-----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, SeX/tMCTsaLBiN0DEdsFPm9rdtYX1OeahCt8Bn5l5egm/vCVeg2BuNOwosNWv2nT tp+tuwk4xJVlu+osZh4DfQ== 0000950172-99-000679.txt : 19990603 0000950172-99-000679.hdr.sgml : 19990603 ACCESSION NUMBER: 0000950172-99-000679 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19990602 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: 99639325 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: GOTTSTEIN BARNARD J CENTRAL INDEX KEY: 0001071874 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: C/O CARR GOTTSTEIN PROPERTIES STREET 2: 550 WEST 7TH AVE SUITE 1540 CITY: ANCHORAGE STATE: AL ZIP: 99501 BUSINESS PHONE: 9072782277 MAIL ADDRESS: STREET 1: C/O CARR GOTTSTEIN PROPERTIES STREET 2: 550 WEST 7TH AVENUE SUITE 1540 CITY: ANCHORAGE STATE: AK ZIP: 99501 SC 13D/A 1 SCHEDULE 13D - AMENDMENT NO. 11 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (Amendment No. 11) ESC Medical Systems Ltd. --------------------------------------- (Name of Issuer) Ordinary Shares, NIS 0.10 par value per share --------------------------------------- (Title of Class of Securities) M40868107 --------------------------------------- (CUSIP Number) Barnard J. Gottstein Carr-Gottstein Properties 550 West 77th Avenue, Suite 1540 Anchorage, Alaska 99501 (907) 278-2277 --------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) with a copy to: Joseph J. Giunta, Esq. Skadden, Arps, Slate, Meagher & Flom LLP 300 South Grand Avenue, Suite 3400 Los Angeles, California 90071-3144 (213) 687-5000 May 29, 1999 --------------------------------------- (Date of Event which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d- 1(e), 13d-1(f) or 13d-1(g), check the following box: / / CUSIP No. M40868107 13D - ------------------------------------------------------------------------------ This Amendment No. 11 (the "Amendment") amends and supplements the Statement on Schedule 13D, dated September 29, 1998, as amended by Amendment No. 1, dated January 15, 1999, Amendment No. 2, dated March 9, 1999, Amendment No. 3, dated March 22, 1999, Amendment No. 4, dated March 24, 1999, Amendment No. 5, dated April 14, 1999, Amendment No. 6, dated April 19, 1999, Amendment No. 7, dated May 10, 1999, Amendment No. 8, dated May 11, 1999, Amendment No. 9, dated May 20, 1999, and Amendment No. 10, dated May 27, 1999 (the "Original Schedule 13D"), relating to the Ordinary Shares, par value NIS 0.10 per share (the "Shares"), of ESC Medical Systems Ltd., an Israeli corporation (the "Company"). Each of the Barnard J. Gottstein Revocable Trust, Barnard J. Gottstein, as trustee of the Barnard J. Gottstein Revocable Trust, and Barnard J. Gottstein, as an individual (collectively, the "Reporting Persons"), are filing this Amendment to update the information with respect to the Reporting Persons' purposes and intentions with respect to the Shares. Item 4. Purpose of Transaction. Item 4 of the Original Schedule 13D is hereby amended and supplemented as follows: On May 25, 1999, Messrs. Genger and Gottstein and the Company agreed that the extraordinary general meeting to be held on June 2, 1999, and the annual meeting of shareholders of the Company to be held on July 15, 1999, would be combined into one meeting to be held on June 23, 1999. In anticipation of the June 23, 1999 meeting, on or about May 29, 1999, Messrs. Genger and Gottstein began mailing their proxy solicitation materials to all shareholders of the Company. Copies of the proxy solicitation materials are attached hereto as Exhibit 22, Exhibit 23, Exhibit 24 and Exhibit 25. Messrs. Genger and Gottstein understand that the Board of Directors of the Company has set June 9, 1999 as the record date for the June 23 meeting. Other than as described above and as previously described in the Original Schedule 13D, the Reporting Persons do not have any present plans or proposals which relate to or would result in (although they reserve the right to develop such plans or proposals) any transaction, change or event specified in clauses (a) through (j) of Item 4 of the form of Schedule 13D. CUSIP No. M40868107 13D - ------------------------------------------------------------------------------ Item 7. Material to be Filed as Exhibits. Item 7 of the Original Schedule 13D is hereby amended to add the following exhibits: Exhibit 22: Open Letter to the Shareholders of the Company, dated May 28, 1999, from Messrs. Genger and Gottstein Exhibit 23: Notice of Combined Extraordinary General Meeting and Annual General Meeting to be held on June 23, 1999 Exhibit 24: Form of Proxy Exhibit 25: Proxy Statement CUSIP No. M40868107 13D - ------------------------------------------------------------------------------ SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: June 2, 1999 /s/ Barnard J. Gottstein -------------------------------------- Barnard J. Gottstein Individually and as Trustee of the Barnard J. Gottstein Revocable Trust BARNARD J. GOTTSTEIN REVOCABLE TRUST /s/ Barnard J. Gottstein ------------------------------------- Barnard J. Gottstein Trustee CUSIP No. M40868107 13D - ------------------------------------------------------------------------------ EXHIBIT INDEX Exhibit Number Title Page ------- ----- ---- 22 Open Letter to the 6 Shareholders of the Company, dated May 28, 1999, from Messrs. Genger and Gottstein 23 Notice of Combined 13 Extraordinary General Meeting and Annual General Meeting to be held on June 23, 1999 24 Form of Proxy 17 25 Proxy Statement 21 EX-99 2 EXHIBIT 22 - LETTER Exhibit 22 NEW PROXY MATERIAL SUPERSEDES PREVIOUSLY SUBMITTED PROXY MATERIAL Open Letter to Shareholders of ESC Medical Systems Ltd. (the "Company") May 28, 1999 IT'S TIME FOR A CHANGE Dear Fellow ESC Shareholder: Evidently, even the Company's dismal first quarter results for 1999 have not prompted the current Board and management to take the necessary action to restore the Company's profitability and credibility in the marketplace. We believe there is no doubt that it is time for a change in the direction of the Company. And that can only be realized by changing the composition of the current Board and management. A new and independent Board could finally provide badly needed oversight over current management and chart the necessary direction that our Company requires. We strongly believe the evidence in support of a change to the composition of the current Board is overwhelming. CONSIDER THE FACTS: 1. THE COMPANY'S POOR STOCK PERFORMANCE * The Company's stock price has fallen from a high of $46.50 on June 14, 1996, to a low of $4.75 as recently as February 24, 1999-A DECLINE OF OVER $41.00 PER SHARE. 2. THE COMPANY'S DISMAL FIRST QUARTER RESULTS FOR 1999 * ESC reported inventory write-offs of $16.6 million for the quarter ended March 31, 1999. It seems impossible for ESC to have had such a significant deterioration in inventory in just three months, which represents about 27% of the $61.2 million in inventory reported as of December 31, 1998! Accordingly, we must wonder: was inventory overstated as of December 31, 1998 or was it intentionally understated as of March 31, 1999 in order to inflate the Company's profitability for the remainder of the year? * On February 11, 1999, ESC management announced that they expected to record a charge for the quarter ended March 31, 1999 of about $13 million to $17 million. Recently, ESC reported actual charges for the quarter ended March 31, 1999 of $30.8 million. * Sales plummeted from $59.5 million to $31.3 million for the quarter ended March 31, 1999 when compared with the quarter ended March 31, 1998 - a 47.4% decrease. After excluding "inventory write-offs" of $16.6 million, a legal expenses provision of $3.0 million and "restructuring expenses" of $11.2 million, ESC still reported a loss of $9.8 million for the quarter ended March 31, 1999, which amounts to an annual on-going loss rate of almost $40 million. * WHILE SALES DECREASED BY A WHOPPING 47.4%, SELLING & MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES FOR THE QUARTER ENDED MARCH 31, 1999 INCREASED TO 75.5% OF SALES COMPARED WITH 35% FOR THE FIRST QUARTER ENDED MARCH 31, 1998! * We were astounded to discover in ESC's May 17, 1999 press release that management has chosen to partly blame ESC's disastrous first quarter results on our efforts to restructure the Board, even though we did not unilaterally begin to act to restructure the Board until the last week of March 1999. Obviously, our actions could not have had any effect on ESC's results for the period ended March 31, 1999. 3. DOES THIS BOARD AND MANAGEMENT CARE ABOUT THEIR SHAREHOLDERS? * Inconsistent with prior practice, ESC did not host any type of analyst meeting in connection with ESC's release of its first quarter results for 1999, at which meeting analysts and shareholders could have been given the opportunity to raise questions and seek explanations for ESC's poor performance during the quarter. * Instead of making an effort to address our concerns about the very obvious problems with this Company, the Board and management filed what we consider to be a totally frivolous lawsuit against us because we requested a meeting of shareholders in order to do something about these problems. 4. QUESTIONABLE GENERAL CORPORATE GOVERNANCE PRACTICES * It was not until March 1, 1999 that a final budget for 1999 was submitted to the Board. For a company with annual sales of approximately $220 million, not having a budget prior to entering into the year budgeted, seems culpably incompetent. * On March 18, 1999, Eckhouse announced the retention of Warburg Dillon Read LLC as ESC's "financial advisor." More than two months later, all attempts to find out the purpose, terms and cost of this retainer agreement have been to no avail. * Since October 1998, several class action lawsuits have been filed by ESC shareholders against the Company for violations of the Federal securities laws. And to add insult to injury, the current Board and management are seeking shareholder approval to be indemnified by the Company in these suits!! What are they trying to hide? Even more so, Karen Sarid, a director and CFO of the Company, is being personally named in one of these lawsuits for alleged insider trading, and the Board of Directors has purported to seek shareholder approval so that the Company can pay for her personal counsel in defending against this lawsuit, even though insider trading is clearly for personal gain and has nothing to do with her corporate responsibilities. In our view, this is a blatant misuse of corporate resources for management's personal interests. 5. WHAT IS IT REALLY ALL ABOUT? COULD IT BE JUST ABOUT CURRENT BOARD'S AND MANAGEMENT'S ATTEMPTS TO ENTRENCH THEMSELVES IN OFFICE? * To our knowledge, the current Board is retaining no fewer than FOUR separate law firms to advise its directors and management on our proposal for a new Board. This is obviously creating a significant drain on corporate resources just to allow management and the current Board the opportunity to entrench themselves in office. * As further evidence of their attempt to entrench themselves, ESC will ask shareholders at the June 23 meeting to approve "employment severance agreements" for the chief financial officer and the executive vice president of the Company. Until the legitimate questions of shareholders are answered with respect to the possible accounting irregularities and dismal earnings highlighted above, we believe it is wholly inappropriate to be granting these "golden parachutes"to the people who may be partly responsible for these disastrous results. * It appears that Shimon Eckhouse has the audacity to plan on voting all of the Company's treasury shares - shares purchased with corporate assets and shares in which he has no economic interest whatsoever - at the June 23 meeting in favor of reelecting him and all of the current Board members (except for Thomas Hardy) to the Board and in favor of all of the Company's proposals. We believe this practice -- allowing management to vote shares acquired through the use of Company resources with the intention to distort the shareholders' true interests -- to be contrary to law and a breach of fiduciary duties to the Company and its shareholders as a whole. Accordingly, we intend to take all steps to ensure such shares will not be voted. * On May 17, 1999, ESC announced that Shimon Eckhouse plans to step down as chief executive officer but has agreed to "assume the responsibility of an active Chairman of the Board." Here again, they have neglected to tell you that the new Israeli companies law, which will become effective in February 2000, will not permit him to continue to serve as both chairman and CEO. Moreover, as explained below, Eckhouse appears to be giving up only the title, but not the powers, of a CEO. NOW: WHAT ABOUT OUR AGENDA? THE PURPOSE BEHIND OUR EFFORTS TO RESTRUCTURE THE CURRENT BOARD HAS NOT CHANGED -- TO CREATE A TRULY INDEPENDENT BOARD CONSISTING OF INDIVIDUALS WHO ARE IN NO WAY BEHOLDEN TO MANAGEMENT IN ORDER TO MAXIMIZE SHAREHOLDER VALUE AND RESTORE THE PROFITABILITY AND CREDIBILITY OF THE COMPANY. OUR SEARCH FOR A NEW CEO Now that Eckhouse has decided to step down as CEO, an independent Board can begin the process of recruiting a new CEO. We believe that our proposed Board would be the best suited Board to conduct that search process. THIS IS ESPECIALLY SO IN LIGHT OF THE CURRENT BOARD'S ENDORSEMENT OF ECKHOUSE'S DECISION TO REMAIN AS AN "ACTIVE" CHAIRMAN WHICH COULD ONLY HAVE THE EFFECT OF DETERRING THE BEST QUALIFIED CANDIDATES FROM AGREEING TO SERVE AS A TRUE CEO. BY ENDORSING THIS BIFURCATED APPROACH THAT REMOVES THE TITLE OF CEO BUT NOT THE POWERS NORMALLY RESERVED FOR A CEO FROM ECKHOUSE, IT IS OBVIOUS TO US THAT THE CURRENT BOARD EITHER DOES NOT UNDERSTAND OR IS NOT SINCERE IN SEEKING A REAL AND TRULY QUALIFIED CEO. WE ASK YOU, WHAT PROSPECTIVE CEO WORTH HIS SALT AND OF TRUE VALUE TO THE SHAREHOLDERS WOULD TAKE A JOB THAT WILL ESSENTIALLY GIVE HIM NO REAL POWER TO IMPLEMENT THE CHANGES SO URGENTLY NEEDED AT THE COMPANY AND INSTEAD HAVE HIM REPORTING TO ECKHOUSE? UNDER THIS PROPOSED RESTRUCTURING, IS ECKHOUSE REALLY RELINQUISHING HIS ROLE AS CEO? We are not waiting for the June 23 election results. We have undertaken our own search for a new CEO and have already identified several highly qualified candidates whom we believe would be capable of rebuilding ESC and leading ESC into the 21st century. Of course, the final decision will be made by the Board as to which of these or any other potential candidates are best suited for the position. We are, however, confident that a new CEO can be identified by the Board within a very short period. OUR COMPROMISE PROPOSAL For your information, we have tried as recently as May 27, 1999 to negotiate a settlement with the Company in order to curtail the expenses associated with a proxy contest, so far to no avail. Specifically, our most recent compromise proposal would (1) fix the Board size at eleven members, (2) remove two current management directors from the Board, (3) add the three individuals from our six nominees not affiliated with either of us whom Eckhouse had conceded would be acceptable additions to the Board, and (4) immediately after the events in clauses (2) and (3) have occurred, the newly constituted Board would identify and add two additional individuals to the Board, who have no prior business or family affiliation with us, any current Board member or any current member of management. In the event that two-thirds of the Board (with Eckhouse abstaining) is unable to agree upon the addition of two such individuals by June 7, 1999, ESC shareholders would be entitled to select the two additional directors from a list of four nominees-two nominated by the Company and two nominated by us-at the meeting to be held on June 23, 1999. Our compromise proposal would create a truly independent Board and clearly demonstrates that our intention has never been to take control of the Company, BUT RATHER TO TAKE CONTROL AWAY FROM THE CURRENT BOARD AND MANAGEMENT -- WHOSE INTEREST IN OUR VIEW IS SELF-ENTRENCHMENT -- AND PLACE IT IN THE HANDS OF THE TRUE OWNERS OF THE COMPANY, ITS SHAREHOLDERS. Eckhouse has yet to respond to our compromise proposal despite the fact the Board could have considered it at their May 28 Board meeting. Inexplicably, the May 28 Board meeting was cancelled. ASK YOURSELF WHY WOULD ECKHOUSE REJECT THIS PROPOSAL. IS IT BECAUSE IT WOULD STRIP AWAY FROM THE CURRENT BOARD AND MANAGEMENT THE ABILITY TO DESIGNATE A MAJORITY OF THE BOARD, THEREBY MAKING IT IMPOSSIBLE TO FURTHER ENTRENCH THEMSELVES IN OFFICE AND CONTINUE TO PRESIDE OVER A COMPANY WHOSE PERFORMANCE IS CLEARLY INADEQUATE? YOU BE THE JUDGE. IN A NUTSHELL: During the past two months, the actions taken by current management, the rubber- stamp reactions demonstrated by the current Board and their behavior toward ESC shareholders have strengthened our belief that the current Board and management will do whatever it takes to remain in office. As further evidence, look at the Company's agenda for the June 23 meeting. In addition to seeking reelection, the Board and management are asking for shareholders to approve: * indemnification of directors with respect to certain litigation brought against them by shareholders, * an increase in the Company's share capital by 20,000,000 shares without any explanation of the purpose of such additional shares (even though nearly half of the current shares have not yet been issued), and * employment and termination protection agreements for two executive officers of the Company who are also directors of the Company. It is our understanding that, to date, the Board has not even met to discuss any of the matters to be presented by the Company to the shareholders at the June 23 meeting. GIVEN THE COMPANY'S PERFORMANCE WHILE THE CURRENT BOARD AND MANAGEMENT HAVE BEEN IN OFFICE, WE ARE NOT SURPRISED THAT THEY WOULD ASK SHAREHOLDERS TO APPROVE OF SUCH MATTERS WHICH IN OUR OPINION WOULD ONLY FURTHER IMPAIR SHAREHOLDERS' RIGHTS, PROVIDE THEM WITH FURTHER PROTECTION FOR THEIR PRIOR IMPRUDENT OR POSSIBLY NEGLIGENT ACTS AND SEEK TO MAKE IT MORE DIFFICULT AND COSTLY TO REMOVE CERTAIN DIRECTORS AND OFFICERS FROM OFFICE. THESE ACTIONS AND THEIR APPARENT BLATANT DISREGARD FOR THE CONCERNS OF ESC SHAREHOLDERS HAVE LEFT US WITH NO OTHER CHOICE BUT TO PROPOSE TO REPLACE THE CURRENT BOARD WITH INDIVIDUALS WHO ARE INDEPENDENT OF THE CURRENT BOARD, MANAGEMENT AND US. WE RECOMMEND YOU VOTE "AGAINST" ALL THREE PROPOSALS. THE CHOICE IS YOURS, NOT THEIRS. IT IS YOUR COMPANY, NOT theirs!! We hope you will support our proposal to restructure the current Board. We urge you to vote the enclosed BLUE proxy today! If you have any questions or need assistance, please call MacKenzie Partners, Inc. at (212) 929-5500 (call collect) or call toll-free at (800) 322-2885. Sincerely, /s/ Barnard J. Gottstein /s/ Arie Genger Any questions or requests for assistance or additional copies of this Open Letter to Shareholders, the Proxy, the Proxy Statement and any other related materials may be directed to the Information Agent at the address and telephone number set forth below. Shareholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning Mr. Genger's and Mr. Gottstein's proposal (the "Proposal"). The Information Agent for the Proposal Is: Mackenzie Partners, Inc. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) or Call Toll-free: (800) 322-2885 -------------------- EX-99 3 EXHIBIT 23 - NOTICE Exhibit 23 SOLICITED ON BEHALF OF ARIE GENGER AND BARNARD J. GOTTSTEIN ESC MEDICAL SYSTEMS LTD. NOTICE OF COMBINED EXTRAORDINARY AND ANNUAL GENERAL MEETING OF SHAREHOLDERS To be Held On June 23, 1999 Fellow Shareholders: You are invited to attend a combined Extraordinary and Annual General Meeting of Shareholders (the "Meeting") of ESC Medical Systems Ltd. (the "Company") to be held in the United States at the Inter-Continental Hotel, 111 East 48th Street, New York, New York on June 23, 1999. The Meeting will take place at 10:00 a.m. local time, subject to adjournment if no quorum is present. The purpose of the Meeting is: 1. To elect the following persons to be members of the Board of Directors of the Company: Aharon Dovrat, Philip Friedman, Thomas Hardy, Darrell S. Rigel, M.D., S.A. Spencer, Mark H. Tabak and Professor Zehev Tadmor. To vote "AGAINST" the following special resolution proposed by the Company: 2. To increase the Company's share capital by NIS 2,000,000 (from NIS 5,000,000 to NIS 7,000,000). The newly authorized share capital shall be divided into 20,000,000 Ordinary Shares, par value NIS 0.10, each by amending Section 4 of the Memorandum of Association of the Company and Articles of Association of the Company. To vote "FOR" the following special resolution proposed by the Company: 3. To amend Article 68 of the Articles of Association of the Company to allow, in addition to the current provisions thereof, for indemnification of officers and directors under the terms of the Companies Law, 1999-5759 (the "Law") including the provisions of Section 260(b) of the Law. To "ABSTAIN" on the following ordinary resolution proposed by the Company: 4. To reappoint Luboshitz, Kasierer & Co. as the Company's Independent Public Accountants for the current fiscal year and authorize the Board of Directors to fix their compensation. To vote "AGAINST" the following ordinary resolutions proposed by the Company: 5. To approve the employment and termination protection agreements of two executive officers of the Company who are also directors and shareholders of the Company. 6. To indemnify directors with respect to certain litigation. To "ABSTAIN" on the following ordinary resolution proposed by the Company: 7. To report on the business of the Company for the year ended December 31, 1998 and to receive and consider the Auditors' Report, the Directors' Report and the Company's Consolidated Financial Statements for the year ended December 31, 1998. And: 8. To transact such other business as may properly come before the Meeting or any adjournments thereof. Pursuant to the Company's Articles of Association, the Board of Directors shall set the date for determining the holders of record of Ordinary Shares entitled to notice of and to vote at the Meeting and any adjournments thereof. As of the date of our mailing of proxy material, no such date has been set. Messrs. Genger and Gottstein believe that the shareholders of the Company should be represented as fully as possible at the Meeting and encourage your attendance. Whether or not you plan to be present, kindly complete, date and sign the enclosed proxy card exactly as your name appears on the envelope containing this Notice of the Meeting and mail it promptly so that your votes can be recorded. No postage is required if mailed in the United States. At any time before the Ordinary Shares subject to proxy are voted, the proxy is revocable by written notice to the persons named in the proxy accompanying this Notice of Meeting or by appearance at the Meeting as to matters noticed for vote at such Meeting and voting in person. Any notice of revocation and any later dated proxy filed with such persons will be forwarded to the Company. Messrs. Genger's and Gottstein's Proxy Statement is furnished herewith. Messrs. Genger and Gottstein have informed the Company that they will solicit proxy material and proxy cards on their behalf. Joint holders of Ordinary Shares should take note that, pursuant to Article 62 of the Articles of Association of the Company, the vote of the senior of joint holders of any share who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the vote(s) of the other joint holder(s) of the shares. For this purpose seniority will be determined by the order in which the names stand in the Register of Members. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE MEETING, YOU CAN REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON. Any questions or requests for assistance or additional copies of this Open Letter to Shareholders, the Proxy, the Proxy Statement and any other related materials may be directed to the Information Agent at the address and telephone number set forth below. Shareholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning Mr. Genger's and Mr. Gottstein's proposal (the "Proposal"). The Information Agent for the Proposal Is: Mackenzie Partners, Inc. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) or Call Toll-free: (800) 322-2885 --------------------------- Sincerely, Arie Genger Barnard J. Gottstein Trans-Resources, Inc. Barnard Jacob Gottstein TTEE By: /s/ Arie Genger By: /s/ Barnard J. Gottst ----------------------------- --------------------------- Arie Genger Barnard J. Gottstein Chairman of the Board Trustee Haifa Chemical Holdings Ltd. By: /s/ Arie Genger ----------------------------- Arie Genger Authorized Signatory TPR Investment Associates, Inc. By: /s/ Arie Genger ------------------------------ Arie Genger President May 28, 1999 EX-99 4 EXHIBIT 24 - FORM OF PROXY Exhibit 24 SOLICITED ON BEHALF OF ARIE GENGER AND BARNARD J. GOTTSTEIN ESC MEDICAL SYSTEMS LTD. PROXY FOR COMBINED EXTRAORDINARY AND ANNUAL GENERAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 23, 1999 KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby constitutes and appoints Avi D. Pelossof, Michael Zellermayer and Yoram Ashery and any of them, the attorneys and proxies of the undersigned, each with full power of substitution to appear and to vote all of the Ordinary Shares of ESC Medical Systems Ltd. registered in the name of the undersigned at the Combined Extraordinary and Annual General Meeting of Shareholders (the "Meeting") of the Company which will be held in the United States at the Inter-Continental Hotel, 111 East 48th Street, New York, New York on June 23, 1999, at 10:00 a.m. local time, subject to adjournment if no quorum is present, for the purposes described in the accompanying Proxy Statement and, in their discretion, on all other matters which properly come before the Meeting. Upon being returned, signed and dated, all shares represented by this Proxy will be voted as indicated by the shareholder below. IN THE ABSENCE OF SUCH INDICATION, THIS PROXY WILL BE VOTED "FOR" PROPOSALS NO. 1 AND 3; "AGAINST" PROPOSALS NO. 2, 5 AND 6; "ABSTAIN" WITH RESPECT TO PROPOSALS NO. 4 AND 7; AND "I GRANT SUCH AUTHORITY" WITH RESPECT TO PROPOSAL 8. THIS PROXY IS SOLICITED ON BEHALF OF MESSRS. GENGER AND GOTTSTEIN. MR. ARIE GENGER'S AND MR. BARNARD J. GOTTSTEIN'S PROPOSAL: 1. To elect the following persons to be members of the Board of Directors of the Company: Aharon Dovrat, Philip Friedman, Thomas Hardy, Darrell S. Rigel, M.D., S.A. Spencer, Mark H. Tabak and Professor Zehev Tadmor. For____ Against____ Abstain____ I object to the election of________________________ as a member of the Board of Directors. MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE "FOR" PROPOSAL NO. 1, AND "AGAINST" THE ELECTION OF NOMINEES PROPOSED BY THE COMPANY. OTHER RESOLUTIONS FOR THE MEETING: SPECIAL RESOLUTIONS: 2. To increase the Company's share capital by NIS 2,000,000 (from NIS 5,000,000 to NIS 7,000,000). The newly authorized share capital shall be divided into 20,000,000 Ordinary Shares, par value NIS 0.10 each, by amending Section 4 of the Memorandum of Association of the Company and Articles of Association of the Company. For____ Against____ Abstain____ MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE "AGAINST" PROPOSAL NO. 2. 3. To amend Article 68 of the Articles of Association of the Company to allow, in addition to the current provisions thereof, for indemnification of officers and directors under the terms of the Companies Law, 1999-5759 (the "Law") including under the provisions of Section 260(b) of the Law. For____ Against____ Abstain____ MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE "FOR" PROPOSAL NO. 3. ORDINARY RESOLUTIONS: 4. To re-appoint Luboshitz, Kasierer & Co. as the Company's Independent Public Accountants for the current fiscal year and authorize the Board of Directors to fix their compensation. For____ Against____ Abstain____ MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE OF "ABSTAIN" WITH RESPECT TO PROPOSAL NO. 4. 5. Executive agreements. (a) To approve the termination protection agreement between the Company and Hillel Bachrach. For____ Against____ Abstain____ (b) To approve the employment agreement between the Company and Karen Sarid. For____ Against____ Abstain____ MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE "AGAINST" PROPOSAL NO. 5. 6. To indemnify directors with respect to certain litigation. For____ Against____ Abstain____ MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE "AGAINST" PROPOSAL NO. 6. 7. To report on the business of the Company for the year ended December 31, 1998 and to receive and consider the Auditors' Report, the Directors' Report and the Company's Consolidated Financial Statements for the year ended December 31, 1998. For____ Against____ Abstain____ MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE OF "ABSTAIN" WITH RESPECT TO PROPOSAL NO. 7. 8. To transact such other business as may properly come before the Meeting or any adjournments thereof in accordance with the best judgment of the person(s) acting as my proxy hereunder. I grant such authority_______ I object to such authority______ MESSRS. GENGER AND GOTTSTEIN RECOMMEND "I GRANT SUCH AUTHORITY" WITH RESPECT TO PROPOSAL NO. 8. YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE ENVELOPE PROVIDED. IT IS IMPORTANT FOR YOU TO BE REPRESENTED AT THE MEETING. THE EXECUTION OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE PRESENT AT THE MEETING. THIS PROXY IS REVOCABLE AT ANY TIME, AND THE UNDERSIGNED RESERVES THE RIGHT TO ATTEND THE MEETING AND VOTE IN PERSON. I WILL ______ WILL NOT ______ attend the Meeting. Date:____________________, 1999 __________________________ Name __________________________ Signature IMPORTANT: Please sign exactly as your name or names appear on the share certificates and when signing as an attorney-in-fact, executor, administrator, trustee or guardian, give your full title as such. If the signatory is a corporation, sign the full corporate name by a duly authorized officer, or if a partnership, sign in partnership name by an authorized person. EX-99 5 EXHIBIT 25 - PROXY STATEMENT Exhibit 25 SOLICITED ON BEHALF OF ARIE GENGER AND BARNARD J. GOTTSTEIN COMBINED EXTRAORDINARY AND ANNUAL GENERAL MEETING OF SHAREHOLDERS OF ESC MEDICAL SYSTEMS LTD. TO BE HELD ON JUNE 23, 1999 PROXY STATEMENT This Proxy Statement is furnished by Mr. Arie Genger and Mr. Barnard J. Gottstein to the holders of Ordinary Shares, par value NIS 0.10 (the "Ordinary Shares"), of ESC Medical Systems Ltd. (the "Company"), in connection with the solicitation of proxies for use at the Combined Extraordinary and Annual General Meeting of Shareholders of the Company (the "Meeting") to be held in the United States at the Inter-Continental Hotel, 111 East 48th Street, New York, New York, USA on June 23, 1999, at 10:00 a.m. local time, subject to adjournment if no quorum is present. At the Meeting, registered shareholders of the Company will be asked, among other things, to vote upon the following matters: (1) to elect to the Board of Directors of the Company the following persons proposed by Messrs. Genger and Gottstein: Aharon Dovrat, Philip Friedman, Thomas Hardy, Darrell S. Rigel, M.D., S.A. Spencer, Mark H. Tabak and Professor Zehev Tadmor; (2) to increase the Company's share capital by NIS 2,000,000 and to divide such newly authorized share capital into 20,000,000 Ordinary Shares, par value NIS 0.10, by making the relevant amendments to the Company's Memorandum and Articles of Association; (3) to amend the Articles by adopting certain indemnification provisions; (4) to reappoint Luboshitz, Kasierer & Co. as the Company's independent accountants for the current fiscal year and authorize the Board of Directors to fix their compensation; (5) to approve the employment and termination protection agreements of two executive officers of the Company who are also directors and shareholders of the Company; (6) to indemnify directors with respect to certain litigation; (7) to review and consider the Auditors' Report, the Directors' Report and the Company's Consolidated Financial Statements for 1998; and (8) to transact such other business as may properly come before the Meeting and any adjournment thereof, all as more fully described below. A form of proxy for use at the Meeting and a return envelope for the proxy are also enclosed. By appointing "proxies," shareholders may vote their Ordinary Shares at the Meeting whether or not they attend. Upon the receipt of a properly signed and dated proxy in the form enclosed, the persons named as proxies therein will vote the Ordinary Shares represented thereby in accordance with the instructions of the shareholder indicated thereon, or if no direction is indicated, in accordance with Messrs. Genger's and Gottstein's recommendations as indicated below in this Proxy Statement. Each of Michael Zellermayer, Avi D. Pelossof and Yoram Ashery (of Zellermayer & Pelossof, Advocates, Tel Aviv, Israel, the legal representatives of Messrs. Genger and Gottstein and proxies for the Meeting) knows of no other matters to be submitted at the Meeting, other than as specified in the Notice of Meeting enclosed with this Proxy Statement and other than the Company's proposal to have seven of the current Board's directors reelected. If any other business is properly brought before the Meeting, however, it is the intention of the persons named as proxies to vote in respect thereof in accordance with their best judgment. Shares represented by executed and unrevoked proxies will be voted. On all other matters considered at the Meeting, abstentions and broker non-votes will not be treated as either a vote "for" or "against" the matter, although they will be counted to determine if a quorum is present. The proxy solicited hereby may be revoked at any time prior to its exercise by means of a written notice delivered to the persons named as proxies in the proxy accompanying this Proxy Statement, c/o Zellermayer & Pelossof Advocates, Europe House, 37 King Shaul Boulevard, Tel- Aviv, Israel 64928 (telephone number is 011-972-3-693-9555; facsimile number is 011-972-3- 695-2884), by the substitution of a new proxy bearing a later date or by a request for the return of the proxy at the Meeting. Any notice of revocation and any later dated proxy filed with the persons named as proxies in the proxy accompany this Proxy Statement will be forwarded to the Company. Messrs. Genger and Gottstein expect to mail this Proxy Statement and the enclosed form of proxy to shareholders on or about May 29, 1999. All expenses of this solicitation will be borne by Messrs. Genger and Gottstein. In addition to the solicitation of proxies by mail, Messrs. Genger and Gottstein and officers and employees of MacKenzie Partners, Inc., as information agent for Messrs. Genger's and Gottstein's solicitation of proxies, may solicit proxies by telephone, telegraph, in person or by other means. Brokerage firms, nominees, fiduciaries and other custodians have been requested to forward proxy solicitation materials to the beneficial owners of Ordinary Shares of the Company held of record by such persons, and Messrs. Genger and Gottstein will reimburse such brokerage firms, nominees, fiduciaries and other custodians for reasonable out-of-pocket expenses incurred by them in connection therewith. SHAREHOLDERS ENTITLED TO VOTE. Only holders of record of Ordinary Shares at the close of business on the record date to be set by the Board of Directors are entitled to notice of and to vote at the Meeting. Each Ordinary Share is entitled to one vote on each matter to be voted on at the Meeting. The Articles of Association of the Company do not provide for cumulative voting for the election of the directors or for any other purpose. VOTES REQUIRED. (i) The proposals relating to the increase of the Company's share capital and the amendments to the Memorandum of Association and Articles of Association are special resolutions which require the affirmative vote of 75% of the Ordinary Shares of the Company voted in person or by proxy at the Meeting on the matter presented for passage. The votes of all shareholders voting on the matter will be counted. (ii) The proposals relating to the election of directors, re-appointment of Luboshitz, Kasierer & Co. as the independent public accountants of the Company and authorization of the Board of Directors to fix their compensation, approval of the employment and termination protection agreements of two executive officers, the indemnification of directors, and approval to report on the business of the Company for the year ended December 31, 1998 and to receive and consider the Auditors' Report, the Directors' Report and the Company's Consolidated Financial Statements for the year ended December 31, 1998, are ordinary resolutions which require the affirmative vote of a majority of the Ordinary Shares of the Company voted in person or by proxy at the Meeting on the matter presented for passage. The votes of all shareholders voting on the matter will be counted, including the shares of the executive officers whose employment or termination protection agreements are proposed to be approved. PROPOSAL NO. 1: ELECTION OF DIRECTORS The persons proposed by Messrs. Genger and Gottstein (Aharon Dovrat, Philip Friedman, Thomas Hardy, Darrell S. Rigel, M.D., S.A. Spencer, Mark H. Tabak and Professor Zehev Tadmor (collectively, the "Nominees")) have furnished information concerning their principal occupations, business addresses and other matters. Other than Mr. Dovrat, all of the nominees are United States citizens or residents and, as a result, the Company may become subject to the U.S. securities laws in the same manner as U.S. companies. Except as disclosed herein, according to executed questionnaires, (a) except for Thomas Hardy, none of the Nominees has ever served as an officer, director or employee of the Company, and (b) there are no arrangements or understandings between any Nominee and any other person pursuant to which he was selected as a Nominee or director of the Company. Messrs. Genger and Gottstein are unaware of any reason why any Nominee, if elected, should be unable to serve as a director. If any of the Nominees are unable to serve, the persons named as proxies in the proxy solicited by Messrs. Genger and Gottstein will vote the shares FOR the election of such other nominees as the persons named as proxies in the proxy solicited by Messrs. Genger and Gottstein may propose. All Nominees listed below have advised Messrs. Genger and Gottstein that they intend to serve as directors if elected. BIOGRAPHICAL INFORMATION Aharon Dovrat. Mr. Dovrat, age 67, is the founder and chairman of Dovrat & Company, Ltd., a privately-held investment company, and the founder and chairman of Isal, Ltd., a publicly-traded investment company, since their inception in January 1999. Between 1991 and December 1998, Mr. Dovrat served as chairman of Dovrat, Shrem & Company, Ltd., a company publicly traded on the Tel-Aviv Stock Exchange that divides its operations into the areas of investment banking and direct investment funds management, underwriting, securities and brokerage services, real estate and industry. Between 1965 and 1991, Mr. Dovrat served as president and chief executive officer of Clal (Israel) Ltd., a holding company which, by 1991, had become Israel's largest independent conglomerate, with capital of over $400 million and aggregate annual sales in excess of $2.5 billion. Mr. Dovrat serves as a member of the board of directors of OSHAP Technologies Ltd., a software company, of Technomatix Technologies Ltd., a software company, and of Delta Galil Ltd., a textile company. Mr. Dovrat's address is c/o Dovrat & Company, Ltd., 37 Shaul Hamelech Boulevard, Tel Aviv, Israel 64928. Philip Friedman. Mr. Friedman, age 50, is the founder, president and chief executive officer of Computer Generated Solutions, Inc., a privately-held company founded by Mr. Friedman in 1984 that specializes in providing comprehensive computer technology and business solutions to companies across the globe in a wide variety of industries. Mr. Friedman's address is c/o Computer Generated Solutions, Inc., 1675 Broadway, New York, New York 10019. Thomas Hardy. Mr. Hardy, age 53, has been a director of the Company since February 1998. Since December 1993, Mr. Hardy has served as President and Chief Operating Officer of Trans-Resources, Inc., a company founded by Mr. Arie Genger and beneficially owned by Mr. Genger and members of his family. Mr. Hardy was Executive Vice President of Trans- Resources, Inc. from 1987 to 1993 and a director and member of its Financial Advisory Committee since October 1992. Mr. Hardy was a director of Laser Industries Inc. from January 1990 until February 1998, when it merged with the Company. Mr. Hardy has also been a director of Haifa Chemicals Ltd., a wholly-owned subsidiary of Trans-Resources, Inc., since 1986. Mr. Hardy's address is c/o Trans-Resources, Inc., 9 West 57th Street, New York, New York 10019. Darrell S. Rigel, M.D. Dr. Rigel, age 48, has been a faculty member at New York University Medical School ("NYU") since 1979, and is currently a physician and Clinical Professor of Dermatology at NYU, and is also an Adjunct Professor of Dermatology at Mt. Sinai School of Medicine in New York City. Dr. Rigel is currently serving as president of a national medical organization. In 1996, Dr. Rigel founded Interactive Horizons, Inc., a privately-held company in the industry of interactive computer systems for which Dr. Rigel serves as its president. Dr. Rigel graduated from Massachusetts Institute of Technology with an SB and an SM in Management Information Sciences. Dr. Rigel's address is 35 East 35th Street, #208, New York, New York 10016. S.A. Spencer. Mr. Spencer, age 67, is the founder, chief executive officer and principal investor of Holding Capital Group, LLC, a private LBO, MBO, venture capital and investment firm founded by Mr. Spencer in 1976. Mr. Spencer serves as a member of the board of directors of Trans-Resources, Inc. Mr. Spencer's address is c/o Holding Capital Group, LLC, 104 Crandon Boulevard, Suite 409, Key Biscayne, Florida 33149. Mark H. Tabak. Mr. Tabak, age 49, is the founder, president and chief executive officer of International Managed Care Advisors, LLC, a company Mr. Tabak founded in 1996 that invests in and develops managed care-type delivery systems addressing mainly primary care needs in Latin America, Western and Central Europe and Asia, among other regions. Mr. Tabak is also presently affiliated with Capital Z Partners, a $3 billion fund focusing on investing in healthcare, insurance and financial services. Between 1993 and July 1996, Mr. Tabak served as president of AIG Managed Care, Inc., a subsidiary of American International Group. Between 1990 and 1993, Mr. Tabak served as president and chief executive officer of Group Health Plan. Between 1986 and 1990, Mr. Tabak served as president and chief executive officer of Clinical Pharmaceuticals, Inc., a pharmacy benefit management company founded by Mr. Tabak in 1986. Between 1982 and 1986, Mr. Tabak served as president and chief executive officer of HealthAmerica Development Corporation. Mr. Tabak serves as a director and as a member of the audit committee of Ceres Group, a company that specializes in the health insurance industry. Mr. Tabak's address is c/o Capital Z Partners, One Chase Manhattan Plaza, 44th Floor, New York, New York 10005. Professor Zehev Tadmor. Professor Tadmor, age 62, is serving as a Distinguished Institute Professor at the Department of Chemical Engineering at the Technion Israel Institute of Technology, Israel's major technological scientific research university (the "Technion"), which he joined in 1968, and has served as the chairman of the board of the S. Neaman Institute for Advanced Studies in Science & Technology at the Technion since October 1998. Between October 1990 and September 1998, Professor Tadmor served as president of the Technion. Professor Tadmor serves as a member of the board of directors of Haifa Chemicals Ltd., a chemical and fertilizer company and a wholly-owned subsidiary of Trans-Resources, Inc. Professor Tadmor also serves as a member of the Technological Advisory Council of Publicard. Professor Tadmor's address is 62 Tishbi Street, Haifa, Israel 34523. Stockholdings in the Company None of the Nominees beneficially own any Ordinary Shares of the Company, except as follows: Mr. Dovrat beneficially owns an aggregate of 20,000 Ordinary Shares (less than 1% of the 27,301,339 Ordinary Shares issued and outstanding as of March 25, 1999). Mr. Dovrat has sole voting and dispositive power with respect to all of such Ordinary Shares. Mr. Friedman beneficially owns an aggregate of 25,000 Ordinary Shares (less than 1% of the 27,301,339 Ordinary Shares issued and outstanding as of March 25, 1999). Mr. Friedman shares voting and dispositive power with his wife with respect to all of such Ordinary Shares. Mr. Hardy beneficially owns an aggregate of 54,250 Ordinary Shares (less than 1% of the 27,301,339 Ordinary Shares issued and outstanding as of March 25, 1999). Mr. Hardy has sole voting and dispositive power with respect to all of such Ordinary Shares. Mr. Spencer beneficially owns an aggregate of 11,000 Ordinary Shares (less than 1% of the 27,301,339 Ordinary Shares issued and outstanding as of March 25, 1999). Mr. Spencer shares voting and dispositive power with his wife with respect to all of such Ordinary Shares. Relationships and Related Transactions Transactions with Management and Others. Except as otherwise disclosed in this Proxy Statement, none of the Nominees is currently involved, or has been involved since January 1, 1998, in any transaction, series of transactions or proposed transactions to which the Company or any of its subsidiaries, Mr. Gottstein or Mr. Genger (including, without limitation, Trans-Resources, Inc. and its subsidiaries) was or is to be a party. Certain Business Relationships. Except as set forth below, none of the Nominees is currently, or has been since January 1, 1998, involved in any business relationship with the Company or any of its subsidiaries, Mr. Gottstein or Mr. Genger (including, without limitation, Trans-Resources, Inc. and its subsidiaries). Mr. Hardy serves as President, Chief Operating Officer and director of Trans- Resources, Inc., for which he received compensation of $457,000 during 1998. Mr. Hardy is also a director of Haifa Chemicals Ltd., for which he receives no compensation. Mr. Spencer serves as a member of the board of directors of Trans-Resources, Inc., for which he receives $15,000 annually. In addition, Mr. Spencer's firm provides investment banking advice to Trans-Resources, Inc., for which his firm has received no compensation since January 1, 1998. Professor Tadmor serves as a member of the board of directors of Haifa Chemicals Ltd., a wholly-owned subsidiary of Trans-Resources, Inc, for which he receives $15,000 annually. In addition, Professor Tadmor is a scientific technological consultant to Trans-Resources, Inc., for which he receives a retainer fee on a month-to-month basis. Indebtedness of Management. None of the Nominees has been indebted to the Company or any of its subsidiaries, Mr. Gottstein or Mr. Genger (including, without limitation, Trans- Resources, Inc. and its subsidiaries) since January 1, 1998. At the Meeting, the following ordinary resolution will be brought before the shareholders of the Company for adoption: "RESOLVED, to elect the following persons to serve as members of the Board of Directors of the Company: Aharon Dovrat, Philip Friedman, Thomas Hardy, Darrell S. Rigel, M.D., S.A. Spencer, Mark H. Tabak and Professor Zehev Tadmor." Upon receipt of a properly signed and dated proxy and unless otherwise instructed on the Proxy, the persons named in the enclosed proxy will vote the shares represented thereby "FOR" the proposal. MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE "FOR" PROPOSAL NO. 1. PROPOSAL NO. 2: INCREASE OF THE COMPANY'S SHARE CAPITAL Information About the Proposal At the Meeting, the Board of Directors will proposal that the following special resolution be adopted: "RESOLVED, that the Company shall increase its share capital by NIS 2,000,000 (from NIS 5,000,000 to NIS 7,000,000). The newly authorized share capital shall be divided into 20,000,000 Ordinary Shares, par value NIS 0.10 each. The Company shall replace Section 4 of the Memorandum of Association and Section 4(a) of the Articles of Association with the following: 'The authorized Share Capital of the Company is NIS 7,000,000 divided into 70,000,000 (seventy million) Ordinary Shares, par value NIS 0.10 per share.'" Messrs. Genger's and Gottstein's Recommendation Messrs. Genger and Gottstein recommend a vote "AGAINST" the Company's proposal. Currently, the Company has 50,000,000 Ordinary Shares authorized for issuance, of which approximately only 27,000,000 are currently issued and outstanding, and the Company has failed to provide any reason why the number of Ordinary Shares authorized for issuance should be increased to 70,000,000. Accordingly, upon the receipt of a properly signed and dated proxy and unless otherwise instructed on the proxy, the persons named in the enclosed proxy will vote the shares represented thereby "AGAINST" the proposal. MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE "AGAINST" PROPOSAL NO. 2. PROPOSAL NO. 3: AMENDMENT OF ARTICLES OF ASSOCIATION Information About the Proposal According to the Company, the Board of Directors at the Meeting will ask shareholders to approve an amendment to the provisions of the Company's Articles of Association dealing with indemnification of officers and directors to adopt the provisions of the New Companies Law. At the Meeting, the Board of Directors will propose that the following special resolution be adopted: "RESOLVED to amend Article 68 of the Company's Articles of Association by adding the following: Upon the adoption of the Companies Law on February 1, 2000, the following provisions shall come into effect: (a) Subject to the provision of the Companies Law, the Company shall exempt any Officer Holder from his/her liability derived from any damage resulting from any breach of his duty of care towards the Company, to the fullest extent permitted and not prohibited by Sections 258(b) and 259 of the Companies Law; and procure insurance for, or indemnify any Officer Holder to the fullest extent permitted and not prohibited by Sections 258(c), 260 and 261 of the Companies Law, or any successor provisions; provided that procurement of any such insurance or provision of any such indemnification, as the case may be, is approved by the Audit Committee of the Company and otherwise as required by Law; and procure insurance for or indemnify any person who is not an Officer Holder, including, without limitation, any employee, agent, consultant or contractor of the Company who is not an Officer Holder." Messrs. Genger's and Gottstein's Recommendation Messrs. Genger and Gottstein recommend a vote "FOR" the Company's proposal in order for Article 68 of the Company's Articles to be in accordance with the Companies Law that will become effective in February 2000. Accordingly, upon the receipt of a properly signed and dated proxy and unless otherwise instructed on the proxy, the persons named in the enclosed proxy will vote the shares represented thereby "FOR" the proposal. MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE "FOR" PROPOSAL NO. 3. PROPOSAL NO. 4: REAPPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS Information About the Proposal According to the Company, the Board of Directors at the Meeting will ask shareholders to reappoint the accounting firm of Luboshitz, Kasierer & Co. as the independent public accountants of the Company for the fiscal year ending December 31, 1999, and authorize the Board of Directors to determine the basis of their compensation. According to the Company, Luboshitz, Kasierer & Co. has no relationship to the Company or with any affiliate of the Company, except as auditors. At the Meeting, the Board of Directors will propose that the following ordinary resolution be adopted: "RESOLVED, that the Company's independent public accountants, Luboshitz, Kasierer & Co. be, and they hereby are, reappointed as independent public accountants of the Company for the fiscal year ending December 31, 1999, and that the Board of Directors be, and it hereby is, authorized to fix the compensation of said independent public accountants in accordance with the volume and nature of their services." Messrs. Genger's and Gottstein's Recommendation In light of the significant accounting irregularities between the Company's financial statements for the quarters ended December 31, 1998 and March 31, 1999, Messrs. Genger and Gottstein recommend a vote of "ABSTAIN" with respect to the Company's proposal. Shareholders deserve answers to and an explanation for the questionable discrepancies between the financial statements for the last two quarters before the Company can expect shareholders to be adequately informed in order to vote on this matter. Accordingly, upon the receipt of a properly signed and dated proxy and unless otherwise instructed on the proxy, the persons named in the enclosed proxy will vote the shares represented thereby "ABSTAIN" with respect to the proposal. MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE OF "ABSTAIN" WITH RESPECT TO PROPOSAL NO. 4. PROPOSAL NO. 5: APPROVAL OF EXECUTIVE AGREEMENTS Information About the Proposal According to the Company, the Board of Directors at the Meeting will ask shareholders to approve a resolution approved by the Board of Directors and the Audit Committee as to the employment and termination protection agreements of two executive officers, Mr. Hillel Bachrach, the Executive Vice-President of Marketing, Sales and Business Development, and Ms. Karen Sarid, a Vice-President, CFO and Secretary of the Company. According to the Company, the Company intends to propose for shareholder approval at the Meeting a termination protection agreement with Mr. Hillel Bachrach. The agreement would provide for certain payments (generally, up to three times his annual salary and bonus) to be made to Mr. Bachrach in the event of his termination following a change of control in the Company. At the Meeting, the Board of Directors will propose that the following ordinary resolution be adopted: "RESOLVED, that the proposed terms of the termination protection agreement between the Company and Hillel Bachrach and the employment agreement between the Company and Ms. Karen Sarid presented at the Meeting of Shareholders, be, and they hereby are, approved." Messrs. Genger's and Gottstein's Recommendation Messrs. Genger and Gottstein recommend a vote "AGAINST" the Company's proposal. The Company has failed to provide shareholders with sufficient information about the terms and provisions of the proposed executive agreements, and given the Company's dismal performance during the past several months, it seems inconceivable for the Company to ask shareholders to approve of employment and termination agreements which would make it more difficult and costly to make any necessary changes to management. Why should shareholders be asked to help members of management further entrench themselves in office! It appears that the only parties who would benefit if such executive agreements are approved are the executives themselves, not the shareholders. Accordingly, upon the receipt of a properly signed and dated proxy and unless otherwise instructed on the proxy, the persons named in the enclosed proxy will vote the shares represented thereby "AGAINST" the proposal. MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE OF "AGAINST" PROPOSAL NO. 5. PROPOSAL NO. 6: INDEMNIFICATION OF DIRECTORS Information About the Proposal According to the Company, the Board of Directors will ask shareholders to approve a resolution approved by the Board of Directors and the Audit Committee to grant indemnification to the directors for damages arising out of certain class action litigation and any actions against the directors relating to actions taken in response to certain SEC filings. At the Meeting, the Board of Directors will propose that the following ordinary resolution be adopted: "RESOLVED to indemnify each of Shimon Eckhouse, Karen Sarid, Kenneth Rind, Hillel Bachrach, Marshall Butler, Halley Faust, Dan Suesskind, Thomas Hardy and Benjamin Givli (all together and each separately the "Directors") in respect of the events described in any of the following Complaints: No. 98 Civ. 7909, No. 98 Civ. 7530 and No. 98 Civ. 8129, each of which was filed in the United States District Court, Southern District of New York, including any amendments thereto (collectively the "Complaints") and any claims relating thereto, for (a) any monetary obligation imposed upon any of them for the benefit of a third party by a judgment, including a settlement agreed to in writing by the Company, or an arbitration decision certified by the court, as a result of an act or omission of any of their capacity as a director or an office holder of the Company, and (b) reasonable litigation expenses, including legal fees, incurred by any of the Directors or which he/she is obligated to pay by a court order, in a proceeding brought against him/her by or on behalf of the Company or by others, in each case relating to acts or omissions of any of the Directors in his/her capacity as a director or an office holder of the Company relating to the events described in any of the Complaints and any claims relating thereto. Said indemnification shall be limited to any amounts not covered by the officer's and director's liability insurance policy for him/her which is currently in effect." "RESOLVED that in the event that any of Shimon Eckhouse, Hillel Bachrach, Halley Faust, Thomas Hardy, Karen Sarid, Kenneth Rind, Marshall Butler and Dan Suesskind (all together the "Directors" and each separately the "Director") of the Company becomes involved, in their capacity as an officer or a director, in any claim, suit, action, proceeding, investigation or inquiry with respect to the filing with the US Securities Exchange Commission ("SEC") of Schedule 13D, and any amendment thereto by Messrs. Arie Genger and/or Mr. Barnard Gottstein, the Company shall indemnify and reimburse any such Director for his/her legal and other expenses, to the fullest extent permitted by the Companies Ordinance [New Version], 1983-5743 and/or the Companies Law, 1999- 5759, as the case may be, as such expenses incurred by such director in connection therewith. Said indemnification shall be limited to any amounts not covered by the officer's and director's liability insurance policy for him/her which is currently in effect." Messrs. Genger's and Gottstein's Recommendation Messrs. Genger and Gottstein recommend a vote "AGAINST" the Company's proposal. As written, the proposal imposes no limitations on such indemnification, regardless of the directors' culpability. In addition, the Board's silence with respect to the merits of the pending class action litigation filed against the Company has been deafening. Furthermore, it is unclear the amount of insurance coverage the Company currently has to cover its directors. While we would be willing to consider a proposal more narrowly tailored, the proposal presented to shareholders is overly broad in its scope. Accordingly, upon the receipt of a properly signed and dated proxy and unless otherwise instructed on the proxy, the persons named in the enclosed proxy will vote the shares represented thereby "AGAINST" the proposal. MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE "AGAINST" PROPOSAL NO. 6. PROPOSAL NO. 7: APPROVAL TO REPORT ON THE BUSINESS OF THE COMPANY AND TO RECEIVE AND CONSIDER CERTAIN REPORTS FOR THE YEAR ENDED DECEMBER 31, 1998 Information About the Proposal According to the Company, the Board of Directors at the Meeting will ask shareholders to review and consider the Auditors' Report, the Directors' Report and the Company's Consolidated Financial Statements for 1998. At the Meeting, the Board of Directors will propose that the following ordinary resolution be adopted: "RESOLVED, that the Auditors' Report, the Directors' Report and the Consolidated Financial Statements of the Company for the fiscal year ended December 31, 1998, be, and each hereby is, received and considered." Messrs. Genger's and Gottstein's Recommendation The Company has failed to provide copies of the reports referred to above. In the absence of further information, no recommendation can be made. Accordingly, upon the receipt of a properly signed and dated proxy and unless otherwise instructed on the proxy, the persons named in the enclosed proxy will vote the shares represented thereby "ABSTAIN" with respect to the proposal. MESSRS. GENGER AND GOTTSTEIN RECOMMEND A VOTE OF "ABSTAIN" WITH RESPECT TO PROPOSAL NO. 7. OTHER BUSINESS The Meeting is called for the purposes set forth in the Notice accompanying this Proxy Statement. As of the date of this Notice, and except for the proposal of the Company's Board of Directors to have seven of them reelected, Messrs. Genger and Gottstein know of no business which will be presented for consideration at the Meeting other than for the foregoing matters. If other matters not now known properly come before the Meeting, however, it is intended that the persons named as proxies or their substitutes will vote the Ordinary Shares in accordance with their best judgment with respect to such matters. BIOGRAPHICAL INFORMATION CONCERNING PERSONS MAKING THE PROPOSAL Arie Genger, age 54, is the Chairman and Chief Executive Officer of Trans-Resources, Inc. ("TRI"), a privately-owned chemical and fertilizer company that he founded in 1985. TRI has 13 manufacturing plants in the United States, Canada, France, Hungary, Spain and Israel. Through TRI, Mr. Genger is one of the largest foreign private investors in the State of Israel. In 1989, at the invitation of Laser Industries Limited's ("Laser") management, TRI purchased the largest single block of shares in Laser. At the time, Laser had a market capitalization of about $10 million and was teetering on the verge of bankruptcy. Shortly after purchasing the dominant ownership position in Laser, the new board overhauled management and refocused it on both a sales growth and an application diversification effort. The initiatives adopted by management enabled Laser to grow sales and net income (loss) from $28.9 million and ($17.2) million in 1989 to $58.7 million and $8.8 million in 1996, respectively. In the beginning of 1998, Laser merged with ESC at a valuation of about $245.1 million. Prior to founding TRI, Mr. Genger was recruited from the United States to join the Israeli government as both the assistant defense and economic minister in 1981. Barnard J. Gottstein, age 73, is a founding investor in ESC. In addition, in 1949 and just out of college, Mr. Gottstein took over management of J.B. Gottstein & Co., an Alaskan wholesale grocery company founded by his father in 1915. With Mr. Gottstein as Chairman and President, J.B. Gottstein & Co. eventually became the largest wholesale grocery distributor in Alaska. In 1974, Mr. Gottstein merged his wholesale business with a grocery store chain to form Carr-Gottstein, Inc. The wholesale/retail grocery business became the dominant food supplier in Alaska with annual sales of $550 million and 2,600 employees. Also, Carr-Gottstein, Inc. created Carr-Gottstein Properties, which became the largest real estate developer and owner in Alaska. In 1990, the grocery wholesale and retail operations were sold for $300 million, but Mr. Gottstein still owns and remains active in Carr-Gottstein Properties. Between 1986 and 1990, Mr. Gottstein served as President of the Alaska State Board of Education for which he was awarded an honorary Doctor of Law degree from the University of Alaska in Fairbanks. Since 1990, Mr. Gottstein has become an investor in many publicly- and privately-held companies, including ESC. In 1992, Mr. Gottstein began investing in the Company, and since then has watched the Company's progress with great interest. -----END PRIVACY-ENHANCED MESSAGE-----