THE
LCA-VISION FULL VALUE COMMITTEE
9560
Montgomery Road
Cincinnati,
OH 45242
March 9,
2009
To: The
Compensation Committee of the Board of Directors of LCA-Vision,
Inc.
William
Bahl, Chairman
John
Gutfreund
John
Hassan
E.
Anthony Woods
Please be advised that we believe
that a recent grant of stock option awards violates the legal authority
stockholders have provided the Board of Directors, and hereby request formal
justification from the Board as to the validity of such
grant.
Specifically,
the LCA-Vision Full Value Committee believes the stock option awards that the
Compensation Committee of the Board of Directors of LCA-Vision, Inc. (“LCAV”)
granted to Steven Straus, Michael Celebrezze, Stephen Jones, and David Thomas on
March 2, 2009 - constituting approximately
2% of LCAV’s outstanding share
capital -
exceeded and
are in violation of the legal authority stockholders granted to you
in
approving the 2006 Stock Incentive Plan (the “Plan”) at LCAV’s 2006 Annual
Meeting.
According
to the Form 4 filings with the Securities and Exchange Commission (the “SEC”) on
March 4, 2009, the below stock option awards were granted:
Steven
Straus 108,816
stock options
Michael
Celebrezze
85,497 stock options
Stephen
Jones
85,497 stock options
David
Thomas
85,497 stock options
As the
Compensation Committee should be aware, Section 4.2 of the Plan
provides:
Maximum Awards Per
Participant
.
The number of Shares covered by
Options, together with the number of SAR units, granted to any one individual
shall not exceed 37,500 during any one fiscal-year period
; provided,
however, that this limitation shall be 375,000 Shares, together with SAR units,
in the case of an inducement Award made at the time of an Employee’s initial
hiring. If a previously granted Option or SAR is forfeited, cancelled
or deemed cancelled, such Option or SAR shall continue to be counted against the
maximum number of Shares or units that may be granted to any one Participant
during any one fiscal-year.
Based on
our review of LCAV’s SEC filings,
this Plan was never amended to
increase the authority of the Board or the Compensation Committee to award a
greater number of options than that provided in Section
4.2
. Further, we believe
stockholder approval would be
required
for any such amendment under the provisions of the Plan itself
and the relevant NASDAQ Rules and provisions of the Internal Revenue
Code. We note that it has not been disclosed that the grants were
made conditional on subsequent approval by the stockholders of such a Plan
amendment. Moreover, LCAV has not publicly disclosed that the Board
has amended the Plan
even
were
the Board deemed to have unilateral authority to do so.
In
addition to the Board’s apparent and blatant violation of the authority provided
to it by LCAV stockholders regarding material terms of the Plan, we are also
very troubled by the
curious
timing of these sizeable stock option grants.
Relevant here is
the fact that these stock options grants - which were made at a time when LCAV’s
Board and management knew that the RiskMetrics Group ISS Governance Services
(“RiskMetrics”) recommendation was imminent - were not disclosed until
after
RiskMetrics had finalized its voting recommendation. As discussed in
our consent solicitation to remove the current members of the Board, the
failures of the LCAV Board to its stockholders in terms of compensation
practices, both as it relates to the Board itself and management is a persistent
and pervasive issue.
Needless
to say, we are deeply concerned by the
sheer magnitude
of these stock
option grants, which
constitute
approximately 2% of LCAV’s outstanding share capital
. The
LCA-Vision Full Value Committee believes that the LCAV Board owes its
stockholders a timely explanation as to the valid authority underlying these
excessive stock option grants to management, and further believes an immediate
revocation thereof may be in order pending stockholder
approval.
Cc: Gerald
Greenberg and Patricia Lowry
(Taft,
Stettinius & Hollister LLP, outside counsel to LCA-Vision,
Inc.)
Risk
Metrics Group ISS Governance Services
Glass Lewis & Co.
Proxy Governance
Services