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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.
2
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. Nothing set forth in
this Limited
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