-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FrhOO/PNp06ZftdeRb8w6RiZFsx+b/MsyfQwi2RzDwGGbukeTq2MKXJjvHgYYw4+ NqwjaA5kYvBCQq29iD392Q== 0000950112-96-001241.txt : 19960429 0000950112-96-001241.hdr.sgml : 19960429 ACCESSION NUMBER: 0000950112-96-001241 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19960426 SROS: NONE GROUP MEMBERS: K III ACQUISITION CORP GROUP MEMBERS: K-III COMMUNICATIONS CORPORATION GROUP MEMBERS: K-III PRIME CORPORATION SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: WESTCOTT COMMUNICATIONS INC CENTRAL INDEX KEY: 0000850670 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 752110878 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-40756 FILM NUMBER: 96551116 BUSINESS ADDRESS: STREET 1: 1303 MARSH LANE CITY: CARROLLTON STATE: TX ZIP: 75006 BUSINESS PHONE: 2144174100 MAIL ADDRESS: STREET 1: 1303 MARSH LANE CITY: CARROLLTON STATE: TX ZIP: 75006 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: K III ACQUISITION CORP CENTRAL INDEX KEY: 0001012699 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 SC 14D1 1 K-III ACQUISITION CORPORATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------- WESTCOTT COMMUNICATIONS, INC. (Name of Subject Company) K-III ACQUISITION CORP. K-III PRIME CORPORATION K-III COMMUNICATIONS CORPORATION (Bidder) ------------------- COMMON STOCK, PAR VALUE $.01 PER SHARE (Title of Class of Securities) 95752F106 (CUSIP Number of Class of Securities) BEVERLY C. CHELL, ESQ. VICE CHAIRMAN, GENERAL COUNSEL AND SECRETARY K-III COMMUNICATIONS CORPORATION 745 FIFTH AVENUE NEW YORK, NEW YORK 10151 TELEPHONE: (212) 745-0100 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidder) ------------------- COPY TO: GARY I. HOROWITZ, ESQ. SIMPSON THACHER & BARTLETT 425 LEXINGTON AVENUE NEW YORK, NEW YORK 10017 TELEPHONE: (212) 455-2000 CALCULATION OF FILING FEE [CAPTION] ========================================================================================= TRANSACTION VALUATION* AMOUNT OF FILING FEE** $464,288,737.50 $92,858 =========================================================================================
* Based on the offer to purchase all of the outstanding shares of Common Stock of the Subject Company at $21.50 cash per share, 19,816,435 Shares outstanding as of March 31, 1996, 1,688,000 options outstanding as of March 31, 1996 and a maximum of 90,390 Shares that may be issued pursuant to the Subject Company's employee stock purchase plan. ** 1/50 of 1% of Transaction Valuation. / / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: Filing Party: Form or Registration No.: Date Filed: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This Tender Offer Statement on Schedule 14D-1 relates to the offer by K-III Acquisition Corp. (the "Purchaser"), a Texas corporation and a direct, wholly owned subsidiary of K-III Prime Corporation ("K-III Prime"), a Delaware corporation and a direct, wholly owned subsidiary of K-III Communications Corporation (the "Parent"), a Delaware corporation, to purchase all of the outstanding shares of Common Stock, par value $.01 per share (the "Shares"), of Westcott Communications, Inc., a Texas corporation (the "Company"), at a purchase price of $21.50 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated April 26, 1996 (the "Offer to Purchase"), a copy of which is attached hereto as Exhibit (a)(1), and in the related Letter of Transmittal, a copy of which is attached hereto as Exhibit (a)(2), (which, together with the Offer to Purchase, constitute the "Offer"). ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Westcott Communications, Inc. The information set forth in Section 7 ("Certain Information Concerning the Company") of the Offer to Purchase is incorporated herein by reference. (b) The exact title of the class of equity securities being sought in the Offer is Common Stock, par value $.01 per share, of the Company. The information set forth in the Introduction (the "Introduction") of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d) and (g) This Statement is filed by the Purchaser, K-III Prime and the Parent. The information set forth in Section 8 ("Certain Information Concerning the Purchaser, K-III Prime, the Parent and KKR Associates") of the Offer to Purchase and in Schedule I thereto is incorporated herein by reference. (e)-(f) None of the Parent, K-III Prime, the Purchaser or KKR Associates nor, to the best knowledge of the Parent, K-III Prime, the Purchaser or KKR Associates, any of the persons listed in Schedule I to the Offer to Purchase has during the last five years (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a) Since January 1, 1993, there have been no transactions which would be required to be disclosed under this Item 3(a) between any of the Purchaser, K-III Prime, the Parent or KKR Associates or, to the best knowledge of the Purchaser, K-III Prime, the Parent and KKR Associates, any of the persons listed in Schedule I to the Offer to Purchase and the Company or any of its executive officers, directors or affiliates. (b) The information set forth in the Introduction, Section 10 ("Background of the Offer; Contacts with the Company") and Section 11 ("The Merger Agreement") of the Offer to Purchase and in Exhibit (c)(1) of this Schedule 14D-1 is incorporated herein by reference. Except as set forth in the Introduction, Section 10 and Section 11 of the Offer to Purchase and in Exhibit (c)(1) of this Schedule 14D-1, since January 1, 1993, there have been no contacts, negotiations or transactions which would be required to be disclosed under this Item 3(b) between any of the Purchaser, K-III Prime, the Parent or KKR Associates or any of their respective subsidiaries or, to the best knowledge of the Purchaser, K-III Prime, the Parent and KKR Associates, any of those persons listed in Schedule I to the Offer to Purchase and the Company or its affiliates concerning a merger, consolidation or acquisition, a tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(b) The information set forth in Section 9 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(e) The information set forth in the Introduction, Section 10 ("Background of the Offer; Contacts with the Company"), Section 11 ("The Merger Agreement") and Section 12 ("Purpose of the Offer; the Merger; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. (f)-(g) The information set forth in Section 14 ("Effect of the Offer on the Market for the Shares, Stock Quotation and Exchange Act Registration") of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a)-(b) The information set forth in Section 8 ("Certain Information Concerning the Purchaser, K-III Prime, the Parent and KKR Associates"). ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the Introduction, Section 11 ("The Merger Agreement") and Section 12 ("Purpose of the Offer; the Merger; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. Except as set forth in the Introduction, Section 11 and Section 12 of the Offer to Purchase, none of the Purchaser, K-III Prime, the Parent or KKR Associates, nor, to the best knowledge of the Purchaser, K-III Prime, the Parent or KKR Associates, any of the persons listed in Schedule I to the Offer to Purchase, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company (including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies). ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the Introduction and Section 17 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth in Section 8 ("Certain Information Concerning the Purchaser, K-III Prime, the Parent and KKR Associates") of the Offer to Purchase is incorporated herein by reference. ITEM 10. ADDITIONAL INFORMATION. (a) None. 2 (b) and (c) The information set forth in the Introduction and Section 16 ("Certain Legal Matters and Regulatory Approvals") of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in Section 14 ("Effect of the Offer on the Market for the Shares, Stock Quotation and Exchange Act Registration") and Section 16 ("Certain Legal Matters and Regulatory Approvals") of the Offer to Purchase is incorporated herein by reference. (e) None. (f) The information set forth in the Offer to Purchase and the Letter of Transmittal is incorporated herein by reference. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a) (1) Offer to Purchase dated April 26, 1996. (a) (2) Letter of Transmittal. (a) (3) Notice of Guaranteed Delivery. (a) (4) Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a) (5) Letter to clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a) (6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a) (7) Summary Advertisement as published on April 26, 1996. (a) (8) Press Release issued by the Parent on April 26, 1996. (b) (1) Amended and Restated Credit Agreement, dated as of May 23, 1994 and as amended and restated as of November 17, 1994, among K-III Communications Corporation, Canadian Sailings Inc., various lending institutions and the Chase Manhattan Bank, N.A., as agent.* (c) (1) Agreement and Plan of Merger, dated as of April 22, 1996, by and among K-III Communications Corporation, K-III Prime Corporation, K-III Acquisition Corp. and Westcott Communications, Inc. (d) None. (e) Not applicable. (f) None.
- ------------ * Incorporated by reference to K-III Communications Corporation Annual Report on Form 10-K for the year ended December 31, 1994, File No. 1-11106. 3 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct. K-III COMMUNICATIONS CORPORATION By: /s/ Beverly C. Chell ------------------------ Name: Beverly C. Chell Title: Vice Chairman and Secretary K-III PRIME CORPORATION By: /s/ Beverly C. Chell ------------------------ Name: Beverly C. Chell Title: Vice Chairman and Secretary K-III ACQUISITION CORP. By: /s/ Beverly C. Chell ------------------------ Name: Beverly C. Chell Title: Senior Vice President and Secretary Date: April 26, 1996 4 EXHIBIT INDEX
EXHIBIT PAGE NO. DESCRIPTION NO. - --------- --------------------------------------------------------------------------- ---- 11(a)(1) Offer to Purchase dated April 26, 1996..................................... 11(a)(2) Letter of Transmittal...................................................... 11(a)(3) Notice of Guaranteed Delivery.............................................. 11(a)(4) Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees..................................................... 11(a)(5) Letter to clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Nominees..................................................... 11(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9...................................................... 11(a)(7) Summary Advertisement as published on April 26, 1996....................... 11(a)(8) Press Release issued by the Parent on April 26, 1996....................... 11(b) Amended and Restated Credit Agreement, dated as of May 23, 1994 and as amended and restated as of November 17, 1994, among K-III Communications Corporation, Canadian Sailings Inc., various lending institutions and the Chase Manhattan Bank, N.A., as agent.*..................................... 11(c)(1) Agreement and Plan of Merger, dated as of April 22, 1996, by and among K- III Communications Corporation, K-III Prime Corporation, K-III Acquisition Corp. and Westcott Communications, Inc....................... 11(d) None. 11(e) Not applicable. 11(f) None.
- ------------ * Incorporated by reference to K-III Communications Corporation Annual Report on Form 10-K for the year ended December 31, 1994, File No. 1-11106. EX-11.(A)(1) 2 Exhibit 11(a)(1) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF WESTCOTT COMMUNICATIONS, INC. AT $21.50 NET PER SHARE BY K-III ACQUISITION CORP. AN INDIRECT, WHOLLY OWNED SUBSIDIARY OF K-III COMMUNICATIONS CORPORATION - ------------------------------------------------------------------------------ THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MAY 23, 1996, UNLESS THE OFFER IS EXTENDED. - ------------------------------------------------------------------------------ THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THAT NUMBER OF SHARES OF COMMON STOCK WHICH, WHEN COMBINED WITH THE SHARES OF SUCH COMMON STOCK, IF ANY, OWNED BY K-III COMMUNICATIONS CORPORATION AND ITS DIRECT AND INDIRECT SUBSIDIARIES, CONSTITUTES A MAJORITY OF THE THEN OUTSTANDING SHARES ON A FULLY DILUTED BASIS (AS DEFINED HEREIN). THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE SECTIONS 1 AND 15. ------------------- THE BOARD OF DIRECTORS OF WESTCOTT COMMUNICATIONS, INC. HAS DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING EACH OF THE OFFER AND THE MERGER, ARE FAIR TO AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF WESTCOTT COMMUNICATIONS, INC. AND RECOMMENDS THAT HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES TO K-III ACQUISITION CORP. ------------------- IMPORTANT Any shareholder desiring to tender all or any portion of such shareholder's Shares (as defined herein) of Westcott Communications, Inc. should either (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal, mail or deliver the Letter of Transmittal (or such facsimile) and any other required documents to the Depositary (as defined herein), and either deliver the certificates representing the tendered Shares and any other required documents to the Depositary or tender such Shares pursuant to the procedure for book-entry transfer set forth in Section 3 or (2) request such shareholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such shareholder. Shareholders having Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if they desire to tender Shares so registered. A shareholder who desires to tender Shares and whose certificates representing such Shares are not immediately available, or who cannot comply with the procedure for book-entry transfer on a timely basis, may tender such Shares by following the procedures for guaranteed delivery set forth in Section 3. Questions and requests for assistance may be directed to Donaldson, Lufkin & Jenrette Securities Corporation (the "Dealer Manager") or to Georgeson & Company Inc. (the "Information Agent") at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may also be obtained from the Information Agent or the Dealer Manager, or from brokers, dealers, commercial banks or trust companies. ------------------- The Dealer Manager for the Offer is: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION APRIL 26, 1996 TABLE OF CONTENTS
PAGE ---- INTRODUCTION........................................................................... 1 THE TENDER OFFER....................................................................... 3 1. Terms of the Offer; Expiration Date...................................... 3 2. Acceptance for Payment and Payment for Shares............................ 4 3. Procedure for Tendering Shares........................................... 5 4. Withdrawal Rights........................................................ 8 5. Certain Federal Income Tax Consequences.................................. 9 6. Price Range of Shares; Dividends......................................... 9 7. Certain Information Concerning the Company............................... 10 8. Certain Information Concerning the Purchaser, K-III Prime, the Parent and KKR Associates..................................................... 12 9. Source and Amount of Funds............................................... 14 10. Background of the Offer; Contacts with the Company....................... 14 11. The Merger Agreement..................................................... 15 12. Purpose of the Offer; the Merger; Plans for the Company.................. 24 13. Dividends and Distributions.............................................. 25 14. Effect of the Offer on the Market for the Shares, Stock Quotation and Exchange Act Registration.............................................. 26 15. Certain Conditions of the Offer.......................................... 27 16. Certain Legal Matters and Regulatory Approvals........................... 29 17. Fees and Expenses........................................................ 31 18. Miscellaneous............................................................ 32 Schedule I Certain Information Regarding the Directors and Executive Officers of the Purchaser, K-III Prime and the Parent and the General Partners of KKR Associates
i To: The Shareholders of WESTCOTT COMMUNICATIONS, INC. INTRODUCTION K-III Acquisition Corp., a Texas corporation (the "Purchaser") and an indirect, wholly owned subsidiary of K-III Communications Corporation, a Delaware corporation (the "Parent"), hereby offers to purchase all of the outstanding shares of Common Stock, $.01 par value per share (the "Shares"), of Westcott Communications, Inc., a Texas corporation (the "Company"), at a purchase price of $21.50 per Share, net to the seller in cash without interest thereon, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"). Tendering shareholders will not be obligated to pay brokerage fees or commissions or, subject to Instruction 6 of the Letter of Transmittal, stock transfer taxes on the transfer and sale of Shares pursuant to the Offer. The Purchaser will pay all fees and expenses of Donaldson, Lufkin & Jenrette Securities Corporation, which is acting as Dealer Manager for the Offer (in such capacity, the "Dealer Manager"), The Bank of New York, which is acting as the Depositary (in such capacity, the "Depositary") and Georgeson & Company Inc., which is acting as Information Agent (in such capacity, the "Information Agent"), incurred in connection with the Offer. See Section 17. The Board of Directors of the Company (the "Board of Directors") has determined that the Merger Agreement (as defined below) and the transactions contemplated thereby, including each of the Offer and the Merger (as defined below), are fair to and in the best interests of the shareholders of the Company and recommends that the holders of the Shares accept the Offer and tender their Shares to the Purchaser. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION 1) AT LEAST THAT NUMBER OF SHARES (THE "MINIMUM NUMBER OF SHARES") WHICH, WHEN COMBINED WITH THE SHARES, IF ANY, OWNED BY THE PARENT AND ITS DIRECT AND INDIRECT SUBSIDIARIES, CONSTITUTES A MAJORITY OF THE THEN OUTSTANDING SHARES ON A FULLY DILUTED BASIS (AS DEFINED IN SECTION 11) (THE "MINIMUM CONDITION"). SEE SECTIONS 1 AND 15. IF THE PURCHASER PURCHASES NOT LESS THAN THE MINIMUM NUMBER OF SHARES IN THE OFFER, IT WILL BE ABLE TO EFFECT THE MERGER WITHOUT THE AFFIRMATIVE VOTE OF ANY OTHER SHAREHOLDER OF THE COMPANY. SEE SECTION 12. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of April 22, 1996 (the "Merger Agreement"), among the Parent, K-III Prime Corporation, a Delaware corporation ("K-III Prime") and a direct, wholly owned subsidiary of the Parent, the Purchaser and the Company. The Merger Agreement provides, among other things, for the making of the Offer by the Purchaser, and further provides that, following the completion of the Offer, upon the terms and subject to the conditions of the Merger Agreement and the Texas Business Corporation Act (the "TBCA"), the Purchaser will be merged with and into the Company (the "Merger"). Following the Merger, the Company will continue as the surviving corporation (the "Surviving Corporation") and become an indirect, wholly owned subsidiary of the Parent, and the separate corporate existence of the Purchaser will cease. Pursuant to the Merger Agreement, the Company agrees, if and to the extent permitted by law, at the request of the Purchaser and subject to the terms of the Merger Agreement, to take all necessary and appropriate actions to cause the Merger to become effective as soon as reasonably practicable after the purchase of the Shares pursuant to the Offer, without a meeting of the Company's shareholders in accordance with the TBCA. See Section 12. At the effective time of the Merger (the "Effective Time"), each Share issued and outstanding immediately prior to the Effective Time (other than Shares held in the treasury of the Company and each Share, if any, owned by the Purchaser, K-III Prime, the Parent or any direct or indirect wholly owned subsidiary of the Parent or of the Company, which shall be cancelled, and other than Shares, if any (collectively, "Dissenting Shares"), held by shareholders who have not voted in favor of the Merger Agreement or consented thereto in writing and who have timely filed with the Company a written objection to the action contemplated by the Merger Agreement in accordance with the TBCA) will, by virtue of the Merger and without any action on the part of the Purchaser, the Company or the holder thereof, be cancelled, extinguished and converted automatically into the right to receive $21.50 in cash (the "Merger Consideration"), payable, without interest, to the holder thereof, upon the surrender of the certificate that formerly evidenced such Share, less any required withholding taxes. In connection with the Merger Agreement, the Board of Directors of the Company amended the Rights Agreement, dated as of January 9, 1996 (the "Rights Agreement"), between the Company and KeyCorp Shareholder Services, Inc. to render it inapplicable with respect to the Offer, the Merger and the other transactions contemplated by the Merger Agreement and to provide for the expiration of the preferred share purchase rights (the "Rights") issued pursuant to the Rights Agreement no later than immediately prior to the purchase of the Shares by the Purchaser pursuant to the Offer. The Company has represented to the Parent that (i) as of March 31, 1996, there were 19,816,435 Shares issued and outstanding and 1,688,000 Shares reserved for issuance upon the exercise of outstanding stock options and (ii) between March 31, 1996 and the date of the Merger Agreement, no Shares have been issued by the Company (except upon exercise of such options). Under the terms of the Merger Agreement, the Company has reserved the right to issue up to an additional 90,390 Shares pursuant to an existing employee stock purchase plan and, as a result, all of such additional shares (whether or not issued) will be assumed to be outstanding for purposes of determining whether the Minimum Condition is satisfied. Based upon the foregoing, the Purchaser believes that approximately 10,797,413 Shares constitute a majority of the Outstanding Shares on a Fully Diluted Basis. The Company has advised the Purchaser that, to the knowledge of the Company, all the directors of the Company intend to tender their Shares pursuant to the Offer. The Merger Agreement is more fully described in Section 11. Certain federal income tax consequences of the sale of the Shares pursuant to the Offer and the exchange of Shares for the Merger Consideration pursuant to the Merger are described in Section 5. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 2 THE TENDER OFFER 1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), the Purchaser will accept for payment and pay for all Shares validly tendered on or prior to the Expiration Date and not properly withdrawn as permitted by Section 4. The term "Expiration Date" means 12:00 Midnight, New York City time, on Thursday, May 23, 1996, unless and until the Purchaser, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), shall have extended the period during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. The Offer is conditioned upon, among other things, the satisfaction of the Minimum Condition, the expiration or termination of any waiting period applicable to the purchase of Shares pursuant to the Offer under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and receipt of the unconditional consents of the Federal Communications Commission (the "FCC") to the transfer of the Company's licenses to the Purchaser (the "FCC Approvals"). See Section 15, which sets forth in full the conditions to the Offer. Subject to the provisions of the Merger Agreement and the applicable rules and regulations of the Securities and Exchange Commission (the "Commission"), the Purchaser reserves the right, in its sole discretion, to waive any or all conditions to the Offer (other than the Minimum Condition), to increase the price per Share payable in the Offer, and to make any other changes in the terms and conditions of the Offer. Subject to the provisions of the Merger Agreement, including the provisions of the Merger Agreement set forth in the next paragraph, and the applicable rules and regulations of the Commission, if by the Expiration Date any or all of such conditions to the Offer have not been satisfied, the Purchaser reserves the right (but shall not be obligated) to (i) terminate the Offer and return all tendered Shares to tendering shareholders, (ii) waive such unsatisfied conditions and purchase all Shares validly tendered or (iii) extend the Offer and, subject to the terms of the Offer (including the rights of shareholders to withdraw their Shares), retain the Shares which have been tendered, until the termination of the Offer, as extended. Subject to the applicable rules and regulations of the Commission and the terms of the Merger Agreement, the Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events set forth in Section 15 shall have occurred or shall have been determined by the Purchaser to have occurred, to (i) extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary and (ii) amend the Offer in any respect by giving oral or written notice of such amendment to the Depositary. Under the terms of the Merger Agreement, however, without the written consent of the Company, the Purchaser will not decrease the price per Share payable in the Offer, reduce the maximum number of Shares to be purchased in the Offer, impose conditions to the Offer in addition to those set forth in Section 15, amend or change the terms and conditions of the Offer in any manner materially adverse to the holders of Shares, or change or waive the Minimum Condition. The Purchaser shall have no obligation to pay interest on the purchase price of tendered Shares, including in the event the Purchaser exercises its right to extend the period of time during which the Offer is open. The rights reserved by the Purchaser in this paragraph are in addition to the Purchaser's rights to terminate the Offer pursuant to Section 15. Any extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof, and such announcement in the case of an extension will be made in accordance with Rule 14e-1(d) no later than 9:00 A.M., New York City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which the Purchaser may choose to make any public announcement, except as provided by applicable law (including Rules 14d-4(c) and 14d-6(d) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which require that material changes be promptly disseminated to holders of Shares), the Purchaser 3 shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to the Dow Jones News Service. If the Purchaser makes a material change in the terms of the Offer or if it waives a material condition of the Offer, the Purchaser will disseminate additional tender offer material and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the offer, other than a change in price or a change in the percentage of securities sought, will depend upon the facts and circumstances, including the materiality, of the changes. With respect to a change in price or, subject to certain limitations, a change in the percentage of securities sought, a minimum ten business day period from the day of such change is generally required to allow for adequate dissemination to shareholders. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or a federal holiday and consists of the time period from 12:01 A.M. through 12:00 Midnight, New York City time. The Company has provided the Purchaser with the Company's shareholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed by the Purchaser to record holders of Shares and furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment and will pay for all Shares validly tendered and not properly withdrawn on or prior to the Expiration Date as soon as practicable after the later to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the conditions of the Offer set forth in Section 15, including, without limitation, the expiration or termination of the waiting period applicable to the acquisition of Shares pursuant to the Offer under the HSR Act and the receipt of the FCC Approvals; provided that under the Merger Agreement, the Purchaser shall have the right, in its sole discretion, to extend the Offer from time to time for up to a maximum of 10 additional business days for all such extensions, notwithstanding the prior satisfaction of the conditions set forth in Section 15. In addition, subject to applicable rules and regulations of the Commission, the Purchaser expressly reserves the right to delay acceptance for payment of or payment for Shares pending receipt of any regulatory approvals specified in Section 16, including the right to accept the Shares tendered for payment but delay payment for such Shares pending receipt of the FCC Consent. For information with respect to approvals required to be obtained prior to the consummation of the Offer, including under the HSR Act and under applicable regulations under the Communications Act of 1934, as amended (the "Communications Act"), see Section 16. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares ("Share Certificates") or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 3, (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined below) in connection with a book-entry transfer, and (iii) any other documents required by the Letter of Transmittal. The term "Agent's Message" means a message transmitted by a Book-Entry Transfer Facility to and received by the Depositary and forming a part of a Book-Entry Confirmation, which states that 4 such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares which are the subject of such Book-Entry Confirmation, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against such participant. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payments from the Purchaser and transmitting such payments to shareholders whose Shares have been accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. If for any reason whatsoever acceptance for payment of or payment for any Shares tendered pursuant to the Offer is delayed or the Purchaser is unable to accept for payment or pay for Shares tendered pursuant to the Offer, then without prejudice to the Purchaser's rights set forth herein, the Depositary may nevertheless, on behalf of the Purchaser and subject to Rule 14e-l(c) under the Exchange Act, retain tendered Shares and such Shares may not be withdrawn except to the extent that the tendering shareholder is entitled to and duly exercises withdrawal rights as described in Section 4. If any tendered Shares are not accepted for payment for any reason or if Share Certificates are submitted for more Shares than are tendered, Share Certificates evidencing unpurchased or untendered Shares will be returned without expense to the tendering shareholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3, such Shares will be credited to an account maintained at such Book-Entry Transfer Facility), as promptly as practicable following the expiration, termination or withdrawal of the Offer. The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURE FOR TENDERING SHARES. Valid Tender. Except as set forth below, in order for Shares to be validly tendered pursuant to the Offer, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares, and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date and either (i) Share Certificates evidencing tendered Shares must be received by the Depositary at such address or such Shares must be tendered pursuant to the procedure for book-entry transfer described below and a Book-Entry Confirmation must be received by the Depositary, in each case on or prior to the Expiration Date, or (ii) the guaranteed delivery procedures described below must be complied with. Book-Entry Transfer. The Depositary will establish accounts with respect to the Shares at the Book-Entry Transfer Facilities for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of any Book-Entry Transfer Facility may make book-entry delivery of Shares by causing such Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at such Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer at a Book-Entry Transfer Facility, the 5 Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other documents required by the Letter of Transmittal, must in any case be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date, or the guaranteed delivery procedures described below must be complied with. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. The method of delivery of Shares, the Letter of Transmittal and all other required documents, including delivery through any Book-Entry Transfer Facility, is at the election and risk of the tendering shareholder. Shares will be deemed delivered only when actually received by the Depositary (including, in the case of a book-entry transfer, by Book-Entry Confirmation). If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery. Signature Guarantees. Signatures on Letters of Transmittal must be guaranteed by a firm which is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Security Transfer Agents Medallion Program (each of the foregoing being referred to as an "Eligible Institution"), except in cases where Shares are tendered (i) by a registered holder of Shares who has not completed either the box labeled "Special Payment Instructions" or the box labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. See Instruction 1 of the Letter of Transmittal. If the Share Certificates are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or Share Certificates not accepted for payment or not tendered are to be returned, to a person other than the registered holder, the Share Certificates must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name of the registered holder appears on such certificates, with the signatures on such certificates or stock powers guaranteed as aforesaid. See Instructions 1 and 5 of the Letter of Transmittal. Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the Offer and such shareholder's Share Certificates are not immediately available, or such shareholder cannot deliver the Share Certificates and all other required documents to reach the Depositary on or prior to the Expiration Date, or such shareholder cannot complete the procedure for delivery by book-entry transfer on a timely basis, such Shares may nevertheless be tendered, provided that all of the following conditions are satisfied: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form made available by the Purchaser is received by the Depositary as provided below on or prior to the Expiration Date; and (iii) the Share Certificates (or a Book-Entry Confirmation), representing all tendered Shares, in proper form for transfer, together with the Letter of Transmittal (or a facsimile thereof) properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message), and any other documents required by the Letter of Transmittal, are received by the Depositary within three Nasdaq National Market trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, telex, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution and a representation that the shareholder owns the Shares tendered within the meaning of, and that the 6 tender of the Shares effected thereby complies with, Rule 14e-4 under the Exchange Act, each in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of Share Certificates for, or of Book-Entry Confirmation with respect to, such Shares, a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message), and any other documents required by the Letter of Transmittal. Accordingly, payment might not be made to all tendering shareholders at the same time and will depend upon when Share Certificates or Book-Entry Confirmations of such Shares are received into the Depositary's account at a Book-Entry Transfer Facility. Appointment as Proxy. By executing the Letter of Transmittal, a tendering shareholder irrevocably appoints designees of the Purchaser and each of them as such shareholder's attorneys-in-fact and proxies, with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such shareholder's rights with respect to the Shares tendered by such shareholder and accepted for payment by the Purchaser (and with respect to any and all other Shares or other securities issued or issuable in respect of such Shares on or after April 22, 1996). All such powers of attorney and proxies shall be considered irrevocable and coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior powers of attorney and proxies given by such shareholder with respect to such Shares (and such other Shares and securities) will be revoked without further action, and no subsequent powers of attorney and proxies may be given nor any subsequent written consents executed (and, if given or executed, will not be deemed effective). The designees of the Purchaser will, with respect to the Shares (and such other Shares and securities) for which such appointment is effective, be empowered to exercise all voting and other rights of such shareholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's shareholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's payment for such Shares, the Purchaser must be able to exercise full voting rights with respect to such Shares and other securities, including voting at any meeting of shareholders by written consent or otherwise. Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Purchaser in its sole discretion, which determination shall be final and binding on all parties. The Purchaser reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance for payment of which may, in the opinion of its counsel, be unlawful. The Purchaser also reserves the absolute right to waive any of the conditions of the Offer or any defect or irregularity in any tender of Shares of any particular shareholder whether or not similar defects or irregularities are waived in the case of other shareholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. None of the Purchaser, K-III Prime, the Parent, any of their affiliates or assigns, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. Backup Federal Income Tax Withholding and Substitute Form W-9. Under the "backup withholding" provisions of federal income tax law, the Depositary may be required to withhold 31% of the amount of any payments of cash pursuant to the Offer. In order to avoid backup withholding, each shareholder surrendering Shares in the Offer must provide the payor of such cash with such shareholder's correct taxpayer identification number ("TIN") on a Substitute Form W-9 and certify under 7 penalties of perjury that such TIN is correct and that such shareholder is not subject to backup withholding. Certain shareholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. If a shareholder does not provide its correct TIN or fails to provide the certifications described above, the Internal Revenue Service ("IRS") may impose a penalty on such shareholder and payment of cash to such shareholder pursuant to the Offer may be subject to backup withholding. All shareholders surrendering Shares pursuant to the Offer should complete and sign the Substitute Form included in the Letter of Transmittal to provide the information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to the Depositary). Noncorporate foreign shareholders should complete and sign a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 9 of the Letter of Transmittal. Other Requirements. The Purchaser's acceptance for payment of Shares tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering shareholder and the Purchaser upon the terms and subject to the conditions of the Offer, including the tendering shareholder's representation and warranty that the shareholder is the holder of the Shares within the meaning of, and that the tender of the Shares complies with, Rule 14e-4 under the Exchange Act. 4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time after June 24, 1996. If the Purchaser extends the Offer, is delayed in its acceptance for payment of Shares or is unable to purchase Shares validly tendered pursuant to the Offer for any reason, then without prejudice to the Purchaser's rights under the Offer, the Depositary may nevertheless, on behalf of the Purchaser, retain tendered Shares and such Shares may not be withdrawn except to the extent that tendering shareholders are entitled to withdrawal rights as described in this Section 4. Any such delay in acceptance for payment will be accompanied by an extension of the Offer to the extent required by law. For a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If Share Certificates to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution unless such Shares have been tendered for the account of any Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which case a notice of withdrawal will be effective if delivered to the Depositary by any method of delivery described in the first sentence of this paragraph. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination will be final and binding. None of the Purchaser, K-III Prime, the Parent, any of their affiliates or assigns, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered at any time prior to the Expiration Date by following one of the procedures described in Section 3. 8 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The summary of tax consequences set forth below is for general information only and is based on the law as currently in effect. The tax treatment of each shareholder will depend in part upon such shareholder's particular situation. Special tax consequences not described herein may be applicable to particular classes of taxpayers, such as financial institutions, broker-dealers, persons who are not citizens or residents of the United States, shareholders who acquired their Shares through the exercise of an employee stock option or otherwise as compensation, and persons who received payments in respect of options to acquire Shares. ALL SHAREHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS AND CHANGES IN SUCH TAX LAWS. The receipt of cash pursuant to the Offer or the Merger will be a taxable transaction for federal income tax purposes under the Internal Revenue Code of 1986, as amended, and may also be a taxable transaction under applicable state, local, foreign income or other tax laws. Generally, a tendering shareholder will recognize gain or loss in an amount equal to the difference between the cash received by the shareholder pursuant to the Offer or the Merger and the shareholder's adjusted tax basis in the Shares tendered by the shareholder and purchased pursuant to the Offer or the Merger. For federal income tax purposes, such gain or loss will be a capital gain or loss if the Shares are capital assets in the hands of the shareholder, and a long-term capital gain or loss if the shareholder's holding period is more than one year as of the date the Purchaser accepts such Shares for payment pursuant to the Offer or the effective date of the Merger, as the case may be. There are limitations on the deductibility of capital losses. Proposals have been introduced in the House of Representatives and the Senate to reduce the effective tax rates applicable to net long-term capital gains. Additionally, the proposals would further limit the deduction for long-term capital losses. If these or similar future proposals were enacted into law, gains from sales of Shares pursuant to the Offer which constituted long-term capital gains would generally be taxed at reduced effective tax rates. However, there can be no assurance that these proposals will be enacted and, if enacted, the effective dates of the proposals or the particular type of transactions or assets to which the proposals apply could be modified. If the proposals were enacted with an effective date subsequent to the Expiration Date of the Offer, sales of Shares pursuant to the Offer which constituted long-term capital gains would be taxed at the higher rates currently in effect. Shareholders should consult their tax advisors about the impact of this proposed legislation. 6. PRICE RANGE OF SHARES; DIVIDENDS. According to the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (the "Form 10-K"), the Shares are traded on the Nasdaq National Market under the symbol "WCTV." The following table sets forth, for the periods indicated, the high and low closing sales prices per Share as reported by the Nasdaq National Market.
HIGH LOW ------- ------- Year Ended December 31, 1994: First Quarter........................................... $24 3/4 $17 Second Quarter.......................................... 20 3/4 6 3/4 Third Quarter........................................... 16 1/2 8 Fourth Quarter.......................................... 14 7/8 11 1/8 Year Ended December 31, 1995: First Quarter:.......................................... $16 5/8 $11 1/2 Second Quarter.......................................... 18 1/8 12 7/8 Third Quarter........................................... 18 1/4 12 3/4 Fourth Quarter.......................................... 15 7/8 12 3/4 Year Ended December 31, 1996: First Quarter........................................... $18 $12 3/4 Second Quarter (through April 25, 1996)................. 21 1/4 17 5/8
9 On March 15, 1996, the last full trading day prior to the Company's announcing the exploration of a possible sale or merger of the Company, the reported closing sale price per Share on the Nasdaq National Market was $15. On April 19, 1996, the last full trading day prior to announcement of the Offer, the reported closing sale price per Share on the Nasdaq National Market was $19 7/16. On April 25, 1996, the last full trading day prior to the commencement of the Offer, the reported closing sale price per Share on the Nasdaq National Market was $21 1/4. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. According to the Form 10-K, the Company has never paid cash dividends in respect of the Shares. Under the terms of the Merger Agreement, the Company has agreed not to declare, set aside, make or pay any dividend or other distribution on the Shares. 7. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning the Company contained in this Offer to Purchase, including financial information, has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. The summary information concerning the Company in this Section 7 and elsewhere in this Offer to Purchase is derived from the Form 10-K and other publicly available information. The summary information set forth below is qualified in its entirety by reference to such reports (which may be obtained and inspected as described below) and should be considered in conjunction with the more comprehensive financial and other information in such reports and other publicly available reports and documents filed by the Company with the Commission and other publicly available information. Although the Purchaser, K-III Prime and the Parent do not have any knowledge that would indicate that any statements contained herein based upon such reports are untrue, none of the Purchaser, K-III Prime or the Parent assumes any responsibility for the accuracy or completeness of the information contained therein, or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information but which are unknown to the Purchaser, K-III Prime and the Parent. General. The Company is a Texas corporation with its executive offices located in 1303 Marsh Lane, Carrollton, Texas 75006. The Company educates, trains and informs individuals with common interests in selected markets by providing value-added products and services using appropriate communication technologies. By combining the talents and knowledge of industry experts with its creative programming, production, marketing and satellite communications expertise, the Company seeks to produce original, national network quality programming that meets the training, educational and informational needs of the Company's target markets while retaining the entertaining and visually stimulating character of consumer television and video. The Company currently delivers programming to the following markets: the government and public services market through the Law Enforcement Television Network and Fire & Emergency Television Network satellite networks, and American Heat, PULSE/Emergency Medical Update and the Government Services Television Network videotape subscription services; the automotive market through the Automotive Satellite Television Network satellite network; the health care market through the Health & Sciences Television Network and the Long Term Care Network satellite networks, and the American Hospital Association and Westcott Healthcare Teleconference series; the corporate and professional market through the Accounting Television Satellite Network teleconference series, the Professional Security Television Network, CPA Report, Accounting and Financial Television Network and Safety Watch videotape subscription services, Excellence In Training Corporation, Industrial Training Systems Corporation, and Tel-A-Train, Inc. single tape sales, videotape library services, the Executive Education Network interactive satellite network and the Interactive Distance Training Network electronic classroom facilities; the primary and secondary education market through the TI-IN Network satellite network; and the financial services market through the Bankers Training and Consulting Company videotape library service. The Company owns and operates all of its networks either as divisions or wholly owned subsidiaries, except Government Services Television 10 Network which is operated as a limited liability partnership in which the Company is the managing partner and holds a 50% partnership interest. Certain Financial Information. Set forth below are certain selected consolidated financial data for the Company's last three fiscal years which were derived from the Form 10-K. More comprehensive financial information is included in the reports (including management's discussion and analysis of financial condition and results of operations) and other documents filed by the Company with the Commission, and the following financial data is qualified in its entirety by reference to such reports and other documents, including the financial information and related notes contained therein. Such reports and other documents may be examined and copies thereof may be obtained from the offices of the Commission and the Nasdaq National Market in the manner set forth below. WESTCOTT COMMUNICATIONS, INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION (in thousands, except per share data)
FOR THE YEAR ENDED DECEMBER 31, ------------------------------- 1995 1994 1993 -------- -------- ------- INCOME STATEMENT DATA Revenues..................................................... $ 97,799 $ 89,705 $69,262 Cost of revenues............................................. 74,072 70,492 54,624 -------- -------- ------- Income from operations....................................... 23,727 19,213 14,638 Interest expense............................................. (121) (177) (244) Interest income.............................................. 544 94 162 Other income (loss).......................................... 47 (38) (27) -------- -------- ------- Income before income taxes................................... 24,197 19,092 14,529 Provision for income taxes................................... 9,616 7,255 5,532 -------- -------- ------- Net income................................................... 14,581 11,837 8,997 Preferred stock dividends.................................... -- -- 160 -------- -------- ------- Net income available to common shareholders.................. $ 14,581 $ 11,837 $ 8,837 -------- -------- ------- -------- -------- ------- Earnings per common share.................................... $ .74 $ .61 $ .47 Weighted average common and common equivalent shares outstanding.................................................. 19,643 19,379 18,902 BALANCE SHEET DATA (AT PERIOD END) Total assets................................................. $124,983 $108,987 $91,959 Property and equipment--net.................................. 32,696 35,556 30,391 Current portion of long-term obligations..................... 10 10 1,091 Long-term obligations........................................ 19 32 198 Shareholders' equity......................................... 101,406 84,298 67,369
The Shares are registered under the Exchange Act. Accordingly, the Company is subject to the informational filing requirements of the Exchange Act and in accordance therewith is obligated to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in such proxy statements and distributed to the Company's shareholders and filed with the Commission. Such reports, proxy statements and other information are available for inspection at the public reference facilities of the Commission located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and are also available for inspection and copying at prescribed rates at the regional offices of the Commission located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New York, New York 11 10048. Copies of this material may also be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material is also available for inspection at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, DC 20006. 8. CERTAIN INFORMATION CONCERNING THE PURCHASER, K-III PRIME, THE PARENT AND KKR ASSOCIATES. The Purchaser, a Texas corporation and a direct, wholly owned subsidiary of K-III Prime, was organized in connection with the Offer and has not carried on any activities to date other than those incident to its formation and the commencement of the Offer. K-III Prime, a Delaware corporation and a direct, wholly owned subsidiary of Parent, is a holding company for all of the subsidiaries of the Parent. The Parent is a Delaware corporation organized in 1992. Through its wholly owned subsidiaries, the Parent is a leading content provider to the education, business and special interest consumer markets; its best-known brands include Channel One News, The World Almanac, Nelson's, Weekly Reader, Daily Racing Form, Seventeen, Modern Bride and Soap Opera Digest. Most of the Parent's products serve niche markets and are recognized within those markets as premier franchises, and many hold dominant positions. The Parent focuses on ownership and development of content, because content can be tailored to specific information needs across print, electronic and multimedia formats. Furthermore, proprietary branded content exists independent of any specific delivery technology. The Parent organized its businesses into three segments, education, information and media, which accounted, respectively, for approximately 32%, 25%, and 43% of 1995 consolidated net sales of $1,046 million. The principal executive offices of the Parent, K-III Prime and the Purchaser are located at 745 Fifth Avenue, New York, New York 10151. A majority of the outstanding voting securities of the Parent is owned by certain investment partnerships (the "Partnerships") of which KKR Associates is the general partner and a number of institutional and other investors associated with Kohlberg Kravis Roberts & Co. ("KKR") are the limited partners. KKR Associates is a New York limited partnership of which Henry R. Kravis, George R. Roberts, Robert I. MacDonnell, Paul E. Raether, Michael W. Michelson, Saul A. Fox, James H. Greene, Michael T. Tokarz, Edward H. Gilhuly, Perry Golkin, Clifton S. Robbins and Scott M. Stuart are the general partners (see Schedule I) and of which certain past and present employees of KKR and partnerships and trusts for the benefit of the families of such general partners and employees and a former partner of KKR are the limited partners. KKR Associates holds, as principal, through various partnerships of which it is the general partner, major investments in a number of industrial and other companies. The addresses of KKR Associates are 9 West 57th Street, New York, New York 10019 and 2800 Sand Hill Road, Menlo Park, California 94025. The name, citizenship, business address, present principal occupation or employment, and five year employment history of each of the directors and executive officers of the Purchaser, K-III Prime and the Parent and of each of the general partners of KKR Associates are set forth in Schedule I hereto. Set forth below are certain selected consolidated financial data relating to the Parent and its subsidiaries for the Parent's last three fiscal years which have been derived from the financial statements contained in the Parent's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 filed by the Parent with the Commission. More comprehensive financial information is included in the reports (including management's discussion and analysis of financial condition and results of operations) and other documents filed by the Parent with the Commission, and the following financial data is qualified in its entirety by reference to such reports and other documents, including the financial information and related notes contained therein. Such reports and other documents may be examined and copies thereof may be obtained from the offices of the Commission and the New York Stock Exchange, Inc. (the "NYSE") in the manner set forth below. 12 K-III COMMUNICATIONS CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL DATA (dollars in thousands, except per share amounts)
FOR THE YEAR ENDED DECEMBER 31, ------------------------------------------ 1995 1994 1993 ------------ ------------ ---------- INCOME STATEMENT DATA Sales, net......................................... $ 1,046,329 $ 964,648 $ 844,748 Net loss (1)....................................... (75,435) (41,403) (86,496) Preferred stock dividends.......................... 28,978 25,959 22,290 Loss applicable to common shareholders............. (104,413) (67,362) (161,872) Loss per common and common equivalent share........ (.91) (.65) (1.18) Weighted average common and common equivalent shares outstanding............................... 115,077,498 103,642,668 92,392,189 BALANCE SHEET DATA (AT PERIOD END) Working capital (deficiency)....................... $ (56,560) $ 1,338 $ 3,605 Total assets....................................... 1,881,416 1,589,692 1,166,502 Long-term debt..................................... 1,134,916 1,034,689 661,297 $2.875 Senior Exchangeable Preferred Stock......... 97,992 97,718 97,444 $11.625 Series B Exchangeable Preferred Stock...... 133,614 118,511 105,009 Common stock subject to redemption................. 28,022 16,552 25,287 Shareholders' equity............................... 92,562 21,466 4,427
- ------------ (1) The adoption of a change in method of accounting for advertising costs resulted in an increase in operating income or decrease in operating loss and a decrease in net loss of approximately $11,800 ($.10 per share) and approximately $9,800 ($.09 per share) for the years ended December 31, 1995 and 1994, respectively. The Parent is subject to the informational filing requirements of the Exchange Act and in accordance therewith is obligated to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning the Parent's directors and officers, their remuneration, options granted to them, the principal holders of the Parent's securities and any material interest of such persons in transactions with the Parent is required to be disclosed in such proxy statements and distributed to the Parent's shareholders and filed with the Commission. Such reports, proxy statements and other information are available for inspection at the public reference facilities of the Commission located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and are also available for inspection and copying at prescribed rates at the regional offices of the Commission located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of this material may also be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material is also available for inspection at the offices of the NYSE, 20 Broad Street, New York, New York 10005. None of the Purchaser, K-III Prime, the Parent, the Partnerships or, to the best knowledge of the Purchaser, K-III Prime, the Parent and the Partnerships, any of the persons listed on Schedule I hereto or any associate or majority-owned subsidiary of the Purchaser, K-III Prime, the Parent, the Partnerships or any of the persons so listed, beneficially owns or has a right to acquire directly or indirectly any Shares, and none of the Purchaser, K-III Prime, the Parent or the Partnerships or, to the best knowledge of the Purchaser, K-III Prime, the Parent and the Partnerships, any of the persons or entities referred to above, or any of the respective executive officers, directors or subsidiaries of any of the foregoing, has effected any transactions in the Shares during the past 60 days. 13 9. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the Purchaser to purchase all of the outstanding Shares and pay related fees and expenses is expected to be approximately $445 million. The Purchaser will obtain such funds through capital contributions by the Parent. The Parent will obtain such funds through borrowings under its revolving credit facility. The Purchaser has not conditioned the Offer on obtaining financing. The revolving credit facility is provided by a group of lenders and The Chase Manhattan Bank, N.A., as agent (the "Agent"). The revolving credit facility allows the Parent to borrow up to $670 million through the incurrence of revolving credit loans, swingline loans, Canadian dollar loans or the issuance of letters of credit. The Parent expects to refinance the amounts borrowed with the proceeds of a new revolving credit facility. Amounts borrowed by the Parent thereunder will be paid out of the Parent's cash flow. The commitments under the revolving credit facility are subject to mandatory reductions semi-annually on June 30 and December 31, with the first reduction on June 30, 1997 and the final reduction on December 31, 2000. The commitment reductions will be in the amount of $135 million per year, except that the commitment will reduce by $265 million to zero in 2000. The amounts borrowed (other than swingline loans) pursuant to the revolving credit facility bear interest at the following rates per annum, at the Parent's option: (i) the higher of (a) the Federal Funds Effective Rate as published by the Federal Reserve Bank of New York plus 0.5% and (b) the prime commercial lending rate announced by the Agent from time to time; plus, in each case, an applicable margin of up to 1/4 of 1% as specified in the revolving credit facility or (ii) the London Interbank Offered Rate adjusted for reserves plus an applicable margin ranging from 1/2 of 1% to 1 1/2% as specified in the revolving credit facility. The Parent has agreed to pay commitment fees equal to .375% or 3/8 of 1% per annum on the daily average unutilized commitment, certain fees with respect to the issuance of letters of credit and an annual administration fee. The covenants in the revolving credit facility, among other things, restrict the Parent from changing the nature of its businesses, incurring additional indebtedness or liens other than under the revolving credit facility, making investments or loans, paying dividends and making guarantees. In addition, the revolving credit facility requires that the Parent and its restricted subsidiaries, on a consolidated basis, satisfy an interest coverage test, a leverage test and a fixed charge coverage test. All of the Parent's subsidiaries are restricted subsidiaries. Borrowings under the revolving credit facility are guaranteed by each of the domestic subsidiaries of the Parent. 10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. On December 15, 1995, the Parent was contacted by representatives of Goldman, Sachs & Co. ("Goldman Sachs"), the Company's financial advisor. On January 30, 1996, the Parent received from Goldman Sachs an information memorandum in connection with a possible sale of or other transaction involving the Company. On February 7, 1996, management of the Parent met with senior management of the Company and was given access to certain information concerning the Company in order to evaluate its interest in pursuing a possible transaction with the Company. On February 21, 1996, the Parent was informed by Goldman Sachs on behalf of the Company that the Parent would be required, if it wished to pursue such a transaction, to submit a preliminary, non-binding indication of interest to the Company on March 5, 1996. Thereafter, the Parent continued its investigation of the Company, including meeting with Company executives and representatives to discuss a possible acquisition of the Company by the Parent, and on March 5, 1996, the Parent submitted to Goldman Sachs a non-binding indication of interest with respect to such an acquisition. On March 7, 1996, Goldman Sachs on behalf of the Company informed the Parent that it would be invited to conduct a further review of the Company in order to be in a position to make a final, binding proposal for the acquisition of the Company. 14 In the ensuing weeks, as part of the Parent's continuing review, representatives of the Parent had various contacts with Company employees and representatives in order to obtain additional information with regard to the Company, and on April 17, 1996, the Parent submitted a binding proposal for the acquisition of the Company, in the amount of $20.00 per Share. On April 18, 1996, in response to its inquiries, the Parent was informed that its proposal was not the highest received from among the three parties which submitted proposals. On April 19, 1996, the Parent's senior management requested a meeting with representatives of the Company. During the day, representatives of the Company and the Parent had preliminary discussions of the terms of a definitive agreement. Following these discussions, at the meeting requested by the Parent, the Parent raised its bid to $21.00 per Share. After the meeting, the Company's management indicated to the Parent that it would not solicit additional bids and wanted to negotiate a mutually satisfactory definitive agreement for presentation to the Board of Directors. During April 20 and 21, 1996, representatives of the Parent met with representatives of the Company to negotiate the terms of the definitive agreement. After completing such negotiations, the Parent was informed by the Company that the Company had received a revised proposal from one of the other parties interested in acquiring the Company. In response to this information, following further discussion with and communications to the Company, the Parent increased its offer to $21.50 per Share, and the Board of Directors accepted the increased offer. Following the approval of the Board of Directors of the Company, on April 22, 1996, the Company, the Parent, K-III Prime, and the Purchaser entered into the Merger Agreement. 11. THE MERGER AGREEMENT. The following is a summary of the Merger Agreement, which summary is qualified in its entirety by reference to the Merger Agreement which is filed as an exhibit to the Tender Offer Statement on Schedule 14D-1. The Offer. The Merger Agreement provides for the commencement of the Offer as promptly as reasonably practicable, but in no event later than five business days after the public announcement of the Purchaser's intention to commence the Offer. The obligation of the Purchaser to accept for payment and pay for Shares tendered pursuant to the Offer is subject only to (i) the Minimum Condition, and (ii) the satisfaction or waiver of the other conditions described in Section 15. The Merger Agreement provides that "Outstanding Shares on a Fully Diluted Basis" means all outstanding Shares plus all Shares available for issuance under the Company's Employee Stock Purchase Plan plus all Shares issuable upon the conversion of any convertible securities or upon the exercise of any options, warrants or rights (other than the Rights). Under the Merger Agreement, the Purchaser expressly reserves the right, in its sole discretion, to waive any condition to the Offer (other than the Minimum Condition), to increase the price per Share payable in the Offer, and to make any other changes in the terms and conditions of the Offer; provided, however, that, without the prior written consent of the Company, no change may be made which (a) decreases the price per share payable in the Offer, (b) reduces the maximum number of Shares to be purchased in the Offer, (c) imposes conditions to the Offer in addition to those set forth in Section 15, (d) amends or changes the terms and conditions of the Offer in any manner materially adverse to the holders of Shares (other than K-III Prime and its subsidiaries) or (e) changes or waives the Minimum Condition. The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement and the Offer (including, without limitation, the Minimum Condition), the Purchaser shall accept for payment and pay, as promptly as practicable after expiration of the Offer, for all Shares validly tendered and not withdrawn; provided, that the Purchaser shall have the right, in its sole discretion, to extend the Offer from time to time for up to a maximum of 10 additional business days for all such extensions, notwithstanding the prior satisfaction of the conditions described in Section 15. Under the Merger Agreement, the Purchaser agrees that, in the event that it is unable to consummate the Offer at any scheduled expiration thereof due solely to the failure of the Purchaser to obtain the FCC Approvals, it shall, unless the Company is in willful breach of any obligation set forth in the Merger Agreement, extend the Offer (unless the condition requiring such 15 FCC Approvals is not reasonably capable of being satisfied prior to the expiration of 90 days from the commencement of the Offer) until the earlier of (i) the expiration of 90 days from the commencement of the Offer or (ii) such time as the Purchaser shall have received the FCC Approvals. The Merger. The Merger Agreement provides that, upon the terms and subject to the conditions thereof (including those described in Section 15), and in accordance with the TBCA, at the Effective Time, the Purchaser shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of the Purchaser will cease and the Company will continue as the Surviving Corporation. At the Effective Time, each Share issued and outstanding immediately prior to the Effective Time (other than any Shares held in the treasury of the Company, and each Share owned by the Purchaser, K-III Prime, the Parent or any direct or indirect wholly owned subsidiary of the Parent or of the Company, which shall be cancelled, and any Shares that are held by shareholders who have not voted in favor of the Merger Agreement or consented thereto in writing and who shall have timely filed with the Company a written objection to the action contemplated by the Merger Agreement in accordance with the TBCA) shall by virtue of the Merger and without any action on the part of the Purchaser, the Company or the holder thereof, be cancelled, extinguished and converted automatically into the right to receive the Merger Consideration payable, without interest, to the holder of such Share, upon surrender of the certificate that formerly evidenced such Share, less any required withholding taxes. The Merger Agreement provides that immediately after the date on which the Purchaser shall have accepted for payment all Shares validly tendered and not withdrawn pursuant to the Offer, each outstanding option to purchase Shares (in each case, an "Option") granted under (a) the Company's Amended and Restated 1989 Stock Option Plan, as amended, and (b) the Company's Nonemployee Stock Option Plan, as amended, whether or not then exercisable, shall, subject to the Company's receipt of any required consent of the holders of such Options, be cancelled by the Company, and each holder of a cancelled Option shall be entitled to receive from the Purchaser (or, at the option of the Purchaser, from the Company, which will be reimbursed by the Purchaser) at the same time as payment for Shares is made by the Purchaser in connection with the Offer (or, with respect to any person subject to Section 16 of the Exchange Act, as soon as practicable after the first date payment can be made without liability to such person under Section 16(b) of the Exchange Act, in consideration for the cancellation of such Option, an amount in cash equal to the product of (i) the number of Shares previously subject to such Option and (ii) the excess, if any, of the amount per Share paid pursuant to the Offer over the exercise price per Share previously subject to such Option, less any required withholding taxes. Pursuant to the Merger Agreement, each share of common stock, $.01 par value per share, of the Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, $.01 par value per share, of the Surviving Corporation. The Merger Agreement provides that the directors of the Purchaser immediately prior to the Effective Time will be the initial directors of the Surviving Corporation and that the officers of the Company immediately prior to the Effective Time will be the initial officers of the Surviving Corporation. The Merger Agreement provides that, at the Effective Time, the Articles of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended as of the Effective Time by operation of the Merger Agreement and by virtue of the Merger without any further action by the shareholders or directors of the Surviving Corporation to read in their entirety as set forth on Annex B attached to the Merger Agreement. The Merger Agreement also provides that the Bylaws of the Purchaser, as in effect immediately prior to the Effective Time, will be the Bylaws of the Surviving Corporation until thereafter amended as provided by law, the Articles of Incorporation of the Surviving Corporation and such Bylaws. 16 Agreements of the Parent, K-III Prime, the Purchaser and the Company. Shareholders' Meeting. Pursuant to the Merger Agreement, the Company shall, in accordance with applicable law and the Company's Articles of Incorporation and Bylaws, (i) duly call, give notice of, convene and hold an annual or special meeting of its shareholders as soon as practicable following consummation of the Offer for the purpose of considering and taking action on the Merger Agreement and the transactions contemplated thereby and (ii) subject to the fiduciary obligations of the Board of Directors as advised by independent legal counsel, include in the Proxy Statement (as defined below) the recommendation of the Board of Directors that the shareholders of the Company approve and adopt the Merger Agreement and the transactions contemplated thereby, including, without limitation, the Merger, and the written opinion of Goldman Sachs, and use its reasonable best efforts to obtain such approval and adoption. To the extent permitted by law, the Parent, K-III Prime and the Purchaser each agree to vote all Shares beneficially owned by them in favor of the Merger. The Merger Agreement provides that, notwithstanding the foregoing, if and to the extent permitted by law, the Company agrees, at the request of the Purchaser, to take all necessary and appropriate action to cause the Merger to become effective as soon as reasonably practicable after the date on which the Purchaser shall have accepted for payment all shares validly tendered and not withdrawn pursuant to the Offer, without a meeting of the Company's shareholders, in accordance with the TBCA. Proxy Statement. The Merger Agreement provides that as promptly as practicable after the purchase of all Shares validly tendered and not withdrawn pursuant to the Offer, the Company shall file a proxy statement (the "Proxy Statement") to be sent to the shareholders of the Company with the Commission under the Exchange Act, and use its reasonable best efforts to have the Proxy Statement cleared by the Commission. Designation of Directors. The Merger Agreement provides that promptly upon the purchase by the Purchaser of Shares pursuant to the Offer, and from time to time thereafter, the Purchaser shall be entitled to designate up to such number of directors, rounded up to the next whole number, on the Board of Directors as shall give the Purchaser representation on the Board of Directors equal to the product of the total number of directors on the Board of Directors (giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Shares beneficially owned by the Purchaser or any affiliate of the Purchaser at such time bears to the total number of Shares then outstanding, and the Company shall, at such time, promptly take all actions necessary to cause the Purchaser's designees to be elected as directors of the Company, including increasing the size of the Board, or securing the resignations of incumbent directors, or both. At such times, the Company shall use its best efforts to cause persons designated by the Purchaser to constitute the same percentage as persons designated by the Purchaser shall constitute of the Board of Directors of (i) each committee of the Board of Directors (some of whom may be required to be independent as required by applicable law), (ii) each board of directors of each domestic subsidiary and (iii) each committee of each such board, in each case only to the extent permitted by applicable law. The Company's obligations to cause to be elected the Purchaser's Designees to the Board of Directors shall be subject to Section 14(f) of the Exchange Act, and Rule 14f-1 promulgated thereunder. Following the election or appointment of the Purchaser's Designees and prior to the Effective Time, any amendment of the Merger Agreement or the Articles of Incorporation or Bylaws of the Company, any termination of the Merger Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or the acts of the Parent, K-III Prime or the Purchaser or waiver of any of the Company's rights under the Merger Agreement shall require the concurrence of a majority of the directors of the Company then in office who are neither the Purchaser's Designees or employees of the Company or if no such directors are then in office, no such amendment, termination, extension or waiver shall be effected which is materially adverse to the holders of Shares (other than K-III Prime and its subsidiaries). 17 Access to Information; Confidentiality. Pursuant to the Merger Agreement, from the date of the Merger Agreement until the purchase by the Purchaser of any Shares pursuant to the Offer, the Company shall, and shall cause its subsidiaries, officers, directors, employees, auditors and other agents to, afford the officers, employees, auditors and other agents of K-III Prime, and financing sources who shall agree to be bound by the provisions of the Confidentiality Agreement (as hereinafter defined) as though a party thereto, complete access at all reasonable times to its officers, employees, agents, properties, offices, plants and other facilities and to all books and records, and shall furnish K-III Prime and such financing sources with all financial, operating and other data and information as K-III Prime, through its officers, employees or agents, or such financing sources may from time to time reasonably request. The Parent and K-III Prime have agreed to keep such information confidential in accordance with the terms of a Confidentiality Agreement dated as of January 31, 1996 (the "Confidentiality Agreement") entered into between the Company and the Parent. No Solicitation of Transactions. The Merger Agreement provides that the Company and its affiliates shall not, directly or indirectly, through any officer, director, agent or otherwise, solicit, initiate or encourage the submission of any proposal or offer from any person relating to any acquisition or purchase of all or any material portion of the assets of, or any equity interest in, the Company (or any subsidiary or division thereof) or any merger, consolidation, share exchange, business combination or other similar transaction with the Company (or any subsidiary or division thereof) or solicit, participate in or initiate any negotiations regarding, or furnish to any other person any information with respect to, or otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any other person to do or seek any of the foregoing; provided, however, that nothing contained in such section of the Merger Agreement shall prohibit the Company from furnishing information to, or entering into discussions or negotiations with, any person in connection with an unsolicited written proposal to the Company by such person to acquire the Company pursuant to a merger, consolidation, share exchange, business combination or other similar transaction or to acquire all or substantially all of the assets of the Company received by the Company after the date of the Merger Agreement, if, and only to the extent that, (a) the Board of Directors, as advised by independent legal counsel of Company and Goldman Sachs, determines in good faith that such action is required in order for the Board of Directors not to breach its fiduciary duties to shareholders imposed by law and (b) prior to furnishing such information to, or entering into discussions or negotiations with, such person, the Company (i) gives K-III Prime as promptly as practicable prior written notice (which shall include a copy of such written proposal except to the extent such disclosure would cause the Board of Directors to determine that such disclosure would be a breach of its fiduciary duties to shareholders imposed by law, as advised by independent legal counsel of the Company) of the Company's intention to furnish such information or begin such discussions and (ii) receives from such person an executed confidentiality agreement on terms no less favorable to the Company than those contained in the Confidentiality Agreement. Pursuant to the Merger Agreement, the Company also agreed not to release any third party from, or waive any provision of, any confidentiality or standstill agreement to which the Company is a party and that the Company and its affiliates immediately shall cease and cause to be terminated all existing discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. Indemnification and Insurance. The Merger Agreement provides that the Articles of Incorporation and Bylaws of the Surviving Corporation shall contain provisions no less favorable with respect to indemnification than are set forth in the Articles of Incorporation and Bylaws of the Company, which provisions shall not be amended, repealed or otherwise modified for a period of six (6) years from the Effective Time in any manner that would affect adversely the rights thereunder of individuals who at any time prior to the Effective Time were directors, officers or employees of the Company or any of its subsidiaries, unless such modification shall be required by law. The Merger Agreement provides that from and after the Effective Time, K-III Prime and the Surviving Corporation shall indemnify, defend and hold harmless each person who is now, or has been 18 at any time prior to the date of the Merger Agreement or who becomes prior to the Effective Time, an officer, director or employee of the Company or any of its subsidiaries (collectively, the "Indemnified Parties") against all losses, reasonable expenses (including reasonable attorneys' fees), claims, damages, liabilities or amounts that are paid in settlement of, with the approval of the Surviving Corporation (which approval shall not unreasonably be withheld), or otherwise in connection with, any threatened or actual claim, action, suit, proceeding or investigation (a "Claim"), based in whole or in part on or arising in whole or in part out of the fact that the Indemnified Party (or the person controlled by the Indemnified Party) is or was a director, officer or employee of the Company or any of its subsidiaries and pertaining to any matter existing or arising out of actions or omissions occurring at or prior to the Effective Time (including, without limitation, any Claim arising out of the Merger Agreement or any of the transactions contemplated thereby), whether asserted or claimed prior to, at or after the Effective Time, in each case to the fullest extent permitted under the TBCA, and shall pay any expenses, as incurred, in advance of the final disposition of any such action or proceeding to each Indemnified Party to the fullest extent permitted under the TBCA. In the event any such claim is brought against any of the Indemnified Parties, (a) such Indemnified Parties may retain counsel (including local counsel) satisfactory to them and which shall be reasonably satisfactory to K-III Prime and the Surviving Corporation and they shall pay all reasonable fees and expenses of such counsel for such Indemnified Parties; and (b) K-III Prime and the Surviving Corporation shall use all reasonable efforts to assist in the defense of any such Claim, provided that K-III Prime and the Surviving Corporation shall not be liable for any settlement effected without their written consent, which consent, however, shall not be unreasonably withheld. Further Action. The Merger Agreement provides that, upon its terms and subject to its conditions, each of the parties thereto shall use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by the Merger Agreement, including but not limited to (i) cooperation in the preparation and filing of the Offer Documents, the Solicitation/Recommendation Statement on Schedule 14D-9, the Proxy Statement, any required filings under the HSR Act, and other laws and (ii) using its reasonable best efforts to make all required regulatory filings and applications and to obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with the Company and its subsidiaries as are necessary for the consummation of the transactions contemplated by the Merger Agreement and to fulfill the conditions to the Offer and the Merger, including but not limited to the FCC Approvals. Postponement of Annual Meeting. The Merger Agreement provides that the Company shall as soon as possible after the date of the Merger Agreement indefinitely postpone its annual meeting of shareholders currently scheduled for May 22, 1996, and shall take no action unless compelled by legal process to reschedule such annual meeting or to call a special meeting of shareholders of the Company, except in accordance with the Merger Agreement, unless and until the Merger Agreement has been terminated in accordance with its terms. Conduct of Business. Pursuant to the Merger Agreement, the Company has covenanted and agreed that, between the date of the Merger Agreement and the election or appointment of the Purchaser's designees to the Board of Directors (as described in "Agreements of the Parent, K-III Prime, the Purchaser and the Company--Designation of Directors" above) upon the purchase by the Purchaser of any Shares pursuant to the Offer (the "Purchaser's Election Date"), unless K-III Prime shall otherwise agree in writing (which agreement shall not be unreasonably withheld), (1) the business of the Company and its subsidiaries shall be conducted only in, and the Company and its subsidiaries shall not take any action except in, the ordinary course of business and in a manner substantially consistent with past practice, (2) the Company shall use all reasonable efforts to preserve substantially intact its business organization, to keep available the services of the current officers, employees and consultants of the Company and its subsidiaries and to preserve the current relationships of the 19 Company and its subsidiaries with customers, suppliers and other persons with which the Company or any of its subsidiaries has significant business relations and (3) the Company shall not, and shall not permit any of its subsidiaries to: (a) amend or otherwise change its Articles of Incorporation or Bylaws; (b) issue, sell, pledge, dispose of, grant, encumber or authorize the issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares of capital stock of the Company or any of its subsidiaries of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of the Company (except for the Shares, if any, issuable under agreements currently in effect on the date of the Merger Agreement, the issuance of Rights pursuant to the Rights Agreement and shares of capital stock pursuant to Options or the Company's Employee Stock Purchase Plan), or (ii) any of the Company's or any of its subsidiaries' assets, except for sales in the ordinary course of business and in a manner consistent with past practice; (c) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock; (d) reclassify, combine, split, divide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock; (e) (i) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets) any interest in any corporation, partnership, other business organization or any division thereof or any assets (other than inventory, equipment and similar assets acquired in the ordinary course of business), (ii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person, or make any loans or advances, except for indebtedness in a principal amount not, in the aggregate, in excess of $500,000 and repayable without premium or penalty, (iii) enter into any contract or agreement material to the business, results of operations or financial condition of the Company other than in the ordinary course of business, consistent with past practice or enter into or amend any material contract, (iv) authorize any capital expenditure, other than certain permitted capital expenditures or (v) enter into or amend any contract, agreement, commitment or arrangement with respect to any matter set forth in this subsection (e); (f) (i) except for annual increases in compensation payable or to become payable to any officer or other employee of the Company or its subsidiaries consistent with past practices of the Company, increase the compensation payable or to become payable to any officer or other employee, or grant any bonus to, any officer or other employee, or (ii) except in certain circumstances, grant any severance or termination pay to, or enter into any employment or severance agreement with, any director, officer or other employee of the Company or any of its subsidiaries or enter into or amend any collective bargaining agreement, or (iii) establish, adopt, enter into or amend any bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation or other plan, trust or fund for the benefit of any director, officer or class of employees; (g) settle or compromise any pending or threatened litigation which is material or which relates to the transactions contemplated by the Merger Agreement; or (h) take any action that would result in (i) any event or events (whether or not covered by insurance), individually or in the aggregate, having a Material Adverse Effect (defined to mean any change or effect that is or is reasonably likely to be materially adverse to the financial condition, business or results of operations of any person and its subsidiaries, taken as a whole, or on the transactions contemplated by the Merger Agreement), (ii) any material change by the Company in its accounting methods, principles or practices, (iii) any entry by the Company or any of its subsidiaries into any commitment or transaction material to the Company, except in the ordinary course of business and consistent with past practice, (iv) any declaration, setting aside or payment of any dividend or distribution in respect of any capital stock of the Company or any redemption, purchase or other acquisition of any of the Company's or its subsidiaries' securities, (v) other than pursuant to certain employee benefit plans, any increase in or amendment to, or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option, stock purchase or other employee benefit plan, (vi) any general increase in compensation, bonus or other benefits payable to the employees of the Company or any of its subsidiaries or, except for increases in connection with periodic reviews and in amounts consistent with past practice, any specific increase in the compensation, bonus or other benefits payable to such employees, (vii) the payment of any bonus to the employees of the Company or its subsidiaries except 20 for bonuses accrued on the Company's balance sheet for the year ended December 31, 1995 or pursuant to certain bonus plans in effect as of the date of the Merger Agreement, (viii) the operation of the business of the Company and its subsidiaries other than in the ordinary course, consistent with past practice; (ix) any incurrence of indebtedness for borrowed money or assumption or guarantee of indebtedness for borrowed money by the Company or any of its subsidiaries (other than loans from the Company to any wholly owned subsidiary of the Company or from any wholly owned subsidiary to the Company or any other wholly owned subsidiary of the Company), or the granting of any lien on the assets of the Company or any of its subsidiaries to secure indebtedness for borrowed money, (x) any sale or transfer of any assets of the Company or any of its subsidiaries other than in the ordinary course of business and consistent with past practice or (xi) any loan, advance or capital contribution to or investment in any person in an aggregate amount in excess of $100,000 by the Company or any of its subsidiaries (excluding any loan, advance or capital contribution to, or investment in, the Company or any wholly owned subsidiary of the Company). Employee Benefits. Pursuant to the Merger Agreement, K-III Prime agrees that for a period of one year after the Purchaser's Election Date, the employees of the Company (and, after the Merger, the Surviving Corporation) and its subsidiaries will continue to be provided with benefits under employee benefit plans that are no less favorable in the aggregate than those currently provided by the Company and its subsidiaries to such employees; provided that it is understood and agreed that the failure to provide the benefits (other than benefits accrued prior to the termination of the applicable plan) of the Company's Amended and Restated 1989 Stock Option Plan, as amended, and the Company's Nonemployee Stock Option Plan, as amended, and the Company's Employee Stock Purchase Plan shall not be a breach of the Merger Agreement. Pursuant to the Merger Agreement, K-III Prime has agreed to cause the Company (and, after the Merger, the Surviving Corporation) to honor all employee benefit obligations to current and former employees and directors under the Company's employee benefit plans in existence on the date of the Merger Agreement and all employment or severance agreements entered into by the Company or adopted by the Board prior to the date of the Merger Agreement; provided, however, that nothing shall prevent K-III Prime or the Company (and, after the Merger, the Surviving Corporation) from taking any action with respect to such plans, obligations or agreements or refraining from taking any such action which is permitted or provided for under the terms thereof or under applicable law. K-III Prime has agreed that the employees of the Company (and, after the Merger, the Surviving Corporation) shall be given credit for all actual service with the Company and its subsidiaries under all employee benefit plans, programs and policies of the Surviving Corporation or K-III Prime in which they become participants for all purposes thereunder, except to the extent that such crediting would produce duplication of benefits. Guarantee by the Parent. Pursuant to the Merger Agreement, the Parent agreed to take all action necessary to cause K-III Prime and the Purchaser to perform all of their respective agreements, covenants and obligations under the Merger Agreement. The Parent shall be liable for any breach of any representation, warranty, agreement or covenant or obligation of K-III Prime or the Purchaser under the Merger Agreement to the extent K-III Prime or the Purchaser would be liable under the Merger Agreement. Representations and Warranties. The Merger Agreement contains various customary representations and warranties of the parties thereto including representations and warranties by the Company as to the absence of certain changes or events concerning the Company's business, compliance with law, litigation, employee benefit plans, labor matters, real property and leases, trademarks, patents and copyrights, environmental matters, brokers and taxes. 21 The Company also represented in the Merger Agreement that the Board of Directors and the Company have taken all necessary action to amend the terms of the Rights Agreement so that, as long as the Merger Agreement has not been terminated in accordance with its terms, (a) none of the execution or delivery of the Merger Agreement, the making of the Offer, the acquisition of Shares pursuant to the Offer or the consummation of the Merger will cause (i) the occurrence of a "Distribution Date" (as defined in the Rights Agreement), (ii) the Rights to become exercisable under the Rights Agreement, (iii) the Parent, K-III Prime or the Purchaser or any of their affiliates or associates to be deemed an "Acquiring Person" (as defined in the Rights Agreement) or (iv) the "Stock Acquisition Date" (as defined in the Rights Agreement) to occur upon any such event, (b) none of the acceptance for payment or payment for Shares by the Purchaser pursuant to the Offer will cause (i) the occurrence of a Distribution Date, (ii) the Rights to become exercisable under the Rights Agreement, (iii) the Parent, K-III Prime or the Purchaser or any of their affiliates or associates to be deemed an Acquiring Person or (iv) the Stock Acquisition Date to occur upon any such event and (c) the Rights shall expire no later than immediately prior to the purchase of Shares pursuant to the Offer. Conditions of the Merger. Under the Merger Agreement, the respective obligations of the Company, K-III Prime and the Purchaser to consummate the Merger are subject to the satisfaction of the following conditions and only the following conditions: (a) the Merger shall have been approved and adopted by the affirmative vote of the shareholders of the Company to the extent required by the TBCA and the Articles of Incorporation and Bylaws of the Company; (b) no governmental authority shall have enacted, issued, promulgated, enforced or entered any law, order, executive order, stay, decree, judgment, injunction or other order or statute, rule or regulation which is in effect and which has the effect of making the acquisition of Shares by the Parent, K-III Prime or the Purchaser or any affiliate of any of them illegal or otherwise preventing or prohibiting consummation of the transactions contemplated by the Merger Agreement; (c) any waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated; and (d) the Purchaser or its permitted assignee shall have purchased all Shares validly tendered and not withdrawn pursuant to the Offer; provided, however, that neither K-III Prime nor the Purchaser shall be entitled to assert the failure of this condition if, in breach of the Merger Agreement or the terms of the Offer, the Purchaser fails to purchase any Shares validly tendered and not withdrawn pursuant to the Offer. Termination; Fees and Expenses. The Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of the Merger Agreement and the transactions contemplated thereby as follows: (a) by mutual written consent duly authorized by the Boards of Directors of each of the Parent, K-III Prime, the Purchaser and the Company; (b) by K-III Prime if (i) due to an occurrence or circumstance that results in a failure to satisfy any condition set forth under the "Conditions of the Offer" above, the Purchaser shall have (A) failed to commence the Offer within 10 days following the date of the Merger Agreement, (B) terminated the Offer without having accepted any Shares for payment thereunder or (C) failed to pay for Shares pursuant to the Offer within 120 days following the commencement of the Offer, unless any such failure listed above shall have been caused by or resulted from the failure of the Parent, K-III Prime or the Purchaser to perform in any material respect any material covenant or agreement of either of them contained in the Merger Agreement or the material breach by the Parent, K-III Prime or the Purchaser of any material representation or warranty of any of them contained in the Merger Agreement, (ii) prior to the purchase of Shares pursuant to the Offer, (A) the Board of Directors withdraws or modifies (including by amendment of this Schedule 14D-9) in a manner adverse to the Purchaser its approval or recommendation of the Merger Agreement, the Offer or the Merger or shall have resolved to do so, 22 (B) the Board of Directors shall have recommended to the shareholders of the Company any Business Combination Transaction (as hereinafter defined) or resolved to do so, (C) the Minimum Condition shall not have been satisfied by the expiration date of the Offer and on or prior to such date any person (including the Company or any of its subsidiaries or affiliates), other than the Parent, K-III Prime or the Purchaser or any of their affiliates, shall have become the beneficial owner of 20% or more of the Shares, (D) there shall have been a breach of any representation or warranty on the part of the Company which would reasonably be expected to either have a Material Adverse Effect on the Company or prevent the consummation of the Offer or (E) there shall have been a breach of any covenant or agreement on the part of the Company which would reasonably be expected to either have a Material Adverse Effect on the Company or prevent the consummation of the Offer, which shall not have been cured prior to the earlier of (x) 10 days following notice of such breach and (y) two business days prior to the date on which the Offer expires or (iii) the Offer shall have remained open for at least 20 business days, the Minimum Condition shall not have been satisfied by the expiration date of the Offer and on or prior to such date any person (other than the Parent, K-III Prime or the Purchaser or any of their affiliates) shall have made (A) a public announcement or communication with respect to a Business Combination Transaction (as defined below) or (B) a bona fide proposal to consummate a Business Combination Transaction and the terms thereof shall have become public information; (c) by the Company if (i) the Purchaser shall have (A) failed to commence the Offer within 10 days following the date of the Merger Agreement, (B) terminated the Offer without having accepted any Shares for payment thereunder or (C) failed to pay for Shares pursuant to the Offer within 120 days following the commencement of the Offer, unless in the case of (A), (B), or (C) immediately above, such failure to pay for Shares shall have been caused by or resulted from the failure of the Company to satisfy the conditions set forth in paragraph (c) of Section 15; provided that any termination of the Merger Agreement by the Company pursuant to this provision shall not be effective until the Company has made payment of the Alternative Proposal Fee (as hereinafter defined) to the extent required by the Merger Agreement or (ii) prior to the purchase of Shares pursuant to the Offer, any person shall have made a bona fide offer to acquire the Company (A) that the Board of Directors has determined in its good faith judgment is more favorable to the Company's shareholders than the Offer and the Merger and (B) as a result of which the Board of Directors is obligated by its fiduciary duty under applicable law, as advised by independent legal counsel, to terminate the Merger Agreement, provided that any termination of the Merger Agreement by the Company pursuant to this provision shall not be effective until the Company has made payment of the Alternative Proposal Fee; or (d) by K-III Prime or the Company if any court of competent jurisdiction or other governmental body located or having jurisdiction within the United States or any country or economic region in which either K-III Prime or the Company, directly or indirectly, has material assets or operations, shall have issued a final order, decree or ruling or taken any other final action restraining, enjoining or otherwise prohibiting the Offer or the Merger and such order, decree, ruling or other action is or shall have become final and nonappealable. The Merger Agreement provides that the Company shall pay the Purchaser a fee (an "Alternative Proposal Fee") of $15,000,000, which amount is inclusive of all K-III Prime Expenses (as hereinafter defined): (i) within one business day following notice of termination of the Merger Agreement, if the Merger Agreement is terminated pursuant to paragraph (b)(ii)(A), (B) or (C) above, or paragraph (c)(ii) above, or if the Merger Agreement is terminated pursuant to paragraph (b)(ii)(D) or (E) above, as a result of Company's willful breach of the representation, warranty, covenant or agreement permitting such termination; (ii) within one business day following notice of termination of the Merger Agreement if the Merger Agreement is terminated pursuant to paragraph (c)(i) above in the event that at the time of such termination K-III Prime could have terminated the Merger Agreement under paragraph (b)(ii)(A), (B) or (C) above; or (iii) within one business day following the execution of any agreement or any occurrence, as the case may be, referred to in this clause (iii) if the Merger Agreement is terminated and (A) the Offer shall have remained open for at least 20 business days, (B) 23 the Minimum Condition shall not have been satisfied, (C) a Business Combination Transaction proposal shall have been made prior to termination of the Offer and (D) any Business Combination Transaction is thereafter consummated (or an agreement with respect thereto is entered into) within 12 months of such termination. As used herein, the term "Business Combination Transaction" shall mean any of the following involving the Company: (1) any merger, consolidation, share exchange, business combination or other similar transaction (other than the transactions contemplated by the Merger Agreement); (2) any sale, lease, exchange, transfer or other disposition (other than a pledge or mortgage) of 20% or more of the assets of the Company in a single transaction or series of related transactions; (3) the acquisition by a person or entity or any "group" (as such term is defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) of beneficial ownership of 20% or more of the Shares whether by tender offer, exchange offer or otherwise; (4) the adoption by the Company of a plan of liquidation or the declaration or payment of an extraordinary dividend; or (5) the repurchase by the Company or any of its subsidiaries of 20% or more of the outstanding Shares, other than a repurchase which was not approved by the Company or publicly announced prior to the termination of the Merger Agreement and which is not part of a series of transactions resulting in a change of control. (b) The Merger Agreement provides that K-III Prime shall be entitled to receive the K-III Prime Expenses (but not the Alternative Proposal Fee) in immediately available funds (not later than one business day after submission of statements therefor) in the event that the Merger Agreement is terminated by K-III Prime pursuant to paragraph (b)(i) above. "K-III Prime Expenses" means all out-of-pocket expenses and fees up to $5,000,000 actually incurred by K-III Prime or the Purchaser or on their respective behalf in connection with the transactions contemplated by the Merger Agreement prior to the termination of the Merger Agreement (including, without limitation, all fees and expenses of counsel, financial advisors, accountants, banks or other entities providing financing to the Purchaser (including financing, commitment and other fees payable thereto), accountants, environmental and other experts and consultants to the Purchaser and its affiliates, and all printing and advertising expenses) and in connection with the negotiation, preparation, execution, performance and termination of the Merger Agreement, the structuring of the transactions contemplated thereby, any agreements relating thereto and any filings to be made in connection therewith. Except as set forth above, all costs and expenses incurred in connection with the Merger Agreement shall be paid by the party incurring such expenses, whether or not any of the transactions contemplated by the Merger Agreement are consummated. 12. PURPOSE OF THE OFFER; THE MERGER; PLANS FOR THE COMPANY. Purpose. The purpose of the Offer is to acquire control of, and the entire equity interest in, the Company. The Offer is being made pursuant to the Merger Agreement. As promptly as practicable following consummation of the Offer and after satisfaction or waiver of all conditions to the Merger set forth in the Merger Agreement, the Purchaser intends to acquire the remaining equity interest in the Company not acquired in the Offer by consummating the Merger. Vote Required to Approve the Merger. The Board of Directors of the Company has approved and adopted the Merger and the Merger Agreement in accordance with the TBCA. The Board will be required to submit the Merger Agreement to the Company's shareholders for approval at a shareholder's meeting convened for that purpose in accordance with the TBCA. If shareholder approval is required, the Merger Agreement must generally be approved by the vote of the holders of a majority of the outstanding Shares. As a result, if the Minimum Condition is satisfied, the Purchaser will have the power, which it intends to exercise, to approve the Merger Agreement without the affirmative vote of any other shareholder. 24 Pursuant to the Merger Agreement, the Company has agreed, if and to the extent permitted by law, at the request of the Purchaser and subject to the terms of the Merger Agreement, to take all necessary and appropriate actions to cause the Merger to become effective as soon as reasonably practicable after the purchase of the Shares pursuant to the Offer, without a meeting of the Company's shareholders in accordance with the TBCA. Dissenters' Rights in Connection with the Offer. No appraisal rights are available in connection with the Offer. However, if the Merger is consummated, shareholders of the Company may have certain rights under the TBCA to dissent and demand appraisal of, and to receive payment in cash of the fair value of, their Shares. If the statutory procedures are complied with, such rights could lead to a judicial determination of the fair value (excluding any element of value arising from the accomplishment or expectation of the Merger) required to be paid in cash to such dissenting holders for their Shares. Any such judicial determination of the fair value of Shares could be based upon considerations other than or in addition to the consideration received in the Offer or the market value of the Shares, including asset values and the investment value of the Shares. The value so determined could be more than, the same as or less than the consideration received per Share pursuant to the Offer or the consideration per Share to be received in the Merger. Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act which is applicable to certain "going private" transactions and which may under certain circumstances be applicable to the Merger following the purchase of Shares pursuant to the Offer in which the Purchaser seeks to acquire any remaining Shares. Rule 13e-3 should not be applicable to the Merger if the Merger is consummated within one year after the expiration or termination of the Offer and the price paid in the Merger is not less than the per Share price paid pursuant to the Offer. However, in the event that the Purchaser is deemed to have acquired control of the Company pursuant to the Offer and if the Merger is consummated more than one year after completion of the Offer or an alternative acquisition transaction is effected whereby shareholders of the Company receive consideration less than that paid pursuant to the Offer, in either case at a time when the Shares are still registered under the Exchange Act, the Purchaser may be required to comply with Rule 13e-3 under the Exchange Act. If applicable, Rule 13e-3 would require, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the Merger or such alternative transaction and the consideration offered to minority shareholders in the Merger or such alternative transaction, be filed with the Commission and disclosed to shareholders prior to consummation of the Merger or such alternative transaction. The purchase of a substantial number of Shares pursuant to the Offer may result in the Company being able to terminate its Exchange Act registration. See Section 14. If such registration were terminated, Rule 13e-3 would be inapplicable to any such future Merger or such alternative transaction. Plans for the Company. The Parent does not have any current plans to dispose of any businesses or other assets of the Company or to effect any changes in its operations. Except as described in this Offer to Purchase, none of the Purchaser, K-III Prime, the Parent, the Partnerships or, to the best knowledge of the Purchaser, K-III Prime, the Parent and the Partnerships, any of the persons listed on Schedule I have any present plans or proposals that would relate to or result in an extraordinary corporate transaction such as a merger, reorganization or liquidation involving the Company or any of its subsidiaries or a sale or other transfer of a material amount of assets of the Company or any of its subsidiaries, any material change in the capitalization or dividend policy of the Company or any other material change in the Company's corporate structure or business or the composition of its Board of Directors or management. 13. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date of the Merger Agreement, the Company should, reclassify, combine, split, divide or redeem, purchase or otherwise acquire, directly or indirectly, or otherwise change the Shares or its capitalization, or disclose that it has taken any such action, then 25 without prejudice to the Purchaser's rights under Section 15, the Purchaser may make such adjustments to the purchase price and other terms of the Offer as it deems appropriate. If on or after the date of the Merger Agreement, the Company should declare or pay any cash or stock dividend or other distribution on, or issue any rights with respect to, the Shares that is payable or distributable to shareholders of record on a date prior to the transfer to the name of the Purchaser or the nominee or transferee of the Purchaser on the Company's stock transfer records of such Shares that are purchased pursuant to the Offer, then without prejudice to the Purchaser's rights under Section 15, (i) the purchase price payable per Share by the Purchaser pursuant to the Offer will be reduced to the extent any such dividend or distribution is payable in cash and (ii) any non-cash dividend, distribution (including additional Shares) or right received and held by a tendering shareholder shall be required to be promptly remitted and transferred by the tendering shareholder to the Depositary for the account of the Purchaser, accompanied by appropriate documentation of transfer. Pending such remittance or appropriate assurance thereof, the Purchaser will, subject to applicable law, be entitled to all rights and privileges as owner of any such non-cash dividend, distribution or right and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Purchaser in its sole discretion. 14. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, STOCK QUOTATION AND EXCHANGE ACT REGISTRATION. The purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and will reduce the number of holders of Shares. This could adversely affect the liquidity and market value of the remaining Shares held by the public. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the National Association of Securities Dealers, Inc. (the "NASD") for continued inclusion in the Nasdaq National Market, which require that an issuer have at least 200,000 publicly held shares, held by at least 400 shareholders or 300 shareholders of round lots, with a market value of at least $1,000,000 and have net tangible assets of at least $1,000,000, $2,000,000 or $4,000,000, depending on profitability levels during the issuer's four most recent fiscal years. If these standards are not met, the Shares might nevertheless continue to be included in the NASD's Nasdaq Stock Market (the "Nasdaq Stock Market") with quotations published in the Nasdaq "additional list" or in one of the "local lists", but if the number of holders of the Shares were to fall below 300, or if the number of publicly held Shares were to fall below 100,000 or there were not at least two registered and active market makers for the Shares, the NASD's rules provide that the Shares would no longer be "qualified" for Nasdaq Stock Market reporting and the Nasdaq Stock Market would cease to provide any quotations. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Shares are not considered as being publicly held for this purpose. According to the Form 10-K, as of March 15, 1996, there were approximately 5,000 holders of record or through nominee or street name accounts with brokers of Shares and there were 19,805,330 Shares outstanding. If as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet the requirements of the NASD for continued inclusion in the Nasdaq National Market or in any other tier of the Nasdaq Stock Market and the Shares are no longer included in the Nasdaq National Market or in any other tier of the Nasdaq Stock Market, as the case may be, the market for the Shares could be adversely affected. In the event that the Shares no longer meet the requirements of the NASD for continued inclusion in any tier of the Nasdaq Stock Market, it is possible that the Shares would continue to trade in the over-the-counter market and that price quotations would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend upon the number of holders of Shares remaining at such time, the interests in maintaining a market in Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act, as described below, and other factors. The Shares are currently registered under the Exchange Act. The purchase of Shares pursuant to the Offer may result in the Shares becoming eligible for deregistration under the Exchange Act. 26 Registration of the Shares may be terminated upon application of the Company to the Commission if the Shares are not listed on a national securities exchange and there are fewer than 300 record holders. The termination of the registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of the Shares and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with shareholders' meetings and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Shares. Furthermore, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of the securities pursuant to Rule 144 under the Securities Act of 1933. The Shares are currently "margin securities" under the rules of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such Shares for the purpose of buying, carrying, or trading in securities ("purpose loans"). Depending upon factors similar to those described above with respect to listing and market quotations, it is possible that, following the Offer, the Shares might no longer constitute "margin securities" for the purposes of the Federal Reserve Board's margin regulations and therefore could no longer be used as collateral for purpose loans made by brokers. 15. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer, the Purchaser shall not be required to accept for payment or pay for any Shares tendered pursuant to the Offer, and may terminate or amend the Offer (whether or not any Shares have theretofore been purchased or paid for) and may postpone the acceptance for payment of and payment for shares tendered, if, immediately prior to the expiration of the Offer, (i) the Minimum Condition shall not have been satisfied, (ii) any applicable waiting period under the HSR Act shall not have expired or been terminated, or any material approval, permit, authorization, consent or waiting period of any domestic or foreign or supranational governmental, administrative or regulatory agency (federal, state, local, provincial or otherwise) located or having jurisdiction within the United States or any country or economic region in which either the Company or K-III Prime, directly or indirectly, has material assets or operations (it being understood that such material approvals shall include the FCC Consent), shall not have been obtained or satisfied on terms satisfactory to K-III Prime in its reasonable discretion or (iii) at any time on or after the date of the Merger Agreement, and prior to the acceptance for payment of Shares, any of the following conditions shall exist: (a) there shall have been any action or proceeding brought by any Governmental Authority before any federal or state court, or any order or preliminary or permanent injunction entered in any action or proceeding before any federal or state court or governmental, administrative or regulatory authority or agency, located or having jurisdiction within the United States or any country or economic region in which either the Company or K-III Prime, directly or indirectly, has material assets or operations, or any other action taken, proposed or threatened, or statute, rule, regulation, legislation, interpretation, judgment or order proposed, sought, enacted, entered, enforced, promulgated, amended, issued or deemed applicable to K-III Prime, the Company or any subsidiary or affiliate of K-III Prime or the Company or the Offer or the Merger, by any legislative body, court, government or governmental, administrative or regulatory authority or agency located or having jurisdiction within the United States or any country or economic region in which either the Company or K-III Prime, directly or indirectly, has material assets or operations, which could reasonably be expected to have the effect of: (i) making illegal, or otherwise directly or indirectly restraining or prohibiting or making materially more costly, the making of the Offer, the acceptance for payment of, payment for, or ownership, directly or indirectly, of some of or all the Shares by K-III Prime or the Purchaser, the consummation of any of the transactions contemplated by the Merger Agreement or materially delaying the merger; (ii) prohibiting or materially limiting the ownership or operation by the Company or any of its Subsidiaries, or by K-III Prime, the Purchaser or any of K-III Prime's subsidiaries of all or any material portion of the business or 27 assets of the Company or any of its material subsidiaries or K-III Prime or any of its subsidiaries, or compelling the Purchaser, K-III Prime or any of K-III Prime's subsidiaries to dispose of or hold separate all or any material portion of the business or assets of the Target or any of its material subsidiaries or K-III Prime or any of its subsidiaries, as a result of the transactions contemplated by the Offer or the Merger Agreement; (iii) imposing or confirming limitations on the ability of the Purchaser, K-III Prime or any of K-III Prime's subsidiaries effectively to acquire or hold or to exercise full rights of ownership of Shares, including, without limitation, the right to vote any Shares acquired or owned by K-III Prime or the Purchaser or any of K-III Prime's subsidiaries on all matters properly presented to the shareholders of the Company, including, without limitation, the adoption and approval of the Merger Agreement and the Merger or the right to vote any shares of capital stock of any subsidiary (other than immaterial subsidiaries) directly or indirectly owned by the Company; (iv) requiring divestiture by K-III Prime or the Purchaser, directly or indirectly, of any Shares; or (v) which would reasonably be expected to materially adversely affect the business, financial condition or results of operations of the Company and its subsidiaries taken as a whole or the value of the Shares or of the Offer to the Purchaser or K-III Prime; (b) (i) it shall have been publicly disclosed or the Purchaser shall have otherwise learned that beneficial ownership (determined for the purposes of this paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the then outstanding Shares has been acquired by any person or entity or any "group" (as such term is defined under Section 13(d) of the Exchange Act), other than K-III Prime or any of its affiliates or (ii) (A) the Board shall have withdrawn or modified in a manner adverse to Parent, K-III Prime or the Purchaser the approval or recommendation of the Offer, the Merger or the Merger Agreement or approved or recommended any takeover proposal or any other acquisition of Shares other than the Offer and the Merger, (B) any such person or other entity or group shall have entered into a definitive agreement or an agreement in principle with the Company with respect to a tender offer or exchange offer for any Shares or a merger, consolidation or other business combination with or involving the Company or any of its subsidiaries or (C) the Board shall have resolved to do any of the foregoing; (c) the Company shall have failed to perform in any material respect any material obligation of the Company to be performed or complied with by it prior to the Tender Offer Acceptance Date (as defined in the Merger Agreement) or any representation of warranty of the Company in the Merger Agreement shall not be true and correct and the failure to be true and correct shall have a Material Adverse Effect on the Company, provided, however, in determining whether a Material Adverse Effect has occurred, any qualifications as to materiality contained in any such representation and warranty shall be deemed not to apply; (d) the Merger Agreement shall have been terminated in accordance with its terms; (e) the Purchaser and the Company shall have agreed that the Purchaser shall terminate or amend the Offer; or (f) there shall have occurred, or the Purchaser shall have become aware of any fact that would be reasonably expected to have a Material Adverse Effect on the Company; (g) there shall have occurred (i) any general suspension of, or limitation on prices for, or trading in securities on any national securities exchange; (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States; (iii) any limitation (whether or not mandatory) by any United States federal or state government or governmental, administrative or regulatory authority or agency, on, or any other event that could reasonably be expected to materially adversely affect the extension of credit by banks or other lending institutions; (iv) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States that could reasonably be expected to have a material adverse effect on the Company or materially adversely affect (or materially delay) the 28 consummation of the Offer; (v) any extraordinary or material adverse change in the United States securities or financial markets generally from the date hereof, including, without limitation, a decline as of any day and as of ten trading days after such day, of at least 35% in either the Dow Jones Average of Industrial Stocks or the Standard & Poor's 400 index from the date hereof; or (vi) in the case of any of the foregoing existing at the time of commencement of the Offer, a material acceleration or worsening thereof; (h) the Board of Directors of the Company shall not have been increased from six to eight members; three of the existing Company directors shall not have resigned effective as of the date the Purchaser purchases any Shares pursuant to the Offer; and three designees of K-III Prime (to the extent designated by K-III Prime) shall not have been validly designated by the existing directors as of the date the Purchaser purchases any Shares pursuant to the Offer to fill such vacancies; (i) the Company shall have, after the date of the Merger Agreement, issued, sold or granted or authorized the issuance, sale or grant of any shares of the capital stock of the Company or any subsidiary of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of the Company (except for shares of the Company Common Stock issuable upon the exercise of options described in clauses (a) and (b) of Section 2.07 of the Merger Agreement which were outstanding on the date of the Merger Agreement or pursuant to the Company's Employee Stock Purchase Plan); which, in the reasonable judgment of the Purchaser with respect to each and every matter referred to above and regardless of the circumstances (including any action or inaction by the Purchaser or any of its affiliates not inconsistent with the terms hereof) giving rise to any such condition, makes it inadvisable to proceed with the Offer or with such acceptance for payment of or payment for Shares or to proceed with the Merger. The foregoing conditions are for the sole benefit of the Purchaser and K-III Prime and may be asserted by the Purchaser or K-III Prime regardless of the circumstances giving rise to any such condition (including any action or inaction by K-III Prime or the Purchaser not inconsistent with the terms hereof) or may be waived by the Purchaser or K-III Prime in whole or in part at any time and from time to time in their sole discretion. The failure by K-III Prime or the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. A public announcement will be made of a material change in, or waiver of, such conditions, to the extent required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act, and the Offer will be extended in connection with any such change or waiver to the extent required by such rules. 16. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS. General. Except as set forth below, based upon its examination of publicly available filings by the Company with the Commission and other publicly available information concerning the Company and the review of certain information furnished by the Company to the Parent and discussions of representatives of the Parent with representatives of the Company during the Parent's investigation of the Company, none of the Purchaser, K-III Prime nor the Parent is aware of any licenses or other regulatory permits that appear to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the Purchaser's acquisition of Shares (and the indirect acquisition of the stock of the Company's subsidiaries) as contemplated herein, or of any filings, approvals or other actions by or with any domestic (federal or state), foreign or supranational governmental authority or administrative or regulatory agency that would be required prior to the acquisition of Shares (or the indirect acquisition of the stock of the 29 Company's subsidiaries) by the Purchaser pursuant to the Offer as contemplated herein. Should any such approval or other action be required, it is the Purchaser's present intention to seek such approval or action. However, except as set forth herein, the Purchaser does not presently intend to delay the purchase of Shares tendered pursuant to the Offer pending the receipt of any such approval or the taking of any such action (subject to the Purchaser's right to delay or decline to purchase Shares if any of the conditions in Section 15 shall not have been satisfied). There can be no assurance that any such approval or other action, if needed, would be obtained without substantial conditions or that adverse consequences might not result to the business of the Company or that certain parts of the business of the Company might not have to be disposed of or held separate or other substantial conditions complied with in order to obtain such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, the Purchaser could elect to terminate the Offer without the purchase of the Shares thereunder. See Section 15. Antitrust. Under the HSR Act and the rules that have been promulgated thereunder by the Federal Trade Commission (the "FTC"), certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the "Antitrust Division") and the FTC and certain waiting period requirements have been satisfied. The acquisition of Shares pursuant to the Offer is subject to such requirements. See Section 2. The Parent intends to file on the date hereof with the FTC and the Antitrust Division a Premerger Notification and Report Form in connection with the purchase of Shares pursuant to the Offer. Under the provisions of the HSR Act applicable to the Offer, the purchase of Shares pursuant to the Offer may not be consummated until the expiration of a 15-calendar day waiting period following the filing by the Parent. Accordingly, the waiting period under the HSR Act applicable to such purchases of Shares pursuant to the Offer will expire at 11:59 p.m., New York City time, on Saturday, May 11, 1996, unless such waiting period is extended by a request from the FTC or the Antitrust Division for additional information or documentary material prior to the expiration of the waiting period. If either the FTC or the Antitrust Division were to request additional information or documentary material from the Parent, the waiting period would expire at 11:59 p.m., New York City time, on the tenth calendar day after the date of substantial compliance by the Parent with such request. Thereafter, the waiting period could be extended only by court order. If the acquisition of Shares is delayed pursuant to a request by the FTC or the Antitrust Division for additional information or documentary material pursuant to the HSR Act, the Offer may, but need not, be extended and in any event the purchase of and payment for Shares will be deferred until ten days after the request is substantially complied with, unless the waiting period is sooner terminated by the FTC and the Antitrust Division. See Section 2. Only one extension of such waiting period pursuant to a request for additional information is authorized by the HSR Act and the rules promulgated thereunder, except by court order. Any such extension of the waiting period will not give rise to any withdrawal rights not otherwise provided for by applicable law. See Section 4. Although the Company is required to file certain information and documentary material with the Antitrust Division and the FTC in connection with the Offer, neither the Company's failure to make such filings nor a request from the Antitrust Division or the FTC for additional information or documentary material made to the Company will extend the waiting period. The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as the proposed acquisition of Shares by the Purchaser pursuant to the Offer. At any time before or after the purchase by the Purchaser of Shares pursuant to the Offer, either of the FTC and the Antitrust Division could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or seeking the divestiture of Shares purchased by the Purchaser or the divestiture of substantial assets of the Parent, its subsidiaries or the Company. Private parties and state attorneys general may also bring legal action under federal or state antitrust laws under certain circumstances. 30 FCC Approval and Regulation. The Company and one of its subsidiaries hold licenses to operate and control transmit/receive domestic fixed satellite earth stations that are issued by and subject to regulation by the FCC. The Communications Act requires the prior approval of the FCC before the control of the earth stations may be transferred. An application will be filed with the FCC to seek such authority to transfer control of these earth stations from the Company to the Parent. By regulation, the acceptance of the application for filing will be announced by public notice, which will provide interested parties a 30-day period to file comments or objections to the proposed transfer. In the absence of opposition, FCC approval of the transfer would be expected in approximately 60 days. Any opposition could delay the projected approval process. Upon grant of the transfer, the FCC will issue a public notice announcing that the application was approved. Interested parties may petition for reconsideration of the grant within 30 days of the public notice announcing the grant. The FCC may reconsider the grant on its own motion within 40 days after issuance of the public notice. The order approving the transfer will then become "final," i.e., no longer subject to administrative or judicial review, upon close of the 40-day period following publication of the public notice announcing the grant, provided no timely petition for reconsideration has been filed and the FCC has not on its own motion sought such reconsideration. Margin Credit Regulations. Federal Reserve Board Regulations G, T, U and X (the "Margin Credit Regulations") restrict the extension or maintenance of credit for the purpose of buying or carrying margin stock, including the Shares, if the credit is secured directly or indirectly thereby. Such secured credit may not be extended or maintained in an amount that exceeds the maximum loan value of the margin stock. Under the Margin Credit Regulations, the Shares are presently margin stock and the maximum loan value thereof is generally 50% of their current market value. The definition of "indirectly secured" contained in the Margin Credit Regulations provides that the term does not include an arrangement with a customer if the lender in good faith has not relied upon margin stock as collateral in extending or maintaining the particular credit. 17. FEES AND EXPENSES. Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") is acting as Dealer Manager in connection with the Offer and serving as financial advisor to the Parent, K-III Prime and the Purchaser in connection with the transactions pursuant to the Merger Agreement. The Parent has paid to DLJ, in its capacity as Dealer Manager, a fee of $500,000 and has agreed to pay to DLJ, in its capacity as financial advisor, an additional fee of $2.5 million upon the consummation of the acquisition of the Company, in one or a series of transactions, by merger, consolidation or any other business combination, by purchase involving all or a substantial amount of the business, securities or assets of the Company or otherwise. The Parent and the Purchaser will also reimburse DLJ for all out-of-pocket expenses, including reasonable attorneys' fees, and have also agreed to indemnify DLJ against certain liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities laws. The Purchaser has retained Georgeson & Company Inc. to act as the Information Agent and The Bank of New York to act as the Depositary in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telegraph and personal interview and may request brokers, dealers and other nominee stockholders to forward the Offer materials to beneficial owners. The Information Agent and the Depositary will receive reasonable and customary compensation for services relating to the Offer and will be reimbursed for certain out-of-pocket expenses. The Purchaser and the Parent have also agreed to indemnify the Information Agent and the Depositary against certain liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities laws. The Purchaser will not pay any fees or commissions to any broker or dealer or any other person for soliciting tenders of Shares pursuant to the Offer (other than to the Dealer Manager, the Information Agent and the Depositary). Brokers, dealers, commercial banks and trust companies will, upon request, 31 be reimbursed by the Purchaser for customary mailing and handling expenses incurred by them in forwarding offering materials to their customers. 18. MISCELLANEOUS. The Offer is being made solely by this Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares. The Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If the Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, the Purchaser will make a good faith effort to comply with any such state statute. If after such good faith effort, the Purchaser cannot comply with such state statute, the Offer will not be made to nor will tenders be accepted from or on behalf of the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by the Dealer Manager or one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. The Purchaser and the Parent have filed with the Commission a Schedule 14D-1 (including exhibits) pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional information with respect to the Offer. Such statement and any amendments thereto, including exhibits, may be inspected and copies may be obtained from the offices of the Commission (except that they will not be available at the regional offices of the Commission) in the manner set forth in Section 7 of this Offer to Purchase. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER OR THE PARENT NOT CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. K-III Acquisition Corp. April 26, 1996 32 SCHEDULE I CERTAIN INFORMATION REGARDING THE DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER, K-III PRIME AND THE PARENT AND THE GENERAL PARTNERS OF KKR ASSOCIATES 1. Directors and Executive Officers of the Purchaser. The name and position with the Purchaser of each director and executive officer of the Purchaser are set forth below. The other required information with respect to each such person is set forth under "Directors and Executive Officers of the Parent" below. All directors and executive officers listed below and in the other Sections of this Schedule I are citizens of the United States. NAME POSITION --- -------- William F. Reilly............ Chairman of the Board, President and Director Charles G. McCurdy........... Senior Vice President, Treasurer and Director Beverly C. Chell............. Senior Vice President, Secretary and Director 2. Directors and Executive Officers of K-III Prime. The name and position with K-III Prime of each director and executive officer of K-III Prime are set forth below. The other required information with respect to each such person is set forth under "Directors and Executive Officers of the Parent" below. NAME POSITION --- -------- William F. Reilly............. Chairman, Chief Executive Officer and Director Charles G. McCurdy............ Vice Chairman, President and Director Beverly C. Chell.............. Vice Chairman, Secretary and Director Curtis A. Thompson............ Vice President and Controller Michaelanne C. Discepelo...... Vice President Douglas B. Smith.............. Treasurer 3. Directors and Executive Officers of the Parent. The name, business address, present principal occupation or employment and material occupations, positions, offices or employments during the last five years of each director and executive officer of the Parent and certain other information are set forth below. The business address of Messrs. Kravis, Tokarz and Golkin is 9 West 57th Street, New York, New York 10019 and of Mr. Roberts is 2800 Sand Hill Road, Suite 200, Menlo Park, California 94025. The business address of each other director and executive officer is 745 Fifth Avenue, New York, New York 10151. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with the Parent.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES NAME OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS ---- --------------------------------------------- William F. Reilly............. Chairman of the Board, Chief Executive Officer and Director (and served in such capacities with its predecessors); director of FMC Corporation. Henry R. Kravis............... Director since November 1991; Founding Partner of KKR and KKR Associates; effective January 1, 1996 he became a member of the limited liability company which serves as the general partner of KKR; director of American Re Corporation, AutoZone, Inc., Duracell International Inc., IDEX Corporation, Owens-Illinois, Inc., Owens-Illinois Group, Inc., Flagstar Companies Inc., Safeway, Inc., The Stop &
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES NAME OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS ---- --------------------------------------------- Shop Companies, Inc., Flagstar Corporation, Union Texas Petroleum Holdings, Inc., World Color Press, Inc. and Borden Inc. George R. Roberts............. Director since March 1992; Founding Partner of KKR and KKR Associates; effective January 1, 1996 he became a member of the limited liability company which serves as the general partner of KKR; director of American Re Corporation, AutoZone, Inc., Duracell International Inc., IDEX Corporation, Owens-Illinois, Inc., Owens-Illinois Group, Inc., Safeway, Inc., The Stop and Shop Companies, Inc., Flagstar Companies Inc., Flagstar Corporation, Union Texas Petroleum Holdings, Inc., World Color Press, Inc. and Borden Inc. Michael T. Tokarz............. Director since November 1991; General Partner of KKR Associates; General Partner of KKR from January 1, 1993 until January 1, 1996 when he became a member of the limited liability company which serves as the general partner of KKR; executive at KKR prior to 1993; director of IDEX Corporation, Safeway, Inc., Flagstar Companies Inc., Flagstar Corporation and Walters Industries, Inc. Perry Golkin.................. Director since November 1991; General Partner of KKR Associates; General Partner of KKR from January 1, 1995 until January 1, 1996 when he became a member of the limited liability company which serves as the general partner of KKR; executive at KKR prior to 1995; director of American Re Corporation and Walters Industries, Inc. Charles G. McCurdy............ President and Director since November 1991; Treasurer from 1991 to August 1993 (and served in such capacity with its predecessors). Beverly C. Chell.............. Director since March 1992; Vice Chairman, General Counsel and Secretary since November 1991 (and served in such capacity with its predecessors); Vice President, General Counsel and Secretary of Macmillan Publishing Company ("Macmillan") prior thereto. Harry A. McQuillen............ Executive Vice President (since December 1995), President- Media Group since December of 1992; President of K-III Magazine Corporation since November 1991; Vice President of the Parent from May 1992 through December 1995; President of Macmillan and a Vice President at Macmillan prior thereto. Jack L. Farnsworth............ Vice President, President-Information Group since May 1992; President of K-III Information Group since May 1992; President of Daily Racing Form since April 1992; President of Simon & Schuster Higher Education Group from August 1990 to February 1992; Vice President at Macmillan in charge of educational publications prior thereto. Pedro F. Mata................. Vice President, President-Education Group since November 1995; previously the Senior Vice President of W.R. Grace & Co. and President and CEO of Grace Cocoa. George Philips................ Vice President since May 1992, President-Reference Group since March 1992; President of P.F. Collier, Inc. and Vice President at Macmillan prior to that time.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES NAME OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS ---- --------------------------------------------- Curtis A. Thompson............ Vice President and Controller since November 1991; served as Vice President and Controller of each of the subsidiaries of the Parent since August 1989 until other persons assumed the office of Controller at certain of the subsidiaries; prior to that time, Vice President and Controller and Chief Financial Officer of The Michie Company. Michaelanne C. Discepolo...... Vice President since January 1993; joined the Parent in March 1991 as Director of Human Resources; Director of Benefits with Macmillan prior thereto. Douglas B. Smith.............. Treasurer since August 1993; at The Bank of New York in various positions prior thereto, including Senior Vice President prior to joining the Parent.
4. General Partners of KKR Associates. The name, business address, present principal occupation or employment and material occupations, positions, offices or employments during the last five years of the general partners of KKR Associates (other than Messrs. Kravis, Tokarz, Golkin and Roberts, as to each of whom information is set forth above in Section 3 of this Schedule I) and certain other information are set forth below. The business address of Messrs. Raether, Robbins and Stuart is 9 West 57th Street, Suite 4200, New York, New York 10019. The business address of each other general partner is 2800 Sand Hill Road, Suite 200, Menlo Park, CA 94025. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with KKR.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES NAME OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS ---- --------------------------------------------- Robert I. MacDonnell.......... General Partner of KKR until January 1, 1996 when he became a member of the limited liability company which serves as the general partner of KKR; director of AutoZone, Inc., Owens-Illinois, Inc., Owens-Illinois Group, Inc., Safeway, Inc. and The Vons Companies, Inc. Paul E. Raether............... General Partner of KKR until January 1, 1996 when he became a member of the limited liability company which serves as the general partner of KKR; director of Bruno's Inc., Duracell International Inc., Fred Meyer, Inc., IDEX Corporation, The Stop & Shop Companies, Inc., Flagstar Companies Inc. and Flagstar Corporation. Michael W. Michelson.......... General Partner of KKR until January 1, 1996 when he became a member of the limited liability company which serves as the general partner of KKR; director of AutoZone, Inc., Fred Meyer, Inc., Owens-Illinois, Inc., Owens-Illinois Group, Inc., Red Lion Hotels, Inc., Red Lion Properties and Union Texas Petroleum Holdings, Inc. Saul A. Fox................... General Partner of KKR until January 1, 1996 when he became a member of the limited liability company which serves as the general partner of KKR; director of American Re Corporation, Fred Meyer, Inc., Layne, Inc. and Union Texas Petroleum Holdings, Inc. James H. Greene, Jr. ......... General Partner of KKR from January 1, 1993 until January 1, 1996 when he became a member of the limited liability com- pany which serves as the general partner of KKR; executive at KKR prior to 1993; director of Bruno's Inc., Owens-Illinois, Inc., Owens-Illinois Group, Inc., Safeway, Inc., The Stop & Shop Companies, Inc., Union Texas Petroleum Holdings, Inc. and the Vons Companies, Inc.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES NAME OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS ---- --------------------------------------------- Edward A. Gilhuly............. General Partner of KKR from January 1, 1995 until January 1, 1996 when he became a member of the limited liability com- pany which serves as the general partner of KKR; executive at KKR prior to 1995; Director of Layne, Inc., Merit Behavioral Care Corp., Owens-Illinois, Inc., Owens-Illinois Group, Inc., Red Lion Hotels, Inc., Red Lion Properties, Inc. and Union Texas Petroleum Holdings, Inc. Clifton S. Robbins............ General Partner of KKR from January 1, 1995 until January 1, 1996 when he became a member of the limited liability com- pany which serves as the general partner of KKR; executive at KKR prior to 1995; director of Borden, Inc., IDEX Corporation, The Stop & Shop Companies, Inc., Flagstar Companies Inc. and Flagstar Corporation. Scott Stuart.................. General Partner of KKR from January 1, 1995 until January 1, 1996 when he became a member of the limited liability com- pany which serves as the general partner of KKR; executive at KKR prior to 1995; director of Borden, Inc., Duracell International Inc. and World Color Press, Inc.
I-4 Facsimile copies of the Letter of Transmittal, properly completed and duly executed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each shareholder of the Company or his broker, dealer, commercial bank, trust company or other nominee to the Depositary as follows: The Depositary for the Offer is: The Bank of New York ------------------- By Mail: By Facsimile Transmission: By Hand or Overnight Delivery: Tender & Exchange Department (for Eligible Institutions only) Tender & Exchange Department P.O. Box 11248 (212) 815-6213 101 Barclay Street Church Street Station For Information Telephone: Receive and Delivery Window New York, NY 10286-1248 (800) 507-9357 New York, NY 10286
Any questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective telephone numbers and addresses listed below. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may also be obtained from the Information Agent or the Dealer Manager. You may also contact your broker, dealer, commercial bank or trust company for assistance concerning the Offer. The Information Agent for the Offer is: [LOGO] Wall Street Plaza New York, NY 10005 Banks and Brokers Call Collect: (212) 440-9800 ALL OTHERS CALL TOLL-FREE: (800) 223-2064 The Dealer Manager for the Offer is: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION 277 Park Avenue New York, New York 10172 (212) 892-7700 (Call Collect) EX-11.(A)(2) 3 Exhibit 11(a)(2) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF WESTCOTT COMMUNICATIONS, INC. PURSUANT TO THE OFFER TO PURCHASE DATED APRIL 26, 1996 BY K-III ACQUISITION CORP. AN INDIRECT, WHOLLY OWNED SUBSIDIARY OF K-III COMMUNICATIONS CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MAY 23, 1996, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: The Bank of New York By Mail: By Facsimile Transmission: By Hand or Overnight Delivery: Tender & Exchange Department (for Eligible Institutions only) Tender & Exchange Department P.O. Box 11248 (212) 815-6213 101 Barclay Street Church Street Station Confirm by Telephone: Receive and Delivery Window New York, NY 10286-1248 (800) 507-9357 New York, NY 10286
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by shareholders either if certificates for Shares (as defined below) are to be forwarded herewith or, unless an Agent's Message (as defined in Section 2 of the Offer to Purchase (as defined below)) is utilized, if tenders of Shares are to be made by book-entry transfer into the account of The Bank of New York, as Depositary (the "Depositary"), at The Depository Trust Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 3 of the Offer to Purchase. Shareholders who tender Shares by book-entry transfer are referred to herein as "Book-Entry Shareholders". Holders of Shares whose certificates for such Shares (the "Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase), or who cannot complete the procedure for book-entry transfer on a timely basis, must tender their Shares according to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. DESCRIPTION OF SHARES TENDERED NAME(S) & ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS SHARES CERTIFICATE(S) AND SHARE(S) TENDERED NAME(S) APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) TOTAL NUMBER SHARE OF SHARES NUMBER OF CERTIFICATE REPRESENTED BY SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** -------------------------------------------- -------------------------------------------- -------------------------------------------- Total Shares..................
* Need not be completed by Book-Entry Shareholders. ** Unless otherwise indicated, all Shares represented by certificates delivered to the Depositary will be deemed to have been tendered. See Instruction 4. / / CHECK HERE IF SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution............................................... Check box of Book-Entry Transfer Facility (check one): / / The Depository Trust Company / / Philadelphia Depository Trust Company Account Number ....................... Transaction Code Number............ / / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s):............................................. Window Ticket Number (if any):.............................................. Date of Execution of Notice of Guaranteed Delivery:......................... Name of Institution that Guaranteed Delivery:............................... If delivered by Book-Entry Transfer, check box of Book-Entry Transfer Facility (check one): / / The Depository Trust Company / / Philadelphia Depository Trust Company Account Number ....................... Transaction Code Number............ NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to K-III Acquisition Corp., a Texas corporation (the "Purchaser") and a direct, wholly owned subsidiary of K-III Prime Corporation, a Delaware corporation and a direct, wholly owned subsidiary of K-III Communications Corporation, a Delaware corporation (the "Parent"), the above-described shares of Common Stock, $.01 par value per share (the "Shares"), of Westcott Communications, Inc., a Texas corporation (the "Company"), at a purchase price of $21.50 per Share, net to the seller in cash without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated April 26, 1996 (the "Offer to Purchase") and in this Letter of Transmittal (which together constitute the "Offer"). The undersigned understands that the Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, receipt of which is hereby acknowledged. Subject to, and effective upon, acceptance for payment for the Shares tendered herewith in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all of the Shares that are being tendered hereby and any and all dividends, distributions (including additional Shares) or rights declared, paid or issued with respect to the tendered Shares on or after April 22, 1996, and payable or distributable to the undersigned on a date prior to the transfer to the name of the Purchaser or nominee or transferee of the Purchaser on the Company's stock transfer records of the Shares tendered herewith (collectively, a "Distribution"), and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and any Distribution) with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) to (a) deliver such Share Certificates (as defined herein) (and any Distribution) or transfer ownership of such Shares (and any Distribution) on the account books maintained by a Book-Entry Transfer Facility, together in either case with appropriate evidences of transfer, to the Depositary for the account of the Purchaser, (b) present such Shares (and any Distributions) for transfer on the books of the Company and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any Distribution), all in accordance with the terms and subject to the conditions of the Offer. The undersigned irrevocably appoints designees of the Purchaser as such shareholder's proxy, with full power of substitution, to the full extent of such shareholder's rights with respect to the Shares tendered by such shareholder and accepted for payment by the Purchaser and with respect to any and all other Shares or other securities issued or issuable in respect of such Shares on or after April 22, 1996. Such appointment will be effective when, and only to the extent that, the Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior proxies given by such shareholder with respect to such Shares (and such other shares and securities), will be revoked without further action, and no subsequent proxies may be given nor any subsequent written consents executed (and, if given or executed, will not be deemed effective). The designees of the Purchaser will be empowered to exercise all voting and other rights of such shareholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's shareholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's payment for such Shares the Purchaser must be able to exercise full voting rights with respect to such Shares. The undersigned hereby represents and warrants that (a) the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby (and any Distribution) and (b) when the Shares are accepted for payment by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title to the Shares (and any Distribution), free and clear of all liens, restrictions, charges and encumbrances, and the same will not be subject to any adverse claim. The undersigned, upon request, will execute and deliver any additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby (and any Distribution). In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Purchaser any and all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer; and pending such remittance or appropriate assurance thereof, the Purchaser will be, subject to applicable law, entitled to all rights and privileges as owner of any such Distribution and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Purchaser in its sole discretion. All authority herein conferred or agreed to be conferred shall not be affected by and shall survive the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Tenders of Shares made pursuant to the Offer are irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date (as defined in the Offer to Purchase) and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time after June 24, 1996. See Section 4 of the Offer to Purchase. The undersigned understands that tenders of Shares pursuant to any of the procedures described in Section 3 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions set forth in the Offer, including the undersigned's representation that the undersigned owns the Shares being tendered. Unless otherwise indicated herein under "Special Payment Instructions", please issue the check for the purchase price and/or issue or return any certificate(s) for Shares not tendered or not accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered". Similarly, unless otherwise indicated herein under "Special Delivery Instructions", please mail the check for the purchase price and/or any certificate(s) for Shares not tendered or not accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered". In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price and/or any certificate(s) for Shares not tendered or accepted for payment in the name of, and deliver such check and/or such certificates to, the person or persons so indicated. Unless otherwise indicated herein under "Special Payment Instructions", please credit any Shares tendered herewith by book-entry transfer that are not accepted for payment by crediting the account at the Book-Entry Transfer Facility (as defined herein) designated above. The undersigned recognizes that the Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Shares from the name(s) of the registered holder(s) thereof if the Purchaser does not accept for payment any of the Shares so tendered. SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificate(s) for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be issued in the name of someone other than the undersigned or if Shares tendered by book-entry transfer which are not accepted for payment are to be returned by credit to an account maintained at a Book-Entry Transfer Facility. Issue: / / check / / certificate to: Name............................................................................ (PLEASE PRINT) Address......................................................................... ............................................................................... (INCLUDE ZIP CODE) ............................................................................... (TAX ID. OR SOCIAL SECURITY NO.) (SEE SUBSTITUTE FORM W-9 ON THE REVERSE SIDE) Credit Shares tendered by book-entry transfer that are not accepted for payment to (Check one): / / The Depository Trust Company / / Philadelphia Depository Trust Company ............................................................................... (DTC OR PDTC ACCOUNT NO.) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificate(s) for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be sent to someone other than the undersigned or to the undersigned at an address other than that shown above. Mail: / / check / / certificates to: Name............................................................................ (PLEASE PRINT) Address......................................................................... ............................................................................... (INCLUDE ZIP CODE) ............................................................................... (TAX ID. OR SOCIAL SECURITY NO.) (SEE SUBSTITUTE FORM W-9 ON THE REVERSE SIDE) SIGN HERE AND COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE .................................................................... .................................................................... (SIGNATURE(S) OF HOLDER(S)) Dated........................................................., 1996 (Must be signed by the registered holder(s) exactly as name(s) appear(s) on Share Certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5.) Name(s)............................................................. .................................................................... (PLEASE PRINT) Capacity (Full Title)............................................... Address............................................................. (INCLUDE ZIP CODE) Area Code and Telephone Number...................................... Tax Identification or Social Security No. ................................................ COMPLETE SUBSTITUTE FORM W-9 ON REVERSE GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) Authorized Signature................................................ Name................................................................ Name of Firm........................................................ (PLEASE PRINT) Address............................................................. (INCLUDE ZIP CODE) Area Code and Telephone Number...................................... Dated........................................................ , 1996 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this Letter of Transmittal (a) if this Letter of Transmittal is signed by the registered holder(s) of Shares (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered herewith, unless such holder(s) has completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" above, or (b) if such Shares are tendered for the account of a firm which is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Security Transfer Agents Medallion Program (each of the foregoing being referred to as an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5 of this Letter of Transmittal. 2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by shareholders either if certificates are to be forwarded herewith or, unless an Agent's Message is utilized, if tenders are to be made pursuant to the procedure for tender by book-entry transfer set forth in Section 3 of the Offer to Purchase. Share Certificates, or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such Shares into the Depositary's account at a Book-Entry Transfer Facility, as well as this Letter of Transmittal (or a facsimile hereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). Shareholders whose Share Certificates are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot complete the procedure for delivery by book-entry transfer on a timely basis may tender their Shares by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Purchaser, must be received by the Depositary prior to the Expiration Date; and (iii) the Share Certificates (or a Book-Entry Confirmation) representing all tendered Shares, in proper form for transfer, in each case together with the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry delivery, an Agent's Message) and any other documents required by this Letter of Transmittal, must be received by the Depositary within three Nasdaq National Market trading days after the date of execution of such Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering shareholders, by execution of this Letter of Transmittal (or a facsimile hereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares and any other required information should be listed on a separate signed schedule attached hereto. 4. PARTIAL TENDERS. (Not Applicable to Book-Entry Shareholders) If fewer than all the Shares evidenced by any Share Certificate submitted are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered". In such cases, new Share Certificates for the Shares that were evidenced by your old Share Certificates, but were not tendered by you, will be sent to you, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by Share Certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Purchaser of their authority so to act must be submitted. If this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made to or certificates for Shares not tendered or not purchased are to be issued in the name of a person other than the registered holder(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the certificate(s) listed, the certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the certificate(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. 6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction 6, the Purchaser will pay any stock transfer taxes with respect to the transfer and sale of Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificate(s) for Shares not tendered or accepted for payment are to be registered in the name of, any person other than the registered holder(s), or if tendered certificate(s) are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s) or such person) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or an exemption therefrom, is submitted. Except as otherwise provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the certificate(s) listed in this Letter of Transmittal. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in the name of, and/or certificates for Shares not tendered or not accepted for payment are to be issued or returned to, a person other than the signer of this Letter of Transmittal or if a check and/or such certificates are to be returned to a person other than the person(s) signing this Letter of Transmittal or to an address other than that shown in this Letter of Transmittal, the appropriate boxes on this Letter of Transmittal must be completed. A Book-Entry Shareholder may request that Shares not accepted for payment be credited to such account maintained at a Book-Entry Transfer Facility as such Book-Entry Shareholder may designate under "Special Payment Instructions". If no such instructions are given, such Shares not accepted for payment will be returned by crediting the account at the Book-Entry Transfer Facility designated above. 8. WAIVER OF CONDITIONS. Subject to the terms and conditions of the Merger Agreement, the conditions of the Offer (other than the Minimum Condition (as defined in the Offer to Purchase)) may be waived by the Purchaser in whole or in part at any time and from time to time in its sole discretion. 9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income tax law, a shareholder whose tendered Shares are accepted for payment is required to provide the Depositary with such shareholder's correct taxpayer identification number ("TIN") on Substitute Form W-9 below. If the Depositary is not provided with the correct TIN, the Internal Revenue Service may subject the shareholder or other payee to a $50 penalty. In addition, payments that are made to such shareholder or other payee with respect to Shares purchased pursuant to the Offer may be subject to 31% backup withholding. Certain shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, the shareholder must submit a Form W-8, signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8 can be obtained from the Depositary. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. If backup withholding applies, the Depositary is required to withhold 31% of any such payments made to the shareholder or other payee. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. The box in Part 3 of the Substitute Form W-9 may be checked if the tendering shareholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the shareholder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Depositary. The shareholder is required to give the Depositary the TIN (e.g., social security number or employer identification number) of the record owner of the Shares or of the last transferee appearing on the transfers attached to, or endorsed on, the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for assistance may be directed to the Dealer Manager or the Information Agent at their respective addresses and telephone numbers set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may also be obtained from the Information Agent or the Dealer Manager or from brokers, dealers, commercial banks or trust companies. 11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate representing Shares has been lost, destroyed or stolen, the shareholder should promptly notify the Depositary. The shareholder will then be instructed as to the steps that must be taken in order to replace the certificate. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER OR THE NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE. PAYER'S NAME: THE BANK OF NEW YORK SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT Social Security Number FORM W-9 THE RIGHT AND CERTIFY BY SIGNING AND or Employer DATING BELOW. Identification Number ----------------------------
Department of Treasury, Internal Revenue Service PART 2--Certification--Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification PAYER'S REQUEST FOR Number (or I am waiting for a number to be issued to me) and TAXPAYER IDENTIFICATION NUMBER ("TIN") (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. Certification Instructions--You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification form the IRS that you are no longer subject to backup withholding, do not cross out such Item (2).
PART 3-- SIGN HERE Signature . . . . . . . . . . . . . . . . Awaiting TIN / / Date . . . . . . . . . . . . . . , 1996
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld. Signature .................................... Date .................................... , 1996
The Information Agent for the Offer is: [LOGO] Wall Street Plaza New York, New York 10005 Banks and Brokers call collect: (212) 440-9800 ALL OTHERS CALL TOLL FREE: 1-800-223-2064 The Dealer Manager for the Offer is: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION 277 Park Avenue New York, NY 10172 (212) 892-7700 (Call Collect) April 26, 1996 EX-11.(A)(3) 4 Exhibit 11(a)(3) NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF WESTCOTT COMMUNICATIONS, INC. As set forth in Section 3 of the Offer to Purchase described below, this instrument or one substantially equivalent hereto must be used to accept the Offer (as defined below) if certificates for Shares (as defined below) are not immediately available or the certificates for Shares and all other required documents cannot be delivered to the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) or if the procedure for delivery by book-entry transfer cannot be completed on a timely basis. This instrument may be delivered by hand or transmitted by facsimile transmission or mail to the Depositary. The Depositary for the Offer is: THE BANK OF NEW YORK By Mail: By Facsimile Transmission: By Hand or Overnight Delivery: Tender & Exchange Department (for Eligible Institutions Tender & Exchange Department P.O. Box 11248 only) 101 Barclay Street Church Street Station (212) 815-6213 Receive and Deliver Window New York, NY 10286-1248 Confirm by Telephone: New York, NY 10286 (800) 507-9357
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box in the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tender(s) to K-III Acquisition Corp., a Texas corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase dated April 26, 1996 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"), receipt of which is hereby acknowledged, the number of shares of Common Stock, $.01 par value per share (the "Shares"), of Westcott Communications, Inc., a Texas corporation, indicated below pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Signature(s)............................. Address(es).................... Name(s) of Record Holders ............................... ZIP CODE ........................................ PLEASE TYPE OR PRINT Area Code and Tel. No(s)........ Check one box if Shares will Number of Shares......................... be tendered by book-entry transfer) Certificate Nos. (If Available) / / The Depository Trust ......................................... Company / / Philadelphia Depository Trust Company Account Number................... Dated..........................., 1996 ............................... GUARANTEE (Not to be used for signature guarantee) The undersigned, a firm which is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Security Transfer Agents Medallion Program, (a) represents that the above named person(s) "own(s)" the Shares tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended ("Rule 14e-4"), (b) represents that such tender of Shares complies with Rule 14e-4, and (c) guarantees to deliver to the Depositary either the certificates evidencing all tendered Shares, in proper form for transfer, or to deliver Shares pursuant to the procedure for book-entry transfer into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility"), in either case together with the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other required documents, all within three Nasdaq National Market trading days after the date hereof. ......................................... .................................... NAME OF FIRM AUTHORIZED SIGNATURE ......................................... Name................................ ADDRESS PLEASE TYPE OR PRINT ......................................... Title............................... ZIP CODE AREA CODE AND TEL. NO. .................. Dated........................., 1996 NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-11.(A)(4) 5 Exhibit 11(a)(4) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF WESTCOTT COMMUNICATIONS, INC. AT $21.50 NET PER SHARE BY K-III ACQUISITION CORP. AN INDIRECT, WHOLLY OWNED SUBSIDIARY OF K-III COMMUNICATIONS CORPORATION ----------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MAY 23, 1996, UNLESS THE OFFER IS EXTENDED. ----------------------------------------------------------------------- April 26, 1996 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by K-III Acquisition Corp., a Texas corporation (the "Purchaser") and a direct, wholly owned subsidiary of K-III Prime Corporation, a Delaware corporation and a direct, wholly owned subsidiary of K-III Communications Corporation, a Delaware corporation (the "Parent"), to act as Dealer Manager in connection with the Purchaser's offer to purchase for cash all the outstanding shares of Common Stock, $.01 par value per share (the "Shares"), of Westcott Communications, Inc., a Texas corporation (the "Company"), at a purchase price of $21.50 per Share, net to the seller in cash without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated April 26, 1996 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer") enclosed herewith. Holders of Shares whose certificates for such Shares ("Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary (as defined below) prior to the Expiration Date (as defined in the Offer to Purchase), or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee. Enclosed herewith for your information and forwarding to your clients are copies of the following documents: 1. The Offer to Purchase, dated April 26, 1996. 2. The Letter of Transmittal to tender Shares for your use and for the information of your clients. Facsimile copies of the Letter of Transmittal may be used to tender Shares. 3. The Notice of Guaranteed Delivery for Shares to be used to accept the Offer if Share Certificates are not immediately available or if such certificates and all other required documents cannot be delivered to The Bank of New York (the "Depositary") by the Expiration Date or if the procedure for book-entry transfer cannot be completed by the Expiration Date. 4. The Letter to Shareholders of the Company from the Chairman of the Board and Chief Executive Officer of the Company, accompanied by the Company's Solicitation/Recommendation Statement on Schedule 14D-9. 5. A printed form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer. 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9. 7. A return envelope addressed to the Depositary. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MAY 23, 1996, UNLESS THE OFFER IS EXTENDED. In order to take advantage of the Offer, (i) a duly executed and properly completed Letter of Transmittal and any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of Shares, and other required documents should be sent to the Depositary, and (ii) either Share Certificates representing the tendered Shares should be delivered to the Depositary, or such Shares should be tendered by book-entry transfer into the Depositary's account maintained at one of the Book-Entry Transfer Facilities (as described in the Offer to Purchase), all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. If holders of Shares wish to tender, but it is impracticable for them to forward their Share Certificates or other required documents on or prior to the Expiration Date or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures specified in Section 3 of the Offer to Purchase. The Purchaser will not pay any commissions or fees to any broker, dealer or other person (other than the Dealer Manager, the Depositary and Georgeson & Company Inc. (the "Information Agent") (as described in the Offer to Purchase)) for soliciting tenders of Shares pursuant to the Offer. The Purchaser will, however, upon request, reimburse you for customary clerical and mailing expenses incurred by you in forwarding any of the enclosed materials to your clients. The Purchaser will pay or cause to be paid any stock transfer taxes payable on the transfer of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to Donaldson, Lufkin & Jenrette Securities Corporation, the Dealer Manager, or the Information Agent, at their respective addresses and telephone numbers set forth on the back cover of the Offer to Purchase. Additional copies of the enclosed materials may be obtained from the Information Agent. Very truly yours, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE PARENT, THE DEALER MANAGER, THE COMPANY, THE DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. EX-11.(A)(5) 6 Exhibit 11(a)(5) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF WESTCOTT COMMUNICATIONS, INC. AT $21.50 NET PER SHARE BY K-III ACQUISITION CORP. AN INDIRECT, WHOLLY OWNED SUBSIDIARY OF K-III COMMUNICATIONS CORPORATION ----------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MAY 23, 1996, UNLESS THE OFFER IS EXTENDED. ----------------------------------------------------------------------- To Our Clients: Enclosed for your consideration is an Offer to Purchase dated April 26, 1996 (the "Offer to Purchase"), and the related Letter of Transmittal relating to an offer by K-III Acquisition Corp., a Texas corporation (the "Purchaser") and a direct, wholly owned subsidiary of K-III Prime Corporation, a Delaware corporation ("K-III Prime") and a direct, wholly owned subsidiary of K-III Communications Corporation, a Delaware corporation (the "Parent"), to purchase all of the outstanding shares of Common Stock, $.01 par value per share (the "Shares"), of Westcott Communications, Inc., a Texas corporation (the "Company"), at a purchase price of $21.50 per Share, net to the seller in cash without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"). We are the holder of record of Shares held by us for your account. A tender of such Shares can be made only by us as the holder of record and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Shares held by us for your account. We request instructions as to whether you wish to have us tender on your behalf any or all of such Shares held by us for your account, pursuant to the terms and subject to the conditions set forth in the Offer to Purchase. Your attention is directed to the following: 1. The tender price is $21.50 per Share, net to the seller in cash without interest thereon. 2. The Offer is made for all of the outstanding Shares. 3. The Board of Directors of the Company has determined that the Merger Agreement (as defined below) and the transactions contemplated thereby, including each of the Offer and the Merger (as defined below), are fair to and in the best interests of the shareholders of the Company and recommends that holders of the Shares accept the Offer and tender their Shares to the Purchaser. 4. The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of April 22, 1996 (the "Merger Agreement"), which provides that subsequent to the consummation of the Offer, the Purchaser will merge with and into the Company (the "Merger"). At the effective time of the Merger (the "Effective Time"), each Share issued and outstanding immediately prior to the Effective Time (other than Shares held in the treasury of the Company and Shares, if any, owned by the Purchaser, K-III Prime, the Parent or any direct or indirect wholly owned subsidiary of the Parent or of the Company and other than Shares, if any, held by shareholders who have not voted in favor of the Merger Agreement or consented thereto in writing and have timely filed with the Company a written objection to the action contemplated by the Merger Agreement in accordance with the Texas Business Corporation Act) shall be cancelled, extinguished and converted automatically into the right to receive $21.50 in cash, without interest. 5. The Offer and withdrawal rights will expire at 12:00 Midnight, New York City time, on Thursday, May 23, 1996 unless the Offer is extended. 6. The Offer is conditioned upon, among other things, there being validly tendered and not properly withdrawn prior to the expiration of the Offer, at least that number of Shares which, when combined with the Shares, if any, owned by the Parent and its direct and indirect subsidiaries, constitute a majority of the then Outstanding Shares on a Fully Diluted Basis (as defined in the Merger Agreement). 7. Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares pursuant to the Offer. The Offer is being made solely by the Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares. The Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If the Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, the Purchaser will make a good faith effort to comply with any such state statute. If, after such good faith effort, the Purchaser cannot comply with such state statute, the Offer will not be made to nor will tenders be accepted from or on behalf of the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by the Dealer Manager or one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. If you wish to have us tender any or all of the Shares held by us for your account, please instruct us by completing, executing and returning to us the instruction form contained in this letter. If you authorize a tender of your Shares, all such Shares will be tendered unless otherwise specified in such instruction form. Your instructions should be forwarded to us in ample time to permit us to submit a tender on your behalf prior to the expiration of the Offer. INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF WESTCOTT COMMUNICATIONS, INC. The undersigned acknowledge(s) receipt of your letter enclosing the Offer to Purchase dated April 26, 1996 (the "Offer to Purchase") and the related Letter of Transmittal pursuant to an offer by K-III Acquisition Corp., a Texas corporation and a direct, wholly owned subsidiary of K-III Prime Corporation, a Delaware corporation and a direct, wholly owned subsidiary of K-III Communications Corporation, a Delaware corporation, to purchase all outstanding shares of Common Stock, $.01 par value per share (the "Shares"), of Westcott Communications, Inc., a Texas corporation. This will instruct you to tender the number of Shares indicated below (or, if no number is indicated below, all Shares) which are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal furnished to the undersigned. - ---------------------------------------- ----------------------------- NUMBER OF SHARES TO BE TENDERED* SIGN HERE ............................. ........................ SHARES ............................. ............................. SIGNATURE(S) ............................. PLEASE PRINT NAMES(S) ............................. ADDRESS ............................. AREA CODE AND TELEPHONE NUMBER ............................. TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER DATED .................. , 1996 - ------------ * Unless otherwise indicated, it will be assumed that all of your Shares held by us for your account are to be tendered. EX-11.(A)(6) 7 Exhibit 11(a)(6) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--SOCIAL SECURITY NUMBERS HAVE NINE DIGITS SEPARATED BY TWO HYPHENS: I.E. 000-00-0000. EMPLOYER IDENTIFICATION NUMBERS HAVE NINE DIGITS SEPARATED BY ONLY ONE HYPHEN: 00-0000000. THE TABLE BELOW WILL HELP DETERMINE THE NUMBER TO GIVE THE PAYER. - ------------------------------------------------------------ GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - ------------------------------------------------------------ 1. An individual's account The individual 2. Two or more individuals The actual owner of the (joint account) account or, if combined funds, the first individual on the account(1) 3. Custodian account of a The minor(2) minor (Uniform Gift to Minors Act) 4. a. The usual revocable The grantor-trustee(1) savings trust account (grantor is also trustee) b. So-called trust account The actual owner(1) that is not a legal or valid trust under State law 5. Sole proprietorship account The owner(3) - ------------------------------------------------------------ GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - ------------------------------------------------------------ 6. A valid trust, estate, or The legal entity(4) pension trust 7. Corporate account The corporation 8. Partnership account held in The partnership the name of the business 9. Association, club, The organization religious, charitable, educational or other tax-exempt organization 10. A broker or registered The broker or nominee nominee 11. Account with the The public entity Department of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments - -------------------------------------------------------------------------------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your social security number or employer identification number. (4) List first and circle the name of the legal trust, estate, or pension trust. Do not furnish the taxpayer identification number of the personal representative or trustee unless the legal entity itself is not designated in the account title. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 OBTAINING A NUMBER If you do not have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card (for individuals), or Form SS-4, Application for Employer Identification Number (for businesses and all other entities), at the local office of the Social Security Administration or the Internal Revenue Service. To complete Substitute Form W-9 if you do not have a taxpayer identification number, write "Applied For" in the space for the taxpayer identification number in Part I, signed and date the Form, and give it to the requester. Generally, you will then have 60 days to obtain a taxpayer identification number and furnish it to the requester. If the requester does not receive your taxpayer identification number within 60 days, backup withholding, if applicable, will begin and continue until you furnish your taxpayer identification number to the requester. PAYEES EXEMPT FROM BACKUP WITHHOLDING The following is a list of payees exempt from backup withholding and for which no information reporting is required. For interest and dividends, all listed payees are exempt except item (9). For broker transactions, payees listed in items (1) through (13) and a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker are exempt. Payments subject to reporting under sections 6041 and 6041A are generally exempt from backup withholding only if made to payees described in items (1) through (7), except a corporation that provides medical and health care services or bills and collects payments for such services is not exempt from backup withholding or information reporting. Only payees described in items (2) through (6) are exempt from backup withholding for barter exchange transactions, patronage dividends, and payments by certain fishing boat operators. (1) A corporation. (2) An organization exempt from tax under section 501(a), or an IRA, or a custodial account under section 403(b)(7). (3) The United States or any of its agencies or instrumentalities. (4) A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. (5) A foreign government or any of its political subdivisions, agencies, or instrumentalities. (6) An international organization or any of its agencies or instrumentalities. (7) A foreign central bank of issue. (8) A dealer in securities or commodities required to register in the United States or a possession of the United States. (9) A futures commission merchant registered with the Commodity Futures Trading Commission. (10) A real estate investment trust. (11) An entity registered at all times during the tax year under the Investment Company Act of 1940. (12) A common trust fund operated by a bank under section 584(a). (13) A financial institution. (14) A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate Securities, Inc., Nominee List. (15) A trust exempt from tax under section 664 or described in section 4947. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: . Payments to nonresident aliens subject to withholding under section 1441. . Payments to partnerships not engaged in a trade or business in the United States and which have at least one nonresident partner. . Payments of patronage dividends where the amount received is not paid in money. . Payments made by certain foreign organizations. Payments of interest not generally subject to backup withholding include the following: . Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. . Payments of tax-exempt interest (including exempt-interest dividends under section 852). . Payments described in section 6049(b)(5) to non-resident aliens. . Payments on tax-free covenant bonds under section 1451. . Payments made by certain foreign organizations. . Mortgage interest paid to you. EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE A SUBSTITUTE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6042, 6044, 6045, 6049 and 6050A. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividends, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-11.(A)(7) 8 Exhibit 11(a)(7) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made solely by the Offer to Purchase dated April 26, 1996 and the related Letter of Transmittal and is being made to all holders of Shares. The Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to a state statute. If the Purchaser becomes aware of any state where the making of the Offer is prohibited, the Purchaser will make a good faith effort to comply with any such statute or seek to have such statute declared inapplicable to the Offer. If, after such good faith effort, the Purchaser cannot comply with any applicable statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In those jurisdictions whose securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by Donaldson, Lufkin & Jenrette Securities Corporation or one or more registered brokers or dealers licensed under the laws of such jurisdictions. Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock of Westcott Communications, Inc. at $21.50 Net Per Share by K-III Acquisition Corp. an indirect, wholly owned subsidiary of K-III Communications Corporation K-III Acquisition Corp., a Texas corporation (the "Purchaser") and an indirect, wholly owned subsidiary of K-III Communications Corporation, a Delaware corporation (the "Parent"), is offering to purchase all of the outstanding shares of common stock, $.01 par value per share (the "Shares"), of Westcott Communications, Inc., a Texas corporation (the "Company"), at a purchase price of $21.50 per Share, net to the seller in cash without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated April 26, 1996 (the "Offer to Purchase") and in the related Letter of Transmittal (which together constitute the "Offer"). --------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MAY 23, 1996, UNLESS THE OFFER IS EXTENDED. --------------------------------------------------------------------------- The Offer is conditioned upon, among other things, there being validly tendered and not properly withdrawn prior to the expiration of the Offer at least that number of Shares which, when combined with the Shares, if any, owned by the Parent and its direct and indirect subsidiaries, constitutes a majority of the then outstanding Shares on a Fully Diluted Basis. The purpose of the Offer is to acquire control of, and the entire equity interest in, the Company. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of April 22, 1996 (the "Merger Agreement"), among the Parent, K-III Prime Corporation, a Delaware corporation and a direct, wholly owned subsidiary of the Parent ("K-III Prime"), the Purchaser and the Company. The Merger Agreement provides, among other things, for the making of the Offer by the Purchaser, and further provides that, following the completion of the Offer, upon the terms and subject to the conditions of the Merger Agreement and the Texas Business Corporation Act ("Texas Law"), the Purchaser will be merged with and into the Company (the "Merger"), and each Share issued and outstanding immediately prior to the effective time of the Merger (other than Shares held in the treasury of the Company and each Share, if any, owned by the Purchaser, K-III Prime, the Parent or any direct or indirect wholly owned subsidiary of the Parent or of the Company, which shall be cancelled, and other than Shares, if any, held by shareholders who have not voted in favor of the Merger Agreement or consented thereto in writing and who have timely filed with the Company a written objection to the action contemplated by the Merger Agreement in accordance with Texas Law) will, by virtue of the Merger and without any action on the part of the Purchaser, the Company or the holders of the capital stock, be cancelled, extinguished and converted automatically into the right to receive $21.50 in cash payable, without interest, to the holder thereof, upon the surrender of the certificate that formerly evidenced such Share, less any required withholding taxes. The Board of Directors of the Company has determined that the Merger Agreement and the transactions contemplated thereby, including each of the Offer and the Merger, are fair to and in the best interests of the shareholders of the Company and recommends that all holders of Shares accept the Offer and tender all of their Shares to the Purchaser. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary (as defined in the Offer to Purchase) of the Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payments from the Purchaser and transmitting such payments to shareholders whose Shares have been accepted for payment. Under no circumstance will interest on the purchase price for Shares be paid, regardless of any delay in making such payment. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates representing Shares ("Share Certificates") or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined in Section 2 of the Offer to Purchase) in connection with a book-entry transfer, and (iii) any other documents required by the Letter of Transmittal. Subject to the applicable regulations of the Securities and Exchange Commission and the terms of the Merger Agreement, the Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events specified in Section 15 of the Offer to Purchase have occurred, to extend the period during which the Offer is open, by giving oral or written notice of such extension to the Depositary. Any such extension will be followed as promptly as practicable by public announcement to be made no later than 9:00 A.M., New York City time, on the next business day after the previously scheduled Expiration Date. The term "Expiration Date" means 12:00 Midnight, New York City time, on Thursday, May 23, 1996, unless and until the Purchaser, in its sole discretion, shall have extended the period during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. Tenders of Shares made pursuant to the Offer are irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time after June 24, 1996. For a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If Share Certificates to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution (as defined in Section 3 of the Offer to Purchase) unless such Shares have been tendered for the account of any Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which case a notice of withdrawal will be effective if delivered to the Depositary by any method of delivery described in the second sentence of this paragraph. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination will be final and binding. The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided the Purchaser with the Company's shareholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed by the Purchaser to record holders of Shares and furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. The Offer to Purchase and the related Letter of Transmittal contain important information which should be read before any decision is made with respect to the Offer. Questions and requests for assistance may be directed to the Dealer Manager or the Information Agent as set forth below. Requests for copies of the Offer to Purchase and the related Letter of Transmittal and all other tender offer materials may be directed to the Information Agent or the Dealer Manager, and copies will be furnished promptly at the Purchaser's expense. The Purchaser will not pay any fees or commissions to any broker or dealer or any other person (other than the Dealer Manager and the Information Agent) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: GEORGESON & COMPANY INC. -------------- Wall Street Plaza 88 Pine Street New York, New York 10005 1-800-223-2064 (Toll-Free) The Dealer Manager for the Offer is: Donaldson, Lufkin & Jenrette Securities Corporation 277 Park Avenue New York, New York 10172 (212) 892-7700 (Call Collect) April 26, 1996 EX-11.(A)(8) 9 Exhibit 11(a)(8) FOR IMMEDIATE RELEASE Contact: Beverly C. Chell (212) 745-0100 - --------------------- -------- K-III COMMUNICATIONS CORPORATION COMMENCES TENDER OFFER FOR WESTCOTT COMMUNICATIONS, INC. _______________________________________ NEW YORK, NEW YORK, April 26, 1996 -- K-III Communications Corporation (NYSE:KCC) announced today that its subsidiary, K-III Acquisition Corp., commenced its previously announced tender offer for all of the outstanding shares of common stock of Westcott Communications, Inc. (NASDAQ: WCTV) for $21.50 per share in cash, for a total transaction value of $422 million. The Boards of Directors of both companies have approved the transaction. The tender offer is conditioned upon, among other things, K-III receiving valid tenders for more than 50 percent of Westcott's outstanding common stock on a fully diluted basis. Consummation of the offer is also subject to receipt of necessary federal regulatory approvals. Certain customary conditions must also be satisfied. The tender offer and withdrawal rights are scheduled to expire at 12:00 midnight on Thursday, May 23, 1996, unless extended. Donaldson, Lufkin and Jenrette Securities Corporation will serve as dealer manager for the tender offer. Georgeson & Company Inc. is the information agent. K-III Communications is a leading media company active in specialized information, educational services and niche consumer and trade publications. Some of its key brands include Channel One, Weekly Reader, Nelson Directories, World Almanac, and Seventeen, Modern Bride, New York, and Soap Opera Digest magazines. EX-11.(C)(1) 10 Exhibit 11(c)(1) AGREEMENT AND PLAN OF MERGER Among K-III COMMUNICATIONS CORPORATION, K-III PRIME CORPORATION, K-III ACQUISITION CORP. and WESTCOTT COMMUNICATIONS, INC. Dated April 22, 1996 ================================================================================ TABLE OF CONTENTS ARTICLE I THE OFFER 1.01. The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.02. Target Action . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE II THE MERGER 2.01. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.02. Effective Time; Closing . . . . . . . . . . . . . . . . . . . . . 5 2.05. Directors and Officers . . . . . . . . . . . . . . . . . . . . . 6 2.06. Conversion of Securities . . . . . . . . . . . . . . . . . . . . 6 2.07. Employee Stock Options . . . . . . . . . . . . . . . . . . . . . 6 2.08. Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . 7 2.09. Surrender of Shares; Stock Transfer Books . . . . . . . . . . . . 7 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE TARGET 3.01. Organization and Qualification; Subsidiaries . . . . . . . . . . 9 3.02. Articles of Incorporation and Bylaws . . . . . . . . . . . . . . 9 3.03. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.04. Authority Relative to This Agreement . . . . . . . . . . . . . . 10 3.05. No Conflict; Required Filings and Consents . . . . . . . . . . . 10 3.06. Permits; Compliance . . . . . . . . . . . . . . . . . . . . . . . 11 3.07. SEC Filings; Financial Statements . . . . . . . . . . . . . . . . 12 3.08. Absence of Certain Changes or Events . . . . . . . . . . . . . . 13 3.09. Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . 13 3.10. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . 14 3.11. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.13. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . 15 3.14. Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . 16 3.15. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3.16. Tangible Property . . . . . . . . . . . . . . . . . . . . . . . . 17 3.17. Material Contracts . . . . . . . . . . . . . . . . . . . . . . . 17 3.18. Offer Documents; Schedule 14D-9 . . . . . . . . . . . . . . . . . 17 3.19. Amendment to Rights Agreement. . . . . . . . . . . . . . . . . . 18 3.20. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . 18 3.21. Fees and Expenses of Transactions . . . . . . . . . . . . . . . . 18 3.22. Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . 18 3.23. Accreditation . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.24. Interactive Distance Training Network ("IDTN") . . . . . . . . . 19 3.25. Executive Education Network ("EXEN") . . . . . . . . . . . . . . 19 3.26. Renewal Rate . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE IVREPRESENTATIONS AND WARRANTIES OF PARENT,ACQUIROR AND ACQUIROR SUB 4.01. Corporate Organization . . . . . . . . . . . . . . . . . . . . . 20 4.02. Authority Relative to This Agreement . . . . . . . . . . . . . . 20 4.03. No Conflict; Required Filings and Consents . . . . . . . . . . . 20 4.04. Offer Documents; Proxy Statement . . . . . . . . . . . . . . . . 21 4.05. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 4.06. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER 5.01. Conduct of Business by the Target Pending the Acquiror Sub's Election Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE VI ADDITIONAL AGREEMENTS 6.01. Shareholder's Meeting . . . . . . . . . . . . . . . . . . . . . . 23 6.02. Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . 24 6.03. Target Board Representation; Section 14(f) . . . . . . . . . . . 24 6.04. Access to Information; Confidentiality . . . . . . . . . . . . . 25 6.06. Directors' and Officers' Indemnification . . . . . . . . . . . . 26 6.07. Obligations of Acquiror Sub . . . . . . . . . . . . . . . . . . . 27 6.08. Public Announcements . . . . . . . . . . . . . . . . . . . . . . 27 6.09. Delivery of SEC Documents . . . . . . . . . . . . . . . . . . . . 27 6.10. Notification of Certain Matters . . . . . . . . . . . . . . . . . 27 6.11. Further Action . . . . . . . . . . . . . . . . . . . . . . . . . 28 ARTICLE VII CONDITIONS TO THE MERGER 7.01. Conditions to the Merger . . . . . . . . . . . . . . . . . . . . 29 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER 8.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 8.02. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . 31 8.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 8.04. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE IXGENERAL PROVISIONS 9.01. Non-Survival of Representations, Warranties and Agreements . . . 33 9.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 9.03. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . 34 9.04. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 35 9.05. Assignment; Binding Effect; Benefit . . . . . . . . . . . . . . . 35 9.06. Incorporation of Schedules . . . . . . . . . . . . . . . . . . . 35 9.07. Specific Performance . . . . . . . . . . . . . . . . . . . . . . 36 9.08. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 36 9.09. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 9.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 36 9.11. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . 36 9.12. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 36 ANNEX A Conditions to the Offer ANNEX B Articles of Incorporation of The Surviving Corporation Glossary of Defined Terms ------------------------- Definition Location of Defined Term ---------- ------------------------ Acquiring Person Sec. 3.19 Acquiror Sub's Election Date Sec. 5.01 Acquiror Preamble Acquiror Expenses Sec. 8.02(c) affiliate Sec. 9.03(a) Agreement Preamble Alternative Proposal Fee Sec. 8.02(a) Articles of Merger Sec. 2.02 beneficial owner Sec. 9.03(b) Blue Sky Laws Sec. 3.05(b) Board Recitals business day Sec. 9.03(c) Business Combination Transaction Sec. 8.02(a) Certificates Sec. 2.09(b) Claim Sec. 6.06 Code Sec. 3.10 Confidentiality Agreement Sec. 9.12 control Sec. 9.03(d) Dissenting Shares Sec. 2.08 Distribution Date Sec. 3.19 Effective Time Sec. 2.02 Environmental Permits Sec. 3.13(b) Environmental Laws Sec. 3.13(a) ERISA Sec. 3.10 Exchange Act Sec. 1.02(b) i Definition Location of Defined Term ---------- ------------------------ Expiration Date Sec. 3.19 Governmental Authority Sec. 3.06 group Sec. 8.02(a) Hazardous Substances Sec. 3.13(a) HSR Act Sec. 3.05(b) Indemnified Parties Sec. 6.06 Material Adverse Effect Sec. 3.01 Material Contract Sec. 3.17 Merger Recitals Merger Consideration Sec. 2.06(a) Minimum Condition Sec. 1.01(a) Offer Documents Sec. 1.01(b) Offer Recitals Offer to Purchase Sec. 1.01(b) Option Sec. 2.07 Paying Agent Sec. 2.09(a) Per Share Amount Recitals person Sec. 9.03(e) Plans Sec. 3.10 Proxy Statement Sec. 4.04 Rights Agreement Recitals Schedule 14D-9 Sec. 1.02(b) Schedule 14D-1 Sec. 1.01(b) SEC Sec. 1.01(b) Secretary Sec. 2.02 Shares Recitals ii Definition Location of Defined Term ---------- ------------------------ Stock Acquisition Date Sec. 3.19(a) subsidiary Sec. 9.03(f) Subsidiary Sec. 3.01 Surviving Corporation Sec. 2.01 Target Disclosure Schedule Article III Target Shareholder's Meeting Sec. 6.01(a) Target SEC Reports Sec. 3.07(a) Target Permits Sec. 3.06 Target Preferred Stock Sec. 3.03 Target Common Stock Recitals Target Banker Sec. 3.14 Target Preamble Tender Offer Acceptance Date Sec. 2.07 Texas Law Recitals Transactions Sec. 1.02(a) U.S. GAAP Sec. 3.07(b) iii AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of April 22, 1996 (this "Agreement"), by and among K-III COMMUNICATIONS CORPORATION, a Delaware --------- corporation ("Parent"), K-III PRIME CORPORATION, a Delaware corporation, a direct, wholly owned subsidiary of Parent ("Acquiror"), K-III ACQUISITION CORP, -------- a Texas corporation and a direct, wholly owned subsidiary of Acquiror ("Acquiror -------- Sub"), and WESTCOTT COMMUNICATIONS, INC., a Texas corporation (the "Target"). - --- ------ W I T N E S S E T H: WHEREAS, the Boards of Directors of Acquiror, Acquiror Sub and the Target have each determined that it is in the best interests of their respective shareholders for Acquiror, through Acquiror Sub, to acquire the Target upon the terms and subject to the conditions set forth herein; and WHEREAS, in furtherance of such acquisition, it is proposed that Acquiror Sub shall make a cash tender offer (the "Offer") to acquire all the ----- issued and outstanding shares of Common Stock, par value $.01 per share, of the Target ("Target Common Stock"; shares of Target Common Stock being hereinafter ------------------- collectively referred to as the "Shares") and the associated Rights (as defined ------ in Section 1.01) issued pursuant to the Rights Agreement (as defined below) for $21.50 per Share (and associated Right) (such amount, or any greater amount per Share (and associated Right) paid pursuant to the Offer, being hereinafter referred to as the "Per Share Amount") net to the seller in cash, without ---------------- interest thereon, upon the terms and subject to the conditions of this Agreement and the Offer; and WHEREAS, the Board of Directors of Acquiror and Acquiror Sub have approved the making of the Offer and the transactions related thereto; and WHEREAS, the Board of Directors of the Target (the "Board") has (i) ----- determined that the consideration to be paid for each Share in the Offer and in the Merger (as defined below) is fair to and in the best interests of the shareholders of the Target, (ii) approved this Agreement and the Offer and the other transactions contemplated hereby and (iii) resolved and agreed to recommend acceptance of the Offer and the Merger and approval of this Agreement by such shareholders; and WHEREAS, pursuant to and in accordance with the terms of the Rights Agreement, dated as of January 9, 1996 between the Target and KeyCorp Shareholder Services, Inc. (as amended, the "Rights Agreement"), the Board has ---------------- amended the Rights Agreement in the manner contemplated by Section 3.19; and WHEREAS, also in furtherance of such acquisition, the Boards of Directors of Acquiror, Acquiror Sub and the Target have each approved this Agreement and the merger (the "Merger") of Acquiror Sub with and into the Target ------ in accordance with the Texas Business Corporation Act ("Texas Law") following --------- the consummation of the Offer and upon the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Acquiror, Acquiror Sub and the Target hereby agree as follows: ARTICLE I THE OFFER SECTION 1.01. The Offer. (a) Provided that this Agreement shall not --------- have been terminated in accordance with Section 8.01 and none of the events set forth in Annex A hereto shall have occurred or be existing (unless such event ------- shall have been waived by Acquiror Sub), Acquiror shall cause Acquiror Sub to commence, and Acquiror Sub shall commence, the Offer at the Per Share Amount as promptly as reasonably practicable after the date hereof, but in no event later than five business days after the public announcement of Acquiror Sub's intention to commence the Offer. The obligation of Acquiror Sub to accept for payment and pay for Shares tendered pursuant to the Offer shall be subject only to (i) the condition (the "Minimum Condition") that at least the number of ----------------- Shares that, when combined with the Shares already owned by Parent and its direct and indirect subsidiaries, constitute a majority of the then Outstanding Shares on a Fully Diluted Basis shall have been validly tendered and not withdrawn prior to the expiration of the Offer and (ii) the satisfaction or waiver of the other conditions set forth in Annex A hereto. "Outstanding Shares ------- on a Fully Diluted Basis" shall mean all outstanding shares plus all shares available for issuance under the Target's Employee Stock Purchase Plan plus all Shares issuable upon the conversion of any convertible securities or upon the exercise of any options, warrants or rights (other than the Rights (as defined in the Rights Agreement)). Acquiror Sub expressly reserves the right, in its sole discretion, to waive any such condition (other than the Minimum Condition), to increase the price per Share payable in the Offer, and to make any other changes in the terms and conditions of the Offer; provided, however, that (notwithstanding Section 8.03), without the prior written consent of the Target, no change may be made which (A) decreases the price per Share payable in the Offer, (B) reduces the maximum number of Shares to be purchased in the Offer, (C) imposes conditions to the Offer in addition to those set forth in Annex A ------- hereto, (D) amends or changes the terms and conditions of the Offer in any manner materially adverse to the holders of Shares (other than Acquiror and its subsidiaries) or (E) changes or waives the Minimum Condition. The Per Share Amount shall, subject to applicable withholding of taxes, be net to the seller in cash, without interest thereon, upon the terms and subject to the conditions of the Offer. Subject to the terms and conditions of this Agreement and the Offer (including, without limitation, the Minimum Condition), Acquiror Sub shall accept for payment and pay, as promptly as practicable after expiration of the Offer, for all Shares validly tendered and not withdrawn; provided, that -------- Acquiror Sub shall have the right, in its sole discretion, to extend the Offer from time to time for up to a maximum of 10 additional business days for all such extensions, notwithstanding the prior satisfaction of the conditions set forth in Annex A hereto. Acquiror Sub agrees that, in the event that it is ------- unable to consummate the Offer at any scheduled expiration thereof due solely to the failure of the Acquiror Sub to obtain the unconditional consents of the Federal Communications Commission to the transfer of the Target's licenses to Acquiror Sub (the "FCC Approvals"), it shall unless the Target is in willful 2 breach of any obligation set forth in this Agreement, extend the Offer (unless such FCC Approvals are not reasonably capable of being satisfied prior to the expiration of 90 days from the commencement of the Offer) until the earlier of (i) the expiration of 90 days from the commencement of the Offer or (ii) such time as Acquiror Sub shall have received the FCC Approvals. It is agreed that the conditions set forth in Annex A hereto are for the sole benefit of Acquiror ------- Sub and Acquiror and may be asserted by Acquiror Sub or Acquiror regardless of the circumstances giving rise to any such condition (including any action or inaction by Acquiror or Acquiror Sub not inconsistent with the terms hereof) or, except with respect to the Minimum Condition as set forth above, may be waived by Acquiror Sub or Acquiror in whole or in part at any time and from time to time in their sole discretion. (b) As soon as reasonably practicable on the date of commencement of the Offer, Acquiror Sub shall file with the Securities and Exchange Commission (the "SEC") and disseminate to holders of Shares to the extent required by law a --- Tender Offer Statement on Schedule 14D-1 (together with all amendments and supplements thereto, the "Schedule 14D-1") with respect to the Offer and the -------------- other Transactions (as hereinafter defined). The Schedule 14D-1 shall contain or shall incorporate by reference an offer to purchase (the "Offer to Purchase") ----------------- and forms of the related letter of transmittal and any related summary advertisement (the Schedule 14D-1, the Offer to Purchase and such other documents, together with all supplements and amendments thereto, being referred to herein collectively as the "Offer Documents"). Acquiror, Acquiror Sub and --------------- the Target agree to correct promptly any information provided by any of them for use in the Offer Documents which shall have become false or misleading in any material respect, and Acquiror and Acquiror Sub further agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. The Target and its counsel shall be given an opportunity to review and comment on the Offer Documents and any amendments thereto prior to the filing thereof with the SEC. Acquiror and Acquiror Sub will provide the Target and its counsel with a copy of any written comments or telephonic notification of any verbal comments Acquiror or Acquiror Sub may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt thereof and will provide the Target and its counsel with a copy of any written responses and telephonic notification of any verbal response of Acquiror, Acquiror Sub or their counsel. In the event that the Offer is terminated or withdrawn by Acquiror Sub, Acquiror and Acquiror Sub shall cause all tendered Shares to be returned to the registered holders of the Shares represented by the certificate or certificates surrendered to the Paying Agent (as defined herein). SECTION 1.02. Target Action. (a) The Target hereby approves of and ------------- consents to the Offer and represents that (i) the Board, at a meeting duly called and held on April 21, 1996, has (A) determined that this Agreement and the transactions contemplated hereby, including, without limitation, each of the Offer and the Merger (the "Transactions"), are fair to and in the best interests ------------ of the holders of Shares (other than Acquiror and its subsidiaries), (B) approved and adopted this Agreement and the Transactions and (C) resolved to recommend, subject to the conditions set forth herein, that the shareholders of the Target accept the Offer and approve and adopt this Agreement and the Transactions; and (ii) Goldman, Sachs & Co. has delivered to the Board a written opinion 3 that the consideration to be received by the holders of Shares pursuant to each of the Offer and the Merger is fair to such holders from a financial point of view. The Target has been authorized by Goldman, Sachs & Co., subject to prior review by Goldman, Sachs & Co., to include such fairness opinion (or references thereto) in the Offer Documents and in the Schedule 14D-9 (as defined in paragraph (b) of this Section 1.02) and the Proxy Statement referred to in Section 6.02. Subject to the fiduciary duties of the Board under applicable law as advised by independent legal counsel, the Target hereby consents to the inclusion in the Offer Documents of the recommendation of the Board described above. (b) As soon as reasonably practicable on the date of commencement of the Offer, the Target shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto, the "Schedule 14D-9") containing, subject only to the fiduciary duties -------------- of the Board under applicable law as advised by independent legal counsel, the recommendation of the Board described in Section 1.02(a) and shall disseminate the Schedule 14D-9 to the extent required by Rule 14d-9 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any other ------------ applicable federal securities laws. The Target, Acquiror and Acquiror Sub agree to correct promptly any information provided by any of them for use in the Schedule 14D-9 which shall have become false or misleading in any material respect, and the Target further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. Acquiror, Acquiror Sub and their counsel shall be given an opportunity to review and comment on the Schedule 14D-9 and any amendments thereto prior to the filing thereof with the SEC. The Target will provide Acquiror and Acquiror Sub and their counsel with a copy of any written comments or telephonic notification of any verbal comments the Target may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt thereof and will provide Acquiror and Acquiror Sub and their counsel with a copy of any written responses and telephonic notification of any verbal response of the Target or its counsel. (c) The Target shall promptly furnish Acquiror Sub with mailing labels containing the names and addresses of all record holders of Shares and with security position listings of Shares held in stock depositories, each as of the most recent date reasonably practicable. The Target shall furnish Acquiror Sub with such additional information, including, without limitation, updated listings and computer files of shareholders, mailing labels, non-objecting beneficial owner lists and security position listings, and such other assistance as Acquiror, Acquiror Sub or their agents may reasonably request. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer or the Merger, Acquiror and Acquiror Sub shall hold in confidence the information contained in such labels, listings and files, shall use such information only in connection with the Offer and the Merger, and, if this Agreement shall be terminated in accordance with Section 8.01, shall deliver promptly to the Target all copies of such information then in their possession and shall certify in writing to the Target its compliance with this Section 1.02(c). 4 ARTICLE II THE MERGER SECTION 2.01. The Merger. Upon the terms and subject to the ---------- conditions set forth in Article VII, and in accordance with Texas Law, at the Effective Time (as hereinafter defined), Acquiror Sub shall be merged with and into the Target. As a result of the Merger, the separate corporate existence of Acquiror Sub shall cease and the Target shall continue as the surviving corporation of the Merger (the "Surviving Corporation"). The name of the --------------------- Surviving Corporation shall be WESTCOTT COMMUNICATIONS, INC. At Acquiror's election, the Merger may alternatively be structured so that (i) the Target is merged with and into Acquiror, Acquiror Sub or any other direct or indirect wholly owned subsidiary of Acquiror or (ii) any direct or indirect wholly owned subsidiary of Acquiror other than Acquiror Sub is merged with and into the Target. In the event of such an election, the parties agree to execute an appropriate amendment to this Agreement in order to reflect such election and submit this Agreement, as so amended, to a vote of the Target's shareholders in accordance with applicable laws. SECTION 2.02. Effective Time; Closing. As promptly as practicable ----------------------- and in no event later than the fifth business day following the satisfaction or waiver of the conditions set forth in Article VII, the parties hereto shall cause the Merger to be consummated by filing articles of merger (the "Articles -------- of Merger") with the Secretary of State of the State of Texas (the "Secretary") - --------- --------- in such form as is required by, and executed in accordance with the relevant provisions of, Texas Law. The term "Effective Time" means the date and time of -------------- the filing of the Articles of Merger with the Secretary (or such later time as is specified in the Articles of Merger). Immediately prior to the filing of the Articles of Merger, a closing will be held at the offices of Baker & McKenzie, 2001 Ross Avenue, Suite 4500, Dallas, Texas (or such other place and time as the parties may agree). SECTION 2.03. Effect of the Merger. The effect of the Merger shall -------------------- be as provided in the applicable provisions of Texas Law. SECTION 2.04. Articles of Incorporation; Bylaws. (a) At the --------------------------------- Effective Time, the Articles of Incorporation of the Target, as in effect immediately prior to the Effective Time, shall be amended as of the Effective Time by operation of this Agreement and by virtue of the Merger without any further action by the shareholders or directors of the Surviving Corporation to read in its entirety as set forth on Annex B hereto. ------- (b) At the Effective Time, the Bylaws of Acquiror Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter amended as provided by law, the Articles of Incorporation of the Surviving Corporation and such Bylaws. SECTION 2.05. Directors and Officers. The directors of Acquiror Sub ---------------------- immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation 5 until a successor is elected or appointed and has qualified or until the earliest of such director's death, resignation, removal or disqualification, and the officers of the Target immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified, or as otherwise provided in the Bylaws of the Surviving Corporation. SECTION 2.06. Conversion of Securities. At the Effective Time, by ------------------------ virtue of the Merger and without any action on the part of Acquiror Sub, the Target or the holders of any of the following shares of capital stock: (a) Each Share issued and outstanding immediately prior to the Effective Time (other than any Shares to be cancelled pursuant to Section 2.06(b) and any Dissenting Shares (as hereinafter defined)) shall be cancelled, extinguished and converted automatically into the right to receive an amount equal to the Per Share Amount in cash (the "Merger Consideration") payable, -------------------- without interest, to the holder of such Share, upon surrender, in the manner provided in Section 2.09, of the certificate that formerly evidenced such Share, less any required withholding taxes; (b) Each Share held in the treasury of the Target and each Share owned by Acquiror Sub, Acquiror, Parent or any direct or indirect wholly owned subsidiary of Parent or of the Target immediately prior to the Effective Time shall be cancelled and retired without any conversion thereof and no payment or distribution shall be made with respect thereto; and (c) Each share of Common Stock, par value $.01 per share, of Acquiror Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of Common Stock, par value $.01 per share, of the Surviving Corporation. SECTION 2.07. Employee Stock Options. Immediately after the Tender ---------------------- Offer Acceptance Date, each outstanding option to purchase Shares (in each case, an "Option") granted under (a) the Target's Amended and Restated 1989 Stock ------ Option Plan, as amended, and (b) the Target's Nonemployee Stock Option Plan, as amended, whether or not then exercisable, shall, subject to the Target's receipt of any required consent of the holders of such Options, be cancelled by the Target, and each holder of a cancelled Option shall be entitled to receive from Acquiror Sub (or, at the option of Acquiror Sub, from the Target, which will be reimbursed by the Acquiror Sub) at the same time as payment for Shares is made by Acquiror Sub in connection with the Offer (or, with respect to any person subject to Section 16 of the Exchange Act, as soon as practicable after the first date payment can be made without liability to such person under Section 16(b) of the Exchange Act), in consideration for the cancellation of such Option, an amount in cash equal to the product of (i) the number of Shares previously subject to such Option and (ii) the excess, if any, of the Per Share Amount over the exercise price per Share previously subject to such Option, less any required withholding taxes. The term "Tender Offer Acceptance Date" means ---------------------------- the date on which the Acquiror Sub shall have accepted for payment all Shares validly tendered and not withdrawn pursuant to the Offer. 6 SECTION 2.08. Dissenting Shares. Notwithstanding any provision of ----------------- this Agreement to the contrary, Shares that are outstanding immediately prior to the Effective Time and which are held by shareholders who shall not have voted in favor of this Agreement or consented thereto in writing and who shall have timely filed with the Target a written objection to the action contemplated by this Agreement in accordance with Section 5.12 of Texas Law (collectively, the "Dissenting Shares") shall not be converted into or represent the right to ----------------- receive the Merger Consideration. Such shareholders shall be entitled to receive payment of the fair value of such Shares held by them in accordance with the provisions of Texas Law, except that all Dissenting Shares held by shareholders who effectively shall have withdrawn or lost their rights to demand payment of the fair value of such Shares under Texas Law shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration, without any interest thereon, upon surrender, in the manner provided in Section 2.09, of the certificate or certificates that formerly evidenced such Shares, less any required withholding taxes. SECTION 2.09. Surrender of Shares; Stock Transfer Books. (a) Prior ----------------------------------------- to the Effective Time, Acquiror Sub shall designate a bank or trust company reasonably satisfactory to the Target to act as agent (the "Paying Agent") for ------------ the holders of Shares in connection with the Merger to receive the funds to which holders of Shares shall become entitled pursuant to Section 2.06(a). At the Effective Time, Acquiror shall cause the Surviving Corporation to have sufficient funds to deposit, and shall cause the Surviving Corporation to deposit in trust with the Paying Agent, sufficient funds to make all payments pursuant to Section 2.09(b). Such funds shall be invested by the Paying Agent as directed by the Surviving Corporation, provided that such investments shall be in obligations of or guaranteed by the United States of America or of any agency thereof and backed by the full faith and credit of the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors Services, Inc. or Standard & Poor's Corporation, respectively, or in deposit accounts, certificates of deposit or banker's acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar time deposits purchased from, commercial banks with capital, surplus and undivided profits aggregating in excess of $100 million (based on the most recent financial statements of such bank which are then publicly available at the SEC or otherwise); provided, -------- however, that no loss on any investment made pursuant to this Section 2.09 shall - ------- relieve Acquiror or the Surviving Corporation of its obligation to pay the Per Share Amount for each Share outstanding immediately prior to the Effective Time. Any gain on any investment made pursuant to this Section 2.09 shall be the property of the Surviving Corporation. (b) Promptly after the Effective Time, Acquiror shall cause the Surviving Corporation to mail to each person who was, at the Effective Time, a holder of record of Shares entitled to receive the Merger Consideration pursuant to Section 2.06(a) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the certificates evidencing such Shares (the "Certificates") shall pass, only upon proper ------------ delivery of the Certificates to the Paying Agent) and instructions for use in effecting the surrender of the Certificates pursuant to such letter of transmittal. Upon surrender to the Paying Agent of a Certificate, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the 7 holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each Share formerly evidenced by such Certificate, and such Certificate shall then be cancelled. No interest shall accrue or be paid on the Merger Consideration payable upon the surrender of any Certificate for the benefit of the holder of such Certificate. If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered Certificate is registered on the stock transfer books of the Target, it shall be a condition of payment that the Certificate so surrendered shall be endorsed properly or otherwise be in proper form for transfer and that the person requesting such payment shall have paid all transfer and other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such taxes either have been paid or are not applicable. The Surviving Corporation shall pay all charges and expenses, including those of the Paying Agent, in connection with the distribution of the Merger Consideration. (c) At any time following the sixth month after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds which had been made available to the Paying Agent and not disbursed to holders of Shares (including, without limitation, all interest and other income received by the Paying Agent in respect of all funds made available to it) and, thereafter, such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) only as general creditors thereof with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by them. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of a Share for any Merger Consideration delivered in respect of such Share to a public official pursuant to any abandoned property, escheat or other similar law. (d) At the Effective Time, the stock transfer books of the Target shall be closed and, thereafter, there shall be no further registration of transfers of Shares on the records of the Target. From and after the Effective Time, the holders of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares except as otherwise provided herein or by applicable law. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE TARGET Except as set forth in the Disclosure Schedule delivered by the Target and signed by the Target and Acquiror for identification prior to the execution and delivery of this Agreement (the "Target Disclosure Schedule"), which shall -------------------------- be numbered in such a way as to correspond with the section references below and the disclosure made shall relate only to the representations and warranties made within the relevant section, the Target hereby represents and warrants to Parent, Acquiror and Acquiror Sub that: SECTION 3.01. Organization and Qualification; Subsidiaries. The -------------------------------------------- Target is a corporation, and each subsidiary of the Target (a "Subsidiary") is a ---------- corporation or partnership, in 8 each case duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the requisite corporate or partnership power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted. The Target and each Subsidiary are duly qualified or licensed as a foreign corporation or partnership to do business, and are in good standing, in each jurisdiction where the character of the properties owned, leased or operated by them or the nature of their business makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good standing that would not, individually or in the aggregate, have a Material Adverse Effect on the Target. As used in this Agreement, the term "Material Adverse Effect" means ----------------------- with respect to any person, any change or effect that is or is reasonably likely to be materially adverse to the financial condition, business or results of operations of such person and its subsidiaries, taken as a whole, or on the transactions contemplated by this Agreement. As of the date hereof, a true and correct list of all Subsidiaries, together with the jurisdiction of organization of each Subsidiary and the percentage of the outstanding capital stock or other equity interests of each Subsidiary owned by the Target and each other Subsidiary, is set forth in Section 3.01 of the Target Disclosure Schedule. Except as disclosed in Section 3.01 of the Target Disclosure Schedule, the Target does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity. SECTION 3.02. Articles of Incorporation and Bylaws. The Target has ------------------------------------ heretofore furnished or made available to Acquiror a complete and correct copy of the Articles of Incorporation and Bylaws or equivalent organizational documents, each as amended to date, of the Target and each Subsidiary. Neither the Target nor any Subsidiary is in violation of any provision of its Articles of Incorporation, Bylaws or equivalent organizational documents. SECTION 3.03. Capitalization. The authorized capital stock of the -------------- Target consists of 29,000,000 shares of Target Common Stock and 1,000,000 shares of preferred stock, $.01 par value ("Target Preferred Stock"). As of March 31, ---------------------- 1996 (a) 19,816,435 shares of Target Common Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable and not subject to preemptive rights, and (b) 1,688,000 shares of Target Common Stock were issuable pursuant to outstanding Options. The number of Options, by exercise price, outstanding on March 31, 1996 are set forth in Section 3.03 of the Target Disclosure Schedule. As of the date of this Agreement, no shares of Target Preferred Stock are issued and outstanding. The authorized capital stock and issued and outstanding stock of each subsidiary is set forth in Section 3.03 of the Target Disclosure Schedule. Except as set forth in this Section 3.03, Section 3.03 of the Target Disclosure Schedule or in the Target SEC Reports (as herein defined) filed prior to the date of this Agreement, as of the date of this Agreement, there are no options, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of, or other equity interests in, the Target or any Subsidiary obligating the Target or any Subsidiary to issue or sell any shares of capital stock of, or other equity interests in, the Target or any Subsidiary. Between March 31, 1996 and the date of this Agreement, no shares of Target Common Stock have been issued by the Target, except upon the exercise of stock options described above and no shares of Target Common Stock pursuant to the Target's Employee Stock Purchase Plan, in each case in 9 accordance with their respective terms, and no Options have been granted. Except as set forth in Section 3.03 of the Target Disclosure Schedule, there are no outstanding contractual obligations of the Target or any Subsidiary to repurchase, redeem or otherwise acquire any shares of Target Common Stock or any capital stock of, or any equity interest in, any Subsidiary. Except as described in the Target SEC Reports filed prior to the date of this Agreement or Section 3.03 of the Target Disclosure Schedule, each outstanding share of capital stock of, or other equity interest in, each Subsidiary is duly authorized, validly issued, fully paid and nonassessable. As of the date hereof, no more than 90,390 shares of Target Common Stock were available for issuance under Target's Employee Stock Purchase Plan. SECTION 3.04. Authority Relative to This Agreement. The Target has ------------------------------------ all necessary corporate power and authority to execute and deliver this Agreement and, with respect to the Merger, upon the approval and adoption of this Agreement and the Merger by the Target's shareholders in accordance with this Agreement and Texas Law, to perform its obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement by the Target and the consummation by the Target of the Transactions have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Target are necessary to authorize this Agreement or to consummate the Transactions (other than, with respect to the Merger, the approval and adoption of this Agreement and the Merger by the Target's shareholders in accordance with Texas Law and the filing and recordation of appropriate Articles of Merger with the Secretary in accordance with this Agreement and Texas Law). This Agreement has been duly and validly executed and delivered by the Target and, assuming the due authorization, execution and delivery of this Agreement by Acquiror and Acquiror Sub, constitutes a legal, valid and binding obligation of the Target, enforceable against the Target in accordance with its terms. SECTION 3.05. No Conflict; Required Filings and Consents. (a) The ------------------------------------------ execution and delivery of this Agreement by the Target do not, and the performance of this Agreement by the Target will not, subject to (x) with respect to the Merger, obtaining the requisite approval and adoption of this Agreement and the Merger by the Target's shareholders in accordance with this Agreement and Texas Law, and (y) obtaining the consents, approvals, authorizations and permits and making the filings described in Section 3.05(b) and Section 3.05(b) of the Target Disclosure Schedule, (i) conflict with or violate the Articles of Incorporation, Bylaws or equivalent organizational documents of the Target or any Subsidiary, (ii) conflict with or violate any domestic (federal, state or local) or foreign law, rule, regulation, order, judgment or decree ("Law") applicable to the Target or any Subsidiary or by which any property or asset of the Target or any Subsidiary is bound or affected, or (iii) except as specified in Section 3.05(a)(iii) of the Target Disclosure Schedule, result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, unilateral amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of the Target or any Subsidiary, or require the consent of any third party pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Target or any Subsidiary is a party or by which the Target or any Subsidiary or any property or asset of the Target or any Subsidiary is bound or affected, except for such conflicts, violations, breaches, defaults, rights, liens and consents which 10 individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect on the Target. (b) The execution and delivery of this Agreement by the Target do not, and the performance of this Agreement by the Target will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) pursuant to the Exchange Act, state securities or "blue sky" laws ("Blue Sky -------- Laws"), the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended - ---- (the "HSR Act") and the rules and regulations promulgated thereunder, and filing ------- and recordation of appropriate Articles of Merger with the Secretary as required by Texas Law, (ii) as specified in Section 3.05(b) of the Target Disclosure Schedule and (iii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the Merger, or otherwise prevent the Target from performing its obligations under this Agreement. SECTION 3.06. Permits; Compliance. Except as disclosed in Section ------------------- 3.06 of the Target Disclosure Schedule, each of the Target and the Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any United States (federal, state or local) or foreign government, or governmental, regulatory or administrative authority, agency or commission or court of competent jurisdiction ("Governmental Authority") necessary for the ---------------------- Target or any Subsidiary to own, lease and operate its properties or to carry on its business as it is now being conducted, except for those which the failure to possess would not individually or in the aggregate reasonably be expected to have a Material Adverse Effect on the Target (the "Target Permits") and, as of -------------- the date hereof, no suspension or cancellation of any of the Target Permits is pending or, to the knowledge of the Target, threatened. Except as disclosed in Section 3.06 of the Target Disclosure Schedule or as would not reasonably be expected to have a Material Adverse Effect on the Target, neither the Target nor any Subsidiary is in conflict with, or in default or violation of, or, with the giving of notice or the passage of time, would be in conflict with, or in default or violation of, (a) any Law applicable to the Target or any Subsidiary or by which any property or asset of the Target or any Subsidiary is bound or affected, (b) any of the Target Permits or (c) the terms and provisions of the Affirmative Action Plan of the Target and the Subsidiaries. Except as disclosed in Section 3.06 of the Target Disclosure Schedule, neither the Target nor any of the Subsidiaries is subject to regulation by the Federal Communications Commission, to the licensing requirements of the Communications Act of 1934, as amended, or the Communications Satellite Act of 1962, as amended. SECTION 3.07. SEC Filings; Financial Statements. (a) The Target has --------------------------------- timely filed all forms, reports and documents required to be filed by it with the Securities and Exchange Commission since December 31, 1992 (collectively, the "Target SEC Reports"). The Target SEC Reports (i) were prepared in all ------------------ material respects in accordance with the requirements of the Securities Act of 1933, as amended, and the Exchange Act, as the case may be, and the rules and regulations thereunder and (ii) did not, at the time they were filed (or at the effective date thereof in the case of registration statements), contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made 11 therein, in the light of the circumstances under which they were made, not misleading. No Subsidiary is currently required to file any form, report or other document with the Securities and Exchange Commission. (b) Each of the financial statements (including, in each case, any notes thereto) contained in the Target SEC Reports was prepared in accordance with United States generally accepted accounting principles applied on a consistent basis ("U.S. GAAP") throughout the periods indicated (except as may --------- be indicated in the notes thereto and except that financial statements included with interim reports do not contain all U.S. GAAP notes to such financial statements) and each fairly presented in all material respects the financial position, results of operations and changes in shareholders' equity and cash flows of the Target as at the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments which were not and are not expected, individually or in the aggregate, to have a Material Adverse Effect on the Target). (c) Except (i) to the extent set forth on the balance sheet of the Target and the consolidated Subsidiaries as at December 31, 1995, including the notes thereto, (ii) as set forth in Section 3.07(c) of the Target Disclosure Schedule or (iii) as disclosed in any SEC Report filed by the Target after December 31, 1995 and prior to the date of this Agreement, neither the Target nor any Subsidiary has any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise) which would be required to be reflected on a balance sheet, or in the notes thereto, prepared in accordance with U.S. GAAP, except for liabilities and obligations incurred in the ordinary course of business consistent with past practice since December 31, 1995, which would not, individually or in the aggregate, be material in amount. (d) The Target has heretofore furnished or made available to Acquiror complete and correct copies of all amendments and modifications (if any) that have not been filed by the Target with the SEC to all agreements, documents and other instruments that previously had been filed by the Target as exhibits to the Target SEC Reports and are currently in effect. (e) The receivables of the Target and the Subsidiaries, either reflected on the balance sheet of the Target and the consolidated Subsidiaries as at December 31, 1995 (the "December Balance Sheet") or created subsequent to the December Balance Sheet are, to the extent not previously collected in full, true and valid receivables, created in the ordinary course of the business of the Target and its Subsidiaries. Since December 31, 1995, neither the Target nor the Subsidiaries have (i) permitted or agreed to any extension in the time for payment of receivables other than in the ordinary course of business and consistent with past practice or (ii) changed their collection practices with respect to the receivables including, without limitation, granted discounts in return for the early collection thereof other than in the ordinary course of business and consistent with past practice. SECTION 3.08. Absence of Certain Changes or Events. Since December ------------------------------------ 31, 1995, except as set forth in this Agreement or disclosed pursuant to Section 3.08 of the Target Disclosure Schedule, or disclosed in any Target SEC Report filed since December 31, 1995 and prior to the date 12 of this Agreement, the Target and the Subsidiaries have conducted their business only in the ordinary course and in a manner consistent with past practice and, since December 31, 1995, there has not been (a) any event or events (whether or not covered by insurance), individually or in the aggregate, having a Material Adverse Effect on the Target, (b) any material change by the Target in its accounting methods, principles or practices, (c) any entry by the Target or any Subsidiary into any commitment or transaction material to the Target, except in the ordinary course of business and consistent with past practice, (d) any declaration, setting aside or payment of any dividend or distribution in respect of any capital stock of the Target or any redemption, purchase or other acquisition of any of the Target's or the Subsidiaries' securities, (e) other than pursuant to the Plans (as defined in Section 3.10), any increase in or amendment to, or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option, stock purchase or other employee benefit plan, (f) granted any general increase in compensation, bonus or other benefits payable to the employees of the Target or the Subsidiaries or, except for increases in connection with periodic reviews and in amounts consistent with past practice, any specific increase in the compensation, bonus or other benefits payable to such employees, (g) paid any bonus to the employees of the Target or the Subsidiaries except for bonuses accrued on the December Balance Sheet, (h) any operation of the business of the Target and the Subsidiaries other than in the ordinary course, consistent with past practice; (i) any incurrence of indebtedness for borrowed money or assumption or guarantee of indebtedness for borrowed money by the Target or any of the Subsidiaries (other than loans from the Target to any wholly owned Subsidiary or from any wholly owned Subsidiary to the Target or any other wholly owned Subsidiary), or the grant of any lien on the assets of the Target or the Subsidiaries to secure indebtedness for borrowed money, (j) any sale or transfer of any assets of the Target or the Subsidiaries other than in the ordinary course of business and consistent with past practice, or (k) any loan, advance or capital contribution to or investment in any person in an aggregate amount in excess of $100,000 by the Target or any Subsidiary (excluding any loan, advance or capital contribution to, or investment in, the Target or any wholly owned Subsidiary). SECTION 3.09. Absence of Litigation. Except as disclosed in Section --------------------- 3.09 of the Target Disclosure Schedule or the Target SEC Reports filed prior to the date of this Agreement, there is no claim, action, proceeding or investigation pending or, to the best knowledge of the Target, threatened against the Target or any Subsidiary, by, on behalf of or before any arbitrator or Governmental Authority which (a) individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect on the Target or (b) seeks to and is reasonably likely to significantly delay or prevent the consummation of the Offer or the Merger. Neither the Target or any Subsidiary nor any property or asset of the Target or any Subsidiary is in violation of any order, writ, judgment, injunction, decree, determination or award having, individually or in the aggregate, a Material Adverse Effect on the Target. Neither the Target nor any Subsidiary is subject to any judgment, order or decree that could reasonably be expected to have a Material Adverse Effect on the Target. SECTION 3.10. Employee Benefit Plans. Section 3.10 of the Target ---------------------- Disclosure Schedule lists (a) all employee benefit plans, programs and arrangements maintained for the benefit of any current or former employee, officer or director of the Target or any Subsidiary (the "Plans") ----- 13 and (b) all written contracts and agreements relating to employment and all severance agreements with any of the directors, officers or employees of the Target or any Subsidiaries (other than, in each case, any such contract or agreement that is terminable by the Target or any Subsidiary at will without penalty or other adverse consequence). Section 3.10 of the Target Disclosure Schedule sets forth the name of each officer or employee of the Target or any Subsidiary with an annual base compensation greater than $75,000 and the annual base compensation applicable to each such officer or employee. The Target has made available to Acquiror a copy of each Plan, each material document prepared in connection with each Plan and each Target Employment Contract. None of the Plans is a multiemployer plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Except as set forth in ----- Section 3.10 of the Target Disclosure Schedule, none of the Plans promises or provides retiree medical or life insurance benefits to any person. Each Plan intended to be qualified under Section 401(a) of the Internal Revenue Code, as amended (the "Code") is so qualified. Each Plan has been operated in all ---- material respects in accordance with its terms and the requirements of applicable Law. The Target has not incurred any direct or indirect material liability under, arising out of or by operation of Title IV of ERISA in connection with the termination of, or withdrawal from, any Plan or other retirement plan or arrangement and, as of the date hereof, no fact exists or event has occurred that would reasonably be expected to give rise to any such liability. Except as set forth in Section 3.10 of the Target Disclosure Schedule, no Plan is or has been covered by Title IV of ERISA or Section 412 of the Code. Except as set forth in Section 3.10 of the Target Disclosure Schedule, the Target and the Subsidiaries have complied in all respects with all laws, rules and regulations pertaining to employment practices including, without limitation, the Worker Adjustment Retraining Notification Act, the wage hour laws, the Americans with Disabilities Act, and the discrimination laws, and no fact or event exists that could give rise to liability under such acts, laws, rules or regulations, except for such occurrences, noncompliances and liabilities as would not, individually or in the aggregate, have a Material Adverse Effect on the Target. SECTION 3.11. Labor Matters. Neither the Target nor any Subsidiary ------------- is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Target or any Subsidiary. SECTION 3.12. Taxes. (a) Except as set forth in Section 3.12(a) of ----- the Target Disclosure Schedule, the Target and each of the Subsidiaries have (i) filed all federal, state, local and foreign tax returns required to be filed by them prior to the date of this Agreement (taking into account extensions), (ii) paid or accrued all taxes shown to be due on such returns and paid all applicable ad valorem and value added taxes as are due and (iii) paid or accrued all taxes for which a notice of assessment or collection has been received (other than amounts being contested in good faith by appropriate proceedings), except in the case of clause (i), (ii) or (iii) for any such filings, payments or accruals which would not, individually or in the aggregate, have a Material Adverse Effect on the Target. Except as set forth in Section 3.12(a) of the Target Disclosure Schedule, neither the Internal Revenue Service nor any other federal, state, local or foreign taxing authority has asserted any claim for taxes, or to the best knowledge of the Target, is threatening to assert any claims for taxes, which claims, individually or in the aggregate, could have a Material Adverse Effect on the Target. The Target has open years for federal, state and foreign income tax returns 14 only as set forth in Section 3.12(a) of the Target Disclosure Schedule. The Target and each Subsidiary have withheld or collected and paid over to the appropriate governmental authorities (or are properly holding for such payment) all taxes required by law to be withheld or collected, except for amounts which would not, individually or in the aggregate, have a Material Adverse Effect on the Target. There are no liens for taxes upon the assets of the Target or any Subsidiary (other than liens for taxes that are not yet due or that are being contested in good faith by appropriate proceedings), except for liens which would not, individually or in the aggregate, have a Material Adverse Effect on the Target. (b) Neither the Target nor any Subsidiary has taken or agreed to take any action that would prevent the Merger from constituting a reorganization qualifying under the provisions of Section 368(a) of the Code. SECTION 3.13. Environmental Matters. (a) For purposes of this --------------------- Agreement, the following terms shall have the following meanings: (i) "Hazardous Substances" means (A) those substances defined in or regulated under -------------------- the following federal statutes and their state counterparts, as each may be amended from time to time, and all regulations thereunder: the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide Act, the Toxic Substances Control Act and the Clean Air Act; (B) petroleum and petroleum products, byproducts and breakdown products including crude oil and any fractions thereof; (C) natural gas, synthetic gas, and any mixtures thereof; (D) polychlorinated biphenyls; (E) any other chemicals, materials or substances defined or regulated as toxic or hazardous or as a pollutant or contaminant or as a waste under any applicable Environmental Law; and (F) any substance with respect to which a federal, state or local agency requires environmental investigation, monitoring, reporting or remediation; and (ii) "Environmental Laws" means any federal, state, foreign, or ------------------ local law, rule or regulation, now or hereafter in effect and as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to pollution or protection of the environment, health, safety or natural resources, including without limitation, those relating to (A) releases or threatened releases of Hazardous Substances or materials containing Hazardous Substances or (B) the manufacture, handling, transport, use, treatment, storage or disposal of Hazardous Substances or materials containing Hazardous Substances. (b) Except as described in Section 3.13 of the Target Disclosure Schedule or as would not individually or in the aggregate result in or be likely to result in any fine, tax, assessment, penalty, loss, cost, damage, liability, expense or other payment related thereto in excess of $200,000: (i) the Target and each Subsidiary are and have been in compliance with all applicable Environmental Laws; (ii) the Target and each Subsidiary have obtained all permits, approvals, identification numbers, licenses or other authorizations required under any applicable Environmental Laws ("Environmental Permits") and --------------------- are and have been in compliance with their requirements; (iii) such Environmental Permits are transferable to the Surviving Corporation pursuant to the Merger without the consent of any Governmental Authority; (iv) there are no underground or aboveground 15 storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Substances are being or have been treated, stored or disposed of on any owned or leased real property or on any real property formerly owned, leased or occupied by the Target or any Subsidiary; (v) there is, to the best knowledge of the Target, no asbestos or asbestos-containing material on any owned or leased real property in violation of applicable Environmental Laws; (vi) the Target and the Subsidiaries have not released, discharged or disposed of Hazardous Substances on any real property owned or leased or on any real property formerly owned or leased by the Target or any Subsidiary and none of such property is contaminated with any Hazardous Substances; (vii) neither the Target nor any of the Subsidiaries is undertaking, and neither the Target nor any of the Subsidiaries has completed, any investigation or assessment or remedial or response action relating to any such release, discharge or disposal of or contamination with Hazardous Substances at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law; and (viii) there are no pending or, to the knowledge of the Target, past or threatened actions, suits, demands, demand letters, claims, liens, notices of non-compliance or violation, notices of liability or potential liability, investigations, proceedings, consent orders or consent agreements relating in any way to Environmental Laws, any Environmental Permits or any Hazardous Substances against the Target or any Subsidiary or any of their property, and there are no circumstances that can reasonably be expected to form the basis of any such Environmental Claim, including without limitation with respect to any off-site disposal location presently or formerly used by the Target or any of the Subsidiaries or any of their predecessors. (c) The Target and the Subsidiaries have made available to Acquiror copies of any environmental reports, studies or analyses in its possession or under its control relating to owned or leased real property or the operations of the Target or the Subsidiaries. (d) Section 3.13 of the Target Disclosure Schedule sets forth a list of all real property currently owned or owned within the last three years by the Target or any of the Subsidiaries. SECTION 3.14. Opinion of Financial Advisor. The Target has received ---------------------------- the opinion of Goldman, Sachs & Co. ("Target Banker") on the date of this ------------- Agreement to the effect that the consideration to be paid by Acquiror Sub in the Offer and the Merger is fair from a financial point of view to the Target's shareholders as of the date thereof. SECTION 3.15. Brokers. No broker, finder or investment banker (other ------- than Target Banker) is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Target or any Subsidiary. The Target has heretofore furnished to Acquiror a correct copy of all agreements between the Target and Target Banker pursuant to which such firm would be entitled to any payment relating to the Transactions. SECTION 3.16. Tangible Property. The Target and the Subsidiaries ----------------- have good and marketable title to all their tangible properties and assets, with only such exceptions as, individually or in the aggregate, would not have a Material Adverse Effect on the Target. All of the assets of the 16 Target and the Subsidiaries have been maintained and repaired for their continued operation and are in good operating condition, reasonable wear and tear excepted, and usable in the ordinary course of business, except where the failure to be in such repair or condition or so usable would not individually or in the aggregate have a Material Adverse Effect on the Target. SECTION 3.17. Material Contracts. Section 3.17 of the Target ------------------ Disclosure Schedule lists (a) each contract which is required by its terms or is currently expected to result in the payment or receipt by the Target or any Subsidiary of more than $500,000 and which is not terminable by the Target or any Subsidiary without the payment of any penalty or fine on not more than three months' notice (a "Material Contract"), (b) all material agreements relating to ----------------- joint ventures, partnerships and equity or debt investments, (c) all noncompete agreements with the Target or the Subsidiaries (whether as beneficiary or obligor), (d) all agreements, notes, bonds, indentures or other instruments governing indebtedness for borrowed money, and any guarantee thereof or the pledge of any assets or other security therefor and (e) all agreements with any affiliate (other than the Target or a wholly owned subsidiary) of the Target or the Subsidiaries to which the Target or any Subsidiary is a party, in each case other than contracts which have been filed as an exhibit to or have been incorporated by reference in any Target SEC Report. Each Material Contract is in full force and effect and is enforceable against the parties thereto (other than the Target) in accordance with its terms and no condition or state of facts exists that, with notice or the passage of time, or both, would constitute a material default by the Target or, to the knowledge of the Target, any third party under such Material Contracts. The Target has duly complied in all material respects with the provisions of each Material Contract to which it is a party. SECTION 3.18. Offer Documents; Schedule 14D-9. Neither the Schedule ------------------------------- 14D-9 nor any information supplied by the Target for inclusion in the Offer Documents shall, at the respective times the Schedule 14D-9, the Offer Documents, or any amendments or supplements thereto are filed with the SEC or are first published, sent or given to shareholders of the Target, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by the Target with respect to information supplied by Acquiror Sub or Acquiror for inclusion in the Schedule 14D-9. The Schedule 14D-9 shall comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations thereunder. SECTION 3.19. Amendment to Rights Agreement. (a) The Target has ------------------------------ heretofore provided Acquiror with a complete and correct copy of the Rights Agreement, including all amendments (including the amendments contemplated by this Section 3.19) and exhibits thereto. The Board and the Target have taken all necessary action to amend the Rights Agreement so that, as long as this Agreement has not been terminated in accordance with Section 8.01, (A) none of the execution or delivery of this Agreement, the making of the Offer, the acquisition of Shares pursuant to the Offer or the consummation of the Merger will cause (i) the occurrence of a "Distribution Date" (as defined in the Rights ----------------- Agreement), (ii) the Rights (as defined in the Rights Agreement) to become exercisable under the Rights Agreement, (iii) Parent, Acquiror or Acquiror Sub or any of their affiliates or associates to be deemed an "Acquiring Person" (as ---------------- defined in the Rights Agreement) or 17 (iv) the "Stock Acquisition Date" (as defined in the Rights Agreement) to occur ---------------------- upon any such event, (B) none of the acceptance for payment or payment for Shares by Acquiror Sub pursuant to the Offer will cause (i) the occurrence of a Distribution Date, (ii) the Rights to become exercisable under the Rights Agreement, (iii) Parent, Acquiror or Acquiror Sub or any of their affiliates or associates to be deemed an Acquiring Person or (iv) the Stock Acquisition Date to occur upon any such event, and (C) the "Expiration Date" (as defined in the --------------- Rights Agreement) shall occur no later than immediately prior to the purchase of shares pursuant to the Offer. (b) The "Distribution Date" has not occurred as of the date of this Agreement. SECTION 3.20. Intellectual Property. Section 3.20 of the Target --------------------- Disclosure Schedule sets forth a list of the trademarks and service marks owned or used in the business of the Target or any of the Subsidiaries (the "Trademarks"). Except as set forth in Section 3.20 of the Target Disclosure Schedule, the Target and the Subsidiaries (a) own the copyright to, or (b) have a license to use, all of the programming that has been employed in the operation of the business (the "Programming"). To the best knowledge of the Target and the Subsidiaries, the use by the Target and the Subsidiaries of the Trademarks or the Programming does not infringe on any trademarks, copyrights or any other rights of any other person and there are no existing or threatened claims therefor. SECTION 3.21. Fees and Expenses of Transactions. The fees and --------------------------------- expenses of the attorneys, accountants, brokers, investment bankers and advisors retained by the Target or any of the Subsidiaries in connection with the transactions contemplated by this Agreement do not exceed the amount set forth in Section 3.21 of the Target Disclosure Schedule. SECTION 3.22. Capital Expenditures. The capital expenditures for the -------------------- Target and the Subsidiaries for the calendar years ended December 31, 1994 and 1995 did not exceed $7 million in any such calendar year by a material amount, excluding in each case the expenditures related to the one-time conversion of the satellite transmission equipment from an analog to a digital signal and investments made in program inventory. SECTION 3.23. Accreditation. Section 3.23 of the Target Disclosure ------------- Schedule sets forth a true and correct list of the networks that provide course work eligible for applicable continuing education credit and the organizations that accredit such course work. As of the date of this Agreement, to the best knowledge of the Target and the Subsidiaries, none of the organizations listed in Section 3.23 of the Target Disclosure Schedule has notified the Target or any of the Subsidiaries of such organization's intent to withdraw accreditation. SECTION 3.24. Interactive Distance Training Network ("IDTN"). (a) As ---------------------------------------------- of December 31, 1995, the Target and the Subsidiaries had contracts with customers to provide IDTN services at a cost to such customers of not less than $7.8 million for the calendar year 1996. (b) Section 3.24(b) of the Target Disclosure Schedule lists the top twenty customers for IDTN (based on revenues invoiced) for the year ending December 31, 1995. As of 18 the date of this Agreement, to the best knowledge of the Target and Subsidiaries, except as set forth on Schedule 3.24(b) of the Target Disclosure Schedule, none of such customers has given written notice of its intent to cancel or not renew its contract with the Target or the Subsidiaries for IDTN services. SECTION 3.25. Executive Education Network ("EXEN"). (a) Section ------------------------------------ 3.25(a) of the Target Disclosure Schedule lists the colleges, universities and other educational institutions that provide course work to EXEN as of the date of the Agreement. As of the date of this Agreement, to the best knowledge of the Target and the Subsidiaries, except as set forth on Schedule 3.25(a) of the Target Disclosure Schedule, none of such colleges, universities or other educational institutions has given written notice of its intent to cancel or not renew its relationship with the Target or the Subsidiaries in connection with EXEN. (b) As of the date of this Agreement, except as set forth in Section 3.25(b) of the Target Disclosure Schedule, all customers that have completed "proof of concept" contracts with the Target or the Subsidiaries for EXEN services have entered into contracts with the Target or the Subsidiaries, as applicable, for further EXEN services. SECTION 3.26. Renewal Rate. Section 3.26 to the Target Disclosure ------------ Schedule sets forth, for each subscription based satellite and video programming network, by network, (a) the total number of subscribers as of January 1, 1995, December 31, 1995 and March 31, 1996 and (b) the number of new subscribers enrolled during the twelve months ended December 31, 1995 and the three months ended March 31, 1996, respectively. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT, ACQUIROR AND ACQUIROR SUB Parent, Acquiror and Acquiror Sub hereby, jointly and severally, represent and warrant to the Target that: SECTION 4.01. Corporate Organization. Each of Parent, Acquiror and ---------------------- Acquiror Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to have such power, authority and governmental approvals would not, individually or in the aggregate, have a material adverse effect on the ability of Parent, Acquiror and Acquiror Sub to perform their obligations hereunder and to consummate the Transactions. SECTION 4.02. Authority Relative to This Agreement. Each of Parent, ------------------------------------ Acquiror and Acquiror Sub has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The 19 execution and delivery of this Agreement by Parent, Acquiror and Acquiror Sub and the consummation by Parent, Acquiror and Acquiror Sub of the Transactions have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of Parent, Acquiror or Acquiror Sub are necessary to authorize this Agreement or to consummate the Transactions (other than with respect to the Merger, the filing and recordation of appropriate Articles of Merger with the Secretary, as required by Texas Law). This Agreement has been duly and validly executed and delivered by Parent, Acquiror and Acquiror Sub and, assuming the due authorization, execution and delivery of this Agreement by the Target, constitutes a legal, valid and binding obligation of each of Parent, Acquiror and Acquiror Sub enforceable against each of Parent, Acquiror and Acquiror Sub in accordance with its terms. SECTION 4.03. No Conflict; Required Filings and Consents. (a) The ------------------------------------------ execution and delivery of this Agreement by Parent, Acquiror and Acquiror Sub do not, and the performance of this Agreement by Parent, Acquiror and Acquiror Sub will not, (i) conflict with or violate the Articles of Incorporation or Bylaws of Parent, Acquiror or Acquiror Sub, (ii) conflict with or violate any Law applicable to Parent, Acquiror or Acquiror Sub or by which any property or asset of any of them is bound or affected, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of Parent, Acquiror or Acquiror Sub or require the consent of any third party pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent, Acquiror or Acquiror Sub is a party or by which Parent, Acquiror or Acquiror Sub or any property or asset of any of them is bound or affected, except for any such conflicts, violations, breaches, defaults or other occurrences which would not, individually or in the aggregate, prevent Parent, Acquiror and Acquiror Sub from performing their respective obligations under this Agreement and consummating the Transactions. (b) The execution and delivery of this Agreement by Parent, Acquiror and Acquiror Sub do not, and the performance of this Agreement by Parent, Acquiror and Acquiror Sub will not require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) pursuant to the Exchange Act, Blue Sky Laws, the HSR Act, the rules and regulations of the New York Stock Exchange, and filing and recordation of appropriate Articles of Merger with the Secretary as required by Texas Law and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not have a Material Adverse Effect on Acquiror and would not prevent or delay consummation of the Transactions, or otherwise prevent Parent, Acquiror or Acquiror Sub from performing their respective obligations under this Agreement. SECTION 4.04. Offer Documents; Proxy Statement. The Offer Documents -------------------------------- will not, at the time the Offer Documents are filed with the SEC or are first published, sent or given to shareholders of the Target, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading. The information supplied by Parent, Acquiror or Acquiror Sub for inclusion in the 20 proxy statement to be sent to the shareholders of the Target in connection with the Target Shareholders Meeting (such proxy statement, as amended and supplemented, being referred to herein as the "Proxy Statement") and Schedule --------------- 14D-9 will not, on the date the Proxy Statement or Schedule 14D-9 (or any amendment or supplement thereto) is first mailed to shareholders of the Target, at the time of the Shareholders Meeting and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it is made, is false or misleading with respect to any material fact, or omits to state any material fact required to be stated therein or necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Shareholders Meeting which shall have become false or misleading; provided, however, that Parent, Acquiror or Acquiror Sub makes no -------- ------- representation or warranty with respect to information supplied by the Target for inclusion in the Offer Documents. The Offer Documents shall comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations thereunder. SECTION 4.05. Brokers. No broker, finder or investment banker is ------- entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of Parent, Acquiror or Acquiror Sub other than fees payable by the Parent, the Acquiror and the Acquiror Sub. SECTION 4.06. Financing. Parent, has and will make available to --------- Acquiror Sub the funds to purchase all Shares tendered pursuant to the Offer and to consummate the Merger. ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER SECTION 5.01. Conduct of Business by the Target Pending the Acquiror ------------------------------------------------------ Sub's Election Date. The Target covenants and agrees that, between the date of - ------------------- this Agreement and the election or appointment of Acquiror Sub's designees to the Board pursuant to Section 6.03 upon the purchase by Acquiror Sub of any Shares pursuant to the Offer (the "Acquiror Sub's Election Date"), unless ---------------------------- Acquiror shall otherwise agree in writing (which agreement shall not be unreasonably withheld), (1) the business of the Target and the Subsidiaries shall be conducted only in, and the Target and the Subsidiaries shall not take any action except in, the ordinary course of business and in a manner substantially consistent with past practice, (2) the Target shall use all reasonable efforts to preserve substantially intact its business organization, to keep available the services of the current officers, employees and consultants of the Target and the Subsidiaries and to preserve the current relationships of the Target and the Subsidiaries with customers, suppliers and other persons with which the Target or any Subsidiary has significant business relations and (3) the Target shall not, and shall not permit any Subsidiary to: (a) amend or otherwise change its Articles of Incorporation or Bylaws; (b) issue, sell, pledge, dispose of, grant, encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares of capital stock of the Target or any 21 Subsidiary of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of the Target (except for shares of the Target Common Stock, if any, issuable under agreements currently in effect on the date hereof and described in Section 3.03 of the Target Disclosure Schedule, the issuance of rights pursuant to the Rights Agreement and shares of capital stock pursuant to Options described in Section 3.03 of the Target Disclosure Schedule or Plans currently in effect on the date hereof and described in Section 3.10 of the Target Disclosure Schedule), or (ii) any of the Target's or any Subsidiaries' assets, except for sales in the ordinary course of business and in a manner consistent with past practice; (c) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock; (d) reclassify, combine, split, divide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock; (e) (i) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets) any interest in any corporation, partnership, other business organization or any division thereof or any assets (other than inventory, equipment and similar assets acquired in the ordinary course of business); (ii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person, or make any loans or advances, except for indebtedness in a principal amount not, in the aggregate, in excess of $500,000 and repayable without premium or penalty; (iii) enter into any contract or agreement material to the business, results of operations or financial condition of the Target other than in the ordinary course of business, consistent with past practice or enter into or amend any Material Contract; (iv) authorize any capital expenditure, other than capital expenditures set forth in Section 5.01(e)(iv) of the Target Disclosure Schedule; or (v) enter into or amend any contract, agreement, commitment or arrangement with respect to any matter set forth in this subsection (e); (f) (i) except for annual increases in compensation payable or to become payable to any officer or other employee of the Target or the Subsidiaries consistent with past practices of the Target and the Subsidiaries, increase the compensation payable or to become payable to any officer or other employee, or grant any bonus to, any officer or other employee, or (ii) except as contemplated by Schedule 3.10 of the Target Disclosure Schedule or in accordance with the Company's current policies, grant any severance or termination pay to, or enter into any employment or severance agreement with, any director, officer or other employee of the Target or any Subsidiary or enter into or amend any collective bargaining agreement, or (iii) establish, adopt, enter into or amend any bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation or other plan, trust or fund for the benefit of any director, officer or class of employees; or (g) settle or compromise any pending or threatened litigation which is material or which relates to the transactions contemplated hereby, provided -------- that nothing in this Section 22 5.01(g) will prohibit the Target from settling or compromising any such litigation if, after consultation with counsel, the Target's Board believes that such action is necessary to comply with its fiduciary duties; or (h) take any action that would result in a breach of the representations and warranties made in Section 3.08. ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.01. Shareholder's Meeting. (a) The Target shall, in --------------------- accordance with applicable law and the Target's Articles of Incorporation and Bylaws, (i) duly call, give notice of, convene and hold an annual or special meeting of its shareholders as soon as practicable following consummation of the Offer for the purpose of considering and taking action on this Agreement and the transactions contemplated hereby (the "Target Shareholders Meeting") and (ii) --------------------------- subject to the fiduciary obligations of the Board as advised by independent legal counsel, include in the Proxy Statement the recommendation of the Board that the shareholders of the Target approve and adopt this Agreement and the Transactions, including, without limitation, the Merger and the written opinion of Goldman, Sachs & Co. referred to in Section 1.2(a), and use its reasonable best efforts to obtain such approval and adoption. To the extent permitted by law, Parent, Acquiror and Acquiror Sub each agree to vote all Shares beneficially owned by them in favor of the Merger. (b) Notwithstanding the foregoing, if and to the extent permitted by Law, the Target agrees, at the request of Acquiror Sub, subject to Article VII, to take all necessary and appropriate action to cause the Merger to become effective as soon as reasonably practicable after the Tender Offer Acceptance Date, without a meeting of the Target's shareholders, in accordance with Section 5.16 of Texas Law. SECTION 6.02. Proxy Statement. As promptly as practicable after the --------------- purchase of all Shares validly tendered and not withdrawn pursuant to the Offer, the Target shall file the Proxy Statement with the SEC under the Exchange Act, and shall use its reasonable best efforts to have the Proxy Statement cleared by the SEC. Acquiror, Acquiror Sub and the Target shall cooperate with each other in the preparation of the Proxy Statement, and the Target shall notify Acquiror of the receipt of any comments of the SEC with respect to the Proxy Statement and of any requests by the SEC for any amendment or supplement thereto or for additional information and shall provide to Acquiror promptly copies of all correspondence between the Target or any representative of the Target and the SEC. The Target shall give Acquiror and its counsel the opportunity to review the Proxy Statement prior to its being filed with the SEC and shall give Acquiror and its counsel the opportunity to review all amendments and supplements to the Proxy Statement and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. Each of the Target, Parent, Acquiror and Acquiror Sub agrees to use its reasonable best efforts, after consultation with the other parties hereto, to respond promptly to all such comments of and requests by the SEC and to cause the Proxy Statement and all required amendments and 23 supplements thereto to be mailed to the holders of Shares entitled to vote at the Target Shareholders Meeting at the earliest practicable time. SECTION 6.03. Target Board Representation; Section 14(f). (a) ------------------------------------------ Promptly upon the purchase by Acquiror Sub of Shares pursuant to the Offer, and from time to time thereafter, Acquiror Sub shall be entitled to designate up to such number of directors, rounded up to the next whole number, on the Board as shall give Acquiror Sub representation on the Board equal to the product of the total number of directors on the Board (giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Shares beneficially owned by Acquiror Sub or any affiliate of Acquiror Sub at such time bears to the total number of Shares then outstanding, and the Target shall, at such time, promptly take all actions necessary to cause Acquiror Sub's designees to be elected as directors of the Target, including increasing the size of the Board or securing the resignations of incumbent directors or both. At such times, the Target shall use its best efforts to cause persons designated by Acquiror Sub to constitute the same percentage as persons designated by Acquiror Sub shall constitute of the Board of (i) each committee of the Board (some of whom may be required to be independent as required by applicable law), (ii) each board of directors of each domestic Subsidiary and (iii) each committee of each such board, in each case only to the extent permitted by applicable law. Notwithstanding the foregoing, until the time Acquiror Sub acquires a majority of the then Outstanding Shares on a Fully Diluted Basis, the Target shall use its best efforts to ensure that all the members of the Board and each committee of the Board and such boards and committees of the domestic Subsidiaries as of the date hereof who are not employees of the Target shall remain members of the Board and of such boards and committees. (b) The Target shall promptly take all actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under this Section 6.03 and shall include in the Schedule 14D-9 such information with respect to the Target and its officers and directors as is required under Section 14(f) and Rule 14f-1 to fulfill such obligations. Parent, Acquiror or Acquiror Sub shall supply to the Target and be solely responsible for any information with respect to either of them and their nominees, officers, directors and affiliates required by such Section 14(f) and Rule 14f-1. (c) Following the election or appointment of designees of Acquiror Sub pursuant to this Section 6.03 and prior to the Effective Time, any amendment of this Agreement or the Articles of Incorporation or Bylaws of the Target, any termination of this Agreement by the Target, any extension by the Target of the time for the performance of any of the obligations or other acts of Parent, Acquiror or Acquiror Sub or waiver of any of the Target's rights hereunder shall require the concurrence of a majority of the directors of the Target then in office who neither were designated by Acquiror Sub nor are employees of the Target or if no such directors are then in office, no such amendment, termination, extension or waiver shall be effected which is materially adverse to the holders of Shares (other than Acquiror and its subsidiaries). SECTION 6.04. Access to Information; Confidentiality. (a) Subject to -------------------------------------- the Confidentiality Agreement (as hereinafter defined), from the date hereof to Acquiror Sub's Election Date, the Target shall, and shall cause its subsidiaries, officers, directors, employees, auditors and 24 other agents to, afford the officers, employees, auditors and other agents of Acquiror, and financing sources who shall agree to be bound by the provisions of the Confidentiality Agreement as though a party thereto, complete access at all reasonable times to its officers, employees, agents, properties, offices, plants and other facilities and to all books and records, and shall furnish Acquiror and such financing sources with all financial, operating and other data and information as Acquiror, through its officers, employees or agents, or such financing sources may from time to time reasonably request. Notwithstanding anything to the contrary contained in the Confidentiality Agreement, none of the actions required to be taken by Acquiror or Acquiror Sub under this Agreement shall be deemed to violate the Confidentiality Agreement. (b) No investigation pursuant to this Section 6.04 shall affect any representations or warranties of the parties herein or the condition of the obligations of the parties hereto. SECTION 6.05. No Solicitation of Transactions. The Target and its ------------------------------- affiliates shall not, directly or indirectly, through any officer, director, agent or otherwise, solicit, initiate or encourage the submission of any proposal or offer from any person relating to any acquisition or purchase of all or any material portion of the assets of, or any equity interest in, the Target (or any subsidiary or division thereof) or any merger, consolidation, share exchange, business combination or other similar transaction with the Target (or any subsidiary or division thereof) or solicit, participate in or initiate any negotiations regarding, or furnish to any other person any information with respect to, or otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any other person to do or seek any of the foregoing; provided, however, that nothing contained in this Section -------- ------- 6.05 shall prohibit the Target from furnishing information to, or entering into discussions or negotiations with, any person in connection with an unsolicited written proposal to the Target by such person to acquire the Target pursuant to a merger, consolidation, share exchange, business combination or other similar transaction or to acquire all or substantially all of the assets of the Target received by the Target after the date of the Agreement, if, and only to the extent that, (a) the Target's Board, as advised by independent legal counsel of Target and Target Banker, determines in good faith that such action is required in order for the Board not to breach its fiduciary duties to shareholders imposed by law and (b) prior to furnishing such information to, or entering into discussions or negotiations with, such person, the Target (i) gives Acquiror as promptly as practicable prior written notice (which shall include a copy of such written proposal except to the extent such disclosure would cause the Board of Directors of Target to determine that such disclosure would be a breach of its fiduciary duties to shareholders imposed by Law, as advised by independent legal counsel of Target) of the Target's intention to furnish such information or begin such discussions and (ii) receives from such person an executed confidentiality agreement on terms no less favorable to the Target than those contained in the Confidentiality Agreement. The Target agrees not to release any third party from, or waive any provision of, any confidentiality or standstill agreement to which the Target is a party. The Target and its affiliates immediately shall cease and cause to be terminated all existing discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. SECTION 6.06. Directors' and Officers' Indemnification. The Articles ---------------------------------------- of Incorporation and Bylaws of the Surviving Corporation shall contain provisions no less favorable 25 with respect to indemnification than are set forth in the Articles of Incorporation and Bylaws of the Target, which provisions shall not be amended, repealed or otherwise modified for a period of six (6) years from the Effective Time in any manner that would affect adversely the rights thereunder of individuals who at any time prior to the Effective Time were directors, officers or employees of the Target or any of its Subsidiaries, unless such modification shall be required by Law. From and after the Effective Time, Acquiror and the Surviving Corporation shall indemnify, defend and hold harmless each person who is now, or has been at any time prior to the date of this Agreement or who becomes prior to the Effective Time, an officer, director or employee of the Target or any of the Subsidiaries (collectively, the "Indemnified Parties") against all losses, ------------------- reasonable expenses (including reasonable attorneys' fees), claims, damages, liabilities or amounts that are paid in settlement of, with the approval of the Surviving Corporation (which approval shall not unreasonably be withheld), or otherwise in connection with, any threatened or actual claim, action, suit, proceeding or investigation (a "Claim"), based in whole or in part on or arising ----- in whole or in part out of the fact that the Indemnified Party (or the person controlled by the Indemnified Party) is or was a director, officer or employee of the Target or any of the Subsidiaries and pertaining to any matter existing or arising out of actions or omissions occurring at or prior to the Effective Time (including, without limitation, any Claim arising out of this Agreement or any of the transactions contemplated hereby), whether asserted or claimed prior to, at or after the Effective Time, in each case to the fullest extent permitted under Texas Law, and shall pay any expenses, as incurred, in advance of the final disposition of any such action or proceeding to each Indemnified Party to the fullest extent permitted under Texas Law. Without limiting the foregoing, in the event any such claim is brought against any of the Indemnified Parties, (a) such Indemnified Parties may retain counsel (including local counsel) satisfactory to them and which shall be reasonably satisfactory to Acquiror and the Surviving Corporation and they shall pay all reasonable fees and expenses of such counsel for such Indemnified Parties; and (b) the Acquiror and the Surviving Corporation shall use all reasonable efforts to assist in the defense of any such Claim, provided that the Acquiror and the Surviving Corporation shall not be liable for any settlement effected without their written consent, which consent, however, shall not be unreasonably withheld. The Indemnified Parties as a group shall retain only one law firm (plus appropriate local counsel) to represent them with respect to each such Claim unless there is, as determined by counsel to the Indemnified Parties, under applicable standards of professional conduct, a conflict or a reasonable likelihood of a conflict on any significant issue between the positions of any two or more Indemnified Parties at the expense of the Acquiror and the Surviving Corporation. Notwithstanding the foregoing, nothing contained in this Section 6.06 shall be deemed to grant any right to any Indemnified Party which is not permitted to be granted to such person under Texas Law. SECTION 6.07. Obligations of Acquiror Sub. Acquiror shall take all --------------------------- action necessary to cause Acquiror Sub to perform its obligations under this Agreement and to consummate the Merger on the terms and subject to the conditions set forth in this Agreement. SECTION 6.08. Public Announcements. (a) Parent, Acquiror, Acquiror -------------------- Sub and the Target shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or the Transactions and shall not issue any such press 26 release or make any such public statement prior to such consultation, except as may be required by Law or any listing agreement with its securities exchange, and (b) prior to the Effective Time, the Target will not issue any other press release or otherwise make any public statements regarding its business, except as may be required by Law or any listing agreement with the National Association of Securities Dealers, Inc. to which the Target is a party. SECTION 6.09. Delivery of SEC Documents. The Target shall promptly ------------------------- provide the Acquiror with any report, statement or schedule filed by the Target with the SEC subsequent to the date of this Agreement and, to the extent practicable, will provide Acquiror the opportunity to review and provide comments to any such report, statement or schedule prior to its filing with the SEC. SECTION 6.10. Notification of Certain Matters. The Target shall give ------------------------------- prompt notice to Acquiror, and Acquiror shall give prompt notice to the Target, of (a) the occurrence, or non-occurrence, of any event the occurrence, or non-occurrence, of which would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate and (b) any failure of the Target, Parent, Acquiror or Acquiror Sub, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to -------- ------- this Section 6.10 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. SECTION 6.11. Further Action. Upon the terms and subject to the -------------- conditions hereof, each of the parties hereto shall use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including but not limited to (i) cooperation in the preparation and filing of the Offer Documents, the Schedule 14D-9, the Proxy Statement, any required filings under the HSR Act and other laws described in clause (i) of the exception in Section 3.05(b), and any amendments to any thereof and (ii) using its reasonable best efforts to make all required regulatory filings and applications and to obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with the Target and its Subsidiaries as are necessary for the consummation of the transactions contemplated by this Agreement and to fulfill the conditions to the Offer and the Merger, including but not limited to the FCC Approvals. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall use their reasonable best efforts to take all such necessary action. SECTION 6.12 Employee Benefits. ----------------- (a) Acquiror agrees that, during the period commencing at the Acquiror Sub's Election Date and ending on the first anniversary thereof, the employees of the Target and the Subsidiaries will continue to be provided with benefits under employee benefit plans that are no less favorable in the aggregate than those currently provided by the Target and the Subsidiaries to such employees; provided that it is understood and agreed that the failure to provide the benefits (other 27 than benefits accrued prior to the termination of the applicable plan) of the Target's Amended and Restated 1989 Stock Option Plan, as amended, the Target's Nonemployee Stock Option Plan, as amended, and the Target's Employee Stock Purchase Plan shall not be a breach of this Section 6.12. (b) Acquiror will cause the Target (and, after the Merger, the Surviving Corporation) to honor all employee benefit obligations to current and former employees and directors under the Target's employee benefit plans in existence on the date hereof and disclosed in Section 3.10 of the Target Disclosure Schedule and all employment or severance agreements entered into by the Target or adopted by the Board of Directors of the Target prior to the date hereof and disclosed in Section 3.10 or 6.12(b) of the Target Disclosure Schedule; provided, however, that nothing shall prevent Acquiror or the Target -------- ------- (and, after the Merger, the Surviving Corporation) from taking any action with respect to such plans, obligations or agreements or refraining from taking any such action which is permitted or provided for under the terms thereof or under applicable Law. (c) Employees of the Target (and, after the Merger, the Surviving Corporation) shall be given credit for all actual service with the Target and the Subsidiaries under all employee benefit plans, programs and policies of the Surviving Corporation or Acquiror in which they become participants for all purposes thereunder, except to the extent that such crediting would produce duplication of benefits. SECTION 6.13 Amendments to the Rights Agreement. The Target ---------------------------------- covenants and agrees that it will amend the Rights Agreement in the manner set forth in Section 3.19, no later than the close of business on the date of this Agreement, and, except as expressly contemplated by Section 3.19 of this Agreement, the Target covenants and agrees that it will not amend the Rights Agreement. SECTION 6.14. Postponement of Annual Meeting. The Target shall as ------------------------------ soon as possible after the date of this Agreement indefinitely postpone its annual meeting of shareholders currently scheduled for May 22, 1996, and shall take no action unless compelled by legal process to reschedule such annual meeting or to call a special meeting of shareholders of the Target, except in accordance with this Agreement, unless and until this Agreement has been terminated in accordance with its terms. ARTICLE VII CONDITIONS TO THE MERGER SECTION 7.01. Conditions to the Merger. The obligations of the ------------------------ Target, Acquiror, and Acquiror Sub to consummate the Merger shall be subject to the satisfaction of the following conditions and only the following conditions: (a) the Merger shall have been approved and adopted by the affirmative vote of the shareholders of the Target to the extent required by Texas Law and the Articles of Incorporation and Bylaws of the Target; 28 (b) no Governmental Authority shall have enacted, issued, promulgated, enforced or entered any law, order, executive order, stay, decree, judgment, injunction or other order or statute, rule or regulation which is in effect and which has the effect of making the acquisition of Shares by Parent, Acquiror or Acquiror Sub or any affiliate of either of them illegal or otherwise preventing or prohibiting consummation of the Transactions; (c) any waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated; and (d) Acquiror Sub or its permitted assignee shall have purchased all Shares validly tendered and not withdrawn pursuant to the Offer; provided, -------- however, that neither Acquiror nor Acquiror Sub shall be entitled to assert the - ------- failure of this condition if, in breach of this Agreement or the terms of the Offer, Acquiror Sub fails to purchase any Shares validly tendered and not withdrawn pursuant to the Offer. ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER SECTION 8.01. Termination. This Agreement may be terminated and the ----------- Merger and the other Transactions may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of this Agreement and the transactions contemplated hereby as follows: (a) By mutual written consent duly authorized by the Boards of Directors of each of Parent, Acquiror, Acquiror Sub and the Target; or (b) By Acquiror if (i) due to an occurrence or circumstance that results in a failure to satisfy any condition set forth in Annex A hereto, ------- Acquiror Sub shall have (A) failed to commence the Offer within 10 days following the date of this Agreement, (B) terminated the Offer without having accepted any Shares for payment thereunder or (C) failed to pay for Shares pursuant to the Offer within 120 days following the commencement of the Offer, unless any such failure listed above shall have been caused by or resulted from the failure of Parent, Acquiror or Acquiror Sub to perform in any material respect any material covenant or agreement of either of them contained in this Agreement or the material breach by Parent, Acquiror or Acquiror Sub of any material representation or warranty of either of them contained in this Agreement, (ii) prior to the purchase of Shares pursuant to the Offer, (A) the Board of the Target withdraws or modifies (including by amendment of the Schedule 14D-9) in a manner adverse to Acquiror its approval or recommendation of this Agreement, the Offer or the Merger or shall have resolved to do so, (B) the Board shall have recommended to the shareholders of the Target any Business Combination Transaction (as hereinafter defined) other than the Transactions or resolved to do so, (C) the Minimum Condition shall not have been satisfied by the expiration date of the Offer and on or prior to such date any person (including the Target or any of its Subsidiaries or affiliates), other than Parent, Acquiror or 29 Acquiror Sub or any of their affiliates, shall have become the beneficial owner of 20% or more of the Shares, (D) there shall have been a breach of any representation or warranty on the part of the Target which would reasonably be expected to either have a Material Adverse Effect on the Target or prevent the consummation of the Offer or (E) there shall have been a breach of any covenant or agreement on the part of the Target which would reasonably be expected to either have a Material Adverse Effect on the Target or prevent the consummation of the Offer, which shall not have been cured prior to the earlier of (x) 10 days following notice of such breach and (y) two business days prior to the date on which the Offer expires or (iii) the Offer shall have remained open for at least twenty (20) business days, the Minimum Condition shall not have been satisfied by the expiration date of the Offer and on or prior to such date any person (other than Parent, Acquiror or Acquiror Sub or any of their affiliates) shall have made (A) a public announcement or communication with respect to a Business Combination Transaction (as defined below) or (B) a bona fide proposal to consummate a Business Combination Transaction and the terms thereof shall have become public information; or (c) By the Target if Acquiror Sub shall have (A) failed to commence the Offer within 10 days following the date of this Agreement, (B) terminated the Offer without having accepted any Shares for payment thereunder or (C) failed to pay for Shares pursuant to the Offer within 120 days following the commencement of the Offer, unless in the case of (A), (B), or (C) immediately above, such failure to pay for Shares shall have been caused by or resulted from the failure of the Target to satisfy the conditions set forth in paragraph (c) of Annex A; provided that any termination of this Agreement by the Target ------- -------- pursuant to this Section 8.01(c)(i) shall not be effective until the Target has made payment of the full fee to the extent required by Section 8.02(a) hereof, or (ii) prior to the purchase of Shares pursuant to the Offer, any person shall have made a bona fide offer to acquire the Target (A) that the Board has determined in its good faith judgment is more favorable to the Target's shareholders than the Offer and the Merger and (B) as a result of which the Board is obligated by its fiduciary duty under applicable law, as advised by independent legal counsel, to terminate this Agreement, provided that any termination of this Agreement by the Target pursuant to this Section 8.01(c)(ii) shall not be effective until the Target has made payment of the full fee required by Section 8.02(a) hereof; or (d) By Acquiror or the Target if any court of competent jurisdiction or other governmental body located or having jurisdiction within the United States or any country or economic region in which either Acquiror or the Target, directly or indirectly, has material assets or operations, shall have issued a final order, decree or ruling or taken any other final action restraining, enjoining or otherwise prohibiting the Offer or the Merger and such order, decree, ruling or other action is or shall have become final and nonappealable. SECTION 8.02. Fees and Expenses. (a) The Target shall pay Acquiror a ----------------- fee (an "Alternative Proposal Fee") of $15,000,000, which amount is inclusive of ------------------------ all of Acquiror Expenses (as hereinafter defined): (i) within one business day following notice of termination of this Agreement, if this Agreement is terminated pursuant to Section 8.01(b)(ii)(A), (B) or (C) or Section 8.01 (c)(ii) or if this Agreement is terminated pursuant to Section 8.01(b)(ii)(D) or (E) as a result of Target's willful breach of the representation, warranty, covenant or agreement permitting such 30 termination; (ii) within one business day following notice of termination of this Agreement if this Agreement is terminated pursuant to Section 8.01(c)(i) in the event that at the time of such termination Acquiror could have terminated this Agreement under Section 8.01(b)(ii)(A), (B) or (C) or (iii) within one business day following the execution of any agreement or any occurrence, as the case may be, referred to in this clause (iii) if this Agreement is terminated pursuant to Section 8.01 and (A) the Offer shall have remained open for at least twenty (20) business days, (B) the Minimum Condition shall not have been satisfied, (C) a Business Combination Transaction proposal shall have been made prior to termination of the Offer, and (D) any Business Combination Transaction is thereafter consummated (or an agreement with respect thereto is entered into) within 12 months of such termination. As used herein, the term "Business -------- Combination Transaction" shall mean any of the following involving the Target: - ----------------------- (1) any merger, consolidation, share exchange, business combination or other similar transaction (other than the Transactions); (2) any sale, lease, exchange, transfer or other disposition (other than a pledge or mortgage) of 20% or more of the assets of the Target in a single transaction or series of related transactions; (3) the acquisition by a person or entity or any "group" (as such ----- term is defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) of beneficial ownership of 20% or more of the shares of Target Common Stock, whether by tender offer, exchange offer or otherwise; (4) the adoption by the Target of a plan of liquidation or the declaration or payment of an extraordinary dividend; or (5) the repurchase by the Target or any of its Subsidiaries of 20% or more of the outstanding Shares, other than a repurchase which was not approved by the Target or publicly announced prior to the termination of this Agreement and which is not part of a series of transactions resulting in a change of control. (b) Acquiror shall be entitled to receive the Acquiror Expenses (but not the Alternative Proposal Fee) in immediately available funds (not later than one business day after submission of statements therefor) in the event that this Agreement is terminated by Acquiror pursuant to Section 8.01(b)(i). (c) As used herein, "Acquiror Expenses" means all out-of-pocket ----------------- expenses and fees up to $5,000,000 actually incurred by Acquiror or Acquiror Sub or on their respective behalf in connection with the Transactions prior to the termination of this Agreement (including, without limitation, all fees and expenses of counsel, financial advisors, accountants, banks or other entities providing financing to Acquiror (including financing, commitment and other fees payable thereto), accountants, environmental and other experts and consultants to Acquiror and its affiliates, and all printing and advertising expenses) and in connection with the negotiation, preparation, execution, performance and termination of this Agreement, the structuring of the Transactions, any agreements relating thereto and any filings to be made in connection therewith. (d) Except as set forth in this Section, all costs and expenses incurred in connection with this Agreement and the Transactions shall be paid by the party incurring such expenses, whether or not any Transaction is consummated. SECTION 8.03. Amendment. This Agreement may be amended by the --------- parties hereto by action taken by or on behalf of their respective Boards of Directors at any time prior to the Effective Time; provided, however, that, -------- ------- after the approval and adoption of this Agreement and the 31 Transactions by the shareholders of the Target, no amendment may be made which would violate Texas Law. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. SECTION 8.04. Waiver. At any time prior to the Effective Time, any ------ party hereto may (a) extend the time for the performance of any obligation or other act of any other party hereto, (b) waive any inaccuracy in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any agreement or condition contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby. SECTION 8.05 Effect of Termination. In the event of the termination --------------------- of this Agreement pursuant to Section 8.01, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto except as set forth in Section 8.02 and Section 9.01; provided, however, that -------- ------- nothing herein shall relieve any party from liability for any breach hereof. ARTICLE IX GENERAL PROVISIONS SECTION 9.01. Non-Survival of Representations, Warranties and ----------------------------------------------- Agreements. The representations, warranties and agreements in this Agreement - ---------- shall terminate at the Effective Time or upon termination of this Agreement pursuant to Section 8.01, as the case may be, except that (a) the representations and warranties of the Target set forth in Article III shall terminate on the Acquiror Sub's Election Date, and (b) the agreement set forth in Articles II and IX and Sections 6.04(b), 6.06, 6.07, 6.12 and 8.02 and Article IX shall survive termination indefinitely. SECTION 9.02. Notices. All notices, requests, claims, demands and ------- other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, facsimile, telegram or telex or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.02): if to Parent, Acquiror or Acquiror Sub: c/o K-III Communications Corporation 745 Fifth Avenue New York, New York 10151 Attention: Beverly C. Chell, Esq. Facsimile: (212) 745-0199 32 with a copy to: Simpson Thacher & Bartlett 426 Lexington Avenue New York, New York 10017 Attention: Gary I. Horowitz, Esq. Facsimile: (212) 455-2502 if to the Target: Westcott Communications, Inc. 1303 Marsh Lane Carrollton, Texas 75006 Attention: President Facsimile: (214) 716-5105 with a copy to: Baker & McKenzie 2001 Ross Avenue, Suite 4500 Dallas, Texas 75201 Attention: Daniel W. Rabun and Alan G. Harvey Facsimile: (214) 978-3099 SECTION 9.03. Certain Definitions. For purposes of this Agreement, ------------------- the term: (a) "affiliate" of a specified person means a person who, directly or --------- indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such specified person; (b) "beneficial owner" with respect to any shares means a person who ---------------- shall be deemed to be the beneficial owner of such shares (i) which such person or any of its affiliates or associates (as such term is defined in Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or indirectly, (ii) which such person or any of its affiliates or associates has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of consideration rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding, (iii) which are beneficially owned, directly or indirectly, by any other persons with whom such person or any of its affiliates or associates or any person with whom such person or any of its affiliates or associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any such shares, or (iv) pursuant to Section 13(d) of the Exchange Act and any rules or regulations promulgated thereunder; 33 (c) "business day" means any day on which the principal offices of ------------ the SEC in Washington, D.C. are open to accept filings, or, in the case of determining a date when any payment is due, any day on which banks are not required or authorized to close in New York, New York; (d) "control" (including the terms "controlled by" and "under common ------- ------------- ------------ control with") means the possession, directly or indirectly or as trustee or - ------------ executor, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise; (e) "person" means an individual, corporation, partnership, limited ------ partnership, syndicate, person (including, without limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government; and (f) "subsidiary" or "subsidiaries" of any person means any ---------- ------------ corporation, partnership, joint venture or other legal entity of which such person (either alone or through or together with any other subsidiary), owns or has rights to acquire, directly or indirectly, more than 50% of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. SECTION 9.04. Severability. If any term or other provision of this ------------ Agreement is invalid, illegal or incapable of being enforced by any rule of Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the Transactions be consummated as originally contemplated to the fullest extent possible. SECTION 9.05. Assignment; Binding Effect; Benefit. Neither this ----------------------------------- Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that Acquiror and Acquiror Sub may assign all or any of their respective rights and obligations hereunder to any direct or indirect wholly owned subsidiary or subsidiaries of Acquiror, provided that no such assignment shall relieve the assigning party of -------- its obligations hereunder if such assignee does not perform such obligations. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Notwithstanding anything contained in this Agreement to the contrary, except for the provisions of Section 6.06, nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement. 34 SECTION 9.06. Incorporation of Schedules. The Target Disclosure -------------------------- Schedule and the Acquiror Disclosure Schedule referred to herein and signed for identification by the parties hereto are hereby incorporated herein and made a part hereof for all purposes as if fully set forth herein. SECTION 9.07. Specific Performance. The parties hereto agree that -------------------- irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity. SECTION 9.08. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, ------------- AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE RULES OF CONFLICTS OF LAW THEREOF. ALL ACTIONS AND PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE HEARD AND DETERMINED IN ANY COURT SITTING IN THE CITY OF DALLAS, TEXAS. SECTION 9.09. Headings. The descriptive headings contained in this -------- Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 9.10. Counterparts. This Agreement may be executed and ------------ delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. SECTION 9.11. Waiver of Jury Trial. Each of Acquiror, the Target and -------------------- Acquiror Sub hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the actions of Acquiror, the Target or Acquiror Sub in the negotiation, administration, performance and enforcement thereof. SECTION 9.12. Entire Agreement. This Agreement, the Target ---------------- Disclosure Schedule, the Acquiror Disclosure Schedule, the confidentiality agreement, dated January 31, 1996 (the "Confidentiality Agreement"), between the ------------------------- Target and Acquiror, and any documents delivered by the parties in connection herewith constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings among the parties with respect thereto. No addition to or modification of any provision of this Agreement shall be binding upon any party hereto unless made in writing and signed by all parties hereto. SECTION 9.13. Parent Guarantee. Parent agrees to take all action ---------------- necessary to cause Acquiror and Acquiror Sub to perform all of their respective agreements, covenants and obligations under this Agreement. Parent shall be liable for any breach of any representation, warranty, agreement, covenant or obligation of Acquiror or Acquiror Sub under this Agreement to the extent Acquiror or Acquiror Sub would be liable under this Agreement. 35 IN WITNESS WHEREOF, Acquiror, Acquiror Sub and the Target have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. K-III COMMUNICATIONS CORPORATION By /s/ Beverly C. Chell ----------------------------------------------- Name: Beverly C. Chell Title: Vice Chairman K-III PRIME CORPORATION By /s/ Beverly C. Chell ----------------------------------------------- Name: Beverly C. Chell Title: Vice Chairman K-III ACQUISITION CORP. By /s/ Beverly C. Chell ----------------------------------------------- Name: Beverly C. Chell Title: Vice Chairman WESTCOTT COMMUNICATIONS, INC. By /s/ Carl Westcott ----------------------------------------------- Name: Carl H. Westcott Title: Chief Executive Officer ANNEX A Conditions to the Offer Capitalized terms used herein shall have the meanings ascribed thereto in the Agreement to which this Annex A is appended. Notwithstanding any other provision of the Offer, Acquiror Sub shall not be required to accept for payment or pay for any Shares tendered pursuant to the Offer, and may terminate or amend the Offer (whether or not any Shares have theretofore been purchased or paid for) and may postpone the acceptance for payment of and payment for Shares tendered, if, immediately prior to the expiration of the Offer, (i) the Minimum Condition shall not have been satisfied, (ii) any applicable waiting period under the HSR Act shall not have expired or been terminated, or any material approval, permit, authorization, consent or waiting period of any domestic, foreign or supranational governmental, administrative or regulatory agency (federal, state, local, provincial or otherwise) located or having jurisdiction within the United States or any country or economic region in which either the Target or Acquiror, directly or indirectly, has material assets or operations (it being understood that such material approvals shall include the FCC Approvals), shall not have been obtained or satisfied on terms satisfactory to Acquiror in its reasonable discretion or (iii) at any time on or after the date of this Agreement, and prior to the acceptance for payment of Shares, any of the following conditions shall exist: (a) there shall have been any action or proceeding brought by any Governmental Authority before any federal or state court, or any order or preliminary or permanent injunction entered in any action or proceeding before any federal or state court or governmental, administrative or regulatory authority or agency, located or having jurisdiction within the United States or any country or economic region in which either the Target or Acquiror, directly or indirectly, has material assets or operations, or any other action taken, proposed or threatened, or statute, rule, regulation, legislation, interpretation, judgment or order proposed, sought, enacted, entered, enforced, promulgated, amended, issued or deemed applicable to Acquiror, the Target or any subsidiary or affiliate of Acquiror or the Target or the Offer or the Merger, by an legislative body, court, government or governmental, administrative or regulatory authority or agency located or having jurisdiction within the United States or any country or economic region in which either the Target or Acquiror, directly or indirectly, has material assets or operations, which could reasonably be expected to have the effect of : (i) making illegal, or otherwise directly or indirectly restraining or prohibiting or making materially more costly, the making of the Offer, the acceptance for payment of, payment for, or ownership, directly or indirectly, of some of or all the Shares by Acquiror or Acquiror Sub, the consummation of any of the transactions contemplated by the Agreement or materially delaying the Merger; (ii) prohibiting or materially limiting the ownership or operation by the Target or any of its Subsidiaries, or by Acquiror, Acquiror Sub or any of Acquiror's subsidiaries of all or any material portion of the business or assets of the Target or any of its material subsidiaries or Acquiror or any of its subsidiaries, or compelling Acquiror Sub, Acquiror or any of Acquiror's subsidiaries to dispose of or hold separate all or any material portion of the business or assets of the Target or any of its material subsidiaries or Acquiror or any of its subsidiaries, as a result of the A-1 transactions contemplated by the Offer or the Agreement; (iii) imposing or confirming limitations on the ability of Acquiror Sub, Acquiror or any of Acquiror's subsidiaries effectively to acquire or hold or to exercise full rights of ownership of Shares, including, without limitation, the right to vote any Shares acquired or owned by Acquiror or Acquiror Sub or any of Acquiror's subsidiaries on all matters properly presented to the shareholders of the Target, including, without limitation, the adoption and approval of the Agreement and the Merger or the right to vote any shares of capital stock of any Subsidiary (other than immaterial Subsidiaries) directly or indirectly owned by the Target; (iv) requiring divestiture by Acquiror or Acquiror Sub, directly or indirectly, of any Shares; or (v) which would reasonably be expected to materially adversely affect the business, financial condition or results of operations of the Target and its Subsidiaries taken as a whole or the value of the Shares or of the Offer to Acquiror Sub or Acquiror; (b) (i) it shall have been publicly disclosed or Acquiror Sub shall have otherwise learned that beneficial ownership (determined for the purposes of this paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the then outstanding Shares has been acquired by any person or entity or any "group" (as such term is defined under Section 13(d) of the Exchange Act), other than Acquiror or any of its affiliates or (ii) (A) the Board shall have withdrawn or modified in a manner adverse to Parent, Acquiror or Acquiror Sub the approval or recommendation of the Offer, the Merger or this Agreement or approved or recommended any takeover proposal or any other acquisition of Shares other than the Offer and the Merger, (B) any such person or other entity or group shall have entered into a definitive agreement or an agreement in principle with the Target with respect to a tender offer or exchange offer for any Shares or a merger, consolidation or other business combination with or involving the Target or any of its Subsidiaries or (C) the Board shall have resolved to do any of the foregoing; (c) the Target shall have failed to perform in any material respect any material obligation of the Target to be performed or complied with by it prior to the Tender Offer Acceptance Date or any representation or warranty of the Target in this Agreement shall not be true and correct and the failure to be true and correct shall have a Material Adverse Effect on the Target; provided, -------- however, in determining whether a Material Adverse Effect has occurred, any - ------- qualifications as to materiality contained in any such representation and warranty shall be deemed not to apply. (d) this Agreement shall have been terminated in accordance with its terms; (e) Acquiror Sub and the Target shall have agreed that Acquiror Sub shall terminate or amend the Offer; or (f) there shall have occurred, or Acquiror Sub shall have become aware of any fact that would be reasonably expected to have a Material Adverse Effect on the Target; (g) shall have occurred (i) any general suspension of, or limitation on prices for, or trading in securities on any national securities exchange; (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States; (iii) any limitation (whether or not mandatory) by any United States federal or state government or A-2 governmental, administrative or regulatory authority or agency, on, or any other event that could reasonably be expected to materially adverse effect, the extension of credit by banks or other lending institutions; (iv) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States that could reasonably be expected to have a Material Adverse Effect on the Target or materially adverse effect (or materially delay) the consummation of the Offer; (v) any extraordinary or material adverse change in the United States securities or financial markets generally from the date hereof, including, without limitation, a decline as of any day and as of ten trading days after such day, of at least 35% in either the Dow Jones Average of Industrial Stocks or the Standard & Poor's 400 index from the date hereof; or (vi) in the case of any of the foregoing existing at the time of commencement of the Offer, a material acceleration or worsening thereof; (h) the Board of Directors of the Target shall not have been increased from six to eight members; three of the existing Target directors shall not have resigned effective as of the Tender Offer Acceptance Date; and three designees of Acquiror (to the extent designated by Acquiror) shall not have been validly designated by the existing directors as of the Tender Offer Acceptance Date to fill such vacancies; (i) the Target shall have, after the date of the Agreement, issued, sold or granted or authorized the issuance, sale or grant of any shares of the capital stock of the Target or any Subsidiary of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of the Target (except for shares of the Target Common Stock issuable upon the exercise of Options described in clauses (a) and (b) of Section 2.07 of the Agreement which were outstanding on the date of the Agreement or pursuant to the Target's Employee Stock Purchase Plan); which, in the reasonably judgment of Acquiror Sub with respect to each and every matter referred to above and regardless of the circumstances (including any action or inaction by Acquiror Sub or any of its affiliates not inconsistent with the terms hereof) giving rise to any such condition, makes it inadvisable to proceed with the Offer or with such acceptance for payment of or payment for Shares or to proceed with the Merger. The foregoing conditions are for the sole benefit of Acquiror Sub and Acquiror and may be asserted by Acquiror Sub or Acquiror regardless of the circumstances giving rise to any such condition (including any action or inaction by Acquiror or Acquiror Sub not inconsistent with the terms hereof) or may be waived by Acquiror Sub or Acquiror in whole or in part at any time and from time to time in their sole discretion. The failure by Parent, Acquiror or Acquiror Sub at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. A-3 ANNEX B ARTICLES OF INCORPORATION OF WESTCOTT COMMUNICATIONS, INC. ARTICLE ONE The name of the Corporation is Westcott Communications, Inc. ARTICLE TWO The period of duration of the Corporation is perpetual. ARTICLE THREE The purpose for which the Corporation is organized is to engage in the transaction of any and all lawful business for which corporations may be incorporated under the Texas Business Corporation Act. ARTICLE FOUR The aggregate number of shares of capital stock which the Corporation shall have authority to issue is 1,000, par value $.01 per share, designated Common Stock. Each share of such Common Stock shall have identical rights and privileges in every respect. ARTICLE FIVE No holder of any shares of capital stock of the Corporation, whether now or hereafter authorized, shall, as such holder, have any preemptive or preferential right to receive, purchase, or subscribe to (a) any unissued or treasury shares of any class of stock (whether now or hereafter authorized) of the Corporation, (b) any obligations, evidences of indebtedness, or other securities of the Corporation convertible into or exchangeable for, or carrying or accompanied by any rights to receive, purchase, or subscribe to, any such unissued or treasury shares, (c) any right of subscription to, any right to receive, or any warrant or option for the purchase of, any of the foregoing securities, or (d) any other securities that may be issued or sold by the Corporation. ARTICLE SIX The Corporation will not commence business until it has received for the issuance of its shares consideration of the value of $1,000.00, consisting of money, labor done, or property actually received. ARTICLE SEVEN Cumulative voting for the election of directors is expressly denied and prohibited. ARTICLE EIGHT Any action of the Corporation which, under the provisions of the Texas Business Corporation Act or any other applicable law, is required to be authorized or approved by the holders of any specified fraction which is in excess of one-half or any specified percentage which is in excess of fifty percent of the outstanding shares (or of any class or series thereof) of the Corporation shall, notwithstanding any law, be deemed effectively and properly authorized or approved if authorized or approved by the vote of the holders of more than fifty percent of the outstanding shares entitled to vote thereon (or, if the holders of any class or series of the Corporation's shares shall be entitled by the Texas Business Corporation Act or any other applicable law to vote thereon separately as a class, by the vote of the holders of more than fifty percent of the outstanding shares of each such class or series). Without limiting the generality of the foregoing, the foregoing provisions of this Article Eight shall be applicable to any required shareholder authorization or approval of: (a) any amendment to these articles of incorporation; (b) any plan of merger, share exchange, or reorganization involving the Corporation; (c) any sale, lease, exchange, or other disposition of all, or substantially all, the property and assets of the Corporation; and (d) any voluntary dissolution of the Corporation. Directors of the Corporation shall be elected by a plurality of the votes cast by the holders of shares entitled to vote in the election of directors of the Corporation at a meeting of shareholders at which a quorum is present. Except as otherwise provided in this Article Eight or as otherwise required by the Texas Business Corporation Act or other applicable law, with respect to any matter, the affirmative vote of the holders of a majority of the Corporation's shares entitled to vote on that matter and represented in person or by proxy at a meeting of shareholders at which a quorum is present shall be the act of the shareholders. Nothing contained in this Article Eight is intended to require shareholder authorization or approval of any action of the Corporation whatsoever unless such approval is specifically required by the other provisions of these articles of incorporation, the bylaws of the Corporation, or by the Texas Business Corporation Act or other applicable law. 2 ARTICLE NINE The street address of the registered office of the Corporation is 1212 Guadalupe, Suite 102, Austin, Texas 78701, and the name of its registered agent at such address is Capitol Services, Inc. ARTICLE TEN To the fullest extent permitted by applicable law, a director of the Corporation shall not be liable to the Corporation or its shareholders for monetary damages for an act or omission in the director's capacity as a director, except that this Article Ten does not eliminate or limit the liability of a director of the Corporation to the extent the director is found liable for: (i) a breach of the director's duty of loyalty to the Corporation or its shareholders; (ii) an act or omission not in good faith that constitutes a breach of duty of the director to the Corporation or an act or omission that involves intentional misconduct or a knowing violation of the law; (iii) a transaction from which the director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the director's office; or (iv) an act or omission for which the liability of a director is expressly provided by an applicable statute. Any repeal or amendment of this Article Ten by the shareholders of the Corporation shall be prospective only and shall not adversely affect any limitation on the personal liability of a director of the Corporation arising from an act or omission occurring prior to the time of such repeal or amendment. In addition to the circumstances in which a director of the Corporation is not personally liable as set forth in the foregoing provisions of this Article Ten, a director shall not be liable to the Corporation or its shareholders to such further extent as permitted by any law hereafter enacted, including without limitation any subsequent amendment to the Texas Miscellaneous Corporation Laws Act or the Texas Business Corporation Act. ARTICLE ELEVEN Any action which may be taken, or which is required by law or the Articles of Incorporation or bylaws of the Corporation to be taken, at any annual or special meeting of shareholders may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall have been signed by the holder or holders of shares having not 3 less than the minimum number of votes that would be necessary to take such action at a meeting at which the holders of all shares entitled to vote on the action were present and voted. ARTICLE TWELVE The Corporation shall indemnify any person who was, is, or is threatened to be made a named defendant or respondent in a proceeding (as hereinafter defined) because the person (i) is or was a director or officer of the Corporation or (ii) while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan, or other enterprise, to the fullest extent that a corporation may grant indemnification to a director under the Texas Business Corporation Act, as the same exists or may hereafter be amended. 4 -----END PRIVACY-ENHANCED MESSAGE-----