UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 For the
fiscal year ended December 31, 2000, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For
the transition period from ____ to _____
Commission file number: 0-13012
ESC MEDICAL SYSTEMS LTD.
(Exact name of registrant as specified in its charter)
Israel N.A.
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P.O. Box 240, Yokneam, Israel 20692
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 972-4-959-9000
Securities Registered pursuant to Section 12(b) of the Act: None.
Title of Each Class Name of Each Exchange on Which
Registered
None None
Securities registered pursuant to Section 12(g)of the Act:
Ordinary Shares, NIS 0.10 par value per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
The number of Ordinary Shares, NIS 0.10 par value per share, of the
registrant outstanding as of April 27, 2001 was 27,630,898.
The aggregate market value of the Ordinary Shares held by non-affiliates of
the registrant, based on the closing price of the Ordinary Shares on March
23, 2001 as reported on the Nasdaq National Market, was approximately
$741,060,684.36. Ordinary Shares held by each current executive officer and
director and by each person who is known by the registrant to own 5% or
more of the outstanding Ordinary Shares have been excluded from this
computation in that such persons may be deemed to be affiliates of the
Company. Share ownership information of certain persons known by the
Company to own greater than 5% of the outstanding common stock for purposes
of the preceding calculation is based solely on information on Schedule
13-G filed with the Commission and is as of December 31, 2000. This
determination of affiliate status is not a conclusive determination for
other purposes.
Documents Incorporated by Reference
None.
ESC Medical Systems Ltd. (the "Company" or "ESC") hereby amends
and restates in their entirety each of the following items of its Annual
Report on Form 10-K for the fiscal year ended December 31, 2000 filed with
the Securities and Exchange Commission on March 30, 2001.
- -----------------------------------------------------------
Item No. Part III Page
No.
- -----------------------------------------------------------
10 Directors and Officers Registrant 2
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11 Executive Compensation 9
- -----------------------------------------------------------
12 Security Ownership and Certain 14
Beneficial Owners and Management
- -----------------------------------------------------------
13 Certain Relationship and Related 16
Transactions
- -----------------------------------------------------------
PART III.
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT.
The Board of Directors
The management of the business of the Company is vested in the
Board of Directors, which may exercise all such powers and do all such acts
and things as the Company is authorized to exercise and do, and are not
required by law or otherwise to be exercised by the shareholders. The Board
of Directors may, subject to the provisions of the Israeli Companies Law
1999 ("Companies Law"), delegate any or all of its powers to committees,
each consisting of one or more directors, and it may, from time to time,
revoke such delegation or alter the composition of any such committees.
Unless otherwise expressly provided by the Board, such committees shall not
be empowered to further delegate such powers.
Under the Companies Law, a board of directors of a public company
must hold at least one meeting every three months. During the 2000 fiscal
year and since the annual general meeting held on May 30, 2000 (the "2000
Meeting"), the Board of Directors held eight meetings. Each of the
incumbent directors attended at least 75% of the aggregate of (i) the total
number of meetings of the Board of Directors (held during the period that
such director was in office) and (ii) the total number of meetings of all
committees of the Board of which such director was a member (held during
the period that such director was in office).
Committees of the Board of Directors
------------------------------------
The Board of Directors of the Company has an Executive Committee,
Audit Committee and Compensation Committee.
Executive Committee
The Executive Committee has been empowered and authorized to
exercise any and all of the powers and authorities vested with the Board of
Directors relating to the management of the business of the Company, unless
limited at any time by action by the Board of Directors, provided that no
such action by the Board of Directors shall invalidate any action by the
Executive Committee taken prior thereto, and provided further, that no
action shall be taken by the Executive Committee which shall materially
alter the nature of the business of the Company, dispose of any substantial
assets of the Company, acquire any substantial new business or approve the
Company's budget. The powers of the Executive Committee are subject to the
provisions of the Companies Law, including the provisions prohibiting
delegation by a board of directors to committees of certain issues. The
Executive Committee consists of the following five directors: Jacob A.
Frenkel (Chairman); Thomas G. Hardy; Ahron Dovrat; S.A. Spencer; and Prof.
Zehev Tadmor. During the 2000 fiscal year and since the 2000 Meeting, the
Executive Committee held two meetings.
Audit Committee
Under the Companies Law, the board of directors of a public
company, including a company whose shares are traded in a stock exchange
abroad, must appoint an audit committee, comprised of at least three
independent directors but excluding: the chairman of the board of
directors; the general manager; the chief executive officer; and any
controlling shareholder and any director employed by the Company or who
provides services to the Company on a regular basis. The role of the audit
committee is to review and make recommendations with respect to flaws in
the business management of the Company, in consultation with the internal
auditor and the Company's independent accountants, and suggest an
appropriate course of action.
The approval of the Audit Committee is required to effect
specified actions and transactions with office holders and interested
parties. An interested party is defined in the Companies Law as a 5% or
greater shareholder, any person or entity who has the right to designate
one director or more or the general manager of the company or any person
who serves as a director or as a general manager. Under the NASDAQ Stock
Market rules, the Company is required to form an audit committee consisting
of at least three independent directors. The responsibilities of the audit
committee under the NASDAQ Stock Market rules include, among other things,
evaluating the independence of a Company's outside auditors.
The Company's Audit Committee currently consists of the following
four directors, each of whom qualify as an independent director in
compliance with the NASDAQ Stock Market rules: S.A. Spencer (Chairman);
Prof. Zehev Tadmor; Mark Tabak and Philip Friedman. During the 2000 fiscal
year and since the 2000 Meeting, the Audit Committee held three meetings.
Compensation Committee
The Compensation Committee, which consists of three directors,
administers the Company's stock option plans and the Company's overall
compensation practices. The members of the Company's Compensation Committee
since December 31, 2000 are Aharon Dovrat (Chairman), Thomas G. Hardy and
Mark Tabak (the "Compensation Committee"). During the 2000 fiscal year and
since the 2000 Meeting, the Compensation Committee held three meetings.
The following table lists certain information with respect to our
directors, including the name, age, principal occupation and business
experience during the past five years and the commencement of each term as
a director.
Name Business Experience
- ---- -------------------
Professor Jacob A. Frenkel Prof. Frenkel, age 58, joined the Board of Directors of the Company on January
25, 2000, and was elected Chairman of the Board. Professor Frenkel is the
President of Merrill Lynch International and Chairman of Merrill Lynch's
Sovereign Advisory Group and Global Financial Institutions Group. He is also the
Chairman and CEO of the Group of Thirty (G-30). Previously, he served as
Governor of the Bank of Israel from 1991 through 2000. During his tenure as
Governor, he led the liberalization of the Israeli financial system, removed
foreign exchange controls, and reduced Israel's inflation rate to a level
prevailing in the major industrial countries. Prior to becoming the Governor of
the Bank of Israel, he served from 1987 through 1991 as the Economic Counselor
and Director of Research at the International Monetary Fund, and also held the
David Rockefeller Chair of International Economics at the University of Chicago
where he served on the faculty from 1973 to 1987. In 1994 he was named the
Weisfeld Professor of Economics of Peace and International Relations at Tel Aviv
University.
Aharon Dovrat Mr. Dovrat, age 69, joined the Board of Directors of the Company on June
23, 1999. Mr. Dovrat is the founder and chairman of Dovrat & Company, Ltd., a
privately held investment company, and chairman of Isal, Ltd., a publicly traded
investment company. Between 1991 and 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, fund 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 also serves as the chairman of the board of directors of: Dovrat &
Company, Isal Ltd., Breezecom Ltd., a wireless telecommunications equipment
technology company, and Cognifit Ltd. In addition, Mr. Dovrat serves as a member
of the board of directors of DS Polaris Ltd., Technomatix Technologies Ltd., a
software company, Delta Galil Ltd., a textile company, Dovrat Shrem & Co. and
B.O.S.- Better Online Solutions.
Philip Friedman Mr. Friedman, age 50, joined the Board of Directors June 23, 1999. Mr.
Friedman is the founder, President and Chief Executive Officer of Computer
Generated Solutions, Inc., a leading privately held technology 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 was recognized as an Entrepreneur of
the Year of the City of New York in 1996.
Thomas G. Hardy Mr. Hardy, age 55, joined the Board of Directors of the Company in February
1998. Since January 2000, Mr. Hardy has served as Vice Chairman of the Board of
Directors of Trans Resources Inc. He was President and Chief Operating Officer
of Trans-Resources, Inc. from December 1993 to December 2000, and was Executive
Vice President of Trans Resources Inc. from June 1987 to December 1993. In
addition, Mr. Hardy has been a director and member of the Financial Advisory
Committee of Trans Resources Inc. since October 1992. Mr. Hardy was a director
of Laser Industries Ltd. from January 1990 until February 1998, when it merged
with the Company.
Dr. Darrell S. Rigel Dr. Rigel, age 50, joined the Board of Directors of the Company on June 23,
1999. He has been a faculty member at New York University Medical School ("NYU")
since 1979, 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 a former president of the American
Academy of Dermatology. In 1996, Dr. Rigel founded and assumed the Presidency of
Interactive Horizons, Inc., a privately held company in the industry of
interactive computer systems. Dr. Rigel graduated from Massachusetts Institute
of Technology with an BS and an MS in Management Information Sciences.
Sash A. Spencer Mr. Spencer, age 69, joined the Board of Directors of the Company on June 23,
1999. He 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 also serves as a member of the
board of directors of Trans-Resources, Inc.
Professor Zehev Tadmor Prof. Tadmor, age 64, joined the Board of Directors of the Company on June 23,
1999. He currently serves 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. He served as the chairman of the
board of the S. Neaman Institute for Advanced Studies in Science & Technology at
the Technion since October 1998, and as chairman of the Yitzchak Rabin Center for
Israel Studies since June 2000. 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 on the board of governors of Technion, the
USA-Israel Science & Technology Commission, and is an elected member of the
Israeli Academy of Science and Humanities and the USA National Academy of
Engineering.
Mark H. Tabak Mr. Tabak, age 49, joined the Board of Directors of the Company on June 23,
1999. Mr. Tabak is the Vice Chairman of Multiplan, Inc. and founder, President
and Chief Executive Officer of International Managed Care Advisors, LLC, a
company that invests in and develops managed care type delivery systems
mainly addressing primary care needs in Latin America, Western and Central
Europe and Asia. Mr. Tabak is also managing partner of Healthcare Capital
Partners, affiliated with Capital Z Partners, a $3 billion investment fund
focusing on investing in healthcare, insurance and financial services. Between
1993 and 1996, Mr. Tabak served as President of AIG Managed Care, a subsidiary
of American International Group. Between 1990 and 1993, Mr. Tabak served as
President and Chief Executive Officer of Group Health Plan, a managed care
company and from 1986 to 1990, he served as President and Chief Executive
Officer of Clinical Pharmaceuticals, Inc., a pharmacy benefit management company
he founded in 1986. From 1982 to 1986, he served as President and Chief
Executive Officer of Health America Development Corporation.
Dr. Bernard Couillaud Dr. Couillaud, age 56, joined the Board of Directors of the Company on April 30,
2001. Since July, 1996, he has served as President and Chief Executive Officer of
Coherent Inc. and as a member of the Coherent Board of Directors. Dr. Couillaud
served as Vice President and General Manager of the Coherent Laser Group from
March 1992 to July 1996. From July 1990 to March 1992, Dr. Couillaud served as
Manager of the Coherent Advanced Systems Business Unit, and from September 1987
to July 1990 he served as Director of Research and Development for the Coherent
Laser Group. From November 1983, when he joined Coherent Laser Group, to
September 1987, Dr. Couillaud held various managerial positions with Coherent.
Dr. Couillaud received his PhD in Chemistry from Bordeaux University, Bordeaux,
France.
All directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and
qualified or until their earlier death, resignation or removal.
The following individuals are the executive officers and key
management of the Company:
Name Position and Business Experience
- ---- --------------------------------
Yacha Sutton Mr. Sutton, age 57, has served as Chief Executive Officer of the Company since
June 1999. Between July 1998 and April 1999, Mr. Sutton served as the Chief
Executive Officer of Scanvec Amiable Ltd. Between March 1995 and February 1998,
Mr. Sutton served as the President and Chief Executive Officer of Laser
Industries Ltd. Prior to such time, Mr. Sutton served as an Executive Vice
President and Chief Financial Officer of Laser Industries Ltd.
Sagi Genger Mr. Genger, age 29, was appointed Chief Financial Officer of the Company in
November 1999. Prior to joining the Company, Mr. Genger was employed in the
mergers and acquisitions department of Donaldson, Lufkin, and Jenrette, a
leading Wall Street investment bank, from 1997 through 1999. Prior to that, Mr.
Genger worked from 1996 through 1997 at Holding Capital Group, a boutique
investment house. Mr. Genger has an MBA and BS in Finance, International
Management and Legal Studies from the Wharton School of Business. Mr. Genger is
the son of Mr. Arie Genger, a shareholder who owns more than 5% of the Company's
issued and outstanding Ordinary Shares.
Louis Scafuri Mr. Scafuri, age 49, joined the Company in May 1999 as the Chief Executive
Officer of North America Operations. He presently serves as the Company's Chief
Operating Officer. Prior to this, Mr. Scafuri was the President and Chief
Operations Officer for Marquette Medical Systems, which was acquired by GE
Medical Systems. During his fourteen years with Marquette Medical Systems, he
held a number of management and leadership positions, including President of
Marquette Cardiology Group, Executive Vice President of Europe, Middle Eastern
and African Operations and President of Marquette's Corometrics Medical System
Subsidiary.
Asif Adil Mr. Adil, age 46, began to serve as Executive Vice President of Business Operations
on September 1, 2000. Mr. Adil previously worked with McKinsey & Company, Inc. for
the past 12 years, during the last six of which he was a partner. At McKinsey, he
was a leader of the North American Healthcare and Consumer Sectors. In addition
to responsibility for ESC's direct-to-consumer initiative (Aculight), he leads ESC's
business operations in North America and the United Kingdom. Mr. Adil has
counseled governments and clients across a spectrum of business opportunities
focused in the healthcare and consumer sectors. He has worked extensively with
new and established companies on strategic business issues including pricing and
promotion, branding, acquisition and divestitures, and global product launches.
Knowledge building in e-commerce and alliances were Mr. Adil's areas of
specialty at McKinsey. He has also held senior management positions with Sony
Corporation and PepsiCo Inc. He has an M.B.A. with Distinction from Cornell
University and is a licensed C.P.A.
Peter D'Errico Mr. D'Errico, age 43, joined the Company in January 2000 and was appointed as
the Vice President of Corporate Marketing. Previously, Mr. D'Errico was Vice
President, Worldwide Marketing for Chiron Diagnostics. During his sixteen years
with Chiron Diagnostics and CIBA Corning Diagnostics, he held a number of
management and leadership position including Vice President, International
Group, Managing Director, CIBA Corning Diagnostics Ltd., Halstead England and
Executive Director, New Business Development. Mr. D'Errico received a Masters in
Business Administration from Harvard University in 1983.
Yossi Gal Mr. Gal, age 45, joined the Company in July 2000 as Vice President of Human
Resources. Prior to joining the Company, Mr. Gal served as Vice President of
Human Resources and MIS in GE Medical Systems Israel from 1997 to 2000.
Previously, Mr. Gal worked with Elscint Ltd. for 16 years in a number of
managerial positions, which included Human Resources, Planning and Control
Director of Elscint's Manufacturing Division and Corporate Manager of Staffing
and Overseas Personnel. Mr. Gal has a B.A. in Sociology and Political Science
from Haifa University and an MSc. In Management & Behavioral Science from the
Technion.
Moshe Grencel Mr. Grencel, age 47, joined the Company in January 2001 as Vice President of
Operations. Prior to joining ESC, Mr. Grencel served as General Manager of
Elscint Industrial Solutions from 1998 to 2001. From years 1994 to 1998, Mr.
Grencel served as Vice President of Manufacturing at Elscint Ltd. Mr. Grencel
has a B.Sc. degree in Industrial Engineering from the Technion.
Yoram Levy Mr. Levy, age 51, is the Company's Vice President for Quality Assurance. He
joined the Company in March 1995 as the R&D director. Prior to this, Levy was
the R&D Director for Fidelity Medical where he managed the design of an Image
Processor for x-ray rooms. Before joining Fidelity Medical, Mr. Levy held R&D
management positions with Sony Corporation of America, Astronautics Corporation
of America, Elbit computers and Elscint Ltd. in the medical imaging, high
definition video image processing and in the defense industry.
Alon Maor Mr. Maor, age 38, joined the Company in January 1999 as the President and
Representative Director of ESC Japan. Since January 2000, Mr. Maor has served as
Chief Executive Officer of Asia Pacific Operations. Prior to joining the
Company, Mr. Maor was the President and Representative Director of Direx Japan,
a subsidiary of Direx Medical Systems. During his eleven years with Direx
Medical Systems, he formed Direx Japan and was responsible for capturing major
market share in Japan and Asia.
Israel Ohana, Ph. D. Dr. Ohana, age 47, joined the Company in February 2000 as the Vice President,
Research and Development. Prior to joining the Company, Dr. Ohana served as Vice
President of the Nuclear Medicine Division during 1997 through 1999 at Elscint
Ltd. From 1995 through 1997, Dr. Ohana served as Nuclear Medicine research and
development manager at Elscint Ltd. Dr. Ohana led the development of several
revolutionary products in the area of tumor localization and cardiac malfunction
and is the author or co-author of a number of patents and scientific
publications. Dr. Ohana received a BA in physics and mathematics from the Hebrew
University of Jerusalem, Israel and an M.A. and Ph.D. in Physics from the Hebrew
University of Jerusalem, Israel.
Dr. Michael Slatkine Dr. Slatkine, age 54, was appointed Vice President, New Business Development
in September 1999 after having served as Vice President, Marketing since March
1998, and Senior Vice President-New Business Development of Laser Industries
Ltd. starting in 1995. Dr. Slatkine managed the marketing and development
activities of Sharplan Lasers Inc., a subsidiary of Laser Industries Ltd., from
1992 to 1995. Dr. Slatkine holds a Ph.D. in Applied Physics from the Weizmann
Institute of Science and completed postdoctoral research at the LosAlamos
National Laboratories, New Mexico, USA.
Hadar Solomon Mr. Solomon, age 44, was appointed Vice President, General Counsel and
Corporate Secretary in March 1998, after having served as Vice President,
Corporate Affairs, General Counsel and Secretary of Laser Industries Ltd.
since May 1988. From July 1984 to May 1988, he served as Assistant General
Counsel of Laser Industries Ltd. Mr. Solomon is a Graduate of the Faculty of
Law of the Hebrew University of Jerusalem and is a member of the Israeli Bar.
Raphael Werner Mr. Werner, age 42, was appointed Chief Executive Officer of the Americas on
July 2000. Prior to that, he served as Vice President, Operations of the
Company since September 1999. He has served as Acting General Manager of Laser
Industries Ltd. since February 1998 and as Vice President of International
Operations of Laser Industries Ltd. since April 1997. From April 1993 to April
1997, he served as Laser Industries Ltd.'s Director and Vice President,
Operations. Mr. Werner holds a B.S. in Industrial Engineering from Tel Aviv
University.
Section 16(A) Beneficial Ownership Reporting Compliance
In 1999, the Company ceased to qualify as a "foreign private
issuer" (as defined in the Exchange Act) and became subject to the
reporting requirements of Section 16(a) of the Exchange Act. Section 16(a)
requires that the Company's directors and executive officers, and holders
of more than 10% of the Company's outstanding Ordinary Shares, file with
the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of Ordinary Shares. The Company believes
that during the fiscal year ended December 31, 2000, its directors,
executive officers, and holders of more than 10% of its Ordinary Shares
complied with the filing requirements of Section 16(a). In making this
statement, the Company has relied solely on a review of copies of reports
filed under Section 16(a) furnished to the Company and on the written
representations of its directors and executive officers, except for one
director who inadvertently failed to make a timely report.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth information concerning total
compensation earned by or paid to the Chief Executive Officer and the four
other highest paid executive officers of the Company as of December 31,
2000 (the "Named Officers") during the fiscal years indicated for services
rendered to the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term
Compensation
Securities
Variable Other Underlying
Name and Compensation Annual Options/SARs All Other
Principal Position Year Salary Bonus Compensation Granted Compensation
($) ($) ($) (1) (#) ($)
--------
Yacha Sutton 2000 240,000 0 36,000(2) 400,000 318,750(3)
Chief Executive 1999 $87,298 0 28,977 223,005 318,750
Officer 1997 N/A N/A N/A N/A 660,284
Louis Scafuri 2000 277,884 262,000 -- 0 0
Chief Operating 1999 163,461 275,519 -- 450,000 0
Officer* 1998 N/A N/A N/A N/A 0
Alon Maor 2000 322,122 0 415,384(4) 0
Chief Executive 1999 282,153 0 442,453 100,000 0
Officer of Asia 1998 N/A N/A N/A N/A 0
Pacific Operation **
Peter D'Errico 2000 149,038 64,854 -- 100,000 0
Vice President 1999 N/A N/A N/A N/A 0
-- Corporate Marketing 1998 N/A N/A N/A N/A 0
Raphael Werner -- 2000 173,539 60,000 -- 0 0
Chief Executive 1999 84,000 66,000 -- 66,000 0
Officer -- Americas 1998 82,750 33,000 -- 0 0
Business Unit***
---------------
* Prior to May 2000, Mr. Scafuri served as the Chief Executive
Officer, North America Operation.
** Prior to January 2000, Mr. Maor served as the President and
Representative Director of ESC Japan.
*** Prior to July 2000, Mr. Werner served as the Vice President of
Operations since September 1999 and as the Acting General Manager
of Laser Industries Ltd. since February 1998.
N/A The Named Officers were not actively employed by the Company
as of such time.
(1) Does not include perquisites or other personal benefits,
securities or property, the aggregate value of which does not
exceed the lesser of $50,000 or 10% of the Named Officer's salary
and bonus.
(2) Payment includes $18,000 for flat rent and $18,000 for a payment
made in respect of an Advance Study Fund.
(3) Payments made pursuant to a non-compete agreement between
Yacha Sutton and the Company in connection with the acquisition
of Laser Industries Ltd. by the Company.
(4) Payment includes $111,111 for reimbursements relating to flat
rental and $257,977 in sales commissions.
Option/SAR Grants in Last Fiscal Year
The following table provides information on options granted to the
Named Officers during the last fiscal year pursuant to the Company's option
plans.
The table also shows, among other data, hypothetical potential
gains from options granted in fiscal year 2000. These hypothetical gains
are based entirely on assumed annual growth rates of 5% and 10% in the
value of the price of Ordinary Share over the life of the options granted
in fiscal year 2000. The assumed rates of growth were selected by the
Securities and Exchange Commission for illustrative purposes only, and are
not intended to predict future stock prices, which will depend upon market
conditions and the Company's future performance and prospects. No SAR's
were granted during the last fiscal year and no SAR's are currently
outstanding.
OPTION/SAR GRANTS IN LAST FISCAL YEAR.
Potential Realizable
Individual Option Grants Value at Assumed Annual
Rates of Stock Price
Number of Appreciation for Option
Securities Percent of Total Term
Name Underlying Options Granted Exercise
Options to Employees in Price Expiration 5%($) 10%($)
Granted (#)(1) Fiscal Year ($/sh) Date
-------
Yacha Sutton 400,000(2) 16% 8.875 01 / 10 2,232,576 5,657,786
Louis Scafuri 0 0 -- -- -- --
Alon Maor 0 0 -- -- -- --
Peter D'Errico 100,000 4% 8 12/09 503,116 1,274,994
Raphael Werner 0 0 -- -- -- --
(1) All options have a term of ten years from respective grant dates.
(2) The Compensation Committee of the Board accelerated Mr. Sutton's
options as of January 2, 2001. In connection with such
acceleration Mr. Sutton agreed to a lock-up arrangement mirroring
the original vesting period prohibiting Mr. Sutton from selling
shares acquired from exercise of such options, except with respect
to the sale of shares necessary to enable a cashless exercise of
other options.
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values
The following table summarizes for each of the Named Officers
option exercises during the 2000 fiscal year, including the aggregate value
of gains on the date of exercise, the total number of unexercised options
for Ordinary Shares, if any, held at December 31, 2000 and the aggregate
number and dollar value of unexercised in-the-money options for Ordinary
Shares, if any, held at December 31, 2000. The value of unexercised
in-the-money options at fiscal year-end is the difference between the
exercise or base price of such options and the fair market value of the
underlying Ordinary Shares on December 29, 2000, which was $12.0625 per
share. Actual gains, if any, upon exercise will depend on the value of
Ordinary Shares on the date of any exercise of options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION/SARVALUES
Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
Fiscal Year End (#) Fiscal Year End ($)(1)
Shares
Acquired on Value Exercisable Unexercisable Exercisable Unexercisable
Name Exercise Realized ($)
(#)
--------
Yacha Sutton 0 0 289,671 333,334 1,594,415 1,063,335
Louis Scafuri 0 0 445,000 0 3,115,980 --
Alon Maor 0 0 100,000 0 700,200 --
Peter D'Errico 0 0 20,000 80,000 81,300 325,200
Raphael Werner 0 0 26,000 31,000 181,717 416,110
- ------
(1) The closing price of the ordinary shares on December 31, 2000 was $12.065 per share.
Employment Agreements, Termination Provisions and Change in Control Arrangements
Employment Agreement with Yacha Sutton
Effective January 1, 2000, the Company entered into an employment
agreement with Yacha Sutton (the "Sutton Agreement"), pursuant to which Mr.
Sutton will be employed by the Company in the position of Chief Executive
Officer. The Sutton Agreement will terminate automatically on December 31,
2002, unless otherwise agreed between Mr. Sutton and the Company in writing
and with the approval of the Board or unless earlier terminated under
specified circumstances.
The Sutton Agreement provides for a monthly base salary of
$20,000. Mr. Sutton is entitled to use a Company vehicle in accordance with
the Company's existing policies and the Company provides Mr. Sutton with
such additional benefits as generally provided by the Company to its senior
executives, including managers' insurance and Education Fund. The Sutton
Agreement provides for non-competition and non-solicitation covenants for a
period of two years following the date of termination of the Sutton
Agreement.
Mr. Sutton was granted options to purchase up to 400,000 of the
Company's ordinary shares under the terms and conditions of the Company's
1999 Option Plan (the "Plan"). The exercise price per share for the shares
covered by the said options is $8.875 (the closing price of the ordinary
shares on the Nasdaq Stock Market on January 3, 2000). These options have
all vested. Unless the Sutton Agreement and Mr. Sutton's employment with
the Company is terminated by Mr. Sutton for any reason or by the Company
for cause, all vested options will be exercisable at any time thereafter
until December 31, 2009, and will otherwise be subject to the provisions of
the Plan.
In the event of any termination of the Sutton Agreement and Mr.
Sutton's employment, the Company will only be obligated to pay (i) base
salary and benefits until the effective date of termination, provided that
Mr. Sutton continues his employment obligations through such period (if so
required by the Company), (ii) any severance payment to which Mr. Sutton
will be entitled pursuant to applicable Israeli law less any amounts
received by Mr. Sutton from his Managers' Insurance on account of a
severance payment and (iii) earned but unpaid benefits under Company plans.
In addition to the payments specified above, if Mr. Sutton's
employment is terminated by the Company at any time other than for cause
(as defined in the Sutton Agreement), then the unpaid balance of the
amounts payable by the Company to Mr. Sutton pursuant to the
Non-Competition Agreement, dated February 22, 1998, between the Company and
Mr. Sutton will be paid to Mr. Sutton in a lump sum, in lieu of monthly
installments.
Employment Agreement with Louis Scafuri
The Company and ESC Medical Systems Inc., a wholly owned
subsidiary of the Energy Systems Holdings, Inc., a wholly-owned subsidiary
of the Company, are parties to an employment agreement with Louis Scafuri
(the "Scafuri agreement") pursuant to which Mr. Scafuri serves as Chief
Operating Officer. The Scafuri Agreement became effective as of April 1,
1999, and will continue in effect (unless previously terminated) until
March 31, 2002, except that on each March 31 (commencing March 31, 2000),
the Scafuri Agreement will be extended for an additional period of one year
unless either party delivers a notice of intent not to renew not later than
January 1 of any year. The Scafuri Agreement may be terminated by either
party by giving a six-months prior written notice of the intent to
terminate the agreement; provided that in the event of a Change in Control
(as defined in the Scafuri Agreement), the Company may exercise its right
to terminate Mr. Scafuri's employment only upon at least one year's prior
notice.
The Scafuri Agreement provides for a monthly base salary of
$22,917. In 2000, Mr. Scafuri received an annual bonus of $262,000 which
was based upon the Company's achievement of certain performance goals. Mr.
Scafuri is also eligible for an annual bonus in an amount of up to 80% of
the base salary provided that the Company achieves certain performance
goals. Mr. Scafuri is also subject to a two year non-compete covenant and a
one-year non-solicitation covenant following the date he ceases to be
employed by the Company.
Employment Agreement with Alon Maor
ESC Japan Company Ltd. ("ESC Japan"), a wholly owned subsidiary of
the Company, is party to an employment agreement with Alon Maor (the "Maor
Agreement") pursuant to which Mr. Maor serves as Chief Executive Officer of
Asia Pacific operations. The Maor Agreement may be terminated by either
party upon the expiration of the term by a giving six-months prior notice.
Pursuant to the Maor Agreement, Mr. Maor will receive an annual
base salary in the amount of 22,000,000 (twenty-two million yen), an annual
housing allowance of approximately Y12,000,000, an annual allowance of
Y5,000,000 for the education of his children (subject to a tax gross up), a
company car and reimbursement for club membership dues. In addition, ESC
Japan will provide Mr. Maor with a retirement benefit after his first year
of service, which amount will equal the gross monthly salary at the time of
retirement and which will be increased in subsequent years by one month's
gross salary for each full year of employment by Mr. Maor. ESC Japan will
also pay 50% of the cost of Mr. Maor's Japanese National Health Insurance
Premiums. The Maor Agreement also provides for Mr. Maor to enter into a
confidentiality and non-competition agreement in accordance with standard
Company policy.
Employment Agreement with Peter D'Errico
ESC Medical Systems, Inc. is party to an employment agreement with
Peter D'Errico (the "D'Errico Agreement") pursuant to which Mr. D'Ericco serves
as the Vice President of Corporate Marketing for the Company. As of January 6,
2000, Mr. D'Errico received an annual base salary of $155,000. Mr. D'Errico may
be entitled to a bonus in the amount of $87,500 depending the achievement of
certain performance targets.
The D'Errico Agreement also provides for an option to purchase an
aggregate of 100,000 ordinary shares. The options will vest over a period
of five years with an exercise price of $8.00 per share. Mr. D'Errico is
also entitled certain benefits which the Company provides for similarly
situated employees. Pursuant to the D'Errico Agreement, in the event of a
termination of Mr. D'Errico's Agreement as a result of death or disability,
or for reasons which are beyond Mr. D'Errico's control, Mr. D'Errico will
be entitled to a severance payment in the amount equal to six-months
salary. The D'Errico Agreement also provides for Mr. D'Errico to enter into
a confidentiality and non-competition agreement in accordance with standard
Company policy.
Employment Agreement with Raphael Werner
The Company is a party to an employment agreement with Mr. Raphael
Werner (the "Werner Agreement") pursuant to which Mr. Werner serves as the
Chief Executive Officer of the Company's American operations. The term of
the Werner Agreement commenced on July 1, 2000. Under the terms of the
Werner Agreement, the Company is required to give Mr. Werner three months
prior notice in the event the Company terminates the Werner Agreement
within 24 months from the date of Mr. Werner's relocation to the United
States. The Werner Agreement provides for an annual base salary of $180,000
and an annual bonus of $90,000 for meeting certain targets as fully
detailed in the Werner Agreement.
Pursuant to the Werner Agreement, the Company is obligated to pay
up to $15,000 to Mr. Werner to cover expenses associated with relocation of
Mr. Werner and his family back to Israel, unless the termination of
employment was initiated by Mr. Werner. The Werner Agreement provides for
benefits similar to those provided by the Company to other similarly
situated employees. Under the terms of the Werner Agreement, Mr. Werner is
also obligated to enter into confidentiality and non-competition agreement
in accordance with standard Company policy.
Directors' Compensation
Subject to shareholder approval, each of the directors of the
Company who serves on any one or more of the sub-committees of the Board
(other than the Chairman), are entitled to a cash retainer fee for
participation in meetings of the Board of Directors or any sub-committee at
$2,500 per calendar quarter. Directors (other than the Chairman) are not
entitled to receive any additional per-meeting fee but they will be
reimbursed for their reasonable travel and accommodation expenses.
Compensation Committee Interlocks and Insider Participation
in Compensation Decisions
No member of the Compensation Committee is currently, or was at
any time during the fiscal year ended December 31, 2000, an officer or
employee of the Company (except for Mr. Thomas G. Hardy's consultancy
engagement with the Company as specified under Item 13 hereunder). No
executive officer of the Company served on the board of directors or
compensation committee of any entity which has one or more executive
officers serving as members of the Company's Board of Directors or
Compensation Committee.
In April, 2001, the Board of Directors notified changes to the
compensation terms of the executive officers of the Company, subject to the
execution of amendments to existing employment agreements.
ITEM 12: SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information regarding beneficial
ownership of the Company's Ordinary Shares as of April 27, 2001(except as
otherwise specified in the footnotes) by (i) each person who is the
beneficial owner of more than 5% of the outstanding Ordinary Shares, (ii)
all directors of the Company, (iii) the Company's Chief Executive Officer
and four most highly compensated executive officers, and (iv) all directors
and executive officers as a group. The Company had approximately 27,630,898
ordinary shares outstanding as of April 27, 2001.
----------------------------------------------------------------------------------------------------
Beneficial Owner Shares Owned Options Total
Exercisable Beneficial Percentage
within 60 days Ownership Ownership
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Coherent, Inc. (1) 5,432,099 0 5,432,099 16.42%
Provident Investment 3,053,917 0 3,053,917 11.05%
Counsel (2)
Arie Genger (3) 2,279,757 500,000 2,779,757 10.06%
FMR Corp (4) 2,445,350 0 2,445,350 8.85%
Bernard Gottstein (5) 1,939,634 0 1,939,634 7.02%
Aharon Dovrat 0 20,000 20,000 0.07%
Jacob A. Frenkel 10,000 400,000 410,000 1.48%
Philip Friedman 25,000 40,000 65,000 0.24%
Thomas Hardy 91,515 0 91,515 0.33%
Darrell S. Rigel 6,000 40,000 46,000 0.17%
Sash A. Spencer 11,000 40,000 51,000 0.19%
Mark H. Tabak 0 40,000 40,000 0.15%
Zehev Tadmor 0 20,000 20,000 0.07%
Yacha Sutton 225,000 198,005 423,005 1.52%
Louis Scafuri 5,000 445,000 450,000 1.63%
Alon Maor 0 100,000 100,000 0.36%
Peter D'Errico 2,000 20,000 22,000 0.08%
Raphael Werner 0 9,000 9,000 0.03%
All directors and 525,415 1,449,005 1,974,420 7.15%
executive officers as a
group (22 persons)
---------------
(1) The address of Coherent, Inc. ("Coherent") is 5100 Patrick Henry
Drive, Santa Clara, California 95054. Pursuant to an Asset
Purchase Agreement, dated as of February 25, 2001, by and among
ESC Medical Systems Ltd., Energy Systems Holdings, Inc., and
Coherent, Coherent agreed to acquire 5,432,099 ordinary shares of
ESC in exchange for certain of its assets, principally relating to
its Medical Group.
(2) The address of Provident Investment Counsel is 300 North Lake
Avenue, Pasadena, CA 91101-4022.
(3) The address of Mr. Arie Genger is 375 Park Avenue, New York, New
York 10152. The 2,279,757 shares include (a) 59,210 shares held
directly by Mr. Genger, (b) 2,176,547 shares held by corporations
directly or indirectly controlled by Mr. Genger, which controlled
corporations might be deemed to share voting and investment power
with Mr. Genger as to these shares, (c) 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 and (d) 4,000 shares beneficially owned by
Mr. Genger's spouse, as to which Mr. Genger disclaims beneficial
ownership.
(4) The address of FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02109.
(5) The address of Mr. Gottstein is 550 West 7th Avenue, Suite 1540,
Anchorage, Alaska 99501.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In October 2000, the Company engaged Mr. Thomas G. Hardy, a
director of the Company, as an outside consultant. Through March 31, 2000,
Mr. Hardy received approximately $100,000 from the Company for his consulting
services. As required under the Companies Law, Mr. Hardy's consulting
agreement will be brought for approval to the next shareholders meeting.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ESC MEDICAL SYSTEMS LTD.
By: /s/ Yacha Sutton
Yacha Sutton,
Chief Executive Officer
Dated: April 30, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- ------------------------- ------------------------------ ----------------
- ------------------------- ------------------------------ ----------------
/s/ Jacob A. Frenkel Chairman of the April 30, 2001
Prof. Jacob A. Frenkel Board of Directors
/s/ Aharon Dovrat Director April 30, 2001
Mr. Aharon Dovrat
/s/ Philip Friedman Director April 30, 2001
Mr. Philip Friedman
/s/ Thomas G. Hardy Director April 30, 2001
Mr. Thomas G. Hardy
/s/ Darrell S. Rigel Director April 30, 2001
Prof. Darrell S. Rigel
/s/ S.A. Spencer Director April 30, 2001
Mr. S.A. Spencer
/s/ Mark H. Tabak Director April 30, 2001
Mr. Mark H. Tabak
/s/ Zehev Tadmor Director April 30, 2001
Prof. Zehev Tadmor
/s/ Yacha Sutton Chief Executive Officer April 30, 2001
Mr. Yacha Sutton (Principal Executive Officer)
/s/ Sagi Genger Chief Financial Officer April 30, 2001
Mr. Sagi Genger (Principal Financial Officer)