Criticizes
Management and Board for Company's Disastrous Performance and for Failing to
Grasp the Gravity of the Company's Current Condition
Clarifies
Intentions With Regard to Current Investment in LCA-Vision and Sets Record
Straight With Regard to Past Departures From Company
Announces
Intention to Seek to Remove and Replace the Current Directors If Further
Rebuffed by Board
CINCINNATI--(BUSINESS
WIRE)--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
-
News
). 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
-
News
) (“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!
T
his ‘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 opportunisti
c 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
C
ommittee 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 di
scussions 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 se
rving 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 pres
ented 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 L
CAV’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 BOAR
D’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 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 CONSEN
T
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.
Contact:
For The
LCA-Vision Full Value Committee
and
Stephen N. Joffe
Lisa
Blaker, 513-659-2001
Source:
The LCA-Vision Full Value Committee