-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HqJeOHzr7nw1/CoBn/n1OKNNe6C9UEb7yyAIBjq3dbbyK6omTR+BocrHUVobUXn8 3rvT4qEomiZtlSv1OvvMQA== 0000891554-99-001259.txt : 19990617 0000891554-99-001259.hdr.sgml : 19990617 ACCESSION NUMBER: 0000891554-99-001259 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19990616 GROUP MEMBERS: ARIE GENGER GROUP MEMBERS: HAIFA CHEMICALS HOLDINGS LTD GROUP MEMBERS: THOMAS G. HARDY GROUP MEMBERS: TPR INVESTMENT ASSOCIATES INC GROUP MEMBERS: TRANS RESOURCES INC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ESC MEDICAL SYSTEMS LTD CENTRAL INDEX KEY: 0001004945 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES [5047] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-54169 FILM NUMBER: 99647229 BUSINESS ADDRESS: STREET 1: YOKNEAM INDUSTRIAL PK CITY: YOKNEAM ISRAEL 20692 STATE: L5 ZIP: 00000 BUSINESS PHONE: 9729599000 MAIL ADDRESS: STREET 1: 100 CRESENT ROAD CITY: NEEDHAM STATE: MA ZIP: 02194 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TRANS RESOURCES INC CENTRAL INDEX KEY: 0000810020 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INORGANIC CHEMICALS [2810] IRS NUMBER: 362729497 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 9 WEST 57TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2128883044 MAIL ADDRESS: STREET 1: 9 WEST 57TH STREET CITY: NEW YORK STATE: NY ZIP: 10019 SC 13D/A 1 AMENDMENT NO. 11 TO SCHEDULE 13D 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 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. 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. 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. 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. 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 - -------------------------------------------------------------------------------- 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 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 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 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 EX-99.30 2 OPEN LETTER TO THE SHAREHOLDERS 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 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 * 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 * 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 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 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 -----END PRIVACY-ENHANCED MESSAGE-----