FORM LIMITED GUARANTEE
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.
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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 Guarantee shall affect any liability of Parent to the Guaranteed Party
or shall confer or give to any Person other than the Guaranteed Party any rights
or remedies against any Person, including the Guarantor, except as expressly
set
forth herein. Notwithstanding anything in this Limited Guarantee to the
contrary, this Limited Guarantee shall not limit the liability the Guarantor
may
have to the Guaranteed Party for fraud in the inducement in connection with
entering into this Limited Guarantee, the Merger Agreement or the transactions
contemplated thereby.
4. Subrogation.
The
Guarantor will not exercise any rights of subrogation or contribution,
reimbursement, exoneration or indemnification or any right to participate in
any
claim or remedy of the Guaranteed Party against any other Person, whether
arising by contract or operation of law (including without limitation any
such
right arising under bankruptcy or insolvency Laws) or otherwise, including,
without limitation, the right to take or receive from such Person, directly
or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right by
reason
of any payment or performance
by it
pursuant to the provisions of Section 1 hereof or the enforcement of the
Guarantor’s obligations hereunder unless and until the Guaranteed Obligations
have been paid in full.
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5. Termination.
This
Limited Guarantee shall terminate and the Guarantor shall have no further
obligation under this Limited Guarantee as of the earliest of (i) the Effective
Time, (ii) the termination of the Merger Agreement in accordance with its terms
by mutual consent of the parties or under circumstances in which Parent and
Merger Sub would not be obligated to make any payments under Section 8.3(c)
of
the Merger Agreement or otherwise pursuant to the Merger Agreement; (iii) three
months after the termination of the Merger Agreement in accordance with its
terms; and (iv) the second year anniversary of the date hereof. In the event
that the Guaranteed Party or any Subsidiaries of the Guaranteed Party asserts
in
any litigation relating to this Limited Guarantee that the provisions
of Section 1 hereof limiting the Guarantor’s liability to the Maximum Amount or
the
provisions of Section 3 hereof are illegal, invalid or unenforceable, in whole
or in part, or asserts
any theory of liability against the Guarantor or any of its Affiliates with
respect to the transactions contemplated by the Merger Agreement other than
liability of the Guarantor under this Limited Guarantee (as limited by the
provisions of Section 1),
the
obligations of the Guarantor under this Limited Guarantee shall terminate
forthwith and shall thereupon be null and void.
6. Continuing
Guarantee.
Except
to the extent terminated pursuant to the provisions of Section 5 hereof, this
Limited Guarantee is a continuing one and shall remain in full force and effect
until the indefeasible payment and satisfaction in full of the Guaranteed
Obligations, shall be binding upon the Guarantor, its successors and assigns,
and shall inure to the benefit of, and be enforceable by, the Guaranteed Party
and its successors, transferees and assigns. All obligations to which this
Limited Guarantee applies or may apply under the terms hereof shall be
conclusively presumed to have been created in reliance hereon.
7. Entire
Agreement.
This
Limited Guarantee constitutes the entire agreement with respect to the subject
matter hereof and supersedes any and all prior discussions, negotiations,
proposals, undertakings, understandings and agreements, whether written or
oral,
among Parent and
the
Guarantor or any of their Affiliates, on the one hand, and the Guaranteed Party
or any of its Affiliates,
on the
other hand, except for the Merger Agreement and the Confidentiality Agreement
dated February 16, 2006.
8. Amendments
and Waivers.
No
amendment or waiver of any provision of this Limited Guarantee will be valid
and
binding unless it is in writing and signed, in the case of an amendment, by
the
Guarantor and the Guaranteed Party or, in the case of waiver, by the party
against whom the waiver is to be effective. No waiver by any party of any breach
or violation of, or default under, this Limited Guarantee, whether intentional
or not, will be deemed to extend to any prior or subsequent breach, violation
or
default hereunder or affect in any way any rights arising by virtue of any
prior
or subsequent such occurrence. No delay or omission on the part of any party
in
exercising any right, power or remedy under this Limited Guarantee will operate
as a waiver thereof.
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9. Counterparts.
This
Limited Guarantee may be executed in any number of counterparts, each of which
will be deemed an original, but all of which together will constitute but one
and the same instrument. This Limited Guarantee will become effective when
duly
executed by each party hereto.
10. Notices.
All
notices, requests, demands, claims and other communications required
or permitted to be delivered, given or otherwise provided under this Limited
Guarantee
must be
in writing and must be delivered, given or otherwise provided:
(a) by
hand
(in which case, it will be effective
upon
delivery);
(b) by
facsimile (in which case, it will be effective upon receipt of confirmation of
good
transmission); or
(c) by
overnight delivery by a nationally recognized courier service (in which
case,
it
will be effective
on
the
next business day after
being
deposited with such courier service; in
each
case, to the address (or facsimile number) listed below (or to such other
address or facsimile number as a party may designate by notice to the other
parties):
If
to the
Guarantor, to it at:
[Fremont
Partners III, L.P.]
[Fremont
Partners III Side-by-Side, L.P.]
[TPG
Partners V, L.P.]
[address]
Attention:
[ ]
Facsimile
number: [____]
with
copies to:
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇ ▇. ▇▇▇▇, Esq.
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Skadden,
Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇
▇.
▇▇▇▇, Esq.
▇▇▇▇
▇.
▇▇▇▇, Esq.
Facsimile:
(▇▇▇)
▇▇▇-▇▇▇▇
If
to the
Guaranteed Party, to it at:
5
Direct
General Corporation
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇
▇.
▇▇▇▇▇, President
Fax
Number: (▇▇▇)
▇▇▇-▇▇▇▇
with
copies to:
Direct
General Corporation
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇
▇.
▇▇▇▇▇▇, Esq.
Fax
Number: (▇▇▇)
▇▇▇-▇▇▇▇
and
Baker,
Donelson, Bearman, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, PC
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Esq.
Fax
Number: (▇▇▇)
▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇
& ▇▇▇▇▇▇▇ LLP
▇▇
▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, Esq.
Fax
Number: (▇▇▇)
▇▇▇-▇▇▇▇
11. Governing
Law.
This
Limited Guarantee, the rights of the parties and all actions
arising
in whole or part under or in connection herewith will be governed by and
construed in accordance with the laws of the State of Delaware.
12. Jurisdiction;
Venue; Waiver of Service of Process.
(a) Jurisdiction.
Each
party to this Limited Guarantee, by its execution hereof, (i)
hereby irrevocably submits to the exclusive jurisdiction of the state courts
of
the State
of
Delaware for the purpose of any action between the parties arising in whole
or
in part under or in connection with this Limited Guarantee, (ii) hereby waives
to the extent not prohibited by applicable
Law, and agrees not to assert, by way of motion, as a defense or otherwise,
in
any such
action,
any claim that it is not subject personally to the jurisdiction of the
above-named courts, that
its
property is exempt or immune from attachment or execution, that any such action
brought
in one
of the above-named courts should be dismissed on grounds of forum non conveniens,
should
be
transferred or removed to any court other than one of the above-named courts,
or
should be stayed by reason of the pendency of some other proceeding in any
other
court other than one of the above-named courts, or that this Limited Guarantee
or the subject matter hereof may
not
be enforced in or by such court and (iii) hereby agrees not to commence any
such
action
other
than before one of the above-named courts. Notwithstanding the previous
sentence, a party may
commence any action in a court other than the above-named courts solely for
the
purpose of
enforcing an order or judgment issued by one of the above-named
courts.
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(b) Venue.
Each
party agrees that for any action between the parties arising in whole or in
part
under or in connection with this Limited Guarantee, such party will bring
actions only in the State of Delaware.
(c) Service
of Process.
Each
party hereby (i) consents to service of process in any action between the
parties arising in whole or in part under or in connection with this Limited
Guarantee in any manner permitted by Delaware law, (ii) agrees that service
of
process made in accordance with clause (i) or made by registered or certified
mail,
return receipt requested, at its address specified
pursuant
to Section 10, will constitute good and valid service of process in any such
action and (iii) waives and agrees not to assert (by way of motion, as a
defense, or otherwise) in any such action any claim that service of process
made
in accordance with clause (i) or (ii) does not constitute good and valid service
of process.
13. Representations
and Warranties.
The
Guarantor hereby represents and warrants to the Guaranteed Party that
(a) it has all limited partnership power and authority to execute, deliver
and perform this Limited Guarantee; (b) the execution, delivery and
performance of this Limited Guarantee by the Guarantor has been duly and validly
authorized and approved by all necessary limited partnership action, and no
other proceedings or actions on the part of the undersigned are necessary
therefor; (c) this Limited Guarantee has been duly and validly executed and
delivered by it and constitutes a valid and legally binding obligation of it,
enforceable against the undersigned in accordance with its terms, subject to
(i)
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting creditors’ rights generally, and (ii)
general equitable principles (whether considered in a proceeding in equity
or at
law); (d) the execution, delivery and performance by the undersigned of
this Limited Guarantee do not and will not (i) violate the organizational
documents of the undersigned, (ii) violate any applicable Law or judgment,
order or decree of any Governmental Authority or (iii) result in any violation
of, or default (with or without notice or lapse of time, or both) under, or
give
rise to a right of termination, cancellation or acceleration of any obligation
or to the loss of any benefit under, any contract to which the Guarantor is
a
party; and (e) the Guarantor has the financial capacity to pay and perform
its
obligations under this Limited Guarantee, and all funds necessary for the
Guarantor to fulfill its Guaranteed Obligations under this Limited Guarantee
shall be available to the Guarantor for so long as this Limited Guarantee shall
remain in effect in accordance with Section 6 hereof.
14. No
Assignment.
Neither
the Guarantor nor the Guaranteed Party may assign its rights, interests or
obligations hereunder to any other Person (except by operation of law) without
the prior written consent of the Guaranteed Party (in the case of an assignment
by the Guarantor) or the Guarantor (in the case of an assignment by the
Guaranteed Party), except that if a portion of the Guarantor’s commitment under
the Equity Commitment Letter is assigned in accordance with the terms thereof,
then a corresponding portion of its Obligations hereunder may be assigned to
the
same assignee; provided
that any
such assignment shall not relieve the Guarantor of its obligations
hereunder.
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15. Waiver
of Jury Trial.
TO
THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, THE PARTIES
HEREBY WAIVE, AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS PLAINTIFF,
DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY ACTION ARISING IN
WHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS LIMITED GUARANTEE OR ANY
OF
THE TRANSACTIONS CONTEMPLATED HEREBY, WHETHER NOW EXISTING OR HEREAFTER ARISING,
AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. THE PARTIES AGREE THAT
ANY
OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE
OF
THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY
TO WAIVE ITS RIGHT TO TRIAL BY JURY IN ANY PROCEEDING WHATSOEVER BETWEEN THEM
RELATING TO THIS LIMITED GUARANTEE OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY AND THAT ANY SUCH PROCEEDING WILL INSTEAD BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
16. Severability.
Any
term or provision of this Limited Guarantee that is invalid or unenforceable
in
any situation in any jurisdiction will not affect
the
validity or enforceability of the remaining terms and provisions hereof or
the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction; provided,
however,
that
this Limited Guarantee may not be enforced without giving effect to the
limitation of the amount payable hereunder to the Maximum Amount provided in
Section 1 hereof and to the provisions of Sections 3 and 5 hereof. No party
hereto shall assert, and each party shall cause its respective Affiliates not
to
assert, that this Limited Guarantee or any part hereof is invalid, illegal
or
unenforceable.
17. Headings.
The
headings contained in this Limited Guarantee are for convenience purposes only
and will not in any way affect the meaning or interpretation
hereof.
[Remainder
of page intentionally left blank]
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IN
WITNESS WHEREOF, the undersigned have executed and delivered this Limited
Guarantee as of the date first written above.
GUARANTOR: [FREMONT
PARTNERS III, L.P.]
[FREMONT
PARTNERS III SIDE-BY-SIDE, L.P.]
[TPG PARTNERS V, L.P.]
By: [ ],
its
[general partner][managing member]
By:___________________________________
Name:
Title:
GUARANTEED
PARTY: DIRECT
GENERAL CORPORATION
By:___________________________________
Name:
Title: