LCA-VISION INC.
7840 Montgomery Road
Cincinnati, Ohio 45236
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 11, 1998
TO THE STOCKHOLDERS OF LCA-VISION INC.:
You are cordially invited to attend the Annual Meeting of the
Stockholders of LCA-Vision Inc. to be held on May 11, 1998 at
10:00 a.m. at The Queen City Club, 331 East Fourth Street,
Cincinnati, Ohio 45202, for the purpose of considering and acting
on the following:
1. Election of four directors to serve until the 1999
Annual Meeting.
2. Transaction of such other business as may properly
come before the meeting or any adjournment thereof.
Stockholders of record at the close of business on April 1,
1998 will be entitled to vote at the meeting.
By Order of the Board of Directors
Sandra F.W. Joffe
Secretary
April 21, 1998
IMPORTANT
A Proxy Statement and proxy are submitted herewith. As a stockholder,
you are urged to complete and mail the proxy promptly whether or not you plan
to attend this Annual Meeting in person. The enclosed envelope for return of
proxy requires no postage if mailed in the U.S.A. Stockholders attending the
meeting may personally vote on all matters which are considered in which event
their signed proxies are revoked. It is important that your shares be voted.
In order to avoid the additional expense to the Company of further
solicitation, we ask your cooperation in mailing your proxy promptly.
<PAGE>
PROXY STATEMENT
LCA-VISION INC.
7840 Montgomery Road
Cincinnati, Ohio 45236
ANNUAL MEETING OF STOCKHOLDERS
May 11, 1998
INTRODUCTION
The enclosed form of proxy is being solicited on behalf of
the Board of Directors of LCA-Vision Inc. (also referred to as
"LCA-Vision" or the "Company") for the Annual Meeting of
Stockholders to be held on May 11, 1998. Each of the 36,664,815
shares of LCA-Vision Common Stock, $.001 par value (the "Common
Stock") and each of the 1,688 shares of LCA-Vision Class A
Preferred Stock, $.001 par value (the "Class A Preferred Stock")
outstanding on April 1, 1998, the record date of the meeting, is
entitled to one vote on all matters coming before the meeting.
Each of the 12.6 shares of Interim Series Class B Preferred Stock,
$.001 par value (the "Class B Preferred Stock") outstanding is
entitled to one vote for each share of Common Stock into which a
share of Class B Preferred Stock is convertible (a total of
1,293,731 shares of Common Stock). Only stockholders of record on
the books of the Company at the close of business on April 1, 1998
will be entitled to vote at the meeting either in person or by
proxy. This Proxy Statement is being mailed to stockholders on or
about April 21, 1998.
The shares represented by all properly executed proxies which
are sent to the Company will be voted as designated and each not
designated will be voted affirmatively. Each person granting a
proxy may revoke it by giving notice to the Company's Secretary in
writing or in open meeting at any time before it is voted.
Proxies will be solicited principally by mail, but may also be
solicited by directors, officers and other regular employees of
the Company who will receive no compensation therefor in addition
to their regular salaries. Brokers and others who hold stock in
trust will be asked to send proxy materials to the beneficial
owners of the stock, and the Company will reimburse them for their
expenses. The expense of soliciting proxies will be borne by the
Company.
The Annual Report of the Company for the fiscal year ended
December 31, 1997 is enclosed with this Proxy Statement.
ELECTION OF DIRECTORS
Four directors are to be elected to hold office until the
1999 Annual Meeting of Stockholders. It is the intention of the
individuals named in the proxy to vote for the election of only
the four nominees named. Only four directors will be elected. In
no event will the proxies solicited hereby be voted for other than
the four nominees named.
All of the nominees are currently serving as members of the
Board of Directors. While management has no reason to believe
that any of the nominees will, prior to the date of the meeting,
refuse or be unable to accept the nominations, should any nominee
so refuse or become unable to accept, the proxies will be voted
for the election of such substitute nominee, if any, as may be
recommended by the Board of Directors. Nominees receiving the
four highest totals of votes cast in the election will be elected
as directors. Proxies in the form solicited hereby which are
returned to the Company will be voted in favor of the four
nominees specified above unless otherwise instructed by the
stockholders. Abstentions and shares not voted by brokers and
other entities holding shares on behalf of beneficial owners will
not be counted and will have no effect on the outcome of the
election.
Directors are elected annually and serve for one year terms.
Information with respect to each of the four nominees is as
follows:
Stephen N. Joffe, M.D., age 55, is the President of the
Company. He was the founder of the Company's corporate
predecessor, Laser Centers of America, Inc. ("LCA") and served as
its Chairman of the Board and Chief Executive Officer from its
founding in 1985 until its merger into the Company in 1995. He
also founded Surgical Laser Technologies, Inc. in 1983 and served
as its Chairman until January 1990. In addition, Dr. Joffe is an
Esteemed Professor of Surgery at the University of Cincinnati
Medical Center, a position he has held since 1990. He was a full-time
Professor of Surgery at the University of Cincinnati Medical
Center for nine years prior to 1990. He has held faculty
appointments at the Universities of London, Glasgow and Cincinnati
and holds fellowships of the American College of Surgeons and the
Royal College of Surgeons of Edinburgh and Glasgow.
John C. Hassan, age 55, is and has been the President of
Champion Printing, Inc. for more than five years. Previously, he
was Vice President, Marketing of the Drackett Company, a division
of Bristol-Meyers Squibb. He currently serves as Treasurer of
Printing Industries of Southern Ohio, and is a board member of the
Ohio Graphics Arts Health Fund, the Camargo Club and serves on the
Greater Cincinnati United Way and Fine Arts campaigns. Mr. Hassan
received his undergraduate degree from Princeton University and
his M.B.A. from Dartmouth College.
William O. Coleman, age 69, formerly held positions at The
Procter & Gamble Company (1955 to 1989) that included General
Sales Manager, Vice President Food Products, Vice President
International/Latin America, and most recently, Vice President
Professional Affairs, Special Projects. Mr. Coleman continues to
serve as a Trustee of the Procter & Gamble Retirement Trusts. In
addition to his accomplishments professionally, Mr. Coleman also
has served as: General Chairman of the Greater Cincinnati United
Way Campaign; President of the Boys & Girl Clubs; Chairman of the
Dan Beard Council Boy Scouts; Vice Chairman, University of
Cincinnati Foundation; and Director of the Greater Cincinnati
Foundation. A graduate of the University of Oklahoma (B.B.A.,
Finance), Mr. Coleman served in the U.S. Navy in Korea.
John H. Gutfreund, age 68, is President of Gutfreund &
Company, Inc., a New York-based financial consulting firm that
specializes in advising select corporations and financial
institutions in the United States, Europe and Asia. Formerly, Mr.
Gutfreund was with Salomon Brothers from 1953 - 1991. He was:
Chairman of the Board and Chief Executive Officer, Salomon
Brothers Inc. (1981 - 1991); Co-Chairman, Phibro Corp. (1981 -
1983); Co-Chief Executive Officer, Phibro-Salomon Inc. (formerly
Phibro Corp.) 1983 - 1984; Chief Executive Officer, Phibro-Salomon
Inc. (1984 - 1986); Chairman, Chief Executive Officer, President,
Salomon Inc. (formerly Phibro-Salomon Inc.) 1986 - 1991. Mr.
Gutfreund is: Director, Montefiore Medical Center, New York City
and a Member of the Executive Committee of the Board of Trustees
and Finance and Real Estate Committees; Member, Council on Foreign
Relations; Member, the Board of Trustees, New York Public Library,
Astor, Lenox and Tilden Foundations; Honorary Trustee, Oberlin
(Ohio) College; and Trustee, Arperture Foundation. He is past
Vice Chairman of the New York Stock Exchange (1985 - 1987); past
Member, Board of Directors, Securities Industry Association; past
Chairman of the Downtown Lower Manhattan Association; past
President and Member of the Board of Governors of the Bond Club of
New York; and past Member, The Trilateral Commission. A graduate
of Oberlin College (B.A., 1951), Mr. Gutfreund served in the U.S.
Army in Korea in 1951 - 1953.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
In the fiscal year ended December 31, 1997, the Board of
Directors met on five occasions. Each incumbent director during
the last fiscal year attended 75% or more of the aggregate of (i)
the total number of meetings of the Board of Directors (held
during the period for which he or she has been a director) and
(ii) the total number of meetings held by all committees of the
Board on which he or she served (during the periods that he or she
served). The Board of Directors has two standing committees, the
Audit Committee and the Compensation Committee.
The Audit Committee recommends to the entire Board of
Directors the independent auditors to be retained by the Company,
consults with the independent auditors with respect to their audit
plans, reviews their audit report and any management letters
issued by them, and consults with the independent auditors with
regard to financial reporting and the adequacy of internal
controls. The Audit Committee was established in 1997 and held
one meeting in 1997. Its membership consists solely of
independent directors. Its present members are Messrs. Coleman,
Gutfreund and Hassan.
The Compensation Committee recommends to the entire Board of
Directors the compensation arrangements for the Company's
executive officers and administers the Company's stock option
plans. The Compensation Committee was established in 1997 and
held one meeting in 1997. Its membership consists solely of
independent directors. Its present members are Messrs. Coleman
and Gutfreund.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Under Section 13(d) of the Securities Exchange Act of 1934
and the rules promulgated thereunder, a beneficial owner of a
security is any person who directly or indirectly has or shares
voting power or investment power over such security. Such
beneficial owner under this definition need not enjoy the economic
benefit of such securities. The following table sets forth
information with respect to the beneficial ownership of shares of
Common Stock and Preferred Stock as of December 31, 1997 of each
executive officer, each director, and each stockholder known to be
the beneficial owner of 5% or more of Common Stock or Preferred
Stock, and all officers and directors as a group.
Amount and
Nature
Name and Address of of Percent
Beneficial Owner Title of Class Ownership(1) of Class
Stephen N. Joffe, M.D., Common Stock 16,524,330 shares 43.5%
President & Director owned of record
Sandra F.W. Joffe, and beneficially(2)
Secretary & Treasurer
8750 Red Fox Lane Class A 3,376 shares owned 50.0%
Cincinnati, Ohio 45243 Preferred Stock of record and
beneficially
Class B
Preferred Stock 12.6 shares owned 100.0%
of record and
beneficially
Summit Technology, Inc. Common Stock 7,164,361 shares 19.5%
21 Hickory Drive owned of record and
Waltham, MA 02154 beneficially
Craig P.R. Joffe Common Stock 2,500,313 shares 6.8%
7840 Montgomery Road owned of record and
Cincinnati, Ohio 45236 beneficially(3)
William O. Coleman Common Stock 87,500 shares .1%
Director owned beneficially(4)
John H. Gutfreund Common Stock 125,600 shares owned .1%
Director of record and
beneficially (5)
John C. Hassan Common Stock 76,250 shares owned .1%
Director beneficially(6)
All directors and Common Stock 17,265,305 shares 44.6%
executive officers as owned of record and
a group (6 persons) beneficially(7)
Class A
Preferred Stock 3,376 shares owned 50.0%
of record and
beneficially
Class B 12.6 shares owned 100.0%
Preferred Stock of record and
beneficially
__________________________
(1) The persons named in the table have sole voting and
investment power with respect to all shares of common stock shown
as beneficially owned by them, subject to community property laws,
where applicable, and the information contained in other footnotes
to this table.
(2) Stephen N. Joffe, MD and Sandra F.W. Joffe are married to
one another and each is therefore deemed to be the beneficial
owner of all shares owned by the other. The total shown consists
of 11,377,950 shares of Common Stock owned of record by Dr. Joffe,
3,851,649 shares of Common Stock owned of record by Mrs. Joffe,
1,000 shares of Common Stock owned of record by Dr. and Mrs. Joffe
jointly, 1,129,448 shares of Common Stock issuable to Dr. Joffe in
the event of conversion of 11 shares of Class B Preferred Stock
owned by him, and 164,283 shares of Common Stock issuable to Mrs.
Joffe in the event of conversion of 1.6 shares of Class B
Preferred Stock owned by her.
(3) Includes 11 shares owned of record by Dr. Joffe and 1.6
shares owned of record by Mrs. Joffe.
(4) Includes 12,500 shares owned of record and 75,000 shares
issuable to Mr. Coleman upon the exercise of certain unexercised
stock options.
(5) Includes 50,000 shares owned of record by Mr. Gutfreund,
600 shares owned of record by him as custodian for his minor
child, and 75,000 shares of Common Stock issuable to Mr. Gutfreund
upon the exercise of certain unexercised outstanding stock
options.
(6) Consists of 76,250 shares of Common Stock issuable to Mr.
Hassan upon the exercise of certain unexercised stock options.
(7) Consists of 15,313,824 shares owned of record directly or
indirectly by such persons, 1,293,731 shares issuable upon
conversion of Class B Preferred Stock owned by such persons, and
657,750 shares issuable upon the exercise of stock options held
directly or indirectly by such persons.
EXECUTIVE COMPENSATION
Summary
The following table summarizes, for the fiscal years
indicated, all annual compensation earned by or granted to the
Company's Chief Executive Officer and the only other executive
officers whose compensation exceeded $100,000 for all services
rendered to the Company in all capacities (the "named executives")
during the last fiscal year:
<PAGE>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------- ------
Name and Securities
Principal Underlying All Other
Position Year Salary($) Bonus($) Options(#) Compensation
- -------- ---- --------- -------- ---------- ------------
Stephen N. 1997 $198,000 -- -- $55,009(1)
Joffe, 1996 $198,000 -- -- $52,534(1)
President and 1995 $547,032 -- -- $60,672(1)
Chief Executive
Officer
Larry P. Rapp, 1997 $114,975 -- -- --
Chief Financial 1996 $ 76,915(2) -- 200,000 shs --
Officer
Judith A. Crist, 1997 $109,400 -- -- --
Executive 1996 $109,400 -- 200,750 shs. --
Vice-President, 1995 $ 94,600 $25,594 -- --
Operations
_____________________________
(1) Includes for 1995, 1996 and 1997, respectively, $5,845,
5,845 and $7,468, which was a car allowance and $14,139, $778 and
$681, which were term life insurance and long-term disability
premiums for insurance benefitting named executive. Also includes
for 1995, 1996 and 1997, respectively, $40,688, $45,911 and
$46,860, respectively, placed in a life insurance trust
benefitting the named executive.
(2) Partial year salary. Mr. Rapp commenced his employment
with the Company on April 15, 1996.
Stock Options
The Company did not grant any stock options to any of the
named executives in 1997, nor did any named executives exercise
any options held by them in 1997. The following table sets forth
information regarding the value of unexercised in-the-money
options held by the named executives as of December 31, 1997:
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEARS AND FY-END OPTION VALUES
Number Value of
Shares of Securities Unexercised
Acquired Underlying In-the-Money
on Value Unexercised Options
Name Exercise(#) Realized($) Options at FY-End at FY-End($)
- --------- ---------- ---------- ----------------- ------------
Exer- Unexer- Exer- Unexer-
cisable cisable cisable cisable
------- ------- ------- -------
Larry P. -- -- 40,000 160,000 -- --
Rapp
Judith A. -- -- 40,188 160,562 -- --
Crist
Director Compensation
Effective 1998, non-employee directors of the Company are
paid cash director's fees of $2,500 per calendar quarter plus
reimbursement of related out-of-pocket expenses. In addition,
directors are entitled to receive stock option grants under the
LCA-Vision Directors' Nondiscretionary Stock Option Plan. Under
this Plan, a nonemployee director receives a grant of options to
purchase 75,000 shares of Common Stock upon his or her election or
appointment to the Board and is entitled thereafter to an annual
grant of options to purchase 1,250 shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 1996, the Company was a party, directly or
indirectly, to the following additional transactions with its
current directors, executive officers and principal stockholders
(including any of their associates or affiliates):
Prior to the merger of LCA into the Company, Dr. and Mrs.
Joffe, utilizing a portion of the proceeds of their S corporation
distributions from LCA, agreed to lend a total of $4,390,772 to
the Company, receiving in return, two promissory notes for the
principal amount plus interest at a rate of 6.91% per annum. All
sums due to Dr. and Mrs. Joffe under the promissory notes are due
and payable in full upon the maturity of the promissory notes,
September 26, 2005. During 1996 a total of $2,200,000 of such
debt was extinguished by Dr. Joffe and $321,672 by Mrs. Joffe in
exchange for the issuance to Dr. Joffe of 11 shares and to Mrs.
Joffe a total of 1.6 shares of the Company's Class B Preferred
Stock. As of December 31, 1997 a total of $1,500,000 of principal
and $462,953 of accrued interest was owed to Dr. and Mrs. Joffe
under these notes. During 1996, $354,097 was paid to Dr. and Mrs.
Joffe under such notes. No payments were made in 1997. In August
1997, in connection with the Company's acquisition of Refractive
Centers International, Inc. from Summit Technology, Inc., the
Company and Dr. and Mrs. Joffe agreed to amend the promissory
notes to provide that the Company may not make principal payments
under the notes to Dr. and Mrs. Joffe in any year unless for the
prior fiscal year the Company's earnings before taxes,
amortization and depreciation net of capital expenditures exceeded
$1,000,000, and then payments may be made only up to 25% of such
excess.
Prior to August 1997, Dr. Joffe was the guarantor of
approximately $11,080,000 in bank loans to the Company, including
a mortgage note in the amount of $3,080,000, and a working capital
credit line of up to $8,000,000. Dr. Joffe was not compensated
for these personal guarantees.
Stephen N. Joffe, M.D. is the principal stockholder and
majority owner of The LCA Center for Surgery, Ltd. (the "Surgery
Center"), Cincinnati, Ohio, an Ohio limited liability company,
which was organized in September 1995. The Company does not hold
an investment in the Surgery Center. The Company has leased to
the Surgery Center, for a period of 20 years at an annual rental
of $190,000, a portion of its headquarters building located at
7840 Montgomery Road. In February 1997, the Company agreed to
forego rent in return for the Surgery Center providing to the
Company certain systems and processes for research and
development, for providing additional staffing, and for giving the
Company unlimited use of the leased premises for research,
testing, educational and other agreed purposes.
In addition, in August 1997 the Company pledged to The Fifth
Third Bank ("Fifth Third") a $985,000 Certificate of Deposit
("CD") issued by Fifth Third as security for a $985,000 loan
("Surgery Center Loan") made by Fifth Third to the Surgery Center,
an entity principally owned by Stephen N. Joffe, M.D. The Company
pledged the CD for up to 30 days while the Surgery Center, or
Stephen N. Joffe, M.D. personally, arranged to replace the CD as
collateral for the Surgery Center Loan. When Stephen N. Joffe,
M.D.'s personal guarantee of the prior Company facility expired in
August 1997, he remained personally obligated to the Company with
respect to replacing the CD as collateral for the Surgery Center
Loan. Dr. Joffe fulfilled this obligation to the Company by
pledging the required collateral and the Company is no longer
obligated to Fifth Third with respect to the CD. These additional
transactions were negotiated and agreed because the Surgery
Center, as a tenant in the Company's headquarters building, could
not timely provide Fifth Third collateral for the Surgery Center
Loan.
1999 STOCKHOLDER PROPOSALS
In order for any stockholder proposals for the 1999 Annual
Meeting of Stockholders to be eligible for inclusion at the
meeting, they must be received by the Secretary of the Company at
7840 Montgomery Road, Cincinnati, Ohio 45236, prior to December
15, 1999.
OTHER MATTERS
The Board of Directors does not know of any other business to
be presented to the meeting and does not intend to bring other
matters before the meeting. However, if other matters properly
come before the meeting, it is intended that the persons named in
the accompanying proxy will vote thereon according to their best
judgment in the interests of the Company.
By Order of the Board of Directors
Sandra F.W. Joffe
Secretary
1714 PS 98
