SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
BIRNER DENTAL MANAGEMENT SERVICES, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
BIRNER DENTAL MANAGEMENT SERVICES, INC.
3801 EAST FLORIDA AVENUE, SUITE 508
DENVER, COLORADO 80210
May 7, 2004
TO THE SHAREHOLDERS OF BIRNER
DENTAL MANAGEMENT SERVICES, INC.:
You are cordially invited to attend the 2004 Annual Meeting of Shareholders (the
"Meeting") of Birner Dental Management Services, Inc. (the "Company"), to be
held on Tuesday, June 8, 2004, 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
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NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD JUNE 8, 2004
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TO OUR SHAREHOLDERS:
The 2004 Annual Meeting of Shareholders (the "Meeting") of Birner Dental
Management Services, Inc., a Colorado corporation (the "Company"), will be held
on Tuesday, June 8, 2004, 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 I directors to serve for a term of three years or
until their successors are duly elected and qualified;
(2) to approve an amendment to the 1995 Employee Stock Option Plan (the
"Plan") to increase the number of shares of the Company's Common Stock
available under the Plan by 150,000 shares;
(3) to consider such other matters as may properly come before the Meeting
and at any and all adjournments thereof.
As fixed by the Board of Directors, only shareholders of record at the close of
business on April 12, 2004 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
May 7, 2004
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 8, 2004
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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 2004 Annual Meeting of Shareholders (the "Meeting") to
be held at 10:00 a.m., Mountain Time, on Tuesday, June 8, 2004, 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 May 7, 2004.
The Company's Annual Report on Form 10-K (the "Annual Report"), which includes
audited financial statements for the fiscal year ended December 31, 2003, 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 12, 2004, the record date for
shareholders entitled to vote at the Meeting, 1,185,260 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 I directors and, FOR the
amendment to the 1995 Employee Stock Option Plan (the "Plan") to increase the
number of shares of the Company's Common Stock available under the Plan by
150,000 shares, 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.
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 approval to increase the
number of shares available under the 1995 Employee Stock Option Plan by 150,000
shares or 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 by the affirmative vote of a majority of the shares present in
person or represented by proxy at the meeting.
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 I directors, the approval to increase the number of shares of
our Common Stock available under our 1995 Employee Stock Option Plan by 150,000
shares, 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 I directors, the
approval to increase the number of shares of our Common Stock available under
our 1995 Employee Stock Option Plan by 150,000 shares, 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 I 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 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.), 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) and two Class
III directors whose terms will expire upon the election and qualification of
directors at the annual meeting of shareholders held in 2006 (Frederic W.J.
Birner and Mark A. Birner, D.D.S). 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. Mr. O'Neil was appointed to the Board of Directors on January 23, 2003
and has not yet been approved by shareholders. The Company is currently seeking
an additional independent board member to add to the Company's Board of
Directors. The Company's nomination procedures require that the independent
directors of the Company screen and, then by majority vote, recommend to the
entire Board of Directors a nominee for appointment to the Company's Board of
Directors.
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 2007 annual meeting of shareholders
or until their successors are elected and qualified.
Class I Director Nominees
The Board of Directors unanimously recommends that the shareholders vote FOR
election of the following nominees as Class I directors of the Company.
Name Age Director Since
--------------------- --- --------------
James M. Ciccarelli 51 1996
Paul E. Valuck, D.D.S. 47 2001
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 II and Class III directors. The following table shows the
names, ages and positions of each continuing director.
Class II - Term Expires in 2005
Name Age Director Since
--------------------- --- --------------
Dennis N. Genty 46 1995
Brooks G. O'Neil 47 2003
Class III - Term Expires in 2006
Name Age Director Since
--------------------- --- --------------
Frederic W.J. Birner 46 1995
Mark A. Birner, D.D.S. 44 1995
Directors' Meetings and Committees
The entire Board of Directors met nine times during the year ended December 31,
2003, including five actions by unanimous consent. Each incumbent director
attended 100% of the board meetings except for Mr. Brooks G. O'Neil who attended
eight 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 sole responsibility
to appoint or replace the independent public auditor to audit the annual
financial statements of the Company as well as monitoring: (1) the Company's
financial reporting process generally, (2) the integrity of the financial
statements of the Company, (3) the independent auditor's qualifications and
independence, (4) the performance of the Company's internal audit function and
independent auditors, and (5) the compliance by the company with legal and
regulatory requirements. 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 has determined that Mr. O'Neil has accounting
and related financial management expertise and is qualified as an audit
committee financial expert within the meaning of SEC regulations. The Board of
Directors has adopted a written charter for the Audit Committee, a copy of which
is attached as Appendix A to the Company's 2004 Proxy Statement. The Audit
Committee met one time in 2003 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. Compensation for the Chief Executive Officer and the other
executive officers is determined by a majority of the independent directors of
the Board of Directors. The Compensation Committee met five times in 2003 at
which all members were present.
Audit Committee Report 1
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 auditor, 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 auditor 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 auditor promulgated by the Securities and Exchange Commission, the
audit committee has reviewed the non-audit services currently provided by the
Company's independent auditor and has considered whether the provision of such
services is compatible with maintaining the independence of the Company's
independent auditor.
The Audit Committee discussed with the Company's independent auditors the
overall scope and plan for their audit. The Audit Committee also discussed with
the independent auditors the results of their examination, their evaluation of
the Company's internal controls, and the overall quality of the Company's
financial reports.
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1 This Section is not soliciting material, is not deemed filed with the SEC and
is not to be incorporated by reference in any filing of the Company under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
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, 2003, 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.
PROPOSAL TWO: INCREASE SHARES AVAILABLE UNDER 1995 EMPLOYEE
STOCK OPTION PLAN
Amendment
The Board of Directors has determined that, in order to be able to provide
additional incentive to the Company's management and selected employees, it is
in the best interests of shareholders that the number of shares of Common Stock
which the Company is currently authorized to issue pursuant to the exercise of
options granted under the 1995 Employee Stock Option Plan (the "Plan") be
increased by 150,000 shares.
The purpose of the amendment is to ensure that the Company has a sufficient
number of shares reserved under the Plan to accomplish the Plan's objective of
affording selected employees, directors and consultants of the Company who are
responsible for the conduct and management of its business or who are involved
in endeavors significant to its success. The Company believes that rewarding
individuals in this fashion creates an increased interest in, and a greater
concern for, its success on the part of the individuals. Past results have
proven that options have helped to attract and retain key employees and
independent directors. Currently, there are approximately 5,000 shares available
for future grants under the Plan. If the amendment to the Plan is approved,
there will be approximately 155,000 shares available for future grants under the
Plan. The shares available, if approved, would be used for future hires or
acquisitions, key employees, independent directors and executive management. The
Company believes that the increased shares in the Plan should cover anticipated
option grants for the next 24 months.
The Company is currently authorized to issue up to 329,250 shares of Common
Stock under the Plan. As of April 2, 2004, options have been exercised to
purchase 119,576 shares, options to purchase up to 204,665 shares of Common
Stock were outstanding and 5,009 shares remain available for future grants under
the Plan.
Pursuant to unanimous written consent dated April 26, 2004, the Board of
Directors of the Company adopted an amendment to the Plan, subject to the
approval of the shareholders of the Company, which increases by 150,000, from
329,250 to 479,250, the number of shares of Common Stock authorized under the
Plan.
General
The Plan was adopted by the Board of Directors effective as of October 30, 1995,
and was amended as of April 26, 2004. The Plan has been ratified and approved by
the Company's shareholders. The following is a summary of the material features
of the Plan.
The Plan provides for the grant of incentive stock options, as defined in the
Internal Revenue Code of 1986, as amended (the "Code"), to employees (including
officers and employee-directors) and non-statutory stock options to employees,
directors and consultants. The Company's Board of Directors or a committee
appointed by and serving at the pleasure of the Board, consisting of not less
than two directors, administers the Plan. The Board or committee, whichever is
appointed to administer the Plan, is called the "Committee." The Committee
determines recipients and types of options to be granted, including the exercise
price, the number of shares, the grant dates, and the exercisability thereof.
Shares Available for Issuance
Approximately 155,000 shares of Common Stock after the amendment, and
approximately 5,000 shares of the Company's Common Stock prior to the amendment,
are currently available for the granting of options under the Plan. In addition,
options to purchase up to 204,665 shares of common stock are outstanding for
which shares of the Company's Common Stock are currently available under the
Plan. The number of shares available under the Plan, the number of shares
subject to outstanding options, and the exercise price per share of such options
are subject to adjustment on account of stock dividends, stock splits, mergers,
consolidations, recapitalizations, combinations or exchanges of stock, or other
similar occurrences effecting a change in the outstanding shares without the
receipt of additional consideration by the Company. If any option under the Plan
terminates or expires, the shares allocable to the unexercised portion of the
option will again be available for the purposes of the Plan.
Option Exercise Price and Other Terms
The term of any stock option granted under the Plan may not exceed 10 years.
Shares subject to options that have expired or have otherwise terminated without
having been exercised in full shall again become available for the grant of
options under the Plan. The exercise price of options granted under the Plan is
determined by the Committee, provided that the exercise price of a stock option
cannot be less than 100% of the fair market value of the shares subject to the
option on the date of grant. The fair market value is determined by reference to
closing prices on the public market. Options granted under the Plan vest at the
rate specified in the option agreements, which generally provide that options
vest in three to five equal annual installments. No stock option may be
transferred by the optionee other than by will or the laws of descent and
distribution. Options shall be exercisable during the optionee's lifetime only
by the optionee. Options granted to an optionee terminate upon the earlier to
occur of (i) the expiration date set forth in the option agreement, (ii) the
termination of employment (or, in the case of directors or consultants, the
termination of service), or (iii) the death or disability of the optionee. An
optionee whose option terminates for any reason (other than by death or
disability) may exercise an option during the three-month period following such
termination (unless such option expires sooner by its terms). Options may be
exercised for up to twelve months following termination due to death or
disability (unless such options expire sooner by their terms). Subject to
certain limitations, the Committee may extend the termination date of any stock
option granted under the Plan in its sole discretion. Notwithstanding any
vesting requirements contained in any Option Agreement, upon occurrence of a
change in control, all outstanding options shall become immediately vested and
exercisable prior to the change in control.
No incentive stock option may be granted to any person who, at the time of the
grant, owns (or is deemed to own) stock possessing more than 10% of the total
combined voting power of the Company or any affiliate of the Company, unless the
option exercise price is at least 110% of the fair market value of the stock
subject to the option on the date of grant, and the term of the option does not
exceed five years from the date of grant. The aggregate fair market value,
determined at the time of grant by the committee, of the shares of Common Stock
with respect to which incentive stock options are exercisable for the first time
by an optionee during any calendar year (under all such plans of the Company and
its affiliates) may not exceed $100,000.
Amendment and Termination
The Company's Board of Directors may at any time amend, suspend or terminate the
Plan except that no action by the Board may impair outstanding options. No
amendment to the Plan may be made without shareholder approval that would
increase the total number of shares under the Plan (except for any adjustments
as described above for stock dividends and other events), reduce the minimum
exercise price of options or materially modify the eligibility requirements.
Subject to the terms of the Plan, the Board may modify, extend or renew any
outstanding option under the Plan, accept the surrender of outstanding options,
and authorize the grant of substitute options.
Federal Income Tax Consequences
The grant of an incentive stock option under the Plan does not produce taxable
income to the optionee or a tax deduction to the Company. Upon exercise of an
incentive stock option, the employee will not realize taxable income and the
Company will not be entitled to a compensation deduction; however, the excess of
the fair market value over the exercise price may be taxed to the employee under
the alternative minimum tax provisions of the Code. The Code imposes a statutory
holding period for incentive stock options, which is the later of (1) one year
after the shares were transferred to an employee upon exercise of an option or
(2) two years after the date of grant. If an employee sells or otherwise
disposes of shares acquired upon the exercise of an incentive stock option prior
to meeting the statutory holding period requirements, all or a portion of any
gain will be taxed as ordinary income to the employee; in that case, the Company
will be entitled to deduct an equal amount as a compensation expense. The amount
of ordinary income is the lesser of (1) the difference between the fair market
value at the date of exercise and the exercise price, or (2) the gain on the
sale (the amount realized less the exercise price). Otherwise, an optionee's
disposition of shares acquired upon the exercise of an incentive stock option
(including a disposition after the expiration of the statutory holding period)
will result in short-term or long-term capital gain or loss measured by the
difference between the disposition price and the employee's tax basis in the
shares (the tax basis is generally the exercise price plus the amount previously
recognized as ordinary income).
The grant of a nonqualified stock option under the Plan does not produce taxable
income to the optionee or a tax deduction to the Company. Upon exercise of a
nonqualified stock option, the excess of the fair market value of the shares
acquired over the exercise price will be taxable to the optionee as ordinary
income and will be deductible by the Company as a compensation expense. This
income is subject to withholding taxes which should be collected at the time of
exercise.
The Board of Directors unanimously recommends voting "FOR" the proposal to amend
the 1995 Employee Stock Option Plan. Proxies solicited by the Board of Directors
will be voted "FOR" approval of the amendment to the 1995 Employee Stock Option
Plan.
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 19, 2004, 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
listed on the summary compensation table, 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).................... 231,491 19.1%
Mark A. Birner, D.D.S. (4).................. 219,172 18.1%
Dennis N. Genty (5)......................... 161,418 13.3%
Lee Schlessman (6)......................... 131,785 11.2%
James M. Ciccarelli (7)..................... 7,500 0.6%
Paul E. Valuck, D.D.S 8)..................... 15,273 1.3%
Brooks G. O'Neil (9)........................ 10,273 0.9%
All executive officers and directors (six
persons) (10)............................... 645,127 49.0%
(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 or warrants currently exercisable or exercisable
within 60 days of February 19, 2004, 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 for each beneficial owner is based on 1,172,177
shares of Common Stock outstanding at February 19, 2004 plus any options
or warrants currently exercisable or exercisable within 60 days of
February 19, 2004, computed separately for each beneficial owner using
information provided in the following footnotes.
(3) Includes 33,334 shares of Common Stock that are issuable upon the
exercise of options that are currently exercisable and 6,667 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 Mr.
Birner's wife. Mr. Birner disclaims beneficial ownership of all shares
held by his wife.
(4) Includes 33,333 shares of Common Stock that are issuable upon the
exercise of options that are currently exercisable and 6,667 shares of
Common Stock that are issuable upon the exercise of warrants that are
currently exercisable.
(5) Includes 33,333 shares of Common Stock that are issuable upon the
exercise of options that are currently exercisable and 6,667 shares of
Common Stock that are issuable upon the exercise of warrants that are
currently exercisable. Includes 59,693 shares of Common Stock owned by
Mr. Genty's 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) Includes 7,500 shares of Common Stock that are issuable upon the exercise
of options that are currently exercisable.
(8) Includes 10,000 shares of Common Stock that are issuable upon the
exercise of options that are currently exercisable.
(9) Includes 6,000 shares of Common Stock that are issuable upon the exercise
of options that are currently exercisable.
(10) Includes 143,501 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 of
February 19, 2004.
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.
Equity Compensation Plan Information
The following table sets forth information concerning options, warrants and
rights outstanding and available for granting as of December 31, 2003:
(a) (b) (c)
Number of securities
remaining available
for future issuance
Number of securities to be Weighted-average exercise under equity compensation
issued upon exercise of price of outstanding plans (excluding
outstanding options, options, warrants and securities reflected
Plan category warrants and rights rights in column (a))
- ------------- -------------------------- ------------------------- -------------------------
Equity compensation plans
approved by security holders 301,998 $8.60 102,077
Equity compensation plans
not approved by security
holders - - -
------- ------ -------
Total 301,998 $8.60 102,077
======= ====== =======
Options and warrants issued are generally for a period of five years and
generally vest 33% each year for three years, provided however, that upon a sale
of the Company, all Warrants shall automatically become vested.
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 46 Chairman of the Board, Chief
Executive Officer and Director
Mark A. Birner, D.D.S. 44 President and Director
Dennis N. Genty 46 Chief Financial Officer,
Secretary, Treasurer and Director
James M. Ciccarelli 51 Director
Brooks G. O'Neil 47 Director
Paul E. Valuck, D.D.S. 47 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. 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. 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.
James M. Ciccarelli joined the Company as a consultant in August 1996 and has
served as a director since November 1996. Mr. Ciccarelli served as Chairman of
the Board of ActiveLink Communications (formerly CommWorld International) from
October 1998 to September 2003. 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.
Brooks G. O'Neil was appointed as a director of the Company on January 23, 2003.
Mr. O'Neil joined Dougherty & Co. as Senior Research Analyst for health care on
January 20, 2004. From March 2001 until January 2003, he served as a principal
of TripleTree, LLC, an investment-banking firm focused on information technology
and health care. Prior to this, Mr. O'Neil was a Managing Director of Piper
Jaffray for fifteen years where he was an institutional equity salesman, health
care research analyst and investment banker.
Paul E. Valuck, D.D.S. has been in private dental practice in Denver since
January 1998.
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 2003, Director compensation
consisted of, $7,750 paid to Mr. Ciccarelli, $6,250 paid to Mr. O'Neil and
$8,000 paid to Dr. 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, 2003 (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 2001 $225,000 $10,000 - $1,125 (1)
Chairman of the Board, 2002 $225,000 $140,622 10,000 (2) -
Chief Executive Officer and 2003 $260,000 $234,508 33,334 (3) -
Director
Mark A. Birner, D.D.S. 2001 $150,000 $10,000 - $1,125 (1)
President and Director 2002 $150,000 $140,622 10,000 (2) -
2003 $185,000 $234,507 33,333 (4) -
Dennis N. Genty 2001 $150,000 $10,000 - $1,125 (1)
Chief Financial Officer 2002 $150,000 $140,622 10,000 (2) -
Treasurer, Secretary and 2003 $185,000 $234,506 33,333 (4) -
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.
(3) Represents shares of Common Stock issuable upon exercise of options to
purchase 33,334 shares of Common Stock, granted on January 2, 2003 with an
exercise price of $11.68 per share.
(4) Represents shares of Common Stock issuable upon exercise of options to
purchase 33,333 shares of Common Stock, granted on January 2, 2003 with an
exercise price of $11.68 per share.
Option/ Warrant Grants
No warrants were granted to any of the Named Executive Officers during the
fiscal year ended December 31, 2003. The following table sets forth each grant
of options made during the fiscal year ended December 31, 2003 to each Named
Executive Officer:
Option/Warrant Grants in Last Fiscal Year
Individual Grants
----------------------------------------------------
Number of Percent of Potential Realizable
Securities Total Options/ Value at Assumed
Underlying Warrants Exercise Annual Rates of Stock
Options/ Granted to or Base Price Appreciation for
Warrants Employees in Price Expiration Option/Warrant Term (3)
Name Granted Fiscal Year (1) ($/Sh) (2) Date 5% 10%
- --------------------- -------- --------------- ---------- ---------- --------- ---------
Frederic W.J. Birner 33,334 21.1% $ 11.68 01/02/08 $ 107,335 $ 238,005
Mark A. Birner, D.D.S. 33,333 21.1% $ 11.68 01/02/08 $ 107,332 $ 237,998
Dennis N. Genty 33,333 21.1% $ 11.68 01/02/08 $ 107,332 $ 237,998
(1) Based on an aggregate of 158,000 shares subject to options and warrants
granted to employees during the fiscal year ended December 31, 2003.
(2) Options 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.
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, 2003. None of the Named Executive Officers exercised any
options or warrants during the fiscal year ended December 31, 2003.
Aggregated Option/Warrant Exercises in Last Fiscal Year
and Fiscal Year End Option/Warrant Values
Number of Securities
Options/Warrants Underlying Unexercised Value of Unexercised,
Exercised During Options/Warrants Held at In-the-Money Options/Warrants
Fiscal Year 2003 December 31, 2003 at December 31, 2003 (1)
--------------------------------------------------------- -----------------------------
Shares Acquired Value
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ -------------- -------- ------------ ------------- ----------- ----------------
Frederic W.J. Birner 6,878 $7,591 36,668 6,666 $ 73,773 $ 53,528
Mark A. Birner, D.D.S. - - 36,667 6,666 $ 73,772 $ 53,528
Dennis N. Genty - - 36,667 6,666 $ 73,772 $ 53,528
(1) In-the-money 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, 2003 of $13.09 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 Compensation2
Currently, a majority of the independent Board members make determinations with
respect to the Chief Executive Officer and other executive officers
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 $234,508, $234,507 and $234,506 to Mr. Frederic
W.J. Birner, Mark A. Birner, D.D.S. and Mr. Dennis N. Genty, respectively,
during 2003.
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 2003, the Compensation Committee granted 33,334 options to Mr. Frederic
W.J. Birner, 33,333 to Mark A. Birner, D.D.S. and 33,333 to Mr. Dennis N. Genty.
- --------------------
2 This Section is not soliciting material, is not deemed filed with the SEC and
is not to be incorporated by reference in any filing of the Company under
the Securities Act of 1933, as amended, or the Securities Exchange Ace of 1934,
as amended, whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
Chief Executive Officer Compensation for Fiscal Year 2003. The compensation
for Frederic W.J. Birner during 2003 consisted of his base salary, the rate
of which was established in 2003, and cash bonuses of $234,508. Mr. Birner's
base salary was increased $35,000 in 2003.
BOARD OF DIRECTORS ACTING AS
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.
PERFORMANCE GRAPH3
The following line graph compares the percentage change from December 31, 1998
through December 31, 2003 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. and
Coast Dental Services, Inc.
Comparison of 5-Year Cumulative Total Return
Assumes Initial Investment of $100
[INSERT PERFORMANCE GRAPH HERE]
12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
Description
- ------------------------- -------- -------- -------- -------- --------
Birner Dental Management
Services, Inc. $100.00 $ 39.29 $ 13.39 $ 31.78 $ 69.50 $93.50
Peer Group 100.00 43.98 32.14 26.30 35.86 50.92
Nasdaq Composite Index 100.00 185.46 111.65 88.58 61.09 92.16
S&P 500 Composite Index 100.00 121.05 110.02 96.95 75.52 97.19
- -----------------------------------------------
*Total return based on $100 initial investment and reinvestment of dividends
3 This Section is not soliciting material, is not deemed filed with the SEC and
is not to be incorporated by reference in any filing of the Company under
the Securities Act of 1933, as amended, or the Securities Exchange Ace of 1934,
as amended, whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Independent Auditors
On November 14, 2001, the Board of Directors engaged Hein as the Company's
independent auditors. 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.
Audit Fees
During the fiscal year ended December 31, 2003, 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,
2003 were $41,500 by Hein.
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.
Audit Related Fees
None.
Tax Fees
None.
All Other Fees
For the fiscal year ended December 31, 2003, the aggregate fees billed for
professional services rendered to the Company by Hein for the audit of the
401(k) retirement savings plan were $6,200.
For the fiscal year ended December 31, 2002, the aggregate fees billed for
professional services rendered to the Company by Hein for the audit of the
401(k) retirement savings plan were $6,000.
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, Mr. Genty was late in filing his
Statement of Changes in Beneficial Ownership on Form 4 for a May 19, 2003
transaction, Mr. Ciccarelli was late in filing his Statement of Changes in
Beneficial Ownership on From 4 for a January 27, 2003 transaction and Mr. O'Neil
was late in filing his Initial Statement of Beneficial Ownership of Securities
on Form 3 and his Statement of Changes in Beneficial Ownership on From 4 for
transactions that occurred on January 23, 2003. All other Section 16(a) reports
were filed on a timely basis.
SHAREHOLDER PROPOSALS
The Company on or before January 7, 2005 must receive shareholder proposals for
inclusion in the Company's proxy materials relating to the next annual meeting
of shareholders.
2003 ANNUAL REPORT ON FORM 10-K
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2003
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 OR THEY CAN OBTAIN THE
INFORMATION ON THE COMPANY'S WEBSITE AT WWW.BDMS-PERFECTTEETH.COM. THE COMPANY
WILL PROVIDE COPIES OF THE EXHIBITS TO THE FORM 10-K UPON PAYMENT OF A
REASONABLE FEE.
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
May 7, 2004
PROXY . PROXY
Proxy Solicited by the Board of Directors for the Annual Meeting of Shareholders
To be held June 8, 2004
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 8, 2004, 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 I Directors:
[ ] FOR the nominees listed below (except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for the nominees listed below
James M. Ciccarelli
-------------------
Paul E. Valuck, D.D.S.
----------------------
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THE NOMINEE'S NAME ON THE LINE IMMEDIATELY BELOW.)
(2) Amendment to the 1995 Employee Stock Option Plan to increase the
number of shares of the Company's Common Stock available under the
Plan by 150,000 shares.
[ ] 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
AMENDMENT TO THE 1995 EMPLOYEE STOCK OPTION PLAN TO INCREASE THE NUMBER OF
SHARES OF COMMON STOCK AVAILABLE UNDER THE PLAN BY 150,000 SHARES.
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
------------------------- , 2004
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.
Appendix A
BIRNER DENTAL MANAGEMENT SERVICES, INC.
AUDIT COMMITTEE CHARTER
Purpose
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the Company's financial reporting process generally, (2) the
integrity of the financial statements of the Company, (3) the independent
auditor's qualifications and independence, (4) the performance of the
independent auditors, and (5) the compliance by the Company with legal and
regulatory requirements.
The Audit Committee shall prepare the report required by the rules of
the Securities and Exchange Commission to be included in the Company's annual
proxy statement.
Committee Membership
The Audit Committee shall consist of no fewer than three members of the
Board. The members of the Audit Committee shall meet the independence and
experience requirements of The Nasdaq Stock Market and applicable laws and
regulations.
The members of the Audit Committee shall be appointed by the Board.
Audit Committee members may be replaced by the Board.
Committee Authority and Responsibilities
The Audit Committee shall have the sole authority to appoint or replace
the independent auditor (subject, if applicable, to shareholder ratification).
The Audit Committee shall approve all audit engagement fees and terms and
pre-approve all significant non-audit engagements with the independent auditors.
The Audit Committee shall have oversight of the work of the independent auditors
for the Company. The Audit Committee shall consult with management but shall not
delegate these responsibilities.
The Audit Committee shall meet as often as it determines, but not less
frequently than quarterly. The Audit Committee may form and delegate authority
to subcommittees when appropriate.
The Audit Committee shall have the authority, to the extent it deems
necessary or appropriate, to retain special legal, accounting or other
consultants to advise the Committee. The Audit Committee may request any officer
or employee of the Company or the Company's outside counsel or independent
auditor to attend a meeting of the Committee or to meet with any members of, or
consultants to, the Committee.
As part of its job to foster open communication, the Audit Committee
should meet at least annually with management and the independent auditors in
separate executive sessions to discuss any matters that the Audit Committee or
each of these groups believe should be discussed privately. The Audit Committee
or at least its chair should meet with management and, if it deems necessary,
the independent auditor in separate executive sessions at least quarterly. The
Audit Committee may also, to the extent it deems necessary or appropriate, meet
with the Company's investment bankers or financial analysts who follow the
Company.
The Audit Committee shall make regular reports to the Board. The Audit
Committee shall review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval. The Audit Committee
shall annually review the Audit Committee's own performance.
The Audit Committee, to the extent it deems necessary or appropriate,
shall:
Financial Statement and Disclosure Matters
1. Review and discuss with management and the independent auditor
the annual audited financial statements, including disclosures
made in management's discussion and analysis, and recommend to
the Board whether the audited financial statements should be
included in the Company's Form 10-K.
2. Review and discuss with management, and if it deems necessary
the independent auditor, the Company's quarterly financial
statements prior to the filing of its Form 10-Q, including the
results of the independent auditors' reviews of the quarterly
financial statements.
3. Discuss with management and the independent auditor
significant financial reporting issues and judgments made in
connection with the preparation of the Company's financial
statements, including any significant changes in the Company's
selection or application of accounting principles, any major
issues as to the adequacy of the Company's internal controls,
the development, selection and disclosure of critical
accounting estimates, and analyses of the effect of
alternative assumptions, estimates or GAAP methods on the
Company's financial statements.
4. Discuss with management the Company's earnings press releases,
including the use, if any, of "pro forma" or "adjusted"
non-GAAP information, as well as financial information and
earnings guidance provided to analysts and rating agencies.
5. Discuss with management and the independent auditor the effect
of regulatory and accounting initiatives as well as
off-balance sheet structures, if any, on the Company's
financial statements.
6. Discuss with management the Company's major financial risk
exposures and the steps management has taken to monitor and
control such exposures, including the Company's risk
assessment and risk management policies.
7. Discuss with the independent auditor the matters required to
be discussed by Statement on Auditing Standards No. 61
relating to the conduct of the audit. In particular, discuss:
a) The adoption of, or changes to, the Company's significant
auditing and accounting principles and practices as suggested
by the independent auditor or management.
b) Review other material written communications between the
independent auditor and the management of the Company,
including the management letter provided by the independent
auditor, the Company's response to that letter and any
schedule of unadjusted differences.
c) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or
access to requested information, and any significant
disagreements between management and the independent auditor.
Oversight of the Company's Relationship with the Independent Auditor
8. Review the experience and qualifications of the senior members of the
independent auditor team.
9. Obtain and review a report from the independent auditor at least
annually regarding (a) the auditor's internal quality-control
procedures, (b) any material issues raised by the most recent
quality-control review, or peer review, of the firm, or by any inquiry
or investigation by governmental or professional authorities within the
preceding five years respecting one or more independent audits carried
out by the firm, (c) any steps taken to deal with any such issues, and
(d) all relationships between the independent auditor and the Company.
Evaluate the qualifications, performance and independence of the
independent auditor, including considering whether the auditor's
quality controls are adequate and the provision of non-audit services
is compatible with maintaining the auditor's independence, and taking
into account the opinions of management and the internal auditor. The
Audit Committee shall present its conclusions to the Board and, if so
determined by the Audit Committee, recommend that the Board take
additional action to satisfy itself of the qualifications, performance
and independence of the auditor.
10. The Audit Committee shall receive from the independent auditor a
written statement delineating all relationships between such auditor
and the Company, consistent with Independent Standards Board Standard
1. The Audit Committee shall engage in a dialogue with the independent
auditor with respect to any disclosed relationships or services that
may impact the objectivity and independence of such auditor.
11. Recommend to the Board policies for the Company's hiring of employees
or former employees of the independent auditor who were engaged on the
Company's account.
12. Discuss with the national office of the independent auditor issues on
which they were consulted by the Company's audit team and matters of
audit quality and consistency.
13. Meet with the independent auditor prior to the audit to discuss the
planning and staffing of the audit.
Compliance Oversight Responsibilities
14. Obtain from the independent auditor assurance that Section 10A of the
Securities Exchange Act of 1934 has not been violated.
15. Approve or reject all related party transactions.
16. Review the Company's policies and procedures regarding compliance with
applicable laws and regulations and with the Company's Code of Business
Conduct and Ethics.
17. Discuss with management and the independent auditor any correspondence
with regulators or governmental agencies and any employee complaints or
published reports which raise material issues regarding the Company's
financial statements or accounting policies.
18. Discuss with the Company's principal outside counsel legal matters that
may have a material impact on the financial statements or the Company's
compliance policies, including corporate securities trading policies.
19. Establish and oversee the process for receipt, retention and treatment
of complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters.
20. Establish and oversee the process for the confidential, anonymous
submission by employees of the Company of concerns regarding
questionable accounting or auditing matters.
Limitation of Audit Committee's Role
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements and disclosures are
complete and accurate and are in accordance with generally accepted accounting
principles and applicable rules and regulations. These are the responsibilities
of management and the independent auditor.
APPENDIX B
BIRNER DENTAL MANAGEMENT SERVICES, INC.
1995 EMPLOYEE STOCK OPTION PLAN
AMENDED THROUGH APRIL 26, 2004
PURPOSE
The purpose of the Birner Dental Management Services, Inc.
1995 Employee Stock Option Plan (the "Plan") is to further the growth and
development of Birner Dental Management Services, Inc. (the "Company") by
affording an opportunity for stock ownership to selected employees, directors
and consultants of the Company and its subsidiaries who are responsible for the
conduct and management of its business or who are involved in endeavors
significant to its success.
DEFINITIONS
Unless otherwise indicated, the following words when used
herein shall have the following meanings:
"Affiliate" shall mean, with respect to any person or
entity, a person or entity that directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such person or entity.
"Board of Directors" shall mean the Board of
Directors of the Company.
"Change in Control" shall be deemed to have occurred:
At such time as a third person, including a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
becomes the beneficial owner of shares of the Company having 50% or more of the
total number of votes that may be cast for the election of Directors of the
Company; or
On the date on which the stockholder(s) of
the Company approve: (i) any agreement for a merger or consolidation of the
Company with another corporation, provided that there shall be no change of
control if the persons and entities who were the stockholders of the Company
immediately before such merger or consolidation continue to own,
directly or indirectly, more than two-thirds of the outstanding voting
securities of the corporation resulting from such merger or consolidation in
substantially the same proportion as their ownership of the voting securities of
the Company outstanding immediately before such merger or consolidation; or (ii)
any sale, exchange or other disposition of all or substantially all of the
Company's assets; or
on the effective date of any sale, exchange
or other disposition of greater than 50% in fair
market value of the Company's assets, other than in the ordinary course of
business, whether in a single transaction or a series of related transactions.
In determining whether clause (1) of the preceding sentence has been
satisfied, the third person owning shares must be someone other than a
person or an Affiliate of a person that, as of October 30, 1995, was
the beneficial owner of shares of the Company having 20% or more of the
total number of votes that may be cast for the election of Directors of
the Company. The Committee's reasonable determination as to whether
such an event has occurred shall be final and conclusive.
"Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
"Common Stock" shall mean the Company's common stock
(no par value per share) and any share or shares of the Company's capital stock
hereafter issued or issuable in substitution for such shares.
"Director" shall mean a member of the Board of
Directors.
"Incentive Stock Option" shall mean any option
granted to an eligible employee under the Plan, which the Company intends at the
time the option is granted to be an Incentive Stock Option within the meaning of
Section 422 of the Code.
"Nonqualified Stock Option" shall mean any option
granted to an eligible employee, Director or consultant
under the Plan which is not an Incentive Stock Option.
"Option" shall mean and refer collectively to
Incentive Stock Options and Nonqualified Stock Options.
"Option Agreement" means the agreement specified in
Section 7.2.
"Optionee" shall mean any employee, Director or
consultant who is granted an Option under the Plan.
"Optionee" shall also mean the personal representative of an Optionee and any
other person who acquires the right to exercise an Option by bequest or
inheritance.
"Parent" shall mean a parent corporation of the
Company as defined in Section 424(e) of the Code.
"Subsidiary" shall mean a subsidiary corporation of
the Company as defined in Section 424(f) of the Code.
EFFECTIVE DATE
The effective date of the Plan is October 30, 1995; provided,
however, that the adoption of the Plan by the Board of Directors is subject to
approval and ratification by the shareholders of the Company within 12 months of
the effective date. Options granted under the Plan prior to approval of the Plan
by the shareholders of the Company shall be subject to approval of the Plan by
the shareholders of the Company.
ADMINISTRATION
Administrative Committee. The Plan shall be administered by a
Committee appointed by and serving at the pleasure of the Board of Directors,
consisting of not less than two Directors (the "Committee"). The Board of
Directors may from time to time remove members from or add members to the
Committee, and vacancies on the Committee, howsoever caused, shall be filled by
the Board of Directors.
Committee Meetings and Actions. The Committee shall hold
meetings at such times and places as it may determine. A majority of the members
of the Committee shall constitute a quorum, and the acts of the majority of the
members present at a meeting or a consent in writing signed by all members of
the Committee shall be the acts of the Committee and shall be final, binding and
conclusive upon all persons, including the Company, its Subsidiaries, its
shareholders, and all persons having any interest in Options which may be or
have been granted pursuant to the Plan.
Powers of Committee. The Committee shall have the full and
exclusive right to grant and determine terms and conditions of all Options
granted under the Plan and to prescribe, amend and rescind rules and regulations
for administration of the Plan. In granting Options, the Committee shall take
into consideration the contribution the Optionee has made or may make to the
success of the Company or its Subsidiaries and such other factors as the
Committee shall determine.
Interpretation of Plan. The determination of the Committee as
to any disputed question arising under the Plan, including questions of
construction and interpretation, shall be final, binding and conclusive upon all
persons, including the Company, its Subsidiaries, its shareholders, and all
persons having any interest in Options which may be or have been granted
pursuant to the Plan.
Indemnification. Each person who is or shall have been a
member of the Committee or of the Board of Directors shall be indemnified and
held harmless by the Company against and from any loss, cost, liability or
expense that may be imposed upon or reasonably incurred in connection with or
resulting from any claim, action, suit or proceeding to which such person may be
a party or in which such person may be involved by reason of any action taken or
failure to act under the Plan and against and from any and all amounts paid in
settlement thereof, with the Company's approval, or paid in satisfaction of a
judgment in any such action, suit or proceeding against him, provided such
person shall give the Company an opportunity, at its own expense, to handle and
defend the same before undertaking to handle and defend it on such person's own
behalf. The foregoing right of indemnification shall not be exclusive of, and is
in addition to, any other rights of indemnification to which any person may be
entitled under the Company's Articles of Incorporation or Bylaws, as a matter of
law, or otherwise, or any power that the Company may have to indemnify them or
hold them harmless.
STOCK SUBJECT TO THE PLAN
Number. The aggregate number of shares of Common Stock which
may be issued under Options granted pursuant to the Plan shall not exceed
479,250 shares. Shares which may be issued under Options may consist, in whole
or in part, of authorized but unissued stock or treasury stock of the Company
not reserved for any other purpose.
Unused Stock. If any outstanding Option under the Plan expires
or for any other reason ceases to be exercisable, in whole or in part, other
than upon exercise of the Option, the shares which were subject to such Option
and as to which the Option had not been exercised shall continue to be available
under the Plan.
Adjustment for Change in Outstanding Shares. If there is any
change, increase or decrease, in the outstanding shares of Common Stock which is
effected without receipt of additional consideration by the Company, by reason
of a stock dividend, recapitalization, merger, consolidation, stock split,
combination or exchange of stock, or other similar circumstances, then in each
such event, the Committee shall make an appropriate adjustment in the aggregate
number of shares of stock available under the Plan, the number of shares of
stock subject to each outstanding Option and the Option prices in order to
prevent the dilution or enlargement of any Optionee's rights. In making such
adjustments, fractional shares shall be rounded to the nearest whole share. The
Committee's determinations in making adjustments shall be final and conclusive.
Reorganization or Sale of Assets. If the Company is merged or
consolidated with another corporation and the Company is not the surviving
corporation, or if all or substantially all of the assets of the Company are
acquired by another entity, or if the Company is liquidated or reorganized,
(each of such events being referred to hereinafter as a "Reorganization Event"),
the Committee shall, as to outstanding Options, either (1) make appropriate
provision for the protection of any such outstanding Options by the substitution
on an equitable basis of appropriate stock of the Company, or of the merged,
consolidated or otherwise reorganized corporation, which will be issuable in
respect of the Common Stock, provided that no additional benefits shall be
conferred upon Optionees as a result of such substitution, and provided further
that the excess of the aggregate fair market value of the shares subject to the
Options immediately after such substitution over the purchase price thereof is
not more than the excess of the aggregate fair market value of the shares
subject to such Options immediately before such substitution over the purchase
price thereof, or (2) upon written notice to all Optionees, which notice shall
be given not less than 20 days prior to the effective date of the Reorganization
Event, provide that all unexercised Options must be exercised within a specified
number of days (which shall not be less than ten) of the date of such notice or
such Options will terminate. In response to a notice provided pursuant to clause
(2) of the preceding sentence, an Optionee may make an irrevocable election to
exercise the Optionee's Option contingent upon and effective as of the effective
date of the Reorganization Event. The Committee may, in its sole discretion,
accelerate the exercise dates of outstanding Options in connection with any
Reorganization Event.
ELIGIBILITY
All full- or part-time employees of the Company and its
Subsidiaries who are responsible for the conduct and management of its business
or who are involved in endeavors significant to its success shall be eligible to
receive both Incentive Stock Options and Nonqualified Stock Options under the
Plan. Directors and consultants who are neither full- nor part-time employees of
the Company or its Subsidiaries but who are involved in endeavors significant to
its success shall be eligible to receive Nonqualified Stock Options, but not
Incentive Stock Options, under the Plan. Any Director who is otherwise eligible
to participate, who makes an election in writing not to receive any grants under
the Plan, shall not be eligible to receive any such grants during the period set
forth in such election.
GRANT OF OPTIONS
Grant of Options. The Committee may from time to time in its
discretion determine which of the eligible employees, Directors and consultants
of the Company or its Subsidiaries should receive Options, the type of Options
to be granted (whether Incentive Stock Options or Nonqualified Stock Options),
the number of shares subject to such Options, and the dates on which such
Options are to be granted. No employee may be granted Incentive Stock Options to
the extent that the aggregate fair market value (determined as of the time each
Option is granted) of the Common Stock with respect to which any such Options
are exercisable for the first time during a calendar year (under all incentive
stock option plans of the Company and its Parent and Subsidiaries) would exceed
$100,000.
Option Agreement. Each Option granted under the Plan shall be
evidenced by a written Option Agreement setting forth the terms upon which the
Option is granted. Each Option Agreement shall designate the type of Options
being granted (whether Incentive Stock Options or Nonqualified Stock Options),
and shall state the number of shares of Common Stock, as designated by the
Committee, to which that Option pertains. More than one Option may be granted to
an eligible person.
Option Price. The option price per share of Common Stock under
each Option shall be determined by the Committee and stated in the Option
Agreement. The option price for Incentive Stock Options granted under the Plan
shall not be less than 100% of the fair market value (determined as of the day
the Option is granted) of the shares subject to the Option. The option price for
Nonqualified Stock Options granted under the Plan shall not be less than 100% of
the fair market value (determined as of the day the Option is granted) of the
shares subject to the Option.
Determination of Fair Market Value. If the Common Stock is
listed upon an established stock exchange or exchanges, then the fair market
value per share shall be deemed to be the average of the quoted closing prices
of the Common Stock on such stock exchange or exchanges on the day for which the
determination is made, or if no sale of the Common Stock shall have been made on
any stock exchange on that day, on the next preceding day on which there was
such a sale. If the Common Stock is not listed upon an established stock
exchange but is traded in the NASDAQ National Market System, the fair market
value per share shall be deemed to be the closing price of the Common Stock in
the National Market System on the day for which the determination is made, or if
there shall have been no trading of the Common Stock on that day, on the next
preceding day on which there was such trading. If the Common Stock is not listed
upon an established stock exchange and is not traded in the National Market
System, the fair market value per share shall be deemed to be the mean between
the dealer "bid" and "ask" closing prices of the Common Stock on the NASDAQ
System on the day for which the determination is made, or if there shall have
been no trading of the Common Stock on that day, on the next preceding day on
which there was such trading. If none of these conditions apply, the fair market
value per share shall be deemed to be an amount as determined in good faith by
the Committee by applying any reasonable valuation method.
Duration of Options. Each Option shall be of a duration as
specified in the Option Agreement; provided, however, that the term of each
Option shall be no more than ten years from the date on which the Option is
granted and shall be subject to early termination as provided herein.
Additional Limitations on Grant. No Incentive Stock Option
shall be granted to an employee who, at the time the Incentive Stock Option is
granted, owns stock (as determined in accordance with Section 424(d) of the
Code) representing more than 10% of the total combined voting power of all
classes of stock of the Company or of any Parent or Subsidiary, unless the
option price of such Incentive Stock Option is at least 110% of the fair market
value (determined as of the day the Incentive Stock Option is granted) of the
stock subject to the Incentive Stock Option and the Incentive Stock Option by
its terms is not exercisable more than five years from the date it is granted.
Other Terms and Conditions. The Option Agreement may contain
such other provisions, which shall not be inconsistent with the Plan, as the
Committee shall deem appropriate, including, without limitation, provisions that
relate the Optionee's ability to exercise an Option to the passage of time or
the achievement of specific goals established by the Committee or the occurrence
of certain events specified by the Committee.
EXERCISE OF OPTIONS
Manner of Exercise. Subject to the limitations and conditions
of the Plan or the Option Agreement, an Option shall be exercisable, in whole or
in part, from time to time, by giving written notice of exercise to the
Secretary of the Company, which notice shall specify the number of shares of
Common Stock to be purchased and shall be accompanied by (1) payment in full to
the Company of the purchase price of the shares to be purchased, plus (2)
payment in full of such amount as the Company shall determine to be sufficient
to satisfy any liability it may have for any withholding of federal, state or
local income or other taxes incurred by reason of the exercise of the Option,
and (3) a representation meeting the requirements of Section 12.2 if requested
by the Company, and (4) a Stock Restriction Agreement meeting the requirements
of Section 12.3 if requested by the Company.
Payment of Purchase Price. Payment for shares and withholding
taxes shall be in the form of either (1) cash, (2) a certified or bank cashier's
check to the order of the Company, or (3) shares of the Common Stock, properly
endorsed to the Company, in an amount the fair market value of which on the date
of receipt by the Company (as determined in accordance with Section 7.4) equals
or exceeds the aggregate option price of the shares with respect to which the
Option is being exercised, or (4) in any combination thereof; provided, however,
that no payment may be made in shares of Common Stock unless payment in such
form and upon such exercise has been approved in advance by the Committee. Upon
the exercise of any Option, the Company, in its sole discretion, may make
financing available to the Optionee for the payment of the purchase price on
such terms and conditions as the Committee shall specify.
CHANGE IN CONTROL
Notwithstanding any vesting requirements contained in any
Option Agreement, upon the occurrence of a Change in Control, all outstanding
Options shall become immediately vested and exercisable prior to the Change in
Control.
EFFECT OF TERMINATION OF EMPLOYMENT
Termination of Employment Other Than Upon Death or Disability.
Upon termination of an Optionee's employment with the Company or a Subsidiary
other than upon death or disability (within the meaning of Section 22(e)(3) of
the Code), an Optionee may, at any time within three months after the date of
termination but not later than the date of expiration of the Option, exercise
the Option to the extent the Optionee was entitled to do so on the date of
termination. Any Options not exercisable as of the date of termination and any
Options or portions of Options of terminated Optionees not exercised as provided
herein shall terminate.
Termination By Death of Optionee. If an Optionee shall die
while in the employ of the Company or a Subsidiary or within a period of three
months after the termination of employment with the Company or a Subsidiary
under circumstances to which Section 10.1 apply, the personal representatives of
the Optionee's estate or the person or persons who shall have acquired the
Option from the Optionee by bequest or inheritance may exercise the Option at
any time within the year after the date of death but not later than the
expiration date of the Option, to the extent the Optionee was entitled to do so
on the date of death. Any Options not exercisable as of the date of death and
any Options or portions of Options of deceased Optionees not exercised as
provided herein shall terminate.
Termination By Disability of Optionee. Upon termination of an
Optionee's employment with the Company or a Subsidiary by reason of the
Optionee's disability (within the meaning of Section 22(e)(3) of the Code), the
Optionee may exercise the Option at any time within one year after the date of
termination but not later than the expiration date of the Option, to the extent
the Optionee was entitled to do so on the date of termination. Any Options not
exercisable as of the date of termination and any Options or portions of Options
of disabled Optionees not exercised as provided herein shall terminate.
Termination of Directors and Consultants. For purposes of this
Section 10, a termination of employment shall be deemed to include the
termination of a Director's service as a member of the Board of Directors and
the termination of a consulting arrangement in the case of consultants.
Extension of Option Termination Date. The Committee, in its
sole discretion, may extend the termination date of an Option granted under the
Plan without regard to the preceding provisions of this Section 10. In such
event, the termination date shall be a date selected by the Committee in its
sole discretion, but not later than the latest expiration date of the Option
permitted pursuant to Section 7.5. Such extension may be made in the Option
Agreement as originally executed or by amendment to the Option Agreement, either
prior to or following termination of an Optionee's employment. The Committee
shall have no power to extend the termination date of an Incentive Stock Option
beyond the periods provided in Sections 10.1, 10.2 and 10.3 prior to the
termination of the Optionee's employment or without the approval of the
Optionee, which may be granted or withheld in the Optionee's sole discretion.
Any extension of the termination date of an Incentive Stock Option shall be
deemed to be the grant of a new Option for purposes of the Code.
NON-TRANSFERABILITY OF OPTION
Options granted pursuant to the Plan are not transferable by
the Optionee other than by Will or the laws of descent and distribution and
shall be exercisable during the Optionee's lifetime only by the Optionee. Upon
any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the
Option contrary to the provisions hereof, or upon the levy of any attachment or
similar process upon the Option, the Option shall immediately become null and
void.
ISSUANCE OF SHARES
Transfer of Shares to Optionee. As soon as practicable after
the Optionee has given the Company written notice of exercise of an Option and
has otherwise met the requirements of Section 8.1, the Company shall issue or
transfer to the Optionee the number of shares of Common Stock as to which the
Option has been exercised and shall deliver to the Optionee a certificate or
certificates therefor, registered in the Optionee's name. In no event shall the
Company be required to transfer fractional shares to the Optionee, and in lieu
thereof, the Company may pay an amount in cash equal to the fair market value
(as determined in accordance with Section 7.4) of such fractional shares on the
date of exercise. If the issuance or transfer of shares by the Company would for
any reason, in the opinion of counsel for the Company, violate any applicable
federal or state laws or regulations, the Company may delay issuance or transfer
of such shares to the Optionee until compliance with such laws can reasonably be
obtained. In no event shall the Company be obligated to effect or obtain any
listing, registration, qualification, consent or approval under any applicable
federal or state laws or regulations or any contract or agreement to which the
Company is a party with respect to the issuance of any such shares.
Investment Representation. Upon demand by the Company, the
Optionee shall deliver to the Company a representation in writing that the
purchase of all shares with respect to which notice of exercise of the Option
has been given by the Optionee is being made for investment only and not for
resale or with a view to distribution, and containing such other representations
and provisions with respect thereto as the Company may require. Upon such
demand, delivery of such representation promptly and prior to the transfer or
delivery of any such shares and prior to the expiration of the option period
shall be a condition precedent to the right to purchase such shares.
Stock Restriction Agreement. Upon demand by the Company, the
Optionee shall execute and deliver to the Company a Stock Restriction Agreement
in such form as the Company may provide at the time of exercise of the Option.
Such Agreement may include, without limitation, restrictions upon the Optionee's
right to transfer shares, including the creation of an irrevocable right of
first refusal in the Company and its designees, and provisions requiring the
Optionee to transfer the shares to the Company or the Company's designees upon a
termination of employment. Upon such demand, execution of the Stock Restriction
Agreement by the Optionee prior to the transfer or delivery of any shares and
prior to the expiration of the option period shall be a condition precedent to
the right to purchase such shares, unless such condition is expressly waived in
writing by the Company.
AMENDMENTS
The Board of Directors may at any time and from time to time
alter, amend, suspend or terminate the Plan or any part thereof as it may deem
proper, except that no such action shall diminish or impair the rights under an
Option previously granted. Unless the shareholders of the Company shall have
given their approval, the total number of shares for which Options may be issued
under the Plan shall not be increased, except as provided in Section 5.3, and no
amendment shall be made which reduces the price at which the Common Stock may be
offered under the Plan below the minimum required by Section 7.3, except as
provided in Section 5.3, or which materially modifies the requirements as to
eligibility for participation in the Plan. Subject to the terms and conditions
of the Plan, the Board of Directors may modify, extend or renew outstanding
Options granted under the Plan, or accept the surrender of outstanding Options
to the extent not theretofore exercised and authorize the granting of new
Options in substitution therefor, except that no such action shall diminish or
impair the rights under an Option previously granted without the consent of the
Optionee.
TERM OF PLAN
This Plan shall terminate on October 29, 2005; provided,
however, that the Board of Directors may at any time prior thereto suspend or
terminate the Plan.
RIGHTS AS STOCKHOLDER
An Optionee shall have no rights as a stockholder of the
Company with respect to any shares of Common Stock covered by an Option until
the date of the issuance of the stock certificate for such shares.
NO EMPLOYMENT RIGHTS
Nothing contained in this Plan or in any Option granted under
the Plan shall confer upon any Optionee any right with respect to the
continuation of such Optionee's employment by the Company or any Subsidiary or
interfere in any way with the right of the Company or any Subsidiary, subject to
the terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Optionee from the rate in existence at the time of the grant of the Option.
GOVERNING LAW
This Plan, and all Options granted under this Plan, shall be
construed and shall take effect in accordance with the laws of the State of
Colorado, without regard to the conflicts of laws rules of such State.
2934628_1.DOC
INCENTIVE STOCK OPTION AGREEMENT
OPTIONEE:
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DATE OF GRANT:
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AGREEMENT between Birner Dental Management Services, Inc. (the
"Company"), and the above named Optionee ("Optionee"), an employee of the
Company or a Subsidiary thereof.
The Company and Optionee agree as follows:
Grant of Option.
Optionee is hereby granted an Incentive Stock Option, within the
meaning of Section 422 of the Code (the "Option"), to purchase Common Stock of
the Company pursuant to the Birner Dental Management Services, Inc. 1995
Employee Stock Option Plan (the "Plan"). The Option and this Agreement are
subject to and shall be construed in accordance with the terms and conditions of
the Plan, as now or hereinafter in effect. Any terms which are used in this
Agreement without being defined and which are defined in the Plan shall have the
meaning specified in the Plan.
Date of Grant.
The date of the grant of the Option is the date first set forth above,
the date of the action by the Committee which administers the Plan (the
"Committee") in granting the same.
Number and Price of Shares.
The number of shares as to which the Option is granted is the number
set forth in Schedule 3A to this Agreement. The purchase price per share is the
amount set forth in Schedule 3B to this Agreement.
Expiration Date.
Unless sooner terminated as provided in Section 10 of the Plan, the
Option shall expire and terminate on the date set forth in Schedule 4 to this
Agreement, and in no event shall the Option be exercisable after that date.
Manner of Exercise.
Except as provided in this Agreement, the Option shall be exercisable,
in whole or in part, from time to time, in the manner provided in Section 8 of
the Plan.
Time of Exercise.
The Option granted hereby shall become vested in and exercisable by
Optionee in the installments, on the dates and subject to the conditions set
forth in Schedule 6 to this Agreement; provided, however, that Optionee must
have been continuously employed by the Company or a Subsidiary thereof from the
date of grant of the Option until the date specified on Schedule 6 or until the
conditions specified on Schedule 6 have been satisfied.
Stock Restriction Agreement.
Upon exercise of the Option, the Optionee shall execute and deliver to
the Company a Stock Restriction Agreement in substantially the form attached to
this Agreement as Exhibit A. Execution and delivery of the Stock Restriction
Agreement prior to the transfer or delivery of any shares and prior to the
expiration of the option period shall be a condition precedent to the right to
purchase such shares.
Nontransferability of Option.
The Option is not transferable by Optionee other than by Will or the
laws of descent and distribution, and the Option shall be exercisable during
Optionee's lifetime only by Optionee. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of the Option contrary to the
provisions hereof, or upon the levy of any attachment or similar process upon
the Option, the Option shall immediately become null and void.
Withholding for Taxes.
The Company shall have the right to deduct from Optionee's salary any
federal or state taxes required by law to be withheld with respect to the
exercise of the Option or any disqualifying disposition of the Common Stock
acquired upon exercise of the Option.
Legends.
Certificates representing Common Stock acquired upon exercise of this
Option may contain such legends and transfer restrictions as the Company shall
deem reasonably necessary or desirable, including, without limitation, legends
restricting transfer of the Common Stock until there has been compliance with
federal and state securities laws and until Optionee or any other holder of the
Common Stock has paid the Company such amounts as may be necessary in order to
satisfy any withholding tax liability of the Company resulting from a
disqualifying disposition described in Section 422(a) of the Code.
Employee Benefits.
Optionee agrees that the grant and vesting of the Option and the
receipt of shares of Common Stock upon exercise of the Option will constitute
special incentive compensation that will not be taken into account as "salary"
or "compensation" or "bonus" in determining the amount of any payment under any
pension, retirement, profit sharing or other remuneration plan of the Company.
Amendment.
Subject to the terms and conditions of the Plan, the Committee may
modify, extend or renew the Option, or accept the surrender of the Option to the
extent not theretofore exercised and authorize the granting of new Options in
substitution therefor, except that no such action shall diminish or impair the
rights under the Option without the consent of the Optionee.
Interpretation.
The interpretations and constructions of any provision of and
determinations on any question arising under the Plan or this Agreement shall be
made by the Committee, and all such interpretations, constructions and
determinations shall be final and conclusive as to all parties.
Receipt of Plan.
By entering into this Agreement, Optionee acknowledges (i) that he or
she has received and read a copy of the Plan and (ii) that this Agreement is
subject to and shall be construed in accordance with the terms and conditions of
the Plan, as now or hereinafter in effect.
Governing Law.
This Agreement shall be construed and shall take effect in accordance
with the laws of the State of Colorado, without regard to the conflicts of laws
rules of such State.
Miscellaneous.
This Agreement constitutes the entire understanding and agreement of
the parties with respect to the subject matter hereof and supersedes all prior
and contemporaneous agreements or understandings, inducements or conditions,
express or implied, written or oral, between the parties with respect hereto. If
any provision of this Agreement, or the application thereof, shall for any
reason and to any extent be invalid or unenforceable, the remainder of this
Agreement and the application of such provision to other circumstances shall be
interpreted so as best to reasonably effect the intent of the parties hereto.
All notices or other communications which are required to be given or may be
given to either party pursuant to the terms of this Agreement shall be in
writing and shall be delivered personally or by registered or certified mail,
postage prepaid, to the address of the parties as set forth following the
signature of such party. Notice shall be deemed given on the date of delivery in
the case of personal delivery or on the delivery or refusal date as specified on
the return receipt in the case of registered or certified mail. Either party may
change its address for such communications by giving notice thereof to the other
party in conformity with this Section 16.
IN WITNESS WHEREOF, the Company by a duly authorized officer of the
Company and Optionee have executed this Agreement on _____________, effective as
of the date of grant.
BIRNER DENTAL MANAGEMENT SERVICES, INC.
By:
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Title:
------------------------------------
Address:
----------------------------------
OPTIONEE
Address:
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SCHEDULES
TO
INCENTIVE STOCK OPTION AGREEMENT
Schedule
3A Number of Shares of Stock:
------------------------- ------------------------
3B Purchase Price per Share:
------------------------ -------------------------
4 Expiration Date:
--------------- ----------------------------------
6 Vesting Schedule:
----------------
Date Number of Shares
Which Become Exercisable
======== =========
======== =========
======== =========
======== =========
======== =========
Additional Conditions to Vesting: Notwithstanding the foregoing, no
portion of the Option shall be vested and exercisable until the following
conditions have been satisfied:
NONQUALIFIED STOCK OPTION AGREEMENT
OPTIONEE:
--------------------------------------------
DATE OF GRANT:
---------------------------------------
AGREEMENT between Birner Dental Management Services, Inc. (the
"Company"), and the above named Optionee ("Optionee"), an employee of the
Company or a Subsidiary thereof.
The Company and Optionee agree as follows:
Grant of Option.
Optionee is hereby granted a Nonqualified Stock Option (the "Option")
to purchase Common Stock of the Company pursuant to the Birner Dental Management
Services, Inc. 1995 Employee Stock Option Plan (the "Plan"). The Option is not
intended to qualify as an Incentive Stock Option within the meaning of Section
422 of the Code. The Option and this Agreement are subject to and shall be
construed in accordance with the terms and conditions of the Plan, as now or
hereinafter in effect. Any terms which are used in this Agreement without being
defined and which are defined in the Plan shall have the meaning specified in
the Plan.
Date of Grant.
The date of the grant of the Option is the date first set forth above,
the date of the action by the Committee which administers the Plan (the
"Committee") in granting the same.
Number and Price of Shares.
The number of shares as to which the Option is granted is the number
set forth in Schedule 3A to this Agreement. The purchase price per share is the
amount set forth in Schedule 3B to this Agreement.
Expiration Date.
Unless sooner terminated as provided in Section 10 of the Plan, the
Option shall expire and terminate on the date set forth in Schedule 4 to this
Agreement, and in no event shall the Option be exercisable after that date.
Manner of Exercise.
Except as provided in this Agreement, the Option shall be exercisable,
in whole or in part, from time to time, in the manner provided in Section 8 of
the Plan.
Time of Exercise.
The Option granted hereby shall become vested in and exercisable by
Optionee in the installments, on the dates and subject to the conditions set
forth in Schedule 6 to this Agreement; provided, however, that Optionee must
have been continuously employed by the Company or a Subsidiary thereof from the
date of grant of the Option until the date specified on Schedule 6 or until the
conditions specified on Schedule 6 have been satisfied.
Stock Restriction Agreement.
Upon exercise of the Option, the Optionee shall execute and deliver to
the Company a Stock Restriction Agreement in substantially the form attached to
this Agreement as Exhibit A. Execution and delivery of the Stock Restriction
Agreement prior to the transfer or delivery of any shares and prior to the
expiration of the option period shall be a condition precedent to the right to
purchase such shares.
Nontransferability of Option.
The Option is not transferable by Optionee other than by Will or the
laws of descent and distribution, and the Option shall be exercisable during
Optionee's lifetime only by Optionee. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of the Option contrary to the
provisions hereof, or upon the levy of any attachment or similar process upon
the Option, the Option shall immediately become null and void.
Withholding for Taxes.
The Company shall have the right to deduct from Optionee's salary any
federal or state taxes required by law to be withheld with respect to the
exercise of the Option.
Legends.
Certificates representing Common Stock acquired upon exercise of this
Option may contain such legends and transfer restrictions as the Company shall
deem reasonably necessary or desirable, including, without limitation, legends
restricting transfer of the Common Stock until there has been compliance with
federal and state securities laws.
Employee Benefits.
Optionee agrees that the grant and vesting of the Option and the
receipt of shares of Common Stock upon exercise of the Option will constitute
special incentive compensation that will not be taken into account as "salary"
or "compensation" or "bonus" in determining the amount of any payment under any
pension, retirement, profit sharing or other remuneration plan of the Company.
Amendment.
Subject to the terms and conditions of the Plan, the Committee may
modify, extend or renew the Option, or accept the surrender of the Option to the
extent not theretofore exercised and authorize the granting of new Options in
substitution therefor, except that no such action shall diminish or impair the
rights under the Option without the consent of the Optionee.
Interpretation.
The interpretations and constructions of any provision of and
determinations on any question arising under the Plan or this Agreement shall be
made by the Committee, and all such interpretations, constructions and
determinations shall be final and conclusive as to all parties.
Receipt of Plan.
By entering into this Agreement, Optionee acknowledges (i) that he or
she has received and read a copy of the Plan and (ii) that this Agreement is
subject to and shall be construed in accordance with the terms and conditions of
the Plan, as now or hereinafter in effect.
Governing Law.
This Agreement shall be construed and shall take effect in accordance
with the laws of the State of Colorado, without regard to the conflicts of laws
rules of such State.
Miscellaneous.
This Agreement constitutes the entire understanding and agreement of
the parties with respect to the subject matter hereof and supersedes all prior
and contemporaneous agreements or understandings, inducements or conditions,
express or implied, written or oral, between the parties with respect hereto. If
any provision of this Agreement, or the application thereof, shall for any
reason and to any extent be invalid or unenforceable, the remainder of this
Agreement and the application of such provision to other circumstances shall be
interpreted so as best to reasonably effect the intent of the parties hereto.
All notices or other communications which are required to be given or may be
given to either party pursuant to the terms of this Agreement shall be in
writing and shall be delivered personally or by registered or certified mail,
postage prepaid, to the address of the parties as set forth following the
signature of such party. Notice shall be deemed given on the date of delivery in
the case of personal delivery or on the delivery or refusal date as specified on
the return receipt in the case of registered or certified mail. Either party may
change its address for such communications by giving notice thereof to the other
party in conformity with this Section 16.
IN WITNESS WHEREOF, the Company by a duly authorized officer of the
Company and Optionee have executed this Agreement on _____________, effective as
of the date of grant.
BIRNER DENTAL MANAGEMENT SERVICES, INC.
By:
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Title:
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Address:
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OPTIONEE
Address:
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SCHEDULES
TO
NONQUALIFIED STOCK OPTION AGREEMENT
Schedule
3A Number of Shares of Stock:
------------------------- ------------------------
3B Purchase Price per Share:
------------------------ -------------------------
4 Expiration Date:
--------------- ----------------------------------
6 Vesting Schedule:
----------------
Date Number of Shares
Which Become Exercisable
======== =========
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Additional Conditions to Vesting: Notwithstanding the foregoing, no
portion of the Option shall be vested and exercisable until the following
conditions have been satisfied: