Execution Copy

LIMITED RECOURSE SECURED PROMISSORY NOTE

$5,000,000
April 15, 2009

FOR VALUE RECEIVED, LTC Global, Inc., a Nevada corporation (“Maker”), promises
to pay, subject to the terms and conditions contained herein, to the order of
Penn Treaty American Corporation, a Pennsylvania corporation (“Payee”), in
lawful money of the United States of America, the principal sum of FIVE MILLION
DOLLARS ($5,000,000), in the manner provided below.

This Note has been executed and delivered pursuant to and in accordance with the
terms and conditions of the Termination and Limited Release Agreement, dated as
of the date hereof, between Maker and Payee (the “Termination Agreement”).  This
Note replaces the Promissory Note, dated as of November 5, 2008, in the original
principal amount of $10,250,000, issued by Maker in favor of Payee.

1. Payments.

1.1. Interest.  The principal amount outstanding under this Note shall accrue
interest at a rate equal to 0.721% per month.

1.2. Payments.  Principal and accrued interest under this Note shall be paid in
monthly installments (each, a “Monthly Installment Payment”) on the fifteenth
(15th) day of each month (each, an “Installment Payment Date”), commencing on
May 15, 2009, until the Maturity Date (as defined below) in an amount equal to
the greater of (a) the aggregate amount of Commissions (as defined below)
received by Maker or its affiliates during the immediately preceding month (the
“Monthly Commission Based Payment”) or (b) the Minimum Required Payment (as
defined below) as of such Installment Payment Date.  For purposes of this Note,
“Minimum Required Payment” shall mean, as of the applicable Installment Payment
Date, 1.00721 times the Guarantee Balance (as defined below) as calculated for
the prior month, minus the Maximum Guarantee Balance for such Installment
Payment Date as set forth on Schedule A hereto, if positive.  For the purposes
of this Note, “Guarantee Balance” means, as of an Installment Payment Date, the
difference of (i) the product of (A) 1.00721 times (B) the Guarantee Balance as
calculated for the prior month over (ii) the sum of (x) the Monthly Installment
Payment for such Installment Payment Date and (y) any voluntary prepayments by
the Maker made since the prior Installment Payment Date; provided that the prior
month’s Guarantee Balance as of May 15, 2009 shall mean
$2,500,000.  Notwithstanding anything herein to the contrary, all principal and
accrued interest shall be due and payable on the Maturity Date.

1.3. Maturity Date.  The earliest to occur of (a) the date on which the original
principal amount of this Note and all accrued interest thereon is paid in full
and (b) April 16, 2019.
 
 

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1.4. Collateral.  As collateral security for the prompt and complete payment
when due of the original principal amount of this Note, accrued interest thereon
(including any interest accruing thereon after maturity, or after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding relating to Company, whether or not a claim
for post-filing or post-petition interest is allowed in such proceeding) and all
other amounts due hereunder (in each case, whether at the stated maturity, by
acceleration or otherwise) (collectively, the “Obligations”), Maker hereby
grants to Payee a security interest in the Collateral (as defined below), now
owned by Maker in which Maker has or at any time in the future may acquire any
right title or interest.  Maker shall cause its affiliate, ACSIA Long Term Care,
Inc., a Delaware corporation (“ACSIA”), to execute a mutually agreeable security
agreement granting a security interest to Payee in the Collateral owned by
ACSIA, which security interest shall secure the Obligations.  As used herein,
the term “Collateral” shall mean any and all commissions payable to Maker and
ACSIA, from Penn Treaty Network America Insurance Company and American Network
Insurance Company in connection with the solicitation, sale, production or
servicing of long term care insurance policies in force on or prior to the date
hereof (the “Commissions”), other than (i) commissions attributable to insurance
policies produced by United Insurance Group Agency, Inc. or by Specialty
Planners, Inc. (f/k/a Associated California State Insurance Agencies, Inc.), and
(ii) commissions acquired by Maker or its affiliates by way of purchase or
business combination after the date hereof.

1.5. Manner of Payment.  All payments of principal and interest on this Note
shall be made to Payee by wire transfer of immediately available funds to an
account designated in writing by Payee.

1.6. Maximum Amount.  Notwithstanding anything set forth herein to the contrary,
in no event shall Maker be obligated to pay an aggregate principal amount
hereunder in excess of $5,000,000 plus interest accrued thereon.

1.7. Prepayment.  Maker may, without premium or penalty, at any time and from
time to time, prepay all or any portion of the outstanding principal balance due
under this Note.

2. Events of Default; Remedies.

2.1. Events of Default. The occurrence of any of the following events will
deemed to be an “Event of Default” under this Note: (i) the nonpayment of
principal, interest or other indebtedness under this Note on the date the same
shall become due and payable, whether at maturity, by acceleration or otherwise;
(ii) the failure of Maker to comply with or perform any of its obligations under
the Termination Agreement or the failure of any representation or warranty
hereunder or under the Termination Agreement to be true as of the time made;
(iii) the failure of ACSIA to comply with or perform any of its obligations
under the Security Agreement, dated as of the date hereof, between Payee and
ACSIA (the “Security Agreement”) or the failure of any representation or
warranty made by ACSIA under the Security Agreement to be true as of the time
made; (iv) the commencement of an involuntary case or the filing of a petition
against Maker or ACSIA seeking arrangement, adjustment or composition of or in
respect of Maker or
 
 
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ACSIA under the Federal bankruptcy laws, as now or hereafter constituted, or
under any other applicable Federal or state bankruptcy or insolvency or other
similar law, or seeking the appointment of a receiver, liquidator, custodian,
trustee (or similar official) of Maker or ACSIA for any substantial part of its
property, or seeking the winding-up or liquidation of its affairs (and such
involuntary case or petition is not dismissed within 30 days after the filing
thereof), or (v) the commencement by Maker or ACSIA of a voluntary case or the
institution by Maker or ACSIA of proceedings to be adjudicated a bankrupt or
insolvent, or the consent by it to the institution of bankruptcy or insolvency
proceedings against it, under the Federal bankruptcy laws as now or hereafter
constituted, or any other applicable Federal or state bankruptcy or insolvency
or other similar law, or the consent by Maker or ACSIA to the appointment of or
taking possession by a receiver, liquidator, trustee, custodian (or other
similar official) of Maker or ACSIA for any substantial part of its property, or
the making by it of any assignment for the benefit of its creditors or the
admission by it in writing of its inability to pay its debts generally as they
become due or the failure of Maker or ACSIA to generally pay its debts as such
debts become due.

2.2. Remedies.  Upon the occurrence of an Event of Default described in clause
(i) or (ii) above, Payee may, at its option, by written notice to Maker declare
the entire unpaid balance of principal together with interest accrued thereon
and all other sums due under this Note to be immediately due and payable.  If
there shall occur an Event of Default  described in clause (iii) or (iv) above,
the entire unpaid balance of principal together with interest accrued and unpaid
thereon and all other sums due under this Note shall be immediately due and
payable on the date on which such Event of Default occurs, without notice to
Maker.  In addition, upon the occurrence of an Event of Default, Payee may
exercise, in addition to all other rights and remedies granted to it in this
Note, all other rights and remedies a secured party under the Uniform Commercial
Code, as enacted in the State of Delaware, including without limitation, the
right to collect, receive, appropriate and realize upon the Collateral, or any
part thereof.  Payee may also recover all costs of suit and other expenses in
connection therewith, together with reasonable attorney’s fees incurred in
connection with collection of the amounts due hereunder or the enforcement of
its rights hereunder and interest on any judgment obtained by Payee at the legal
rate until actual payment is made to Payee of the full amount due Payee.

2.3. Limited Recourse.  Notwithstanding anything herein to the contrary, with
respect to all payments due hereunder other than the Minimum Required Payment
due as of any Installment Payment Date, the sole recourse of Payee hereunder
shall be to Maker’s and Maker’s Affiliates’ interest in the Collateral.

3. Miscellaneous.

3.1. Waiver.  The rights and remedies of Payee under this Note shall be
cumulative and not alternative.  No waiver by Payee of any right or remedy under
this Note shall be effective unless in a writing signed by Payee.  Neither the
failure nor any delay in exercising any right, power or privilege under this
Note will operate as a waiver of such right, power or privilege and no single or
partial exercise of any such right, power or privilege by Payee will preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege.  To the maximum extent permitted by
applicable law (a) no claim
 
 
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or right of Payee arising out of this Note can be discharged by Payee, in whole
or in part, by a waiver or renunciation of the claim or right unless in a
writing, signed by Payee, (b) no waiver that may be given by Payee will be
applicable except in the specific instance for which it is given and (c) no
notice to or demand on Maker will be deemed to be a waiver of any obligation of
Maker or of the right of Payee to take further action without notice or demand
as provided in this Note.  Maker hereby waives presentment, demand, protest and
notice of dishonor and protest.

3.2. Authority.  Maker hereby represents that it has full power, authority and
legal right to execute and deliver this Note and the Termination Agreement, to
perform its obligations hereunder and thereunder, and that this Note and the
Termination Agreement constitutes the valid and binding obligations of Maker
enforceable against Maker in accordance with their respective terms.

3.3. Notices.  Any notice required or permitted to be given hereunder shall be
given in accordance with Section 6 of the Termination Agreement.

3.4. Severability.  If any provision of this Note is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Note will remain in full force and effect.  Any provision of this Note held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.  This Note is subject to
the express condition that at no time shall Maker be obligated or required to
pay interest on the principal balance due hereunder at a rate which could
subject Payee to either civil or criminal liability as a result of being in
excess of the maximum interest rate which Maker is permitted by applicable law
to contract or agree to pay.

3.5. Governing Law.  This Note shall be governed by the laws of the State of
Delaware without regard to conflicts of laws principles.

3.6. Parties in Interest.  This Note shall bind Maker and its successors and
assigns.  This Note shall not be assigned or transferred by Maker or Payee
without the express prior written consent of the other party.
*  *  *  *  *

 
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IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the date
first written above.

 
LTC GLOBAL, INC.
             
By: /s/ Richard Pitbladdo
 
Name: Richard Pitbladdo
 
Title: Chief Financial Officer

 
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SCHEDULE A

MAXIMUM GUARANTEE BALANCE

Installment Payment
Date
Maximum Guarantee
Balance
 
$2,500,000.00
15-May-09
$2,466,547.52
15-Jun-09
$2,432,853.93
15-Jul-09
$2,398,917.51
15-Aug-09
$2,364,736.49
15-Sep-09
$2,330,309.12
15-Oct-09
$2,295,633.62
15-Nov-09
$2,260,708.20
15-Dec-09
$2,225,531.07
15-Jan-10
$2,190,100.40
15-Feb-10
$2,154,414.37
15-Mar-10
$2,118,471.14
15-Apr-10
$2,082,268.86
15-May-10
$2,045,805.65
15-Jun-10
$2,009,079.64
15-Jul-10
$1,972,088.94
15-Aug-10
$1,934,831.63
15-Sep-10
$1,897,305.80
15-Oct-10
$1,859,509.50
15-Nov-10
$1,821,440.80
15-Dec-10
$1,783,097.72
15-Jan-11
$1,744,478.29
15-Feb-11
$1,705,580.52
15-Mar-11
$1,666,402.40
15-Apr-11
$1,626,941.91
15-May-11
$1,587,197.02
15-Jun-11
$1,547,165.67
15-Jul-11
$1,506,845.80
15-Aug-11
$1,466,235.34
15-Sep-11
$1,425,332.18
15-Oct-11
$1,384,134.22
15-Nov-11
$1,342,639.33
15-Dec-11
$1,300,845.38
15-Jan-12
$1,258,750.20
15-Feb-12
$1,216,351.63
15-Mar-12
$1,173,647.48
15-Apr-12
$1,130,635.54

 
 
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15-May-12
$1,087,313.61
15-Jun-12
$1,043,679.44
15-Jul-12
$999,730.78
15-Aug-12
$955,465.37
15-Sep-12
$910,880.93
15-Oct-12
$865,975.15
15-Nov-12
$820,745.73
15-Dec-12
$775,190.32
15-Jan-13
$729,306.57
15-Feb-13
$683,092.13
15-Mar-13
$636,544.61
15-Apr-13
$589,661.60
15-May-13
$542,440.69
15-Jun-13
$494,879.44
15-Jul-13
$446,975.41
15-Aug-13
$398,726.12
15-Sep-13
$350,129.07
15-Oct-13
$301,181.78
15-Nov-13
$251,881.70
15-Dec-13
$202,226.30
15-Jan-14
$152,213.02
15-Feb-14
$101,839.28
15-Mar-14
$51,102.48
15-Apr-14
$0.00

 
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