SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934
(Amendment No. 10)*
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)
May 29, 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 34 Pages
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This Amendment No. 10 (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 and Amendment No. 9 filed on June 2, 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 4. Purpose of Transaction.
Item 4 of the Schedule 13D is hereby amended and supplemented as follows:
On May 25, 1999, Messrs. Genger and Bernard J. Gottstein ("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 26, Exhibit 27, Exhibit 28 and Exhibit 29. 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 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 2 of 34 Pages
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Item 7. Material to be Filed as Exhibits.
Item 7 of the Schedule 13D is hereby amended to add the following exhibits:
Exhibit 26: Open Letter to the Shareholders of the Company, dated May
28, 1999, from Messrs. Genger and Gottstein
Exhibit 27: Notice of Combined Extraordinary General Meeting and Annual
General Meeting to be held on June 23, 1999
Exhibit 28: Form of Proxy
Exhibit 29: Proxy Statement
Page 3 of 34 Pages
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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/ 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 4 of 34 Pages
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EXHIBIT INDEX
Exhibit
Number Title Page
------ ----- ----
26 Open Letter to the Shareholders of the 6
Company, dated May 28, 1999, from
Messrs. Genger and Gottstein
27 Notice of Combined Extraordinary General 13
Meeting and Annual General Meeting to be
held on June 23, 1999
28 Form of Proxy 17
29 Proxy Statement 21
Page 5 of 34 Pages
Exhibit 26
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.
Page 6 of 34 Pages
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* 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
Page 7 of 34 Pages
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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
Page 8 of 34 Pages
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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
Page 9 of 34 Pages
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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.
Page 10 of 34 Pages
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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
Page 11 of 34 Pages
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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
Page 12 of 34 Pages
Exhibit 27
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.
Page 13 of 34 Pages
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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.
Page 14 of 34 Pages
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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
Page 15 of 34 Pages
<PAGE>
Sincerely,
Arie Genger Barnard J. Gottstein
Trans-Resources, Inc. Barnard Jacob Gottstein TTEE
By: /s/ Arie Genger By: /s/ Barnard J. Gottstein
------------------------------- -------------------------
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
Page 16 of 34 Pages
Exhibit 28
BLUE
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.
Page 17 of 34 Pages
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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.
Page 18 of 34 Pages
<PAGE>
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.
Page 19 of 34 Pages
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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.
Page 20 of 34 Pages
Exhibit 29
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.
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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
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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.,
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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.
Page 24 of 34 Pages
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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.
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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
Chem icals 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.
Page 26 of 34 Pages
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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.
Page 27 of 34 Pages
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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.
Page 28 of 34 Pages
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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.
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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.
Page 30 of 34 Pages
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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."
Page 31 of 34 Pages
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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.
Page 32 of 34 Pages
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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.
Page 33 of 34 Pages
<PAGE>
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.
Page 34 of 34 Pages
