LCAV (MM)

PROPOSAL 3: APPROVAL OF AUTHORITY TO ADJOURN OR POSTPONE THE SPECIAL MEETING

Stockholders may be asked to vote on a proposal to approve one or more adjournments or postponements of the special meeting to a later date or time, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of the proposal to adopt the merger agreement.

The LCA board of directors unanimously recommends that stockholders vote “FOR” the proposal to adjourn or postpone the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies.

If you return a properly executed proxy card, but do not indicate instructions on your proxy card, your shares of common stock represented by such proxy card will be voted “FOR” the proposal to approve one or more adjournments or postponements of the special meeting.

Whether or not a quorum is present, a proposal to approve an adjournment or postponement of the special meeting to a later time, if necessary or appropriate, requires the affirmative vote of a majority of the shares of common stock represented in person or by proxy at the special meeting and entitled to vote on the matter.

THE COMPANIES

LCA-Vision Inc.

LCA-Vision Inc., a leading provider of laser vision correction services under the LasikPlus® brand, operates 62 LasikPlus® vision centers in the U.S., including 52 full-service LasikPlus® fixed-site laser vision correction centers and 10 pre- and post-operative LasikPlus® satellite centers. LCA-Vision has performed more than 1.3 million procedures since FDA approval of photorefractive keratectomy (PRK) in late 1995.

Shares of LCA common stock are listed with, and trade on, NASDAQ under the symbol “LCAV.”

LCA’s principal executive offices are located at 7840 Montgomery Road, Cincinnati, OH 45236; its telephone number is (513) 792-9292; and its Internet website address is www.lasikplus.com. The information provided on or accessible through LCA’s website is not part of this proxy statement and is not incorporated in this proxy statement by this or any other reference to its website provided in this proxy statement.

PhotoMedex, Inc.

PhotoMedex is a global skin health company providing integrated disease management and aesthetic solutions to dermatologists, professional aestheticians and consumers. The company provides proprietary products and services that address skin diseases and conditions including psoriasis, vitiligo, acne, actinic keratosis (a precursor to certain types of skin cancer) and photo damage. Its experience in the physician market provides the platform to expand its skin health solutions to spa markets, as well as traditional retail, online and infomercial outlets for home-use products. As a result of its December 2011 merger with Radiancy Inc., PhotoMedex has added a range of home-use devices under the no!no!™ brand, for various indications including hair removal, acne treatment and skin rejuvenation. The company also offers a professional product line for acne clearance, skin tightening, psoriasis care and hair removal sold to physician clinics and spas.

Shares of PhotoMedex common stock are listed with, and trade on, NASDAQ and the Tel-Aviv Stock Exchange under the symbol “PHMD.”

PhotoMedex’s principal executive offices are located at 100 Lakeside Drive, Suite 100, Horsham, PA 19044; and its telephone number is (215) 619-3600; and its Internet website address is www.photomex.com. The information provided on or accessible through PhotoMedex’s website is not part of this proxy statement and is not incorporated in this proxy statement by this or any other reference to its website provided in this proxy statement.

MergerSub

MergerSub, a wholly owned subsidiary of PhotoMedex, is a Delaware corporation that was recently formed and has no operations. Upon the terms and subject to the conditions of the merger agreement, MergerSub will be merged with and into LCA, with LCA surviving the merger as a wholly owned subsidiary of PhotoMedex.

The principal executive offices of MergerSub are located at 100 Lakeside Drive, Suite 100, Horsham, PA 19044; and its telephone number is (215) 619-3600.

THE MERGER

The discussion of the merger in this proxy statement is qualified in its entirety by reference to the merger agreement, a copy of which is attached to this proxy statement as Annex A and which is incorporated by reference into this proxy statement.

Effects of the Merger 

Pursuant to the terms of the merger agreement, at the effective time of the merger, MergerSub will be merged with and into LCA, with LCA surviving the merger as a wholly owned subsidiary of PhotoMedex.

At the effective time of the merger, each outstanding share of LCA common stock (other than any shares owned by PhotoMedex, MergerSub or the Company (as treasury stock or otherwise) or any of their respective wholly owned subsidiaries, or any person who properly demands appraisal of their shares pursuant to the DGCL), will be converted into the right to receive $5.37 in cash, without interest and less any applicable withholding taxes (the “merger consideration”).

Immediately prior to the effective time of the merger, each outstanding stock option issued under the Company’s equity compensation plans or programs, whether or not then exercisable or vested, will be cancelled and converted into the right to receive an amount in cash equal to, without interest and less applicable withholding taxes, the product of the excess, if any, of $5.37 over the per share exercise price of the applicable stock option multiplied by the aggregate number of shares of LCA common stock that may be acquired upon exercise of the stock option immediately prior to the effective time of the merger. As of the date of this proxy statement, there are no outstanding options to purchase shares of LCA common stock for which the exercise price is less than $5.37, and according, all outstanding Company options will be cancelled without consideration as of immediately prior to the effective time of the merger.

Immediately prior to the effective time of the merger, each outstanding restricted stock unit award and other right, contingent or accrued, to acquire or receive shares of LCA common stock that may be held, awarded, outstanding, payable or reserved for issuance under the Company’s equity compensation plans or programs, whether or not then vested or exercisable, will be cancelled and converted into the right to receive an amount in cash equal to the product of $5.37, without interest and less applicable withholding taxes, multiplied by the aggregate number of shares of LCA common stock in respect of the award (based on a deemed achievement of performance conditions at target level, if applicable). As of the date of this proxy statement, there are 486,083 shares of LCA common stock subject to unvested stock awards that are expected to be cancelled and converted, as described above. These unvested awards, if and when vested, will be subject to withholding tax which will reduce the number of shares to be issued by a number equal to the quotient of the aggregate tax withholding amount divided by the then current market price of the common stock.

Background of the Merger 

As part of the ongoing oversight and financial management of LCA, on a frequent and regular basis, LCA’s board of directors, all the members of which qualify as “independent directors,” and management evaluate strategic alternatives relating to the Company’s business, including potential opportunities for business combinations, acquisitions, the sale of individual portions of the business, stock repurchases, dividends, reorganizations, restructurings and other possible strategic transactions, each with a view toward maximizing stockholder value.

In connection with its ongoing evaluation of strategic alternatives relating to the Company, at regularly scheduled meetings, the LCA board of directors has received financial updates from the Company’s management and discussed with management the Company’s results of operations, including, in particular, significant items that impacted results of operations of the Company’s business, industry and general economic conditions and management’s outlook for the Company’s business and industry.

On February 14, 2011, the Company retained Cain Brothers as the Company’s exclusive financial advisor with respect to the development of an acquisition program and the consummation of one or more potential acquisitions. Cain Brothers also agreed to assist the Company, if requested, in securing capital necessary to consummate an acquisition transaction, to provide other financial advisory services as mutually agreed, and, if requested, to assist the Company as financial advisor in any sale of the Company.

On July 20, 2011, the Company entered into a letter of intent with a privately owned competitor, providing for the purchase by the Company of the competitor for a price to be paid in a combination of cash, LCA common stock and notes issued by the Company. Although the Company and the competitor entered into a non-disclosure agreement, engaged in extensive due diligence, exchanged several drafts of acquisition documents, and attempted to resolve several important issues that arose during the course of negotiations, in September 2011 negotiations between the parties terminated because they could not resolve major issues relating to the integration of their businesses.

Throughout the balance of 2011, all of 2012 and into early 2013, Cain Brothers assisted the Company in attempting to identify and investigate potential merger and acquisition opportunities. Cain Brothers contacted potential acquisition candidates, Cain Brothers and Company management reported regularly to the LCA board of directors on the results of these efforts, and the LCA board of directors discussed potential acquisition targets. Nonetheless, by early 2013 Cain Brothers and the Company had not identified any opportunity which the LCA board of directors determined to be in the best interests of the Company and its stockholders to pursue.

On January 29, 2013, a representative of an investment banking firm contacted Michael Celebrezze, chief executive officer of the Company, offered to introduce the Company to PhotoMedex, and asked to represent the Company in any discussions with PhotoMedex. Mr. Celebrezze advised the banker that Cain Brothers was the Company’s exclusive financial advisor. The banker arranged a conference call on or about February 6, 2013 between Mr. Celebrezze and senior management of PhotoMedex to discuss whether the companies had interest in discussing some type of business relationship.  At the February 21, 2013 regularly scheduled meeting of the LCA board of directors, Mr. Celebrezze described his telephone conversation with PhotoMedex to the board. To introduce them to the Company’s business, Mr. Celebrezze invited members of PhotoMedex’s senior management to tour four of the Company’s vision centers, which they did on March 27, 2013. Mr. Celebrezze did not provide PhotoMedex any material non-public information concerning the Company at this time. On March 20, 2013, the parties entered into a mutual confidentiality and non-circumvention agreement, and PhotoMedex provided the Company certain non-public information concerning PhotoMedex.

On June 10, 2013, PhotoMedex sent the Company background information on PhotoMedex’s business and financial condition including certain non-public information concerning PhotoMedex.

During this period each of the parties also reviewed public information relating to the other, including each party’s SEC filings.

On July 12, 2013, PhotoMedex and the Company entered into a mutual non-disclosure agreement providing that neither party would disclose any confidential information of the other party provided to it under the mutual non-disclosure agreement. Each party also agreed that it would not, without the other party’s consent, solicit to hire any employee of the other party for a period of one year following the end of any discussions and to contact the other party only through certain designated representatives. Each party further agreed that, for a period six months after the end of any discussions, it would not purchase 5.0% or more of the common stock of the other party, solicit proxies of the other party’s stockholders for any purpose, join in any partnership, limited partnership, syndicate or group with respect to the other party’s common stock, seek to call a special meeting of the other party’s stockholders, or engage in or propose any tender offer, merger, consolidation, or other acquisition with respect to the other party. The mutual non-disclosure agreement also prohibited either party from disclosing publicly the existence of the discussions, except as required by law.

Following the execution of the mutual non-disclosure agreement, PhotoMedex submitted to the Company a list of documents and other material PhotoMedex desired to review as part of its due diligence process. On July 25, 2013, the Company began the process of providing PhotoMedex access to the requested information and other material non-public information.

On August 6, 2013, E. Anthony Woods, Chairman of the LCA board of directors , Dolev Rafaeli, Chief Executive Officer of PhotoMedex, Dennis McGrath, President and Chief Financial Officer of PhotoMedex and representatives of the financial advisors of both parties met in New York City to discuss high level terms of a potential strategic transaction. At that meeting PhotoMedex presented a written non-binding indication of interest to acquire all of the common stock of the Company at a price of $4.25 per share, of which 80% would be paid in cash and 20% would be paid in shares of PhotoMedex’s common stock. PhotoMedex noted that the proposal was based on certain projections and synergy assumptions, which would have to be validated in due diligence and represented a 37.1% premium to the closing stock price one week earlier.

The LCA board of directors met on August 10, 2013 to discuss PhotoMedex’s proposal, a copy of which had been previously sent to each director. Mr. Woods reported to the LCA board of directors on his recent conversations with Dr. Rafaeli and others at PhotoMedex. He said that PhotoMedex was focused primarily on synergies it could achieve by combining the businesses of PhotoMedex and LCA and not on any growth in the Company’s core business. Cain Brothers advised the LCA board of directors that the proposed price would likely be accretive to PhotoMedex’s expected earnings and that it was unlikely that PhotoMedex would agree to a transaction price that would be dilutive to its earnings. The LCA board of directors discussed the proposal and formed a consensus that its terms were unappealing and not reflective of the Company’s full value. After further discussion, the LCA board of directors directed Mr. Woods to advise PhotoMedex that the LCA board of directors was carefully considering the proposal and evaluating the value of the proposal relative to the Company’s current and potential value, and a response would be forthcoming.

The LCA board of directors met as regularly scheduled on August 21-22, 2013 to consider further PhotoMedex’s indication of interest and other matters. A representative of Cain Brothers presented Cain Brothers’ analysis of the terms proposed by PhotoMedex, an assessment of the proposed valuation of the Company relative to market benchmarks and other analyses, a discussion of the viability of the Company pursuing an acquisition strategy as an alternative, and a review of other potential purchasers, alternative strategies, and process and tactical considerations for negotiations with PhotoMedex. The LCA board of directors proceeded to meet in executive session with Cain Brothers and, after extensive discussion, directed Cain Brothers to advise PhotoMedex’s financial advisor that the consideration proposed by PhotoMedex was inadequate.

Following communication of the LCA board of directors’ response, due diligence and discussions regarding potential synergies between PhotoMedex and LCA continued between the two companies through the end of September 2013, but there were no further negotiations with respect to the terms of a potential transaction.

On October 2, 2013, Dr. Rafaeli sent to Mr. Woods a revised non-binding indication of interest. The revised proposal called for PhotoMedex to acquire the Company at a nominal purchase price of $6.31 per share of common stock, consisting of a base price of $4.75 per share (60% to be paid in cash and 40% to be paid in PhotoMedex common stock) plus the issuance of two series of contingent warrants, the value of which would depend upon the Company’s achieving defined revenue milestones in the two years after the closing of the merger.

The LCA board of directors convened a special meeting on October 7, 2013 to consider the revised PhotoMedex proposal. The LCA board of directors was joined by its financial advisor and the Company’s outside counsel. Cain Brothers advised the LCA board of directors that the contingent warrants were difficult to value and inconsistent with customary practice in the acquisition of public companies. After discussion, the LCA board of directors determined that the $4.75 per share base price was inadequate in and of itself, and the proposed contingent warrants were undesirable because they would be illiquid, their value would be highly uncertain (depending upon the future performance of the Company’s business, which would then be under the full control of PhotoMedex), they could result in unfavorable tax treatment to the Company's stockholders, and they would complicate an evaluation of the transaction by the Company’s stockholders. Following further discussion and consideration of PhotoMedex’s revised proposal, the LCA board of directors determined that although the current PhotoMedex proposal was inadequate, it would seriously consider a revised proposal from PhotoMedex that included a substantially greater all-cash purchase price. Accordingly, the LCA board of directors directed Mr. Woods to communicate its response, including its concerns regarding the contingent warrants, to PhotoMedex. It also authorized Cain Brothers to convey the LCA board of directors’ response informally to PhotoMedex’s financial advisor.

On October 10, 2013, after a representative of Cain Brothers had spoken with PhotoMedex’s financial advisor, Mr. McGrath wrote to Mr. Woods asking when PhotoMedex would receive the Company’s formal response to its proposal.

On October 13, 2013 , Mr. Woods wrote to Dr. Rafaeli with respect to the PhotoMedex proposal. He said that the LCA board of directors had carefully considered each aspect of the proposal but could not accept PhotoMedex’s valuation of the two series of proposed contingent warrants, and he shared with Dr. Rafaeli the other concerns of the LCA board of directors described above. Mr. Woods said that a revised proposal from PhotoMedex for an all-cash transaction at a substantially greater price would receive serious consideration by the LCA board of directors.

On October 14, 2013, Dr. Rafaeli sent an e-mail to Mr. Woods stating that PhotoMedex did not understand the LCA board of directors’ concern over the valuation of the contingent warrants. He said that PhotoMedex would be willing to proceed with discussion of an all-cash offer, but only at a price of $4.75 per share. He further stated that PhotoMedex’s interest in the proposed transaction would terminate on Friday, October 18, 2013 unless the LCA board of directors indicated it was willing to proceed on the basis proposed by PhotoMedex, and that PhotoMedex would terminate the non-disclosure agreement at that time.

The LCA board of directors met on October 15, 2013 to consider Dr. Rafaeli’s response. It noted that by deleting the contingent warrants and not increasing the cash component of the proposal, PhotoMedex had confirmed the LCA board of directors’ determination that the contingent warrants had little value. Cain Brothers updated the LCA board of directors on its discussions with PhotoMedex’s financial advisor. Cain Brothers reported that PhotoMedex maintained its position that any transaction be accretive to its earnings, but that a transaction at a much higher price could still be accretive, depending on the amount of the synergies realized by PhotoMedex. Cain Brothers further advised the LCA b oard of d irectors that a discounted cash flow analysis of the Company indicated that a transaction price in the $4.00 to $5.00 range would be consistent with the present value of the Company’s projected cash flows, but might not fully value the Company’s long-term growth potential. The LCA board of directors also noted that the Company currently held cash of approximately $1.40 per share, which could be used to help finance the transaction or distributed to the Company’s stockholders. The LCA board of directors also considered that PhotoMedex might choose, after the expiration of the standstill period in the non-disclosure agreement, to pursue a hostile acquisition proposal. After further discussion, the LCA board of directors decided to consider the matter further before responding to Dr. Rafaeli.

The LCA board of directors met again on October 18, 2013 to further discuss a response to PhotoMedex. Mr. Celebrezze reported to the LCA board of directors on recent developments in the Company’s business. He said that the Company had made substantial progress in the last five years and that he expected the results for 2013 of its core LASIK business to be approximately breakeven. He noted that the improvement in profitability had resulted from cost reduction and price increases rather than an increase in the volume of procedures performed by the Company. He also discussed management’s objectives and the Company’s prospects for 2014, noting that 5% growth was a realistic goal. Mr. Celebrezze then left the meeting. Cain Brothers reported to the LCA board of directors on its recent discussions with PhotoMedex’s financial advisor. The LCA board of directors discussed the relative merits of an all-cash transaction and a part-cash/part-stock transaction. The LCA board of directors decided to respond to PhotoMedex with a counterproposal of $5.75 per share (consisting of a cash payment of $5.25 per share plus a special cash dividend by the Company to its stockholders of $0.50 per share). This counterproposal was then communicated by Cain Brothers to PhotoMedex’s financial advisor. PhotoMedex promptly rejected this counterproposal and did not make a counteroffer. PhotoMedex notified the LCA board of directors that it was terminating its negotiations and discussions with the Company as of October 18, 2013.

In early November 2013, PhotoMedex’s financial advisor indicated to Cain Brothers that PhotoMedex might be willing to increase the proposed transaction price to $5.25 in cash. Mr. McGrath and Mr. Woods spoke by telephone on November 13, 2013. In that call, Mr. McGrath expressed a willingness to resume discussions if they could be conducted face-to-face rather than through intermediaries and there could be a telephonic discussion between the principals prior to any meeting to obtain reasonable assurance that attaining agreement would be possible. PhotoMedex also expressed a need for further due diligence by meeting some additional Company personnel. On November 14, 2013, Mr. Woods replied to Mr. McGrath that there would be no point to meeting in person unless PhotoMedex was willing to increase its offer. He also expressed the view that, although an all-cash transaction would provide the most straightforward structure, the LCA board of directors’ goal was the highest realizable value for the Company’s stockholders.

The LCA board of directors discussed all of this at its regularly scheduled meeting on November 19, 2013 and directed Mr. Woods as to a response to PhotoMedex.

On November 22, 2013, Mr. Woods sent an e-mail to Mr. McGrath to review the prior positions of the two companies – PhotoMedex’s proposal of $4.75 per share in cash and the LCA board of directors’ proposal of $5.75 per share (consisting of a cash payment of $5.25 per share plus a special dividend to stockholders of $0.50 per share). Mr. Woods stated that the LCA board of directors would consider a price above the midpoint of the two offers but less than $5.75 per share and that an all-cash offer would be preferred, assuming that the other terms and conditions associated with the proposal were reasonable.

On December 20, 2013, in a letter from Dr. Rafaeli to Mr. Woods, PhotoMedex proposed an all cash acquisition of the Company at $5.33 per share, a 60.5% premium to the then market price of $3.32. The letter also proposed that each director and executive officer of the Company would, at the time of the signing of a definitive merger agreement, agree to vote in favor of the transaction. In addition, PhotoMedex would expect to enter into transition agreements with key members of the Company’s management team. The letter stated that PhotoMedex had approximately $49.0 million in cash and cash equivalents, which it would use to fund in part the purchase price and that it intended to fund the balance of the merger consideration under its current or new credit facilities. In exchange for PhotoMedex’s making a commitment to achieving a transaction, it would require that the definitive merger agreement provide for a reasonable and customary termination fee. In addition, the Company would be required to give PhotoMedex exclusive negotiating rights through February 10, 2014.

Over the next several days, the parties and their advisers discussed the terms of the PhotoMedex proposal, including the proposed price. The LCA board of directors, together with representatives of Cain Brothers and LCA’s outside counsel, met on December 24, 2013 to discuss the proposal and authorized Mr. Woods and the Company to proceed with execution of a letter of intent if PhotoMedex would agree to (i) increase the purchase price from $5.33 to $5.37, per share, (ii) clarify among other things that the price included all shares of the Company, including those that would be issued pursuant to restricted stock units that would vest before or at the closing of the merger, and (iii) include a customary “fiduciary out” provision.

After negotiations, the parties signed a non-binding confidential letter of intent, dated as December 30, 2013, providing for the acquisition of the Company by PhotoMedex at a price of $5.37 per share in cash and the other terms proposed by PhotoMedex and described above, modified in accordance with the LCA board of directors’ proposals. The letter of intent also extended the expiration date of the standstill provisions of the non-disclosure agreement between the parties to May 31, 2014.

On January 8, 2014, representatives of PhotoMedex met with the executive officers of the Company at the offices of the Company’s outside counsel in Cincinnati, Ohio. At that meeting senior management of the Company provided a detailed overview of their individual responsibilities. The next morning, the PhotoMedex representatives took a tour of the Cincinnati Vision Center and Call Center and had additional discussions with Mr. Celebrezze.

On January 14, 2014, PhotoMedex’s counsel provided to the Company’s counsel an initial draft of the merger agreement. On January 24, 2014, the Company’s counsel provided to PhotoMedex’s counsel a mark-up of the draft merger agreement. Between then and February 13, 2014, counsel for the parties exchanged several more drafts of the merger agreement and negotiated its final provisions. The material points negotiated during that period were:

During the period between the signing of the letter of intent and the execution of the definitive merger agreement, employees and representatives of PhotoMedex also conducted numerous discussions with the Company and its representatives and reviewed Company files and documents with respect to the Company’s business, financial condition, assets, liabilities, contracts, employee matters, tax matters and other subjects generally referred to as “due diligence.” The Company provided PhotoMedex’s representatives with access to this material and answered questions.

Also during this period, PhotoMedex negotiated employment agreements between PhotoMedex and the four executive officers of the Company, which agreements will become effective upon the closing of the merger, and will supersede the executive officers' respective employment agreements with LCA. See “The Merger—Interests of LCA’s Directors and Executive Officers in the Merger” for a description of the material terms of these employment agreements. The Company’s counsel did not represent the executive officers in the conduct of these negotiations.

During this period, Mr. Woods and the Company’s counsel and financial advisor kept the LCA board of directors informed of the process and substance of all material negotiations with PhotoMedex.

During the first week of February 2014, PhotoMedex held discussions with the Company regarding receiving assurances that the Company would sign a definitive merger agreement by February 13, 2014. On February 6, 2014, the LCA board of directors met telephonically to discuss matters relating to the proposed merger. Mr. Woods noted that on February 18, 2014 the Company was scheduled to announce its financial results for the three months and year ended December 31, 2013, and the LCA board of directors was generally informed of the key financial results that were expected to be announced at that time. Mr. Woods said that some directors had asked whether the Company should delay signing the merger agreement until there was an opportunity for the market price of the LCA common stock to react to the announcement of the financial results. Prior to the meeting, Mr. Woods had distributed to the LCA board of directors a discussion outline prepared by Cain Brothers expressing its views with respect to the pros and cons of delaying the signing, including the risk that PhotoMedex would terminate negotiations.

After discussion, and considering, among other factors, the change in the merger price premium resulting from changes in trading prices for the Company’s common stock, the Company’s 2013 operating results and prospects for 2014, the views of the Company’s chief executive officer, financial advisor and legal counsel, and other changes in circumstances since the LCA board of directors’ approval of the letter of intent, the LCA board of directors determined that it would be desirable to seek an increase in the merger price before announcement of the 2013 results. In making this determination, the LCA board of directors considered the adverse consequences that could result from seeking a price increase, including the risk of PhotoMedex terminating the negotiations. Cain Brothers was directed to provide further information to the LCA board of directors with respect to the change in the merger price premium and an increase in the merger price. After this discussion, the representative from Cain Brothers left the meeting.

In response to prior communications from Mr. Woods, the LCA board of directors then discussed retention of a financial adviser to render an opinion to the LCA board of directors as to the fairness, from a financial point of view, of the proposed merger to the stockholders of the Company. Upon advice of counsel and after discussion, the LCA board of directors determined it would be advisable, in the performance of its fiduciary duties, to obtain a fairness opinion. The LCA board of directors then discussed whether Cain Brothers or another firm should be retained for this purpose. The LCA board of directors decided to retain Cain Brothers based on, among other things, its familiarity with the Company, the amount of its proposed fee and its promise to provide the opinion in a timely manner. In making this decision, the LCA board of directors noted that a substantial portion of Cain Brothers’ fee for acting as adviser to the Company was conditioned upon the consummation of a transaction, but determined, upon advice of counsel, that, assuming appropriate disclosure of the Cain Brothers’ fee in the proxy statement, this did not prevent the LCA board of directors from relying upon Cain Brothers’ opinion.

The LCA board of directors’ meeting reconvened by conference call the evening of February 6, 2014. Mr. Woods reported that after the morning’s meeting he had contacted PhotoMedex to report that the LCA board of directors had met to discuss the timing for execution of the merger agreement, that questions had been raised and that the LCA board of directors had requested additional information, which was being assembled. Mr. Woods also reported that a representative of Cain Brothers had spoken with PhotoMedex’s financial advisor, who had expressed strong opposition to any price increase.

Prior to the meeting, Mr. Woods had distributed to the LCA board of directors a schedule prepared by Cain Brothers showing the effect of changes in the trading price of Company stock on the premium to market in the proposed merger price of $5.37 per share. The schedule showed that, based on a 90-day volume weighted average price ("VWAP"), the merger price to market price premium had declined from 53% on December 24, 2013, the day the LCA board of directors approved the $5.37 price, to 33% on February 5, 2014. To restore the 53% margin as of February 5 would require the merger price to be increased by $0.83 per share, an increase in the total merger price of $16.5 million. To restore 50% of the margin decrease would require the purchase price to be increased by $0.41 per share, an increase in the total merger price of approximately $8.1 million. The board and its financial advisor also discussed and considered the implied premiums relative to premiums paid in comparable transactions.

The LCA board of directors discussed the possible consequences of seeking an increase in the purchase price, including the possibility that PhotoMedex might terminate negotiations and seek to acquire the Company on a hostile basis at some future time. After lengthy discussion, the consensus of the LCA board of directors was to seek a $0.41 per share price increase and in return to express the Company’s willingness to meet PhotoMedex’s objective of signing a merger agreement by February 13, 2014 and to agree to a go-shop period of 30 days and a termination fee of $3.0 million plus reimbursement of expenses as sought by PhotoMedex.

PhotoMedex promptly responded that it could not increase the merger consideration because its financing commitments had been negotiated. Furthermore, it stated that the price it had proposed was its best and final offer and that it would terminate the negotiations if the merger agreement were not signed at the previously agreed price by February 13, 2014.

Cain Brothers reported this response to the LCA board of directors at a telephonic meeting held on February 10, 2014. Mr. Celebrezze then advised the LCA board of directors that procedure volume for the first quarter of 2014 to date was being adversely affected by the unseasonable weather and the timing of promotional pricing offered by the Company . After further discussion with Mr. Celebrezze and Cain Brothers about the Company’s prospects, the relationship of the premium inherent in the $5.37 price against premiums in comparable transactions, and a range of termination fee and expense reimbursement arrangements,  the consensus of the LCA board of directors was to proceed at the $5.37 price and a February 13 signing of the merger agreement if PhotoMedex would agree to cap the Company’s expense reimbursement obligation in the event of a termination of the transaction.

Thereafter counsel for the parties finalized the text of the merger agreement, PhotoMedex finalized negotiation of the terms of the employment agreements with the Company’s executive officers, PhotoMedex finalized negotiation of the terms of the voting agreements, and Company counsel reviewed the terms of the foregoing and of PhotoMedex’s financing commitments.

On February 13, 2014, a meeting of the LCA board of directors was convened at the offices of the Company to consider and vote upon the proposed merger. Also present at the meeting were Mr. Celebrezze and representatives of Cain Brothers (by conference telephone) and Company counsel. At the meeting, Company counsel reviewed with the LCA board of directors the terms and conditions of the proposed merger agreement and related documents, including the financing commitments and the conditions to closing, restrictions on soliciting other offers, termination fee and expense reimbursement provisions. Company counsel also reviewed with the LCA board the directors’ fiduciary duties in the context of the proposed transaction. Cain Brothers reviewed with the LCA board of directors its financial analysis of the proposed price of $5.37 per share in cash. A copy of the analysis was provided to the LCA board of directors. Cain Brothers then rendered to the LCA board of directors its written opinion, that based on and subject to the assumptions made, matters considered and qualifications and limitations on the scope of the review undertaken by Cain Brothers as described in its opinion, the proposed purchase price of $5.37 per share in cash to be received by the Company’s stockholders pursuant to the merger agreement was fair from a financial point of view to such stockholders (other than shares held in treasury and shares owned by PhotoMedex, its affiliates, and their investors). See “The Merger—Opinion of Independent Financial Advisor” beginning on page 26. The LCA board of directors considered, among other factors, the Company’s financial condition and long-term financial forecast, results of operations, competitive position, financial and strategic plan, strategic options and prospects as well as the execution risk involved in achieving these prospects, the nature of the Company’s business and the industries in which it competes, and industry, economic and market conditions, both on a historical and on a prospective basis. The LCA board of directors also considered that, although neither the Company nor Cain Brothers had solicited alternative transactions, the merger agreement permitted the Company to do so during the go-shop period and to respond to unsolicited third-party offers thereafter, subject to the provisions of the merger agreement. After a detailed discussion of the terms of the draft merger agreement and related documents, consideration of the other relevant issues and a variety of business, financial and market factors, including those set forth below under “The Merger—Recommendation of the Board of Directors” beginning on page 23, the LCA board of directors, which consists entirely of independent directors, unanimously determined that it was advisable and in the best interest of the Company and its stockholders to adopt and approve the merger agreement and to recommend to the Company’s stockholders that they vote in favor of the approval of the merger agreement.

Following the meeting, the Company and PhotoMedex executed the merger agreement.

On February 13, 2014, after the close of trading on NASDAQ, the Company and PhotoMedex issued a joint press release announcing that they had entered into a definitive merger agreement whereby PhotoMedex would acquire all of the outstanding shares of LCA common stock at a price of $5.37 per share in cash upon the terms and conditions in the merger agreement. The Company also filed a Current Report on Form 8-K with the SEC with the text of the press release and the merger agreement as exhibits.

On February 18, 2014, the Company issued a press release and filed another Form 8-K with respect to its financial results for the year and three months ended December 31, 2013.

During the go-shop period, Cain Brothers contacted 48 potential strategic buyers. Two of these companies entered into a confidentiality agreement with LCA and conducted due diligence. Both of them thereafter declined to make an alternative acquisition proposal.

Recommendation of the Board of Directors

After careful consideration, the LCA board of directors, on February 13, 2014, unanimously (i) approved and declared advisable the merger agreement, the merger and the transactions contemplated by the merger agreement, (ii) declared that it is in the best interest of the stockholders of the Company that the Company enter into the merger agreement and consummate the merger on the terms and subject to the conditions set forth in the merger agreement, (iii) directed that the adoption of the merger agreement be submitted to a vote at a meeting of the stockholders of the Company and (iv) recommended to the stockholders of the Company that they vote “ FOR ” the adoption of the merger agreement.

In reaching its determination, the members of the LCA board of directors consulted with the Company’s management, as well as the Company’s outside financial and legal advisors, considered the short-term and long-term interests and prospects of the Company and its stockholders, and considered a number of factors, including, among others, the following:

The LCA board of directors also considered the following adverse factors associated with the merger, among others:

After reviewing the considerations described above, the LCA board of directors unanimously adopted resolutions:

The foregoing discussion of the information and factors considered by the LCA board of directors is not intended to be exhaustive but, the Company believes it includes all material factors considered by the LCA board of directors. In view of the wide variety of factors considered and the complexity of these matters, the LCA board of directors found it impracticable to, and did not, quantify or otherwise attempt to assign relative weight to each of the specific factors considered in reaching its determination. Rather, the LCA board of directors based its judgment on the total mix of information available to it regarding the overall effect of the merger on the Company’s stockholders compared to the overall effect of any alternative transaction. Accordingly, the judgments of individual directors may have been influenced to a greater or lesser degree by their individual views with respect to different factors.

The LCA board of directors has unanimously approved and declared advisable the merger agreement, and recommends that you vote “ FOR ” adoption of the merger agreement.

Purpose and Reasons for the Merger

The Company’s purpose for engaging in the merger is to enable its stockholders to receive $5.37 per share in cash, without interest and less any applicable withholding taxes, which represents a premium over the price for LCA common stock as described above in “The Merger—Recommendation of the Board of Directors” beginning on page 23. The Company has determined to undertake the merger at this time based on the conclusions, determinations and reasons of the LCA board of directors described in detail above under “The Merger—Background of the Merger” beginning on page 17 and “The Merger—Recommendation of the Board of Directors” beginning on page 23.

Opinion of Independent Financial Advisor

Pursuant to an engagement letter dated February 14, 2011, the Company retained Cain Brothers as the exclusive financial advisor to the LCA board of directors in connection with potential strategic transactions. Cain Brothers was selected by the LCA board of directors because of Cain Brothers’ qualifications, reputation and expertise as an investment banking firm and its knowledge of the business and affairs of the Company and the industry in which it operates. As part of its investment banking business, Cain Brothers is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions and related transactions, and valuations for corporate and other purposes in the healthcare services and medical technology markets.

At the meeting of the LCA board of directors held on February 13, 2014, Cain Brothers rendered its oral opinion, subsequently confirmed in writing on the same day, to the LCA board of directors that, as of such date and based upon and subject to the considerations, limitations, qualifications, assumptions and other matters set forth in its opinion, the $5.37 per share cash consideration to be received by the holders of LCA common stock (including the holders of outstanding options to purchase shares of LCA common stock) pursuant to the merger agreement (the “merger consideration”) was fair, from a financial point of view, to such holders. The issuance of Cain Brothers’ opinion was approved by Cain Brothers’ Valuation Committee. Except as described in this summary, no limitations were imposed by the LCA board of directors upon Cain Brothers with respect to the investigations made or procedures followed by it in rendering its opinion.

The full text of Cain Brothers’ opinion, dated February 13, 2014, which sets forth, among other things, the assumptions made, the procedures followed, the matters considered and the qualifications and limitations on the scope of the review undertaken by Cain Brothers in rendering its opinion, is attached as Annex B to this proxy statement and is incorporated herein by reference in its entirety. You are urged to, and you should, read the Cain Brothers opinion carefully and in its entirety. The summary of the Cain Brothers opinion in this proxy statement is qualified in its entirety by reference to the full text of the Cain Brothers opinion.

The Cain Brothers opinion was provided to the LCA board of directors for the benefit and use by the LCA board of directors in connection with its consideration of the merger. The Cain Brothers opinion addresses only the fairness, from a financial point of view, of the merger consideration. Cain Brothers expressed no view or opinion as to any other terms, conditions or other aspects or implications of the merger, including, without limitation, the form or structure of the merger, the relative merits of the merger and any other transactions or business strategies discussed by the LCA board of directors as alternatives to the merger or the decision of the LCA board of directors to proceed with the merger, the timing thereof or the process by which it was reached. In addition, no opinion or view was expressed with respect to the fairness or the allocation of any consideration paid to the holders of any particular class of securities, creditors or any other constituency of LCA or to the fairness or the amount or nature of any compensation to be paid to any officer, director or employee of any party to the merger, or any class of such persons. In addition, no opinion or view was expressed with respect to the terms of any employment or non-competition agreement with LCA management or any break-up or termination fee. The Cain Brothers opinion does not constitute a recommendation to any director or stockholder as to how any such director or stockholder should vote on or otherwise act with respect to the merger. Cain Brothers assumed that in conducting the process leading up to the merger agreement, the LCA board of directors complied with its fiduciary duties and that the decision of the LCA board of directors to enter into negotiations and execute the merger agreement was based on the exercise of appropriate business judgment.

Cain Brothers was not authorized to solicit, and did not solicit, indications of interest or proposals from third parties with respect to any strategic transaction involving the acquisition of LCA or any of its assets, and therefore Cain Brothers had no basis to evaluate market interest that could have influenced the view expressed in its opinion. However, the merger agreement permits LCA and its representatives, for a period of 30 days following the date of the merger agreement, to undertake a solicitation process and to enter into negotiations with respect to other takeover proposals.

In arriving at its opinion, Cain Brothers, among other things:

In preparing its opinion, Cain Brothers assumed and relied, with LCA’s consent, on the accuracy and completeness of all information reviewed by it, and Cain Brothers relied upon the assurances of members of LCA’s management that they were not aware of any facts that would make such information inaccurate or misleading. Cain Brothers has not assumed any responsibility for verifying and has not independently verified such information or undertaken an independent valuation or appraisal of the assets or liabilities (contingent or otherwise) of LCA, nor has Cain Brothers been furnished with any such valuation or appraisal. Cain Brothers expressed no opinion as to the liquidation value of LCA or as to the tax or other consequences of the merger. Cain Brothers relied on the advice of LCA, its legal counsel and its independent accountants as to all legal, tax and accounting matters with respect to LCA and the merger and did not make any independent assessment of such matters.

Cain Brothers did not review the books and records of LCA or conduct a physical inspection of the properties or facilities of LCA, nor did it assume any responsibility for any such review or inspection. Cain Brothers assumed, with LCA’s consent, that the executed version of the merger agreement would not differ in any material respect from the last draft it reviewed and that the merger will be consummated on the terms set forth therein, without waiver or modification of any material terms. Cain Brothers assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the merger agreement are true and correct, and that each party will perform all of the covenants and agreements required to be performed by it under the merger agreement.

With respect to the financial projections supplied by LCA to Cain Brothers, Cain Brothers was advised by LCA, and assumed, that such projections were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of LCA’s senior management as to the future competitive, operating and regulatory environments and related financial performance of LCA, and that such projections will be realized in the amounts and in the time periods currently estimated and that additional capital contemplated by the projections will be available. Cain Brothers discussed such projections and estimates, and the assumptions on which they were based, with LCA’s senior management, but Cain Brothers assumed no responsibility for and expressed no view as to such projections or estimates or the assumptions on which they were based. In addition, Cain Brothers assumed that the historical financial statements of LCA were prepared and fairly presented in accordance with U.S. generally accepted accounting principles consistently applied.

In accordance with customary investment banking practice, Cain Brothers employed generally accepted valuation methods in reaching its opinion. The following is a summary of the material financial analyses utilized by Cain Brothers in connection with providing its opinion dated February 13, 2014. References to revenue of LCA refer to such items derived from the historical and projected financial results of LCA which we refer to above and which were provided to Cain Brothers by LCA’s management. The financial analyses summarized below include information presented in tabular format. In order to fully understand Cain Brothers’ financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses.

Premiums Paid Analysis

Using publicly available information, Cain Brothers reviewed 51 completed merger transactions announced since 2011, involving U.S. based targets with enterprise values between $50 million and $250 million, in order to analyze the premiums paid for acquired public companies as compared to the target’s stock prices prior to the announcement of the transaction. Cain Brothers selected transactions in which the acquiror purchased 100% of the outstanding equity of the target, the target pre-offer per share price was at least $1.00 and the target 30-day daily average trading volume was at least 20,000 shares. This sample set excluded transactions with target companies in the financial institution industry, which, based on the professional judgment and experience of Cain Brothers, were not comparable to the merger. Using these criteria, Cain Brothers selected the following transactions for its analysis:

For all 51 transactions, Cain Brothers analyzed the acquisition price per share as a premium to the closing share price one trading day, 30 trading days, 60 trading days, 90 trading days, 180 trading days and 365 trading days prior to the announcement of the transaction. Cain Brothers compared the range of resulting per-share stock-price premiums for the reviewed transactions to the premiums implied by the merger based on LCA’s common stock price one trading day, 30 trading days, 60 trading days, 90 trading days, 180 trading days and 365 trading days prior to an assumed announcement date of the merger of February 13, 2014. Information regarding the premiums from Cain Brothers’ analysis of these selected transactions is set forth in the following table:

Premium Period before Announcement

This analysis indicated the following approximate implied per share equity value reference range for LCA, as compared to the merger consideration:

The purpose of this analysis was to provide an overview of the premiums paid by acquirors (the amount by which the per-share consideration exceeded the target’s pre-announcement share price) in other recent comparable transactions. Using its professional judgment and experience and pursuant to industry standards, Cain Brothers chose this measurement for analysis to compare the premium represented by the merger consideration relative to a premiums paid in change of control transactions generally. None of these transactions or associated companies is identical to the merger. Accordingly, any analysis of the selected transactions necessarily involved complex considerations and judgments concerning the differences in financial and operating characteristics, parties involved and terms of their transactions and other factors that would necessarily affect the implied value of LCA in the merger versus the values of the companies in the selected transactions.

Discounted Cash Flow Analysis

Cain Brothers performed a discounted cash flow analysis based on financial projections provided by LCA’s senior management for the fiscal years ended December 31, 2014 through December 31, 2017. Cain Brothers estimated a range of equity values for LCA common stock based upon (i) the net present value of the projected stand-alone unlevered after-tax free cash flows of LCA for the fiscal years ended December 31, 2014 through December 31, 2017, (ii) an estimated terminal value of LCA as of December 31, 2017, based upon multiples of EBITDA ranging from 6.0x to 8.0x, (iii) $28.7 million in cash, $6.6 million in insurance reserves and $1.9 million in third-party debt at December 31, 2013 and (iv) LCA’s federal net operating loss carry-forwards (“NOLs”). The unlevered free cash flow for each year was calculated from financial projections prepared by LCA’s management by taking operating income, less taxes, plus depreciation and amortization, less capital expenditures, plus/less changes in net working capital. The after-tax free cash flows, terminal values and federal NOLs were then discounted to present value (at December 31, 2013) using discount rates ranging from 17% to 21%, which were derived from an analysis of LCA’s weighted average cost of capital (“WACC”), after adjusting upward to account for micro-cap company premiums as provided by the 2013 Ibbotson Risk Premia Over Time Report and inherent business risk relative to LCA. For purposes of this analysis, Cain Brothers assumed the use of LCA’s existing federal NOLs balance of $46.8 million as of December 31, 2013, to offset LCA’s annual estimated tax liability in calendar years 2014-2017 and included the present value of the federal NOLs available after 2017, in the calculation of total enterprise value. 

The discounted cash flow analysis indicated an approximate implied per share equity value reference range for LCA of $3.48 to $4.50 per share, as compared to the merger consideration of $5.37 per share.

The discounted cash flow analysis does not necessarily indicate actual values or actual future results. The range of discount rates applied was based upon several factors, including Cain Brothers’ knowledge of LCA and the industry in which LCA operates, the business risks associated with LCA and the overall interest rate environment as of February 10, 2014. Discounted cash flow analysis is a widely used valuation methodology, but the results of this methodology are highly dependent on the numerous assumptions that must be made, including earnings growth rates, terminal values and discount rates.

As part of this analysis, Cain Brothers reviewed, among other things, the transaction values of the selected transactions, calculated as the purchase price paid for the target company, plus debt, less cash and other adjustments, as a multiple, to the extent publicly available, of the target company’s revenue for the last twelve months (“LTM”). Given LCA’s operating losses, Cain Brothers utilized only multiples of revenue for comparative purposes in this analysis and did not utilize multiples of EBITDA and/or net income. Financial data for the selected transactions was based on publicly available information as well as non-public information known to Cain Brothers, which it obtained while serving as a financial advisor in three of the selected transactions. Financial data of LCA was based on internal estimates prepared by LCA’s management.

The LTM revenue multiples observed for the selected transactions ranged from 0.68x to 1.42x, with a median of 1.00x. Cain Brothers used these LTM revenue multiples to calculate the implied per share equity value reference range for LCA’s LTM revenue as of December 31, 2013. Because LCA was smaller and less profitable than many of the targets, Cain Brothers focused on multiples between the low and median data point. This analysis indicated the following approximate implied per-share equity value reference range for LCA, as compared to the merger consideration:

Although Cain Brothers used these companies for comparative purposes, no company, business or transaction used in this analysis is identical to LCA or the merger. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the acquisition or other values of the companies, business segments or transactions to which LCA and the merger were compared.

Selected Public Company Trading Analysis

Cain Brothers compared selected financial information and public market multiples for LCA with publicly available information and public market multiples for certain selected public companies.  The companies used in this comparison were selected because they have comparable (a) operational business models, (b) financial profiles, and/or (c) industry fundamentals. The selected companies include alternate site providers whose business model revolves around performing clinical procedures, including surgery in outpatient settings, discretionary/consumer cyclical companies with a product and/or service offering with a demand that is largely discretionary and therefore highly correlated with consumer confidence and unprofitable health care service companies that have displayed negative earnings over the past three years due to challenged industries and/or business models. Based on these criteria, the eight companies listed below were selected for this analysis, referred to as the selected healthcare companies. Each of the selected healthcare companies has a market capitalization (as of February 10, 2014) of between $30 million and $700 million.

Using financial data of the selected healthcare companies obtained from publicly available research analysts’ estimates, public filings and other publicly available information, Cain Brothers reviewed, among other things, the enterprise value of each the selected healthcare companies, calculated as equity value based on the closing stock prices on February 10, 2014, plus debt, less cash and other adjustments, as a multiple of estimated revenue for calendar year 2013. While Cain Brothers would typically assess multiples of EBITDA and/or net income, given LCA’s operating losses, Cain Brothers utilized only multiples of revenue for comparative purposes in this analysis. The overall mean and median for the last twelve month period revenue multiples observed for the selected healthcare companies were 0.84x and 0.89x, respectively, which were used in calculating the implied per-share equity value reference range for LCA.

The selected public company analysis indicated the following approximate implied per-share equity value reference range for LCA, as compared to the merger consideration:

Although Cain Brothers used these companies for comparative purposes, no company used in this analysis is identical to LCA. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which LCA was compared.

Future Value Analysis

Cain Brothers performed an analysis of the present value of the projected future per-share stock price of LCA as of December 31, 2016, using a one-year forward price-to-earnings multiple on projected earnings for calendar year 2017 of $0.52 per share, based on financial projections prepared by LCA’s management. As part of this analysis, Cain Brothers assumed (i) a range of price-to-earnings multiples from 13.0x to 17.0x, which is consistent with the overall healthcare services sector and (ii) fully diluted shares outstanding of 19.2 million, based on the financial projections prepared by LCA’s management. LCA’s projected share price as of December 31, 2016, as calculated based on these assumptions, was then discounted to present value as of February 10, 2014, using discount rates ranging from 17% to 21%, which were derived from an analysis of LCA’s WACC, after adjusting upward to account for micro-cap company premiums as provided by the 2013 Ibbotson Risk Premia Over Time Report and inherent business risk relative to LCA.

The analysis resulted in an implied per share equity value reference range for LCA of $3.92 to $5.64 per share, as compared to the merger consideration of $5.37 per share.

Historical Trading Range

For reference purposes only and not as a component of its fairness analysis, Cain Brothers presented to the LCA board of directors the 52-week trading range of LCA’s common stock ending February 10, 2014, which ranged from $2.78 to $4.93 per share.

Summary of Analyses

Based on the analyses described above, Cain Brothers determined that the merger consideration to be received by the holders of LCA common stock was fair, from a financial point of view, to such holders. The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by Cain Brothers and is qualified in its entirety by reference to the opinion of Cain Brothers attached as Annex B to this proxy statement. In preparing its opinion to the LCA board of directors, Cain Brothers performed a variety of financial and comparative analyses. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Accordingly, Cain Brothers believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create a misleading or incomplete view of the processes underlying the analyses and its opinion.

In addition, each method of analysis has inherent strengths and weaknesses, and the nature of the available information may further affect the analytic value of particular methods. In arriving at its opinion, Cain Brothers did not attribute any particular weight to any analysis or factor, but instead made qualitative judgments as to the significance and relevance of each analysis and factor, and may have deemed various assumptions more or less probable than other assumptions. Moreover, analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. In performing its analyses, Cain Brothers made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond LCA’s control. Any estimates contained in analyses performed by Cain Brothers are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than that suggested by such analyses. Accordingly, the range of valuation resulting from any particular analysis described above should not be taken to be Cain Brothers’ view of the actual value of LCA. Cain Brothers’ analyses are not and do not purport to be appraisals or otherwise reflective of the price at which LCA common stock might actually trade. The analyses performed were prepared solely as part of Cain Brothers’ analysis of the fairness as of the date of the opinion, from a financial point of view, of the merger consideration and were provided for the use of the LCA board of directors in connection with the delivery of Cain Brothers’ opinion.

Cain Brothers’ opinion spoke only as of the date it was rendered and was necessarily based on economic, market and other conditions and circumstances as they existed and could be evaluated on, and the information made available to Cain Brothers as of, February 13, 2014. Events occurring after such date may affect Cain Brothers’ opinion and the assumptions used in preparing it, and Cain Brothers does not assume any obligation to update, revise, reaffirm or withdraw such opinion or to otherwise comment upon events occurring after February 13, 2014. Changes in the operating condition and/or share price of LCA subsequent to such date could result in a material change in Cain Brothers’ judgment of the fairness of the merger consideration. In addition, changes in the eye-care environment, and the valuations accorded to eye-care companies by the public markets, each could result in a material change in Cain Brothers’ judgment of the fairness of the merger consideration.

The merger consideration to be paid to the holders of shares of LCA common stock was determined in negotiations between LCA and PhotoMedex, and the decision to approve and recommend the transaction contemplated by the merger agreement was made independently by the LCA board of directors. Cain Brothers provided advice to LCA during these negotiations. Cain Brothers did not, however, recommend any specific consideration to LCA or that any specific consideration constituted the only appropriate consideration for the merger. Cain Brothers’ opinion and financial analyses were among the many factors considered by the LCA board of directors in making its determination to approve the merger and adopt the merger agreement, and to recommend that the stockholders approve the merger and adopt the merger agreement, and should not be viewed as determinative of the views of the LCA board of directors or management with respect to the value of LCA, the merger consideration or the transaction contemplated by the merger agreement. In rendering its opinion, Cain Brothers was not engaged to act as an agent or fiduciary of LCA, the stockholders or creditors of LCA or any other third party.

Retention of Cain Brothers to Render a Fairness Opinion

Cain Brothers has acted as financial advisor to LCA in connection with the merger and in accordance with the terms of its engagement letter will receive for its services an aggregate fee currently estimated to be approximately 1.25% of the aggregate transaction value or $1.3 million (the “transaction fee”). The transaction fee is payable only upon consummation of the merger. In addition, following the execution of the engagement letter, Cain Brothers received retainer fees totaling $50,000 (the “retainer fee”). The retainer fee is to be credited against the transaction fee. LCA also paid a cash fee of $150,000 to Cain Brothers upon the rendering of its opinion. The LCA board of directors was aware of this fee structure and took it into account in considering the Cain Brothers opinion and in approving the merger.

In addition to any fees for professional services, LCA also has agreed to reimburse Cain Brothers for reasonable expenses incurred by Cain Brothers in performing its services (including fees and disbursements of counsel and of other consultants and advisors retained by Cain Brothers). LCA has also agreed to indemnify Cain Brothers against claims related to any of the services rendered pursuant to the engagement letter or matters that are the subject of, or arise out of, the engagement of Cain Brothers contemplated by the engagement letter, including liabilities under the federal securities laws.

Cain Brothers provides investment banking and other services to a wide range of corporations and individuals from which conflicting interests or duties may arise. During the two-year period prior to the date of Cain Brothers’ opinion, no material relationship existed between Cain Brothers or any of its affiliates and LCA or PhotoMedex or any of their respective affiliates pursuant to which compensation was received by Cain Brothers or its affiliates other than pursuant to its engagement letter as described above. However, Cain Brothers or its affiliates may in the future provide investment banking and other financial services to LCA and PhotoMedex or any of their respective affiliates for which it would expect to receive compensation. Neither Cain Brothers nor any of its employees has a direct financial interest in LCA or PhotoMedex.

Certain Company Forecasts

LCA does not as a matter of course make public projections as to future performance, earnings or other results. However, certain nonpublic financial information was provided to Cain Brothers in its capacity as LCA’s financial advisor, including projections by management of LCA’s stand-alone financial performance for fiscal years 2014 through 2017. These financial projections included forecasts of revenue, operating income or EBIT, EBITDA, net income, capital expenditures and cash flow.

A summary of these financial projections is set forth below. This summary is not being included in this proxy statement to influence your decision whether to vote “FOR” or “AGAINST” the proposal to adopt and approve the merger agreement, but because these financial projections were used by Cain Brothers in performing the discounted cash flow analysis described in the section titled “The Merger—Opinion of Independent Financial Advisor” beginning on page 26. These financial projections were also provided to PhotoMedex and its financing sources in connection with PhotoMedex’s due diligence of LCA.

The inclusion of this information should not be regarded as an indication that the LCA board of directors or financial advisors, or any other person, considered, or now considers, the financial forecasts to be material or to be necessarily predictive of actual future results, and you should not view them as such. Company management’s financial forecasts, upon which the summary financial forecasts included below were based, are inherently subjective in many respects. There can be no assurance that these financial forecasts will be realized or that actual results will not be significantly more positive or negative than forecasted.

The financial projections included in this proxy statement have been prepared by, and are the responsibility of, the Company’s management. The financial projections summarized in this section were prepared solely for internal use by LCA and not with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial data, published guidelines of the Securities and Exchange Commission regarding forward-looking statements, or accounting principles generally accepted in the U.S. The financial projections are forward-looking statements.

LCA’s management believes the forecasts were prepared in good faith and on a reasonable basis based on the best information available to the management at the time of their preparation. The financial projections, however, are not actual results and should not be relied upon as being indicative of actual future results, and readers of this proxy statement are cautioned not to place undue reliance on this information. Neither LCA’s independent registered public accounting firm, nor any other independent accountants, have examined, compiled or performed any procedures with respect to these financial projections, nor have they expressed any opinion or any other form of assurance with respect to this information or its achievability.

Because these financial projections were developed for LCA on a stand-alone basis without giving effect to the merger, the financial projections do not give effect to the merger or any changes to LCA’s operations or strategy that may be implemented after the consummation of the merger, including any potential cost synergies realized as a result of the merger, or to any costs related to or that may arise in connection with the merger.

The inclusion of the financial projections in this proxy statement should not be regarded as an indication that LCA or any of its affiliates, advisors, representatives or PhotoMedex or any other recipient of this information considered or considers the financial projections to be predictive of actual future events, and the financial projections should not be relied upon as such. Neither LCA nor any of its affiliates, advisors, officers, directors or representatives can give any assurance that actual results will not differ from these financial projections. Although the financial projections were prepared in good faith and LCA’s management believes the assumptions on which the financial forecasts were based were reasonable when made, no assurance can be made regarding future events. Because the financial projections cover multiple years, such information by its nature becomes less reliable with each successive year. While presented with numeric specificity, the assumptions upon which the financial projections were based necessarily involve judgments with respect to, among other things, future economic and competitive conditions, which are difficult to predict accurately and many of which are beyond our control. Important factors that may affect actual results include, but are not limited to, the items described in the section titled “Cautionary Statement Regarding Forward-Looking Statements.”

Neither LCA nor any of its affiliates, advisors, officers, directors or representatives undertakes any obligation to update or otherwise revise or reconcile the financial projections to reflect circumstances existing after the date such financial projections were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the financial projections are shown to be in error. LCA does not intend to make publicly available any update or other revision to the financial projections, except as required by law. Neither LCA nor any of its affiliates, advisors, officers, directors or representatives has made or makes any representation to any stockholder or other person regarding the ultimate performance of LCA as compared to the information contained in the financial projections or that forecasted results will be achieved. LCA made no representation to PhotoMedex, in the merger agreement or otherwise, concerning the financial projections.

The inclusion of the financial projections in this proxy statement should not be regarded as an indication that LCA, PhotoMedex, Cain Brothers or anyone who received the financial projections then considered, or now considers, the financial projections to be material information of LCA or a reliable prediction of future events, and the financial projections should not be relied upon as such. LCA views the financial projections as nonmaterial because of the inherent risks and uncertainties associated with such long-range financial forecasts. LCA stockholders are cautioned not to place undue reliance on the financial projections included in this proxy statement.

The following table sets forth projected financial information for LCA for 2014 through 2017:

For purposes of its discounted cash flow analysis, described in the section titled “The Merger—Opinion of Independent Financial Advisor —Discounted Cash Flow Analysis,” Cain Brothers used the following unlevered, after -tax free cash flow projections for LCA, which were derived from projections prepared by LCA’s management regarding revenue, net income and selected balance sheet items for 2014 through calendar year 2017:

LCA DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE FINANCIAL PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE FINANCIAL PROJECTIONS ARE NO LONGER APPROPRIATE.

Interests of LCA’s Directors and Executive Officers in the Merger

In considering the recommendation of the LCA board of directors to adopt the merger agreement, you should be aware that LCA’s directors and executive officers have interests in the merger that may be different from, or in addition to, those of LCA stockholders generally. The LCA board of directors was aware of these interests and considered them, among other matters, in evaluating the merger agreement, in reaching its decision to approve the merger agreement, and in recommending to LCA stockholders that the merger agreement be adopted. These interests include those described below.

Acceleration of Vesting of Equity Awards

Pursuant to the terms of the equity awards held by LCA’s executive officers and directors, upon the consummation of a change of control of LCA, all restricted stock units held by the executive officers and directors will become fully vested at the target performance level, if applicable. Pursuant to the terms of the merger agreement, immediately prior to the effective time of the merger:

Accordingly, immediately prior to the effective time of the merger, each restricted stock unit held by the executive officers and directors will become vested (based on a deemed achievement of performance conditions at target level, if applicable) pursuant to its terms and will be cancelled and converted into the right to receive an amount in cash equal to $5.37. The payments for restricted stock units will be made without interest and less any applicable withholding taxes. However, as of the date of this proxy statement, all outstanding stock options have exercise prices above $5.37 and will therefore be cancelled at closing with no payment due.

The following tables set forth the number of shares underlying restricted stock units held by the executive officers and directors of LCA as of March 14, 2014, assuming achievement of performance conditions at the maximum level, if applicable, and including the restricted stock units granted on March 2, 2014, as described below.

*At maximum

Non-Executive Directors

The Company will continue to pay the directors for their services at the current rate on a prorated basis through the closing of the merger.

*At maximum

**45% of performance awards vest as 45% is the "target" level.

Quantification of Potential Payments to Named Executive Officers in Connection with the Merger

LCA’s “named executive officers” for purposes of the disclosure in this proxy statement are Michael J. Celebrezze, Amy F. Kappen, Bharat Kakar and Rhonda S. Sebastian. In accordance with Item 402(t) of Regulation S-K promulgated under the Exchange Act, the table below sets forth the compensation that is based on or otherwise relates to the merger or that may become payable to each of the named executive officers if the employment of each such officer were terminated by the surviving corporation without “cause” or by the officer for “good reason” on or after the merger is consummated.

The amounts indicated below are estimates of amounts that would be payable assuming that the merger were consummated on March 14, 2014 and that the employment of the executives were terminated immediately thereafter on a basis entitling them to severance payments under their existing employment agreements described below . These estimates are based on multiple assumptions that may or may not actually occur, including the assumption that the employment of each of the executive officers will be terminated on a basis entitling them to severance payments and that the executive officer will not become otherwise employed during that period, which could reduce the amount of certain severance payments that the executive officer is entitled to receive under the terms of their LCA employment agreements. Some of these assumptions are based on information not currently available and, as a result, the actual amounts, if any, to be received by a named executive officer may differ in material respects from the amounts set forth below.

The number and value of shares underlying unvested restricted stock units held by the named executive officers as of March 14, 2014 that would be entitled to accelerated vesting in the merger are set forth below. These amounts reflect the grant by LCA on March 2, 2014 of approximately 60,000 restricted stock units to executive officers that will be subject to immediate vesting upon the consummation of the merger based on deemed performance at the target level, if applicable. The value of each share underlying restricted stock units is assumed to be $5.37. In no event will any such award cause or trigger alone or together with any other payments or benefits, any amount to be not deductible by reason of Section 280G of the Code or to be subject to an excise tax under Section 4999 of the Code, in each case as a result of the consummation of the merger.

The compensation shown in the table above and the related narrative disclosure is subject to the advisory say-on-merger pay proposal, as described in this proxy statement under “Proposal 2: Approval of Advisory Say-On-Merger-Pay Proposal.”

Employment Agreements

Current Employment Agreements

The Company has at-will employment agreements with Mr. Celebrezze (as amended and restated in January 2013), Ms. Sebastian (entered into in September 2009) and Ms. Kappen and Mr. Kakar (each entered into in January 2013) that generally provide for payment of a base salary (subject to annual review), eligibility for group benefit plans, and eligibility for cash or equity awards in the discretion of the Compensation Committee. Each executive’s employment is for a one-year term (six months for Ms. Kappen) that will be automatically renewed for successive one-year periods (six-month periods for Ms. Kappen), unless the Company or the executive provides written notice to the other party not to so renew at least 90 days prior to the end of each term. In the event of termination for Good Reason (defined below), for a reason other than Cause (defined below), in the event of death or disability, or if the employment agreement is not renewed by the Company , the executives are entitled to benefits as follows:

For these agreements, Good Reason is defined as (A) the Company breached any material provision of the agreement; (B) there is a material diminution in the executive’s authority, duties or responsibilities; (C) there is a change of more than 35 miles in the Company’s headquarters in Cincinnati, Ohio; or (D) a successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the Company’s business and/or assets fails to assume all of its obligations under the agreement; in each case after notice and failure to cure. Cause is defined as (i) the executive breached any material provision and within 30 days after notice thereof, the executive fails to cure such breach; or (ii) the executive at any time refuses or fails to perform, or misperforms, any of his or her obligations under or in connection with the agreement in a manner of material importance to the Company and within 30 days after notice the executive fails to cure such action or inaction; or (iii) for Mr. Kakar and Ms. Kappen, the executive commits a fraud or criminal act in connection with his or her employment, and for Mr. Celebrezze and Ms. Sebastian, a court makes a determination that the executive has committed such an act (which, for Ms. Sebastian, must also materially affect the Company).

New Employment Agreements

Concurrently with the execution of the merger agreement, PhotoMedex entered into new employment agreements with each of the named executive officers. These agreements become effective upon the closing of the merger. The terms of the employment agreements were reviewed by the LCA board of directors prior to its approval of the execution of the merger agreements.

The new employment agreements with PhotoMedex specifically supersede each executive officer's existing employment agreement with LCA described above subject to and effective upon the closing, and no payments will be made under the agreements with LCA described above after the closing of the merger.