Document:

exv10w42

 

EXHIBIT 10.42

Genesis Microchip Inc.

Executive Bonus Plan — Fiscal Year 2007

Adopted June 10, 2006

(1) General Purpose: This Executive Bonus Plan—Fiscal Year 2007 (this “Plan” or “Executive
Bonus Plan”) is designed to provide incentive and motivation to the Executive Staff of Genesis
Microchip Inc. (the “Company”) to achieve the Company’s financial and operational plans.

(2) Duration: The Company’s fiscal year 2007 commences on April 1, 2006 and ends on March
31, 2007. The Plan will be in effect from April 1, 2006 through March 31, 2007 (the “Bonus
Period”), subject to the payment of the bonuses after fiscal year end as described in Section 8
below, and will be based on the full fiscal year 2007 financial and operational results of the
Company.

(3) Eligibility: This Plan covers the Chief Executive Officer (“CEO”) and the members of
his Executive Staff. Eligible executives are those persons who are members of the CEO’s Executive
Staff on or before December 31, 2006, and are employed by the Company at the time of the bonus
payment (the “Eligible Executives”). Any Eligible Executive who joins the Executive Staff after the
beginning of the Bonus Period but before December 31, 2006 will receive a prorated bonus, based
upon his/her length of service during fiscal year 2007, provided that said Eligible Executive
remains employed by the Company at the time of the bonus payment.

(4) Bonus Pool: If the Company meets or surpasses certain minimum financial targets under
its fiscal year 2007 operating plan (the “Operating Plan”), a bonus pool will be established under
this Plan. Specifically, these minimum targets are (a) 90% of the Operating Plan revenue, and (b)
90% of the Operating Plan non-GAAP operating income. Both (a) and (b) must be achieved in order
for a bonus pool to be established under this Plan.

(5) Calculation of Bonus: In the event a bonus pool is established under this Plan,
Eligible Executives are eligible for bonuses expressed in the tables below as a percentage of
annual base salary. Each Eligible Executive’s bonus will be calculated on the basis of two
components:

	 	(I)	 	FINANCIAL COMPONENT. This component is based on the Company’s financial
performance relative to the Operating Plan. This component will be weighted 75%
towards non-GAAP operating income and 25% towards revenue achievement. For purposes
of this calculation, non-GAAP operating income may be adjusted for unusual items (such
as mergers and acquisitions) as determined by the CEO and Chief Financial Officer, and
as approved by the Board of Directors. An Eligible Executive may earn a bonus up to
the percentage of his/her salary set forth below, depending on the Company’s financial
performance relative to the Operating Plan.

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FINANCIAL COMPONENT BONUS AMOUNTS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Operating Plan Performance	 	 	<90%	 	 	 	90%	 	 	 	100%	 	 	 	110%	 	 
	 	CEO
	 	 	 	0	%	 	 	 	12.5	%	 	 	 	25	%	 	 	 	50	%	 
	 	Sr. VP, WW Sales
	 	 	 	0	%	 	 	 	9.375	%	 	 	 	18.75	%	 	 	 	37.5	%	 
	 	Other Sr. VPs and EVP
	 	 	 	0	%	 	 	 	6.25	%	 	 	 	12.5	%	 	 	 	25	%	 
	 	All Other VPs*
	 	 	 	0	%	 	 	 	5	%	 	 	 	10	%	 	 	 	20	%	 
	 

Corporate financial performance levels that fall between any two Operating Plan target levels will
be paid at the lower of the two targets. In the event that corporate financial achievement exceeds
110% of the Operating Plan, the Board of Directors may, in its sole discretion, make additional
bonus payments greater than the target bonus percentages set forth in the table above, subject to
the limitation on aggregate bonus payments set forth in Section 6.

(II) MBO COMPONENT. This is a management-by-objective (“MBO”) component that will be based
on the Eligible Executive’s MBO performance. An Eligible Executive may earn a bonus up to
the percentage of his/her salary set forth below, depending on MBO performance.

MBO COMPONENT BONUS AMOUNTS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Operating Plan	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Performance	 	 	<90%	 	 	 	90%	 	 	 	100%	 	 	 	110%	 	 
	 	CEO
	 	 	 	0	%	 	 	 	25	%	 	 	 	25	%	 	 	 	50	%	 
	 	Sr. VP WW Sales
	 	 	 	0	%	 	 	 	18.75	%	 	 	 	18.75	%	 	 	 	37.5	%	 
	 	Sr. VPs and EVP
	 	 	 	0	%	 	 	 	12.5	%	 	 	 	12.5	%	 	 	 	25	%	 
	 	All Other VPs*
	 	 	 	0	%	 	 	 	10	%	 	 	 	10	%	 	 	 	20	%	 
	 

 

			
	*	 	Includes VPs on Executive Staff only.

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(6) Plan Limitations: The total potential bonus amounts, based on the two components set
forth in Section 5 above, are as follows.

TOTAL POTENTIAL BONUS AMOUNTS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Operating Plan	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Performance	 	 	<90%	 	 	 	90%	 	 	 	100%	 	 	 	110%	 	 
	 	CEO
	 	 	 	0	%	 	 	 	37.5	%	 	 	 	50	%	 	 	 	100	%	 
	 	Sr. VP WW Sales
	 	 	 	0	%	 	 	 	28.125	%	 	 	 	37.5	%	 	 	 	75	%	 
	 	Sr. VPs and EVP
	 	 	 	0	%	 	 	 	18.75	%	 	 	 	25	%	 	 	 	50	%	 
	 	Other VPs
	 	 	 	0	%	 	 	 	15	%	 	 	 	20	%	 	 	 	40	%	 
	 

The aggregate amount of bonus payments under this Plan, when combined with the non-executive
Employee Corporate Bonus Plan: (a) shall not exceed 15% of the Company’s non-GAAP operating income
before the bonus expense for fiscal year 2007, and (b) may not cause the Company’s non-GAAP net
income to become a net loss for fiscal year 2007 or any individual quarter during fiscal year 2007.
Notwithstanding anything to the contrary herein, the Board of Directors shall have the discretion
to reduce payments under this Plan so that such payments do not cause the combined bonus plan
payments to exceed the limitations described above.

(7) Discretion of the CEO: The CEO shall have discretion to adjust any Eligible
Executive’s bonus determined under the plan by +/- 15%, subject to the limitations set forth in
Section 6. Final bonus amounts for all Eligible Executives, including the CEO, must be approved by
the Board of Directors.

(8) Approval and Payments: The Board of Directors must pre-approve all payments under this
Plan. Bonus payments will be paid 15 days after the Company’s filing of its fiscal year 2007 Annual
Report on Form 10-K with the Securities and Exchange Commission. An Eligible Executive must be
employed with the Company at the time of payment to receive a bonus payment hereunder. All
payments will be made in the currency in which the Eligible Executive is regularly paid.

(9) Plan Modifications: This Plan will terminate at the end of fiscal year 2007 unless it
is re-authorized by the Board of Directors. The Board of Directors, in its sole discretion, may
make any changes to the Plan it deems appropriate for future bonus periods once the current Bonus
Period is complete. The Board of Directors, in its sole discretion, may modify the fiscal year 2007
corporate financial targets in the event of a merger or acquisition.

(10) Plan Administration; General Terms and Conditions: The administrator of this Plan is
the Board of Directors, which has sole and exclusive authority to interpret the Plan and adopt such
rules and regulations for carrying out the Plan as it deems necessary and

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appropriate. Decisions by the Board of Directors are final and binding on all parties to the
maximum extent allowed by law.

Amounts to be paid under this Plan are to be paid from the general funds of the Company. Nothing
in this Plan shall be construed to create a trust or establish any evidence of any Eligible
Executive’s claim of any right to payment other than as an unsecured general creditor of the
Company.

All payments under this Plan shall be subject to the satisfaction of applicable federal, state or
local income tax withholding requirements and to any employment tax withholding requirements.

Nothing in this Plan shall interfere with or limit in any way the right of the Company, or the
right of any Eligible Executive, to terminate the employment or service relationship with the
Company at any time, with or without cause.

No award granted under this Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or the laws of descent and distribution.

This Plan will be construed, administered and governed in all respects in accordance with the laws
of the State of California.

In the event that any provision of the Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal and invalid provision had not been included.

4exv10w1

 

Exhibit 10.1

FHLMC Loan No. 940970155

The Waterford at Plano

MULTIFAMILY NOTE

MULTISTATE — FIXED TO FLOAT

(REVISION DATE 03-30-2006)

			
	 	 	 
	US $8,685,000.00
	 	Effective Date: As of June 9, 2006

     FOR VALUE RECEIVED, the undersigned (together with such party’s or parties’ successors and
assigns, “Borrower”), jointly and severally (if more than one) promises to pay to the order of
CAPMARK FINANCE INC., a California corporation, the principal sum of Eight Million Six Hundred
Eighty-Five Thousand and 00/100 Dollars (US $8,685,000.00), with interest on the unpaid principal
balance, as hereinafter provided.

	 	1.	 	Defined Terms.
	 
	 	(a)	 	As used in this Note:
	 
	 	 	 	“Adjustable Interest Rate” means the variable annual interest rate calculated for
each Interest Adjustment Period so as to equal the Index Rate for such Interest
Adjustment Period (truncated at the fifth (5th) decimal place if
necessary) plus the Margin.
	 
	 	 	 	“Amortization Period” means a period of 300 full consecutive calendar months.
	 
	 	 	 	“Base Recourse” means a portion of the Indebtedness equal to zero percent (0%) of
the original principal balance of this Note.
	 
	 	 	 	“Business Day” means any day other than a Saturday, a Sunday or any other day on
which Lender or the national banking associations are not open for business.
	 
	 	 	 	“Default Rate” means (i) during the Fixed Rate Period, an annual interest rate equal
to four (4) percentage points above the Fixed Interest Rate; and (ii) during the
Extension Period, a variable annual interest rate equal to four (4) percentage
points above the Adjustable Interest Rate in effect from time to time. However, at
no time will the Default Rate exceed the Maximum Interest Rate.
	 
	 	 	 	“Extended Maturity Date” means, if the Extension Period becomes effective pursuant
to this Note, the earlier of (i) July 1, 2016, and (ii) the date on which the unpaid
principal balance of this Note becomes due and payable by acceleration or otherwise
pursuant to the Loan Documents or the exercise by Lender of any right or remedy
thereunder.
	 
	 	 	 	“Extension Period” means the twelve (12) consecutive calendar months period
commencing on the Scheduled Initial Maturity Date.

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	 	 	 	“Fixed Interest Rate” means the annual interest rate of six and twenty-nine
hundredths percent (6.29%).
	 
	 	 	 	“Fixed Rate Period” means the period beginning on the date of this Note and
continuing through June 30, 2015.
	 
	 	 	 	“Index Rate” means, for any Interest Adjustment Period, the Reference Billâ
Index Rate for such Interest Adjustment Period.
	 
	 	 	 	“Initial Maturity Date” means the earlier of (i) July 1, 2015 (the “Scheduled
Initial Maturity Date”), and (ii) the date on which the unpaid principal balance of
this Note becomes due and payable by acceleration or otherwise pursuant to the Loan
Documents or the exercise by Lender of any right or remedy thereunder.
	 
	 	 	 	“Installment Due Date” means, for any monthly installment of interest only or
principal and interest, the date on which such monthly installment is due and
payable pursuant to Section 3 of this Note. The “First Installment Due Date” under
this Note is August 1, 2006.
	 
	 	 	 	“Interest Adjustment Period” means each successive one calendar month period during
the Extension Period and until the entire Indebtedness is paid in full.
	 
	 	 	 	“Lender” means the holder from time to time of this Note.
	 
	 	 	 	“LIBOR Index” means the British Bankers Association’s (BBA) one (1) month LIBOR Rate
for United States Dollar deposits, as displayed on the LIBOR Index Page used to
establish the LIBOR Index Rate.
	 
	 	 	 	“LIBOR Index Rate” means, for any Interest Adjustment Period after the first
Interest Adjustment Period, the BBA’s LIBOR Rate for the LIBOR Index released by the
BBA most recently preceding the first day of such Interest Adjustment Period, as
such LIBOR Rate is displayed on the LIBOR Index Page. The LIBOR Index Rate for the
first Interest Adjustment Period means the British Bankers Association’s (BBA) LIBOR
Rate for the LIBOR Index released by the BBA most recently preceding the first day
of the month in which the first Interest Adjustment Period begins, as such LIBOR
Rate is displayed on the LIBOR Index Page. “LIBOR Index Page” is the Bloomberg
L.P., page “BBAM”, or such other page for the LIBOR Index as may replace page BBAM
on that service, or at the option of Lender (i) the applicable page for the LIBOR
Index on another service which electronically transmits or displays BBA LIBOR Rates,
or (ii) any publication of LIBOR rates available from the BBA. In the event the BBA
ceases to set or publish a LIBOR rate/interest settlement rate for the LIBOR Index,
Lender will designate an alternative index, and such alternative index shall
constitute the LIBOR Index Page.
	 
	 	 	 	“Loan” means the loan evidenced by this Note.
	 
	 	 	 	“Margin” means two and three-quarters (2.75) percentage points (275 basis points).
	 
	 	 	 	“Maturity Date” means the Extended Maturity Date unless pursuant to Section 3(e) of
this Note the Extension Period does not or cannot become effective, in which case
the Maturity Date means the Initial Maturity Date.

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	 	 	 	“Maximum Interest Rate” means the rate of interest that results in the maximum
amount of interest allowed by applicable law.
	 
	 	 	 	“Prepayment Premium Period” means the period during which, if a prepayment of
principal occurs, a prepayment premium will be payable by Borrower to Lender. The
Prepayment Premium Period is the period from and including the
date of this Note until but not including the first day of the Window Period. For
this Note, the Prepayment Premium Period equals the Yield Maintenance Period.
	 
	 	 	 	“Reference Billsâ” means the unsecured general obligations of the Federal Home
Loan Mortgage Corporation (“Freddie Mac”) designated by Freddie Mac as “Reference
Billsâ Securities” and having original durations to maturity most comparable
to the term of the Reference Bill Index, and issued by Freddie Mac at regularly
scheduled auctions. In the event Freddie Mac shall at any time cease to designate
any unsecured general obligations of Freddie Mac as “Reference Bills Securities”,
then at the option of Lender (i) Lender may select from time to time another
unsecured general obligation of Freddie Mac having original durations to maturity
most comparable to the term of the Reference Bill Index and issued by Freddie Mac at
regularly scheduled auctions, and the term “Reference Bills” as used in this Note
shall mean such other unsecured general obligations as selected by Lender; or (ii)
for any one or more Interest Adjustment Periods, Lender may use the applicable LIBOR
Index Rate as the Index Rate for such Interest Adjustment Period(s).
	 
	 	 	 	“Reference Bill Index” means the one-month Reference Bills. One-month reference
bills have original durations to maturity of approximately 30 days.
	 
	 	 	 	“Reference Bill Index Rate” means, for any Interest Adjustment Period after the
first Interest Adjustment Period, the Money Market Yield for the Reference Bills as
established by the Reference Bill auction conducted by Freddie Mac most recently
preceding the first day of such Interest Adjustment Period, as displayed on the
Reference Bill Index Page. The Reference Bill Index Rate for the first Interest
Adjustment Period means the Money Market Yield for the Reference Bills as
established by the Reference Bill auction conducted by Freddie Mac most recently
preceding the first day of the month in which the first Interest Adjustment Period
begins, as displayed on the Reference Bill Index Page. The “Reference Bill Index
Page” is the Freddie Mac Debt Securities Web Page (accessed via the Freddie Mac
internet site at www.freddiemac.com), or at the option of Lender, any publication of
Reference Bills auction results available from Freddie Mac. However, if Freddie Mac
has not conducted a Reference Bill auction within the 60-calendar day period prior
to the first day of an Interest Adjustment Period, the Reference Bill Index Rate for
such Interest Adjustment Period will be the LIBOR Index Rate for such Interest
Adjustment Period.
	 
	 	 	 	“Remaining Amortization Period” means, at any point in time, the number of
consecutive calendar months equal to the number of months in the Amortization Period
minus the number of scheduled monthly installments of principal and interest
that have elapsed since the date of this Note.
	 
	 	 	 	“Security Instrument” means the multifamily mortgage, deed to secure debt or deed of
trust effective as of the effective date of this Note, from Borrower to or for the
benefit of Lender and securing this Note.

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	 	 	 	“Treasury Security” means the 4.25% U.S. Treasury Security due August 15, 2015.
	 
	 	 	 	“Window Period” means the Extension Period.
	 
	 	 	 	“Yield Maintenance Period” means the period from and including the date of this Note
until but not including the Scheduled Initial Maturity Date.

     (b) Other capitalized terms used but not defined in this Note shall have the meanings given to
such terms in the Security Instrument.

     2. Address for Payment. All payments due under this Note shall be payable at 200 Witmer Road,
Post Office Box 809, Horsham, Pennsylvania 19044, Attn: Servicing — Account Manager, or such
other place as may be designated by Notice to Borrower from or on behalf of Lender.

     3. Payments.

     (a) During the Fixed Rate Period, interest will accrue on the outstanding principal balance of
this Note at the Fixed Interest Rate, subject to the provisions of Section 8 of this Note. During
the Extension Period, interest will accrue on the outstanding principal balance of this Note at the
Adjustable Interest Rate, subject to the provisions of Section 8 of this Note.

     (b) Interest under this Note shall be computed, payable and allocated on the basis of an
actual/360 interest calculation schedule (interest is payable for the actual number of days in each
month, and each month’s interest is calculated by multiplying the unpaid principal amount of this
Note as of the first day of the month for which interest is being calculated by the Fixed Interest
Rate (during the Fixed Rate Period) or the applicable Adjustable Interest Rate (during the
Extension Period), dividing the product by 360, and multiplying the quotient by the number of days
in the month for which interest is being calculated). For convenience in determining the amount of
a monthly installment of principal and interest under this Note, Lender will use a 30/360 interest
calculation payment schedule (each year is treated as consisting of twelve 30-day months).
However, as provided above, the portion of the monthly installment actually payable as and
allocated to interest will be based upon an actual/360 interest calculation schedule, and the
amount of each installment attributable to principal and the amount attributable to interest will
vary based upon the number of days in the month for which such installment is paid. Each monthly
payment of principal and interest will first be applied to pay in full interest due, and the
balance of the monthly payment paid by Borrower will be credited to principal.

     (c) Unless disbursement of principal is made by Lender to Borrower on the first day of a
calendar month, interest for the period beginning on the date of disbursement and ending on and
including the last day of such calendar month shall be payable by Borrower simultaneously with the
execution of this Note. If disbursement of principal is made by Lender to Borrower on the first
day of a calendar month, then no payment will be due from Borrower at the time of the execution of
this Note. The Installment Due Date for the first monthly installment payment under Section 3(d)
of interest only or principal and interest, as applicable, will be the First Installment Due Date
set forth in Section 1(a) of this Note. Except as provided in this Section 3(c) and in Section 10,
accrued interest will be payable in arrears.

     (d) Beginning on the First Installment Due Date, and continuing until and including the
monthly installment due on the Initial Maturity Date, principal and accrued interest shall be
payable by Borrower in consecutive monthly installments due and payable on the first day of each
calendar month. The amount of the monthly installment of principal and interest payable pursuant
to this Section 3(d) on an Installment Due Date shall be Fifty-Seven Thousand Five Hundred Seven
and 21/100 Dollars ($57,507.21).

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     (e) Except as otherwise provided in this Section 3(e), all remaining Indebtedness, including
all principal and interest, shall be due and payable by Borrower on the Initial Maturity Date.
However, so long as (i) the Initial Maturity Date has not occurred prior to the Scheduled Initial
Maturity Date, and (ii) no Event of Default or event or circumstance which, with the giving of
notice or passage of time or both, could constitute an Event of Default exists on the Scheduled
Initial Maturity Date, then the Extension Period automatically will become effective and the date
for full payment of the Indebtedness automatically shall be extended until the Extended Maturity
Date. If the Extension Period becomes effective, monthly installments of
principal and interest or interest only will be payable during the Extension Period as
provided in Section 3(f). Anything in Section 21 of the Security Instrument to the contrary
notwithstanding, during the Extension Period, Borrower will not request that Lender consent to, and
Lender will not consent to, a Transfer that, absent such consent, would constitute an Event of
Default.

     (f) If the Extension Period becomes effective, beginning on August 1, 2015, and continuing
until and including the monthly installment due on the Extended Maturity Date, principal and
accrued interest shall be payable by Borrower in consecutive monthly installments due and payable
on the first day of each calendar month. The amount of the monthly installment of principal and
interest payable pursuant to this Section 3(f) on an Installment Due Date shall be calculated so as
to equal the monthly payment amount which would be payable on the Installment Due Date as if the
unpaid principal balance of this Note as of the first day of the Interest Adjustment Period
immediately preceding the Installment Due Date was to be fully amortized, together with interest
thereon at the Adjustable Interest Rate in effect for such Interest Adjustment Period, in equal
consecutive monthly payments paid on the first day of each calendar month over the Remaining
Amortization Period.

     (g) During the Extension Period, Lender shall provide Borrower with Notice, given in the
manner specified in the Security Instrument, of the amount of each monthly installment due under
this Note. However, if Lender has not provided Borrower with prior notice of the monthly payment
due on any Installment Due Date, then Borrower shall pay on that Installment Due Date an amount
equal to the monthly installment payment for which Borrower last received notice. If Lender at any
time determines that Borrower has paid one or more monthly installments in an incorrect amount
because of the operation of the preceding sentence, or because Lender has miscalculated the
Adjustable Interest Rate or has otherwise miscalculated the amount of any monthly installment, then
Lender shall give notice to Borrower of such determination. If such determination discloses that
Borrower has paid less than the full amount due for the period for which the determination was
made, Borrower, within 30 calendar days after receipt of the notice from Lender, shall pay to
Lender the full amount of the deficiency. If such determination discloses that Borrower has paid
more than the full amount due for the period for which the determination was made, then the amount
of the overpayment shall be credited to the next installment(s) of interest only or principal and
interest, as applicable, due under this Note (or, if an Event of Default has occurred and is
continuing, such overpayment shall be credited against any amount owing by Borrower to Lender).

     (h) All payments under this Note shall be made in immediately available U.S. funds.

     (i) Any regularly scheduled monthly installment of interest only or principal and interest
payable pursuant to this Section 3 that is received by Lender before the date it is due shall be
deemed to have been received on the due date for the purpose of calculating interest due.

     (j) Any accrued interest remaining past due for 30 days or more, at Lender’s discretion, may
be added to and become part of the unpaid principal balance of this Note and any reference to
“accrued interest” shall refer to accrued interest which has not become part of the unpaid
principal balance. Any amount added to principal pursuant to the Loan Documents shall bear
interest at the applicable rate or rates specified in this Note and shall be payable with such
interest upon demand by Lender and absent such demand, as provided in this Note for the payment of
principal and interest.

PAGE 5

 

     (k) In accordance with Section 14, interest charged under this Note cannot exceed the Maximum
Interest Rate. If the Adjustable Interest Rate at any time exceeds the Maximum Interest Rate,
resulting in the charging of interest hereunder to be limited to the Maximum Interest Rate, then
any subsequent reduction in the Adjustable Interest Rate shall not reduce the rate at which
interest under this Note accrues below the Maximum Interest Rate until the total amount of interest
accrued hereunder equals the amount of interest which would have accrued had the Adjustable
Interest Rate at all times been in effect.

     4. Application of Payments. If at any time Lender receives, from Borrower or otherwise, any
amount applicable to the Indebtedness which is less than all amounts due and payable at such time,
Lender may apply the amount received to amounts then due and payable in any manner and in any order
determined by Lender, in Lender’s discretion. Borrower agrees that neither Lender’s acceptance of
a payment from Borrower in an amount that is less than all amounts then due and payable nor
Lender’s application of such payment shall constitute or be deemed to constitute either a waiver of
the unpaid amounts or an accord and satisfaction.

     5. Security. The Indebtedness is secured by, among other things, the Security Instrument, and
reference is made to the Security Instrument for other rights of Lender as to collateral for the
Indebtedness.

     6. Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid
principal balance, any accrued interest, any prepayment premium payable under Section 10, and all
other amounts payable under this Note and any other Loan Document, shall at once become due and
payable, at the option of Lender, without any prior notice to Borrower (except if notice is
required by applicable law, then after such notice). Lender may exercise this option to accelerate
regardless of any prior forbearance. For purposes of exercising such option, Lender shall
calculate the prepayment premium as if prepayment occurred on the date of acceleration. If
prepayment occurs thereafter, Lender shall recalculate the prepayment premium as of the actual
prepayment date.

     7. Late Charge.

     (a) If any monthly installment of interest or principal and interest or other amount payable
under this Note or under the Security Instrument or any other Loan Document is not received in full
by Lender (i) during the Fixed Rate Period, within ten (10) days after the installment or other
amount is due, or (ii) during the Extension Period, within five (5) days after the installment or
other amount is due, counting from and including the date such installment or other amount is due
(unless applicable law requires a longer period of time before a late charge may be imposed, in
which event such longer period shall be substituted), Borrower shall pay to Lender, immediately and
without demand by Lender, a late charge equal to five percent (5%) of such installment or other
amount due (unless applicable law requires a lesser amount be charged, in which event such lesser
amount shall be substituted).

     (b) Borrower acknowledges that its failure to make timely payments will cause Lender to incur
additional expenses in servicing and processing the Loan and that it is extremely difficult and
impractical to determine those additional expenses. Borrower agrees that the late charge payable
pursuant to this Section represents a fair and reasonable estimate, taking into account all
circumstances existing on the date of this Note, of the additional expenses Lender will incur by
reason of such late payment. The late charge is payable in addition to, and not in lieu of, any
interest payable at the Default Rate pursuant to Section 8.

     8. Default Rate.

     (a) So long as (i) any monthly installment under this Note remains past due for thirty (30)
days or more or (ii) any other Event of Default has occurred and is continuing, then
notwithstanding anything in Section 3 of this Note to the contrary, interest under this Note shall

PAGE 6

 

accrue on the unpaid principal balance from the Installment Due Date of the first such unpaid
monthly installment or the occurrence of such other Event of Default, as applicable, at the Default
Rate.

     (b) From and after the Maturity Date, the unpaid principal balance shall continue to bear
interest at the Default Rate until and including the date on which the entire principal balance is
paid in full.

     (c) Borrower acknowledges that (i) its failure to make timely payments will cause Lender to
incur additional expenses in servicing and processing the Loan, (ii) during the time that any
monthly installment under this Note is delinquent for thirty (30) days or more, Lender will incur
additional costs and expenses arising from its loss of the use of the money due and from the
adverse impact on Lender’s ability to meet its other obligations and to take advantage of other
investment opportunities; and (iii) it is extremely difficult and impractical to determine those
additional costs and expenses. Borrower also acknowledges that, during the time that any monthly
installment under this Note is delinquent for thirty (30) days or more or any other Event of
Default has occurred and is continuing, Lender’s risk of nonpayment of this Note will be materially
increased and Lender is entitled to be compensated for such increased risk. Borrower agrees that
the increase in the rate of interest payable under this Note to the Default Rate represents a fair
and reasonable estimate, taking into account all circumstances existing on the date of this Note,
of the additional costs and expenses Lender will incur by reason of the Borrower’s delinquent
payment and the additional compensation Lender is entitled to receive for the increased risks of
nonpayment associated with a delinquent loan.

     9. Limits on Personal Liability.

     (a) Except as otherwise provided in this Section 9, Borrower shall have no personal liability
under this Note, the Security Instrument or any other Loan Document for the repayment of the
Indebtedness or for the performance of any other obligations of Borrower under the Loan Documents
and Lender’s only recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender’s exercise of its rights and remedies with respect to the Mortgaged
Property and to any other collateral held by Lender as security for the Indebtedness. This
limitation on Borrower’s liability shall not limit or impair Lender’s enforcement of its rights
against any guarantor of the Indebtedness or any guarantor of any other obligations of Borrower.

     (b) Borrower shall be personally liable to Lender for the amount of the Base Recourse, plus
any other amounts for which Borrower has personal liability under this Section 9.

     (c) In addition to the Base Recourse, Borrower shall be personally liable to Lender for the
repayment of a further portion of the Indebtedness equal to any loss or damage suffered by Lender
as a result of the occurrence of any of the following events:

	 	(i)	 	Borrower fails to pay to Lender upon demand after an Event of
Default all Rents to which Lender is entitled under Section 3(a) of the
Security Instrument and the amount of all security deposits collected by
Borrower from tenants then in residence. However, Borrower will not be
personally liable for any failure described in this subsection (i) if Borrower
is unable to pay to Lender all Rents and security deposits as required by the
Security Instrument because of a valid order issued in a bankruptcy,
receivership, or similar judicial proceeding.
	 
	 	(ii)	 	Borrower fails to apply all insurance proceeds and condemnation
proceeds as required by the Security Instrument. However, Borrower will not be
personally liable for any failure described in this subsection (ii) if Borrower
is unable to apply insurance or condemnation proceeds as

PAGE 7

 

	 	 	 	required by the Security Instrument because of a valid order issued in a bankruptcy,
receivership, or similar judicial proceeding.
	 
	 	(iii)	 	Borrower fails to comply with Section 14(g) or (h) of the
Security Instrument relating to the delivery of books and records, statements,
schedules and reports.
	 
	 	(iv)	 	Borrower fails to pay when due in accordance with the terms of
the Security Instrument the amount of any item below marked “Deferred”;
provided however, that if no item is marked “Deferred”, this Section 9(c)(iv)
shall be of no force or effect.

	 	 	 	 	 
	 

	 	[Deferred]
	 	Hazard Insurance premiums or other insurance premiums,
	 

	 	[Collect]
	 	Taxes,
	 

	 	[Deferred]
	 	water and sewer charges (that could become a lien on the
Mortgaged Property),
	 

	 	[N/A]
	 	ground rents,
	 

	 	[Deferred]
	 	assessments or other charges (that could become a lien on the Mortgaged Property)

     (d) In addition to the Base Recourse, Borrower shall be personally liable to Lender for:

     (i) the performance of all of Borrower’s obligations under Section 18
of the Security Instrument (relating to environmental matters);

     (ii) the costs of any audit under Section 14(g) of the Security
Instrument; and

     (iii) any costs and expenses incurred by Lender in connection with the
collection of any amount for which Borrower is personally liable under this
Section 9, including Attorneys’ Fees and Costs and the costs of conducting
any independent audit of Borrower’s books and records to determine the
amount for which Borrower has personal liability.

     (e) All payments made by Borrower with respect to the Indebtedness and all amounts received by
Lender from the enforcement of its rights under the Security Instrument and the other Loan
Documents shall be applied first to the portion of the Indebtedness for which Borrower has no
personal liability.

     (f) Notwithstanding the Base Recourse, Borrower shall become personally liable to Lender for
the repayment of all of the Indebtedness upon the occurrence of any of the following Events of
Default:

     (i) Borrower’s ownership of any property or operation of any business
not permitted by Section 33 of the Security Instrument;

     (ii) a Transfer (including, but not limited to, a lien or encumbrance)
that is an Event of Default under Section 21 of the Security Instrument,
other than a Transfer consisting solely of the involuntary removal or
involuntary withdrawal of a general partner in a limited partnership or a
manager in a limited liability company; or

     (iii) fraud or written material misrepresentation by Borrower or any
officer, director, partner, member or employee of Borrower in

PAGE 8

 

connection with the application for or creation of the Indebtedness or any request for
any action or consent by Lender.

     (g) To the extent that Borrower has personal liability under this Section 9, Lender may
exercise its rights against Borrower personally without regard to whether Lender has exercised any
rights against the Mortgaged Property or any other security, or pursued any rights against any
guarantor, or pursued any other rights available to Lender under this Note, the
Security Instrument, any other Loan Document or applicable law. To the fullest extent
permitted by applicable law, in any action to enforce Borrower’s personal liability under this
Section 9, Borrower waives any right to set off the value of the Mortgaged Property against such
personal liability.

     10. Voluntary and Involuntary Prepayments.

     (a) Any receipt by Lender of principal due under this Note prior to the Maturity Date, other
than principal required to be paid in monthly installments pursuant to Section 3, constitutes a
prepayment of principal under this Note. Without limiting the foregoing, any application by
Lender, prior to the Maturity Date, of any proceeds of collateral or other security to the
repayment of any portion of the unpaid principal balance of this Note constitutes a prepayment
under this Note.

     (b) Borrower may voluntarily prepay all of the unpaid principal balance of this Note on an
Installment Due Date so long as Borrower designates the date for such prepayment in a Notice from
Borrower to Lender given at least 30 days prior to the date of such prepayment. If an Installment
Due Date (as defined in Section 1(a)) falls on a day which is not a Business Day, then with respect
to payments made under this Section 10 only, the term “Installment Due Date” shall mean the
Business Day immediately preceding the scheduled Installment Due Date.

     (c) Notwithstanding subsection (b) above, Borrower may voluntarily prepay all of the unpaid
principal balance of this Note on a Business Day other than an Installment Due Date if Borrower
provides Lender with the Notice set forth in subsection (b) and meets the other requirements set
forth in this subsection. Borrower acknowledges that Lender has agreed that Borrower may prepay
principal on a Business Day other than an Installment Due Date only because Lender shall deem any
prepayment received by Lender on any day other than an Installment Due Date to have been received
on the Installment Due Date immediately following such prepayment and Borrower shall be responsible
for all interest that would have been due if the prepayment had actually been made on the
Installment Due Date immediately following such prepayment.

     (d) Unless otherwise expressly provided in the Loan Documents, Borrower may not voluntarily
prepay less than all of the unpaid principal balance of this Note. In order to voluntarily prepay
all or any part of the principal of this Note, Borrower must also pay to Lender, together with the
amount of principal being prepaid, (i) all accrued and unpaid interest due under this Note, plus
(ii) all other sums due to Lender at the time of such prepayment, plus (iii) any prepayment premium
calculated pursuant to Section 10(e).

     (e) Except as provided in Section 10(f), a prepayment premium shall be due and payable by
Borrower in connection with any prepayment of principal under this Note during the Prepayment
Premium Period. The prepayment premium shall be whichever is the greater of subsections (A) and
(B) below:

	 	(A)	 	1.0% of the amount of principal being prepaid;
or
	 
	 	(B)	 	the product obtained by multiplying:

PAGE 9

 

	 	(1)	 	the amount of principal being
prepaid or accelerated,
	 
	 	 	 	by
	 
	 	(2)	 	the excess (if any) of the
Monthly Note Rate over the Assumed Reinvestment Rate,
	 
	 	 	 	by
	 
	 	(3)	 	the Present Value Factor.

For purposes of subsection (B), the following definitions shall apply:

     Monthly Note Rate: one-twelfth (1/12) of the Fixed Interest Rate,
expressed as a decimal calculated to five digits.

     Prepayment Date: in the case of a voluntary prepayment, the date on
which the prepayment is made; in the case of the application by Lender of
collateral or security to a portion of the principal balance, the date of
such application.

     Assumed Reinvestment Rate: one-twelfth (1/12) of the yield rate, as of
the date 5 Business Days before the Prepayment Date, on the Treasury
Security, as reported in The Wall Street Journal, expressed as a decimal
calculated to five digits. In the event that no yield is published on the
applicable date for the Treasury Security, Lender, in its discretion, shall
select the non-callable Treasury Security maturing in the same year as the
Treasury Security with the lowest yield published in The Wall Street Journal
as of the applicable date. If the publication of such yield rates in The
Wall Street Journal is discontinued for any reason, Lender shall select a
security with a comparable rate and term to the Treasury Security. The
selection of an alternate security pursuant to this Section shall be made in
Lender’s discretion.

     Present Value Factor: the factor that discounts to present value the
costs resulting to Lender from the difference in interest rates during the
months remaining in the Yield Maintenance Period, using the Assumed
Reinvestment Rate as the discount rate, with monthly compounding, expressed
numerically as follows:

     

     n = the number of months remaining in Yield Maintenance Period;
provided, however, if a prepayment occurs on an Installment Due Date, then
the number of months remaining in the Yield Maintenance Period shall be
calculated beginning with the month in which such prepayment occurs and if
such prepayment occurs on a Business Day other than an Installment Due Date,
then the number of months remaining in the Yield Maintenance Period shall be
calculated beginning with the month immediately following the date of such
prepayment.

PAGE 10

 

ARR = Assumed Reinvestment Rate

     (f) Notwithstanding any other provision of this Section 10, no prepayment premium shall be
payable with respect to (i) any prepayment made during the Window Period, or (ii) any prepayment
occurring as a result of the application of any insurance proceeds or condemnation award under the
Security Instrument.

     (g) Unless Lender agrees otherwise in writing, a permitted or required prepayment of less than
the unpaid principal balance of this Note shall not extend or postpone the due date of any
subsequent monthly installments or change the amount of such installments.

     (h) Borrower recognizes that any prepayment of any of the unpaid principal balance of this
Note, whether voluntary or involuntary or resulting from an Event of Default by Borrower, will
result in Lender’s incurring loss, including reinvestment loss, additional expense and frustration
or impairment of Lender’s ability to meet its commitments to third parties. Borrower agrees to pay
to Lender upon demand damages for the detriment caused by any prepayment, and agrees that it is
extremely difficult and impractical to ascertain the extent of such damages. Borrower therefore
acknowledges and agrees that the formula for calculating prepayment premiums set forth in this Note
represents a reasonable estimate of the damages Lender will incur because of a prepayment.
Borrower further acknowledges that any lockout and the prepayment premium provisions of this Note
are a material part of the consideration for the Loan, and that the terms of this Note are in other
respects more favorable to Borrower as a result of the Borrower’s voluntary agreement to the
lockout and prepayment premium provisions.

     11. Costs and Expenses. To the fullest extent allowed by applicable law, Borrower shall pay
all expenses and costs, including Attorneys’ Fees and Costs incurred by Lender as a result of any
default under this Note or in connection with efforts to collect any amount due under this Note, or
to enforce the provisions of any of the other Loan Documents, including those incurred in
post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief
from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure
proceeding.

     12. Forbearance. Any forbearance by Lender in exercising any right or remedy under this Note,
the Security Instrument, or any other Loan Document or otherwise afforded by applicable law, shall
not be a waiver of or preclude the exercise of that or any other right or remedy. The acceptance
by Lender of any payment after the due date of such payment, or in an amount which is less than the
required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all
other payments or to exercise any right or remedy with respect to any failure to make prompt
payment. Enforcement by Lender of any security for Borrower’s obligations under this Note shall
not constitute an election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.

     13. Waivers. Borrower and all endorsers and guarantors of this Note and all other third party
obligors waive presentment, demand, notice of dishonor, protest, notice of acceleration, notice of
intent to demand or accelerate payment or maturity, presentment for payment, notice of nonpayment,
grace, and diligence in collecting the Indebtedness.

     14. Loan Charges (Texas Only). Borrower and Lender intend at all times to comply with the law
of the State of Texas governing the Maximum Interest Rate or maximum amount of interest payable on
or in connection with this Note and the Indebtedness (or applicable United States federal law to
the extent that it permits Lender to contract for, charge, take, reserve or receive a greater
amount of interest than under Texas law). If the applicable law is ever judicially interpreted so
as to render usurious any amount payable under this Note or under any other Loan Document, or
contracted for, charged, taken, reserved or received with respect to the Indebtedness, or as a
result of acceleration of the maturity of this Note, or if any prepayment by Borrower results in
Borrower having paid any interest in excess of that permitted by any

PAGE 11

 

applicable law, then Borrower and Lender expressly intend that all excess amounts collected by Lender shall be applied to reduce
the unpaid principal balance of this Note (or, if this Note has been or would thereby be paid in
full, shall be refunded to Borrower), and the provisions of this Note, the Security Instrument and
any other Loan Documents immediately shall be deemed reformed and the amounts thereafter
collectible under this Note or any other Loan Document reduced, without the necessity of the
execution of any new documents, so as to comply with any applicable law, but so as to permit the
recovery of the fullest amount otherwise payable under this Note or any other Loan Document. The right to accelerate the Maturity Date of this Note
does not include the right to accelerate any interest, which has not otherwise accrued on the date
of such acceleration, and Lender does not intend to collect any unearned interest in the event of
acceleration. All sums paid or agreed to be paid to Lender for the use, forbearance or detention
of the Indebtedness shall, to the extent permitted by any applicable law, be amortized, prorated,
allocated and spread throughout the full term of the Indebtedness until payment in full so that the
rate or amount of interest on account of the Indebtedness does not exceed the applicable usury
ceiling. Notwithstanding any provision contained in this Note, the Security Instrument or any
other Loan Document that permits the compounding of interest, including any provision by which any
accrued interest is added to the principal amount of this Note, the total amount of interest that
Borrower is obligated to pay and Lender is entitled to receive with respect to the Indebtedness
shall not exceed the amount calculated on a simple (i.e., non-compounded) interest basis at
the maximum rate on principal amounts actually advanced to or for the account of Borrower,
including all current and prior advances and any advances made pursuant to the Security Instrument
or other Loan Documents (such as for the payment of taxes, insurance premiums and similar expenses
or costs).

     15. Commercial Purpose. Borrower represents that Borrower is incurring the Indebtedness
solely for the purpose of carrying on a business or commercial enterprise, and not for personal,
family, household, or agricultural purposes.

     16. Counting of Days. Except where otherwise specifically provided, any reference in this
Note to a period of “days” means calendar days, not Business Days.

     17. Governing Law. This Note shall be governed by the law of the Property Jurisdiction.

     18. Captions. The captions of the Sections of this Note are for convenience only and shall be
disregarded in construing this Note.

     19. Notices; Written Modifications.

     (a) All Notices, demands and other communications required or permitted to be given pursuant
to this Note shall be given in accordance with Section 31 of the Security Instrument.

     (b) Any modification or amendment to this Note shall be ineffective unless in writing signed
by the party sought to be charged with such modification or amendment; provided, however, that in
the event of a Transfer under the terms of the Security Instrument that requires Lender’s consent,
any or some or all of the Modifications to Multifamily Note set forth in Exhibit A to this Note may
be modified or rendered void by Lender at Lender’s option, by Notice to Borrower and the
transferee, as a condition of Lender’s consent.

     20. Consent to Jurisdiction and Venue. Borrower agrees that any controversy arising under or
in relation to this Note may be litigated in the Property Jurisdiction. The state and federal
courts and authorities with jurisdiction in the Property Jurisdiction shall have jurisdiction over
all controversies that shall arise under or in relation to this Note. Borrower irrevocably
consents to service, jurisdiction, and venue of such courts for any such litigation and waives any
other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.
However, nothing in this Note is intended to limit any right that Lender may have to

PAGE 12

 

bring any suit, action or proceeding relating to matters arising under this Note in any court of any other
jurisdiction.

     21. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO ELECT A TRIAL BY JURY
WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES
AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY
JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY
WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

     22. State-Specific Provisions. N/A.

     ATTACHED EXHIBIT. The Exhibit noted below, if marked with an “X” in the space provided, is
attached to this Note:

          þ Exhibit A            Modifications to Multifamily Note

     IN WITNESS WHEREOF, and in consideration of the Lender’s agreement to lend Borrower the
principal amount set forth above, Borrower has signed and delivered this Note under seal or has
caused this Note to be signed and delivered under seal by its duly authorized representative.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

PAGE 13

 

	 	 	 	 	 	 	 	 	 
	 	 	TRIAD SENIOR LIVING
II, L.P., a Texas

        limited partnership	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Capital Senior Living Properties 5, Inc., a
Delaware corporation, its general partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	/s/ Ralph Beattie	 	 
	 

	 	 	 	 	 	 

Ralph Beattie

Vice President
	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	75-2782784	 	 
	 	 	 	 	 
	 	 	Borrower’s Social Security/Employer ID Number	 	 

PAGE 14

 

PAY TO THE ORDER OF FEDERAL HOME LOAN MORTGAGE

CORPORATION, WITHOUT RECOURSE.

CAPMARK FINANCE INC., a California
corporation

	 	 	 	 	 
	By:
	 	/s/ Max W. Foore	 	 
	 

	 	 	 	 
	 

	 	Max W. Foore	 	 
	 

	 	Vice President	 	 
	 

	 	 	 	 

FHLMC Loan No. 940970155

PAGE 15

 

EXHIBIT A

MODIFICATIONS TO MULTIFAMILY NOTE

The following modifications are made to the text of the Note that precedes this Exhibit.

	1.	 	The third and fourth sentences of Section 3(b) are deleted and replaced with the following:
	 
	 	 	“However, as provided above, the portion of the monthly installment actually payable as and
allocated to interest will be based upon an actual/360 interest calculation schedule, and
the amount of each installment will vary based upon the number of days in the month for
which such installment is paid.”
	 
	2.	 	Section 9(c)(i) is amended by adding the following at the end of the first sentence thereof:
	 
	 	 	“and not applied pursuant to the terms of the tenant’s lease.”
	 
	3.	 	In Section 9(c)(i) and 9(c)(ii), the word “valid” is hereby deleted.

PAGE A-1

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