<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF
THE SECURITIES EXCHANGE ACT OF 1934)
(AMENDMENT NO. )
SCOPE INDUSTRIES
(NAME OF ISSUER)
SCOPE INDUSTRIES
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, NO PAR VALUE
(TITLE OF CLASS OF SECURITIES)
809163108
----------------------------------
(CUSIP NUMBER OF CLASS OF SECURITIES)
<TABLE>
<S> <C>
WITH COPY TO:
MEYER LUSKIN KAY RUSTAND, ESQ.
SCOPE INDUSTRIES ARTER & HADDEN
P.O. BOX 2211 700 S. FLOWER ST., 30TH FL.
SANTA MONICA, CA 90401-2211 LOS ANGELES, CA 90017
310-458-1574 213-629-9300
</TABLE>
----------------------------------------------------------------------
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
JULY 14, 1997
-------------------------------------------------------------
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDER)
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
TRANSACTION
VALUATIONS(1) AMOUNT OF FILING FEE
- ---------------------------------------------------------------------------------------------
<S> <C>
$10,400,000 $2,080
- ---------------------------------------------------------------------------------------------
</TABLE>
[ ] 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.
<TABLE>
<S> <C>
Amount previously paid: Filing party:
- --------------------------- ----------------------------------------
Form or registration no: Date filed:
- ---------------------------- ------------------------------------------
</TABLE>
- ---------------
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(c) of the Securities Act of 1933, as amended.
================================================================================
<PAGE> 2
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer (the "Issuer") and the address of the principal
executive office of the Issuer is:
Scope Industries
233 Wilshire Boulevard
Suite 310
Santa Monica, California 90401
(b) As of June 30, 1997, 1,165,665 shares of the Issuer's common stock, no
par value, were outstanding. The Issuer seeks to purchase a maximum of 200,000
shares of common stock (the "Shares"), pursuant to a modified Dutch auction, as
described in the Offer to Purchase attached as Exhibit 9(a)(1) (the "Offer") and
incorporated herein by reference, pursuant to which securities may be purchased
from an officer, director or affiliate of the Issuer. The minimum consideration
to be paid for such securities is $48.00 per share and the maximum consideration
to be paid for the securities is $52.00 per share.
(c) The Issuer's common stock is listed for trading on the American Stock
Exchange. The following are the high and low sales prices for the common stock
as reported on the American Stock Exchange for each quarterly period during the
past two years.
<TABLE>
<CAPTION>
DIVIDENDS
DECLARED
PER SHARE
-----------------
DATE LOW HIGH REGULAR EXTRA
---------------------------------------------- --- ---- ------- -----
<S> <C> <C> <C> <C>
1995
First quarter............................... $23 1/8 $24 7/8
Second quarter.............................. $23 3/8 $25 1/8
Third quarter............................... $25 $29
Fourth quarter.............................. $28 5/8 $32 1/2 $ .50
1996
First quarter............................... $32 $42
Second quarter.............................. $33 3/4 $38 1/2
Third quarter............................... $37 $43 $.25
Fourth quarter.............................. $39 1/2 $50 1/4 $ .70 $.30
1997
First quarter............................... $41 $50 1/4
Second quarter.............................. $47 $54
</TABLE>
(d) Not applicable
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The Issuer expects to pay an estimated maximum of $10.4 million in cash
for the Shares, which it has available in its bank account.
(b) The Issuer does not expect to borrow any portion of the consideration
to be paid for the Shares.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS FOR PROPOSALS OF THE ISSUER OR
AFFILIATE.
By resolution of the Board of Directors of the Issuer, the Shares will be
retired upon acquisition. The Issuer desires to acquire the Shares to enhance
shareholder value.
The Issuer does not intend to (a) dispose of any of the Shares or of any
other securities of the Issuer to any person; (b) engage in any extraordinary
corporate transaction, such as a merger, reorganization or liquidation; (c) sell
or transfer a material amount of the assets of the Issuer or any of its
subsidiaries; (d) change in any way the present Board of Directors or management
of the Issuer; (e) make any material
2
<PAGE> 3
change in the present dividend rate or policy or indebtedness or capitalization
of the Issuer; (f) make any other material change in the Issuer's corporate
structure or business; (g) change the Issuer's charter, bylaws or instruments
corresponding thereto or take other actions that might impede the acquisition of
control of the Issuer by any person; (h) cause the class of equity security of
the Issuer to be delisted from the American Stock Exchange or from any national
securities exchange or to cease to be authorized to be quoted in an inter-dealer
quotation system of a registered national securities association; (i) cause a
class of equity security of the Issuer to become eligible for termination of
registration pursuant to Section 12(g)(4) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); or (j) suspend the Issuer's obligation to
file reports pursuant to Section 15(d) of the Exchange Act.
The Board of Directors has determined that the Company's financial
condition and outlook and current market conditions, including recent trading
prices of the Shares, make this an attractive time to repurchase a significant
portion of the outstanding Shares. In the view of the Board of Directors, the
Offer represents a significant acceleration of what would otherwise have been a
continuing share repurchase program and an attractive investment and use of the
Company's cash generation abilities that should benefit the Company and its
shareholders over the long term. In particular, the Board of Directors believes
that the purchase of Shares at this time is consistent with the Company's long
term corporate goal of seeking to increase shareholder value. The Board of
Directors believes that the Company's current net liquidity is adequate to
purchase the maximum number of Shares that may be tendered under the terms of
the Offer and to continue to meet the foreseeable liquidity needs of its ongoing
business.
The Company is providing shareholders with the opportunity to determine the
price or prices (not greater than $52.00 nor less than $48.00 per Share) at
which they are willing to sell their Shares, subject to the terms and conditions
of the Offer, and without the usual transaction costs associated with market
sales, including any odd lot discount if less than a round lot is tendered. The
Offer also allows shareholders to sell a portion of their Shares while retaining
a continuing equity interest in the Company if they so desire.
The Company is providing shareholders with liquidity that is not present in
the secondary market that exists for the Shares. Trading volume of the Company's
shares has averaged less than 600 Shares per day over the past six months as
reported by the American Stock Exchange. For 1996, the trading volume averaged
less than 500 Shares per day. The Offer provides shareholders with the
opportunity to sell Shares in quantities larger than the existing market has
indicated it has capacity to absorb without eroding per Share price levels.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
No transaction in the Issuer's common stock was effected during the past 40
business days by the Issuer or by any executive officer or director or
controlling shareholder of the Issuer or of any subsidiary of the Issuer, except
that Meyer Luskin, the President and a director of the Company, exercised a
stock option on June 2, 1997 and purchased 3,000 shares of the Company's common
stock at an exercise price of $32.725 per share, and Robert Henigson, a director
of the Company, sold an aggregate of 2,900 shares of the Company's common stock
in open market transactions. Mr. Henigson sold 700 shares on May 16, 1997, 1,200
shares on May 30, 1997, 300 and 600 shares on July 1, 1997 and 100 shares on
July 2, 1997, and Mr. Henigson received $50.375, $53, $53.125, $53 and $54 per
share, respectively.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER'S SECURITIES.
There are no contracts, arrangements, understandings or relationships
relating, directly or indirectly, to the tender offer under Rule 13e-4 (whether
or not legally enforceable) between the Issuer (including any executive officer,
director or controlling shareholder of the Issuer or any subsidiary thereof) and
any other person with respect to any securities of the Issuer.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
No person has been or is expected to be employed, retained or compensated
by the Issuer or by any other person on behalf of the Issuer to make
solicitations or recommendations in connection with the tender offer.
3
<PAGE> 4
ITEM 7. FINANCIAL INFORMATION.
(a) Except as noted, the following financial data of the Issuer are
included within the Offer to Purchase attached as Exhibit 9(a)(1):
(i) Audited financial statements for the two fiscal years ended June
30, 1995 and June 30, 1996 are incorporated herein by reference to the Form
10-K of the Issuer for the period ended June 30, 1996;
(ii) Unaudited balance sheets and comparative year-to-date income
statements and statements of cash flows and related earnings per share
amounts are incorporated herein by reference to the Issuer's most recent
quarterly report filed on Form 10-Q for the quarter ended March 31, 1997;
(iii) The Company has concluded that the ratio of earnings to fixed
charges for the two most recent fiscal years and the interim periods set
forth above is not material and not applicable; and
(iv) The book value per share as of June 30, 1996, the most recent
fiscal year-end, and as of March 31, 1997, the date of the latest interim
balance sheet provided above is shown on the Summary Historical Financial
Information on page 13 of the Offer to Purchase attached as Exhibit
9(a)(1).
(b) The Offer to Purchase includes on page 15 pro forma financial data to
demonstrate the effect of the tender offer on the financial information provided
under Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION.
(a) There is no present or proposed contract, arrangement, understanding or
relationship between the Issuer and its executive officers, directors or
affiliates that would be material to a decision by a security holder whether to
sell, tender or hold securities being sought in this tender offer.
(b) Other than the filing with the Securities and Exchange Commission under
Section 13e-4 of the Securities Act of 1933, as amended, and the corresponding
filing with the American Stock Exchange, no regulatory requirements are
applicable and no approvals are required for the Company to complete the Offer.
(c) The Issuer does not intend to use credit or borrow funds to purchase
the Shares. Accordingly, Section 7 of the Exchange Act is not applicable.
(d) There are no material pending legal proceedings relating to the tender
offer.
(e) All material information necessary to make the required statements, in
light of the circumstances under which they are made, not materially misleading
has been disclosed.
ITEM 9. MATERIALS TO BE FILED AS EXHIBITS.
(a) The tender offer documents which are to be sent or given to security
holders by Issuer are attached hereto as the following exhibits:
(1) Offer to Purchase
(2) Letter of Transmittal
(3) Notice of Guaranteed Delivery
(4) Instruction Letter for Brokers
(b) There is no loan agreement under Item 2 of this Schedule.
(c) There are no contracts, arrangements, understandings or relationships
referred to in Items 5 or 8(a) of this Schedule.
(d) No written opinion has been prepared by legal counsel at the request of
the Issuer pertaining to the tax consequences of the tender offer.
(e) No securities of the Issuer have been or are to be registered under the
Securities Act of 1933, as amended.
4
<PAGE> 5
(f) One or more of the officers of the Issuer may orally solicit security
holders on behalf of the Issuer, but no written instruction, form or other
material has been furnished to such persons for their use, directly or
indirectly, in connection with the tender offer.
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.
SCOPE INDUSTRIES
By: /s/ MEYER LUSKIN
------------------------------------
Meyer Luskin, President
Dated: July 11, 1997
5
<PAGE> 1
SCOPE INDUSTRIES
OFFER TO PURCHASE FOR CASH
200,000 SHARES OF ITS COMMON STOCK
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS
EXPIRE AT 12:00 MIDNIGHT, LOS ANGELES TIME,
ON AUGUST 31, 1997 UNLESS THE OFFER IS
EXTENDED OR TERMINATED EARLIER
Scope Industries, a California corporation (the "Company"), offers to
purchase shares of its common stock, no par value (the "Shares"), at a single
price, not greater than $52 nor less than $48 per Share, specified by tendering
shareholders, 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"). The Company will purchase up to 200,000 Shares that are
properly tendered at a single per Share price (not greater than $52 nor less
than $48 per Share) determined pursuant to the Offer (the "Purchase Price")
taking into account the number of Shares properly tendered and the prices
specified by tendering shareholders. The Company will select the lowest Purchase
Price that will allow it to buy a maximum of 200,000 Shares (or such lesser
number as are properly tendered at prices within the stated range) pursuant to
the Offer. The Company will purchase at the Purchase Price all Shares properly
tendered at or below the Purchase Price and not withdrawn at the Purchase Price,
net to the seller in cash, upon, the terms and subject to the conditions of the
Offer, including the proration terms hereof.
Shareholders are not obligated to tender or sell any Shares pursuant to the
Offer. If more than 200,000 Shares are validly tendered, the Company will
purchase Shares on a pro rata basis, except that qualifying Odd Lot Owners (as
defined herein) will be given priority as described in Section 2 below.
------------------------
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER
OF SHARES BEING TENDERED.
------------------------
The Shares are listed and principally traded on the American Stock
Exchange, Inc. (the "ASE"). On July 9, 1997, the last trading day before the
Company announced its intention to make the Offer, the closing per Share sales
price as reported on the ASE was $51.375. The Company urges shareholders to
obtain current market quotations for the Shares.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS IS RECOMMENDING THAT ANY
SHAREHOLDER TENDER OR REFRAIN FROM TENDERING ANY SHARES. EACH SHAREHOLDER MUST
MAKE HIS OR HER OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY
SHARES TO TENDER AND AT WHAT PRICE. AS OF THE DATE OF THE OFFER, NONE OF THE
COMPANY'S DIRECTORS OR EXECUTIVE OFFICERS INTENDS TO TENDER SHARES PURSUANT TO
THE OFFER.
THE DATE OF THIS OFFER TO PURCHASE IS JULY 14, 1997.
<PAGE> 2
TO TENDER SHARES PROPERLY, SHAREHOLDERS MUST COMPLETE THE SECTION OF THE
LETTER OF TRANSMITTAL RELATING TO THE PRICE AT WHICH THEY ARE TENDERING SHARES.
IMPORTANT
To accept the Offer, shareholders must strictly comply with the
instructions contained in the Letter of Transmittal. Any shareholder tendering
Shares should either (1) complete and sign the Letter of Transmittal (or a
facsimile copy thereof) and mail or deliver it, together with stock certificates
representing the tendered Shares and any other required documents, to the
Company at the address set forth below, or, if no stock certificates are being
sent, follow the procedure for book-entry delivery set forth in Section 3; or
(2) request his or her broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for him or her. A shareholder having Shares
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact that broker, dealer, commercial bank, trust company
or other nominee, if the shareholder desires to tender those Shares.
Shareholders who desire to tender Shares and whose certificates for such Shares
are not immediately available should tender those Shares by following the
procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to John J. Crowley, Vice President and Chief Financial
Officer, or to Eleanor Smith, Secretary of the Company, at the address and
telephone number set forth below.
SCOPE INDUSTRIES
233 Wilshire Boulevard
Suite 310
Santa Monica, California 90401
(310) 458-1574
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH
THE OFFER ON BEHALF OF THE COMPANY OTHER THAN THOSE CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL. DO NOT RELY ON ANY SUCH RECOMMENDATION
OR ANY SUCH INFORMATION OR REPRESENTATIONS, IF GIVEN OR MADE, AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
2
<PAGE> 3
INTRODUCTION
Scope Industries, a California corporation (the "Company"), hereby offers
to purchase from its shareholders all validly tendered shares of the Company's
common stock, up to a maximum of 200,000 shares of common stock, no par value
(the "Shares") (or such greater number as may be determined appropriate by the
Company following notice to shareholders) at a purchase price per Share, not
greater than $52 and not less than $48, as specified by such shareholders, 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").
The Company views this tender offer as an acceleration of a continuing
Share repurchase program to enhance shareholder value and as an attractive
investment for the Company.
The Company will determine a single per Share price (not greater than $52
nor less than $48 per Share) that it will pay for Shares properly tendered
pursuant to the Offer (the "Purchase Price"), taking into account the number of
Shares so tendered and the prices specified by tendering shareholders. The
Company will select that Purchase Price which will allow it to buy 200,000
Shares (or such lesser number of Shares as are properly tendered at prices not
greater than $52 nor less than $48 per Share) pursuant to the Offer. The Company
will purchase all Shares properly tendered at prices at or below the Purchase
Price and not withdrawn, at the Purchase Price, net to the seller in cash, upon
the terms and subject to the conditions of the Offer, including the proration
terms described below.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.
If, before 12:00 Midnight, Los Angeles time, on the Expiration Date (as
defined in Section 1), more than 200,000 Shares are properly tendered at or
below the Purchase Price and not withdrawn, the Company will buy Shares first
from all Odd Lot Owners (as defined in Section 2) who properly tender all their
Shares at or below the Purchase Price and then on a pro rata basis from all
other shareholders who properly tender Shares at or below the Purchase Price.
See "Section 1. Number of Shares; Proration" and "Section 2. Tenders by Owners
of Fewer than 100 Shares." The Company will return all Shares not purchased
under the Offer, including Shares tendered and not withdrawn at prices greater
than the Purchase Price and Shares not purchased because of proration. Tendering
shareholders will not be obligated to pay brokerage commissions, solicitation
fees or, subject to Instruction 8 of the Letter of Transmittal, stock transfer
taxes on the Company's purchase of Shares. The Company will pay all fees and
expenses in connection with the Offer. See Section 16.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. EACH
SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE. NONE OF THE COMPANY'S DIRECTORS
OR EXECUTIVE OFFICERS INTENDS TO TENDER SHARES PURSUANT TO THE OFFER.
The 200,000 Shares that the Company is offering to purchase represent
approximately 17.2% of the Company's 1,165,665 Shares outstanding as of June 30,
1997.
The Shares are listed and traded principally on the American Stock
Exchange, Inc. (the "ASE") under the symbol "SCP". The Company announced its
intention to make the Offer prior to the opening of trading on July 10, 1997.
The closing per Share sales price as reported on the ASE on July 9, 1997 was
$51.375. The Company urges shareholders to obtain current market quotations for
the Shares.
1. NUMBER OF SHARES; PRORATION.
Upon the terms and subject to the conditions of the Offer, the Company will
accept for payment (and thereby purchase) 200,000 Shares or such lesser number
of Shares as are properly tendered on or before the Expiration Date (and not
withdrawn in accordance with Section 4) at a price (determined in the manner set
forth below) not greater than $52 nor less than $48 per Share. The term
"Expiration Date" means 12:00
3
<PAGE> 4
Midnight, Los Angeles time, on August 31, 1997 unless the Company extends the
period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Company shall
accept Shares. See Section 15 for a description of the Company's right to extend
the time during which the Offer is open and to delay, terminate or amend the
Offer. See also Section 6. Subject to Section 2, if the Company receives more
than 200,000 Shares, the Company will purchase Shares from those shareholders
tendering at or below the Purchase Price before the Expiration Date on a pro
rata basis. The proration period also expires on the Expiration Date.
In accordance with the Offer, the Company will determine the Purchase Price
(not greater than $52 nor less than $48 per Share) that it will pay for Shares
properly tendered, taking into account the number of Shares tendered and the
prices specified by tendering shareholders. The Company will select a single per
Share Purchase Price that will allow it to buy 200,000 Shares (or such lesser
number as are properly tendered at prices not greater than $52 nor less than $48
per Share) pursuant to the Offer. The Company reserves the right to purchase
more than 200,000 Shares pursuant to the Offer, but does not currently plan to
do so.
If,
(a) the Company increases or decreases the price to be paid for
Shares, or the Company increases the number of Shares being sought and any
such increase in the number of Shares being sought exceeds 2% of the
outstanding Shares, or the Company decreases the number of Shares being
sought; and
(b) the Offer is scheduled to expire less than ten business days from
and including the date that notice of such increase or decrease is first
published, sent or given in the manner specified in Section 15,
the Offer will be extended for ten business days from and including the date of
such notice. For purposes of the Offer, a "business day" means any day other
than a Saturday, Sunday or federal holiday and consists of the time period from
12:01 A.M. through Midnight, Los Angeles time.
In accordance with Instruction 2 of the Letter of Transmittal, each
shareholder desiring to tender Shares must specify the price or prices (not
greater than $52 nor less than $48 per Share) at which that shareholder is
willing to have the Company purchase his or her Shares. As promptly as
practicable following the Expiration Date, the Company will determine the
Purchase Price (not greater than $52 nor less than $48 per Share) that it will
pay for Shares properly tendered pursuant to the Offer, taking into account the
number of Shares tendered and the prices specified by tendering shareholders.
All Shares purchased pursuant to the Offer will be purchased at the Purchase
Price. All Shares not purchased pursuant to the Offer, including Shares tendered
at prices greater than the Purchase Price and Shares not purchased because of
proration, will be returned to the tendering shareholders at the Company's
expense as promptly as practicable following the Expiration Date.
If the number of Shares properly tendered prior to the Expiration Date at
or below the Purchase Price is less than or equal to 200,000 Shares (or such
greater number of Shares as the Company may elect to purchase pursuant to the
Offer), the Company will, upon the terms and subject to the conditions of the
Offer, purchase at the Purchase Price all Shares so tendered.
Upon the terms and subject to the conditions of the Offer, in the event
that prior to the Expiration Date a greater number of Shares is properly
tendered at or below the Purchase Price than the Company will accept for
purchase, the Company will accept Shares for purchase in the following order of
priority:
(a) first, all Shares properly tendered at or below the Purchase Price
prior to the Expiration Date by any Odd Lot Owner who:
(1) tenders all Shares beneficially owned by such Odd Lot Owner at
or below the Purchase Price (partial tenders will not qualify for this
preference); and
(2) completes the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery;
and
(b) then, after purchase of all of the foregoing Shares, all of the
Shares properly tendered at or below the Purchase Price before the
Expiration Date on a pro rata basis (with adjustments to avoid purchases of
fractional Shares).
4
<PAGE> 5
In the event that proration of tendered Shares is required, the Company will
determine the final proration factor as promptly as practicable after the
Expiration Date. Although the Company does not expect to be able to announce the
final results of such proration until approximately seven ASE trading days after
the Expiration Date, it will announce preliminary results of proration by press
release as promptly as practicable after the Expiration Date. Shareholders may
obtain such preliminary information from the Company and may be able to obtain
such information from their brokers.
2. TENDERS BY OWNERS OF FEWER THAN 100 SHARES.
The Company will accept for purchase, without proration, all Shares
properly tendered before the Expiration Date at or below the Purchase Price by
or on behalf of shareholders who beneficially held, as of the close of business
on July 7, 1997, an aggregate of fewer than 100 Shares ("Odd Lot Owners") and
who continue to own beneficially all of such Shares as of the Expiration Date.
See Section 1. To avoid proration, however, an Odd Lot Owner must properly
tender at or below the Purchase Price all Shares that such Odd Lot Owner
beneficially owns; partial tenders will not qualify for this preference. This
preference is not available to owners of 100 or more Shares, even if such owners
have separate stock certificates for fewer than 100 Shares. Any Odd Lot Owner
wishing to tender all Shares beneficially owned by him or her pursuant to this
Offer must complete the box captioned "Odd Lots" on the Letter of Transmittal
and, if applicable, on the Notice of Guaranteed Delivery. See Section 3.
3. PROCEDURE FOR TENDERING SHARES.
Proper Tender of Shares. For Shares to be properly tendered pursuant to the
Offer:
(a) the certificates for the Shares (or confirmation of receipt of the
Shares pursuant to the procedures for book-entry transfer set forth below),
together with a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) with any required signature guarantees, and any
other documents required by the Letter of Transmittal, must be received on
or before the Expiration Date by the Company at its address set forth on
the back cover of this Offer to Purchase; or
(b) the tendering shareholder must comply with the guaranteed delivery
procedure set forth below.
As specified in Instruction 2 of the Letter of Transmittal, each
shareholder desiring to tender Shares pursuant to the Offer must properly
indicate in the section captioned "Price (In Dollars) Per Share At Which Shares
Are Being Tendered" on the Letter of Transmittal the price (in multiples of
$0.50) at which his or her Shares are being tendered. Shareholders desiring to
tender Shares at more than one price must complete separate Letters of
Transmittal for each price at which Shares are being tendered, except that the
same Shares cannot be tendered (unless properly withdrawn previously in
accordance with the terms of the Offer) at more than one price. In order to
properly tender Shares, one and only one price box must be checked in the
appropriate section on each Letter of Transmittal.
It is a violation of Section 10(b) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and Rule 10b-4 promulgated thereunder, for a
person to tender Shares for such person's own account unless the person so
tendering:
(a) owns those Shares; or
(b) owns other securities convertible into or exchangeable for the
Shares or owns an option, warrant or right to purchase the Shares and
intends to acquire Shares for tender by conversion, exchange or exercise of
such option, warrant or right.
Section 10(b) and Rule 10b-4 provide a similar restriction applicable to
the tender or guarantee of a tender on behalf of another person.
The Company's acceptance of Shares will constitute a binding agreement
between the tendering shareholder and the Company upon the terms and subject to
the conditions of the Offer. The tendering shareholder represents that (i) such
shareholder owns the Shares being tendered within the meaning of
5
<PAGE> 6
Rule 10b-4 promulgated under the Exchange Act and (ii) the tender of those
Shares complies with Rule 10b-4.
Signature Guarantees and Method of Delivery. Except with respect to book
entry transfer through The Depository Trust Company, all signatures must be
guaranteed on all Letters of Transmittal and all other documents required for
the transfer of Shares. No signature guarantee is required on the Letter of
Transmittal, if the Letter of Transmittal is signed by The Depository Trust
Company, as the registered owner of the Shares (the "Book Entry Transfer
Facility") where payment is to be made directly to such registered owner or, if
Shares are tendered for the account of a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc. or a commercial bank or trust company having an office, branch or agency in
the United States (each such entity being hereinafter referred to as an
"Eligible Institution"). In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5 of
the Letter of Transmittal. If a certificate representing Shares is registered in
the name of a person other than the signer of a Letter of Transmittal, or if
payment is to be made, or Shares not purchased or tendered are to be issued, to
a person other than the registered owner, the certificate must be endorsed or
accompanied by an appropriate stock power, in either case signed exactly as the
name of the registered owner appears on the certificate, with the signature on
the certificate or stock power guaranteed by an Eligible Institution. In all
cases, payment of Shares tendered and accepted for payment pursuant to the Offer
will be made only after timely receipt by the Company of certificates for such
Shares (or a timely confirmation of a book-entry transfer of such Shares into
the Company's account at the Book Entry Transfer Facility), a properly completed
and duly executed Letter of Transmittal (or facsimile thereof) and any other
documents required by the Letter of Transmittal. THE METHOD OF DELIVERY OF ALL
DOCUMENTS, INCLUDING STOCK CERTIFICATES, THE LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED.
Federal Income Tax Withholding. To prevent backup federal income tax
withholding equal to 31% of the gross payments made pursuant to the Offer, each
shareholder who does not otherwise establish an exemption from such withholding
must notify the Company of such shareholder's correct taxpayer identification
number (or certify that such taxpayer is awaiting a taxpayer identification
number) and provide certain other information by completing the Substitute Form
W-9 included in the Letter of Transmittal. Foreign shareholders must submit Form
W-8 in order to avoid backup withholding. For this purpose, a foreign
shareholder is a shareholder that is not (i) a citizen or resident of the United
States; (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or any political subdivision thereof or
(iii) any estate or trust the income of which is subject to United States
federal income taxation regardless of the source of such income.
For a discussion of certain other federal income tax consequences to
tendering shareholders, see Section 14.
Book-Entry Delivery. The Company will establish an account with The
Depository Trust Company with respect to the Shares at the Book-Entry Transfer
Facility 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
Book-Entry Transfer Facility's system may make book-entry delivery of the Shares
by causing such facility to transfer such Shares into the Company's account in
accordance with such facility's procedure for such transfer. Even though
delivery of Shares may be effected through book-entry transfer into the
Company's account at the Book-Entry Transfer Facility, a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and other required documents must, in any case, be
transmitted to and received by the Company at its address set forth on the back
cover of this Offer to Purchase prior to the Expiration Date, or the guaranteed
delivery procedure set forth below must be followed. Delivery of the Letter of
Transmittal and any other required documents to the Book-Entry Transfer Facility
does not constitute delivery to the Company.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates are not immediately available (or
the procedures for book-entry transfer cannot be
6
<PAGE> 7
completed on a timely basis) or time will not permit all required documents to
reach the Company before the Expiration Date, such Shares may nevertheless be
tendered provided that all of the following conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the Company receives (by hand, mail, telegram or facsimile
transmission), on or prior to the Expiration Date, a properly completed and
duly executed Notice of Guaranteed Delivery substantially in the form the
Company has provided with this Offer to Purchase (indicating the price at
which the Shares are being tendered); and
(c) the certificates for all tendered Shares in proper form for
transfer (or confirmation of book-entry transfer of such Shares into the
Company's account at the Book-Entry Transfer Facility), together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by the Letter of Transmittal, are
received by the Company within three ASE trading days after the date the
Company receives such Notice of Guaranteed Delivery.
Determination of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. The Company's decision as to the number of
Shares to be accepted, the price to be paid therefor and the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be in the Company's sole discretion and shall be final and
binding on all parties. The Company reserves the absolute right to reject any or
all tenders it determines not to be in proper form or if acceptance of or
payment for such Shares may, in the opinion of the Company's counsel, be
unlawful. The Company also reserves the absolute right to waive any of the
conditions of the Offer and any defect or irregularity in the tender of any
particular Shares. All defects and irregularities must be cured or waived before
any tender of Shares will be deemed to be proper. Neither the Company, nor any
other person is or will be obligated to give notice of any defects or
irregularities in tenders, and none of them will incur any liability for failure
to give any such notice.
4. WITHDRAWAL RIGHT.
Except as otherwise provided in this Section 4, Shares tendered pursuant to
the Offer are irrevocable. Any shareholder desiring to withdraw Shares tendered
pursuant to the Offer must notify the Company as set forth below at any time
before the Expiration Date or, if not previously accepted for payment by the
Company, at any time after 12:00 Midnight, Los Angeles time, on that date which
is twenty business days following Expiration Date.
For a withdrawal to be effective, the Company must timely receive (at its
address set forth on the back cover of this Offer to Purchase) a written,
telegraphic, telex or facsimile transmission notice of withdrawal. Such notice
of withdrawal must specify the name of the person who deposited the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
owner, if different from that of the person who tendered such Shares. If the
certificates have been delivered or otherwise identified to the Company, then
prior to the release of such certificates, the tendering shareholder must also
submit the serial numbers shown on the particular certificates evidencing the
Shares and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution (except in the case of Shares tendered by an Eligible
Institution). If Shares have been tendered pursuant to the procedure for
book-entry transfer set forth in Section 3, the notice of withdrawal must
specify the name and the number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Shares and otherwise comply with the
procedures of such facility. The Company, in its sole discretion, will determine
the proper form and validity (including time of receipt) of notices of
withdrawal, and such decisions shall be final and binding on all parties.
Neither the Company, nor any other person is or will be obligated to give any
notice of any defects or irregularities in any notice of withdrawal, and no such
person will incur any liability for failure to give any such notice. Any Shares
properly withdrawn will thereafter be deemed not tendered for purposes of the
Offer. Withdrawn Shares may, however, be retendered before the Expiration Date
by again following any of the procedures described in Section 3.
7
<PAGE> 8
5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE.
Upon the terms and subject to the conditions of the Offer, the Company will
determine the Purchase Price it will pay for properly tendered Shares taking
into account the number of Shares tendered and the prices specified by tendering
shareholders and will accept for payment (and thereby purchase) Shares properly
tendered at or below the Purchase Price as soon as practicable after the
Expiration Date.
Upon the terms and subject to the conditions of the Offer, the Company will
purchase and pay a single per Share Purchase Price for 200,000 Shares (subject
to increase or decrease as provided in Section 1 and Section 15) or such lesser
number of Shares as are properly tendered at prices not greater than $52 nor
less than $48 per Share and not withdrawn as permitted in Section 4, as soon as
practicable after the Expiration Date.
The Company will pay for Shares purchased pursuant to the Offer by
depositing the aggregate Purchase Price therefor with the Book-Entry Transfer
Facility, as agent for shareholders tendering by book-entry or by transmitting
payment to the tendering shareholders. In the event of proration, the Company
will determine the proration factor and pay for those tendered Shares accepted
for payment as soon as practicable after the Expiration Date. However, the
Company does not expect to be able to announce the final results of any such
proration until approximately seven ASE trading days after the Expiration Date.
Certificates for all Shares not purchased, including all Shares tendered at
prices greater than the Purchase Price and Shares not purchased due to
proration, will be returned (or, in the case of Shares tendered by book-entry
transfer, such Shares will be credited to the account maintained with the
Book-Entry Transfer Facility by the participant therein who delivered the
Shares) as soon as practicable after the Expiration Date without expense to the
tendering shareholder. Under no circumstances will the Company pay interest on
the Purchase Price.
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer; provided, however, if
payment of the Purchase Price is to be made to, or (in the circumstances
permitted by the Offer) if unpurchased Shares are to be registered in the name
of any person other than the registered owner, or if tendered certificates are
registered in the name of any person other than the person signing the Letter of
Transmittal, the amount of all stock transfer taxes, if any (whether imposed on
the registered owner or such other 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 exemption therefrom is submitted. See
Instruction 8 of the Letter of Transmittal.
ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY AND
SIGN THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL (OR, IN THE
CASE OF A FOREIGN INDIVIDUAL, FORM W-8 OBTAINABLE FROM THE COMPANY) MAY BE
SUBJECT TO REQUIRED FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS
PAID TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 3.
6. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, the Company shall not be
required to accept for payment, to purchase or to pay for any Shares tendered
and may terminate or amend the Offer or may postpone the acceptance for payment
of, the purchase of and the payment for, Shares tendered, if at any time on or
after July 11, 1997 and at or before the time of purchase of any such Shares,
any of the following events shall have occurred (or shall have been determined
by the Company to have occurred) which, in the Company's sole judgment in any
such case and regardless of the circumstances (including any action or
8
<PAGE> 9
omission to act by the Company), makes it inadvisable to proceed with the Offer
or with such purchase or payment:
(a) there shall have been threatened, instituted or pending any action
or proceeding by any government or governmental, regulatory or
administrative agency or authority or tribunal or any other person,
domestic or foreign, or before any court or governmental, regulatory or
administrative authority or agency or tribunal, domestic or foreign, which:
(1) challenges the making of the Offer, the acquisition of Shares
pursuant to the Offer or otherwise relates in any manner to the Offer;
or
(2) in the Company's sole judgment, could materially affect the
business, condition (financial or other), income, operations or
prospects of the Company and its subsidiaries, taken as a whole, or
otherwise could materially impair in any way the contemplated future
conduct of the business of the Company or any of its subsidiaries or
materially impair the Offer's contemplated benefits to the Company; or
(b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the Offer or the Company or
any of its subsidiaries, by any court or any government or governmental,
regulatory or administrative authority or agency or tribunal, domestic or
foreign, which, in the Company's sole judgment, would or might directly or
indirectly:
(1) make the acceptance for payment of, or payment for, some or all
of the Shares illegal or otherwise restrict or prohibit consummation of
the Offer;
(2) delay or restrict the ability of the Company, or render the
Company unable, to accept for payment or pay for some or all of the
Shares;
(3) materially impair the contemplated benefits of the Offer to the
Company; or
(4) materially affect the business, condition (financial or other),
income, operations or prospects of the Company and its subsidiaries,
taken as a whole, or otherwise materially impair in any way the
contemplated future conduct of the business of the Company or any of its
subsidiaries; or
(c) there shall have occurred:
(1) the declaration of any banking moratorium or suspension of
payments in respect of banks in the United States;
(2) any general suspension of trading in, or limitation on prices
for, securities on any United States national securities exchange or in
the over-the-counter market;
(3) the commencement of a war, armed hostilities or any other
national or international crisis directly or indirectly involving the
United States:
(4) any limitation (whether or not mandatory) by any governmental,
regulatory or administrative agency or authority on, or any event which,
in the Company's sole judgment, might affect, the extension of credit by
banks or other lending institutions in the United States;
(5) any significant decrease in the market price of the Shares or
in the general level of market prices of equity securities in the United
States or abroad or any change in the general political, market,
economic or financial conditions in the United States or abroad that
could have a material adverse effect on the Company's business,
operations or prospects or the trading in the Shares; or
(6) in the case of any of the foregoing existing at the time of the
commencement of the Offer, in the Company's sole judgment, a material
acceleration or worsening thereof; or
9
<PAGE> 10
(d) any change shall occur or be threatened in the business, condition
(financial or other), income, operations, Share ownership or prospects of
the Company and its subsidiaries, taken as a whole, which, in the Company's
sole judgment, is or may be material to the Company; or
(e) a tender or exchange offer for any or all of the Shares (other
than the Offer), or any merger, business combination or other similar
transaction with or involving the Company or any subsidiary, shall have
been proposed, announced or made by any person.
The foregoing conditions are for the Company's sole benefit and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition (including any action or inaction by the Company) or may be waived by
the Company in whole or in part. The Company's failure at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right and
each such right shall be deemed an ongoing right which may be asserted at any
time and from time to time.
The Company's determination concerning the events described in this Section
6 shall be final and shall be binding on all parties.
7. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are traded principally on the ASE. The following table sets
forth for the periods indicated the high and low closing per Share sales prices
on the ASE Composite Tape and the dividends declared per Share as reported in
published financial sources:
<TABLE>
<CAPTION>
PER SHARE
DIVIDENDS
-----------------
DATE LOW HIGH REGULAR EXTRA
--------------------------------------------- --- ---- ------- -----
<S> <C> <C> <C> <C>
1995
First quarter.............................. $23 1/8 $24 7/8
Second quarter............................. $23 3/8 $25 1/8
Third quarter.............................. $25 $29
Fourth quarter............................. $28 5/8 $32 1/2 $0.50
1996
First quarter.............................. $32 $42
Second quarter............................. $33 3/4 $38 1/2
Third quarter.............................. $37 $43 $0.25
Fourth quarter............................. $39 1/2 $50 1/4 $0.70 $0.30
1997
First quarter.............................. $41 $50 1/4
Second Quarter............................. $47 $54
</TABLE>
The Company announced its intention to make the Offer after the close of
trading on July 9, 1997. The closing per Share sales price as reported on ASE on
that day was $51.375. The Company urges shareholders to obtain current
quotations of the market price of the Shares.
The Company has paid consecutive annual cash dividends to shareholders
since 1976. The amount and frequency of dividends in the future will depend on
circumstances existing at the time.
8. BACKGROUND AND PURPOSE OF THE OFFER.
The Company has decided to make the Offer because the trading market for
the Shares is not active and, in the absence of the Offer, shareholders may not
be able to sell their Shares on a timely basis at a reasonable price, and may
not be able to sell a substantial number of Shares of the Company's common
stock. Furthermore the Company believes that the Shares are a good investment
for the Company's available funds to enhance shareholder value. Following the
repurchase, every remaining shareholder will own a higher percentage of the
total Company, and earnings per Share improve relative to aggregate net income.
For shareholders who sell at a gain, the repurchase may result in more favorable
capital gain tax treatment than
10
<PAGE> 11
would be the case with a special dividend of the same aggregate amount. See
Section 14. The Company is able to make the Offer because the Board of Directors
believes that cash generated from operations along with the Company's borrowing
capacity will be sufficient to meet the cash needs of the Company for the
foreseeable future.
In addition, the Offer provides shareholders who are considering a sale of
all or a portion of their Shares the opportunity to determine the price or
prices (not greater than $52 nor less than $48 per Share) at which they are
willing to sell their Shares and, if any such Shares are purchased pursuant to
the Offer, to sell those Shares for cash without the usual transaction costs
associated with open-market sales. Any shareholder owning less than 100 Shares
whose Shares are purchased pursuant to the Offer not only will avoid the payment
of brokerage commissions, but also will avoid any applicable odd lot discounts
payable on sales of odd lots on the ASE and the other exchanges on which Shares
are traded. Shareholders whose Shares are not purchased in the Offer will obtain
a proportionate increase in their ownership interest in the Company and thus in
the Company's future earnings and assets.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF
SUCH SHAREHOLDER'S SHARES AND HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY SUCH
RECOMMENDATION. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN
THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN
DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT
WHAT PRICE OR PRICES.
Although the Company has no current plans to acquire additional Shares, the
Company may in the future purchase additional Shares on the open market, in
private transactions, through tender offers or otherwise. Shares the Company
acquires pursuant to the Offer will be authorized but unissued shares.
9. INTEREST OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND ARRANGEMENTS
CONCERNING THE SHARES.
At June 30, 1997, the Company's directors and executive officers as a group
beneficially owned an aggregate of 771,796 Shares (approximately 65.8%) of the
outstanding Shares (including 6,750 Shares which may be acquired by exercise of
options exercisable within 60 days). The Company has been advised that no
directors and no executive officers of the Company intend to tender any Shares
pursuant to the Offer. If the Company purchases 200,000 Shares (or 17.2% of
Shares outstanding at June 30, 1997) pursuant to the Offer, then after the
purchase of Shares pursuant to the Offer, the Company's executive officers and
directors as a group would beneficially own approximately 79.4% of the
outstanding Shares.
Based upon the Company's records and upon information provided to the
Company by its directors, executive officers and affiliates, neither the Company
nor any of its subsidiaries nor, to the best of the Company's knowledge, any of
the directors or executive officers of the Company, nor any associates of any of
the foregoing, has effected any transactions in the Shares during the forty
business days prior to the date hereof, except as follows: Meyer Luskin, the
President and a director of the Company exercised a stock option on June 2, 1997
to purchase 3,000 Shares at an average exercise price of $32.725 per Share; and
Robert Henigson, a director of the Company, sold 700 Shares in an open market
transaction on May 16 at a sale price of $50.375 per Share, 1,200 Shares in an
open market transaction on May 30 at a sale price of $53 per Share, 300 Shares
in an open market transaction on July 1 at a sale price of $53.125 per Share,
600 Shares in an open market transaction on July 1 at a sale price of $53 per
Share and 100 Shares in an open market transaction on July 2 at a sale price of
$54 per Share.
Except as set forth in this Offer to Purchase, neither the Company nor, to
the best of the Company's knowledge, any of its affiliates, directors or
executive officers, or any of the executive officers or directors of its
subsidiaries, is a party to any contract, arrangement, understanding or
relationship with any other person relating, directly or indirectly, to the
Offer 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
11
<PAGE> 12
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, consents or authorizations).
10. SOURCE AND AMOUNT OF FUNDS.
Assuming the Company purchases 200,000 Shares pursuant to the Offer at a
Purchase Price of $52 per Share, the Company expects the maximum aggregate cost,
including all fees and expenses applicable to the Offer, to be approximately
$10,425,000 It is anticipated that all funds so required will be obtained from
the Company's available cash and short-term investments.
11. CERTAIN INFORMATION ABOUT THE COMPANY.
The principal operation of the Company and its subsidiaries is the
recycling of waste bakery and other food items into an animal feed supplement.
The Company has a subsidiary that operates a number of cosmology schools. In
addition, the Company owns various marketable securities, U.S. Treasury bills,
and other short-term money market investments.
The Company also owns various oil and gas royalty and working interests,
and two parcels of land.
Summary Historical Financial Information. The table set forth on page 13
presents certain summary consolidated historical financial information of the
Company and its subsidiaries. The historical financial information at and for
the years ended June 30, 1996 and 1995 has been summarized from the Company's
audited consolidated financial statements incorporated by reference in the
Company's Annual Report on Form 10-K for the year ended June 30, 1996 (the "1996
10-K"). The historical financial information at and for the nine months ended
March 31, 1997 and 1996 has been summarized from the Company's unaudited
consolidated financial statements as set forth in the Company's Quarterly Report
on Form 1O-Q for the nine months ended March 31, 1997 (the "1997 10-Q"). The
following summary historical financial information should be read in conjunction
with, and is qualified in its entirety by reference to, such audited and
unaudited consolidated financial statements and their related notes.
Pro Forma Financial Information. The table set forth on page 15 presents
certain unaudited pro forma consolidated financial information based on
historical information which has been adjusted:
(a) to reflect the repurchase of 200,000 Shares at a $52 Purchase
Price and at a $48 Purchase Price; and
(b) as if the transaction had taken place (i) at the beginning of the
periods presented for income statement purposes and (ii) at the end of the
periods presented for balance sheet purposes but, in each case, such
information does not purport to be indicative of the results which would
actually have been achieved if the Offer had been completed as of the
periods indicated or which may be achieved in the future.
The pro forma financial information should be read in conjunction with the
notes set forth on page 16 and with the audited and unaudited financial
statements and related notes set forth in the 1996 10-K and the 1997 10-Q.
Audited and Interim Financial Statements. The Company is providing with
this Offer a copy of its audited financial statements for the period ended June
30, 1996 taken from its Annual Report and a copy of its Form 10-Q for the
quarter ended March 31, 1997.
12
<PAGE> 13
SCOPE INDUSTRIES
SUMMARY HISTORICAL FINANCIAL INFORMATION AND NOTES
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
--------------------- -------------------
MARCH 31, MARCH 31, JUNE 30, JUNE 30,
1997 1996 1996 1995
--------- --------- -------- --------
UNAUDITED
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF INCOME
Operating sales and revenues............................ $23,431 $21,448 $ 30,223 $ 22,974
Costs and Expenses
Cost of sales and operating expenses.................. 14,600 13,138 18,218 16,262
Depreciation and amortization......................... 1,582 1,605 2,117 2,234
General and administrative............................ 2,878 3,426 4,368 3,905
------- ------- ------- -------
19,060 18,169 24,703 22,401
------- ------- ------- -------
4,371 3,279 5,520 573
Investment and other income............................. 19,033 1,227 812 1,018
------- ------- ------- -------
Income before income taxes............................ 23,404 4,506 6,332 1,591
Provision for income taxes.............................. 5,450 1,590 2,360 150
------- ------- ------- -------
Net Income............................................ $17,954 $ 2,916 $ 3,972 $ 1,441
======= ======= ======= =======
Net Income Per Share.................................. $ 15.00 $ 2.36 $ 3.23 $ 1.15
Weighted average number of shares outstanding........... 1,197 1,238 1,231 1,255
CONSOLIDATED BALANCE SHEETS
Total current assets.................................... $30,949 $10,464 $ 12,932 $ 6,291
Total current liabilities............................... 4,801 4,597 4,646 2,765
Working capital......................................... 26,148 5,867 8,286 3,526
Total assets............................................ 58,497 52,773 55,534 43,068
Total liabilities....................................... 4,881 6,537 7,396 2,765
Shareowners' equity..................................... 53,616 46,236 48,138 40,303
Net book value per share................................ $ 45.95 $ 37.55 $ 40.03 $ 32.38
</TABLE>
13
<PAGE> 14
NOTES TO SUMMARY HISTORICAL INFORMATION
Investments Available For Sale. Net recognizable gains and (losses) on
investments available for sale are included in income before income taxes as
follows:
<TABLE>
<S> <C>
Nine months ended March 31, 1997........................ $17,309,726
Year ended June 30, 1996................................ (87,802)
Nine months ended March 31, 1996........................ 357,718
Year ended June 30, 1995................................ 132,698
</TABLE>
Unrealized gains on investments available for sale (excluded from income,
but reported net of income taxes, as a separate component of shareowners'
equity) were:
<TABLE>
<S> <C>
March 31, 1997.......................................... $ 5,041,813
June 30, 1996........................................... 14,368,007
March 31, 1996.......................................... 12,529,296
June 30, 1995........................................... 8,507,655
</TABLE>
Subsequent Transaction. In April 1997, the Company received early and full
repayment of a note receivable the Company held in the principal amount of
$1,906,255. This transaction resulted in a $1,056,255 gain that is being
recognized by the Company in the quarter ended June 30, 1997.
14
<PAGE> 15
SCOPE INDUSTRIES
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION AND NOTES
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
MARCH 31, 1997 JUNE 30, 1996
---------------------------------- ----------------------------------
PRO FORMA PRO FORMA
--------------------- ---------------------
AT $48.00 AT $52.00 AT $48.00 AT $52.00
HISTORICAL PUR PRICE PUR PRICE HISTORICAL PUR PRICE PUR PRICE
---------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF INCOME
Operating sales and revenues............ $ 23,431 $23,431 $23,431 $ 30,223 $30,223 $30,223
Costs and Expenses
Cost of sales and operating
expenses........................... 14,600 14,600 14,600 18,218 18,218 18,218
Depreciation and amortization......... 1,582 1,582 1,582 2,117 2,117 2,117
General and administrative............ 2,878 2,878 2,878 4,368 4,368 4,368
------- ------- ------- ------- ------- -------
19,060 19,060 19,060 24,703 24,703 24,703
------- ------- ------- ------- ------- -------
4,371 4,371 4,371 5,520 5,520 5,520
Investment and other income............. 19,033 18,636 18,599 812 162 98
------- ------- ------- ------- ------- -------
Income before income taxes............ 23,404 23,007 22,970 6,332 5,682 5,618
Provision for income taxes.............. 5,450 5,300 5,280 2,360 2,120 2,090
------- ------- ------- ------- ------- -------
Net Income............................ $ 17,954 $17,707 $17,690 $ 3,972 $ 3,562 $ 3,528
======= ======= ======= ======= ======= =======
Net Income Per Share.................. $ 15.00 $ 17.76 $ 17.74 $ 3.23 $ 3.45 $ 3.42
Weighted average number of shares
outstanding........................... 1,197 997 997 1,231 1,031 1,031
CONSOLIDATED BALANCE SHEETS
Total current assets.................... $ 30,949 $21,324 $20,524 $ 12,932 $ 7,994 $ 7,994
Total current liabilities............... 4,801 4,801 4,801 4,646 9,333 10,133
Working capital......................... 26,148 16,523 15,723 8,286 (1,339) (2,139)
Total assets............................ 58,497 48,872 48,072 55,534 50,596 50,596
Total liabilities....................... 4,881 4,881 4,881 7,396 12,083 12,883
Shareowners' equity..................... 53,616 43,991 43,191 48,138 38,513 37,713
Net book value per share................ $ 45.95 $ 45.50 $ 44.67 $ 40.03 $ 38.41 $ 37.62
</TABLE>
15
<PAGE> 16
NOTES TO SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
Pro Forma Financial Information. The table above sets forth certain
unaudited pro forma consolidated financial information based on historical
information which has been adjusted:
(a) to reflect the repurchase of 200,000 Shares at a $52 Purchase
Price and at a $48 Purchase Price; and
(b) as if the transaction had taken place (i) at the beginning of the
periods presented for income statement purposes and (ii) at the end of the
periods presented for balance sheet purposes but, in each case, such
information does not purport to be indicative of the results which would
actually have been achieved if the Offer had been completed as of the
periods indicated or which may be achieved in the future; and
(c) to assume the repurchase being financed by funds made available
from disposition of U.S. Treasury bills (T-bills) and from supplemental
borrowing in those periods where T-bills owned would provide less than the
total funds required for the repurchase. Interest rates on borrowed funds
is assumed to be between 7 3/4% and 8 1/4%. Interest earned has been
eliminated on T-bills assumed to have been disposed of; and
(d) to calculate book value as total shareowners' equity divided by
the number of Shares outstanding at the end of the period; and
(e) to calculate net income per share using the weighted average
number of shares outstanding during the period.
The pro forma financial information should be read in conjunction with the
notes set forth above and with the audited and unaudited financial statements
and related notes set forth in the 1996 10-K and the 1997 10-Q.
16
<PAGE> 17
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT.
The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and is likely to reduce the
number of shareholders. Nonetheless, the Company anticipates that there will
still be a sufficient number of Shares outstanding and publicly traded following
the Offer to ensure a continued trading market in the Shares. Based on the
published guidelines of the ASE, however, the Company believes that its purchase
of Shares pursuant to the Offer may cause its remaining Shares to be delisted
from that exchange.
The Shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. The Company believes that,
following the repurchase of Shares pursuant to the Offer, the Shares may no
longer be "margin securities" for purposes of the Federal Reserve Board's margin
regulations.
The Shares are registered under the Exchange Act. The Company is required,
among other things, to furnish certain information to its shareholders and to
the Commission and comply with the Commission's proxy rules in connection with
meetings of the Company's shareholders. The Company believes that its purchase
of Shares pursuant to the Offer may result in the Shares becoming eligible for
deregistration under the Exchange Act, in which event the Company would no
longer be required to file periodic reports under the Exchange Act. The Company
has no present intention, however, to apply to the Commission to deregister the
Shares under the Exchange Act and intends to continue to file periodic reports
thereunder so long as the Company has at least 100 owners of record of Shares.
13. CERTAIN LEGAL MATTERS; REGULATORY AND FOREIGN APPROVALS.
The Company is not aware of any license or regulatory permit that appears
to be material to its business that might be adversely affected by its
acquisition of Shares as contemplated in the Offer or of any approval or other
action by any government or governmental, administrative or regulatory authority
or agency, domestic or foreign, that would be required for the Company's
acquisition or ownership of Shares as contemplated by the Offer. Should any such
approval or other action be required, the Company currently contemplates that it
will seek such approval or other action. The Company cannot predict whether it
may determine that it is required to delay the acceptance for payment of, or
payment for, Shares tendered pursuant to the Offer pending the outcome of any
such matter. There can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial conditions
or that the failure to obtain any such approval or other action, if needed,
would be obtained or would be obtained without substantial conditions or that
the failure to obtain any such approval or other action might not result in
adverse consequences to the Company's business. The Company's obligations under
the Offer to accept for payment and pay for Shares is subject to certain
conditions. See Section 6.
14. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES.
The discussion set forth below of the federal income tax consequences of
participating in the Offer is for general information only and does not purport
to consider all aspects of federal income taxation that may be relevant to
shareholders. The consequences to any particular shareholder may differ
depending upon that shareholder's own circumstances and tax position. In
addition, certain types of shareholders (including corporations, financial
institutions, tax-exempt organizations, foreign persons and persons who acquired
their Shares upon the exercise of employee stock options or otherwise as
compensation) may be subject to special rules. The discussion does not consider
the effect of any applicable foreign, state or local tax laws. EACH SHAREHOLDER
IS URGED TO CONSULT A TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE
OFFER TO SUCH SHAREHOLDER, INCLUDING THE APPLICATION OF STATE, LOCAL AND FOREIGN
TAX LAWS.
For purposes of this discussion, shareholders are assumed to hold their
Shares as capital assets (generally, property held for investment).
The sale of Shares pursuant to the Offer will be a taxable transaction, the
consequences of which will be determined under the stock redemption rules of
Section 302 of the Internal Revenue Code of 1986, as
17
<PAGE> 18
amended (the "Code"). Under those rules, the entire cash proceeds received by a
shareholder for his Shares pursuant to the Offer will be treated as a
distribution taxable as a dividend (to the extent of the Company's available
"earnings and profits"), without regard to gain or loss realized unless the
particular shareholder satisfies one of the three tests described below. If any
of the tests is satisfied, the shareholder will recognize capital gain or loss
equal to the difference between the cash proceeds received for the Shares
pursuant to the Offer and the tax basis of such Shares.
Under Section 302, the entire proceeds received from the sale of Shares
pursuant to the Offer will be treated as a distribution unless the sale (a)
results in a "complete redemption" of the shareholder's stock in the Company,
(b) is "substantially disproportionate" with respect to the shareholder, or (c)
is "not essentially equivalent to a dividend" with respect to the shareholder.
In determining whether any of these tests is satisfied, a shareholder must take
into account both Shares actually owned by such shareholder and any Shares
considered to be owned by such shareholder by reason of the constructive
ownership rules set forth in Section 318 of the Code. Under Section 318, a
shareholder generally will be considered to own Shares which such shareholder
has the right to acquire (e.g., pursuant to options) and Shares owned (and, in
some cases, constructively owned) by certain members of the shareholder's family
and by certain entities (such as corporations, partnerships, trusts and estates)
in which such shareholder, a member of such shareholder's family, or a related
entity has an interest.
A sale of Shares pursuant to the Offer will result in a "complete
redemption" of a shareholder's stock in the Company if, pursuant to the Offer,
the Company purchases all of the Shares actually and constructively owned by the
shareholder. If the shareholder's sale of Shares pursuant to the Offer includes
all Shares actually owned by the shareholder but the shareholder continues to
constructively own Shares held by family members, such shareholder may
nevertheless qualify for "complete redemption" treatment if certain tests are
satisfied and if the shareholder properly follows filing and notification
procedures described in Treasury Regulations. Shareholders in this position
should consult their own tax advisors.
The sale of Shares pursuant to the Offer will be "substantially
disproportionate" with respect to a shareholder if, immediately after the Offer,
such shareholder's actual and constructive percentage ownership of Shares is
less than 80% of the shareholder's actual and constructive percentage ownership
of Shares immediately before the purchase of Shares pursuant to the Offer.
In order for the sale of Shares by a shareholder pursuant to the Offer to
qualify as "not essentially equivalent to a dividend", the shareholder must
experience a "meaningful reduction" in his proportionate interest in the Company
as a result of such sale, taking into account the constructive ownership rules.
The Internal Revenue Service has held in a published ruling that, under the
particular facts of that ruling, a very small reduction in the stock ownership
of a shareholder constituted a "meaningful reduction" when the shareholder owned
an insignificant percentage of the corporation's stock before and after a
redemption and did not exercise any control over corporate affairs. Shareholders
seeking to rely on this test should consult their own tax advisors as to the
application of this standard because each case will be determined on the basis
of its particular facts and circumstances.
Shareholders should be aware that their ability to satisfy any of the
foregoing tests may be affected by any proration pursuant to the Offer. In
addition, an acquisition or disposition of Shares (including market purchases
and sales) substantially contemporaneous with the Offer may be taken into
account in determining whether any of the tests described above is satisfied.
If none of the tests described above is satisfied with respect to a
shareholder, such shareholder's receipt of cash for Shares pursuant to the Offer
will be treated as a distribution, taxable as a dividend to the extent of the
Company's available "earnings and profits." Any cash received in excess of such
earnings and profits will be treated, first, as a non-taxable return of capital
to the extent of the shareholder's basis in his or her Shares, and, thereafter,
as a capital gain to the extent it exceeds the shareholder's basis. The Company
anticipates that its available earnings and profits will be sufficient for all
of any amount treated as a distribution to be taxed as a dividend.
18
<PAGE> 19
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. EACH SHAREHOLDER IS URGED TO CONSULT SUCH SHAREHOLDER'S OWN
TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH SHAREHOLDER
(INCLUDING THE APPLICABILITY AND EFFECT OF THE CONSTRUCTIVE OWNERSHIP RULES AND
FOREIGN, STATE AND LOCAL TAX LAWS) OF THE SALE OF SHARES PURSUANT TO THE OFFER.
15. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS.
The Company expressly reserves the right, at any time and from time to
time, to extend the period of time during which the Offer is open by making a
public announcement of such extension. The Company also expressly reserves the
right, in its sole discretion, to terminate the Offer and not accept for payment
or pay for any Shares not previously accepted for payment or paid for or,
subject to applicable law, to postpone payment for Shares upon the occurrence of
any of the conditions specified in Section 6 by making a public announcement
thereof. The Company's reservation of the right to delay payment for Shares
which it has accepted for payment is limited by Rule 13e-4(f)(5) promulgated
under the Exchange Act, which requires that the Company either pay the
consideration offered or return the Shares tendered promptly after termination
or withdrawal of a tender offer. Subject to compliance with applicable law, the
Company further reserves the right, in its sole discretion, to amend the Offer
in any respect or to waive the limitation on the maximum number of Shares to be
purchased pursuant to the Offer. Amendments to the Offer may be made at any time
and from time to time effected by public announcement thereof, such
announcement, in the case of an extension, to be issued no later than 9:00 A.M.,
Los Angeles time, on the next business day after the previously scheduled
Expiration Date. Any public announcement made pursuant to the Offer will be
disseminated promptly to shareholders in a manner reasonably designed to inform
shareholders of such change. Without limiting the manner in which the Company
may choose to make a public announcement, except as required by applicable law,
the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by making a release to the
Dow Jones News Service.
If the Company materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) promulgated under the Exchange Act. These rules require that the
minimum period during which an offer must remain open following material changes
in the terms of the offer or information concerning the offer (other than a
change in price or a change in percentage of securities sought) will depend on
the facts and circumstances, including the relative materiality of such terms or
information. If (i) the Company increases or decreases the price to be paid for
Shares, or the Company increases the number of Shares being sought and any such
increase in the number of Shares being sought exceeds 2% of the outstanding
Shares, or the Company decreases the number of Shares being sought and (ii) the
Offer is scheduled to expire at any time earlier than the expiration of a period
ending on the tenth business day from, and including, the date that notice of
such increase or decrease is first published, sent or given, the Offer will be
extended until the expiration of such period of ten business days.
16. FEES AND EXPENSES.
The Company will act as a depositary of certificate shares in connection
with the Offer. The Company will pay all expenses, including reasonable
attorneys' fees.
The Company will pay a $0.10 per Share fee to any broker/dealer for
soliciting Shares pursuant to the Offer. The Company will also, on request,
reimburse broker/dealers, commercial banks or trust companies for customary
handling and mailing expenses incurred in forwarding materials in respect of the
Offer to the beneficial owners for which they act as nominees. No such broker,
dealer, commercial bank or trust company has been authorized to act as the
Company's agent for purposes of the Offer.
The Company will pay (or cause to be paid) any stock transfer taxes on its
purchase of Shares, except as otherwise provided in Instruction 8 of the Letter
of Transmittal.
19
<PAGE> 20
17. MISCELLANEOUS.
The Offer is not being made to, nor will the Company accept tenders from,
owners of Shares in any jurisdiction in which the Offer or its acceptance would
not comply with the securities or Blue Sky laws of such jurisdiction.
ADDITIONAL INFORMATION.
Additional information about the Company is set out in its 1996 Form 10-K;
its 1996 Annual Report to Shareholders; its Proxy Statement dated September 11,
1996; and its Quarterly Report on Form 10-Q for the quarter ended March 31,
1997. The Company has also filed an Issuer Tender Offer Statement on Schedule
13E-4 with the Securities and Exchange Commission (the "Commission") which
includes certain additional information relating to the Offer. The Company
regularly files reports on Form 10-K and Form 10-Q as well as other periodic
reports, proxy statements, and other information (including information about
its officers and directors, their holdings of Shares, its principal
shareholders, and any material interest of such persons in transactions with the
Company) with the Commission.
Such material can be inspected and copied at the Commission, Room 1024, 450
Fifth Street N.W., Washington, D.C. 20549, and at its regional offices at Room
1029, Jacob K. Javits Federal Building, 26 Federal Plaza, New York, New York
10278; and Room 1242, Everett McKinley Dirksen Building, 219 South Dearborn
Street, Chicago, Illinois 60604. Reports, proxy materials, and other information
about the Company are also available at the offices of the American Stock
Exchange, 86 Trinity Place, New York, New York 10006. Copies may also be
obtained by mail from the Commission's Public Reference Branch, 450 Fifth
Street, N.W., Washington, D.C. 20549. The Company's Schedule 13E-4 will not be
available at the Commission's regional offices. The Commission also maintains a
web site at http://www.sec.gov which contains reports, proxy statements and
other information regarding registrants that file electronically with the
Commission.
SCOPE INDUSTRIES
20
<PAGE> 21
Facsimile copies of the Letter of Transmittal will be accepted. The Letter of
Transmittal and certificates for the Shares and any other required documents
should be sent or delivered by each shareholder or the shareholder's broker,
dealer, commercial bank, trust company or other nominee to the Company at its
address set forth below:
SCOPE INDUSTRIES
By Mail or By Hand:
Scope Industries
233 Wilshire Boulevard
Suite 310
Santa Monica, California 90401
For Information:
Stock Tender Desk
(310) 458-1574
Any questions or requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to the Company at the telephone number and addresses
above. You may also contact your broker, dealer, commercial bank or trust
company for assistance concerning the Offer.
SCOPE INDUSTRIES
OFFER TO PURCHASE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
OFFER TO PURCHASE..................................................................... 1
INTRODUCTION.......................................................................... 3
1. Number of Shares; Proration....................................................... 3
2. Tenders by Owners of Fewer than 100 Shares........................................ 5
3. Procedure for Tendering Shares.................................................... 5
4. Withdrawal Right.................................................................. 7
5. Purchase of Shares and Payment of Purchase Price.................................. 8
6. Certain Conditions of the Offer................................................... 8
7. Price Range of Shares; Dividends.................................................. 10
8. Background and Purpose of the Offer............................................... 10
9. Interest of Directors and Executive Officers; Transactions and Arrangements
Concerning the Shares........................................................... 11
10. Source and Amount of Funds........................................................ 12
11. Certain Information About the Company............................................. 12
SUMMARY HISTORICAL FINANCIAL INFORMATION AND NOTES.................................... 13
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION AND NOTES........................... 15
12. Effects of the Offer on the Market for Shares; Registration Under the Exchange
Act................................................................................. 17
13. Certain Legal Matters; Regulatory and Foreign Approvals........................... 17
14. Certain U.S. Federal Income Tax Consequences...................................... 17
15. Extension of the Offer; Termination; Amendments................................... 19
16. Fees and Expenses................................................................. 19
17. Miscellaneous..................................................................... 20
Additional Information................................................................ 20
</TABLE>
21
<PAGE> 22
THE OFFER WILL EXPIRE AT MIDNIGHT, LOS ANGELES TIME, ON
AUGUST 31, 1997 UNLESS TERMINATED EARLIER OR EXTENDED
AS PROVIDED IN THE OFFER TO PURCHASE.
LETTER OF TRANSMITTAL
TENDERED PURSUANT TO THE OFFER TO PURCHASE COMMON SHARES
DATED: JULY 14, 1997
TO
SCOPE INDUSTRIES
Deliver by Mail or by Hand to:
SCOPE INDUSTRIES
233 WILSHIRE BOULEVARD, SUITE 310
SANTA MONICA, CALIFORNIA 90401
ATTN: STOCK TENDER DESK
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THAT
SHOWN ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
EACH TENDERING SHAREHOLDER MUST COMPLETE PAGES 1, 2 AND 4
OF THIS LETTER OF TRANSMITTAL AND SIGN IT AT PAGE 4.
SEE INSTRUCTIONS BEGINNING AT PAGE 5.
IN ORDER TO AVOID BACKUP WITHHOLDING, A TENDERING SHAREHOLDER MAY ALSO NEED
TO COMPLETE AND SIGN PAGE 7 OF THIS LETTER OF TRANSMITTAL. SEE INSTRUCTION 13
AND THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9."
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
DESCRIPTION OF COMMON SHARES TENDERED
- ---------------------------------------------------------------------------------------------------------
CERTIFICATE(S) TENDERED
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF COMMON SHARES NUMBER OF
CERTIFICATE REPRESENTED BY COMMON SHARES
NUMBER(S)* CERTIFICATE(S) TENDERED**
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
TOTAL COMMON
SHARES
</TABLE>
- --------------------------------------------------------------------------------
* Please indicate in this column the certificate number(s) for each
certificate representing Common Shares you desire to tender. If nothing
is indicated in this column, the total number of Common Shares evidenced
by all certificates submitted with this Letter of Transmittal will be
deemed to have been tendered.
** Please indicate in this column the number of Common Shares you wish to
tender. If nothing is indicated in this column, the total number of
Common Shares evidenced by each certificate delivered with this Letter
of Transmittal will be deemed to have been tendered.
- --------------------------------------------------------------------------------
PLEASE READ CAREFULLY THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL
<PAGE> 23
DESIGNATION OF PRICE (IN DOLLARS) PER COMMON SHARE
AT WHICH COMMON SHARES ARE BEING TENDERED
BY CHECKING ONE OF THE BOXES BELOW, THE UNDERSIGNED HEREBY TENDERS THE
NUMBER OF COMMON SHARES INDICATED ON PAGE 1 AT A MINIMUM OF THE PRICE CHECKED
BELOW.
THE PRICE AT WHICH YOU TENDER COMMON SHARES MUST BE BETWEEN $48.00 AND
$52.00, INCLUSIVE, IN $.50 INCREMENTS (e.g. $48.50, $49.00 ETC.).
IF COMMON SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, YOU MUST USE A
SEPARATE LETTER OF TRANSMITTAL FOR EACH PRICE SPECIFIED. (SEE INSTRUCTION 2).
CHECK ONLY ONE PRICE BOX IN THIS SECTION. IF MORE THAN ONE BOX IS CHECKED,
THERE IS NO VALID TENDER OF COMMON SHARES. FAILURE TO CHECK ANY BOX ON THIS PAGE
WILL BE DEEMED TO CONSTITUTE A TENDER AT THE MINIMUM PRICE OF $48.00 PER COMMON
SHARE.
IF YOU WANT TO MAXIMIZE THE PROBABILITY THAT THE CORPORATION WILL PURCHASE
ALL THE SHARES YOU TENDER (SUBJECT TO THE POSSIBILITY OF PRORATION), CHECK THE
BOX FOR -- $48.00 -- AS THE PRICE AT WHICH YOU ARE TENDERING YOUR COMMON SHARES.
THIS ACTION WILL RESULT IN RECEIVING THE PRICE PER COMMON SHARE DETERMINED IN
ACCORDANCE WITH THE OFFER, WHICH MAY BE AS LOW AS $48.00 OR AS HIGH AS $52.00.
IF THE PRICE CHECKED EXCEEDS $48.00, THIS ACTION COULD RESULT IN NONE OF
THE COMMON SHARES BEING PURCHASED IF THE PURCHASE PRICE FOR COMMON SHARES
DETERMINED IN ACCORDANCE WITH THE OFFER IS LESS THAN THE PRICE CHECKED.
MINIMUM PRICE (IN U.S. DOLLARS) PER SHARE AT WHICH THE UNDERSIGNED TENDERS
THE NUMBER OF COMMON SHARES INDICATED ON PAGE 1 (PLEASE CHECK ONLY ONE PRICE BOX
BELOW):
[ ] $48.00 [ ] $48.50 [ ] $49.00 [ ] $49.50
[ ] $50.00 [ ] $50.50 [ ] $51.00 [ ] $51.50 [ ] $52.00
ODD LOTS
(SEE INSTRUCTION 4)
To be completed ONLY if Common Shares are being tendered by or on behalf of
a person who owned beneficially, as of the close of business on July 7, 1997, an
aggregate of fewer than 100 Common Shares, and who continues to own all of such
Common Shares beneficially as of the Expiration Date.
The undersigned either (check one box):
[ ] Was the beneficial owner, as of the close of business on July 7, 1997
of an aggregate of fewer than 100 Common Shares, all of which are
being tendered, or
[ ] Is a broker, dealer, commercial bank, trust company or other nominee
which
(a) is tendering, for the beneficial owners thereof, Common Shares with
respect to which it is the record owner, and
(b) believes, based on representations made to it by such beneficial
owners, that each such person was the beneficial owner, as of the
close of business on July 7, 1997 of an aggregate of fewer than 100
Common Shares and is tendering all such Common Shares.
2
<PAGE> 24
Ladies and Gentlemen:
The undersigned holder(s) of the share certificates referred to on page 1
and transmitted herewith hereby tender(s) to Scope Industries, a California
corporation (the "Corporation"), the number of shares of Common Stock of the
Corporation, with no par value ("Common Shares"), specified on page 1 and
represented by such certificates, pursuant to the Corporation's offer to
purchase common shares at a purchase price specified by tendering shareholders,
not greater than $52.00 nor less than $48.00 per Common Share (the "Purchase
Price"), net to the seller in cash, set forth in the Offer to Purchase dated
July 14, 1997 and in this Letter of Transmittal (collectively, the "Offer"). The
undersigned hereby acknowledges receipt of the Offer. Capitalized terms used in
this Letter of Transmittal but not defined herein have the meanings provided in
the Offer to Purchase.
Each of the undersigned hereby represents and warrants that he or she has
full power and authority to tender, sell, assign, and transfer the Common Shares
tendered hereby, without restriction, and that the Corporation will acquire good
and unencumbered title thereto, free and clear of all liens, claims,
restrictions, charges and encumbrances, when the same are purchased by the
Corporation in accordance with the Offer. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Corporation to be
necessary or desirable to complete the sale, assignment, and transfer to the
Corporation of the Common Shares tendered hereby.
The undersigned hereby deposits with the Corporation the above certificates
representing Common Shares. If certificate numbers are not indicated above, the
undersigned is nonetheless depositing all certificates that accompany this
Letter of Transmittal. The undersigned hereby sells, assigns and transfers to,
or upon the order of, the Corporation the Common Shares tendered hereby that are
accepted pursuant to the Offer and hereby irrevocably constitutes and appoints
the Secretary of the Corporation the true and lawful attorney-in-fact of the
undersigned with respect to such Common Shares, with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with an
interest), to: (a) deliver certificates for such Common Shares together with all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Corporation against payment of the Purchase Price pursuant to the Offer, (b)
present such Common Shares for transfer on the books of the Corporation, (c)
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Common Shares, all in accordance with the terms of the Offer and (d)
make delivery of certificates for Common Shares or make payment as provided
under "Special Delivery Instructions" or "Special Payment and/or Registration
Instructions" at page 4 of this Letter of Transmittal.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and all obligations of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors,
and assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
The undersigned understands that the Corporation will determine the
Purchase Price as a single price per Common Share (not greater than $52.00 nor
less than $48.00 per Common Share) that it will pay for Common Shares validly
tendered pursuant to the Offer, based on the number of Common Shares so tendered
and the minimum prices specified by tendering shareholders, in accordance with
the Offer. The undersigned understands that the Corporation will calculate the
minimum Purchase Price that will allow it to buy 200,000 Common Shares (or such
lesser number of Common Shares as are validly tendered at prices not greater
than $52.00 nor less than $48.00 per Common Share) pursuant to the Offer. The
undersigned understands that all Common Shares validly tendered at prices at or
below the Purchase Price will be purchased at the Purchase Price, net to the
seller in cash, upon the terms and subject to the conditions of the Offer,
including provisions applicable to Odd Lot Owners and prorations, and that the
Corporation will return all other Common Shares, including Common Shares
tendered at prices greater than the Purchase Price and Common Shares not
purchased because of proration.
The undersigned recognizes that, under certain circumstances set forth in
the Offer, the Corporation may not be required to accept any of the Common
Shares tendered hereby or may accept less than all of such tendered shares.
This Letter of Transmittal is subject to the terms and conditions set forth
in the Offer to Purchase.
Unless otherwise indicated under Special Delivery Instructions at page 4,
please issue and mail the check for the Purchase Price for the Common Shares
tendered hereby and send any certificate(s) for unpurchased Common Shares (and
accompanying documents, as appropriate), to the shareholder named above at the
address shown on page 1. Similarly, unless otherwise indicated at page 4 under
Special Payment and/or Registration Instructions, please issue the check for the
Purchase Price and any certificate(s) for unpurchased Common Shares in the
name(s) of the shareholder(s) on page 1 and mail such check and any such
certificate(s) to the address(es) of such shareholder(s) shown on page 1. The
undersigned recognizes that the Corporation has no obligation to transfer any
certificate for Common Shares delivered herewith from the name of the registered
holder(s) thereof if the Corporation does not purchase any of the Common Shares
represented by such certificate.
3
<PAGE> 25
SHAREHOLDER(S) SIGN HERE
Must be signed by registered holder(s) exactly as name(s) appear(s) on share
certificate(s) or by person(s) authorized to become registered holder(s) by
certificates, stock powers and other documents transmitted herewith. If signing
is by trustee, executor, administrator, guardian, or other person acting in a
fiduciary or representative capacity, please set forth full title. See
Instruction 5. Signatures must be guaranteed.
X
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Print or type name(s):
- --------------------------------------------------------------------------------
-------------------------------------------------------------
Dated:
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
- -------------------------------------------------------------------------------
Tax Identification or Social Security Nos.:
- ------------------------------------------------------------------------
Signature(s) Guaranteed:
- --------------------------------------------------------------------------------
(SEE INSTRUCTION 7)
IN ORDER TO AVOID BACKUP WITHHOLDING, A TENDERING SHAREHOLDER MAY ALSO NEED TO
COMPLETE AND SIGN PAGE 7 OF THIS LETTER OF TRANSMITTAL.
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 6)
To be completed ONLY if the check for payment of Common Shares purchased or
certificates for unpurchased Common Shares are to be mailed to an address other
than that shown on page 1.
Name:
- -------------------------------------------------
(PLEASE PRINT)
Address:
- -----------------------------------------------
- ---------------------------------------------------------
(INCLUDE ZIP CODE)
SPECIAL PAYMENT AND/OR
REGISTRATION INSTRUCTIONS
(SEE INSTRUCTION 6)
To be completed ONLY if the check for payment of Common Shares purchased or
certificates for unpurchased Common Shares are to be issued or registered in the
name of and mailed to someone other than as shown on page 1.
Name:
- -------------------------------------------------
(PLEASE PRINT)
Address:
- -----------------------------------------------
- ---------------------------------------------------------
(INCLUDE ZIP CODE)
4
<PAGE> 26
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER.
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES FOR COMMON
SHARES. This Letter of Transmittal or a facsimile hereof, properly completed and
duly executed (with signatures guaranteed), must be used in connection with a
tender of Common Shares and must be actually received by the Corporation at the
address set forth above on or before the Expiration Date. If tendered Common
Shares are registered in different ways on different certificates, it will be
necessary to complete, sign and submit as many separate Letters of Transmittal
as there are different registrations of such certificates.
THE METHOD OF DELIVERY OF CERTIFICATES FOR COMMON SHARES AND OTHER
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. THE CORPORATION RECOMMENDS
THAT, IF STOCK CERTIFICATES ARE SENT BY MAIL, DELIVERY BE BY REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED AND PROPER INSURANCE.
2. DESIGNATION OF PRICE AT WHICH COMMON SHARES ARE BEING TENDERED. For
Common Shares to be properly tendered, the shareholder must check the box on
page 2 indicating the minimum price per Common Share at which he or she is
tendering Common Shares under "Designation of Price (in Dollars) Per Common
Share at Which Common Shares Are Being Tendered" on this Letter of Transmittal.
ONLY ONE BOX MAY BE CHECKED UNDER THAT CAPTION. IF MORE THAN ONE BOX IS CHECKED,
THERE IS NO VALID TENDER OF COMMON SHARES. FAILURE TO CHECK ANY BOX WILL BE
DEEMED TO CONSTITUTE A TENDER AT $48.00 PER COMMON SHARE. A shareholder wishing
to tender Common Shares at different prices must complete a separate Letter of
Transmittal for each price at which he or she wishes to tender Common Shares.
The same Common Shares cannot be tendered at more than one price.
3. PARTIAL TENDERS. If you want to tender fewer than all of the Common
Shares evidenced by any certificate enclosed herewith, the number of Common
Shares that you want to tender represented by such certificate must be entered
on the appropriate line on page 1 under "Number of Common Shares Tendered"
opposite the appropriate certificate number. A new certificate for the remainder
of the Common Shares which were evidenced by such certificate(s) delivered
herewith will be sent to the registered holder, unless otherwise provided in the
Special Delivery Instructions on page 6, no later than 30 days after the
expiration of the Offer. All Common Shares represented by certificates listed on
page 1 are deemed to have been tendered unless otherwise indicated.
4. ODD LOTS. As described in Section 1 of the Offer to Purchase, if the
Corporation purchases less than all Common Shares tendered before the Expiration
Date because more than 200,000 Common Shares or such larger number as the
Corporation (may elect pursuant to the Offer) are tendered, the Common Shares
purchased first will consist of all Common Shares tendered by any shareholder
who owned beneficially, as of the close of business on July 7, 1997 and
continues to own beneficially as of the Expiration Date, an aggregate of fewer
than 100 Common Shares and who tenders all of his or her Common Shares at a
single minimum price at or below the Purchase Price. This preference will not be
available unless the box captioned "Odd Lots" on page 2 is completed.
5. SIGNATURES, STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal
is signed by the registered holder(s) of the certificates transmitted hereby,
such signatures must correspond exactly with the name(s) of such registered
holder(s) as they appear on the face of each such certificate, without any
alteration or change whatsoever. All signatures must be guaranteed by an
Eligible Institution (as defined in Instruction 7).
If any certificate transmitted hereby is registered in the names of two or
more holders, all such holders must sign this Letter of Transmittal.
When the Letter of Transmittal is properly signed by the registered
holder(s) of the certificate(s) transmitted thereby, no endorsements of such
certificate(s) or separate stock power(s) are required. If, however, the check
for the purchase price for Common Shares purchased is to be made payable and
sent to a person other than the registered holder(s), then endorsement of the
transmitted certificates or a separate stock power signed by the registered
holder(s) of such certificate is required. Signatures on such certificates or
stock powers and on this Letter of Transmittal must be guaranteed by an Eligible
Institution (as defined in Instruction 7).
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificates transmitted hereby, each such
certificate must be endorsed or accompanied by an appropriate stock power, in
either case signed exactly as the name(s) of the registered holder(s) appear(s)
on the face of such certificates, without any alteration or change whatsoever.
Signatures on such certificates or stock powers and on this Letter of
Transmittal must be guaranteed by an Eligible Institution (as defined in
Instruction 7).
5
<PAGE> 27
If this Letter of Transmittal is signed by any trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, partner of
a partnership or any other person acting in a fiduciary or representative
capacity, each such person should so indicate when signing, and must deliver to
the Corporation proper evidence satisfactory to the Corporation of his or her
authority so to act.
6. SPECIAL DELIVERY OR PAYMENT INSTRUCTIONS. If the check for the Purchase
Price of the Common Shares purchased or the certificate for Common Shares not
accepted because of proration is to be sent to an address, or is to be issued to
a person and sent to an address, different from the registered holder and the
address as shown at page 1 of this Letter of Transmittal in the section marked
"Name(s) and Address(es) of Registered Holder(s)," please complete the "Special
Delivery Instructions" or the "Special Payment and/or Registration
Instructions," as applicable, on page 4.
7. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, trust company, savings bank or savings association having an
office, branch or agency in the United States (each being herein referred to as
an "Eligible Institution") in accordance with applicable law and with the
Securities Transfer Agents Medallion Program (STAMP) operated by Keymark
Financial Services, Inc.
8. STOCK TRANSFER TAXES. The Corporation will pay all stock transfer taxes,
if any, payable as a result of the transfer of purchased Common Shares to the
Corporation pursuant to the Offer. However, the Corporation will not pay stock
transfer taxes payable as a result of a transfer of Common Shares to any other
person or entity prior to or in connection with a tender of the Common Shares to
the Corporation. If payment is to be made to a person other than the registered
holder, or new share certificates are to be registered in the name of any person
other than the person signing this Letter of Transmittal, all stock transfer tax
stamps required (except as a result of the transfer of purchased Common Shares
to the Corporation), if any, must be affixed to the certificates or evidence
satisfactory to the Corporation of the payment of or exemption from such tax
must be submitted herewith. If such stamps are not affixed, or such other
evidence is not submitted to the Corporation with this Letter of Transmittal,
the amount of such stock transfer tax may be deducted from the Purchase Price
payable by the Corporation.
9. INADEQUATE SPACE. If the space provided on page 1 is inadequate, the
additional share certificate numbers and related number of Common Shares
tendered with this Letter of Transmittal should be listed on a separate, signed
schedule affixed hereto.
10. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of any tender of Common Shares will
be determined by the Corporation, which determinations shall be final and
binding. The Corporation reserves the absolute right to reject any or all
tenders determined by it not to be in appropriate form or the acceptance of or
payment for which would, in the opinion of the Corporation's counsel, be
unlawful. The Corporation also reserves the absolute right to waive any of the
conditions of the Offer or any defect in any tender with respect to any
particular Common Shares or any particular shareholder, and the Corporation's
interpretations of the terms and conditions of the Offer (including these
Instructions) shall be final and binding. Unless waived, any defects or
irregularities in connection with tenders must be cured within such time as the
Corporation shall determine. The Corporation shall not be obligated to give
notice of defects or irregularities in tenders, nor shall it incur any liability
for failure to give any such notice. Tenders will not be deemed to have been
made until all defects and irregularities have been cured or waived.
11. ADDITIONAL COPIES. Additional copies of the Offer to Purchase and this
Letter of Transmittal may be obtained from the Corporation at the address set
forth in Instruction 12.
12. QUESTIONS. Any questions concerning the tender of Common Shares under
this Letter of Transmittal may be directed to:
SCOPE INDUSTRIES
233 Wilshire Boulevard, Suite 310
Santa Monica, California 90401
Contact:
Stock Tender Desk
(310) 458-1574
6
<PAGE> 28
IMPORTANT TAX INFORMATION
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
(a) Backup Withholding. In order to prevent the application of Federal
income tax backup withholding on payments that are made to a shareholder with
respect to Common Shares purchased pursuant to the Offer, each shareholder of
record (or each owner of Common Shares, if other than the shareholder of record,
hereinafter also referred to as "Shareholder") must, unless an exemption
applies, provide the Corporation with such Shareholder's taxpayer identification
number on the Substitute Form W-9 set forth on this Letter of Transmittal and
certify under penalties of perjury that such number is correct. If the
Shareholder is an individual, the taxpayer identification number is his or her
Social Security Number. If the Corporation is not provided with the correct
taxpayer identification number, the Shareholder may be subject to penalties
imposed by the Internal Revenue Service.
If backup withholding applies, the Corporation is required to withhold 31%
of any payments made to the Shareholder. Backup withholding is not an additional
tax. Rather, the amount withheld is applied to the taxpayer's Federal income tax
liability. If backup withholding results in an overpayment of taxes, a refund
may be obtained from the Internal Revenue Service.
Certain Shareholders (including, among others, corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. To qualify as an exempt recipient on the basis of foreign status,
a foreign Shareholder must submit to the Corporation a statement, signed under
penalty of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Corporation. A Shareholder should consult
his or her tax advisor as to his or her qualification for exemption from the
backup withholding and reporting requirements and the procedure for obtaining an
exemption.
(b) Withholding of Tax on Certain Foreign Persons. Under Federal income tax
law, the Corporation is required to withhold a tax on certain types of payments
made to a nonresident alien individual, foreign partnership or foreign
corporation. In certain situations, a Shareholder may be exempt from
withholding. A Shareholder should consult his or her tax advisor as to his or
her qualification for exemption from these withholding requirements and the
procedure for obtaining an exemption.
- --------------------------------------------------------------------------------
PAYER'S NAME: SCOPE INDUSTRIES
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN SOCIAL SECURITY NUMBER
THE BOX AT RIGHT AND CERTIFY BY
FORM W-9 SIGNING AND DATING BELOW OR
EMPLOYER IDENTIFICATION NUMBER
--------------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY PART 2 -- CHECK THE BOX IF YOU ARE NOT SUBJECT TO BACKUP withholding because (1) you have
INTERNAL REVENUE SERVICE not been notified that you are subject to backup withholding as a result of failure to
report all interest or dividends or (2) the Internal Revenue Service has notified you that
you are no longer subject to backup withholding. [ ]
--------------------------------------------------------------------------------------------
CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT
THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT, AND
PAYER'S REQUEST FOR TAXPAYER COMPLETE. PART 3
IDENTIFICATION NUMBER (TIN) SIGNATURE ----------------------- DATE , 199----- AWAITING TIN [ ]
</TABLE>
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENT 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.
IMPORTANT: This Letter of Transmittal must be RECEIVED by the Corporation
on or prior to the Expiration Date.
7
<PAGE> 29
NOTICE OF GUARANTEED DELIVERY
TO TENDER SHARES OF COMMON STOCK
OF
SCOPE INDUSTRIES
AS SET FORTH IN SECTION 3 OF THE OFFER TO PURCHASE, THIS FORM OR A
FACSIMILE OF IT MUST BE USED TO ACCEPT THE OFFER (AS DEFINED BELOW) IF:
(a) certificates for Common Stock, no par value (the "Shares") of Scope
Industries, a California corporation (the "Company"), are not
immediately available; or
(b) the procedure for book-entry transfer cannot be completed on a timely
basis; or
(c) time will not permit the Letter of Transmittal or other required
documents to reach the Company referred to below before the Expiration
Date (as defined in Section 1 of the Offer to Purchase referred to
below).
This form or a facsimile of it, signed and properly completed may be
delivered by hand or transmitted by telegram, facsimile transmission or mail, to
the Company by the Expiration Date (as defined in the Offer to Purchase). See
Section 3 of the Offer to Purchase.
TO: SCOPE INDUSTRIES
233 Wilshire Boulevard, Suite 310
Santa Monica, California 90401
Telephone: (310) 458-1574
Facsimile: (310) 451-5371
DELIVERY OF THIS FORM TO AN ADDRESS OTHER THAN THE ONE SHOWN ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE DOES NOT CONSTITUTE 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 ON THE LETTER OF TRANSMITTAL.
<PAGE> 30
Ladies and Gentlemen:
The undersigned hereby tenders to Scope Industries, a California
corporation, at the price per Share indicated below, net to the seller in cash,
upon the terms and subject to conditions set forth in the Company's Offer to
Purchase, dated July 14, 1997 (the "Offer to Purchase"), and the related Letter
of Transmittal (which together constitute the "Offer"), receipt of which is
hereby acknowledged,_______ Shares pursuant to the guaranteed delivery procedure
set forth in Section 3 of the Offer to Purchase.
------------------------------
PRICE (IN DOLLARS) PER SHARE OF COMMON STOCK AT
WHICH SHARES OF COMMON STOCK ARE BEING TENDERED
------------------------------
IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE,
USE A SEPARATE NOTICE OF GUARANTEED DELIVERY FOR
EACH PRICE SPECIFIED
------------------------------
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX OR IF NO BOX IS CHECKED,
THERE IS NO PROPER TENDER OF SHARES OF COMMON STOCK
------------------------------
SHARES TENDERED AT PRICE
DETERMINED BY STOCKHOLDER
------------------------------
[ ] $48.00 [ ] $49.50 [ ] $51.00
[ ] $48.50 [ ] $50.00 [ ] $51.50
[ ] $49.00 [ ] $50.50 [ ] $52.00
2
<PAGE> 31
- --------------------------------------------------------------------------------
ODD LOTS
(SEE INSTRUCTION 4 OF THE LETTER OF TRANSMITTAL)
To be completed ONLY if Shares are being tendered by or on behalf of a
Person owning beneficially, as of July 7, 1997, an aggregate of fewer than 100
Shares, and will continue to be the beneficial owner of such Shares at the
Expiration Date.
THE UNDERSIGNED EITHER (CHECK ONE BOX):
[ ] was the beneficial owner as of July 7, 1997 of an aggregate of fewer
than 100 Shares, and will continue to be the beneficial owner of such
Shares at the Expiration Date, all of which are being tendered; or
[ ] is a broker, dealer, commercial bank, trust company or other nominee
that:
(a) is tendering, for the beneficial owners thereof, Shares with
respect to which it is the record owner, and
(b) believes, based upon representations made to it by such beneficial
owners, that each such Person was the beneficial owner as of July
7, 1997 of an aggregate of fewer than 100 Shares, and is tendering
all of such Shares.
In addition, the undersigned is tendering Shares either (check one
box):
[ ] at the Purchase Price (as defined in the Offer), as the same shall be
determined by the Company in accordance with the terms of the Offer
(person checking this box need not indicate the price per Share above);
or
[ ] at the price per share of Common Stock indicated above under "Price (in
Dollars) Per Share of Common Stock at Which Shares of Common Stock Are
Being Tendered" on this Notice of Guaranteed Delivery.
- --------------------------------------------------------------------------------
Number of Shares:_______________________________________________________________
Certificate Nos. (if available):________________________________________________
If Shares will be delivered by book-entry transfer:_____________________________
Name of Tendering Institution:__________________________________________________
Account No._____________________________________________________________________
At the Depository Trust Company
<TABLE>
<S> <C> <C>
- ------------------------------------------------------ ------------------------------------------------------
(Signature(s)) (Name(s)) (Please Print)
- ------------------------------------------------------ ------------------------------------------------------
(Signature(s)) (Name(s)) (Please Print)
- ------------------------------------------------------ ------------------------------------------------------
(Address) (Area Code and Telephone No.)
- ------------------------------------------------------ ------------------------------------------------------
(Address) (Zip Code)
</TABLE>
3
<PAGE> 32
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the Stock Transfer Association's approved medallion
program (such as STAMP, SEMP or MSP) or which is a commercial bank or trust
company having an office, branch or agency in the United States, guarantees (i)
that the above-named person(s) own(s) the Shares tendered hereby within the
meaning of Rule 13e-4 under the Securities Exchange Act of 1934, as amended,
(ii) that such tender of Shares complies with Rule 13e-4, and (iii) to deliver
to the Company, at its address set forth above, Share certificates evidencing
the Shares tendered hereby, in proper form for transfer, or confirmation of
book-entry transfer of such Shares into the Company's account at The Depository
Trust Company; in each case with delivery of a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed and any other required
documents, all within three American Stock Exchange trading days of the date
hereof.
--------------------------------------
Name of Firm
--------------------------------------
Authorized Signature
--------------------------------------
Name
--------------------------------------
Title
--------------------------------------
Address
--------------------------------------
Zip Code
--------------------------------------
(Area Code and Telephone No.)
Dated:
- ------------------------------, 1997
4
<PAGE> 33
SCOPE INDUSTRIES
OFFER TO PURCHASE FOR CASH UP TO 200,000 SHARES
OF ITS COMMON STOCK AT A PURCHASE PRICE NOT
GREATER THAN $52 NOR LESS THAN $48 PER SHARE
TO OUR CLIENTS:
Enclosed for your consideration are the Offer to Purchase dated July 14,
1997 and the related Letter of Transmittal (which together constitute the
"Offer") in connection with the Offer by Scope Industries, a California
corporation (the "Company"), to purchase up to 200,000 shares of its Common
Stock, no par value (the "Shares"), to the Company at a price, not greater than
$52 nor less than $48 per Share, upon the terms and subject to the conditions
set forth in the Offer.
The Company will, upon the terms and subject to the conditions of the
Offer, determine a single price per Share, not greater than $52 nor less than
$48 per Share, net to the seller in cash (the "Purchase Price"), that it will
pay for the Shares properly tendered and not withdrawn pursuant to the Offer,
taking into account the number of Shares so tendered and the prices specified by
shareholders tendering Shares. The Company will select the lowest Purchase Price
that will allow it to buy 200,000 Shares (or such lesser number of Shares as are
properly tendered and not withdrawn) at a price not greater than $52 nor less
than $48 per Share pursuant to the Offer. All Shares properly tendered prior to
the Expiration Date (as defined in Section 1 of the Offer to Purchase) at prices
at or below the Purchase Price and not withdrawn will be purchased at the
Purchase Price upon the terms and subject to the conditions of the Offer,
including the proration terms and odd lot tender provisions described in the
Offer to Purchase. The Company will return all other Shares, including Shares
tendered at prices greater than the Purchase Price and Shares not purchased
because of proration. See Section 1 of the Offer to Purchase.
Upon the terms and subject to the conditions of the Offer, if at the
Expiration Date, more than 200,000 Shares (or such greater number of Shares as
the Company elects to purchase) are properly tendered and not withdrawn at or
below the Purchase Price, the Company will accept Shares for purchase first from
Odd Lot Owners (as defined in Section 2 of the Offer to Purchase) whose Shares
are properly tendered at or below the Purchase Price (and not withdrawn) and
then on a pro rata basis from all other shareholders whose Shares are properly
tendered at or below the Purchase Price (and not withdrawn). See Introduction
and Section 1 of the Offer to Purchase.
WE ARE THE OWNER OF RECORD OF SHARES OF COMMON STOCK HELD FOR YOUR ACCOUNT.
AS SUCH, WE ARE THE ONLY ONES WHO CAN TENDER YOUR SHARES OF COMMON STOCK, AND
THEN ONLY PURSUANT TO YOUR INSTRUCTIONS. WE ARE SENDING YOU THE LETTER OF
TRANSMITTAL FOR YOUR INFORMATION ONLY. YOU CANNOT USE IT TO TENDER SHARES OF
COMMON STOCK WE HOLD FOR YOUR ACCOUNT.
Please instruct us as to whether you wish us to tender any or all of the
Shares we hold for your account on the terms and subject to the conditions of
the Offer.
We call your attention to the following:
1. You may tender Shares at prices not greater than $52 nor less than
$48 per Share, as indicated in the attached Instruction Form, net to you in
cash.
2. You may designate the priority in which your Shares shall be
purchased in the event of proration.
3. The Offer, proration period and withdrawal rights will expire at
midnight, Los Angeles time, on August 31, 1997, unless the Company extends
the Offer.
<PAGE> 34
4. The Offer is for 200,000 Shares, constituting approximately 17.2%
of the Company's outstanding Shares as of June 30, 1997.
5. Tendering shareholders will not be obligated to pay any brokerage
commissions, solicitation fees or, subject to Instruction 8 of the Letter
of Transmittal, stock transfer taxes on the Company's purchase of Shares
pursuant to the Offer.
6. If you beneficially hold, as of the Expiration Date, an aggregate
of fewer than 100 Shares and you instruct us to tender on your behalf all
such Shares at or below the Purchase Price before the Expiration Date and
check the box captioned "Odd Lots" in the attached Instruction Form, the
Company, upon the terms and subject to the conditions of the Offer, will
accept all such Shares for purchase before proration, if any, of the
purchase of other Shares properly tendered at or below the Purchase Price.
7. If you wish to tender portions of your Shares at different prices,
you must complete a separate Instruction Form for each price at which you
wish to tender each such portion of your Shares. We must submit separate
instructions on your behalf for each price you will accept.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the attached
Information Form. An envelope to return your Instruction Form to us is enclosed.
If you authorize us to tender your Shares, we will tender all such Shares unless
you specify otherwise on the attached Instruction Form.
YOUR INSTRUCTION FORM SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US
TO SUBMIT A TENDER ON YOUR BEHALF ON OR BEFORE THE EXPIRATION DATE OF THE OFFER.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT MIDNIGHT, LOS
ANGELES TIME, AUGUST 31, 1997, UNLESS THE COMPANY EXTENDS THE OFFER.
As described in Section 1 of the Offer to Purchase, if at the Expiration
Date more than 200,000 Shares (or such greater number of Shares as the Company
elects to purchase) are properly tendered and not withdrawn at or below the
Purchase Price, the Company will accept Shares for purchase at the Purchase
Price in the following order of priority:
(a) first, all Shares properly tendered at or below the Purchase Price
prior to the Expiration Date and not withdrawn (by any Odd Lot Owner as
defined in Offer to Purchase) who:
(i) tenders all Shares beneficially owned by such Odd Lot Owner at
or below the Purchase Price (partial tenders will not qualify for this
preference); and
(ii) completes the section entitled Odd Lots on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery;
and
(b) second, after purchase of all the foregoing Shares, all other
Shares properly tendered at or below the Purchase Price, before the
Expiration Date (and not withdrawn) on a pro rata basis, if necessary (with
adjustments to avoid purchases of fractional Shares).
The Company will not accept tenders by, or on behalf of, holders of Shares
in any jurisdiction in which the acceptance of the Offer would not comply with
the laws of such jurisdiction. In any jurisdiction in which the securities or
Blue Sky 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 Company or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
2
<PAGE> 35
INSTRUCTION FORM WITH RESPECT TO THE
SCOPE INDUSTRIES
OFFER TO PURCHASE FOR CASH UP TO 200,000 SHARES
OF ITS COMMON STOCK AT A PURCHASE PRICE NOT
GREATER THAN $52 NOR LESS THAN $48 PER SHARE
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated July 11, 1997, and the related Letter of Transmittal
(which together constitute the "Offer") in connection with the Offer of Scope
Industries, a California corporation (the "Company"), to purchase up to 200,000
shares of its Common Stock, no par value (the "Shares" or the "Common Stock"),
by the Company at a price, not greater than $52 nor less than $48 per Share,
upon the terms and subject to the conditions of the Offer.
The undersigned understands that the Company will, upon the terms and
subject to the conditions of the Offer, determine a single price per Share, not
greater than $52 nor less than $48 per Share, net to the seller in cash (the
"Purchase Price"), that it will pay for the Shares properly tendered and not
withdrawn pursuant to the Offer, taking into account the number of Shares so
tendered and the prices specified by shareholders tendering Shares. The Company
will select the lowest Purchase Price that will allow it to buy 200,000 Shares
(or such lesser number of Shares as are properly tendered and not withdrawn) at
a price not greater than $52 nor less than $48 per Share pursuant to the Offer.
All Shares properly tendered at prices at or below the Purchase Price and not
withdrawn will be purchased at the Purchase Price, upon the terms and subject to
the conditions of the Offer, including the proration terms and odd lot tender
provisions described in the Offer to Purchase. The Company will return all other
Shares, including Shares tendered at prices greater than the Purchase Price and
Shares not purchased because of proration. See Section 1 of the Offer to
Purchase.
The undersigned hereby instruct(s) you to tender to the Company the number
of Shares indicated below 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
the related Letter of Transmittal.
[ ] By checking this box, all Shares held by us for your account, including
fractional Shares, will be tendered.
If fewer than all Shares are to be tendered, please indicate the aggregate
number of Shares to be tendered by us.
------------------------ Shares*
- ---------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
3
<PAGE> 36
ODD LOTS
(SEE INSTRUCTION 8 OF THE LETTER OF TRANSMITTAL)
[ ] By checking this box, the undersigned represents that the undersigned was
the beneficial record owner on the Expiration Date (as defined in Section 1
of the Offer to Purchase), of an aggregate of fewer than 100 Shares and is
instructing the holder to tender all such Shares.
In addition, the undersigned is tendering Shares either (check one box):
[ ] at the Purchase Price, as the same shall be determined by the Company in
accordance with the terms of the Offer (persons checking this box need not
indicate the price per Share below); or
[ ] at the price per Share indicated below under Price (in Dollars) per Share of
Common Stock at which Shares of Common Stock Are Being Tendered on this
Instruction Form.
------------------------------
PRICE (IN DOLLARS) PER SHARE OF COMMON STOCK AT
WHICH SHARES OF COMMON STOCK ARE BEING TENDERED
------------------------------
IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE,
USE A SEPARATE INSTRUCTION FORM FOR
EACH PRICE SPECIFIED
------------------------------
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED,
THERE IS NO PROPER TENDER OF SHARES OF COMMON STOCK
------------------------------
SHARES TENDERED AT PRICE
DETERMINED BY SHAREHOLDER
------------------------------
[ ] $48.00 [ ] $49.50 [ ] $51.00
[ ] $48.50 [ ] $50.00 [ ] $51.50
[ ] $49.00 [ ] $50.50 [ ] $52.00
4
<PAGE> 37
SIGNATURE BOX
Signature(s):___________________________________________________________________
Dated:__________________________________________________________________________
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Account Number:_________________________________________________________________
Area Code and Telephone No.:____________________________________________________
Taxpayer Identification or Social Security Number:______________________________
5
