XXXXXXXXXX CAPITAL PARTNERS, LLC
0000 00XX XXXXXX, XXXXX 0000
XXXXX XXXXXX, XXXXXXXXXX 00000
As of October __, 2006
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"), Xxxxxxxxxx Opportunities Fund V, 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.
This letter agreement shall be governed by and enforced in accordance with the
laws of the State of New York applicable to agreements made and to be performed
wholly within that jurisdiction.
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, prior to the date
hereof, commit to invest at least $20 million in Common Shares of the
Fund .
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) and if the Fund issues any preferred stock, each such Director
shall be designated as a Director to be elected by the holders of the
General Motors Trust Company,
as Trustee for GMAM Investment Funds Trust II
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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.
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
Private Placement Memorandum, attached hereto as Exhibit A as supplemented
by a supplement thereto dated October 4, 2006 (the "Offering 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 representa tive
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
General Motors Trust Company,
as Trustee for GMAM Investment Funds Trust II
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Page 3
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
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, Special Value Expansion Fund, LLC, Special Value Continuation Fund,
LLC, Special Value Continuation Partners, LP 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. Additional Funds. TCP agrees that neither it nor its affiliates will
establish another investment fund or open an additional account for a
client which, in either case, primarily utilizes the same strategies as
the Fund until the Fund's drawdown period shall have ended.
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 other
General Motors Trust Company,
as Trustee for GMAM Investment Funds Trust II
----------------------
Page 4
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. Reports. The Fund will report to the Purchaser the performance and
net asset value of the Common Shares on at least a monthly basis.
12. Distributions. In the event of the liquidation of the Fund, the Fund
will not make any non pro rata distribution of a security in kind unless
both (i) the Board of Directors of the Fund has approved such distribution
as being fair and reasonable to holders of Common Shares and (ii) either
no holder of Common Shares, including the Purchaser, whose Capital
Commitment to the Fund exceeded $10 million shall have received less than
75% or more than 125% of such holder's pro rata share of such distribution
or at least two-thirds of the Common Shares shall have approved such
distribution.
13. Remedies on Default. Solely because of inconsistencies between the
requirements of the Employee Retirement Income Security Act of 1974 and
the provisions of Section 7.1(d)(iii), (iv) and (v), the Fund will not
seek to enforce Section 7.1(d)(iii), (iv) or (v) against the Purchaser in
the event of a default by the Purchaser in satisfying its Capital
Commitment.
14. Other Side Letters. Each of the Fund and TCP agrees that if it
provides to another investor in the Fund variations from or benefits in
addition to the terms of the Operating Agreement, the Offering Memorandum
or the Investment Management Agreement that in the aggregate could
reasonably be construed to be more favorable than those provided by it to
the Purchaser under this Agreement and that would be applicable to the
particular circumstances and status of the Purchaser, the Fund and/or TCP,
as applicable, will offer such variations and benefits to the Purchaser.
15. Litigation. To the best of TCP's knowledge, there is not pending or
threatened any action, suit, proceeding, inquiry or investigation, to
which TCP is a party, or to which the property of TCP is subject, before
or brought by any court or governmental agency or body, domestic or
foreign, which might reasonably be expected to result in a material
adverse change to the financial condition or earnings of TCP or to
materially and adversely affect the properties or assets of TCP or to
materially impair or adversely affect the ability of TCP to function as an
investment adviser or perform its obligations under the Operating
Agreement
General Motors Trust Company,
as Trustee for GMAM Investment Funds Trust II
----------------------
Page 5
and the Investment Management Agreement. To the best of TCP's knowledge,
there is not pending or threatened any action, suit, proceeding, inquiry
or investigation to which the Fund is a party or to which the property of
the Fund is subject, before, or brought by any court or governmental
agency or body, domestic or foreign.
16. Other Representations, Warranties and Covenants.
a. The Fund will comply with the undertakings and
agreements contained in the Operating Agreement and
subscription agreements as they relate to the offer,
sale and transfer of Common Shares.
b. TCP represents that each purchaser of the Common Shares
has received, or will receive, a copy of the Offering
Memorandum prior to the confirmation of the sale of the
Common Shares.
17. Implementation of Partnership. The Purchaser hereby approves the
investment management agreement between Xxxxxxxxxx Opportunities Partners
V, LP and TCP and the co-management agreement among such partnership, TCP
and Babson Capital Management LLC and the related terms of performance
compensation set forth in the Partnership Agreement of the partnership,
all in the form provided to the Purchaser, on the understanding that the
Fund will utilize the partnership only if use of the Series S Preferred
Share does not appear to the Investment Manager to be viable. In
connection with the foregoing, the Fund and TCP represent and warrant that
in the event the Fund utilizes the partnership to hold the assets of the
Fund (as opposed to the Fund holding the assets and issuing the Series S
Preferred Share ("Alternative 1")), the Purchaser will have the same
economic terms and effectively equivalent substantive rights as the
Investor would have had if Alternative 1 had been utilized and such
structure will not, except to the extent of the Purchaser's share of
incremental administrative expense, adversely impact the Purchaser. In
particular TCP represents and warrants that the profit allocation payable
to it or an affiliate under the Partnership Agreement will not exceed the
distributions that would be payable to it or such affiliate in respect of
the Series S Preferred Share under Alternative 1.
18. 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.
19. Entire Agreement. Subject to the provisions of Section 18 above,
this Agreement represents the entire agreement between TCP, the Fund and
the Purchaser with respect to the
General Motors Trust Company,
as Trustee for GMAM Investment Funds Trust II
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Page 6
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
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Page 7
Very truly yours,
XXXXXXXXXX CAPITAL PARTNERS, LLC
By:
--------------------------------
Name:
Title:
XXXXXXXXXX OPPORTUNITIES FUND V, LLC
By:
--------------------------------
Name:
Title:
General Motors Trust Company,
as Trustee for GMAM Investment Funds Trust II
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Page 8
Accepted and Agreed to as of October __, 2006
General Motors Trust Company,
as Trustee for GMAM Investment Funds Trust II,
solely for the benefit of Pool GFIP-103*
By:
--------------------------------
Name:
Title:
Accepted and Agreed to as of October __, 2006
General Motors Investment Management Corporation,
solely for purposes of the third sentence of paragraph 6 hereof
By:
--------------------------------
Name:
Title:
* 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.
