CUSIP No. M40868107 13D
__________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 15)
ESC Medical Systems Ltd.
(Name of Issuer)
Ordinary Shares, NIS 0.10 par value per share
(Title of Class of Securities)
M40868107
(CUSIP Number)
Barnard J. Gottstein
Carr-Gottstein Properties
550 West 77th Avenue, Suite 1540
Anchorage, Alaska 99501
(907) 278-2277
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
with a copy to:
Joseph J. Giunta, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071-3144
(213) 687-5000
June 18, 1999
(Date of Event which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check
the following box:
/ /
This Amendment No. 15 (the "Amendment") amends and supplements the
Statement on Schedule 13D, dated September 29, 1998, as amended by
Amendment No. 1, dated January 15, 1999, Amendment No. 2, dated March 9,
1999, Amendment No. 3, dated March 22, 1999, Amendment No. 4, dated March
24, 1999, Amendment No. 5, dated April 14, 1999, Amendment No. 6, dated
April 19, 1999, Amendment No. 7, dated May 10, 1999, Amendment No. 8, dated
May 11, 1999, Amendment No. 9, dated May 20, 1999, Amendment No. 10, dated
May 27, 1999, Amendment No. 11, dated May 29, 1999, Amendment No. 12, dated
June 15, 1999, Amendment No. 13, dated June 16, 1999, and Amendment No. 14,
dated June 17, 1999(the "Original Schedule 13D"), relating to the Ordinary
Shares, par value NIS 0.10 per share (the "Shares"), of ESC Medical Systems
Ltd., an Israeli corporation (the "Company"). Each of the Barnard J.
Gottstein Revocable Trust, Barnard J. Gottstein, as trustee of the Barnard
J. Gottstein Revocable Trust, and Barnard J. Gottstein, as an individual
(collectively, the "Reporting Persons"), are filing this Amendment to
update the information with respect to the Reporting Persons' purposes and
intentions with respect to the Shares.
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 of the Original Schedule 13D is hereby amended and
supplemented as follows:
On June 17, 1999, Messrs. Genger and Gottstein issued a press
release responding to the Company's continued misstatements. In order to
dispel any notion that they are seeking control of the Company, Messrs.
Genger and Gottstein further reiterated their commitment to use their
voting power to support an independent Board with a majority of the Board
at all times consisting of individuals who have no present or prior
business affiliation with either of them. A copy of the press release is
attached hereto as Exhibit 28 and is incorporated herein by reference.
On June 18, 1999, Messrs. Genger and Gottstein issued a press
release responding to the Company's misleading press release issued on June
18 about the Israeli court's ruling with respect to three motions filed by
Messrs. Genger and Gottstein's Israeli counsel. Contrary to the Company's
press release, the court in Israel has set a hearing date for Tuesday, June
22, 1999 on two of the three motions filed against the Company by Messrs.
Genger and Gottstein. The hearing date on the third motion has yet to be
set. A copy of Messrs. Genger and Gottstein's press release is attached
hereto as Exhibit 29 and is incorporated herein by reference.
Other than as described above and as previously described in the
Original Schedule 13D, the Reporting Persons do not have any present plans
or proposals which relate to or would result in (although they reserve the
right to develop such plans or proposals) any transaction, change or event
specified in clauses (a) through (j) of Item 4 of the form of Schedule 13D.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Item 7 of the Original Schedule 13D is hereby amended to add the
following exhibits:
Exhibit 28: Press release, dated June 17, 1999
Exhibit 29: Press release, dated June 18, 1999
SIGNATURE
After reasonable 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.
Dated: June 18, 1999
/s/ Barnard J. Gottstein
________________________________________
Barnard J. Gottstein
Individually and as Trustee of the
Barnard J. Gottstein Revocable Trust
BARNARD J. GOTTSTEIN REVOCABLE TRUST
/s/ Barnard J. Gottstein
________________________________________
Barnard J. Gottstein
Trustee
EXHIBIT INDEX
Exhibit
Number Title Page
28 Press Release, dated June 17, 1999 6
29 Press Release, dated June 18, 1999 15
Exhibit 28
FOR IMMEDIATE RELEASE
CONTACT:
Larry Dennedy
MacKenzie Partners, Inc.
212-929-5500
GENGER AND GOTTSTEIN RESPOND TO
ESC MEDICAL MAILING
ECKHOUSE "COMPROMISE" IS NO COMPROMISE AT ALL
June 17, 1999, New York, New York - - Arie Genger and Barnard
Gottstein, two of the largest shareholders of ESC Medical System, Ltd.,
(Nasdq: ESCMF) with over 17% of the shares outstanding, today issued the
following statement in response to the continued misstatements by ESC
Chairman, Shimon Eckhouse, designed to mask the real issues and instead
further entrench his management:
"We believe it is critical to the investment value of all ESC
shareholders that a new independent Board of Directors be elected to lead
ESC back to profitability and to restore the confidence of the medical
community, employees and the financial community in ESC. In response to
shareholder questions about our intentions, we have publicly committed in
our SEC filings and published news advertisements in Israel to use our
voting power to support an independent Board with a majority of the Board
of ESC at all times consisting of individuals who have no present or prior
business affiliation with either of us. This should dispel any notion that
we are seeking control of ESC.
"We have also proposed for the new Board's consideration a clear
and substantive two-phase blueprint for restoring ESC's market position
and value. Under this plan the Board would be charged with the key task of
promptly identifying a new CEO with a successful track record in the
medical devices field and proven turnaround expertise.
"In further seeking to cloud the issues, Eckhouse has asked for a
compromise. Eckhouse's idea of a "compromise," however, is no compromise
at all. Rather, Eckhouse seeks to maintain his control position as
"ACTIVE" Board Chairman with a majority of the current directors beholden
to him still intact. In our view, Eckhouse's continued control would
seriously hamper the ability of ESC to recruit a truly qualified CEO to
begin the rebuilding process. Only with a new Board and a dynamic CEO
fully in charge of ESC's operations, and not beholden to Eckhouse or
responsible for the failed programs of the past, can confidence be restored
in ESC's most important constituencies, its customers and the investing
public.
Messrs. Genger and Gottstein emphasized, "Eckhouse's true motives
are proven by the extraordinary lengths he has gone to entrench himself and
his beholden directors:
* FIRST his attorneys have told us they will not honor our
perfectly legal blue proxy card;
* NEXT, we are told Eckhouse intends to use shares repurchased
by ESC - which we believe amount to over 10% of ESC's shares outstanding
and which have not been issued to him or any other individual -- to vote in
favor of himself and his designees. Remember - the company used your
money, not Eckhouse's, to buy those shares;
* FINALLY, Eckhouse has also sought to deny our ability to
communicate with over 4000 individual shareholders by flagrantly disobeying
a court order to share with us a full list of ESC's beneficial
shareholders. Instead he used that same list for his own communications,
seriously prejudicing our ability to communicate on an equal footing with
beneficial holders of ESC shares -- AS REQUIRED BY A COURT ORDER!! IF HE
CAN'T BE TRUSTED TO COMPLY WITH A COURT ORDER, HOW CAN YOU TRUST HIM TO RUN
YOUR COMPANY?
Messrs. Genger and Gottstein concluded, "Eckhouse has continually
failed to deliver on his promises. The financial losses at ESC continue.
We believe that the Gottstein/Genger Blueprint to Restore Shareholder Value
Program outlined in our prior mailings, implemented by an outstanding CEO,
with proper oversight and governance by a truly experienced and independent
Board, is the best and only means for restoring value at ESC.
"OUR INTEREST IS THE SAME AS ALL OTHER ESC STOCKHOLDERS -- TO
RESTORE VALUE TO ESC. REMEMBER WE OWN OVER 17% OF THE COMPANY. ECKHOUSE
HAS FAILED FOR THREE CONSECUTIVE QUARTERS. HE DOES NOT DESERVE ANOTHER
CHANCE AND WE CANNOT AFFORD IT."
THE FULL TEXT OF OUR LATEST LETTER TO SHAREHOLDERS DATED JUNE 15,
1999 FOLLOWS:
WE HAVE ALL LOST MORE THAN ENOUGH
WE MAY NEVER HAVE A SECOND CHANCE TO SAVE ESC
VOTE YOUR ENCLOSED NEW BLUE PROXY TODAY!
June 15, 1999
Dear Fellow ESC Shareholder:
In a little more than one week the combined Extraordinary and Annual
General Meeting of Shareholders of ESC Medical Systems Ltd. will be held on
Wednesday, June 23, 1999 at 10:00 A.M. in New York City.
WE BELIEVE IT IS CRITICAL TO THE VALUE OF ALL OUR INVESTMENTS IN ESC
MEDICAL TO ELECT A NEW INDEPENDENT BOARD OF DIRECTORS TO LEAD ESC BACK TO
PROFITABILITY AND TO RESTORE THE CONFIDENCE OF DOCTORS AND THE MEDICAL
COMMUNITY, EMPLOYEES, SHAREHOLDERS AND FINANCIAL ANALYSTS.
* The new board must have a majority of its members who are NOT BEHOLDEN
TO SHIMON ECKHOUSE OR RESPONSIBLE FOR THE FAILED PROGRAMS OF THE PAST.
* WE CANNOT AFFORD TO HAVE ECKHOUSE AND HIS BOARD MISMANAGE ESC FOR
ANOTHER YEAR.
* THIS MAY BE YOUR ONE AND ONLY CHANCE TO SALVAGE YOUR INVESTMENT IN
ESC.
* Please join with us to elect a new Board of Directors by signing,
dating and returning promptly the enclosed BLUE proxy.
* Since Telephone and Internet voting are presently NOT available
because of the competing slates of directors, please ACT PROMPTLY!
In an attempt to win at any cost, ECKHOUSE'S LAWYERS HAVE TOLD US THEY
INTEND TO CHALLENGE THE VALIDITY OF THE BLUE PROXIES SENT TO YOU EARLIER.
These proxies contained proposals that Eckhouse's management decided to
abandon after we had already mailed to most ESC shareholders.
Unfortunately, the original yellow proxies we also asked you to sign for
the Extraordinary Meeting will not insure our simultaneous success at the
Annual Meeting.
While we believe the previously signed BLUE proxies are PERFECTLY LEGAL
DON'T LET THEM ATTEMPT TO DISENFRANCHISE YOU FROM VOTING. PLEASE SIGN THE
NEW BLUE PROXY TODAY!
DON'T MISS YOUR LAST CHANCE TO VOTE
TO SAVE YOUR INVESTMENT IN ESC MEDICAL!
REMEMBER, we were forced to start this proxy campaign after numerous
frustrating efforts to get the ESC Board and management to focus on
enhancing the Company's financial performance and increasing the price of
ESC's shares. EVEN THOUGH WE TOGETHER OWN ESC'S LARGEST BLOCK OF STOCK
MORE THAN 4.3 MILLION SHARES OR 17% OF ESC'S OUTSTANDING STOCK OUR
CONSTRUCTIVE ADVICE AND OFFERS OF ASSISTANCE WERE REJECTED.
VOTE YOUR NEW BLUE PROXY TO REPLACE THE OLD BOARD
VOTE FOR OUR BLUEPRINT TO RESTORE VALUE FOR SHAREHOLDERS
The new independent Board of Directors proposed by us is composed of highly
qualified and experienced professionals well prepared to turn ESC around.
They are committed to putting ESC on the right track to profitability and
to restoring shareholder value. If you elect the new Board, they will have
the mandate to initiate a plan that will address each of the critical
business elements within ESC. Tell them you want steps taken to best
assure a prompt curtailment of losses by year-end and the repositioning of
the Company for profitability and growth for the future.
OUR BLUEPRINT FOR VALUE PHASE ONE IS AN "INTENSIVE CARE"
ANSWER DESIGNED TO ADDRESS ESC'S IMMEDIATE NEEDS
We believe the new independent Board can immediately start to restore
confidence in the Company and value for shareholders. Our recommendation
is a plan consisting of two phases. If adopted by the new Board, Phase One
could be implemented with the assistance of a leading management consulting
firm. The new Board would be able to move quickly with this firm and
assemble a team with the necessary talents in the medical device field and
in turnarounds and corporate strategy within the first ninety days after
their election. Phase One should be fully in place by year-end.
We believe the Phase One steps discussed below are necessary to stop
further bleeding and to begin the healing process for the Company and its
shareholders.
* The Board should establish a Committee to recruit a new CEO and review
other immediate management needs and make changes as appropriate.
* The CEO candidates should have PROVEN EXPERIENCE AS A CEO OR CHIEF
OPERATING OFFICER OF A SIGNIFICANT MEDICAL DEVICE COMPANY, A TRACK
RECORD OF SUCCESSFUL TURNAROUND EXPERIENCE AND A DEMONSTRATED ABILITY
TO PROVIDE LEADERSHIP IN A GROWTH ENVIRONMENT.
* We have already spoken with two qualified candidates that the new
Board may want to consider who have indicated serious interest and
near term availability. We have already started discussions about
other candidates with an internationally recognized executive search
firm that the new Board could interview to recruit a top flight CEO.
* The Board should establish a strong Finance and Capital Committee of
the Board that can work with the new CEO TO BRING COST STRUCTURE IN
LINE WITH A REALISTIC REVENUE RUN RATE ($120 million using Q1 1999
actual).
* The Finance and Capital committee should have A PRIORITY TO PRESERVE
CASH RESOURCES UNTIL PROFITABILITY IS ASSURED AND SUSTAINED.
* The new Board and management should take immediate steps, such as the
creation of a strong outside Medical Advisory Group, TO RE-ESTABLISH
THE CONFIDENCE of customers and create a program to communicate ESC's
new dedication to customer satisfaction and support.
* An advertising and promotional campaign directed to physicians and
consumers should be developed to generate traffic and improve their
business.
THE NEED FOR CHANGE IS CLEAR
BUT TIME IS RUNNING OUT!
* A new pricing structure for certain products, using a significant
downpayment and a per use fee, should be considered to stimulate sales
while maintaining overall profit margins.
* THE WELL-KNOWN AND HIGHLY REGARDED SHARPLAN BRAND NAME SHOULD BE
REINSTATED.
* Additional and more appropriate sales incentives should be developed.
All of the above initiatives should be supported by major investments
in customer service and training.
* Manufacturing costs, which account for 45% of total costs need to be
cut further by considering additional consolidation of facilities and
physical plants and elimination of slow moving or low margin products.
Headcount plans should be reexamined (950 employees is far too many in
light of the low current sales run rate).
* Sales and Marketing expenses, which were 63% of sales in Q1 1999, ARE
OUT OF CONTROL and need to be brought back to not more than 25% - 30%
of sales.
* R & D expenses, which ballooned to 16% because of the dramatic drop of
sales in Q1 1999, NEED TO BE BROUGHT BACK TO 8% OF SALES GOING
FORWARD. This can be achieved by focusing on high growth projects and
outsourcing technology while also stressing product modifications and
enhancements most likely to immediately raise profitability and by
addressing glaring needs in the marketplace.
OUR BLUEPRINT FOR VALUE PHASE TWO IS
TO RELAUNCH A STRATEGIC GROWTH PLAN
WE ARE EXTREMELY CONFIDENT OF THE NEW BOARD'S ABILITY TO RESTORE
SHAREHOLDER VALUE BASED ON THE QUALIFICATIONS OF OUR DIRECTOR CANDIDATES
AND ON THE SIMILAR EXPERIENCE OF TURNING AROUND LASER. IF ESC'S NEW BOARD
TAKES THE SAME STEPS MR. GENGER TOOK OF INSTALLING A NEW MANAGEMENT TEAM
AND MONITORING AND SUPPORTING THEM, WE BELIEVE ESC CAN RETURN TO
SATISFACTORY GROSS MARGIN PROFITS AND OPERATING PROFITS TARGETS IN THE
FIRST FULL YEAR.
We believe Phase Two of the Blueprint can be fully developed by year-end
1999 and implemented throughout 2000, with the goal to generate sustainable
and solid profitability levels and to return ESC to growth.
* ESC should seek to dramatically increase its current actual quarterly
sales run rate, which was only $31 million in Q1 1999. We believe a
realistic target must be established because we should not expect to
return to the $50-60 million quarterly sales rates overnight.
* In Phase Two the objective should be to re-launch ESC on a growth
trajectory with ANNUAL GROWTH RATE TARGETS OF 15%-20% by continuing to
focus on customer service and satisfaction.
* ESC should focus the strategy on a core group of markets and market
segments and exist existing marginal businesses, markets and products.
* We believe ESC needs to finalize the implementation of sound and
effective Management Information and Control Systems and take
advantage of opportunities to improve new product introductions by
improving communication among R&D, Production and Marketing and
especially our customers.
* ESC should create additional appropriate incentives to attract and
retain top-flight talent at all levels of management.
* ESC NEEDS TO AGGRESSIVELY WORK TO RESOLVE ALL OUTSTANDING LITIGATION,
ESPECIALLY THE LAWSUITS FILED BY SHAREHOLDERS CAUSED BY THE HUNDREDS
IN MILLIONS IN CLAIMED MARKET VALUE LOSSES, BUT ALSO THE LAWSUITS AND
CLAIMS BY OUR PHYSICIAN CUSTOMERS.
* ESC must also create a capital program to address liquidity
requirements and to develop real alternatives regarding the $115
million in Convertible Bonds that come due and payable on September 1,
2002.
Finally, ESC must continue a communication program to keep shareholders,
potential shareholders and industry analysts fully informed as to the
current progress of ESC and its realistic outlook.
ENOUGH IS ENOUGH WE CAN'T AFFORD ANY MORE UNFORESEEN
LOSSES, DRAMATIC SALES DECLINES, AND SURPRISE WRITE-OFFS!
In his recent proxy mailing to you, Shimon Eckhouse asked you to support
his "current version" of a strategic plan. Even this most recent strategy,
which we believe is in response to our proxy contest, is superficial and
seriously flawed. It fails to address ESC's most critical problems, lacks
specific details, and offers no means or metrics to measure progress. LET
US NOT FORGET THAT THIS PLAN IS OFFERED BY ECKHOUSE, WHO HAS FAILED TO
DISMALLY TO DELIVER ON HIS PROMISES.
* THE VALUE OF OUR ESC SHARES IN THE PAST TWELVE MONTHS FELL ALMOST 90%
FROM A HIGH OF $46.50 TO A LOW OF $4.75 PER SHARE.
* DETERIORATING PRODUCT QUALITY, POOR CUSTOMER SERVICE AND SUPPORT ON
TOP OF POOR FISCAL MISMANAGEMENT HAVE ALL CONTRIBUTED TO THE SERIOUS
REVENUE PROBLEM AND FINANCIAL CRISIS FACING ESC MEDICAL.
* WE BELIEVE ECKHOUSE'S CURRENT BOARD OF DIRECTORS HAS TO BE HELD
RESPONSIBLE FOR THESE CATASTROPHIC RESULTS.
REPLACE THE ECKHOUSE BOARD OF DIRECTORS!
VOTE YOUR NEW BLUE PROXY TODAY!
In summary, we believe the "Blueprint to Restore Shareholder Value" program
is a practical business plan. It is designed to stop the bleeding and to
bring in new leadership, create an emphasis on customer service and
satisfaction, and focus on restoring shareholder value. WE BELIEVE THE
PLAN IS ACHIEVABLE AND HAS BEEN BUILT UPON PROGRAMS TESTED AND USED
SUCCESSFULLY AT LASER INDUSTRIES.
SHAREHOLDERS HAVE TOO MUCH AT STAKE!
WE CAN NO LONGER AFFORD TO BELIEVE IN
SHIMON ECKHOUSE OR HIS "PHANTOM" PLAN!
TIME IS SHORT! We urge you to take the time now to sign, date and return
the enclosed new BLUE proxy. Thank you for your continued support.
Sincerely,
/s/ Barnard J. Gottstein /s/ Arie Genger
VOTE FOR A BUSINESS PLAN THAT YOU CAN BELIEVE IN!
VOTE FOR DIRECTORS THAT YOU CAN DEPEND ON!
Any questions or requests for assistance or additional copies of this Open
Letter to Shareholders, the Proxy, the Proxy Statement and any other
related materials may be directed to the Information Agent at the address
and telephone number set forth below. Shareholders may also contact their
broker, dealer, commercial bank, trust company or other nominee for
assistance concerning Mr. Genger's and Mr. Gottstein's proposal (the
"Proposal").
THE INFORMATION AGENT FOR THE PROPOSAL IS:
MACKENZIE
PARTNERS, INC.
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL-FREE: (800) 322-2885
VOTE TO STOP THE BLEEDING AT ESC!
VOTE THE NEW BLUE PROXY TODAY!
Exhibit 29
FOR IMMEDIATE RELEASE
CONTACT:
Larry Dennedy
MacKenzie Partners, Inc.
212-929-5500
ESC MEDICAL MISLEADS PUBLIC ABOUT ISRAELI COURT'S RULING
JUNE 18, 1999, NEW YORK, NEW YORK - - Contrary to a misleading press
release issued earlier today by ESC Medical Systems Ltd. (Nasdaq: ESCMF),
the court in Israel has set a hearing date for Tuesday, June 22, 1999 on
two of the three motions filed by Messrs. Genger and Gottstein in order to
prevent ESC from misusing the corporate machinery for its own self
interest. The only thing the court decided today was not to hear one of
the motions ex-parte, and to set a hearing on Tuesday, June 22 for two of
the motions. The hearing date on the third motion has yet to be set.
As previously reported, Messrs. Genger and Gottstein have sought to hold
ESC in contempt of court for violating a court order to turn over a list of
the Company's beneficial owners within the time required by the Israeli
court, thereby severely prejudicing Messrs. Genger and Gottstein's ability
to communicate with ESC shareholders on equal footing with ESC, all as
required pursuant to the court order. In order for the court to demand ESC
and Eckhouse to show cause as to why they should not be held in contempt,
the court asked Messrs. Genger and Gottstein's attorneys to file a formal
request to do so, which they have done. Once the order is signed by the
court, a hearing date will be set.
Messrs. Genger and Gottstein have also sought to prevent ESC from voting
the shares held by a trust for the benefit of Eckhouse and other ESC
employees shares which were purchased with Company funds in transactions
whose legality is highly suspect. Separately, Messrs. Genger and Gottstein
have raised serious legal questions as to why the trust failed to file a
Schedule 13D with respect to the shares held, thereby keeping all
shareholders in the dark about the nature of the purchases, and the actual
amount held in the trust.
Finally, Messrs. Genger and Gottstein have sought a declaration from the
Israeli court requiring ESC to honor the blue proxy cards being used for
Messrs. Genger and Gottstein's solicitation after ESC threatened to
invalidate such proxies, thereby disenfranchising all ESC shareholders who
wish to support Messrs. Genger and Gottstein's efforts to replace Shimon
Eckhouse and his fellow Directors.
The second two motions described above will be heard on June 22, 1999.
According to Messrs. Genger and Gottstein, "Once again Eckhouse and his
management have demonstrated their contempt for shareholder rights. We
think any shareholder understanding these tactics should be outraged by
ESC's blatant attempt to disenfranchise them and prevent a fair election
from occurring. At every turn, ESC has used Company resources to thwart
our efforts and mislead shareholders. Their press release today is yet
another example of how ESC has tried to mislead the public. Supporting ESC
in this election would be to us tantamount to an endorsement of their
outrageous actions."
