SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934
(Amendment No. 11)*
ESC Medical Systems Ltd.
(Name of Issuer)
Ordinary Shares, NIS 0.10 par value per Share
(Title of Class of Securities)
M40868107
(CUSIP Number)
Edward Klimerman, Esq.
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza, 29th Floor
New York, New York 10112
(212) 698-7700
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
June 15, 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 ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box. |_|
Page 1 of 16
<PAGE>
SCHEDULE 13D
- -------------------------------- ------------------------------
CUSIP NO. Page 2 of 16
M40868107
- -------------------------------- ------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
Arie Genger
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |X|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC, PF, OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States and Israel
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER 99,210(1)(3)
SHARES -------------------------------------------------------------
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER 2,332,062(2)(3)
EACH -------------------------------------------------------------
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER 99,210(1)(3)
WITH -------------------------------------------------------------
10 SHARED DISPOSITIVE POWER 2,332,062(2)(3)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,431,272(1)(2)(3)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
|_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.5%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
(1) Includes 40,000 shares owned by a trust for the benefit of a minor child of
a third party of which Mr. Genger is sole trustee, as to which Mr. Genger
disclaims beneficial ownership.
(2) Includes 4,000 shares beneficially owned by Mr. Genger's spouse, as to which
he disclaims beneficial ownership.
(3) Does not include 3,000 shares beneficially owned by a trust for a minor
child of Mr. Genger, as to which Mr. Genger has no voting or investment control.
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- -------------------------------- ------------------------------
CUSIP NO. Page 3 of 16
M40868107
- -------------------------------- ------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
TPR Investment Associates, Inc.
(I.R.S. Employer Identification No. 13-3506464)
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |X|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC, OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER - 0 -
SHARES -------------------------------------------------------------
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER 2,328,062
EACH -------------------------------------------------------------
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER - 0 -
WITH -------------------------------------------------------------
10 SHARED DISPOSITIVE POWER 2,328,062
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,328,062
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
|_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.1%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- -------------------------------- ------------------------------
CUSIP NO. Page 4 of 16
M40868107
- -------------------------------- ------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
Trans-Resources, Inc. (I.R.S. Employer Identification No. 36-2729497)
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |X|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC, OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER - 0 -
SHARES -------------------------------------------------------------
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER 2,115,562
EACH -------------------------------------------------------------
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER - 0 -
WITH -------------------------------------------------------------
10 SHARED DISPOSITIVE POWER 2,115,562
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,115,562
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
|_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.2%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- -------------------------------- ------------------------------
CUSIP NO. Page 5 of 16
M40868107
- -------------------------------- ------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
Haifa Chemicals Holdings Ltd.
(Israeli corporation with no United States I.R.S. Identification No.)
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |X|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC, OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Israel
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER - 0 -
SHARES -------------------------------------------------------------
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER 682,312
EACH -------------------------------------------------------------
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER - 0 -
WITH -------------------------------------------------------------
10 SHARED DISPOSITIVE POWER 682,312
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
682,312
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
|_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.7%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- -------------------------------- ------------------------------
CUSIP NO. Page 6 of 16
M40868107
- -------------------------------- ------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
Thomas G. Hardy
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |X|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Australia
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER 54,250
SHARES -------------------------------------------------------------
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER - 0 -
EACH -------------------------------------------------------------
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER 54,250
WITH -------------------------------------------------------------
10 SHARED DISPOSITIVE POWER - 0 -
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
54,250
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
|_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.2%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
<PAGE>
This Amendment No. 11 (the "Amendment") amends and supplements the Schedule
13D filed on October 9, 1998, as previously amended and restated by Amendment
No. 1, filed on March 12, 1999 and further amended by Amendment No. 2 filed on
March 23, 1999, Amendment No. 3 filed on March 26, 1999, Amendment No. 4 filed
on April 15, 1999, Amendment No. 5 filed on April 20, 1999, Amendment No. 6
filed on May 11, 1999, Amendment No. 7 filed on May 13, 1999, Amendment No. 8
filed on May 21, 1999, Amendment No. 9 filed on June 2, 1999 and Amendment No.
10 filed on June 3, 1999 (the "Schedule 13D"), on behalf of Mr. Arie Genger
("Genger"), TPR Investment Associates, Inc., a Delaware corporation ("TPR"),
TPR's subsidiary, Trans-Resources, Inc., a Delaware corporation ("TRI"), TRI's
indirect subsidiary, Haifa Chemicals Holdings Ltd., a company incorporated in
the State of Israel ("HCH"; Genger and said corporations, all of which are
directly or indirectly controlled by Genger, being collectively called the "TRI
Entities"), and Mr. Thomas G. Hardy ("Hardy"; Hardy and the TRI Entities being
collectively called the "Reporting Persons") with respect to the Ordinary
Shares, par value NIS 0.10 per share (the "Shares"), of ESC Medical Systems
Ltd., a company incorporated in the State of Israel (the "Company"). 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 3. Source and Amount of Funds or Other Consideration.
Item 3 of the Schedule 13D is hereby amended and supplemented as follows:
See Item 5 hereof for certain information regarding recent purchases of
Shares by TPR at an aggregate price (excluding brokerage commissions) of
$88,750, paid for with general corporate funds of TPR.
Item 4. Purpose of Transaction.
Item 4 of the Schedule 13D is hereby amended and supplemented as follows:
In response to shareholder inquiries regarding Messrs. Genger's and Barnard
J. Gottstein's ("Gottstein") 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 30 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 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.
Page 7 of 16
<PAGE>
Item 5. Interest in Securities of the Issuer.
Item 5 of the Schedule 13D is hereby amended and supplemented as follows:
On June 3, 1999, TPR (which is controlled by Genger) purchased 10,000
Shares at a price per Share of $5.9375 and on June 4, 1999, TPR purchased 5,000
Shares at a price per Share of $5.875. The transactions were effected in the
open market. Reference is made to the information contained in Items 7-13 of
each Reporting Person's separate cover page for the updated aggregate number and
percentage of total outstanding Shares beneficially owned by each Reporting
Person.
The percentages set forth in each Reporting Person's separate cover page
have been recalculated to be based upon 25,716,000 Shares outstanding, which
represents the weighted average number of Shares outstanding during the
three-month period ended March 31, 1999, as reported in the Company's Form 6-K,
which was filed with the Securities and Exchange Commission on May 18, 1999.
In addition to 212,500 Shares which TPR directly owns, TPR, as the parent
corporation of TRI, may be deemed to share voting and disposition power with TRI
with respect to the Shares directly owned by TRI and HCH.
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:
Pursuant to an oral understanding between Messrs. Genger and Gottstein
solely with respect to the aggregate 15,000 Shares purchased by TPR on June 3,
1999 and June 4, 1999, Mr. Gottstein agreed to purchase 7,500 of such shares
from TPR at cost.
Item 7. Material to be Filed as Exhibits.
Item 7 of the Schedule 13D is hereby amended to add the following exhibits:
Exhibit 30: Open Letter to the Shareholders of the Company, dated
June 15, 1999, from Messrs. Genger and Gottstein
Page 8 of 16
<PAGE>
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/ Arie Genger
---------------------------------------------
Arie Genger
TPR INVESTMENT ASSOCIATES, INC.
By: /s/ Arie Genger
----------------------------------------
Arie Genger, President
TRANS-RESOURCES, INC.
By: /s/ Arie Genger
----------------------------------------
Arie Genger, Chairman of the Board
HAIFA CHEMICALS HOLDINGS LTD.(1)
By: /s/ Arie Genger
----------------------------------------
Arie Genger
/s/ Thomas G. Hardy
--------------------------------------------
Thomas G. Hardy
- --------
(1) Pursuant to power of attorney
Page 9 of 16
<PAGE>
EXHIBIT INDEX
Exhibit
Number Title Page
------ ----- ----
30 Open Letter to the Shareholders of the 11
Company, dated June 15, 1999, from
Messrs. Genger and Gottstein
Page 10 of 16
Exhibit 30
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!
Page 11 of 16
<PAGE>
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.
Page 12 of 16
<PAGE>
* 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 we
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.
Page 13 of 16
<PAGE>
* 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 exit 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 caused by the hundreds in millions in claimed
market value losses by shareholders, 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 so 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.
Page 14 of 16
<PAGE>
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
Page 15 of 16
<PAGE>
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!
Page 16 of 16
