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. 11)
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
May 29, 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. 11 (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, and Amendment No. 10,
dated May 27, 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 May 25, 1999, Messrs. Genger and Gottstein and the Company agreed
that the extraordinary general meeting to be held on June 2, 1999, and the
annual meeting of shareholders of the Company to be held on July 15, 1999,
would be combined into one meeting to be held on June 23, 1999. In
anticipation of the June 23, 1999 meeting, on or about May 29, 1999,
Messrs. Genger and Gottstein began mailing their proxy solicitation
materials to all shareholders of the Company. Copies of the proxy
solicitation materials are attached hereto as Exhibit 22, Exhibit 23,
Exhibit 24 and Exhibit 25. Messrs. Genger and Gottstein understand that the
Board of Directors of the Company has set June 9, 1999 as the record date
for the June 23 meeting.
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 7. Material to be Filed as Exhibits.
Item 7 of the Original Schedule 13D is hereby amended to add the
following exhibits:
Exhibit 22: Open Letter to the Shareholders of the
Company, dated May 28, 1999, from Messrs.
Genger and Gottstein
Exhibit 23: Notice of Combined Extraordinary General
Meeting and Annual General Meeting to be held
on June 23, 1999
Exhibit 24: Form of Proxy
Exhibit 25: Proxy Statement
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 2, 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
CUSIP No. M40868107 13D
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EXHIBIT INDEX
Exhibit
Number Title Page
------- ----- ----
22 Open Letter to the 6
Shareholders of the Company,
dated May 28, 1999, from
Messrs. Genger and Gottstein
23 Notice of Combined 13
Extraordinary General Meeting
and Annual General Meeting to
be held on June 23, 1999
24 Form of Proxy 17
25 Proxy Statement 21
Exhibit 22
NEW PROXY MATERIAL
SUPERSEDES PREVIOUSLY SUBMITTED PROXY MATERIAL
Open Letter to Shareholders of
ESC Medical Systems Ltd. (the "Company")
May 28, 1999
IT'S TIME FOR A CHANGE
Dear Fellow ESC Shareholder:
Evidently, even the Company's dismal first quarter results for
1999 have not prompted the current Board and management to take the
necessary action to restore the Company's profitability and credibility in
the marketplace. We believe there is no doubt that it is time for a change
in the direction of the Company. And that can only be realized by changing
the composition of the current Board and management. A new and independent
Board could finally provide badly needed oversight over current management
and chart the necessary direction that our Company requires. We strongly
believe the evidence in support of a change to the composition of the
current Board is overwhelming.
CONSIDER THE FACTS:
1. THE COMPANY'S POOR STOCK PERFORMANCE
* The Company's stock price has fallen from a high of $46.50 on June
14, 1996, to a low of $4.75 as recently as February 24, 1999-A
DECLINE OF OVER $41.00 PER SHARE.
2. THE COMPANY'S DISMAL FIRST QUARTER RESULTS FOR 1999
* ESC reported inventory write-offs of $16.6 million for the quarter
ended March 31, 1999. It seems impossible for ESC to have had such a
significant deterioration in inventory in just three months, which
represents about 27% of the $61.2 million in inventory reported as of
December 31, 1998! Accordingly, we must wonder: was inventory
overstated as of December 31, 1998 or was it intentionally
understated as of March 31, 1999 in order to inflate the Company's
profitability for the remainder of the year?
* On February 11, 1999, ESC management announced that they expected to
record a charge for the quarter ended March 31, 1999 of about $13
million to $17 million. Recently, ESC reported actual charges for the
quarter ended March 31, 1999 of $30.8 million.
* Sales plummeted from $59.5 million to $31.3 million for the quarter
ended March 31, 1999 when compared with the quarter ended March 31,
1998 - a 47.4% decrease. After excluding "inventory write-offs" of
$16.6 million, a legal expenses provision of $3.0 million and
"restructuring expenses" of $11.2 million, ESC still reported a loss
of $9.8 million for the quarter ended March 31, 1999, which amounts
to an annual on-going loss rate of almost $40 million.
* WHILE SALES DECREASED BY A WHOPPING 47.4%, SELLING & MARKETING,
GENERAL AND ADMINISTRATIVE EXPENSES FOR THE QUARTER ENDED MARCH 31,
1999 INCREASED TO 75.5% OF SALES COMPARED WITH 35% FOR THE FIRST
QUARTER ENDED MARCH 31, 1998!
* We were astounded to discover in ESC's May 17, 1999 press release
that management has chosen to partly blame ESC's disastrous first
quarter results on our efforts to restructure the Board, even though
we did not unilaterally begin to act to restructure the Board until
the last week of March 1999. Obviously, our actions could not have
had any effect on ESC's results for the period ended March 31, 1999.
3. DOES THIS BOARD AND MANAGEMENT CARE ABOUT THEIR SHAREHOLDERS?
* Inconsistent with prior practice, ESC did not host any type of
analyst meeting in connection with ESC's release of its first quarter
results for 1999, at which meeting analysts and shareholders could
have been given the opportunity to raise questions and seek
explanations for ESC's poor performance during the quarter.
* Instead of making an effort to address our concerns about the very
obvious problems with this Company, the Board and management filed
what we consider to be a totally frivolous lawsuit against us because
we requested a meeting of shareholders in order to do something about
these problems.
4. QUESTIONABLE GENERAL CORPORATE GOVERNANCE PRACTICES
* It was not until March 1, 1999 that a final budget for 1999 was
submitted to the Board. For a company with annual sales of
approximately $220 million, not having a budget prior to entering
into the year budgeted, seems culpably incompetent.
* On March 18, 1999, Eckhouse announced the retention of Warburg Dillon
Read LLC as ESC's "financial advisor." More than two months later,
all attempts to find out the purpose, terms and cost of this retainer
agreement have been to no avail.
* Since October 1998, several class action lawsuits have been filed by
ESC shareholders against the Company for violations of the Federal
securities laws. And to add insult to injury, the current Board and
management are seeking shareholder approval to be indemnified by the
Company in these suits!! What are they trying to hide? Even more so,
Karen Sarid, a director and CFO of the Company, is being personally
named in one of these lawsuits for alleged insider trading, and the
Board of Directors has purported to seek shareholder approval so that
the Company can pay for her personal counsel in defending against
this lawsuit, even though insider trading is clearly for personal
gain and has nothing to do with her corporate responsibilities. In
our view, this is a blatant misuse of corporate resources for
management's personal interests.
5. WHAT IS IT REALLY ALL ABOUT? COULD IT BE JUST ABOUT CURRENT BOARD'S AND
MANAGEMENT'S ATTEMPTS TO ENTRENCH THEMSELVES IN OFFICE?
* To our knowledge, the current Board is retaining no fewer than FOUR
separate law firms to advise its directors and management on our
proposal for a new Board. This is obviously creating a significant
drain on corporate resources just to allow management and the current
Board the opportunity to entrench themselves in office.
* As further evidence of their attempt to entrench themselves, ESC will
ask shareholders at the June 23 meeting to approve "employment
severance agreements" for the chief financial officer and the
executive vice president of the Company. Until the legitimate
questions of shareholders are answered with respect to the possible
accounting irregularities and dismal earnings highlighted above, we
believe it is wholly inappropriate to be granting these "golden
parachutes"to the people who may be partly responsible for these
disastrous results.
* It appears that Shimon Eckhouse has the audacity to plan on voting
all of the Company's treasury shares - shares purchased with
corporate assets and shares in which he has no economic interest
whatsoever - at the June 23 meeting in favor of reelecting him and
all of the current Board members (except for Thomas Hardy) to the
Board and in favor of all of the Company's proposals. We believe this
practice -- allowing management to vote shares acquired through the
use of Company resources with the intention to distort the
shareholders' true interests -- to be contrary to law and a breach of
fiduciary duties to the Company and its shareholders as a whole.
Accordingly, we intend to take all steps to ensure such shares will
not be voted.
* On May 17, 1999, ESC announced that Shimon Eckhouse plans to step
down as chief executive officer but has agreed to "assume the
responsibility of an active Chairman of the Board." Here again, they
have neglected to tell you that the new Israeli companies law, which
will become effective in February 2000, will not permit him to
continue to serve as both chairman and CEO. Moreover, as explained
below, Eckhouse appears to be giving up only the title, but not the
powers, of a CEO.
NOW: WHAT ABOUT OUR AGENDA?
THE PURPOSE BEHIND OUR EFFORTS TO RESTRUCTURE THE CURRENT BOARD
HAS NOT CHANGED -- TO CREATE A TRULY INDEPENDENT BOARD CONSISTING OF
INDIVIDUALS WHO ARE IN NO WAY BEHOLDEN TO MANAGEMENT IN ORDER TO MAXIMIZE
SHAREHOLDER VALUE AND RESTORE THE PROFITABILITY AND CREDIBILITY OF THE
COMPANY.
OUR SEARCH FOR A NEW CEO
Now that Eckhouse has decided to step down as CEO, an
independent Board can begin the process of recruiting a new CEO. We believe
that our proposed Board would be the best suited Board to conduct that
search process. THIS IS ESPECIALLY SO IN LIGHT OF THE CURRENT BOARD'S
ENDORSEMENT OF ECKHOUSE'S DECISION TO REMAIN AS AN "ACTIVE" CHAIRMAN WHICH
COULD ONLY HAVE THE EFFECT OF DETERRING THE BEST QUALIFIED CANDIDATES FROM
AGREEING TO SERVE AS A TRUE CEO. BY ENDORSING THIS BIFURCATED APPROACH THAT
REMOVES THE TITLE OF CEO BUT NOT THE POWERS NORMALLY RESERVED FOR A CEO
FROM ECKHOUSE, IT IS OBVIOUS TO US THAT THE CURRENT BOARD EITHER DOES NOT
UNDERSTAND OR IS NOT SINCERE IN SEEKING A REAL AND TRULY QUALIFIED CEO. WE
ASK YOU, WHAT PROSPECTIVE CEO WORTH HIS SALT AND OF TRUE VALUE TO THE
SHAREHOLDERS WOULD TAKE A JOB THAT WILL ESSENTIALLY GIVE HIM NO REAL POWER
TO IMPLEMENT THE CHANGES SO URGENTLY NEEDED AT THE COMPANY AND INSTEAD HAVE
HIM REPORTING TO ECKHOUSE? UNDER THIS PROPOSED RESTRUCTURING, IS ECKHOUSE
REALLY RELINQUISHING HIS ROLE AS CEO?
We are not waiting for the June 23 election results. We have
undertaken our own search for a new CEO and have already identified several
highly qualified candidates whom we believe would be capable of rebuilding
ESC and leading ESC into the 21st century. Of course, the final decision
will be made by the Board as to which of these or any other potential
candidates are best suited for the position. We are, however, confident
that a new CEO can be identified by the Board within a very short period.
OUR COMPROMISE PROPOSAL
For your information, we have tried as recently as May 27, 1999
to negotiate a settlement with the Company in order to curtail the expenses
associated with a proxy contest, so far to no avail. Specifically, our most
recent compromise proposal would (1) fix the Board size at eleven members,
(2) remove two current management directors from the Board, (3) add the
three individuals from our six nominees not affiliated with either of us
whom Eckhouse had conceded would be acceptable additions to the Board, and
(4) immediately after the events in clauses (2) and (3) have occurred, the
newly constituted Board would identify and add two additional individuals
to the Board, who have no prior business or family affiliation with us, any
current Board member or any current member of management. In the event that
two-thirds of the Board (with Eckhouse abstaining) is unable to agree upon
the addition of two such individuals by June 7, 1999, ESC shareholders
would be entitled to select the two additional directors from a list of
four nominees-two nominated by the Company and two nominated by us-at the
meeting to be held on June 23, 1999.
Our compromise proposal would create a truly independent Board
and clearly demonstrates that our intention has never been to take control
of the Company, BUT RATHER TO TAKE CONTROL AWAY FROM THE CURRENT BOARD AND
MANAGEMENT -- WHOSE INTEREST IN OUR VIEW IS SELF-ENTRENCHMENT -- AND PLACE
IT IN THE HANDS OF THE TRUE OWNERS OF THE COMPANY, ITS SHAREHOLDERS.
Eckhouse has yet to respond to our compromise proposal despite
the fact the Board could have considered it at their May 28 Board meeting.
Inexplicably, the May 28 Board meeting was cancelled.
ASK YOURSELF WHY WOULD ECKHOUSE REJECT THIS PROPOSAL. IS IT
BECAUSE IT WOULD STRIP AWAY FROM THE CURRENT BOARD AND MANAGEMENT THE
ABILITY TO DESIGNATE A MAJORITY OF THE BOARD, THEREBY MAKING IT IMPOSSIBLE
TO FURTHER ENTRENCH THEMSELVES IN OFFICE AND CONTINUE TO PRESIDE OVER A
COMPANY WHOSE PERFORMANCE IS CLEARLY INADEQUATE? YOU BE THE JUDGE.
IN A NUTSHELL:
During the past two months, the actions taken by current
management, the rubber- stamp reactions demonstrated by the current Board
and their behavior toward ESC shareholders have strengthened our belief
that the current Board and management will do whatever it takes to remain
in office. As further evidence, look at the Company's agenda for the June
23 meeting. In addition to seeking reelection, the Board and management are
asking for shareholders to approve:
* indemnification of directors with respect to certain litigation
brought against them by shareholders,
* an increase in the Company's share capital by 20,000,000 shares
without any explanation of the purpose of such additional
shares (even though nearly half of the current shares have not
yet been issued), and
* employment and termination protection agreements for two
executive officers of the Company who are also directors of the
Company.
It is our understanding that, to date, the Board has not even met to
discuss any of the matters to be presented by the Company to the
shareholders at the June 23 meeting.
GIVEN THE COMPANY'S PERFORMANCE WHILE THE CURRENT BOARD AND MANAGEMENT HAVE
BEEN IN OFFICE, WE ARE NOT SURPRISED THAT THEY WOULD ASK SHAREHOLDERS TO
APPROVE OF SUCH MATTERS WHICH IN OUR OPINION WOULD ONLY FURTHER IMPAIR
SHAREHOLDERS' RIGHTS, PROVIDE THEM WITH FURTHER PROTECTION FOR THEIR PRIOR
IMPRUDENT OR POSSIBLY NEGLIGENT ACTS AND SEEK TO MAKE IT MORE DIFFICULT AND
COSTLY TO REMOVE CERTAIN DIRECTORS AND OFFICERS FROM OFFICE. THESE ACTIONS
AND THEIR APPARENT BLATANT DISREGARD FOR THE CONCERNS OF ESC SHAREHOLDERS
HAVE LEFT US WITH NO OTHER CHOICE BUT TO PROPOSE TO REPLACE THE CURRENT
BOARD WITH INDIVIDUALS WHO ARE INDEPENDENT OF THE CURRENT BOARD, MANAGEMENT
AND US.
WE RECOMMEND YOU VOTE "AGAINST" ALL THREE PROPOSALS.
THE CHOICE IS YOURS, NOT THEIRS. IT IS YOUR COMPANY, NOT
theirs!! We hope you will support our proposal to restructure the current
Board. We urge you to vote the enclosed BLUE proxy today! If you have any
questions or need assistance, please call MacKenzie Partners, Inc. at (212)
929-5500 (call collect) or call toll-free at (800) 322-2885.
Sincerely,
/s/ Barnard J. Gottstein /s/ Arie Genger
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
--------------------
Exhibit 23
SOLICITED ON BEHALF OF ARIE GENGER AND BARNARD J. GOTTSTEIN
ESC MEDICAL SYSTEMS LTD.
NOTICE OF COMBINED EXTRAORDINARY AND
ANNUAL GENERAL MEETING OF SHAREHOLDERS
To be Held On June 23, 1999
Fellow Shareholders:
You are invited to attend a combined Extraordinary and Annual General
Meeting of Shareholders (the "Meeting") of ESC Medical Systems Ltd. (the
"Company") to be held in the United States at the Inter-Continental Hotel,
111 East 48th Street, New York, New York on June 23, 1999. The Meeting will
take place at 10:00 a.m. local time, subject to adjournment if no quorum is
present.
The purpose of the Meeting is:
1. To elect the following persons to be members of the Board of
Directors of the Company: Aharon Dovrat, Philip Friedman, Thomas
Hardy, Darrell S. Rigel, M.D., S.A. Spencer, Mark H. Tabak and
Professor Zehev Tadmor.
To vote "AGAINST" the following special resolution proposed by the Company:
2. To increase the Company's share capital by NIS 2,000,000 (from NIS
5,000,000 to NIS 7,000,000). The newly authorized share capital shall
be divided into 20,000,000 Ordinary Shares, par value NIS 0.10, each
by amending Section 4 of the Memorandum of Association of the Company
and Articles of Association of the Company.
To vote "FOR" the following special resolution proposed by the Company:
3. To amend Article 68 of the Articles of Association of the Company to
allow, in addition to the current provisions thereof, for
indemnification of officers and directors under the terms of the
Companies Law, 1999-5759 (the "Law") including the provisions of
Section 260(b) of the Law.
To "ABSTAIN" on the following ordinary resolution proposed by the Company:
4. To reappoint Luboshitz, Kasierer & Co. as the Company's Independent
Public Accountants for the current fiscal year and authorize the
Board of Directors to fix their compensation.
To vote "AGAINST" the following ordinary resolutions proposed by the
Company:
5. To approve the employment and termination protection agreements of
two executive officers of the Company who are also directors and
shareholders of the Company.
6. To indemnify directors with respect to certain litigation.
To "ABSTAIN" on the following ordinary resolution proposed by the Company:
7. To report on the business of the Company for the year ended December
31, 1998 and to receive and consider the Auditors' Report, the
Directors' Report and the Company's Consolidated Financial Statements
for the year ended December 31, 1998.
And:
8. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
Pursuant to the Company's Articles of Association, the Board of
Directors shall set the date for determining the holders of record of
Ordinary Shares entitled to notice of and to vote at the Meeting and any
adjournments thereof. As of the date of our mailing of proxy material, no
such date has been set.
Messrs. Genger and Gottstein believe that the shareholders of the
Company should be represented as fully as possible at the Meeting and
encourage your attendance. Whether or not you plan to be present, kindly
complete, date and sign the enclosed proxy card exactly as your name
appears on the envelope containing this Notice of the Meeting and mail it
promptly so that your votes can be recorded. No postage is required if
mailed in the United States. At any time before the Ordinary Shares subject
to proxy are voted, the proxy is revocable by written notice to the persons
named in the proxy accompanying this Notice of Meeting or by appearance at
the Meeting as to matters noticed for vote at such Meeting and voting in
person. Any notice of revocation and any later dated proxy filed with such
persons will be forwarded to the Company. Messrs. Genger's and Gottstein's
Proxy Statement is furnished herewith.
Messrs. Genger and Gottstein have informed the Company that they will
solicit proxy material and proxy cards on their behalf.
Joint holders of Ordinary Shares should take note that, pursuant to
Article 62 of the Articles of Association of the Company, the vote of the
senior of joint holders of any share who tenders a vote, whether in person
or by proxy, will be accepted to the exclusion of the vote(s) of the other
joint holder(s) of the shares. For this purpose seniority will be
determined by the order in which the names stand in the Register of
Members.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU
ATTEND THE MEETING, YOU CAN REVOKE YOUR PROXY AND VOTE YOUR SHARES IN
PERSON.
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
---------------------------
Sincerely,
Arie Genger Barnard J. Gottstein
Trans-Resources, Inc. Barnard Jacob Gottstein TTEE
By: /s/ Arie Genger By: /s/ Barnard J. Gottst
----------------------------- ---------------------------
Arie Genger Barnard J. Gottstein
Chairman of the Board Trustee
Haifa Chemical Holdings Ltd.
By: /s/ Arie Genger
-----------------------------
Arie Genger
Authorized Signatory
TPR Investment Associates, Inc.
By: /s/ Arie Genger
------------------------------
Arie Genger
President
May 28, 1999
Exhibit 24
SOLICITED ON BEHALF OF ARIE GENGER AND BARNARD J. GOTTSTEIN
ESC MEDICAL SYSTEMS LTD.
PROXY FOR COMBINED EXTRAORDINARY AND
ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 23, 1999
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby
constitutes and appoints Avi D. Pelossof, Michael Zellermayer and Yoram
Ashery and any of them, the attorneys and proxies of the undersigned, each
with full power of substitution to appear and to vote all of the Ordinary
Shares of ESC Medical Systems Ltd. registered in the name of the
undersigned at the Combined Extraordinary and Annual General Meeting of
Shareholders (the "Meeting") of the Company which will be held in the
United States at the Inter-Continental Hotel, 111 East 48th Street, New
York, New York on June 23, 1999, at 10:00 a.m. local time, subject to
adjournment if no quorum is present, for the purposes described in the
accompanying Proxy Statement and, in their discretion, on all other matters
which properly come before the Meeting.
Upon being returned, signed and dated, all shares represented by this
Proxy will be voted as indicated by the shareholder below. IN THE ABSENCE
OF SUCH INDICATION, THIS PROXY WILL BE VOTED "FOR" PROPOSALS NO. 1 AND 3;
"AGAINST" PROPOSALS NO. 2, 5 AND 6; "ABSTAIN" WITH RESPECT TO PROPOSALS NO.
4 AND 7; AND "I GRANT SUCH AUTHORITY" WITH RESPECT TO PROPOSAL 8. THIS
PROXY IS SOLICITED ON BEHALF OF MESSRS. GENGER AND GOTTSTEIN.
MR. ARIE GENGER'S AND MR. BARNARD J. GOTTSTEIN'S PROPOSAL:
1. To elect the following persons to be members of the Board of
Directors of the Company:
Aharon Dovrat, Philip Friedman, Thomas Hardy, Darrell S. Rigel, M.D.,
S.A. Spencer, Mark H. Tabak and Professor Zehev Tadmor.
For____ Against____ Abstain____
I object to the election of________________________ as a member of the
Board of Directors.
MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE
"FOR" PROPOSAL NO. 1, AND
"AGAINST" THE ELECTION OF NOMINEES PROPOSED BY THE COMPANY.
OTHER RESOLUTIONS FOR THE MEETING:
SPECIAL RESOLUTIONS:
2. To increase the Company's share capital by NIS 2,000,000 (from NIS
5,000,000 to NIS 7,000,000). The newly authorized share capital shall
be divided into 20,000,000 Ordinary Shares, par value NIS 0.10 each,
by amending Section 4 of the Memorandum of Association of the Company
and Articles of Association of the Company.
For____ Against____ Abstain____
MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE
"AGAINST" PROPOSAL NO. 2.
3. To amend Article 68 of the Articles of Association of the Company to
allow, in addition to the current provisions thereof, for
indemnification of officers and directors under the terms of the
Companies Law, 1999-5759 (the "Law") including under the provisions
of Section 260(b) of the Law.
For____ Against____ Abstain____
MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE
"FOR" PROPOSAL NO. 3.
ORDINARY RESOLUTIONS:
4. To re-appoint Luboshitz, Kasierer & Co. as the Company's Independent
Public Accountants for the current fiscal year and authorize the
Board of Directors to fix their compensation.
For____ Against____ Abstain____
MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE OF
"ABSTAIN" WITH RESPECT TO PROPOSAL NO. 4.
5. Executive agreements.
(a) To approve the termination protection agreement between the
Company and Hillel Bachrach.
For____ Against____ Abstain____
(b) To approve the employment agreement between the Company and
Karen Sarid.
For____ Against____ Abstain____
MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE
"AGAINST" PROPOSAL NO. 5.
6. To indemnify directors with respect to certain litigation.
For____ Against____ Abstain____
MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE
"AGAINST" PROPOSAL NO. 6.
7. To report on the business of the Company for the year ended December
31, 1998 and to receive and consider the Auditors' Report, the
Directors' Report and the Company's Consolidated Financial Statements
for the year ended December 31, 1998.
For____ Against____ Abstain____
MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE OF
"ABSTAIN" WITH RESPECT TO PROPOSAL NO. 7.
8. To transact such other business as may properly come before the
Meeting or any adjournments thereof in accordance with the best
judgment of the person(s) acting as my proxy hereunder.
I grant such authority_______
I object to such authority______
MESSRS. GENGER AND GOTTSTEIN RECOMMEND
"I GRANT SUCH AUTHORITY" WITH RESPECT TO PROPOSAL NO. 8.
YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE ENVELOPE
PROVIDED. IT IS IMPORTANT FOR YOU TO BE REPRESENTED AT THE MEETING. THE
EXECUTION OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU
ARE PRESENT AT THE MEETING. THIS PROXY IS REVOCABLE AT ANY TIME, AND THE
UNDERSIGNED RESERVES THE RIGHT TO ATTEND THE MEETING AND VOTE IN PERSON.
I WILL ______ WILL NOT ______ attend the Meeting.
Date:____________________, 1999
__________________________
Name
__________________________
Signature
IMPORTANT: Please sign exactly as your name or names appear on the share
certificates and when signing as an attorney-in-fact, executor,
administrator, trustee or guardian, give your full title as
such. If the signatory is a corporation, sign the full
corporate name by a duly authorized officer, or if a
partnership, sign in partnership name by an authorized person.
Exhibit 25
SOLICITED ON BEHALF OF ARIE GENGER AND BARNARD J. GOTTSTEIN
COMBINED EXTRAORDINARY AND
ANNUAL GENERAL MEETING OF SHAREHOLDERS
OF ESC MEDICAL SYSTEMS LTD.
TO BE HELD ON JUNE 23, 1999
PROXY STATEMENT
This Proxy Statement is furnished by Mr. Arie Genger and Mr. Barnard
J. Gottstein to the holders of Ordinary Shares, par value NIS 0.10 (the
"Ordinary Shares"), of ESC Medical Systems Ltd. (the "Company"), in
connection with the solicitation of proxies for use at the Combined
Extraordinary and Annual General Meeting of Shareholders of the Company
(the "Meeting") to be held in the United States at the Inter-Continental
Hotel, 111 East 48th Street, New York, New York, USA on June 23, 1999, at
10:00 a.m. local time, subject to adjournment if no quorum is present.
At the Meeting, registered shareholders of the Company will be asked,
among other things, to vote upon the following matters: (1) to elect to the
Board of Directors of the Company the following persons proposed by Messrs.
Genger and Gottstein: Aharon Dovrat, Philip Friedman, Thomas Hardy, Darrell
S. Rigel, M.D., S.A. Spencer, Mark H. Tabak and Professor Zehev Tadmor; (2)
to increase the Company's share capital by NIS 2,000,000 and to divide such
newly authorized share capital into 20,000,000 Ordinary Shares, par value
NIS 0.10, by making the relevant amendments to the Company's Memorandum and
Articles of Association; (3) to amend the Articles by adopting certain
indemnification provisions; (4) to reappoint Luboshitz, Kasierer & Co. as
the Company's independent accountants for the current fiscal year and
authorize the Board of Directors to fix their compensation; (5) to approve
the employment and termination protection agreements of two executive
officers of the Company who are also directors and shareholders of the
Company; (6) to indemnify directors with respect to certain litigation; (7)
to review and consider the Auditors' Report, the Directors' Report and the
Company's Consolidated Financial Statements for 1998; and (8) to transact
such other business as may properly come before the Meeting and any
adjournment thereof, all as more fully described below.
A form of proxy for use at the Meeting and a return envelope for the
proxy are also enclosed. By appointing "proxies," shareholders may vote
their Ordinary Shares at the Meeting whether or not they attend. Upon the
receipt of a properly signed and dated proxy in the form enclosed, the
persons named as proxies therein will vote the Ordinary Shares represented
thereby in accordance with the instructions of the shareholder indicated
thereon, or if no direction is indicated, in accordance with Messrs.
Genger's and Gottstein's recommendations as indicated below in this Proxy
Statement.
Each of Michael Zellermayer, Avi D. Pelossof and Yoram Ashery (of
Zellermayer & Pelossof, Advocates, Tel Aviv, Israel, the legal
representatives of Messrs. Genger and Gottstein and proxies for the
Meeting) knows of no other matters to be submitted at the Meeting, other
than as specified in the Notice of Meeting enclosed with this Proxy
Statement and other than the Company's proposal to have seven of the
current Board's directors reelected. If any other business is properly
brought before the Meeting, however, it is the intention of the persons
named as proxies to vote in respect thereof in accordance with their best
judgment. Shares represented by executed and unrevoked proxies will be
voted. On all other matters considered at the Meeting, abstentions and
broker non-votes will not be treated as either a vote "for" or "against"
the matter, although they will be counted to determine if a quorum is
present.
The proxy solicited hereby may be revoked at any time prior to its
exercise by means of a written notice delivered to the persons named as
proxies in the proxy accompanying this Proxy Statement, c/o Zellermayer &
Pelossof Advocates, Europe House, 37 King Shaul Boulevard, Tel- Aviv,
Israel 64928 (telephone number is 011-972-3-693-9555; facsimile number is
011-972-3- 695-2884), by the substitution of a new proxy bearing a later
date or by a request for the return of the proxy at the Meeting. Any notice
of revocation and any later dated proxy filed with the persons named as
proxies in the proxy accompany this Proxy Statement will be forwarded to
the Company.
Messrs. Genger and Gottstein expect to mail this Proxy Statement and
the enclosed form of proxy to shareholders on or about May 29, 1999. All
expenses of this solicitation will be borne by Messrs. Genger and
Gottstein. In addition to the solicitation of proxies by mail, Messrs.
Genger and Gottstein and officers and employees of MacKenzie Partners,
Inc., as information agent for Messrs. Genger's and Gottstein's
solicitation of proxies, may solicit proxies by telephone, telegraph, in
person or by other means. Brokerage firms, nominees, fiduciaries and other
custodians have been requested to forward proxy solicitation materials to
the beneficial owners of Ordinary Shares of the Company held of record by
such persons, and Messrs. Genger and Gottstein will reimburse such
brokerage firms, nominees, fiduciaries and other custodians for reasonable
out-of-pocket expenses incurred by them in connection therewith.
SHAREHOLDERS ENTITLED TO VOTE. Only holders of record of Ordinary
Shares at the close of business on the record date to be set by the Board
of Directors are entitled to notice of and to vote at the Meeting. Each
Ordinary Share is entitled to one vote on each matter to be voted on at the
Meeting. The Articles of Association of the Company do not provide for
cumulative voting for the election of the directors or for any other
purpose.
VOTES REQUIRED. (i) The proposals relating to the increase of the
Company's share capital and the amendments to the Memorandum of Association
and Articles of Association are special resolutions which require the
affirmative vote of 75% of the Ordinary Shares of the Company voted in
person or by proxy at the Meeting on the matter presented for passage. The
votes of all shareholders voting on the matter will be counted. (ii) The
proposals relating to the election of directors, re-appointment of
Luboshitz, Kasierer & Co. as the independent public accountants of the
Company and authorization of the Board of Directors to fix their
compensation, approval of the employment and termination protection
agreements of two executive officers, the indemnification of directors, and
approval to report on the business of the Company for the year ended
December 31, 1998 and to receive and consider the Auditors' Report, the
Directors' Report and the Company's Consolidated Financial Statements for
the year ended December 31, 1998, are ordinary resolutions which require
the affirmative vote of a majority of the Ordinary Shares of the Company
voted in person or by proxy at the Meeting on the matter presented for
passage. The votes of all shareholders voting on the matter will be
counted, including the shares of the executive officers whose employment or
termination protection agreements are proposed to be approved.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
The persons proposed by Messrs. Genger and Gottstein (Aharon Dovrat,
Philip Friedman, Thomas Hardy, Darrell S. Rigel, M.D., S.A. Spencer, Mark
H. Tabak and Professor Zehev Tadmor (collectively, the "Nominees")) have
furnished information concerning their principal occupations, business
addresses and other matters. Other than Mr. Dovrat, all of the nominees are
United States citizens or residents and, as a result, the Company may
become subject to the U.S. securities laws in the same manner as U.S.
companies. Except as disclosed herein, according to executed
questionnaires, (a) except for Thomas Hardy, none of the Nominees has ever
served as an officer, director or employee of the Company, and (b) there
are no arrangements or understandings between any Nominee and any other
person pursuant to which he was selected as a Nominee or director of the
Company.
Messrs. Genger and Gottstein are unaware of any reason why any
Nominee, if elected, should be unable to serve as a director. If any of the
Nominees are unable to serve, the persons named as proxies in the proxy
solicited by Messrs. Genger and Gottstein will vote the shares FOR the
election of such other nominees as the persons named as proxies in the
proxy solicited by Messrs. Genger and Gottstein may propose. All Nominees
listed below have advised Messrs. Genger and Gottstein that they intend to
serve as directors if elected.
BIOGRAPHICAL INFORMATION
Aharon Dovrat. Mr. Dovrat, age 67, is the founder and chairman of
Dovrat & Company, Ltd., a privately-held investment company, and the
founder and chairman of Isal, Ltd., a publicly-traded investment company,
since their inception in January 1999. Between 1991 and December 1998, Mr.
Dovrat served as chairman of Dovrat, Shrem & Company, Ltd., a company
publicly traded on the Tel-Aviv Stock Exchange that divides its operations
into the areas of investment banking and direct investment funds
management, underwriting, securities and brokerage services, real estate
and industry. Between 1965 and 1991, Mr. Dovrat served as president and
chief executive officer of Clal (Israel) Ltd., a holding company which, by
1991, had become Israel's largest independent conglomerate, with capital of
over $400 million and aggregate annual sales in excess of $2.5 billion. Mr.
Dovrat serves as a member of the board of directors of OSHAP Technologies
Ltd., a software company, of Technomatix Technologies Ltd., a software
company, and of Delta Galil Ltd., a textile company. Mr. Dovrat's address
is c/o Dovrat & Company, Ltd., 37 Shaul Hamelech Boulevard, Tel Aviv,
Israel 64928.
Philip Friedman. Mr. Friedman, age 50, is the founder, president and
chief executive officer of Computer Generated Solutions, Inc., a
privately-held company founded by Mr. Friedman in 1984 that specializes in
providing comprehensive computer technology and business solutions to
companies across the globe in a wide variety of industries. Mr. Friedman's
address is c/o Computer Generated Solutions, Inc., 1675 Broadway, New York,
New York 10019.
Thomas Hardy. Mr. Hardy, age 53, has been a director of the Company
since February 1998. Since December 1993, Mr. Hardy has served as President
and Chief Operating Officer of Trans-Resources, Inc., a company founded by
Mr. Arie Genger and beneficially owned by Mr. Genger and members of his
family. Mr. Hardy was Executive Vice President of Trans- Resources, Inc.
from 1987 to 1993 and a director and member of its Financial Advisory
Committee since October 1992. Mr. Hardy was a director of Laser Industries
Inc. from January 1990 until February 1998, when it merged with the
Company. Mr. Hardy has also been a director of Haifa Chemicals Ltd., a
wholly-owned subsidiary of Trans-Resources, Inc., since 1986. Mr. Hardy's
address is c/o Trans-Resources, Inc., 9 West 57th Street, New York, New
York 10019.
Darrell S. Rigel, M.D. Dr. Rigel, age 48, has been a faculty member
at New York University Medical School ("NYU") since 1979, and is currently
a physician and Clinical Professor of Dermatology at NYU, and is also an
Adjunct Professor of Dermatology at Mt. Sinai School of Medicine in New
York City. Dr. Rigel is currently serving as president of a national
medical organization. In 1996, Dr. Rigel founded Interactive Horizons,
Inc., a privately-held company in the industry of interactive computer
systems for which Dr. Rigel serves as its president. Dr. Rigel graduated
from Massachusetts Institute of Technology with an SB and an SM in
Management Information Sciences. Dr. Rigel's address is 35 East 35th
Street, #208, New York, New York 10016.
S.A. Spencer. Mr. Spencer, age 67, is the founder, chief executive
officer and principal investor of Holding Capital Group, LLC, a private
LBO, MBO, venture capital and investment firm founded by Mr. Spencer in
1976. Mr. Spencer serves as a member of the board of directors of
Trans-Resources, Inc. Mr. Spencer's address is c/o Holding Capital Group,
LLC, 104 Crandon Boulevard, Suite 409, Key Biscayne, Florida 33149.
Mark H. Tabak. Mr. Tabak, age 49, is the founder, president and chief
executive officer of International Managed Care Advisors, LLC, a company
Mr. Tabak founded in 1996 that invests in and develops managed care-type
delivery systems addressing mainly primary care needs in Latin America,
Western and Central Europe and Asia, among other regions. Mr. Tabak is also
presently affiliated with Capital Z Partners, a $3 billion fund focusing on
investing in healthcare, insurance and financial services. Between 1993 and
July 1996, Mr. Tabak served as president of AIG Managed Care, Inc., a
subsidiary of American International Group. Between 1990 and 1993, Mr.
Tabak served as president and chief executive officer of Group Health Plan.
Between 1986 and 1990, Mr. Tabak served as president and chief executive
officer of Clinical Pharmaceuticals, Inc., a pharmacy benefit management
company founded by Mr. Tabak in 1986. Between 1982 and 1986, Mr. Tabak
served as president and chief executive officer of HealthAmerica
Development Corporation. Mr. Tabak serves as a director and as a member of
the audit committee of Ceres Group, a company that specializes in the
health insurance industry. Mr. Tabak's address is c/o Capital Z Partners,
One Chase Manhattan Plaza, 44th Floor, New York, New York 10005.
Professor Zehev Tadmor. Professor Tadmor, age 62, is serving as a
Distinguished Institute Professor at the Department of Chemical Engineering
at the Technion Israel Institute of Technology, Israel's major
technological scientific research university (the "Technion"), which he
joined in 1968, and has served as the chairman of the board of the S.
Neaman Institute for Advanced Studies in Science & Technology at the
Technion since October 1998. Between October 1990 and September 1998,
Professor Tadmor served as president of the Technion. Professor Tadmor
serves as a member of the board of directors of Haifa Chemicals Ltd., a
chemical and fertilizer company and a wholly-owned subsidiary of
Trans-Resources, Inc. Professor Tadmor also serves as a member of the
Technological Advisory Council of Publicard. Professor Tadmor's address is
62 Tishbi Street, Haifa, Israel 34523.
Stockholdings in the Company
None of the Nominees beneficially own any Ordinary Shares of the
Company, except as follows:
Mr. Dovrat beneficially owns an aggregate of 20,000 Ordinary
Shares (less than 1% of the 27,301,339 Ordinary Shares issued and
outstanding as of March 25, 1999). Mr. Dovrat has sole voting and
dispositive power with respect to all of such Ordinary Shares.
Mr. Friedman beneficially owns an aggregate of 25,000 Ordinary
Shares (less than 1% of the 27,301,339 Ordinary Shares issued and
outstanding as of March 25, 1999). Mr. Friedman shares voting and
dispositive power with his wife with respect to all of such Ordinary
Shares.
Mr. Hardy beneficially owns an aggregate of 54,250 Ordinary
Shares (less than 1% of the 27,301,339 Ordinary Shares issued and
outstanding as of March 25, 1999). Mr. Hardy has sole voting and
dispositive power with respect to all of such Ordinary Shares.
Mr. Spencer beneficially owns an aggregate of 11,000 Ordinary
Shares (less than 1% of the 27,301,339 Ordinary Shares issued and
outstanding as of March 25, 1999). Mr. Spencer shares voting and
dispositive power with his wife with respect to all of such Ordinary
Shares.
Relationships and Related Transactions
Transactions with Management and Others. Except as otherwise
disclosed in this Proxy Statement, none of the Nominees is currently
involved, or has been involved since January 1, 1998, in any transaction,
series of transactions or proposed transactions to which the Company or any
of its subsidiaries, Mr. Gottstein or Mr. Genger (including, without
limitation, Trans-Resources, Inc. and its subsidiaries) was or is to be a
party.
Certain Business Relationships. Except as set forth below, none of
the Nominees is currently, or has been since January 1, 1998, involved in
any business relationship with the Company or any of its subsidiaries, Mr.
Gottstein or Mr. Genger (including, without limitation, Trans-Resources,
Inc. and its subsidiaries).
Mr. Hardy serves as President, Chief Operating Officer and
director of Trans- Resources, Inc., for which he received
compensation of $457,000 during 1998. Mr. Hardy is also a director of
Haifa Chemicals Ltd., for which he receives no compensation.
Mr. Spencer serves as a member of the board of directors of
Trans-Resources, Inc., for which he receives $15,000 annually. In
addition, Mr. Spencer's firm provides investment banking advice to
Trans-Resources, Inc., for which his firm has received no
compensation since January 1, 1998.
Professor Tadmor serves as a member of the board of directors
of Haifa Chemicals Ltd., a wholly-owned subsidiary of
Trans-Resources, Inc, for which he receives $15,000 annually. In
addition, Professor Tadmor is a scientific technological consultant
to Trans-Resources, Inc., for which he receives a retainer fee on a
month-to-month basis.
Indebtedness of Management. None of the Nominees has been indebted to
the Company or any of its subsidiaries, Mr. Gottstein or Mr. Genger
(including, without limitation, Trans- Resources, Inc. and its
subsidiaries) since January 1, 1998.
At the Meeting, the following ordinary resolution will be brought
before the shareholders of the Company for adoption:
"RESOLVED, to elect the following persons to serve as members of the
Board of Directors of the Company: Aharon Dovrat, Philip Friedman,
Thomas Hardy, Darrell S. Rigel, M.D., S.A. Spencer, Mark H. Tabak and
Professor Zehev Tadmor."
Upon receipt of a properly signed and dated proxy and unless
otherwise instructed on the Proxy, the persons named in the enclosed proxy
will vote the shares represented thereby "FOR" the proposal.
MESSRS. GENGER AND GOTTSTEIN RECOMMEND
A VOTE "FOR" PROPOSAL NO. 1.
PROPOSAL NO. 2:
INCREASE OF THE COMPANY'S SHARE CAPITAL
Information About the Proposal
At the Meeting, the Board of Directors will proposal that the
following special resolution be adopted:
"RESOLVED, that the Company shall increase its share capital by NIS
2,000,000 (from NIS 5,000,000 to NIS 7,000,000). The newly authorized
share capital shall be divided into 20,000,000 Ordinary Shares, par
value NIS 0.10 each. The Company shall replace Section 4 of the
Memorandum of Association and Section 4(a) of the Articles of
Association with the following:
'The authorized Share Capital of the Company is NIS 7,000,000 divided
into 70,000,000 (seventy million) Ordinary Shares, par value NIS 0.10
per share.'"
Messrs. Genger's and Gottstein's Recommendation
Messrs. Genger and Gottstein recommend a vote "AGAINST" the Company's
proposal. Currently, the Company has 50,000,000 Ordinary Shares authorized
for issuance, of which approximately only 27,000,000 are currently issued
and outstanding, and the Company has failed to provide any reason why the
number of Ordinary Shares authorized for issuance should be increased to
70,000,000.
Accordingly, upon the receipt of a properly signed and dated proxy
and unless otherwise instructed on the proxy, the persons named in the
enclosed proxy will vote the shares represented thereby "AGAINST" the
proposal.
MESSRS. GENGER AND GOTTSTEIN RECOMMEND
A VOTE "AGAINST" PROPOSAL NO. 2.
PROPOSAL NO. 3:
AMENDMENT OF ARTICLES OF ASSOCIATION
Information About the Proposal
According to the Company, the Board of Directors at the Meeting will
ask shareholders to approve an amendment to the provisions of the Company's
Articles of Association dealing with indemnification of officers and
directors to adopt the provisions of the New Companies Law.
At the Meeting, the Board of Directors will propose that the
following special resolution be adopted:
"RESOLVED to amend Article 68 of the Company's Articles of Association
by adding the following:
Upon the adoption of the Companies Law on February 1, 2000, the
following provisions shall come into effect:
(a) Subject to the provision of the Companies Law, the Company
shall exempt any Officer Holder from his/her liability derived
from any damage resulting from any breach of his duty of care
towards the Company, to the fullest extent permitted and not
prohibited by Sections 258(b) and 259 of the Companies Law; and
procure insurance for, or indemnify any Officer Holder to the
fullest extent permitted and not prohibited by Sections 258(c),
260 and 261 of the Companies Law, or any successor provisions;
provided that procurement of any such insurance or provision of
any such indemnification, as the case may be, is approved by
the Audit Committee of the Company and otherwise as required by
Law; and procure insurance for or indemnify any person who is
not an Officer Holder, including, without limitation, any
employee, agent, consultant or contractor of the Company who is
not an Officer Holder."
Messrs. Genger's and Gottstein's Recommendation
Messrs. Genger and Gottstein recommend a vote "FOR" the Company's
proposal in order for Article 68 of the Company's Articles to be in
accordance with the Companies Law that will become effective in February
2000.
Accordingly, upon the receipt of a properly signed and dated proxy
and unless otherwise instructed on the proxy, the persons named in the
enclosed proxy will vote the shares represented thereby "FOR" the proposal.
MESSRS. GENGER AND GOTTSTEIN RECOMMEND
A VOTE "FOR" PROPOSAL NO. 3.
PROPOSAL NO. 4:
REAPPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Information About the Proposal
According to the Company, the Board of Directors at the Meeting will
ask shareholders to reappoint the accounting firm of Luboshitz, Kasierer &
Co. as the independent public accountants of the Company for the fiscal
year ending December 31, 1999, and authorize the Board of Directors to
determine the basis of their compensation. According to the Company,
Luboshitz, Kasierer & Co. has no relationship to the Company or with any
affiliate of the Company, except as auditors.
At the Meeting, the Board of Directors will propose that the
following ordinary resolution be adopted:
"RESOLVED, that the Company's independent public accountants,
Luboshitz, Kasierer & Co. be, and they hereby are, reappointed as
independent public accountants of the Company for the fiscal year
ending December 31, 1999, and that the Board of Directors be, and it
hereby is, authorized to fix the compensation of said independent
public accountants in accordance with the volume and nature of their
services."
Messrs. Genger's and Gottstein's Recommendation
In light of the significant accounting irregularities between the
Company's financial statements for the quarters ended December 31, 1998 and
March 31, 1999, Messrs. Genger and Gottstein recommend a vote of "ABSTAIN"
with respect to the Company's proposal. Shareholders deserve answers to and
an explanation for the questionable discrepancies between the financial
statements for the last two quarters before the Company can expect
shareholders to be adequately informed in order to vote on this matter.
Accordingly, upon the receipt of a properly signed and dated proxy
and unless otherwise instructed on the proxy, the persons named in the
enclosed proxy will vote the shares represented thereby "ABSTAIN" with
respect to the proposal.
MESSRS. GENGER AND GOTTSTEIN RECOMMEND
A VOTE OF "ABSTAIN" WITH RESPECT TO PROPOSAL NO. 4.
PROPOSAL NO. 5:
APPROVAL OF EXECUTIVE AGREEMENTS
Information About the Proposal
According to the Company, the Board of Directors at the Meeting will
ask shareholders to approve a resolution approved by the Board of Directors
and the Audit Committee as to the employment and termination protection
agreements of two executive officers, Mr. Hillel Bachrach, the Executive
Vice-President of Marketing, Sales and Business Development, and Ms. Karen
Sarid, a Vice-President, CFO and Secretary of the Company.
According to the Company, the Company intends to propose for
shareholder approval at the Meeting a termination protection agreement with
Mr. Hillel Bachrach. The agreement would provide for certain payments
(generally, up to three times his annual salary and bonus) to be made to
Mr. Bachrach in the event of his termination following a change of control
in the Company.
At the Meeting, the Board of Directors will propose that the
following ordinary resolution be adopted:
"RESOLVED, that the proposed terms of the termination protection
agreement between the Company and Hillel Bachrach and the employment
agreement between the Company and Ms. Karen Sarid presented at the
Meeting of Shareholders, be, and they hereby are, approved."
Messrs. Genger's and Gottstein's Recommendation
Messrs. Genger and Gottstein recommend a vote "AGAINST" the
Company's proposal. The Company has failed to provide shareholders with
sufficient information about the terms and provisions of the proposed
executive agreements, and given the Company's dismal performance during the
past several months, it seems inconceivable for the Company to ask
shareholders to approve of employment and termination agreements which
would make it more difficult and costly to make any necessary changes to
management. Why should shareholders be asked to help members of management
further entrench themselves in office! It appears that the only parties who
would benefit if such executive agreements are approved are the executives
themselves, not the shareholders.
Accordingly, upon the receipt of a properly signed and dated proxy
and unless otherwise instructed on the proxy, the persons named in the
enclosed proxy will vote the shares represented thereby "AGAINST" the
proposal.
MESSRS. GENGER AND GOTTSTEIN RECOMMEND
A VOTE OF "AGAINST" PROPOSAL NO. 5.
PROPOSAL NO. 6:
INDEMNIFICATION OF DIRECTORS
Information About the Proposal
According to the Company, the Board of Directors will ask
shareholders to approve a resolution approved by the Board of Directors and
the Audit Committee to grant indemnification to the directors for damages
arising out of certain class action litigation and any actions against the
directors relating to actions taken in response to certain SEC filings.
At the Meeting, the Board of Directors will propose that the
following ordinary resolution be adopted:
"RESOLVED to indemnify each of Shimon Eckhouse, Karen Sarid, Kenneth
Rind, Hillel Bachrach, Marshall Butler, Halley Faust, Dan Suesskind,
Thomas Hardy and Benjamin Givli (all together and each separately the
"Directors") in respect of the events described in any of the
following Complaints: No. 98 Civ. 7909, No. 98 Civ. 7530 and No. 98
Civ. 8129, each of which was filed in the United States District
Court, Southern District of New York, including any amendments
thereto (collectively the "Complaints") and any claims relating
thereto, for (a) any monetary obligation imposed upon any of them for
the benefit of a third party by a judgment, including a settlement
agreed to in writing by the Company, or an arbitration decision
certified by the court, as a result of an act or omission of any of
their capacity as a director or an office holder of the Company, and
(b) reasonable litigation expenses, including legal fees, incurred by
any of the Directors or which he/she is obligated to pay by a court
order, in a proceeding brought against him/her by or on behalf of the
Company or by others, in each case relating to acts or omissions of
any of the Directors in his/her capacity as a director or an office
holder of the Company relating to the events described in any of the
Complaints and any claims relating thereto. Said indemnification
shall be limited to any amounts not covered by the officer's and
director's liability insurance policy for him/her which is currently
in effect."
"RESOLVED that in the event that any of Shimon Eckhouse, Hillel
Bachrach, Halley Faust, Thomas Hardy, Karen Sarid, Kenneth Rind,
Marshall Butler and Dan Suesskind (all together the "Directors" and
each separately the "Director") of the Company becomes involved, in
their capacity as an officer or a director, in any claim, suit,
action, proceeding, investigation or inquiry with respect to the
filing with the US Securities Exchange Commission ("SEC") of Schedule
13D, and any amendment thereto by Messrs. Arie Genger and/or Mr.
Barnard Gottstein, the Company shall indemnify and reimburse any such
Director for his/her legal and other expenses, to the fullest extent
permitted by the Companies Ordinance [New Version], 1983-5743 and/or
the Companies Law, 1999- 5759, as the case may be, as such expenses
incurred by such director in connection therewith. Said
indemnification shall be limited to any amounts not covered by the
officer's and director's liability insurance policy for him/her which
is currently in effect."
Messrs. Genger's and Gottstein's Recommendation
Messrs. Genger and Gottstein recommend a vote "AGAINST" the
Company's proposal. As written, the proposal imposes no limitations on such
indemnification, regardless of the directors' culpability. In addition, the
Board's silence with respect to the merits of the pending class action
litigation filed against the Company has been deafening. Furthermore, it is
unclear the amount of insurance coverage the Company currently has to cover
its directors. While we would be willing to consider a proposal more
narrowly tailored, the proposal presented to shareholders is overly broad
in its scope.
Accordingly, upon the receipt of a properly signed and dated proxy
and unless otherwise instructed on the proxy, the persons named in the
enclosed proxy will vote the shares represented thereby "AGAINST" the
proposal.
MESSRS. GENGER AND GOTTSTEIN RECOMMEND
A VOTE "AGAINST" PROPOSAL NO. 6.
PROPOSAL NO. 7:
APPROVAL TO REPORT ON THE BUSINESS OF THE COMPANY AND
TO RECEIVE AND CONSIDER CERTAIN REPORTS FOR THE YEAR ENDED
DECEMBER 31, 1998
Information About the Proposal
According to the Company, the Board of Directors at the Meeting will
ask shareholders to review and consider the Auditors' Report, the
Directors' Report and the Company's Consolidated Financial Statements for
1998.
At the Meeting, the Board of Directors will propose that the
following ordinary resolution be adopted:
"RESOLVED, that the Auditors' Report, the Directors' Report and the
Consolidated Financial Statements of the Company for the fiscal year
ended December 31, 1998, be, and each hereby is, received and
considered."
Messrs. Genger's and Gottstein's Recommendation
The Company has failed to provide copies of the reports referred to
above. In the absence of further information, no recommendation can be
made.
Accordingly, upon the receipt of a properly signed and dated proxy
and unless otherwise instructed on the proxy, the persons named in the
enclosed proxy will vote the shares represented thereby "ABSTAIN" with
respect to the proposal.
MESSRS. GENGER AND GOTTSTEIN RECOMMEND
A VOTE OF "ABSTAIN" WITH RESPECT TO PROPOSAL NO. 7.
OTHER BUSINESS
The Meeting is called for the purposes set forth in the Notice
accompanying this Proxy Statement. As of the date of this Notice, and
except for the proposal of the Company's Board of Directors to have seven
of them reelected, Messrs. Genger and Gottstein know of no business which
will be presented for consideration at the Meeting other than for the
foregoing matters. If other matters not now known properly come before the
Meeting, however, it is intended that the persons named as proxies or their
substitutes will vote the Ordinary Shares in accordance with their best
judgment with respect to such matters.
BIOGRAPHICAL INFORMATION
CONCERNING
PERSONS MAKING THE PROPOSAL
Arie Genger, age 54, is the Chairman and Chief Executive Officer of
Trans-Resources, Inc. ("TRI"), a privately-owned chemical and fertilizer
company that he founded in 1985. TRI has 13 manufacturing plants in the
United States, Canada, France, Hungary, Spain and Israel. Through TRI, Mr.
Genger is one of the largest foreign private investors in the State of
Israel. In 1989, at the invitation of Laser Industries Limited's ("Laser")
management, TRI purchased the largest single block of shares in Laser. At
the time, Laser had a market capitalization of about $10 million and was
teetering on the verge of bankruptcy. Shortly after purchasing the dominant
ownership position in Laser, the new board overhauled management and
refocused it on both a sales growth and an application diversification
effort. The initiatives adopted by management enabled Laser to grow sales
and net income (loss) from $28.9 million and ($17.2) million in 1989 to
$58.7 million and $8.8 million in 1996, respectively. In the beginning of
1998, Laser merged with ESC at a valuation of about $245.1 million. Prior
to founding TRI, Mr. Genger was recruited from the United States to join
the Israeli government as both the assistant defense and economic minister
in 1981.
Barnard J. Gottstein, age 73, is a founding investor in ESC. In
addition, in 1949 and just out of college, Mr. Gottstein took over
management of J.B. Gottstein & Co., an Alaskan wholesale grocery company
founded by his father in 1915. With Mr. Gottstein as Chairman and
President, J.B. Gottstein & Co. eventually became the largest wholesale
grocery distributor in Alaska. In 1974, Mr. Gottstein merged his wholesale
business with a grocery store chain to form Carr-Gottstein, Inc. The
wholesale/retail grocery business became the dominant food supplier in
Alaska with annual sales of $550 million and 2,600 employees. Also,
Carr-Gottstein, Inc. created Carr-Gottstein Properties, which became the
largest real estate developer and owner in Alaska. In 1990, the grocery
wholesale and retail operations were sold for $300 million, but Mr.
Gottstein still owns and remains active in Carr-Gottstein Properties.
Between 1986 and 1990, Mr. Gottstein served as President of the Alaska
State Board of Education for which he was awarded an honorary Doctor of Law
degree from the University of Alaska in Fairbanks. Since 1990, Mr.
Gottstein has become an investor in many publicly- and privately-held
companies, including ESC. In 1992, Mr. Gottstein began investing in the
Company, and since then has watched the Company's progress with great
interest.
