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Letter to Biolase stockholdersAugust 27, 2014To My Fellow BIOLASE Stockholders,As you know the BIOLASE 2014 annual meeting is being held today and at that meeting BIOLASE stockholders will vote in members of our Company's Board of Directors for a one-year term each. I have voted my 1.8 million BIOLASE shares as "Withhold" for each of the five Director nominees for a number of reasons, as outlined in this Letter.I urge you to "Know Your Vote" and fully understand the pedigree of BIOLASE Board of Director nominees as well as their alliances and motivations. There is much more to be known about the five Director nominees standing for election than what stockholders are being spoon-fed through BIOLASE's filings with the U.S. Securities and Exchange Commission (SEC).More specifically, in my view the nominees have neither the skills nor the professional track record to build BIOLASE into a great company. Several have a history of behavior that is at odds with best corporate governance practices, if not securities laws, and while in leadership positions at other companies have been named in multiple class-action lawsuits brought by stockholders. Moreover, three of the five nominees own no shares of BIOLASE common stock, and their interests are thus not aligned with those of all Company stockholders. The other two nominees only recently acquired shares, albeit at a significantly depressed price.I believe that the current Board is acting under the direction of Oracle Partners (Oracle), BIOLASE's largest stockholder, and Larry N. Feinberg, Oracle's Managing Partner. As you know, on June 12, 2014, I resigned as the Company's Chairman and Chief Executive Officer, and on August 6, 2014, I resigned as a Director in protest after having served on the Board for the past 23 years.Here are the reasons each Director nominee does not deserve my votePaul N. Clark(Chairman)Mr. Clark's professional biography includes serving as a Director of Agilent Technologies (NYSE: A), and previously serving as Chairman, President and CEO of ICOS Corporation (acquired by Eli Lilly & Co. in 2007) and President of Abbott's Pharmaceuticals Division. Indeed Mr. Clark's sale of ICOS to Lilly came under swift and harsh criticism, with allegations from both institutional investors and proxy-advisory firms that he sold the company too cheaply and was personally rewarded too well. Mr. Clark was also criticized for withholding what many stockholders considered to be material information when promoting the transaction, including clinical and regulatory updates on at least two drug programs, as well as information about higher-than-expected sales of the company's flagship product and the fact that profits for that year were to be more than triple earlier estimates. The Board also awarded a last-minute round of sizeable retention bonuses to senior management, including an additional $4.3 million to Mr. Clark on top of a so-called "golden parachute" set to exceed $23 million. Importantly, Mr. Clark has no experience in the dental industry, with advanced medical technologies or with any companies the approximate size and stage of development as BIOLASE. In addition, Mr. Clark purchased BIOLASE common stock in the days immediately preceding the November 12, 2013 filing by Oracle of a Schedule 13D with the SEC reporting that Oracle beneficially owned 2.6 million shares, or 7.4%, of BIOLASE (a figure that is now considerably higher). Oracle has testified under oath that it informed Mr. Clark of its upcoming plans to file a Schedule 13D prior to reporting its position publicly, and Mr. Clark has testified under oath that he purchased 88,000 shares of BIOLASE common stock in open-market transactions while in possession of that confidential information three and four days prior to the date of the public filing. In the subsequent four months, the price of BIOLASE common stock increased by approximately 150%. Immediately before joining the BIOLASE Board, Mr. Clark asked to buy $1 million of BIOLASE stock at a 40% discount to the market price to make him "interested" in getting involved with our Company. That inequitable request was denied by me and Mr. Clark declined to purchase the shares at the market price of approximately $3.50 at the time. Within 24 hours of joining the Board Mr. Clark terminated my employment as CEO, and he subsequently acquired $1 million in BIOLASE stock in a private-placement transaction at $1.92 per share, representing a discount greater than his hoped-for 40%. According to public filings and including shares bought in the private placement transaction announced on July 21, 2014, Mr. Clark owns 605,954 shares of BIOLASE common stock.Dr. Frederic H. MollDr. Moll's professional biography includes serving as Chairman and CEO of Auris Surgical Robotics and as co-founder and CEO of Intuitive Surgical, both surgical robotics companies. Importantly, Mr. Moll was terminated by Intuitive Surgical in 2002 for poor performance as reflected in a decline in share price from $38 to $6 (yet he remained a Director), many years prior to that company's notable success, which is rightly attributed to the management team that followed him. Subsequent to Intuitive Surgical when Dr. Moll was CEO and a Director of Hansen Medical, Inc. (another surgical robotics company that was involved in patent litigation with Intuitive Surgical after Dr. Moll changed jobs), that company faced two related class-action lawsuits by stockholders triggered by a "whistleblower" that subsequently uncovered accounting irregularities and led to the restatement with the SEC of financial results for the 2008 first, second and third quarters and full year, and the 2009 first and second quarters. Under Dr. Moll and his management team, the price of Hansen Medical common stock declined from $39 per share in 2007 to slightly above $1 per share today, a drop of more than 97%. While a Director of MAKO Surgical Corp. (another robotics company), Dr. Moll was named in yet another stockholder class-action lawsuit, this one alleging MAKO had issued false and misleading statements about the company's financial performance and future prospects, with a subsequent 40% drop in share price once the true financial condition and future prospects became known. Also, it is notable that at Dr. Moll's strong recommendation BIOLASE hired Dr. Alexander Arrow as President and Chief Operating Officer. During the process of hiring Dr. Arrow, Dr. Moll did not disclose that he had terminated Dr. Arrow's employment at his own company for non-performance. According to public filings, Dr. Moll owns no shares of BIOLASE common stock.Jeffrey M. Nugent(also currently serving as interim CEO)Mr. Nugent's professional biography includes serving as President and CEO of Neutrogena and Revlon, as well as Chairman, CEO and Director of several other personal care and beauty companies. Importantly, Mr. Nugent has no experience in any of the current or contemplated end-markets for BIOLASE's technology, nor direct management experience with companies the approximate size and stage of development as BIOLASE. His family name has been severely tarnished as his brother Ted, National Rifle Association board member and conservative columnist, in a well-publicized remark called President Barack Obama a "subhuman mongrel" in January 2014 while campaigning for a Texas gubernatorial candidate. Mr. Nugent subsequently defended his brother's comments during an interview on CNBC, saying that while it was wrong for his brother to refer to the President using such language in a public setting, it was entirely acceptable for him to do so in his living room. Furthermore, Mr. Nugent's compensation package as interim CEO exceeds $1 million. He is receiving base annual cash compensation of $300,000, plus an award of 172,282 stock options and 37,879 restricted shares of BIOLASE common stock as an additional incentive. Prior to joining the Board Mr. Nugent asked to buy BIOLASE stock at the same discount requested by Mr. Clark, as described above, and such inequitable request also was denied by me. Including shares bought in the private placement transaction announced on July 21, 2014, Mr. Nugent owns 52,083 shares of BIOLASE common stock.James R. TalevichMr. Talevich's professional biography includes serving as a senior financial executive and as a Director of Nova LifeStyle, a manufacturer of residential furniture. Importantly, Mr. Talevich has no experience in the dental or capital equipment fields. Instead, he makes a living by simply collecting fees from sitting on the Boards of Directors of various public and private companies, and is not involved in any capacity in the operations, management or daily decision-making of such companies. Mr. Talevich was part of the Director block that voted to abruptly terminate my employment as CEO. Indeed he represented the essential "swing vote" on the Board, yet he cast his vote without performing any due diligence on my management and the true condition of BIOLASE. In casting his vote, he essentially fell in line with Oracle's desires. According to public filings, Mr. Talevich owns no shares of BIOLASE common stock.Dr. Jonathan T. LordDr. Lord is a nominee proposed by Oracle Partners and a "For" vote is recommended by the Company's Board of Directors. As an Oracle nominee, his loyalties are already clear. Dr. Lord is a pathologist by training and is a professor of pathology, which is tangential at best to the business and strategy of BIOLASE. He previously served as a Director of MAKO Surgical Corp., as described above in the section about Dr. Moll. According to public filings, Dr. Lord owns no shares of BIOLASE common stock."The loyalty of the four legacy Directors is already established, and their loyalty is to Oracle and not to all BIOLASE stockholders. Control of the Board was previously achieved through a now-clear Trojan Horse strategy of deceit and the manipulation of resignations by past Directors. It's intriguing that I was terminated as CEO within hours of new Directors being appointed and without undertaking proper due diligence on my management and the status of the Company's business, which is a breach of their fiduciary duty of utmost care, integrity, honesty and loyalty.Questionable loyaltyAs I have previously established, there exists the very real possibility that current and former Directors with loyalties to Oracle have misappropriated corporate opportunities belonging to BIOLASE and also have inappropriately shared details of proprietary, confidential BIOLASE technology with others with heretofore unknown intentions. That laser technology is of great value to our Company and represents game-changing potential in the field of general surgery.Dr. Alexander K. ArrowRegarding Dr. Arrow, he is simply an agent of Oracle and the Oracle-controlled Board of Directors. While under oath in court, he gave contradictory testimony about his resignation as a Director, and his fellow Directors successfully blocked my repeated efforts to terminate his employment as an officer of our Company for poor performance.Inconvenient voiceYou should know that although I am happy to correspond directly with you via this Letter, my efforts to gain public and widespread visibility for the information contained herein was thwarted by BIOLASE as their legal counsel contacted various commercial newswire services preemptively to alert them not to distribute news releases about BIOLASE submitted to them by any third party, including me. This action begs the question why would Directors go to such lengths to control the views of in-the-know third parties if the Directors have nothing to hide?My involvement and accomplishments at BIOLASE are numerousI served on the BIOLASE Board of Directors continuously from 1991 through August 2014 and currently am the beneficial owner of approximately 1.8 million shares of BIOLASE common stock. I served as Executive Vice Chairman from 1994 through 2006, and as interim Chief Executive Officer from September 2006 to January 2007. I served as Chairman of the Board of Directors and as Chief Executive Officer from September 2010 through June 2014, during which time and at my request I was paid an annual salary of only $1.Under my leadership, from 1994 to early 2006 when I resigned as Executive Chairman, revenues grew from approximately $1million to approximately $70 million and the Company's market capitalization increased from approximately $3.5 million to approximately $500 million. In my second round as Chairman and CEO, I managed a formidable business and financial turnaround by restructuring what was essentially a bankrupt BIOLASE, into a success again, tripling revenues from approximately $20 million to approximately $60 million with an increase in market capitalization from approximately $15 million in August 2010 to approximately $130 million in February 2013, twice exceeding $200 million during the period. Since Mr. Clark and Mr. Nugent became members the Board and allied with Oracle Partners as its agents, the price of BIOLASE common stock has dropped by approximately 40% as of today.I look forward to continuing my advocacy on behalf of all BIOLASE stockholders, and I thank you for your ongoing interest in the success of our Company.Sincerely,Federico PignatelliOpen letter to Biolase stockholders and reasons why Paul Clark, Alexander Arrow, Frederic Moll, James Talevich, Jeffrey Nugent and Jonathan Lord don't deserve my vote.
More hidden facts about Biolase's management (Update)
Here's the second open letter, which Federico Pignatelli published in Orange County Register in response to accusations from Biolase. I thought I'd paste it here because in my opinion it includes important facts, which invalidate Biolase's statements. I believe every stockholder should have the right to know the full story. Please share your opinion in the comments....
To My Fellow BIOLASE Stockholders, An article appeared in the Los Angeles Times on September 14, 2014 outlining leadership changes at BIOLASE to "stanch a decade of red ink" while also mentioning my former role as Chairman and CEO. While this might lead one to believe the 10 years of losses were incurred under my watch, nothing could be further from the truth. In early 2006 I left a healthy, successful company that had painstakingly been built under my leadership since 1994, with an attendant rise in market value from $3 million to a high of $500 million. In September 2010 I again took over as CEO of BIOLASE, which was nearly bankrupt and whose market value had declined to a scant $15 million. Following three years of restructuring (2011-2013), revenues subsequently tripled to nearly $60 million and market value peaked at $200 million. During those three years the company reported an operating loss of $9.3 million after investing $15 million in R&D related to more than 10 new cutting-edge laser and other products, which represent the real future of our company. Six months ago I was attacked legally in a battle for control by an activist corporate raider named Larry Feinberg, the founder and principle of Oracle Partners, who had discovered the enormous value I built in BIOLASE. His discovery, however, was made through leaks of material, confidential information by BIOLASE Board members close to him, who then conspired with certain other Directors to wrestle control of BIOLASE from me, as Chairman and CEO, and the stockholders I dutifully represented. As noted in the Los Angeles Times, "In March [2014], Oracle candidates Jeffrey M. Nugent and Paul N. Clark were named to the board." Even the legendary investor George Soros, by recently initiating an investment position in our company, has discovered the opportunity that BIOLASE presents in changing the way surgery is performed, with its patented WaterLase® and other technologies developed under my management. In a Letter to Stockholders published in this newspaper on August 27, 2014, I was compelled to voice strong concern over the BIOLASE Board nominees, as well as their allegiances to just one shareholder, Larry Feinberg, and his unruly practices and motivations in taking control of BIOLASE without paying all shareholders the market premium that is customary in a change of control. On September 2, 2014, BIOLASE announced that its Board named acting CEO Jeffrey M. Nugent as permanent President and CEO (notwithstanding the lack of performance and a languishing stock price), and Dr. Alexander K. Arrow, previously President and Chief Operating Officer, was named Chief Medical Officer, a new position. Mr. Nugent continues to serve as a member of the Board, whereas Dr. Arrow resigned as a Director earlier this year in a highly disputed manner, causing an unwarranted change in control. These executive changes are yet another example of the influence Mr. Feinberg is exerting over our company. While on the surface Mr. Nugent's new titles simply make his operational involvement in BIOLASE permanent and Dr. Arrow, as a medical doctor, seems better suited to his new position, there is much more that you need to know. The Facts about Mr. Jeffrey Nugent Jeffrey Nugent lives in New York City, which is some 2,800 miles from BIOLASE headquarters in Irvine, California. We do not know how much time he spends at headquarters – now or in the future – but we do know that when he is in Orange County he stays at luxury hotels and dines at high-end restaurants, all at the company's expense. We also know that Mr. Nugent flies business class to and from BIOLASE and that a roundtrip business-class ticket from New York to Los Angeles can cost $5,000 or more. We also know that Mr. Nugent's compensation package as interim CEO exceeded $1 million, and it's safe to assume his package as permanent President and CEO is at least as generous, and it also includes a golden parachute (a perk he shares with other employees he recently hired). Adding in reimbursed travel, living expenses and perks makes his compensation and that of others all the more egregious to a company the size and stage of development as BIOLASE. During my time in executive management at our company, no employee ever had an employment contract or a golden parachute, and I chose to be paid only $1 per year and to have no perks or privileges of any kind in order to set an example to all. For more than 23 years I served BIOLASE in various capacities, including Chairman, Executive Chairman, Executive Vice Chairman, Director and/or CEO. I, too, own a residence in New York City in addition to one in Southern California less than 60 miles from headquarters, yet BIOLASE never paid for my travel expenses between New York and California, as I considered that to be personal travel between two residences. Further, when I was in New York on business for BIOLASE, the company never paid a dime for my living expenses. On average, while CEO I incurred approximately $60,000 in reimbursed expenses each year related to domestic and overseas business travel, and that was while building a network of 72 international distributors in only three years, up from less than 10 distributors at the end of 2010. With recent history as a guide, it's safe to estimate that Mr. Nugent will be incurring expenses of a quarter-million dollars or more annually – on top of his conspicuous compensation package – all of which will be paid by our company and you and me, its stockholders. I was shocked to learn that Mr. Nugent invested nearly $100,000 in BIOLASE on July 22, 2014 by acquiring 52,000 shares of common stock at $1.92 per share, and then to witness him wasting shareholder money in luxury travel for himself and his exorbitant compensation. At the BIOLASE 2014 annual meeting on August 27, the Board appointed Director Dr. Jonathan T. Lord as Chairman of the Compensation Committee. Dr. Lord was a Director nominee proposed by Oracle, and it is more than curious that a pathologist who also is a professor of pathology is charged with overseeing the compensation and perks of the BIOLASE executive management team. Compensation Committee member Dr. Frederic H. Moll, along with Audit Committee members James R. Talevich, Paul N. Clark and, again, Dr. Moll, are exercising, to say the least, questionable judgment and clearly self-serving oversight when it comes to compensation and expense reimbursement related to Mr. Nugent. From a business perspective, I have previously voiced concern over Mr. Nugent's qualifications to lead BIOLASE, in particular given the fact his experience is primarily with personal care and beauty companies. It is puzzling what Oracle and its Director agents see in Mr. Nugent. Regrettably, the exodus of the most talented BIOLASE employees continues unabated. It appears that many BIOLASE employees view Mr. Nugent's leadership as questionably as I do. The Facts about Dr. Alexander Arrow Dr. Arrow is simply an agent of Oracle and the Oracle-controlled Board. While under oath in court, he gave contradictory and false testimony about his resignation as a Director that, ultimately, led to Oracle's agents gaining control of the Board by just one vote. In addition, Oracle's agent Directors successfully blocked my repeated efforts to terminate Dr. Arrow's employment as an officer of our company for grossly poor performance since October of last year, which is the same time Oracle began accumulating shares and exerting control. I believe Dr. Arrow made his false declaration based on his fear that I would be terminating his employment. Rather than terminate Dr. Arrow, current management created a new position for him. Prior to joining BIOLASE Dr. Arrow held titles at several firms suggesting medical responsibilities (e.g., Medical Director). Yet notably, a Chief Medical Officer is primarily responsible for a company's dealings with its medical constituents, including customers and key opinion leaders. Dr. Arrow's degree is not in dentistry, but rather he is a medical doctor who never practiced medicine subsequent to receiving his M.D. degree. He is not board-certified in any medical specialty, nor does it appear he performed more than the minimal residency and internship requirements, with no fellowship or even medical research work on his resume. Instead he chose to pursue a career on Wall Street as soon as his basic medical training ended nearly 20 years ago. Personally, I am having a difficult time reconciling Dr. Arrow's training and background with his current job responsibilities. Furthermore, Mr. Nugent, along with his fellow Directors and members of the executive team, are making questionable and risky decisions regarding the company's strategic direction, technology stewardship, products, customers and end-users. I intend to address those topics in subsequent Letters. I look forward to continuing my advocacy on behalf of all BIOLASE stockholders, and I thank you for your ongoing interest in the success of our company. Sincerely, Federico PignatelliSeptember 21, 2014 About Federico Pignatelli Mr. Pignatelli served on the BIOLASE Board continuously from 1991 through August 2014 and currently is the beneficial owner of approximately 1.8 million shares of BIOLASE common stock. He served as Executive Chairman from 1994 through 2006, and as Chairman Emeritus from March 2006 to July 2010. He served as Chairman of the Board and as Chief Executive Officer from September 2010 through June 2014, during which time and at his request he was paid an annual salary of only $1. Under his leadership, from 1994 to early 2006 when he resigned as Executive Chairman, revenues grew from approximately $1million to approximately $70 million and the company's market capitalization increased from approximately $3.5 million to approximately $500 million. In his second round as Chairman and CEO, he managed a formidable business and financial turnaround by restructuring what was essentially a bankrupt BIOLASE into a success again, tripling revenues from approximately $20 million to approximately $60 million with an increase in market capitalization from approximately $15 million in August 2010 to approximately $130 million in February 2013, twice exceeding $200 million during the period.BIOGRAPHIES:Paul ClarkPaul Clark is an influential member of corporate culture, having pursued high ranking positions from the moment he gained his degrees during his college years. He has moved primarily within pharmaceutical and nutritional circles, successfully obtaining high ranking positions and places on the board of multiple companies.
EducationPaul Clark began his education by entering into the University of Alabama pursuing a B.A. in Finance, which he successfully accomplished, going on to add his M.B.A. in Business Administration during his time at the Amos Tuck School of business at Dartmouth College.These two degrees would go on to serve him well as he entered into his professional life, which was to truly begin in 1999.CareerIn 1971 Paul Clark started his career with the Union Camp Corporation, before moving on to work at Sandoz in 1973. A company known for it's Ophthalamics, Otics, and many more products over the years as it developed. In 1984 he started to truly grow his career when he was promoted to Vice President of Abbot Laboratories, a company quite well known for it's nutritional supplements such as Similac, Pedialyte, and Ensure among others. He served in this capacity for another 6 years, until he was promoted to Senior Vice President for his achievements working for this company. After another 8 years he once again moved within the company, taking the position of EVP until 1999, when he left for ICOS.In 1999 Paul Clark was promoted to the auspicious position of President and CEO of ICOS, the inventory, producer, and distributor of Cialis, one of the strongest competitors to Viagra. As part of his service as CEO of this company, he ultimately organized and orchestrated the sale of the company to Lilly in 2007.His sale of ICOS came under deep criticism and suspicion, as the price it was sold for appeared to be far below it's actual worth. Further, Paul Clark allegedly received personal rewards for having sold the company at such a price.During the process of handling this transaction, he was also criticized for not having fully disclosed all the relevant information about the transaction to the stockholders. This includes updates about regulatory and clinical matters on two or more drug programs, and the unexpectedly high sales of the company's main product.Despite a complete lack of Dental background, he came aboard the BIOLASE Board of Directors. It was evident from the beginning that he was definitely focused on a purely financial gain from BIOLASE, first petitioning to purchase stock in the company at an extremely low rate, and refusing the more reasonable $3.50 a share offered. Once he came onto the board after having this request denied, he immediately terminated the CEO.http://www.gencap.com/team/paul_clark_sab.phphttp://www.forbes.com/profile/paul-clark/http://investing.businessweek.com/research/stocks/private/person.asp?personId=548428&privcapId=20641http://www.agilent.com/about/newsroom/presrel/2006/17may-gp06016.htmlhttp://www.nndb.com/people/546/000128162/Paul N. Clark is recognized for a "strong background in the life sciences and pharmaceutical industries." Paul Clark took up work at Sandoz Pharmaceuticals in 1973, working various sales, marking and operations positions until 1983. After leaving Sandoz, He served as Vice President in marketing and sales positions for Marion Laboratories from 1983 to 1984, when he began working for Abbot Laboratories.Mr. Clark became VP at Abbot Laboratories in 1984 and worked in various capacities, specifically running the Pharmaceuticals division. He became Senior VP in 1990 and retired in 1998 as Executive Vice President of Abbot Laboratories and Board Member. During his tenure as president the sales in the Pharmaceuticals Division increased from $250 Million to $2.6 Billion. In June 1999, Clark was appointed as the President and Chief executive Officer at ICOS Corp. until January of 2007. Starting in February 2000 he also served as Chairman of the Board for ICOS. Personal LifeMr. Clark has was born in 1947 to a conservative Republican family, and has been politically active in this area at many points throughout his life. He was instrumental in working in the John McCain campaign in 2008, and also serves on the Washington Roundtable Board of Directors.
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