CUSIP No. M40868107 13D
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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. 12)
ESC Medical Systems Ltd.
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(Name of Issuer)
Ordinary Shares, NIS 0.10 par value per share
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(Title of Class of Securities)
M40868107
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(CUSIP Number)
Barnard J. Gottstein
Carr-Gottstein Properties
550 West 77th Avenue, Suite 1540
Anchorage, Alaska 99501
(907) 278-2277
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(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 15, 1999
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(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:
[ ]
CUSIP No. M40868107 13D
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This Amendment No. 12 (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, and Amendment No. 11, dated May 29, 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:
In response to shareholder inquiries regarding Messrs. Genger's
and Gottstein's intentions with respect to the Company, Messrs. Genger and
Gottstein recently developed a blueprint that they envision their proposed
nominees, if elected, might refer to in order to remedy the problems facing
the Company. The blueprint is described in a letter being mailed today to
all shareholders of the Company. A copy of the letter is attached hereto
as Exhibit 26 and is incorporated herein by reference. There can be no
assurance that, if Messrs. Genger's and Gottstein's nominees are elected to
the Board, the newly constituted Board will adopt any or all of the
recommendations set forth in the blueprint.
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.
CUSIP No. M40868107 13D
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ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Item 6 of the Original Schedule 13D is hereby amended and
supplemented as follows:
On June 3, 1999 and June 4, 1999, a corporation controlled by
Mr. Genger purchased in the aggregate 15,000 Shares. Pursuant to an oral
understanding between Messrs. Genger and Gottstein solely with respect to
the 15,000 Shares, Mr. Gottstein agreed to purchase in the near future
7,500 of such shares from Mr. Genger at cost.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Item 7 of the Original Schedule 13D is hereby amended to add the
following exhibit:
Exhibit 26: Open Letter to the Shareholders of the Company, dated
June 15, 1999, from Messrs. Genger and Gottstein
CUSIP No. M40868107 13D
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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 15, 1999
/s/ Barnard J. Gottstein
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Barnard J. Gottstein
Individually and as Trustee of the
Barnard J. Gottstein Revocable Trust
BARNARD J. GOTTSTEIN REVOCABLE TRUST
/s/ Barnard J. Gottstein
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Barnard J. Gottstein
Trustee
CUSIP No. M40868107 13D
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EXHIBIT INDEX
Exhibit
Number Title Page
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26 Open Letter to the Shareholders of the Company, 6
dated June 15, 1999, from Messrs. Genger and
Gottstein
Exhibit 26
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!
