LCA-Vision's Former Executive Management Team Sends Open Letter to LCA-Vision Stockholders
18 December 2008 - 12:00AM
PR Newswire (US)
Criticizes Management and Board for Company's Disastrous
Performance and for Failing to Grasp the Gravity of the Company's
Current Condition CINCINNATI, Dec. 17 /PRNewswire/ -- 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. DATASOURCE: Steve Joffe CONTACT: Lisa Blaker,
+1-513-659-2001, for Steve Joffe
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