a Phase I environmental report in form and substance and prepared by a firm acceptable to Indemnitee in the exercise of its reasonable discretion, with the costs of such report, and any reasonable out-of-pocket costs of Indemnitee in connection therewith to be at the expense of Borrower. If applicable and upon reasonable conditions, Lender shall endeavor to provide Borrower with reasonable access to the Property to prepare such environmental report.


2.6 Notice of Legal Actions. Each party hereto shall, within ten (10) Business Days of receipt thereof, give written notice to the other party hereto of (i) any written notice, written advice or other written communication from any governmental entity or any source whatsoever


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with respect to any Hazardous Materials on, from or affecting the Property, and (ii) any Legal Action brought against such party or related to the Property, with respect to which the Indemnitor may have liability under this Agreement. Such notice shall comply with the provisions of Section 5.1 hereof.


ARTICLE 3


REPRESENTATIONS AND WARRANTIES AND COVENANTS


3.1 General Representations and Warranties. The Indemnitor represents and warrants that:


(a) if the Indemnitor is a corporation, partnership or limited liability company, (i) it has the full power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and (ii) the execution, delivery and performance of this Agreement by the Indemnitor has been duly and validly authorized by all requisite organizational action and is in the ordinary course of business of the Indemnitor and will not result in the breach of any term or provision of the charter, by-laws, partnership or trust agreement, articles of organization, operating agreement or other governing instrument of the Indemnitor.


(b) if the Indemnitor is an individual, he/she is acting in an individual capacity and has full power and authority to make this Agreement valid and binding upon the Indemnitor, enforceable in accordance with its terms;


(c) compliance with this Agreement will not result in the breach of any term or provision of, or conflict with or constitute a default under or result in the acceleration of, any obligation under any agreement, indenture or loan or credit agreement or other instrument to which the Indemnitor or the Property is subject, or result in the violation of any law, rule, regulation, order, judgment or decree to wh ...