FORM LIMITED
GUARANTEE
Limited Guarantee, dated as of December 4, 2006
(this “ Limited Guarantee ”), by [INVESTOR] (the
“ Guarantor ”) in favor of DIRECT GENERAL
CORPORATION (the “ Guaranteed Party ”).
Reference is hereby made to the Agreement and Plan of Merger by and
among ELARA HOLDINGS, INC. (“ Parent ”),
ELARA MERGER CORPORATION (“ Merger Sub ”),
and the Guaranteed Party, dated as of December 5, 2006 (as the same
may be amended from time to time, the “ Merger
Agreement ”). Capitalized terms used herein but not
otherwise defined have the meanings ascribed to them in the Merger
Agreement.
1.
Limited Guarantee
. The Guarantor hereby irrevocably
and unconditionally guarantees to the Guaranteed Party, as and to
the extent provided in Section 2 below, the payment of [ ]
1 % of Parent’s obligation with respect to the
Parent Termination Fee and Parent’s obligations under Section
8.3(c) of the Merger Agreement (collectively, the “
Guaranteed Obligations ”) to the Guaranteed Party
arising under, or in connection with, the Merger Agreement;
provided that the maximum aggregate liability of the
Guarantor hereunder, other than in connection with fraud in the
inducement by the Guarantor in connection with Parent entering into
the Merger Agreement or the Guarantor entering into this Limited
Guarantee, shall not exceed $[___] 2 (the “
Maximum Amount ”), it being understood that this
Guarantee may not be enforced without giving effect to the Maximum
Amount. Other than for fraud in the inducement by the Guarantor in
connection with Parent entering into the Merger Agreement or the
Guarantor entering into this Limited Guarantee, the Guaranteed
Party hereby agrees that the Guarantor shall in no other event be
required to pay to any Person more than the Maximum Amount under,
or in respect of, or in connection with this Limited Guarantee and
the Guarantor shall not have any obligation or liability to any
Person relating to, arising out of or in connection with, this
Limited Guarantee other than as expressly set forth
herein.
2.
Terms of Limited
Guarantee .
(a) This Limited Guarantee is one of payment, not
collection nor performance other than in respect of payment
obligations of Parent under Section 8.3(c) of the Merger Agreement,
and a separate action or actions may be brought and prosecuted
against the Guarantor to enforce this Limited Guarantee,
irrespective of whether any action is brought against Parent or any
other Person or whether Parent or any other Person is joined in any
such action or actions.
(b) The liability of the Guarantor under this
Limited Guarantee shall, to the fullest extent permitted under
applicable Law, be absolute and unconditional, irrespective
of:
1 This percentage is the Investor’s pro rata
portion of the aggregate commitment as of the signing of the Merger
Agreement. Aggregate percentage in the guarantees shall total
100%.
2 This amount is equal to the pro rata portion of
the Parent Liability Cap.
(i) any release or discharge of any obligation of
Parent contained in the Merger Agreement resulting from any change
in the corporate existence, structure or ownership of Parent, or
any insolvency, bankruptcy, reorganization, liquidation or other
similar proceeding affecting Parent or any of its
assets;
(ii) any amendment or modification of the Merger
Agreement made in accordance with the terms thereof, or change in
the manner, place or terms of payment or performance, or any change
or extension of the time of payment or performance of, renewal or
alteration of, any Guaranteed Obligation, any escrow arrangement or
other security therefor, any liability incurred directly or
indirectly in respect thereof, or any amendment or waiver of or any
consent to any departure from the terms of the Merger Agreement or
the documents entered into in connection therewith, in each case,
made in accordance with the terms thereof ;
(iii) the existence of any claim, set-off or other
right that the Guarantor may have at any time against Parent or the
Guaranteed Party, whether in connection with any Guaranteed
Obligation or otherwise; or
(iv) any other act or omission that may or might in
any manner or to any extent vary the risk of the
Guarantor.
(c) The Guarantor hereby waives any and all notice
of the creation, renewal, extension or accrual of any of the
Guaranteed Obligations and notice of or proof of reliance by the
Guaranteed Party upon this Limited Guarantee or acceptance of this
Limited Guarantee. The Guaranteed Obligations, and any of them,
shall conclusively be deemed to have been created, contracted or
incurred in reliance upon this Limited Guarantee, and all dealings
between Parent or the Guarantor, on the one hand, and the
Guaranteed Party, on the other, shall likewise be conclusively
presumed to have been had or consummated in reliance upon this
Limited Guarantee. When pursuing its rights and remedies hereunder
against the Guarantor, the Guaranteed Party shall be under no
obligation to pursue such rights and remedies it may have against
Parent or any other Person for the Guaranteed Obligations or any
right of offset with respect thereto, and any failure by the
Guaranteed Party to pursue such other rights or remedies or to
collect any payments from Parent or any such other Person or to
realize upon or to exercise any such right of offset, and any
release by the Guaranteed Party of Parent or any such other Person
or any right of offset, shall not relieve the Guarantor of any
liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of Law,
of the Guaranteed Party.
(d) The Guarantor irrevocably waives acceptance
hereof, presentment, demand, protest and any notice.
(e) The Guaranteed Party shall not be obligated to
file any claim relating to any Guaranteed Obligation in the event
that Parent becomes subject to a bankruptcy, reorganization or
similar proceeding, and the failure of the Guaranteed Party to so
file shall not affect the Guarantor’s obligations hereunder.
In the event that any payment to the Guaranteed Party in respect of
any Guaranteed Obligation is rescinded or must otherwise be
returned for any reason whatsoever, the Guarantor shall remain
liable hereunder with respect to the Guaranteed Obligation as if
such payment had not been made.
3.
Sole Remedies
. The Guaranteed Party acknowledges
and agrees that the sole cash asset of Parent is cash in a
de minimis amount and that no additional funds
are expected to be contributed to Parent unless the Closing occurs.
The Guaranteed Party further agrees that it has no right of
recovery against the Guarantor, any former, current or future,
direct or indirect director, officer, employee, agent or Affiliate
of the Guarantor, any former, current or future, direct or indirect
holder of any equity interests or securities of the Guarantor
(whether such holder is a limited or general partner, member,
stockholder or otherwise), any former, current or future assignee
of the Guarantor or any former, current or future director,
officer, employee, agent, general or limited partner, manager,
member, stockholder, Affiliate, controlling Person, representative
or assignee of any of the foregoing (each such Person, a “
Related Person ”), through Parent or otherwise,
whether by or through attempted piercing of the corporate, limited
liability company or limited partnership veil, by or through a
claim by or on behalf of Parent against the Guarantor or any
Related Person, or otherwise, except for its rights against the
Guarantor under this Limited Guarantee; provided ,
however , that in the event the Guarantor (i) consolidates
with or merges with any other Person and is not the continuing or
surviving entity of such consolidation or merger or (ii) transfers
or conveys all or a substantial portion of its properties and other
assets to any Person such that the sum of the Guarantor’s
remaining net assets plus uncalled capital is less than the Maximum
Amount, then, and in each such case, the Guaranteed Party may seek
recourse, whether by the enforcement of any judgment or assessment
or by any legal or equitable proceeding (it being understood and
agreed that the Guaranteed Party shall not be entitled to specific
performance in respect of Parent’s obligations under the
Merger Agreement other than the payment obligations under Section
8.3(c) thereof) or by virtue of any statue, regulation or other
applicable Law, against such continuing or surviving entity or such
Person (in either case, a “ Successor Entity ”),
as the case may be, but only to the extent of the liability of the
Guarantor hereunder. Recourse against the Guarantor under this
Limited Guarantee shall be the sole and exclusive remedy of the
Guaranteed Party and all of its Affiliates against the Guarantor
and any Related Person (other than against Parent) in respect of
any liabilities or obligations arising under, or in connection
with, the Merger Agreement or the transactions contemplated
thereby. The Guaranteed Party hereby covenants and agrees that it
shall not institute, and shall cause its Subsidiaries not to
institute, any proceeding or bring any other claim arising under,
or in connection with, the Merger Agreement or the transactions
contemplated thereby, against the Guarantor or any Related Person
(other than against Parent), except for claims of the Guaranteed
Party against the Guarantor or a Successor Entity under this
Limited Guarantee. No
|