Exhibit 2.2
DAMAGES CONTRIBUTION
AGREEMENT
Damages Contribution Agreement,
dated as of November 16, 2006 (this “ Damages
Contribution Agreement ”), between Ripplewood Partners
II, L.P., a Delaware limited partnership (the “ Loss
Payor ”), and The Reader’s Digest Association,
Inc., a Delaware corporation (the “ Loss Payee
”). Any terms used but not defined herein have the meaning
assigned to those terms in the Merger Agreement (as defined
below).
1. Damages Contribution
Agreement . To induce the Loss Payee to enter into an Agreement
and Plan of Merger, dated as of November 16, 2006 (as amended,
amended and restated, supplemented or otherwise modified from time
to time in accordance with its terms, the “ Merger
Agreement ”), by and among Doctor Acquisition Holding
Co., a Delaware corporation (“ Parent ”), and
Doctor Acquisition Co., a Delaware corporation (“ Sub
” and, together with Parent, the “ Merger Cos
”), and the Loss Payee, pursuant to which Sub will merge with
and into the Loss Payee, the Loss Payor hereby unconditionally and
irrevocably commits to the Loss Payee, on the terms and conditions
set forth herein, to make an equity contribution to Parent in cash
to the extent of the payment obligations of the Merger Cos under
the Merger Agreement, including any Parent obligation to pay
liquidated damages for a breach by Parent or Sub of the Merger
Agreement pursuant to Section 6.07(d) of the Merger Agreement
(the “ Obligations ”); provided , that
the maximum amount payable by the Loss Payor hereunder shall not
exceed $25,000,000 plus all the Company’s out-of-pocket
expenses, including attorneys’ fees, actually incurred in
connection with the Merger Agreement, the Merger and the other
Transactions in an aggregate amount not to exceed $5,000,000 (the
“ Cap ”; the Obligations, as limited by the Cap,
the “ Covered Obligations ”), it being
understood that the Loss Payee will not seek to enforce this
Damages Contribution Agreement without giving effect to the Cap. It
is understood and agreed that, in lieu of requiring the Loss Payor
to make an equity contribution to Parent in cash, at the election
of the Loss Payee in its sole discretion, the Loss Payor will be
required to pay directly to the Loss Payee the full amount of the
Covered Obligations that is due and payable hereunder, in which
event such payments shall be credited and applied towards the
Covered Obligations and the obligations of the Loss Payor under
this Damages Contribution Agreement (and of the Merger Cos under
the Merger Agreement) shall be deemed satisfied to the extent of
such payments. This Damages Contribution Agreement is an
unconditional promise to contribute or to pay up to a specified
amount on the terms and conditions set forth herein and is not a
guarantee of payment or collection.
2. Nature of Damages Contribution
Agreement . The Loss Payee shall not be obligated to file any
claim relating to the Obligations in the event that any Merger Co
becomes subject to a bankruptcy, reorganization or similar
proceeding, and the failure of the Loss Payee to so file shall not
affect the Loss Payor’s obligations hereunder. In the event
that any payment to the Loss Payee in respect of the Obligations is
rescinded or must otherwise be returned for any reason whatsoever,
the Loss Payor shall remain liable hereunder with respect to its
Covered Obligations as if such payment had not been made;
provided , however , that the aggregate payment
hereunder by Loss Payor to any person shall not in any event exceed
the Cap.
3. Changes in Obligations,
Certain Waivers . The Loss Payor agrees that the Loss Payee may
at any time and from time to time, without notice to or further
consent of the Loss Payor, extend the time of payment of any of the
Obligations, and may also make any
agreement with a Merger Co for the extension,
renewal, payment, compromise, discharge or release thereof, in
whole or in part, or for any modification of the terms thereof or
of any agreement between the Loss Payee and any Merger Co without
in any way impairing or affecting the Loss Payor’s
obligations under this Damages Contribution Agreement. The Loss
Payor agrees that the obligations of the Loss Payor hereunder shall
not be released or discharged, in whole or in part, or otherwise
affected by (a) the failure of the Loss Payee to assert any
claim or demand or to enforce any right or remedy against any
Merger Co or any other person interested in the transactions
contemplated by the Merger Agreement; (b) any change in the
time, place or manner of payment of any of the Obligations or any
rescission, waiver, compromise, consolidation or other amendment or
modification of any of the terms or provisions of the Merger
Agreement or any other agreement evidencing, securing or otherwise
executed in connection with any of the Obligations (including the
Equity Commitment Agreements); (c) the addition, substitution
or release of any entity or other person interested in the
transactions contemplated by the Merger Agreement; (d) any
change in the corporate existence, structure or ownership of any
Merger Co or any other person interested in the transactions
contemplated by the Merger Agreement; (e) any insolvency,
bankruptcy, reorganization or other similar proceeding affecting
any Merger Co or any other person interested in the transactions
contemplated by the Merger Agreement; (f) the existence of any
claim, set-off or other right which the Loss Payor may have at any
time against any Merger Co or the Loss Payee, whether in connection
with the Obligations or otherwise; or (g) the adequacy of any
other means the Loss Payee may have of obtaining payment of any of
the Obligations. To the fullest extent permitted by law, the Loss
Payor hereby expressly waives any and all rights or defenses
arising by reason of any law which would otherwise require any
election of remedies by the Loss Payee. The Loss Payor waives
promptness, diligence, notice of the acceptance of this Damages
Contribution Agreement and of the Obligations, presentment, demand
for payment, notice of non-performance, default, dishonor and
protest, notice of any Obligations incurred and all other notices
of any kind (except for notices to be provided to Parent and its
counsel in accordance with Sections 8.01(f) and 9.02 of the
Merger Agreement), all defenses which may be available by virtue of
any valuation, stay, moratorium law or other similar law now or
hereafter in effect, any right to require the marshalling of assets
of any Merger Co or any other person interested in the transactions
contemplated by the Merger Agreement, and all suretyship defenses
generally (other than fraud or willful misconduct by the Loss Payee
or any of its subsidiaries or Controlled Affiliates, defenses to
the payment of the Obligations that are available to a Merger Co
under the Merger Agreement or breach by the Loss Payee of this
Damages Contribution Agreement). The Loss Payor acknowledges that
it will receive substantial direct and indirect benefits from the
transactions contemplated by the Merger Agreement and that the
waivers set forth in this Damages Contribution Agreement are
knowingly made in contemplation of such benefits.
For purposes of this Damages
Contribution Agreement, “ Controlled Affiliate ”
of any person means any affiliate that such person directly or
indirectly controls (within the meaning of Rule 12b-2 of the
Exchange Act) and, for purposes of this Damages Contribution
Agreement, includes the directors and officers of such
person.
The Loss Payor hereby
unconditionally and irrevocably agrees not to exercise any rights
that it may now have or hereafter acquire against Parent or Sub
that arise from the existence, payment, performance, or enforcement
of the Loss Payor’s Covered Obligations under or in respect
of this Damages Contribution Agreement or any other
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agreement in connection therewith, including any
right of subrogation, reimbursement
