BIRNER DENTAL MANAGEMENT SERVICES, INC.
3801 EAST FLORIDA AVENUE, SUITE 508
DENVER, COLORADO 80210
April 25, 2003
TO THE SHAREHOLDERS OF BIRNER
DENTAL MANAGEMENT SERVICES, INC.:
You are cordially invited to attend the 2003 Annual Meeting of Shareholders (the
"Meeting") of Birner Dental Management Services, Inc. (the "Company"), to be
held on Tuesday, June 3, 2003, at 10:00 a.m., Mountain Time, at the Company's
offices, 3801 East Florida Avenue, Suite 508, Denver, Colorado 80210.
Please read the enclosed Annual Report to Shareholders on Form 10-K and Proxy
Statement for the Meeting. Whether or not you plan to attend the Meeting, please
sign, date and return the proxy card in the enclosed envelope to Computershare
Trust Company, Inc. as soon as possible so that your vote will be recorded. If
you attend the Meeting, you may withdraw your proxy and vote your shares in
person.
Very truly yours,
BIRNER DENTAL MANAGEMENT SERVICES, INC.
By: /s/ Frederic W. J. Birner
Name: Frederic W.J. Birner
Title: Chairman of the Board and Chief Executive Officer
BIRNER DENTAL MANAGEMENT SERVICES, INC.
3801 EAST FLORIDA AVENUE, SUITE 508
DENVER, COLORADO 80210
---------------------------
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD JUNE 3, 2003
---------------------------
TO OUR SHAREHOLDERS:
The 2003 Annual Meeting of Shareholders (the "Meeting") of Birner Dental
Management Services, Inc., a Colorado corporation (the "Company"), will be held
on Tuesday, June 3, 2003, at 10:00 a.m., Mountain Time, at the Company's
offices, 3801 East Florida Avenue, Suite 508, Denver, Colorado 80210, for the
following purposes:
(1) to elect two Class III directors to serve for a term of three years or
until their successors are duly elected and qualified;
(2) to approve the grant of 30,000 warrants on February 11, 2002 at an
exercise price of 110% of the then fair market value of the Company's
Common Stock;
(3) to consider such other matters as may properly come before the Meeting
and at any and all adjournments thereof.
Only shareholders of record at the close of business on April 7, 2003 are
entitled to notice of and to vote at the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Dennis N. Genty
-----------------------------------
Name: Dennis N. Genty
Title: Chief Financial Officer,
Secretary and Treasurer
Denver, Colorado
April 25, 2003
A PROXY CARD IS ENCLOSED. YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU
OWN. TO ASSURE THAT YOUR SHARES WILL BE VOTED AT THE MEETING, PLEASE COMPLETE
AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE
PREPAID, ADDRESSED ENVELOPE TO COMPUTERSHARE TRUST COMPANY, INC. NO ADDITIONAL
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. THE GIVING OF A PROXY WILL
NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
BIRNER DENTAL MANAGEMENT SERVICES, INC.
3801 EAST FLORIDA AVENUE, SUITE 508
DENVER, COLORADO 80210
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be held June 3, 2003
---------------------------
GENERAL INFORMATION
The enclosed proxy is solicited by and on behalf of the Board of Directors of
Birner Dental Management Services, Inc., a Colorado corporation (the "Company"),
for use at the Company's 2003 Annual Meeting of Shareholders (the "Meeting") to
be held at 10:00 a.m., Mountain Time, on Tuesday, June 3, 2003, at the Company's
offices, 3801 East Florida Avenue, Suite 508, Denver, Colorado 80210, and at any
and all adjournments thereof. This Proxy Statement and the accompanying form of
proxy are first being mailed or given to the shareholders of the Company on or
about April 25, 2003.
The Company's Annual Report on Form 10-K (the "Annual Report"), which includes
audited financial statements for the fiscal year ended December 31, 2002, is
being mailed to shareholders of the Company simultaneously with this Proxy
Statement.
INFORMATION CONCERNING SOLICITATION AND VOTING
All voting rights are vested exclusively in the holders of the Company's Common
Stock, without par value. Each share of the Company's Common Stock is entitled
to one vote. Cumulative voting in the election of directors is not permitted.
Holders of a majority of shares entitled to vote at the Meeting, when present in
person or by proxy, constitute a quorum. On April 7, 2003, the record date for
shareholders entitled to vote at the Meeting, 1,354,137 shares of the Company's
Common Stock, without par value, were issued and outstanding.
Proxies in the enclosed form will be effective if properly executed and returned
prior to the Meeting in the enclosed envelope to Computershare Trust Company,
Inc., Proxy Department, P.O. Box 1596, Denver, Colorado 80201-1596. The Common
Stock represented by each effective proxy will be voted at the Meeting in
accordance with the instructions on the proxy. If no instructions are indicated
on a proxy, all Common Stock represented by such proxy will be voted FOR
election of the nominees named in the proxy as Class III directors, FOR the
approval of the grant of 30,000 warrants on February 11, 2002 and, as to any
other matters of business which properly come before the Meeting, by the named
proxies at their discretion.
Any shareholder signing and mailing the enclosed proxy may revoke it at any time
before it is voted by giving written notice of the revocation to the Company, by
voting in person at the Meeting or by filing at the Meeting a later executed
proxy.
1
When a quorum is present, in the election of directors, the nominees having the
highest number of votes cast in favor of their election will be elected to the
Company's Board of Directors. With respect to the proposal for the approval of
the grant of 30,000 warrants on February 11, 2002 and as to any other matter
that may properly come before the Meeting, unless a greater number of votes are
required by law or by the Company's Amended and Restated Articles of
Incorporation, a matter will be approved by the shareholders if the votes cast
in favor of the matter exceed the votes cast in opposition.
Abstentions, broker non-votes (i.e., shares held by brokers or nominees as to
which the broker or nominee indicates on a proxy that it does not have
discretionary authority to vote) and any other shares not voted will be treated
as shares that are present and entitled to vote for purposes of determining the
presence of a quorum. However, for purposes of determining the outcome of the
election of Class III directors, the approval of the grant of 30,000 warrants on
February 11, 2002, or of any other matter which properly may come before the
Meeting, abstentions, broker non-votes and any other shares not voted will not
be considered as votes cast. Thus, abstentions, broker non-votes and any other
shares not voted will have no impact in the election of Class III directors, the
approval of the grant of 30,000 warrants on February 11, 2002 or any other
matter which properly may come before the Meeting so long as a quorum is
present.
The Company will pay the cost of soliciting proxies in the accompanying form.
The Company has retained the services of Computershare Trust Company, Inc. to
assist in distributing proxy materials to brokerage houses, banks, custodians
and other nominee holders. The estimated cost of such services is approximately
$1,400 plus out-of-pocket expenses. Although there are no formal agreements to
do so, proxies may be solicited by officers and other regular employees of the
Company by telephone or by personal interview for which employees will not
receive additional compensation. Arrangements also may be made with brokerage
houses and other custodians, nominees and fiduciaries to forward solicitation
materials to beneficial owners of the shares held of record by such persons, and
the Company may reimburse such persons for reasonable out-of-pocket expenses
incurred by them in so doing.
Proposal one: ELECTION OF class III DIRECTORS
General
The Company's Amended and Restated Articles of Incorporation provide for the
classification of the Company's Board of Directors. The Board of Directors is
divided into three classes. One class stands for re-election at each annual
meeting of shareholders. The Board of Directors has set the size of the Board at
six members. The Board of Directors currently is classified into two Class III
directors whose terms will expire upon the election and qualification of
directors at the annual meeting of shareholders held in 2003 (Frederic W.J.
Birner and Mark A. Birner, D.D.S.); two Class I directors whose terms will
expire upon the election and qualification of directors at the annual meeting of
shareholders held in 2004 (James M. Ciccarelli and Paul E. Valuck, D.D.S.) and
two Class II directors whose terms will expire upon the election and
qualification of directors at the annual meeting of shareholders held in 2005
(Dennis N. Genty and Brooks G. O'Neil). At each annual meeting of shareholders,
directors will be elected by the shareholders of the Company for a full term of
three years to succeed those directors whose terms are expiring. The powers and
responsibilities of each class of directors are identical. All directors shall
serve until their successors are duly elected and qualified, subject, however,
to prior death, resignation, retirement, disqualification or removal from
office.
2
Proxies cannot be voted for a greater number of persons than the number
of nominees named therein. Unless authority to vote is withheld, the persons
named in the enclosed form of proxy will vote the shares represented by such
proxy FOR the election of the nominees for director named below. If, at the time
of the Meeting, the nominees shall have become unavailable for any reason for
election as a director, the persons entitled to vote the proxy will vote for
such substitute nominee, if any, as they determine in their discretion. If
elected, the nominees will hold office until the year 2006 annual meeting of
shareholders or until their successors are elected and qualified.
Class III Director Nominees
The Board of Directors unanimously recommends that the shareholders vote FOR
election of the following nominees as Class III directors of the Company.
Name Age Position Director Since
---- --- -------- --------------
Frederic W.J. Birner 45 Chairman of the Board, Chief 1995
Executive Officer and Director
Mark A. Birner, D.D.S. 43 President and Director 1995
Continuing Directors
The persons named below will continue to serve as directors of the Company until
the annual meeting of shareholders in the year indicated below and until their
successors are elected and take office. Shareholders are not voting on the
election of the Class I and Class II directors. The following table shows the
names, ages and positions of each continuing director.
Class I - Term Expires in 2004
Name Age Position Director Since
---- --- -------- --------------
James M. Ciccarelli 50 Director 1996
Paul E. Valuck, D.D.S. 46 Director 2001
Class II - Term Expires in 2005
Name Age Position Director Since
---- --- -------- --------------
Dennis N. Genty 45 Chief Financial Officer, 1995
Secretary, Treasurer and
Director
Brooks G. O'Neil 46 Director 2003
3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of February 13, 2003, by
(i) all persons known by the Company to be the beneficial owners of 5% or more
of the Common Stock, (ii) each director, (iii) each of the executive officers,
and (iv) all executive officers and directors as a group. Unless otherwise
indicated, the address of each of the persons named below is in care of the
Company, 3801 East Florida Avenue, Suite 508, Denver, Colorado 80210.
Number of Shares
Name of Beneficial Owner Beneficially Owned Percent of Class (1)(2)
------------------------ ------------------ -----------------------
Frederic W.J. Birner (3)................... 239,159 16.2%
Mark A. Birner, D.D.S. (4)................. 222,840 15.1%
Dennis N. Genty (5)........................ 162,086 11.0%
Lee Schlessman (6)......................... 134,078 9.4%
Walter Knysz, Jr. D.D.S. (7) 78,175 5.5%
James M. Ciccarelli (8).................... 13,750 1.0%
Paul E. Valuck, D.D.S (9).................. 10,273 *
Brooks G. O'Neil (10)...................... 6,273 *
All executive officers and directors (six
persons) (11).............................. 654,381 41.5%
- ----------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options, warrants and convertible debentures currently
exercisable or convertible, or exercisable or convertible within 60
days of February 13, 2002, are deemed outstanding for computing the
percentage of the person or entity holding such securities but are not
outstanding for computing the percentage of any other person or entity.
Except as indicated by footnote, and subject to community property laws
where applicable, the persons named in the table above have sole voting
and investment power with respect to all shares of Common Stock shown
as beneficially owned by them.
(2) Percentage of ownership is based on 1,432,045 shares of Common Stock
outstanding at February 13, 2003.
(3) Includes 38,335 shares of Common Stock that are issuable upon the
exercise of options that are currently exercisable and 3,334 shares of
Common Stock that are issuable upon the exercise of warrants that are
currently exercisable. Includes 2,125 shares of Common Stock owned by
his wife. Mr. Birner disclaims beneficial ownership of all shares held
by his wife.
(4) Includes 38,334 shares of Common Stock that are issuable upon the
exercise of options that are currently exercisable and 3,334 shares of
Common Stock that are issuable upon the exercise of warrants that are
currently exercisable.
(5) Includes 38,334 shares of Common Stock that are issuable upon the
exercise of options that are currently exercisable and 3,334 shares of
Common Stock that are issuable upon the exercise of warrants that are
currently exercisable. Includes 118,443 shares of Common Stock owned by
his wife. Mr. Genty disclaims beneficial ownership of all shares held
by his wife.
(6) Includes 61,753 shares of Common Stock over which Mr. Schlessman has
sole voting power pursuant to certain powers of attorney, but for which
he disclaims beneficial ownership. The address for Mr. Schlessman is
1301 Pennsylvania Street, Suite 800, Denver, CO 80203.
(7) The address for Dr. Knysz is 300 East Long Lake Road, Suite 311,
Bloomfield Hills, MI 48304.
(8) Includes 13,750 shares of Common Stock that are issuable upon the
exercise of options that are currently exercisable.
(9) Includes 5,000 shares of Common Stock that are issuable upon the
exercise of options that are currently exercisable.
(10) Includes 2,000 shares of Common Stock that are issuable upon the
exercise of options that are currently exercisable.
(11) Includes 145,755 shares of Common Stock issuable upon the exercise of
options and warrants held by all executive officers and directors as a
group that are currently exercisable or are exercisable within 60 days.
4
There has been no change in control of the Company since the beginning of its
last fiscal year, and there are no arrangements known to the Company, including
any pledge of securities of the Company, the operation of which may at a
subsequent date result in a change in control of the Company.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning each of the directors and
executive officers of the Company. All directors shall serve until their
successors are duly elected and qualified, subject, however, to prior death,
resignation, retirement, disqualification or removal from office. Officers are
appointed by and serve at the discretion of the Board of Directors.
Name Age Position
---- --- --------
Frederic W.J. Birner 45 Chairman of the Board, Chief Executive Officer
and Director
Mark A. Birner, D.D.S. 43 President and Director
Dennis N. Genty 45 Chief Financial Officer, Secretary, Treasurer
and Director
James M. Ciccarelli 50 Director
Brooks G. O'Neil 46 Director
Paul E. Valuck, D.D.S. 46 Director
Business Biographies
Frederic W.J. Birner is a founder of the Company and has served as Chairman of
the Board and Chief Executive Officer since the Company's inception in May 1995.
From May 1992 to September 1995, he was employed as a Senior Vice President in
the Corporate Finance Department at Cohig & Associates, Inc., an investment
banking firm. From 1983 to February 1992, Mr. Birner held various positions with
Hanifen, Imhoff, Inc., an investment banking firm, most recently as Senior Vice
President in the Corporate Finance Department. Mr. Birner received his M.S.
degree from Columbia University and his B.A. degree from The Colorado College.
Mr. Birner is the brother of Mark A. Birner, D.D.S.
Mark A. Birner, D.D.S. is a founder of the Company and has served as President,
and as a director, since the Company's inception in May 1995. From February 1994
to October 1995, Dr. Birner was the owner and operator of three individual
dental practices. From 1986 to February 1994, he was an associate dentist with
Family Dental Group. Dr. Birner received his D.D.S. and B.A. degrees from the
University of Colorado and completed his general practice residency at the
University of Minnesota. Dr. Birner is the brother of Frederic W.J. Birner.
Dennis N. Genty is a founder of the Company and has served as Secretary since
May 1995, and as Chief Financial Officer, Treasurer, and as a director, since
September 1995. From October 1992 to September 1995, he was employed as a Vice
President in the Corporate Finance Department at Cohig & Associates, Inc., an
investment banking firm. From May 1990 to October 1992, he was a Vice President
in the Corporate Finance Department at Hanifen, Imhoff, Inc., an investment
banking firm. Mr. Genty received his M.B.A. degree from Columbia University and
his B.S. degree from the Colorado School of Mines.
James M. Ciccarelli joined the Company as a consultant in August 1996 and has
served as a director since November 1996. Mr. Ciccarelli has been Chairman of
the Board of ActiveLink Communications (formerly CommWorld International) since
October 1998. Mr. Ciccarelli served as Chairman of the Board of Wireless
Telecom, Inc., a wireless data and network service provider from March 1993 to
January 2000. In addition Mr. Ciccarelli served as their Chief Executive Officer
from March 1993 to October 1998. From September 1990 to March 1993, Mr.
Ciccarelli was a Vice President of Intelligent Electronics, a high technology
distribution and services company, and the President and CEO of its Reseller
Network Division. From November 1988 to September 1990, Mr. Ciccarelli was the
President of Connecting Point of America, a franchisor of retail computer
stores.
5
Brooks G. O'Neil was appointed as a director of the Company on January 23, 2003.
Mr. O'Neil has served as a principal of Tripletree, LLC, an investment banking
firm focused on information technology and health care, since 2002. Prior to
this, Mr. O'Neil was with U.S. Bancorp Piper Jaffray for fifteen years as a
managing director in the Health Care Investment Banking Group. Mr. O'Neil earned
an M.B.A. from the Amos Tuck School of Business Administration, Dartmouth
College and a B.A. from the University of Connecticut.
Paul E. Valuck, D.D.S. was in private dental practice in Denver from September
1985 until November 1995. From November 1995 until December 1997, Dr. Valuck
practiced as an affiliated dentist with the Company. Since January 1998 Dr.
Valuck has been in private dental practice in Denver. Dr. Valuck received his
D.D.S. and his B.S. Pharmacy degree from the University of Colorado.
CERTAIN TRANSACTIONS
The Company's Chief Executive Officer, Frederic W.J. Birner, repaid to the
Company the amount of $112,134 representing the total outstanding amount of a
note, with principal and interest due December 31, 2002. The Company's
President, Mark A. Birner, repaid to the Company the amount of $94,065
representing the total outstanding amount of a note, with principal and interest
due December 31, 2002. The Company's Chief Financial Officer, Dennis N. Genty,
repaid to the Company the amount of $78,280 representing the total outstanding
amount of a note, with principal and interest due December 31, 2002.
Directors' Meetings and Committees
The entire Board of Directors met eight times during the year ended December 31,
2002, including four actions by unanimous consent. Each incumbent director
attended 100% of the board meetings except for Mr. Steven M. Bathgate who
attended seven meetings. The Audit Committee is comprised of outside directors
and the full Board of Directors acts as the Company's Compensation Committee.
Audit Committee
The Audit Committee has as its primary responsibilities the recommendation of an
independent public accountant to audit the annual financial statements of the
Company, the review of internal and external audit functions, the review of
internal accounting controls, the review of annual financial statements, and a
review at its discretion of compliance with corporate policies and codes of
conduct. The Audit Committee is comprised of outside directors. The current
members of the Audit Committee are James M. Ciccarelli (Chairman), Brooks G.
O'Neil and Paul E. Valuck, D.D.S. The Board of Directors has reviewed Rule
4200(a)(14) of the National Association of Securities Dealers and has determined
that Messrs. Ciccarelli, O'Neil and Valuck are independent directors as defined
in that Rule. The Board of Directors has adopted a written charter for the Audit
Committee, a copy of which was attached as Appendix A to the Company's 2001
Proxy Statement. The Audit Committee met one time in 2002 at which all members
were present.
Compensation Committee
Currently, the full Board of Directors is acting as the Compensation Committee.
The Compensation Committee determines officers' salaries and bonuses and
administers the grant of stock options and other awards pursuant to the Birner
Dental Management Services, Inc. 1995 Employee Plan (the "Employee Plan") and
the Birner Dental Management Services, Inc. 1995 Stock Option Plan for Managed
Dental Centers. The Compensation Committee met two times in 2002 at which all
members were present.
6
DIRECTOR AND executive compensation
Director Compensation
Prior to October 1, 2002 Directors did not receive cash compensation from the
Company for their services as directors nor were they reimbursed for expenses in
connection with attendance at Board of Directors and committee meetings.
Effective October 1, 2002 outside Directors became entitled to: 1) a $1,000 per
calendar quarter retainer, 2) $1,000 per Board of Directors Meeting if attended
in person, 3) $750 per Board of Directors Meeting if attended by telephone, 4)
$1,000 per Audit Committee Meeting if attended in person and 5) $750 per Audit
Committee Meeting if attended by telephone. During the fourth quarter of 2002,
Director compensation consisted of $1,750 paid to Mr. Bathgate, $1,750 paid to
Mr. Ciccarelli and $2,000 paid to Mr. Valuck.
Executive Compensation
Summary Compensation
The following table sets forth the compensation paid by the Company to the Chief
Executive Officer and each of the executive officers of the Company who were
paid total salary and bonus exceeding $100,000 during the fiscal year ended
December 31, 2002 (the "Named Executive Officers").
Summary Compensation Table
Long-Term
Annual Compensation Compensation
--------------------------------------- ----------------
Securities
Underlying All Other
Name and Principal Position Fiscal Year Salary Bonus Options/Warrants Compensation
- --------------------------- ----------- -------- -------- ---------------- ------------
Frederic W.J. Birner 2000 $223,413 $ - - $2,006 (1)
Chairman of the Board and 2001 $225,000 $ 10,000 - $1,125 (1)
Chief Executive Officer 2002 $225,000 $140,622 10,000 (2) -
Mark A. Birner, D.D.S. 2000 $148,942 $ - - $1,893 (1)
President and Director 2001 $150,000 $ 10,000 - $1,125 (1)
2002 $150,000 $140,622 10,000 (2) -
Dennis N. Genty 2000 $148,942 $ - - $2,681 (1)
Chief Financial Officer 2001 $150,000 $ 10,000 - $1,125 (1)
Treasurer, Secretary and 2002 $150,000 $140,622 10,000 (2) -
Director
- ------------------
(1) 401(k) contributions paid for by the Company on behalf of each named
executive officer.
(2) Represents shares of Common Stock issuable upon exercise of warrants to
purchase 10,000 shares of Common Stock, granted on February 11, 2002
with an exercise price of $5.06 per share.
7
Equity Compensation Plan Information
The following table sets forth information concerning options, warrants and
rights outstanding and available for granting as of December 31, 2002:
(a) (b) (c)
Number of securities remaining
Number of securities to be Weighted-average exercise available for future issuance
issued upon exercise of price of outstanding under equity compensation plans
outstanding options, options, warrants and (excluding securities reflected
Plan category warrants and rights rights in column (a))
- ------------- -------------------------- ------------------------- -------------------------------
Equity compensation plans
approved by security holders
221,088 $7.64 217,876
Equity compensation plans
not approved by security
holders 30,000 $5.06 -
Total 251,088 $7.33 217,876
Warrants issued are for a period of five years and vest 33% each year for three
years, provided however, that upon a sale of the Company, all Warrants shall
automatically become vested.
Option/ Warrant Grants
No options were granted to any of the Named Executive Officers during the fiscal
year ended December 31, 2002. The following table sets forth each grant of
warrants made during the fiscal year ended December 31, 2002 to each Named
Executive Officer:
Option/Warrant Grants in Last Fiscal Year
Individual Grants
Potential Realizable
Number of Percent of Value at Assumed
Securities Total Options/ Annual Rates of Stock
Underlying Warrants Exercise Price Appreciation for
Options/ Granted to or Base Option/Warrant Term (3)
Warrants Employees in Price Expiration -----------------------
Name Granted Fiscal Year (1) ($/Sh) (2) Date 5% 10%
- ---- -------- --------------- ---------- ---- -- ---
Frederic W.J. Birner 10,000 28.6% $ 5.06 02/11/07 $ 14,000 $ 30,900
Mark A. Birner, D.D.S. 10,000 28.6% $ 5.06 02/11/07 $ 14,000 $ 30,900
Dennis N. Genty 10,000 28.6% $ 5.06 02/11/07 $ 14,000 $ 30,900
- --------------------
(1) Based on an aggregate of 35,000 shares subject to options and warrants
granted to employees during the fiscal year ended December 31, 2002.
(2) Warrants were granted at an exercise price equal to 110% of the fair
market value of the Common Stock, as determined by the Board of
Directors on the date of grant.
(3) The potential realizable value is calculated based on the term of the
option / warrant at its time of grant (five years) and is calculated by
assuming that the stock price on the date of grant as determined by the
Board appreciates at the indicated annual rate compounded annually for
the entire term of the option / warrant and that the option / warrant
is exercised and sold on the last day of its term for the appreciated
price. The 5% and 10% assumed rates of appreciation are derived from
the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of the future Common
Stock price.
8
Option Exercises and Holdings
The following table sets forth for the Named Executive Officers the number and
value of securities underlying unexercised in-the-money options and warrants
held as of December 31, 2002. None of the Named Executive Officers exercised any
options or warrants during the fiscal year ended December 31, 2002.
Aggregated Option/Warrant Exercises in Last Fiscal Year
and Fiscal Year End Option/Warrant Values
Number of Securities
Underlying Unexercised Value of Unexercised,
Options/Warrants Held at In-the-Money Options/Warrants at
December 31, 2002 December 31, 2002 (1)
------------------------------ --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------- ----------- -------------
Frederic W.J. Birner 11,879 10,000 $ 919 $ 46,700
Mark A. Birner, D.D.S. 11,526 10,000 $ 872 $ 46,700
Dennis N. Genty 9,234 10,000 $ 566 $ 46,700
(1) Value is based on the difference between the stock option / warrant
exercise price and the closing price of the Common Stock on the Nasdaq
SmallCap Market on December 31, 2002 of $9.73 per share.
Compensation Committee Interlocks and Insider Participation
No executive officer of the Company currently serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Board of Directors or as an executive
officer of the Company. See "Director and Executive Compensation" and "Certain
Transactions" for a description of transactions between the Company and members
of the Board of Directors.
Compensation Committee Report on Executive Compensation
Currently, the entire Board of Directors makes all determinations with respect
to executive officer compensation. The following report is submitted by the
Board of Directors of the Company, in its capacity as Compensation Committee,
pursuant to rules established by the Securities and Exchange Commission, and
provides certain information regarding compensation of the Company's executive
officers.
The Compensation Committee is responsible for establishing and administering a
general compensation policy and program for the Company. The Compensation
Committee also possesses all of the powers of administration under the Company's
employee benefit plans, including all stock option plans and other employee
benefit plans. Subject to the provisions of those plans, the Compensation
Committee must determine the individuals eligible to participate in the plans,
the extent of such participation and the terms and conditions under which
benefits may be vested, received or exercised.
Compensation Policies. The Company's executive compensation policies are
designed to complement the Company's business objectives by motivating and
retaining quality members of senior management, by aligning management's
interests with those of the Company's shareholders and by linking total
compensation to the performance of the Company. The Company's executive
compensation policies generally consist of equity-based long-term incentives,
short-term incentives and competitive base salaries. The Compensation Committee
will continue to monitor the performance of the Company and its executive
officers in reassessing executive compensation.
Base Salary. The Compensation Committee reviews the base salaries of the
Company's executive officers on an annual basis. Base salaries are determined
based upon a subjective assessment of the nature and responsibilities of the
position involved, the performance of the particular officer and of the Company,
the officer's experience and tenure with the Company and base salaries paid to
persons in similar positions with companies comparable to the Company.
Quarterly Bonus. Quarterly bonuses may be paid to the Company's executive
officers based on the Company's financial performance. The Compensation
Committee granted bonuses of $140,622 each to three executive officers during
2002.
9
Long-Term Incentives. The Company's long-term compensation strategy is focused
on the grant of stock options under the stock option plans and warrants, which
the Compensation Committee believes rewards executive officers for their efforts
in improving long-term performance of the Common Stock and creating value for
the Company's shareholders, and which the Compensation Committee believes aligns
the financial interests of management with those of the Company's shareholders.
During 2002, the Compensation Committee granted 10,000 warrants each to three
executive officers.
Chief Executive Officer Compensation for Fiscal Year 2002. The compensation for
Frederic W.J. Birner during 2002 consisted of his base salary, the rate of which
was established in 1999, and cash bonuses of $140,622. Mr. Birner's base salary
was not increased in 2002.
COMPENSATION COMMITTEE
Frederic W.J. Birner
Mark A. Birner, D.D.S.
Dennis N. Genty
James M. Ciccarelli
Brooks G. O'Neil
Paul E. Valuck D.D.S.
10
PERFORMANCE GRAPH
The following line graph compares the percentage change from date of public
offering (February 11, 1998) through December 31, 2002 for (i) the Common Stock,
(ii) a peer group (the "Peer Group") of companies selected by the Company that
are predominantly dental management companies located in the United States,
(iii) Nasdaq Composite Index and (iv) S&P 500 Composite Index. The companies in
the Peer Group are American Dental Partners, Inc., Castle Dental Centers, Inc.,
Coast Dental Services, Inc., Interdent, Inc. and Monarch Dental Corporation.
Comparison of 5-Year Cumulative Total Return
Assumes Initial Investment of $100
[INSERT PERFORMANCE GRAPH HERE]
2/11/98 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
------- -------- -------- -------- -------- --------
Description
Birner Dental Management
Services, Inc. $100.00 $ 50.00 $ 19.64 $ 6.70 $ 15.89 $34.75
Peer Group 100.00 57.05 31.62 10.83 7.03 10.30
Nasdaq Composite Index 100.00 136.69 254.01 152.78 121.23 83.21
S&P 500 Composite Index 100.00 127.17 153.93 139.92 123.29 96.04
- -------------------------------
*Total return based on $100 initial investment and reinvestment of dividends
11
Audit Committee Report
The audit committee has reviewed and discussed the audited financial statements
of the Company with management and has discussed with Hein + Associates LLP
("Hein"), the Company's independent public accountants, the matters required to
be discussed under Statements on Auditing Standards No. 61 ("SAS 61"). In
addition, the audit committee has received from Hein the written disclosures and
the letter required to be delivered by Hein under Independence Standards Board
Standard No. 1 ("ISB Standard No. 1") addressing all relationships between the
independent public accountants and the Company that might bear on their
independence. The audit committee has reviewed the materials to be received from
Hein and has met with representatives of Hein to discuss the independence of
their firm.
In connection with the new standards for independence of the Company's
independent public accountants promulgated by the Securities and Exchange
Commission, the audit committee has reviewed the non-audit services currently
provided by the Company's independent public accountants and has considered
whether the provision of such services is compatible with maintaining the
independence of the Company's independent public accountants.
Based on the audit committee's review of the financial statements, its
discussion with Hein regarding SAS 61, and the written materials provided by
Hein under ISB Standard No. 1 and the related discussion with Hein of their
independence, the audit committee has recommended to the Board of Directors that
the audited financial statements of the Company be included in its Annual Report
on Form 10-K for the fiscal year ended December 31, 2002, for filing with the
Securities and Exchange Commission.
THE AUDIT COMMITTEE
James M. Ciccarelli (Chairman)
Brooks G. O'Neil
Paul E. Valuck D.D.S.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Independent Public Accountants
On November 14, 2001, the Company dismissed Arthur Andersen LLP as the Company's
principal accountant. The decision to change accountants was recommended by the
Audit Committee of the Board of Directors and approved by the Board of
Directors.
The Report of Arthur Andersen LLP on the financial statements of the Company for
the fiscal year ended December 31 2000 did not contain an adverse opinion or
disclaimer of opinion nor was it qualified or modified as to uncertainty, audit
scope or accounting principles. The Company does not believe that there were any
disagreements with Arthur Andersen LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
during the fiscal year ended December 31, 2000 and during the subsequent interim
period through November 14, 2001, which, if not resolved to Arthur Andersen
LLP's satisfaction, would have caused Arthur Andersen LLP to make reference to
the subject matter of the disagreement(s) in connection with its Reports.
On November 14, 2001, the Board of Directors engaged Hein as the Company's
independent public accountants. Representatives of Hein will be present at the
Annual Meeting and will have the opportunity to make a statement if they so
desire. These representatives will be available to respond to appropriate
questions from shareholders at the meeting.
12
Audit Fees
During the fiscal year ended December 31, 2002, the aggregate fees billed for
professional services rendered for the audit of the Company's annual financial
statements and the reviews of the financial statements included in the Company's
Quarterly Reports on Form 10-Q filed during the fiscal year ended December 31,
2002 were $40,500 by Hein + Associates, LLP.
All Other Fees
For the fiscal year ended December 31, 2002, the aggregate fees billed for
professional services rendered to the Company by Hein + Associates, LLP for the
audit of the 401(k) retirement savings plan were $6,000.
PROPOSAL TWO: APPROVE THE GRANT OF 30,000 WARRANTS ON FEBRUARY 11, 2002
AT AN EXERCISE PRICE OF 110% OF THE THEN FAIR MAKET VALUE OF THE
COMPANY'S COMMON STOCK
General
On February 11, 2002, the Compensation Committee recommended, and the Board of
Directors unanimously approved the grant of warrants to purchase 10,000 shares
of the Company's Common Stock to each of Frederic W.J. Birner, Chairman of the
Board and Chief Executive Officer, Mark A. Birner, President and Director and
Dennis N. Genty, Chief Financial Officer, Secretary, Treasurer and Director at
an exercise price of 110% of the then fair market value of the Company's Common
Stock, or $5.06 per share. This grant specified that the warrants would vest
equally over a three-year period and would expire on February 11, 2007. At April
7, 2003, the market value of the shares covered by the warrants was $12.10 per
share and $121,000 in the aggregate for each 10,000 shares. This grant of
warrants was related to the Company's performance for the fiscal year ended
December 31, 2001.
The Board of Directors unanimously recommends voting "FOR" the approval of the
grant of 30,000 warrants on February 11, 2002. Proxies solicited by the Board of
Directors will be voted "FOR" approval of the grant of 30,000 warrants on
February 11, 2002.
SECTION 16 REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors, executive officers and beneficial owners of more than 10% of the
outstanding shares of the Company to file with the Securities and Exchange
Commission reports regarding changes in their beneficial ownership of shares in
the Company. To the Company's knowledge and based solely on a review of the
Section 16(a) reports furnished to the Company, all Section 16(a) reports were
filed on a timely basis.
SHAREHOLDER PROPOSALS
The Company on or before January 9, 2004 must receive shareholder proposals for
inclusion in the Company's proxy materials relating to the next annual meeting
of shareholders.
2002 ANNUAL REPORT ON FORM 10-K
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2002
ACCOMPANIES THIS PROXY STATEMENT AND WAS FILED ELECTRONICALLY WITH THE
SECURITIES AND EXCHANGE COMMISSION. SHAREHOLDERS WHO WISH TO OBTAIN, WITHOUT
CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT (WITHOUT EXHIBITS) ON FORM 10-K
SHOULD ADDRESS A WRITTEN REQUEST TO DENNIS N. GENTY, CHIEF FINANCIAL OFFICER,
SECRETARY AND TREASURER, BIRNER DENTAL MANAGEMENT SERVICES, INC., 3801 EAST
FLORIDA AVENUE, SUITE 508, DENVER, COLORADO 80210. THE COMPANY WILL PROVIDE
COPIES OF THE EXHIBITS TO THE FORM 10-K UPON PAYMENT OF A REASONABLE FEE.
13
OTHER BUSINESS
As of the date of this Proxy Statement, management was not aware of any business
not described above which would be presented for consideration at the Meeting.
If any other business properly comes before the Meeting, it is intended that the
shares represented by proxies will be voted in respect thereto in accordance
with the judgment of the persons voting them.
The above Notice and Proxy Statement are sent by order of the Board of
Directors.
/s/ Dennis N. Genty
-------------------------
Dennis N. Genty
Chief Financial Officer, Secretary and Treasurer
Denver, Colorado
April 25, 2003
14
[PROXY CARD]
PROXY PROXY
Proxy Solicited by the Board of Directors for the Annual Meeting of Shareholders
To be held June 3, 2003
The undersigned hereby appoints Frederic W.J. Birner, Mark A. Birner, D.D.S. and
Dennis N. Genty, and each of them, proxies of the undersigned, with full power
of substitution, to vote all shares of Common Stock of Birner Dental Management
Services, Inc., which the undersigned is entitled to vote, at the Annual Meeting
of Shareholders (the "Meeting") to be held on Tuesday, June 3, 2003, at 10:00
a.m., Mountain Time, at the Company's offices, 3801 East Florida Avenue, Suite
508, Denver, Colorado, and at any and all adjournments thereof for the following
purposes:
(1) Election of Class III Directors:
_
|_| FOR the nominees listed below (except as marked to the contrary below)
_
|_| WITHHOLD AUTHORITY to vote for the nominees listed below
Frederic W.J. Birner
Mark A. Birner, D.D.S.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THE NOMINEE'S NAME ON THE LINE IMMEDIATELY BELOW.)
_______________________________________________________________________________
(2) Approve the grant of 30,000 warrants on February 11, 2002 at an
exercise price of 110% of the then fair market value of the Company's
Common Stock.
_ _ _
|_| FOR |_| AGAINST |_| ABSTAIN
(3) In their discretion, the proxies are authorized to vote upon such other
business as properly may come before the Meeting.
(back of card)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS INDICATED, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING "FOR" ELECTION OF THE
NOMINEES FOR DIRECTOR AS SELECTED BY THE BOARD OF DIRECTORS AND FOR THE APPROVAL
OF THE GRANT OF 30,000 WARRANTS ON FEBRUARY 11, 2002.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and the Proxy Statement furnished therewith. The undersigned hereby
revokes any proxies given prior to the date reflected below.
Dated
__________________________________, 2003
________________________________________
________________________________________
SIGNATURE (S) OF SHAREHOLDER (S)
Please complete, date and sign exactly as
your name appears hereon. If shares are held
jointly, each holder should sign. When
signing as attorney, executor,
administrator, trustee, guardian or
corporate official, please add your title.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. PLEASE SIGN AND
RETURN THIS PROXY IN THE ENCLOSED, SELF-ADDRESSED ENVELOPE TO COMPUTERSHARE
TRUST COMPANY, INC., AS AGENT FOR THE COMPANY. THE GIVING OF A PROXY WILL NOT
AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.