EXHIBIT 3
XXXXXXXXXX CAPITAL PARTNERS, LLC
0000 00XX XXXXXX, XXXXX 0000
XXXXX XXXXXX, XXXXXXXXXX 00000
As of September 1, 2004
General Motors Trust Company,
as Trustee for GMAM Investment Funds Trust II
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sir/Madam:
This letter agreement will confirm our discussions and set forth the
terms of the agreement (the "Agreement") between General Motors Trust Company,
as Trustee for GMAM Investment Funds Trust II (the "Purchaser"), Xxxxxxxxxx
Capital Partners, LLC ("TCP"), Special Value Expansion Fund, LLC (the "Fund")
and, solely for purposes of the third sentence of paragraph 6 below, General
Motors Investment Management Corporation ("GMIMCO"), in connection with an
investment in common shares (the "Common Shares") of the Fund by the Purchaser.
1. TCP Duties and Obligations. TCP agrees to use its reasonable best efforts
to operate the Fund in conformance with the Investment Company Act of 1940
and the applicable rules promulgated thereunder (the "1940 Act").
2. TCP Investment. TCP and/or its affiliates will commit to invest $500,000 in
the Fund prior to the date hereof.
3. Directors. Subject to and to the extent permitted by applicable law, if any
Director sitting on the Board of Directors of the Fund is an affiliate of
TCP (including, for the avoidance of doubt, Xxxxxxx X. Xxxxxxxxxx), each
such Director shall be designated as a Director to be elected by the
holders of the preferred shares of the Fund, to the extent the 1940 Act
requires the holders of preferred shares to have the right to elect
Directors of the Fund.
General Motors Trust Company,
as Trustee for GMAM Investment Funds Trust II
September 1, 2004
Page 2
4. Transfers. Notwithstanding any provision of the Subscription Agreement
relating to the Purchaser's commitment to purchase Common Shares (the
"Subscription Agreement") or the Amended and Restated Operating Agreement
of the Fund (the "Operating Agreement") to the contrary, the Purchaser and
any transferee permitted hereunder may at any time and from time to time
(i) assign all or a portion of its rights and obligations under the
Subscription Agreement to any of the Purchaser's affiliates (each, a "GMAM
Affiliate"), to a successor trust or a successor trustee (together with a
GMAM Affiliate, a "Permitted Transferee"), (ii) transfer all or a portion
of its Common Shares to any Permitted Transferee, (iii) assign all or a
portion of its rights and obligations under the Operating Agreement
(including its obligations with respect to Capital Contributions (as
defined in the Operating Agreement) pursuant to Section 7 of the Operating
Agreement) to any Permitted Transferee, and (iv) assign all or a portion of
its rights and obligations under this Agreement to any Permitted
Transferee, in each case in accordance with the applicable provisions of
Section 11 of the Operating Agreement; provided, that (x) the condition set
forth in Section 11.2(a)(i) of the Operating Agreement need not be
satisfied, (y) the assignee or transferee has the financial capacity to
fund any remaining Capital Contributions required to be made by it and (z)
the assignee or transferee acknowledges that it is bound by the Operating
Agreement as modified by this letter. A Permitted Transferee will become a
Substituted Member (as defined in the Operating Agreement) without Fund
consent following any transfer of Common Shares to such Permitted
Transferee pursuant to the terms of this paragraph 4.
5. Offering Memorandum. TCP represents to the Purchaser that the final Private
Placement Memorandum relating to the offering of the Common Shares does
not, as of the date hereof, contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
6. Investment Committee. At the request of the Purchaser, one representative
designated by the Purchaser will be entitled to advance notice of, and to
attend as an observer (in person or by telephone) of, all meetings of the
Investment Committee for the Fund (as described in the Offering Memorandum
relating to the Common Shares). Such representative shall be concurrently
provided with any information, documents and reports provided to members of
the Investment Committee that such representative shall request, but shall
not be a member of the Investment Committee and shall not have the right to
vote with respect to any matter that comes before the Investment Committee.
GMIMCO acknowledges, and shall cause such individual to acknowledge, to the
Fund that (i) any such information is confidential and shall not be
disclosed to any other person, including any other affiliated person
(including individuals) of the Purchaser or a GMAM Affiliate, or used by
such individual for any purpose other than monitoring the Purchaser's
General Motors Trust Company,
as Trustee for GMAM Investment Funds Trust II
September 1, 2004
Page 3
investment in the Fund and (ii) GMIMCO and such individual are subject to
any confidentiality agreements entered into by TCP or the Fund. The rights
granted to the Purchaser in this paragraph are subject to applicable law
and regulatory developments, and may be revoked in part or in total at the
option of the Fund or TCP if either of such entities reasonably determines
that the revocation of such rights is necessary or appropriate in order for
the Fund or TCP to comply with applicable law and/or regulatory
developments thereunder; provided, however, that in such case the Fund will
work with the Purchaser to give to a representative thereof access to
similar information in a manner that is not in violation of applicable law.
In addition, for so long as any representative of the Purchaser is
designated to be able to receive notice of and attend meetings of the
Investment Committee for the Fund as provided for in this paragraph, any
such person agrees to be treated as an "access person" under the
Consolidated Code of Ethics of the Fund, Special Value Opportunities Fund,
LLC and TCP (the "Code of Ethics") to the same extent as Directors of the
Fund who are not interested persons of the Fund or TCP and to provide to
the Fund a duplicate of all reports provided by such person to GMIMCO under
GMIMCO's code of ethics; provided that such person shall no longer be
considered an "access person" under the Code of Ethics, and shall not be
obligated to comply with the provisions thereof or the foregoing additional
reporting requirement, after the six- month period beginning on the date
that such person ceases to be so designated.
7. Fund Commitments. TCP agrees that (i) there shall not be any Common Share
investor (other than the Purchaser and TCP and/or its affiliates) with a
Common Share capital commitment to the Fund of greater than $300,000, (ii)
the Fund will only accept Common Share capital commitments in an amount not
to exceed $300 million and (iii) the Purchaser will be allocated a portion
of the $300 million in Common Share capital commitments to be accepted by
the Fund such that the Purchaser's Common Share capital commitment will
equal $300 million less (x) TCP's (and/or its affiliates') $500,000 Common
Share capital commitment and (y) the total of all Common Share capital
commitments made by other investors in the Fund, such amount not to exceed
$5,000,000.
8. Distribution Undertaking. The Fund will use reasonable best efforts to
avoid any imposition of tax under Section 541 of the Internal Revenue Code
of 1986, as amended.
9. No Permanent Establishment. The Fund shall not open or maintain an office
in any jurisdiction outside the United States without obtaining the written
opinion of reputable local counsel that such office will not cause the
Purchaser, solely as a result of the Purchaser's holding of Common Shares,
to be required to either (i) file income tax returns in such jurisdiction
or (ii) pay tax in such jurisdiction with respect to the Purchaser's income
General Motors Trust Company,
as Trustee for GMAM Investment Funds Trust II
September 1, 2004
Page 4
other than income from the Fund. The Fund shall also obtain a similar
written opinion prior to the Fund's making an investment in any entity
organized or operating in a jurisdiction that would, in the opinion of the
Fund or its counsel, treat the Fund as a flow-through or fiscally
transparent entity for purposes of its income tax laws.
10. Corporate Taxation. The Fund has elected, or will elect, effective as of
the date hereof, pursuant to Treasury Regulation Section 301.7701-3(c), to
be classified as an association taxable as a corporation for U.S. federal
tax purposes.
11. Conflicts. This Agreement supplements the Operating Agreement and the
Subscription Agreement, and to the extent of any conflict between such
documents and this Agreement, the terms hereof shall control. In all other
respects, the terms of the Operating Agreement and/or the Subscription
Agreement shall control.
12. Entire Agreement. Subject to the provisions of Section 11 above, this
Agreement represents the entire agreement between TCP, the Fund and the
Purchaser with respect to the matters contained herein and supercedes all
prior arrangements and discussions between TCP, the Fund and the Purchaser
with respect to such matters.
General Motors Trust Company,
as Trustee for GMAM Investment Funds Trust II
September 1, 2004
Page 5
Very truly yours,
XXXXXXXXXX CAPITAL PARTNERS, LLC
By: /s/ Xxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Managing Partner
SPECIAL VALUE EXPANSION FUND, LLC
By: /s/ Xxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Secretary
General Motors Trust Company,
as Trustee for GMAM Investment Funds Trust II
September 1, 2004
Page 6
Accepted and Agreed to as of September 1, 2004
General Motors Trust Company,
as Trustee for GMAM Investment Funds Trust II,
solely for the benefit of Pool GFIP-103*
By: /s/ Duen-Xx Xxx
---------------------------------
Name: Duen-Li Xxxx Xxx
Title: Managing Director
Accepted and Agreed to as of September 1, 2004
General Motors Investment Management Corporation, solely for purposes of the
third sentence of paragraph 6 hereof
By: /s/ Duen-Xx Xxx
---------------------------------
Name: Duen-Li Xxxx Xxx
Title: Managing Director
* TCP and the Fund acknowledge and agree that in the event of any claim
whatsoever or howsoever made by TCP or the Fund against General Motors Trust
Company, as Trustee for GMAM Investment Funds Trust II ("GM") in connection with
GM's investment in the Fund, such parties' recourse to GM shall be limited and
attributable solely to the assets of pool GFIP-103 and upon exhaustion of such
assets, such party shall have no further recourse against GM; provided, however,
that GM confirms that it will not exhaust the assets of pool GFIP-103 solely to
avoid its obligations to TCP or the Fund or to avoid any liability it might have
to TCP or the Fund in connection with such pool's investment in the Fund.
Furthermore, TCP and the Fund acknowledge and agree that any and all benefits
accruing to GM in connection with GM's investment in the Fund shall inure solely
to pool GFIP-103, and not to GM generally.
