Document:

EX-10.7

  Exhibit 10.7

  Execution Version

   

   

  Hercules Capital, Inc.

   

   

   

   

   

   

  Second Supplement to Note Purchase Agreement

   

   

  Dated as of June 23, 2022  

   

   

   

   

   

   

  Re:	$50,000,000 6.00% Series 2022A Senior Notes

  Due June 23, 2025

   

   

   

   

   

   

   

   

   

  

   

  Hercules Capital, Inc.

   

  Dated as of

  June 23, 2022 

   

  To the Additional Purchaser(s) named in

  Schedule A hereto 

   

  Ladies and Gentlemen:

  This Second Supplement to Note Purchase Agreement (the or this “Supplement”) is between Hercules Capital, Inc., a Maryland corporation (the “Company”), and the institutional investors named on Schedule A attached hereto (the “Additional Purchasers”).

  Reference is hereby made to that certain Note Purchase Agreement dated February 5, 2020 (the “Note Purchase Agreement”) among the Company and the Purchasers listed on the Purchaser Schedule thereto.  All capitalized terms not otherwise defined herein shall have the same meaning as specified in the Note Purchase Agreement.  Reference is further made to Section 4.14 of the Note Purchase Agreement which requires that, prior to the delivery of any Additional Notes, the Company and each Additional Purchaser shall execute and deliver a Supplement.

  The Company hereby agrees with the Additional Purchaser(s) as follows:

  	1.	The Company has authorized the issue and sale of $50,000,000 aggregate principal amount of its 6.00% Series 2022A Senior Notes due June 23, 2025 (as amended, restated or otherwise modified from time to time pursuant to Section 17 of the Note Purchase Agreement and including any such notes issued in substitution therefor pursuant to Section 13 of the Note Purchase Agreement, the “Series 2022A Notes”).  The Series 2022A Notes, together with the Series 2020B Notes issued pursuant to the First Supplement to Note Purchase Agreement dated as of November 2, 2020 and the Series 2020 Notes issued pursuant to the Note Purchase Agreement and each series of Additional Notes which may from time to time hereafter be issued pursuant to the provisions of Section 2.2 of the Note Purchase Agreement, are collectively referred to as the “Notes” (such term shall also include any such notes issued in substitution therefor pursuant to Section 13 of the Note Purchase Agreement).  The Series 2022A Notes shall be substantially in the form set out in Exhibit 1 hereto, with such changes therefrom, if any, as may be approved by the Additional Purchaser(s) and the Company.

  	2.	Subject to the terms and conditions hereof and as set forth in the Note Purchase Agreement and on the basis of the representations and warranties hereinafter set forth, the Company agrees to issue and sell to each Additional Purchaser, and each Additional Purchaser agrees to purchase from the Company, Series 2022A Notes in the principal amount set forth opposite such Additional Purchaser’s name on Schedule A hereto at a price of 100% of the principal amount thereof on the closing date hereinafter mentioned.

  	3.	The execution and delivery of this Supplement shall occur at the offices of Chapman and Cutler LLP, 320 South Canal Street, Chicago, IL 60606, on June 23, 2022 (the “Execution Date”).  The sale and purchase of the Series 2022A Notes to be purchased by each Additional Purchaser shall occur at the offices of Chapman and Cutler 

   

  

   

  LLP, 320 South Canal Street, Chicago, IL 60606, at 8:00 a.m. Chicago time, at a closing (the “Series 2022A Closing”) on June 23, 2022.  At the Series 2022A Closing, the Company will deliver to each Additional Purchaser the Series 2022A Notes to be purchased by such Additional Purchaser in the form of a single Series 2022A Note (or such greater number of Series 2022A Notes in denominations of at least $100,000 as such Additional Purchaser may request) dated the date of the Series 2022A Closing and registered in such Additional Purchaser’s name (or in the name of such Additional Purchaser’s nominee), against delivery by such Additional Purchaser to the Company or its order of immediately available funds for the account of the Company pursuant to the applicable funding instructions delivered in accordance with Section 4.10 of the Note Purchase Agreement.  If, at the Series 2022A Closing, the Company shall fail to tender such Series 2022A Notes to any Additional Purchaser as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to any Additional Purchaser’s satisfaction, such Additional Purchaser shall, at such Additional Purchaser’s election, be relieved of all further obligations under this Agreement, without thereby waiving any rights such Additional Purchaser may have by reason of such failure by the Company to tender such Series 2022A Notes or any of the conditions specified in Section 4 not having been fulfilled to such Additional Purchaser’s satisfaction.

  	4.	The obligation of each Additional Purchaser to purchase and pay for the Series 2022A Notes to be sold to such Additional Purchaser at the Series 2022A Closing is subject to the fulfillment to such Additional Purchaser’s satisfaction, prior to the Series 2022A Closing, of the conditions set forth in Section 4 of the Note Purchase Agreement with respect to the Series 2022A Notes to be purchased at the Series 2022A Closing as if each reference to “Notes,” “Closing” and “Purchaser” set forth therein was modified to refer the “Series 2022A Notes,” the “Series 2022A Closing” and the “Additional Purchaser” (each as defined in this Supplement) and to the following additional conditions:

  	(a)	Except as supplemented, amended or superceded by the representations and warranties set forth in Exhibit A hereto, each of the representations and warranties of the Company set forth in Section 5 of the Note Purchase Agreement shall be correct as of the date of the Series 2022A Closing (except for representations and warranties which apply to a specific earlier date which shall be true as of such earlier date or as of the date specified in Exhibit A to the extent such provision is superceded in Exhibit A) and the Company shall have delivered to each Additional Purchaser an Officer’s Certificate, dated the date of the Series 2022A Closing certifying that such condition has been fulfilled.

  	(b)	Contemporaneously with the Series 2022A Closing, the Company shall sell to each Additional Purchaser, and each Additional Purchaser shall purchase, the Series 2022A Notes to be purchased by such Additional Purchaser at the Series 2022A Closing as specified in Schedule A. 

  	5.	The terms of Section 8 of the Note Purchase Agreement shall apply to the Series 2022A Notes except that 

  “Prepayment Settlement Amount” shall mean, 

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  	(a) 	with respect to any Series 2022A Note, an amount equal to the “Prepayment Settlement Amount”, as follows: 

  			
	Prepaid or accelerated during the period
	 
	Prepayment Settlement Amount

	On or before March 23, 2025
	 
	Make-Whole Amount

	After March 23, 2025
	 
	$0

  For the avoidance of doubt, the definition of “Make-Whole Amount” set forth in Section 8.6 of the Note Purchase Agreement shall be applicable to any Series 2022A Note.

  	6.	In addition to the covenants and agreements set forth in the Note Purchase Agreement, the Company covenants and agrees, which covenants and agreements shall have the benefit of Section 11(c)(ii) of the Note Purchase Agreement, for the benefit of the Additional Purchasers and each other holder of a Note that the following is hereby added to the Note Purchase Agreement as Section 22.8:

  Section 22.8. 	Externalization. (a) Notice of Externalization. The Company will, within fifteen Business Days after the occurrence of an Externalization, give written notice of such Externalization to each holder of Notes.  Such notice shall contain and constitute an offer to prepay Notes as described in subparagraph (b) of this Section 22.8 and shall be accompanied by the certificate described in subparagraph (e) of this Section 22.8.

  	(b)	Offer to Prepay Notes. The offer to prepay Notes contemplated by subparagraph (a) of this Section 22.8 shall be an offer to prepay, in accordance with and subject to this Section 22.8, all, but not less than all, the Notes held by each holder (in this case only, “holder” in respect of any Note registered in the name of a nominee for a disclosed beneficial owner shall mean such beneficial owner) on a date specified in such offer (the “Section 22.8 Proposed Prepayment Date”). Such date shall be not less than 30 days and not more than 60 days after the date of such offer (if the Section 22.8 Proposed Prepayment Date shall not be specified in such offer, the Section 22.8 Proposed Prepayment Date shall be the first Business Day after the 45th day after the date of such offer).

  	(c)	Acceptance/Rejection. A holder of Notes may accept the offer to prepay made pursuant to this Section 22.8 by causing a notice of such acceptance to be delivered to the Company not later than 15 Business Days after receipt by such holder of the most recent offer of prepayment. A failure by a holder of Notes to respond to an offer to prepay made pursuant to this Section 22.8 shall be deemed to constitute rejection of such offer by such holder.

  	(d)	Prepayment. Prepayment of the Notes to be prepaid pursuant to this Section 22.8 shall be at 100% of the principal amount of such Notes, together with interest on such Notes accrued to, but excluding, the date of prepayment, but without Make-Whole Amount, Prepayment Settlement Amount or other premium.

  	(e)	Officer’s Certificate. Each offer to prepay the Notes pursuant to this Section 22.8 shall be accompanied by a certificate, executed by a Senior Financial Officer of the Company and dated the date of such offer, specifying: (i) the Section 22.8 Proposed Prepayment Date; (ii) that such offer is made pursuant to this Section 22.8; (iii) the principal amount of each Note offered to be prepaid; (iv) the interest that would 

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  be due on each Note offered to be prepaid, accrued to, but excluding, the Section 22.8 Proposed Prepayment Date; (v) that the conditions of this Section 22.8 have been fulfilled; and (vi) the date of the Externalization.

  For the purposes of this Section 22.8, an “Externalization” means the date on which the shareholders of the Company duly and validly approve a change in the management structure of the Company from an internally managed business development company to an externally managed business development company by approving the Company entering into an investment advisory agreement with a third-party external adviser.

  For the avoidance of doubt, the provisions of this Section 22.8 are applicable to the Series 2020 Notes, the Series 2022A Notes and any Additional Notes sold by the Company.

  	7.	In addition to the covenants and agreements set forth in the Note Purchase Agreement, the Company covenants and agrees for the benefit of the Additional Purchasers and each other holder of a Note, that the definition of “Unencumbered Assets” shall be amended to read as follows:  

   “Unencumbered Assets” means (a) the value of total assets of the Company that are not secured by a Lien (other than Liens not prohibited by Section 10.5 (except for Liens securing Indebtedness for borrowed money incurred directly by the Company as the borrower or guarantor (other than a customary bad-boy or limited guaranty of Indebtedness of a Financing Subsidiary) and permitted by Section 10.5(dd)) and, notwithstanding the foregoing, in the event a Lien exists, in connection with Indebtedness incurred by such Finance Subsidiary, on the Equity Interest of such Financing Subsidiary (as a result of a guaranty, accommodation pledge or otherwise), such Equity Interest shall be deemed an asset for purposes of this clause (a) with the value of such Equity Interest being equal to the value of the assets owned by such Subsidiary less the principal amount of Indebtedness for borrowed money of such Subsidiary), including, without duplication, the value of any Equity Interests owned by the Company, directly or indirectly, in a consolidated subsidiary, less (b) all unsecured liabilities and unsecured indebtedness not represented by Senior Securities of the Company

  	8.	In addition to the covenants and agreements set forth in the Note Purchase Agreement, the Company covenants and agrees, for the benefit of the Additional Purchasers and each other holder of a Note, that Section 17.1(a)(2)(iii) of the Note Purchase Agreement shall be amended to read as follows:  

  	(iii)	amend any of Sections 8 (except as set forth in the second sentence of Section 8.2 (or such corresponding provision of any Supplement) and Section 17.1(a)(3)), 11(a), 11(b), 12, 17, 20 or 22.8; and

  	9.	In addition to the covenants and agreements set forth in the Note Purchase Agreement, the Company covenants and agrees, for the benefit of the Additional Purchasers and each other holder of a Note, that the following definitions are hereby added to the Schedule A of Note Purchase Agreement:

  “NRSRO” means a Nationally Recognized Statistical Rating Organization so designated by the SEC whose ratings for senior unsecured indebtedness of business development companies are authorized for use with, and recognized by, the SVO, other than Egan Jones.

  “Egan Jones” means Egan Jones Rating Company or if applicable, its successor.

  	10.	Each Additional Purchaser represents and warrants that the representations and warranties set forth in Section 6 of the Note Purchase Agreement are true and correct on the date of the Series 2022A Closing with respect 

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  to the purchase of the Series 2022A Notes by such Additional Purchaser as if each reference to “Notes,” “Closing” and “Purchaser” set forth therein was modified to refer the “Series 2022A Notes,” the “Series 2022A Closing” and the “Additional Purchaser” and each reference to “this Agreement” therein was modified to refer to the Note Purchase Agreement as supplemented by this Supplement.

  	11.	The Company and each Additional Purchaser agree to be bound by and comply with the terms and provisions of the Note Purchase Agreement as fully and completely as if such Additional Purchaser were an original signatory to the Note Purchase Agreement.

  The execution hereof shall constitute a contract between the Company and the Additional Purchaser(s) for the uses and purposes hereinabove set forth, and this agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement.

   

  Hercules Capital, Inc.

   

  By: /s/ Seth H. Meyer

  	  Name: Seth H. Meyer 

  	  Title: Chief Financial Officer 

   

   

   

   

  	5

  

   

  This Agreement is hereby accepted and agreed to as of the date hereof. 

   

  	SLC MANAGEMENT U.S. INTERMEDIATE

  	INVESTMENT GRADE PRIVATE CREDIT FUND, L.P.

   

  By: Sun Life Capital Management (U.S.) LLC, its Investment Adviser

   

  By: /s/ David Belanger

  	Name: David Belanger

  	Title: Managing Director

  	 

  By: /s/ Art Baril

  	Name: Art Baril

  	Title: Senior Director

   

   

  	 

  

   

   

   

  This Agreement is hereby accepted and agreed to as of the date hereof. 

   

  	MEDICA INSURANCE COMPANY

   

  By: Sun Life Capital Management (U.S.) LLC, its Investment Adviser

   

  By: /s/ David Belanger

  	Name: David Belanger

  	Title: Managing Director

  	 

  By: /s/ Art Baril

  	Name: Art Baril

  	Title: Senior Director

   

   

  	 

  

   

   

  This Agreement is hereby accepted and agreed to as of the date hereof. 

   

  	ARCH INSURANCE COMPANY

   

  By: /s/ James Peniston

  	Name: James Peniston

  	Title: Director, Head of Corporate Credit

  	Arch Investment Management Ltd., on behalf of Arch Insurance Company, solely as investment manager and not in its individual capacity

   

   

  	 

  

   

   

  This Agreement is hereby accepted and agreed to as of the date hereof. 

   

  	ARCH REINSURANCE COMPANY

   

  By: /s/ James Peniston

  	Name: James Peniston

  	Title: Director, Head of Corporate Credit

  	Arch Investment Management Ltd., on behalf of Arch reinsurance Company, solely as investment manager and not in its individual capacity

   

  	 

   

  	 

  

   

   

  This Agreement is hereby accepted and agreed to as of the date hereof. 

   

  	CHUBB LIFE INSURANCE COMPANY LTD.

   

  By: /s/ Chen Lin

  	Name: Chen Lin

  	Title: Portfolio Manager, Chubb Life

   

   

  	 

  

   

   

  This Agreement is hereby accepted and agreed to as of the date hereof. 

   

  	FIDELITY & GUARANTY LIFE INSURANCE COMPANY

  By: Aspida Life Re Ltd., its investment manager 

  By: Ares Insurance Solutions LLC, its sub-advisor

  By: Ares Alternative Credit Management LLC, its sub-advisor

   

  By: /s/ Kevin Alexander

  	Name: Kevin Alexander

  	Title: Partner

   

   

  	 

  

   

   

  This Agreement is hereby accepted and agreed to as of the date hereof. 

   

  	THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

  By: Nuveen Alternatives Advisors LLC, a Delaware limited liability company, its investment manager

   

  By: /s/ Greg Miller

  	Name: Greg Miller

  	Title: Director

   

   

  	 

  

   

   

  This Agreement is hereby accepted and agreed to as of the date hereof. 

   

  	CSAA INSURANCE EXCHANGE

  By: Nuveen Alternatives Advisors LLC, a Delaware limited liability company, its investment manager

   

  By: /s/ Greg Miller

  	Name: Greg Miller

  	Title: Director

   

  	 

  

   

   

  This Agreement is hereby accepted and agreed to as of the date hereof. 

   

  	THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA

   

  By: /s/ Trinh Nguyen

  	Name: Trinh Nguyen

  	Title: Managing Director

   

   

  	 

  

   

   

  This Agreement is hereby accepted and agreed to as of the date hereof. 

   

  	FEDERATED MUTUAL INSURANCE COMPANY

   

  By: /s/ Donna Ennis

  	Name: Donna Ennis

  	Title: Vice President & Senior Portfolio Manager

   

   

  	 

  

   

   

   

  This Agreement is hereby accepted and agreed to as of the date hereof. 

   

  	FEDERATED LIFE INSURANCE COMPANY

   

  By: /s/ Donna Ennis

  	Name: Donna Ennis

  	Title: Vice President & Senior Portfolio Manager

   

  	 

  

   

   

  This Agreement is hereby accepted and agreed to as of the date hereof. 

   

  	THE OHIO NATIONAL LIFE INSURANCE COMPANY

   

  By: /s/ Brenda Kalb 

  	Name: Brenda Kalb

  	Title: Vice President 

  	 

  

   

  Supplemental Representations

  The Company represents and warrants to each Additional Purchaser that except as hereinafter set forth in this Exhibit A, each of the representations and warranties set forth in Section 5 of the Note Purchase Agreement (other than representations and warranties that apply solely to a specific earlier date which shall be true as of such earlier date and other than the Section references hereinafter set forth) is true and correct in all material respects as of the date of the applicable Series 2020 Closing with respect to the Series 2022A Notes with the same force and effect as if each reference to “the Notes” set forth therein was modified to refer to the “Series 2022A Notes” and each reference to “this Agreement” therein was modified to refer to the Note Purchase Agreement as supplemented by the Second Supplement.  The Section references hereinafter set forth correspond to the similar sections of the Note Purchase Agreement which are supplemented hereby:

  	Section 5.3.	Disclosure.  (a) The Company, through its agent, Goldman Sachs, has delivered to each Additional Purchaser a copy of an Investor Presentation, dated May 2022 (the “Memorandum”), relating to the transactions contemplated hereby in connection with the Series 2022A Notes.  The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries.  This Agreement, the Memorandum, the financial statements listed in Schedule 5.5 and the documents, certificates or other writings delivered to the Additional Purchasers by or on behalf of the Company (other than financial projections, pro forma financial information and other forward-looking information referenced in Section 5.3(b), information relating to third parties and general economic information) prior to June 9, 2022 in connection with the transactions contemplated hereby and identified in Schedule 5.3 (this Agreement, the Memorandum and such documents, certificates or other writings and such financial statements delivered to each Additional Purchaser being referred to, collectively, as the “Disclosure Documents”), taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made.  Except as disclosed in the Disclosure Documents, since December 31, 2021, there has been no change in the financial condition, operations, business or properties of the Company or any Subsidiary except changes that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  There is no fact known to the Company that would reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Disclosure Documents.

  	(b)	All financial projections, pro forma financial information and other forward-looking information which has been delivered to each Additional Purchaser by or on behalf of the Company in connection with the transactions contemplated by this Agreement are based upon good faith assumptions and, in the case of financial projections and pro forma financial information, good faith estimates, in each case, believed to be reasonable at the time made, it being recognized that (i) such financial information as it relates to future events is subject to significant uncertainty and contingencies (many of which are beyond the control of the Company) and are therefore not to be viewed as fact, and (ii) actual results during the period or periods covered by such financial information may materially differ from the results set forth therein.

  	Section 5.4.	Organization and Ownership of Shares of Subsidiaries; Affiliates.  (a) Schedule 5.4 contains (except as noted therein) complete and correct lists as of the date of the applicable Series 2022A Closing of (i) the Company’s Subsidiaries, showing, as to each Subsidiary, the name thereof, the jurisdiction of its organization, the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary and whether such Subsidiary is a Subsidiary Guarantor, and (ii) the Company’s directors and senior officers.

  Exhibit A

  (to Supplement)

  

   

  	Section 5.5.	Financial Statements; Material Liabilities.  The Company has delivered to each Additional Purchaser copies of the financial statements of the Company and its Subsidiaries listed on Schedule 5.5.  All of such financial statements (including in each case the related schedules and notes, but excluding all financial projections, pro forma financial information and other forward-looking information) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments and lack of footnotes).

  	Section 5.13.	Private Offering by the Company.  Neither the Company nor anyone acting on its behalf has offered the Notes or any substantially similar debt Securities for sale to, or solicited any offer to buy the Notes or any substantially similar debt Securities from, or otherwise approached or negotiated in respect thereof with, any Person other than the Additional Purchasers and not more than 15 other Institutional Investors , each of which has been offered the Notes at a private sale for investment.  Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of section 5 of the Securities Act or to the registration requirements of any Securities or blue sky laws of any applicable jurisdiction.

  	Section 5.14.	Use of Proceeds; Margin Regulations.  The Company will apply the proceeds of the sale of the Notes hereunder for the general corporate purposes of the Company and its Subsidiaries and as otherwise set forth in the section of the Transaction Overview of the Executive Summary in the Memorandum.  No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any Securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220).  Margin stock does not constitute more than 25% of the value of the consolidated assets of the Company and its subsidiaries and the Company does not have any present intention that margin stock will constitute more than 25% of the value of such assets. As used in this Section, the terms “margin stock” and “purpose of buying or carrying” shall have the meanings assigned to them in said Regulation U.

  	Section 5.15.	Existing Indebtedness; Future Liens.  (a) Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Indebtedness of the Company and its Subsidiaries as of the applicable Series 2022A Closing, since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of the Company or its Subsidiaries.  As of the applicable Series 2022A Closing, neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of the Company or such Subsidiary and, to the knowledge of the Company, no event or condition exists with respect to any Indebtedness of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment.

   

   

  A-2

  

   

  Schedules 5.3, 5.4, 5.5, 5.15, 10.1, 10.5 and 10.7 of the Note Purchase Agreement are hereby supplemented by the attached Schedules 5.3, 5.4, 5.5, 5.15, 10.1, 10.5 and 10.7

   

  A-3

  

   

  [Form of Series 2022A Note]

  Hercules Capital, Inc.

  6.00% Series 2022A Senior Note due June 23, 2025

  No. [_________]	[Date]
$[____________]	PPN 427096 B#8

  For Value Received, the undersigned, Hercules Capital, Inc. (herein called the “Company”), a corporation organized and existing under the laws of the State of Maryland, hereby promises to pay to [____________], or registered assigns, the principal sum of [_____________________] Dollars (or so much thereof as shall not have been prepaid) on June 23, 2025 (the “Maturity Date”), with interest (computed on the basis of a 360‐day year of twelve 30‐day months) (a) on the unpaid balance hereof at the rate of (a) 6.00% per annum from the date hereof, payable semiannually, on the 23rd day of June and December in each year, commencing with the June or December next succeeding the date hereof, and on the Maturity Date, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, (x) on any overdue payment of interest and (y) during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Prepayment Settlement Amount (if any), at a rate per annum from time to time equal to the Default Rate (as defined in the hereinafter defined Note Purchase Agreement), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand).

  Payments of principal of, interest on and any Prepayment Settlement Amount with respect to this Note are to be made in lawful money of the United States of America at the Company in New York, New York or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below.

  This Note is one of a series of Senior Notes (the “Notes”) issued pursuant to a Supplement dated June 23, 2022 to the Note Purchase Agreement, dated February 5, 2020 (as from time to time amended, supplemented or modified, the “Note Purchase Agreement”), among the Company, the Additional Purchasers named therein and Additional Purchasers of Notes from time to time issued pursuant to any Supplement to the Note Purchase Agreement.  This Note and the holder hereof are entitled with the holders of all other Notes of all series from time to time outstanding under the Note Purchase Agreement to all the benefits provided for thereby or referred to therein.  Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representation set forth in Section 6 of the Note Purchase Agreement.  Unless otherwise indicated, capitalized terms used in this Note shall have the respective meanings ascribed to such terms in the Note Purchase Agreement.

  This Note is a registered Note with the Company and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized in writing, a new Note of the same series for a like principal amount will be issued to, and registered in the name of, the transferee.  Prior to due presentment for registration of transfer, the Company may treat the Person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.

   

  

   

   This Note is not subject to regularly scheduled prepayments of principal.  This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise.

  If an Event of Default occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Prepayment Settlement Amount) and with the effect provided in the Note Purchase Agreement.

  This Note shall be construed and enforced in accordance with, and the rights of the Company and the holder of this Note shall be governed by, the law of the State of New York excluding choice‐of‐law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.

  Hercules Capital, Inc.

   

   

   

  By 	

  	  Name:	

  	  Title:	

   

   

   

   

  	-2-EXHIBIT 10.2
May 17, 2022
LTC Properties, Inc.
2829 Townsgate Road, Suite 350
Westlake Village, California 91361
		Re:
	First Amendment to Amended and Restated Note Purchase and Private Shelf Agreement

Ladies and Gentlemen:
Reference is made to the Amended and Restated Note Purchase and Private Shelf Agreement, dated as of June 2, 2016 (as amended, amended and restated, supplemented or otherwise modified to the date hereof, the “Agreement”), by and between LTC Properties, Inc., a Maryland corporation (the “Company”), on the one hand, and the Purchasers named therein, on the other hand.  Capitalized terms used and not otherwise defined herein shall have the meanings provided in the Agreement.
1.Amendments.  Pursuant to the provisions of Section 17 of the Agreement, and subject to the terms and conditions of this letter agreement, the Purchasers hereby agree with the Company that the Agreement is modified, effective as of December 31, 2021, as follows:
1.1Section 10.9 of the Agreement is amended and restated, as follows:
“10.9Financial Covenants.
(a)Maximum Total Indebtedness to Total Asset Value Ratio.  As of the last day of each Fiscal Quarter of the Company, the Company shall not permit the ratio of Total Indebtedness to Total Asset Value to be greater than 0.60 to 1.00.
(b)Maximum Secured Debt to Total Asset Value Ratio.  As of the last day of each Fiscal Quarter of the Company, the Company shall not permit the ratio of Secured Debt to Total Asset Value to be greater than 0.35 to 1.00.
(c)Maximum Unsecured Debt to Unencumbered Asset Value.  As of the last day of each Fiscal Quarter of the Company, the Company shall not permit the ratio of Unsecured Debt of the Company and its Subsidiaries to Unencumbered Asset Value to be greater than 0.60 to 1.00.
(d)Minimum EBITDA to Fixed Charges Ratio.  As of the last day of each Rolling Period of the Company, the Company shall not permit the ratio of EBITDA for such Rolling Period to Fixed Charges for such Rolling Period to be less than 1.50 to 1.00.
(e)Maintenance of Tangible Net Worth.  The Company shall not permit at any time Tangible Net Worth to be less than the sum of (a) $834,451,000 plus (b) 75% of the aggregate net proceeds received by the Company or any of its Subsidiaries after December 31, 2020 in connection with any offering of capital stock or other equity interests of the Company or the Subsidiaries, but only to the extent that such net proceeds are not used to redeem existing capital stock or other equity interests of the Company or the Subsidiaries.”
1.2The second paragraph of Section 10.10 of the Agreement is amended and restated, as follows:
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“Notwithstanding anything to the contrary in the immediately preceding paragraph of this Section 10.10: (i) no such modification of a Financial Covenant that would be less beneficial to the holders of the Notes, and no such elimination of a Financial Covenant, shall be effective if a Default or Event of Default has occurred and is continuing immediately prior to the time such Modified Bank Financial Covenant or elimination of a Financial Covenant becomes effective; (ii) no modification or series of modifications effected pursuant to the provisions of this Section 10.10 shall be effective to: (A) increase the maximum permitted ratio of Total Indebtedness to Total Asset Value as set forth in Section 10.9(a) of this Agreement to a level greater than 0.60 to 1.00 (provided that such Financial Covenant shall be calculated on a basis consistent with the manner in which it was calculated on the First Amendment Effective Date) or eliminate such Financial Covenant set forth in Section 10.9(a) from this Agreement, (B) increase the maximum permitted ratio of Secured Debt to Total Asset Value as set forth in Section 10.9(b) of this Agreement to a level greater than 0.40 to 1.00 (provided that such Financial Covenant shall be calculated on a basis consistent with the manner in which it was calculated on the First Amendment Effective Date) or eliminate such Financial Covenant set forth in Section 10.9(b) from this Agreement, (C) (1) increase the maximum permitted ratio of Unsecured Debt of the Company and its Subsidiaries to Unencumbered Asset Value as set forth in Section 10.9(c) of this Agreement to a level greater than 0.6667 to 1.0000 (provided that such Financial Covenant shall be calculated on a basis consistent with the manner in which it was calculated on the First Amendment Effective Date), (2) modify the definition of “Capitalization Rate” such that the capitalization rate for: ALFs would be lower than 7.00% SNFs would be lower than 8.50%, Non-Government Reimbursed Properties that are independent living facilities would be lower than 6.50%, hospitals would be lower than 9.00%, Non-Government Reimbursed Properties that are not independent living facilities would be lower than 7.00%; or other Government Reimbursed Properties would be lower than 9.00%, or (3) eliminate such Financial Covenant set forth in Section 10.9(c) from this Agreement unless (x) such Financial Covenant is replaced with a Financial Covenant prohibiting the ratio of Total Asset Value (but computed solely for unencumbered assets of the Company and its Subsidiaries) to Unsecured Debt, or a formulation for such replacement Financial Covenant which is substantially similar thereto, from being less than 1.50 to 1.00 as of the last day of each Fiscal Quarter of the Company, (y) a customary priority debt covenant satisfactory to the Required Holders is added to Section 10.9 and (z) Section 10.1 is modified in a manner consistent with such newly added priority debt covenant and reasonably satisfactory to the Required Holders, provided that if such Financial Covenant set forth in Section 10.9(c) is eliminated as provided in this clause (C)(3), then, unless such Financial Covenant is subsequently reinstated, the immediately preceding clauses (C)(1) and (C)(2) will not be applicable, (D) decrease the minimum required ratio of EBITDA for any Rolling Period to Fixed Charges for such Rolling Period as set forth in Section 10.9(d) of this Agreement to a level less than 1.50 to 1.00 (provided that such Financial Covenant shall be calculated on a basis consistent with the manner in which it was calculated on the First Amendment Effective Date) or eliminate such Financial Covenant set forth in Section 10.9(d) from this Agreement, or (E) modify any defined terms applicable to or used in the calculation of any Financial Covenant; and (iii) in the event the Bank Facility is terminated, all Financial Covenants hereunder shall be unaffected and shall remain in effect in the same manner as they existed immediately prior to such termination. For the avoidance of doubt, (i) any proposed changes to any Financial Covenant pursuant to this Section 10.10 which exceed, or are less than (as applicable), the thresholds set forth in clause (ii) above (when calculated on a basis consistent with the manner in which such Financial Covenant was calculated on the First Amendment Effective Date and not according to any other method of calculation set forth in any Modified Bank Financial Covenant adopted after the First Amendment Effective Date), shall remain unmodified and shall not become effective and (ii) if, following the First Amendment Effective Date, any Financial Covenant remains unmodified in the circumstances described in clause (i) of this sentence
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following the adoption of a Modified Bank Financial Covenant, such unmodified Financial Covenant shall continue to be calculated for purposes of Section 10.9 solely on a basis consistent with the manner in which such Financial Covenant was calculated on the First Amendment Effective Date and not according to any other method of calculation set forth in any Modified Bank Financial Covenant, and any breach of such unmodified Financial Covenant shall constitute an Event of Default, pursuant to the terms of Section 11 hereunder, notwithstanding the fact that the Company may be in compliance with such ineffective Modified Bank Financial Covenant at such time.”
1.3Section 10.2 of the Agreement is hereby deleted in its entirety and replaced as follows:
“[Reserved.]”
1.4The definition of “Permitted Acquisition” is hereby deleted in its entirety from Schedule B of the Agreement.
1.5The following new definitions are added to Schedule B of the Agreement in their proper alphabetical order, as follows:
““Cash Equivalents” means (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one (1) year from the date of acquisition thereof, (b) marketable direct obligations issued or fully guaranteed by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within one (1) year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody’s, (c) commercial paper maturing within one (1) year from the date of creation thereof and, at the time of acquisition, having a rating of at least A 1 from S&P or at least P 1 from Moody’s, (d) certificates of deposit, time deposits, overnight bank deposits or bankers’ acceptances maturing within one (1) year from the date of acquisition thereof issued by any bank organized under the laws of the United States or any state thereof or the District of Columbia having at the date of acquisition thereof combined capital and surplus of not less than $250,000,000, (e) deposit accounts maintained with (i) any bank that satisfies the criteria described in clause (d) above, or (ii) any other bank organized under the laws of the United States or any state thereof so long as the full amount maintained with any such other bank is fully insured by the Federal Deposit Insurance Corporation, (f) repurchase obligations of any commercial bank satisfying the requirements of clause (d) of this definition or recognized securities dealer having combined capital and surplus of not less than $250,000,000, having a term of not more than seven (7) days, with respect to securities satisfying the criteria in clauses (a) or (d) above, provided all such agreements require physical delivery of the securities securing such repurchase agreement, except those delivered through the Federal Reserve Book Entry System, and (g) investments in money market funds substantially all of whose assets are invested in the types of assets described in clauses (a) through (f) above.
“First Amendment Effective Date” means May 17, 2022.
“Government Reimbursed Properties” means Senior Housing Assets (other than hospitals) in respect of which 51% or more of revenues are generated from reimbursements under Medicare, Medicaid and other government programs for payment of services rendered by healthcare providers.
“Non-Government Reimbursed Properties” means Senior Housing Assets (other than hospitals) that are not Government Reimbursed Properties.
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“Other Investments” means any investment other than the following:  (a) an Investment in Cash Equivalents; (b) an investment by the Company in its Subsidiaries or by a Subsidiary in one or more of its Subsidiaries; (c) an intercompany advance made from time to time among the Company and its Subsidiaries in the ordinary course of business to finance working capital needs; (d) an investment held by the Company and its Subsidiaries as of the date hereof; (e) an investment in Unconsolidated Affiliates, Assets Under Development, or Redevelopment Assets; (f) an investment received in connection with a workout of any obligation owed to the Company or its Subsidiaries; or (g) an investment or acquisition with respect to real property or improvements on real property located in, or of a business with its primary operations in, the United States of America, which, in each case, is in an Eligible Line of Business and not a Hostile Acquisition (including, but not limited to, sale/leaseback transactions, mortgage loans, lines of credit or other financings).
“Qualified Loan” means, as of any date of determination, any mezzanine loan, mortgage loan, convertible debt or working capital loan that is held or owned by the Company or any Subsidiary (i) listed on the Officer’s Certificate delivered to the holders of the Notes on the date of this Agreement pursuant to the requirements of Section 4A(1), or (ii) thereafter, listed on Exhibit A to Schedule I of the certificate of a Senior Financial Officer after such loan’s designation by the Company as a Qualified Loan, so long as the Company shall fully comply with the requirements of Section 7.2(a) with regard to the reporting of such Qualified Loan, which loan (in the case of either the immediately preceding clause (i) or clause (ii)) meets the following criteria:
(a)100% held or owned by the Company or a Subsidiary;
(b)with respect to a mortgage loan, secured by a first or second mortgage or a first or second deed of trust on Senior Housing Assets in favor of the Company or such Subsidiary and such Senior Housing Asset is not subject to any other Lien or negative pledge (other than Permitted Liens or, solely with respect to second mortgages or second deeds of trust, a first mortgage lien or first deed of trust);
(c)the underlying Senior Housing Asset is currently in service (not under development);
(d)the underlying Senior Housing Asset is located in the United States and the loan documents pertaining to the mortgage or deed of trust are governed by the law of a state of the United States;
(e)neither the mezzanine loan, mortgage loan, convertible debt or working capital loan, nor the right to receive payments thereunder, is subject to any Lien (other than Permitted Liens) or to any negative pledge;
(f)if such mezzanine loan, mortgage loan, convertible debt or working capital loan is owned by a Subsidiary, none of the Company’s beneficial ownership interest in such Subsidiary is subject to any Lien (other than Permitted Liens or Liens in favor of the Company) or to any negative pledge;
(g)with respect to a mortgage loan, the underlying Property, based on the Company’s or its Subsidiary’s actual knowledge, is free of all material structural defects or major architectural deficiencies, material title defects, material environmental conditions or other adverse matters which, individually or collectively, materially impair the value of such Property; and
(h)the borrower, mortgagor or grantor with respect to such mezzanine loan, mortgage loan, convertible debt or working capital loan is not delinquent sixty (60) days or more in interest or principal payments due thereunder.
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“Reduced Lease Asset” means any Unencumbered Asset where any tenant of such Unencumbered Asset (i) has paid less than 100% of its minimum rental payments during the sixty (60) day period immediately preceding the applicable date of calculation and (ii) is otherwise performing all of its material obligations under its Lease.
“Unconsolidated Affiliate” means an Affiliate of the Company whose financial statements are not required to be consolidated with the financial statements of the Company in accordance with GAAP.
“Underpaid Lease Asset” means any Unencumbered Asset where any tenant of such Unencumbered Asset (i) has paid less than 90% of its minimum rental payments during the sixty (60) day period immediately preceding the applicable date of calculation and (ii) is otherwise performing all of its material obligations under its Lease.”
1.6The following existing definitions in Schedule B of the Agreement are amended and restated, as follows:
““Capitalization Rate” means (a) 8.0% for ALFs, (b) 10.0% for SNFs, (c) 7.5% for Non-Government Reimbursed Properties that are independent living facilities, (d) 10.0% for hospitals, (e) 8.0% for Non-Government Reimbursed Properties that are not independent living facilities, and (f) 10.0% for other Government Reimbursed Properties.
“EBITDA” means, for any period, determined on a consolidated basis for the Company and its Subsidiaries in accordance with GAAP, the sum of net income (or loss) for such period plus, to the extent deducted in the calculation thereof:  (i) depreciation and amortization expense; (ii) interest expense; (iii) income tax expense; (iv) extraordinary, unrealized or nonrecurring losses, including impairment charges and reserves, minus, to the extent included in the calculation thereof:  (v) funds received by the Company or a Subsidiary as rent but which are reserved for capital expenses; (vi) unrealized gains on the sale of assets; and, (vii) income tax benefits.
“Fixed Charges” means, for any period, Debt Service for such period, plus Preferred Dividends for such period, plus $400 per bed per annum for any Property on which the Lease of such Property does not require the tenant to pay for all capital expenditures.
“Property Income” means, with respect to any Unencumbered Asset, cash rents (excluding, as an abundance of caution, non-cash straight-line rent) and other cash revenues received by the Company or a Subsidiary in the ordinary course of business for such Unencumbered Asset, but excluding security deposits and prepaid rent except to the extent applied in satisfaction of tenants’ obligations for rent; provided, that for any Unencumbered Asset that (x) constituted an Underpaid Lease Asset in the twelve (12) months preceding any date of determination and (y) where the non-performing tenant has been replaced with a performing tenant, the Company or the applicable Subsidiary shall be permitted to include cash rents paid under such replacement lease on an annualized basis.
“Property NOI” means, as of any date of determination and with respect to any Unencumbered Asset, the aggregate amount of (i) Property Income for the Rolling Period (without duplication) minus (ii) Property Expenses for the Rolling Period (without duplication).
“Rolling Period” means, as of any date of determination, the four Fiscal Quarters ending on or immediately preceding such date.
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“Secured Debt” means, as of any date of determination and without duplication, the aggregate principal amount of all indebtedness outstanding of the Company and its Subsidiaries, evidenced by notes, bonds, debentures or similar instruments and capital lease obligations that are secured by a Lien.
“Senior Housing Assets” means any Properties on which the improvements consist only of one or more of the following:  (a) senior apartments; (b) independent living facilities; (c) congregate communities; (d) assisted living facilities; (e) nursing homes; (f) hospitals; (g) memory care communities, (h) medical office buildings, (i) life science properties, (j) surgical centers, (k) free standing emergency facilities and (l) other Properties primarily used for senior citizen residences or health care services, together with other improvements incidental thereto.
“Tangible Net Worth” means, as of any time of determination, total stockholders’ equity on the Company’s consolidated balance sheet as reported in its Form 10-K or 10-Q plus accumulated depreciation less all amounts appearing on the assets side of its consolidated balance sheet representing an intangible asset under GAAP.
“Total Asset Value” means, as of any date of determination, the Gross Book Value of all assets of the Company and its Subsidiaries less all amounts appearing on the assets side of its consolidated balance sheet separately identifiable as intangible assets under GAAP; provided that (A) to the extent the amount of Total Asset Value attributable to Assets Under Development exceeds 20% of Total Asset Value, such excess shall be excluded; (B) to the extent the amount of Total Asset Value attributable to Redevelopment Assets exceeds 20% of Total Asset Value, such excess shall be excluded; (C) to the extent the amount of Total Asset Value attributable to Unconsolidated Affiliates exceeds 15% of Total Asset Value, such excess shall be excluded; (D) to the extent the amount of Total Asset Value attributable to Other Investments exceeds 15% of Total Asset Value, such excess shall be excluded; and (E) to the extent the amount of Total Asset Value attributable to Assets Under Development, Redevelopment Assets, Unconsolidated Affiliates, and Other Investments in the aggregate exceed 30% of Total Asset Value, such excess shall be excluded.
“Unencumbered Asset” means, as of any date of determination, any unencumbered real Property (i) listed on the Officer’s Certificate delivered to the holders of the Notes on the date of this Agreement pursuant to the requirements of Section 4A(1), or (ii) thereafter, listed on Exhibit A to Schedule I of the certificate of a Senior Financial Officer after such Property’s designation by the Company as an Unencumbered Asset, so long as the Company shall fully comply with the requirements of Section 7.2(a) with regard to the reporting of such Unencumbered Asset, which unencumbered Property (in the case of either the immediately preceding clause (i) or clause (ii)) meets the following criteria:
(a)is 100% owned in fee simple by the Company or a Subsidiary;
(b)is currently in service (not under development) and generates cash rental income to the Company or such Subsidiary;
(c)is a Senior Housing Asset located in the United States of America;
(d)if such Property is owned by the Company, (i) neither the Company’s beneficial ownership interest in such Property nor the Property is subject to any Lien (other than Permitted Liens and Liens in favor of a collateral agent for the ratable benefit of the holders from time to time of the Notes, the Other Noteholders and the Lenders under (and as defined in) the Credit Agreement and other indebtedness (subject to compliance with Section 10.1)) or to any negative pledge other than the negative pledge set forth herein, in any Other Note Agreement or in the Credit Agreement and (ii) the Company has the unilateral right to (x) sell, transfer or otherwise dispose of such Property and (y) to create a Lien on such Property as
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security for indebtedness of the Company (other than restrictions imposed by the negative pledge set forth herein, in any Other Note Agreement or in the Credit Agreement);
(e)if such Property is owned by a Subsidiary, (i) none of the Company’s beneficial ownership interest in such Subsidiary, such Subsidiary’s beneficial ownership interest in such Property or the Property is subject to any Lien (other than Permitted Liens and Liens in favor of the Company) or to any negative pledge other than the negative pledge set forth herein, in any Other Note Agreement or in the Credit Agreement and (ii) such Subsidiary has the unilateral right to, and the Company has the unilateral right to cause such Subsidiary to, (x) sell, transfer or otherwise dispose of such Property and (y) to create a Lien on such Property as security for indebtedness of the Company or such Subsidiary (other than restrictions imposed by the negative pledge set forth herein, in any Other Note Agreement or in the Credit Agreement);
(f)such Property, based on the Company’s or the Subsidiary’s actual knowledge, is free of all material structural defects or major architectural deficiencies, material title defects, material environmental conditions or other adverse matters which, individually or collectively, materially impair the value of such Property;
(g)either the tenants of such real Property are no more than sixty (60) days in arrears on 100% of the minimum rental payments due under their applicable Leases or such Unencumbered Asset constitutes a Reduced Lease Asset; and
(h)either the tenants of such real Property are no more than sixty (60) days in arrears on 90% of the minimum rental payments due under their applicable Leases or such Unencumbered Asset constitutes both a Reduced Lease Asset and an Underpaid Lease Asset.”
“Unencumbered Asset Value” means, as of any date of determination, an amount equal to the sum of:
(a)for all Unencumbered Assets owned by the Company or a Subsidiary for more than twenty-four months prior to the date of determination (excluding Underpaid Lease Assets), the quotient of (i) the Property NOI from such Unencumbered Assets divided by (ii) the Capitalization Rate, plus
(b)for all Unencumbered Assets owned by the Company or a Subsidiary for twenty-four months or less prior to the date of determination (excluding Underpaid Lease Assets), the Gross Book Value of such Unencumbered Assets; plus
(c)for all Qualified Loans owned by the Company or a Subsidiary, the book value of such Qualified Loans as of the date of such determination; plus
(d)notwithstanding (a) and (b) above, for all Underpaid Lease Assets owned by the Company or a Subsidiary, (x) the greater of (i) the Gross Book Value of such Underpaid Lease Asset and (ii) the Property NOI from such Unencumbered Asset divided by the Capitalization Rate multiplied by (y) seventy-five percent (75%); plus
(e)notwithstanding (a) and (b) above, for any Unencumbered Asset that (x) constituted an Underpaid Lease Asset in the twelve (12) months preceding any date of determination and (y) where the non-performing tenant has been replaced with a performing tenant, the greater of (i) the Property NOI from such Unencumbered Asset divided by the Capitalization Rate; and (ii) the Gross Book Value of such Unencumbered Asset;
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provided, that to the extent the amount of Unencumbered Asset Value attributable to Qualified Loans under clause (c) hereof would exceed 30% of Unencumbered Asset Value, such excess shall be excluded; provided further, that to the extent the amount of Unencumbered Asset Value attributable to Qualified Loans that are mezzanine loans, convertible debt, working capital loans, second mortgages or second deeds of trust under clause (c) hereof would exceed 5% of Unencumbered Asset Value, such excess shall be excluded; and provided further, that to the extent the amount of Unencumbered Asset Value attributable to Unencumbered Assets that constituted Reduced Lease Assets would exceed 15% of Unencumbered Asset Value, such excess shall be excluded.  Unencumbered Asset Value attributable to any of the items listed above in this definition owned by any non-Wholly-owned Subsidiary shall be adjusted to be limited to (i) the percentage of Equity Interests in such non-Wholly-owned Subsidiary owned by the Company as of such date multiplied by (ii) the applicable Property NOI, Gross Book Value or book value.
1.7Each of the definitions of “Eligible Property NOI” and “Qualified Mortgage Loan” is deleted, and each remaining reference to a “Qualified Mortgage Loan” or “Qualified Mortgage Loans” in the Agreement (including in the Schedules and Exhibits thereto) is replaced with a reference to a “Qualified Loan” or “Qualified Loans,” as applicable.
1.8Schedule 10.2 of the Agreement is hereby deleted in its entirety.
1.9Exhibit E to the Agreement is hereby deleted in its entirety and replaced with the Exhibit E attached hereto at Annex I.
2.Limitation of Modifications.  The amendments effected in this letter agreement shall be limited precisely as written and shall not be deemed to be (a) an amendment, consent, waiver or other modification of any other terms or conditions of the Agreement or any other document related to the Agreement, or (b) a consent to any future amendment, consent, waiver or other modification.  Except as expressly set forth in this letter, the Agreement and the documents related to the Agreement shall continue in full force and effect.
3.Representations and Warranties.  The Company hereby represents and warrants as follows:  (i) No Default or Event of Default has occurred and is continuing; (ii) the Company’s execution, delivery and performance of the Agreement, as modified by this letter agreement, have been duly authorized by all necessary corporate and other action and do not and will not require any registration with, consent or approval of, or notice to or action by, any Person (including any Governmental Authority) in order to be effective and enforceable; (iii) the Agreement, as modified by this letter agreement, constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws of general application relating to or affecting the enforcement of creditors’ rights or by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); (iv) each of the representations and warranties set forth in Section 5 of the Agreement is true, correct and complete as of the date hereof (except to the extent such representations and warranties expressly relate to another date, in which case such representations and warranties are true, correct and complete as of such other date); and (v) other than an amendment fee equal to 0.05% (5 basis points) of the outstanding principal amount of the applicable notes under each Other Note Agreement, no lender under any of the Other Note Agreements is receiving any fee or other remuneration in connection with the amendments referenced in clause (iii) of Section 4 below.
4.Effectiveness.This letter agreement shall become effective on the date when (i) the holders of Notes shall have received a fully executed counterpart of this letter from the Company, (ii) the holders of Notes shall have received a corresponding fully executed amendment of each of the Other Note Agreements, (iii) each holder of a Note shall have received an amendment fee equal to 0.05% (5 basis
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points) of the outstanding principal amount of the Notes held by such holder as of the date hereof, and (iv) the Company shall have paid Winston & Strawn LLP its accrued and unpaid legal fees and expenses, to the extent such fees and expenses have been invoiced.
5.Schedule of Investments.  Attached hereto at Annex II is a schedule setting forth each investment by the Company and its Subsidiaries as of the date hereof.
6.Miscellaneous.
(a)This document may be executed in multiple counterparts, which together shall constitute a single document.  Delivery of executed counterparts of this letter agreement by secure electronic format (pdf) shall be effective as an original.
(b)This letter agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the internal laws of the State of New York, excluding choice-of-law principles of the law of such state that would permit the application of the laws of a jurisdiction other than such state.
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If you are in agreement with the foregoing, please sign a counterpart of this letter in the space indicated below and deliver it to the holders of Notes whereupon, subject to the conditions expressed herein, it shall become a binding agreement between the Company, on the one hand, and the holders of Notes, on the other hand.
Sincerely,
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The foregoing is hereby agreed to as of the date thereof.
AMERICAN GENERAL LIFE INSURANCE COMPANY THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
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By: AIG Asset Management (U.S.), LLC in regard only to $46,980,000 of the 4.26% Senior Notes due November 20, 2028 issued by LTC Properties, Inc. under the Agreement as defined in this letter agreement
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	By: 
	/s/ Bryan Eells
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	Name:
	Bryan Eells
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	Title: 
	Senior Vice President
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AMERICAN GENERAL LIFE INSURANCE COMPANY
By: Blackstone ISG-I Advisors L.L.C., pursuant to powers of attorney now and hereafter granted to it
By: Blackstone Real Estate Special Situations Advisors L.L.C., pursuant to powers of attorney now and hereafter granted to it
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	By: 
	/s/ Michael Wiebolt
	​

	Name:
	Michael Wiebolt
	​

	Title: 
	Authorized Signatory
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​
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By: Blackstone ISG-I Advisors L.L.C., pursuant to powers of attorney now and hereafter granted to it
By: Blackstone Real Estate Special Situations Advisors L.L.C., pursuant to powers of attorney now and hereafter granted to it
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	By: 
	/s/ Michael Wiebolt
	​

	Name:
	Michael Wiebolt
	​

	Title: 
	Authorized Signatory
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​
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​
	Accepted and agreed to
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	as of the date first
	​

	appearing above:
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	​
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	THE COMPANY:
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	LTC PROPERTIES, INC.

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	By:
	/s/ Wendy Simpson

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	Name:
	Wendy Simpson

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	Title:
	Chairman and Chief Executive Officer

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	​
	By: 
	/s/ Pamela J. Shelley-Kessler

	​
	Name:
	Pamela J. Shelley-Kessler

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	Title:
	Co-President, Chief Financial Officer and Corporate Secretary

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Annex I
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EXHIBIT E
[FORM OF COMPLIANCE CERTIFICATE]
[Omitted pursuant to Item 601(a)(5) of Regulation S-K.  The registrant will provide a copy to the Securities and Exchange Commission or its staff upon request.]
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Annex II

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