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The LCA-Vision Full Value Committee, comprised of Dr. Stephen N. Joffe,
Craig P.R. Joffe and Alan H. Buckey, today announced that it has sent a
letter to the stockholders of LCA-Vision Inc. (NasdaqGS: LCAV). The
members of The LCA-Vision Full Value Committee collectively own
approximately 11.4% of the Company’s outstanding shares.
The full text of the letter follows:
A Message from the LCA-Vision Full Value Committee
ATTENTION LCA-VISION STOCKHOLDERS
December 17, 2008
Dear Fellow Stockholder:
IT IS TIME FOR A CHANGE!
Dr. Stephen N. Joffe, Craig P.R. Joffe and Alan H. Buckey
(collectively, “The LCA-Vision Full Value Committee”) own in the
aggregate approximately 11.4% of the outstanding shares of
LCA-Vision, Inc.(NasdaqGS: LCAV) (“LCA-Vision” or the “Company”),
making us one of the largest stockholders of the Company. The
LCA-Vision Full Value Committee is comprised of the founders and
former executive management team of LCA-Vision that helped build the
Company from the ground up into the industry leader it once was. In
a very short period of time, over 90% of the Company’s value has
been wiped out under the existing executive management team and
Board of Directors of the Company (the “LCA Board”). What’s more,
the management and Board do not seem to share our serious concerns,
or feel any sense of urgency regarding this dramatic decline in the
Company’s operating and stock performance.
In the two years since Steve Straus was hired as CEO by the Board of
Directors in November 2006, LCA-Vision shares have decreased over
90% from $32.71 to $3.12, the closing price on the day before we
disclosed our 11.4% position in a filing with the Securities and
Exchange Commission. This represents an astounding loss in market
capitalization to the Company’s stockholders of hundreds of millions
of dollars and is simply unacceptable. Regardless of the metric or
indicator one looks at - whether it be the Company’s market
capitalization, same store revenues, procedural volume, marketing
costs, cash on the balance sheet, or employee attrition and morale -
the story of abysmal performance is the same. While we know
macroeconomic, industry and consumer challenges have contributed, in
part, to the Company’s difficulties, we believe the Company’s
disastrous performance is primarily attributable to a lack of
strategic direction, poor decision-making, and poor execution by the
LCA Board and executive management team.
The Company’s management and Board are leading the Company down a
path to self-destruction. We, on the other hand, have a plan to
right the ship and put the Company back on the path towards
maximizing stockholder value. In light of our past experience both
with the Company and in the laser correction industry generally, we
are uniquely positioned to help turn LCA-Vision around. We will do
everything within our power to save the Company that we worked so
hard to build into an industry leader. Under our leadership, as
recently as 2006, LCA-Vision was named one of the top Small Cap
Growth companies in the United States by Fortune and one of the “Hot
Growth Companies” by Business Week. With a lot of hard work by a
passionate team that knows what they’re doing, we are committed to
turn the Company around to get there again.
LCA-VISION’S CURRENT BOARD JUST DOESN’T GET IT!
It has become clear to us that LCA-Vision’s Board just does not get
it! We were both shocked and disappointed to read in a December 10,
2008 letter from the Company’s Chairman, E. Anthony Woods, the LCA
Board does not agree with our description of the Company’s condition
as “dire” or its prognosis as “poor.” How bad does it have to get
for stockholders before management and the Board to acknowledge the
gravity of the situation facing the Company?
We have attempted numerous times to voice our serious concerns to
the Board regarding the Company’s woeful performance and to offer
our assistance and expertise to work together to help turn the
Company around. How did the Company respond? By adopting a
self-serving ‘poison pill’ designed to entrench the Company’s Board
and management. Although the Board has done little to actually help
the Company or its shareholders, apparently our significant concerns
did not fall on totally deaf ears.
Do not be fooled! This ‘poison pill’ is not nearly as much
about protecting your interests as it is about protecting and
promoting the self-serving interests of management and the LCA
Board. We find it rather ironic that the Company claims the
‘poison pill’ was adopted to protect stockholders against tactics
that could impair the LCA Board’s ability to represent
stockholders’ interests fully. In fact, it appears to us that the
ones who stockholders really need protection from is a Board and
management team who are burning $2 million of cash per month,
adopting ‘golden parachutes’ for executives, and paying out
excessive compensation to executives and members of the Board, all
despite the Company’s abysmal performance. Furthermore, the Board
would have you believe that “the stockholder rights plan adopted
by LCA-Vision is similar to rights plans adopted by many other
publicly traded companies.” What they conveniently fail to tell
you is that the ‘poison pill’ contains an overbroad, unusual and
uncustomary ‘adverse person’ provision that essentially gives the
Company “carte blanche” authority to lower the poison pill’s
ownership threshold to just 10 percent if a majority of the LCA
Board determines that an individual or group of investors
(including existing 10% holders) is an “adverse person.” As the
Board also neglected to tell you, RiskMetrics (ISS) generally
looks down upon ‘poison pills’ that include provisions like this
that could cause a large stockholder to inadvertently trigger the
pill.
DO NOT BE MISLED!
In the coming months, LCA-Vision stockholders will be making
critical decisions regarding the future of our Company. As such, it
is imperative that you have all the facts straight and understand
precisely how the interests of the LCA-Vision Full Value Committee
are squarely aligned with those of all stakeholders. We urge you not
to be distracted by any “smokescreens” the Company may use to divert
your attention from the real issues affecting the Company. The
bottom line is that no “smokescreen” can conceal the plain truth
about the Company’s disastrous performance.
WHAT THEY MAY SAY: “The LCA-Vision Full Value Committee is
seeking to take control of the Company without paying a premium.
The members of the LCA-Vision Full Value Committee are short-term
opportunistic stockholders. They acquired more than 10% of the
Company over a period of less than a month at current low price
levels. As such, their interests may not be aligned with those of
long-term stockholders. In fact, the members of the LCA-Vision
Full Value Committee were exploring a potential transaction to
take your Company private as recently as July of this year.”
THE REALITY: Make no mistake about it: the members of The
LCA-Vision Full Value Committee are long-term stockholders of the
Company. As such, our interests are directly aligned with the
interests of all stockholders. If elected to the LCA Board, we are
committed to working tirelessly to increase stockholder value. The
members of the LCA-Vision Full Value Committee terminated all
substantive discussions in connection with a potential transaction
in July of this year and began to independently acquire shares of
the Company’s common stock based on their belief that the shares
represented an attractive investment opportunity.
WHAT THEY MAY SAY: “Each of the members of the LCA-Vision
Full Value Committee has previously served as an executive officer
of LCA-Vision and, in the case of Dr. Joffe and Craig Joffe, also
as a director. Each of these gentlemen voluntarily resigned from
those positions to pursue alternative personal or business
objectives. The LCA Board believes that their recent offers to
help the Company are not genuine especially since they previously
abandoned the Company.”
THE REALITY: Dr. Joffe, Craig Joffe and Alan Buckey left
the Company at different times, under different circumstances. Dr.
Joffe resigned as CEO in February 2006, and was replaced as
Chairman of the Board in March 2006. The backdrop surrounding
these events was a disagreement with the Board over the terms of
his compensation. Dr. Joffe was never awarded a single stock
option or share by the Board during his entire tenure with the
Company. The LCA-Vision Full Value Committee is fully committed to
tying the CEO’s compensation to performance and will not continue
the Company’s unfortunate trend of rewarding the CEO with
increased compensation and benefits while stockholder value
suffers, regardless of who the CEO is. Craig Joffe resigned as a
Director, Chief Operating Officer & General Counsel in March 2007.
After serving as Interim CEO of the Company from March-November
2006, Craig Joffe worked with Steve Straus for approximately five
months before concluding that Mr. Straus would not lead the
Company in a direction with which Craig Joffe would be proud to be
associated. Alan Buckey resigned in June 2008. Mr. Buckey had
serious concerns with the performance of Mr. Straus as CEO and
encountered problems in attempting to work with Mr. Straus and the
members of the LCA-Board to increase stockholder value. Mr. Buckey
presented the Chairman of the Board a long list of concerns about
Steve Straus’s continued role at the Company. After the Chairman
continued to blindly support Steve Straus, Mr. Buckey realized he
had no choice but to resign. Since his departure, the serious
concerns Mr. Buckey had perceived and voiced regarding the Company
and CEO Straus have been unfortunately realized, as evidenced by
the recent disastrous performance and loss of confidence in the
CEO. With Mr. Buckey’s departure, the loss of institutional
knowledge and history in the Company’s executive suite was
complete.
A number of surgeons have indicated their strong support for the
return of Dr. Joffe and the other members of the LCA-Vision Full
Value Committee. On more than one occasion in the past year, a
majority of the Company’s affiliated surgeons have informed the
Company’s Chairman and independent directors that they have “NO
CONFIDENCE” in the ability of Mr. Steve Straus as a leader.
WHAT THEY MAY SAY: “One of the primary reasons Dr. Joffe
resigned his positions with the Company in 2006 was due to his
undisclosed interests in TLC Vision Corporation (“TLC”), one of
the Company’s primary competitors. In 2007, Dr. Joffe expressed
interest in a potential transaction to take TLC private and then
threatened an election contest in 2008. How can you trust that Dr.
Joffe is fully committed to LCA-Vision and that his interests are
aligned with yours?”
THE REALITY: Dr. Joffe is fully committed to LCA-Vision,
the Company he founded. He feels financially, ethically, and
reputationally compelled to help rescue LCA-Vision before it
implodes. Dr. Joffe looks forward to the opportunity to once again
help build LCA-Vision into the industry leader it once was under
his auspices. Furthermore, if elected to the LCA Board, Dr. Joffe
would agree not to take an interest or ownership position in any
ophthalmic-related company and his focus would be on maximizing
stockholder value at LCA-Vision.
WHAT THEY MAY SAY: “Dr. Joffe and Craig Joffe co-founded
Joffe MediCenter, a competitor of LCA-Vision in certain markets.
As such, stockholders should question their true intentions with
regard to their investment in LCA-Vision and should ask themselves
whether their interests are aligned.”
THE REALITY: Joffe MediCenter, a laser vision and aesthetic
company, operates in just two locations in the U.S. and arguably
competes with LCA-Vision vision centers in these markets. With its
two locations, Dr. Joffe and Craig Joffe do not believe Joffe
MediCenter is material to LCAV’s financial and operational
results. Cognizant of any potential for perceived conflicts of
interest, however, Dr. Joffe and Craig Joffe would agree, if
elected to the LCA Board, to explore, in good faith, selling to
the Company their interests in Joffe MediCenter, among other
options. In addition, during such discussions with the Board, Dr.
Joffe and Craig Joffe would agree not to open any new locations
that compete with LCA-Vision vision centers in such markets.
Stockholders should know that the investment in Joffe MediCenter,
in which Craig Joffe serves as the CEO, has enabled Dr. Joffe and
Craig Joffe to remain current in the laser vision correction
industry, including operating in the challenging macroeconomic and
consumer environment that exist today. In addition to growing its
LASIK business during these challenging economic times, Joffe
MediCenter has provided Dr. Joffe and Craig Joffe key insights
regarding possible revenue streams LCA-Vision may want to assess
as it looks to diversify its revenue streams going forward,
including laser-based and other aesthetic procedures. The
LCA-Vision Full Value Committee believes that it can make the most
out of these insights in helping to restore value at the Company.
ASK YOURSELF WHETHER THE CURRENT BOARD’S INTERESTS ARE ALIGNED
WITH YOUR BEST INTERESTS AS STOCKHOLDERS
We believe the apparent lack of concern for stockholder value is at
least in part due to the fact that the current directors have little
personal stake in the company. It should be noted that collectively
the members of the LCA Board and the executive management team
beneficially own less than 1% of the Company. And approximately half
of the shares owned by the Board were granted by the Company as
compensation to the Board for their service. Despite the Company’s
disastrous performance, management continues to reward themselves
with large payouts. In the first quarter of 2008, the LCA Board
granted the CEO an 8% raise. In the second quarter of 2008, upon
announcing disastrous financial and operating results, the LCA Board
significantly increased the CEO’s guaranteed payments under a golden
parachute from one year to two years, and provided him with other
benefits. We urge all stockholders to ask themselves whose interests
the Board has in mind when it fails to tie the compensation of its
CEO to performance, and when it responds to our genuine offer to
help restore value by adopting an overly broad poison pill without
stockholder approval. We believe the answer is clear.
WE ARE NOT THE ONLY ONES WHO HAVE LOST CONFIDENCE IN THIS BOARD
AND MANAGEMENT TEAM
Since announcing our significant stock position in the Company, we
have had the opportunity to speak to a number of LCA-Vision’s
stockholders and analysts. Needless to say, it has become abundantly
clear to us that we are not the only ones unhappy with the Company’s
performance. Since Steve Straus was appointed CEO in November 2006,
over 10 of the Company’s leading ophthalmologists have either
resigned or been terminated by the Company, apparently without
cause. In addition, in a letter dated June 10, 2008, a majority of
the Company’s affiliated surgeons informed the Company’s Chairman
and independent directors that they had “NO CONFIDENCE in the
ability of Mr. Steve Straus to right the direction of LCA-Vision as
a businessman and as a leader of surgeons and staff.” This letter,
which was signed by 40 of the 46 surgeons contacted, was followed up
by subsequent correspondence to the LCA Board from the surgeons
declaring their lack of confidence in the CEO. How did the LCA Board
respond? By adopting more protective indemnification agreements to
further insulate them from their own accountability “to the fullest
extent of the law.” Does this sound like a Board that is more
committed to advancing stockholders’ interests, or its own?
STOCKHOLDER VALUE CONTINUES TO ERODE UNDER THIS BOARD AND
MANAGEMENT TEAM
While the Board spends its time and our money looking for ways to
further entrench itself and protect its own interests, LCA’s
operational and financial performance continues to deteriorate. Over
the past nine months, stockholder value has continued to erode under
this Board and management team’s misguided strategic direction, and
there does not appear to be an end in sight.
IT IS TIME FOR ACCOUNTABILITY
Enough is enough! It is time for stockholders to be heard. This
Board has made a mockery out of corporate governance, while the
Company continues to lose money at an alarming rate and stockholders
suffer significant losses. Given the current Board’s history of weak
oversight and poor judgment, we do not believe the current Board has
the ability or willingness to make the necessary structural,
leadership and operational changes required to maximize stockholder
value. Accordingly, the LCA-Vision Full Value Committee believes the
best way to address these issues is by removing all members of the
current LCA Board and replacing them with highly qualified and
experienced individuals committed to enhancing stockholder value.
In the coming days, we will yet again reach out to the LCA Board in
hopes that they are now ready to engage in meaningful discussions
with us regarding our serious concerns with the Company and the
reconfiguration of the LCA Board to include the members of The
LCA-Vision Full Value Committee. If the LCA Board continues to
rebuff us and summarily dismiss us as a “distraction,” we will not
hesitate to take all necessary action to protect our investment,
including seeking to remove and replace the existing LCA Board. We
hope that you share our sense of urgency and support us as we
continue to do everything within our power to save the Company and
maximize stockholder value.
Thank you in advance for your support.
Sincerely,
The LCA-Vision Full Value Committee
CERTAIN INFORMATION CONCERNING PARTICIPANTS
The LCA-Vision Full Value Committee intends to make a preliminary filing
with the Securities and Exchange Commission (“SEC”) of a consent
solicitation statement relating to the solicitation of written consents
from stockholders of LCA-Vision Inc., a Delaware corporation (the
“Company”), in connection with seeking to remove and replace the current
members of the Board of Directors of the Company.
THE LCA-VISION FULL VALUE COMMITTEE ADVISES ALL STOCKHOLDERS OF THE
COMPANY TO READ THE CONSENT SOLICITATION STATEMENT AND ANY OTHER
SOLICITATION MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. SUCH SOLICITATION MATERIALS WILL BE
AVAILABLE AT NO CHARGE ON THE SEC’S WEB SITE AT HTTP://WWW.SEC.GOV.
IN ADDITION, THE PARTICIPANTS IN THIS SOLICITATION WILL PROVIDE COPIES
OF THE CONSENT SOLICITATION STATEMENT WITHOUT CHARGE UPON REQUEST.
REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS’ SOLICITOR.
The participants in the consent solicitation are Dr. Stephen N. Joffe,
Craig P.R. Joffe and Alan H. Buckey.
As of the date of this filing, Dr. Joffe directly beneficially owns
1,171,952 shares of Common Stock of the Company, Craig P.R. Joffe
directly beneficially owns 863,829 shares of Common Stock of the
Company, and Alan H. Buckey directly beneficially owns 77,900 shares of
Common Stock of the Company.
For the purposes of Rule 13d-5(b)(1) of the Securities Exchange Act of
1934, as amended, each of the participants in this solicitation is
deemed to beneficially own the shares of Common Stock of the Company
beneficially owned in the aggregate by the other participants. Each of
the participants in this proxy solicitation disclaims beneficial
ownership of such shares of Common Stock except to the extent of his or
its pecuniary interest therein.