UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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)
- -------------------------------------------------------------------------------
(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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BIRNER DENTAL MANAGEMENT SERVICES, INC.
3801 EAST FLORIDA AVENUE, SUITE 508
DENVER, COLORADO 80210
April 28, 2006
TO THE SHAREHOLDERS OF BIRNER
DENTAL MANAGEMENT SERVICES, INC.:
You are cordially invited to attend the 2006 Annual Meeting of Shareholders (the
"Meeting") of Birner Dental Management Services, Inc. (the "Company"), to be
held on Thursday, June 1, 2006, 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 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 postage prepaid, addressed envelope, as soon as possible so that your
vote will be recorded. If you attend the Meeting, you may withdraw your proxy
and vote your shares in person.
Very truly yours,
BIRNER DENTAL MANAGEMENT SERVICES, INC.
By: /s/ Frederic W. J. Birner
-------------------------
Name: Frederic W.J. Birner
Title: Chairman of the Board and Chief Executive Officer
BIRNER DENTAL MANAGEMENT SERVICES, INC.
3801 EAST FLORIDA AVENUE, SUITE 508
DENVER, COLORADO 80210
---------------------------
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD JUNE 1, 2006
---------------------------
TO OUR SHAREHOLDERS:
The 2006 Annual Meeting of Shareholders (the "Meeting") of Birner Dental
Management Services, Inc., a Colorado corporation (the "Company"), will be held
on Thursday, June 1, 2006, at 10:00 a.m., Mountain Time, at the Company's
offices, 3801 East Florida Avenue, Suite 508, Denver, Colorado 80210, for the
following purposes:
(1) to elect two Class III directors to serve for a term of three years or until
a successor is duly elected and qualified; (2) 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 10, 2006 are entitled to notice of and to vote at the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Dennis N. Genty
-------------------
Name: Dennis N. Genty
Title: Chief Financial Officer, Secretary and Treasurer
Denver, Colorado
April 28, 2006
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. 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 1, 2006
---------------------------
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 2006 Annual Meeting of Shareholders (the "Meeting") to
be held at 10:00 a.m., Mountain Time, on Thursday, June 1, 2006, at the
Company's offices, 3801 East Florida Avenue, Suite 508, Denver, Colorado 80210,
and at any and all adjournments thereof. This Proxy Statement and the
accompanying form of proxy are first being mailed or given to the shareholders
of the Company on or about April 28, 2005.
The Company's Annual Report on Form 10-K (the "Annual Report"), which includes
audited financial statements for the fiscal year ended December 31, 2005, is
being mailed to shareholders of the Company simultaneously with this Proxy
Statement. The Annual Report is not part of the Company's proxy soliciting
materials.
INFORMATION CONCERNING SOLICITATION AND VOTING
All voting rights are vested exclusively in the holders of the Company's common
stock, without par value ("Common Stock"). Each share of 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 10, 2006, the
record date for shareholders entitled to vote at the Meeting, 2,378,961 shares
of Common Stock were issued and outstanding.
Proxies in the enclosed form will be effective if properly executed and returned
prior to the Meeting in the enclosed, postage prepaid, addressed envelope. The
Common Stock represented by each effective proxy will be voted at the Meeting in
accordance with the instructions on the proxy. If no instructions are indicated
on a proxy, all Common Stock represented by such proxy will be voted FOR
election of the nominees named in the proxy as Class III directors and as to any
other matters of business which properly come before the Meeting, by the named
proxies at their discretion.
Any shareholder signing and mailing the enclosed proxy may revoke it at any time
before it is voted by giving written notice of the revocation to the Company, by
voting in person at the Meeting or by filing at the Meeting a later executed
proxy.
1
When a quorum is present, in the election of directors, the nominees having the
highest number of votes cast in favor of their election will be elected to the
Board of Directors. With respect to any other matter that may properly come
before the Meeting, unless a greater number of votes are required by law or by
the Company's Amended and Restated Articles of Incorporation, a matter will be
approved by the shareholders 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 for purposes of determining the presence of a quorum.
However, for purposes of determining the outcome of the election of the Class
III directors, 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 the Class III directors,
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
$1,300 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 TWO CLASS III DIRECTORS
General
The Company's Amended and Restated Articles of Incorporation provide for the
classification of the Company's Board of Directors. The Board of Directors is
divided into three classes. One class stands for re-election at each annual
meeting of shareholders. The Board of Directors has set the size of the Board at
five 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 2007 (Thomas D. Wolf and
Paul E. Valuck, D.D.S.), one Class II director whose term will expire upon the
election and qualification of a director at the annual meeting of shareholders
held in 2008 (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 will serve until their
successors are duly elected and qualified, subject, however, to prior death,
resignation, retirement, disqualification or removal from office. On June 8,
2004, Mr. Wolf was appointed to the Board of Directors and Mr. Dennis N. Genty
resigned from the Board of Directors. The appointment of Mr. Wolf and the
resignation of Mr. Genty enabled the Company to be in compliance with applicable
Nasdaq rules that require that a majority of the Company's directors must be
independent according to specified criteria. Shareholders have not yet elected
Mr. Wolf.
2
Proxies cannot be voted for a greater number of persons than the number of
nominees named therein. Unless authority to vote is withheld, the persons named
in the enclosed form of proxy will vote the shares represented by such proxy FOR
the election of the nominees for director named below. If, at the time of the
Meeting, a nominee 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 2009 annual meeting of shareholders or until
their successors are elected and qualified.
Class III Director Nominees
The Board of Directors unanimously recommends that the shareholders vote FOR
election of the following nominees as Class III directors of the Company.
Name Age Position Director Since
---- --- -------- --------------
Frederic W.J. Birner 48 Chairman of the Board, Chief 1995
Executive Officer and Director
Mark A. Birner, D.D.S. 46 President and Director 1995
Each of the directors' biographies is set forth in "Directors and Executive
Officers" below.
Continuing Directors
The persons named below will continue to serve as directors of the Company until
the annual meeting of shareholders in the year indicated below and until their
successors are elected and take office. Shareholders are not voting on the
election of the Class I and Class II directors. The following table shows the
names, ages and positions of each continuing director. Each of the directors'
biographies is set forth in "Directors and Executive Officers" below.
Class I - Term Expires in 2007
Name Age Director Since
---- --- --------------
Thomas D. Wolf 51 2004
Paul E. Valuck, D.D.S. 49 2001
Class II - Term Expires in 2008
Name Age Director Since
---- --- --------------
Brooks G. O'Neil 49 2003
The Company does not have a standing nominating committee, and nominations for
director are made by the Company's independent directors (as defined in Nasdaq
Rule 4200(a)(15)). The Board of Directors believes that, considering the size of
the Company and the Board of Directors, nominating decisions can be made
effectively on a case-by-case basis and there is no need for the added formality
of a nominating committee.
The Board of Directors does not have an express policy with regard to the
consideration of any director candidates recommended by our shareholders since
the Board believes that it can adequately evaluate any such nominees on a
case-by-case basis. The Board of Directors will consider director candidates
proposed on a timely basis as described under "Shareholder Proposals," and will
evaluate shareholder-recommended candidates under the same criteria as
internally generated candidates. Shareholders must include sufficient
information about candidates nominated for director to enable the Company's
independent directors to consider the candidate's qualifications and suitability
for service on the Board of Directors. Although the Board of Directors does not
currently have formal minimum criteria for nominees, substantial relevant
business and industry experience would generally be considered important
qualifying criteria, as would the ability to attend and prepare for board,
committee and shareholder meetings. Any candidate must state in advance his or
her willingness and interest in serving on the Board of Directors and its
committees.
3
The Board of Directors does not presently provide a formal process for
shareholders to send communications to the Board. Shareholders and other
interested parties wishing to contact any member (or all members) of the Board
of Directors or any committee of the Board may do so by mail, addressed, either
by name or title, to the Board of Directors or to any such individual director
or group or committee of the directors, and such correspondence should be sent
to the Company's principal office. The Board of Directors intends to
continuously evaluate its communication process with the Company's shareholders,
and may adopt additional procedures to facilitate shareholder communications
with the Board of Directors, consistent with standards of the professionalism
and the Company's administrative resources.
Directors' Meetings and Committees
The entire Board of Directors met five times during the year ended December 31,
2005, and acted by unanimous consent 11 times. Each incumbent director attended
100% of the board meetings except for Mark A. Birner, D.D.S., who attended four
meetings. Our policy regarding attendance by members of the Board of Directors
at our Annual Meeting of Shareholders is to encourage our directors to attend,
subject to their availability for travel at that time.
Audit Committee
The Audit Committee is comprised of outside directors. The current members of
the Audit Committee are Brooks G. O'Neil, Paul E. Valuck, D.D.S and Thomas D.
Wolf (Chairman). The Board of Directors has reviewed Rule 4200(a)(14) of the
National Association of Securities Dealers and has determined that Messrs.
O'Neil, Valuck and Wolf are independent directors as defined in that Rule. The
Board of Directors 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 Securities and Exchange Commission regulations. The
designation of this audit committee financial expert is a Securities and
Exchange Commission disclosure requirement related to his experience and
understanding of certain accounting and auditing matters. The designation does
not impose any greater duties, obligations, or liability upon this member than
are generally imposed on Audit Committee members.
The primary responsibilities of the Audit Committee are to select, engage,
compensate, and oversee the Company's independent registered public accounting
firm and pre-approve all services to be performed by them, and to review and
oversee the Company's financial reporting process generally, the integrity of
the financial statements of the Company, the independent registered public
accounting firm's qualifications and independence, the performance of the
Company's internal audit function and of the independent registered public
accounting firm, and the compliance by the Company with legal and regulatory
requirements.
The Board of Directors has adopted a written charter for the Audit Committee, a
copy of which is attached to the Company's 2004 proxy statement. The Audit
Committee met four times in 2005, and all members were present at these
meetings.
Compensation Committee
The current members of the Compensation Committee are Brooks G. O'Neil, Paul E.
Valuck, D.D.S and Thomas D. Wolf, each of whom is an outside director. 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. 2005 Equity Incentive Plan (the "2005 Plan"). The
Compensation Committee met two times in 2005, and all members were present at
these meetings.
4
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 registered public accounting firm, 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 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 registered public accounting firm promulgated by the Securities and
Exchange Commission, the Audit Committee has reviewed the non-audit services
currently provided by the Company's independent registered public accounting
firm and has considered whether the provision of such services is compatible
with maintaining the independence of the Company's independent registered public
accounting firm.
The Audit Committee discussed with the Company's independent registered public
accounting firm the overall scope and plan for their audit. The Audit Committee
also discussed with the independent registered public accounting firm the
results of their examination, their evaluation of the Company's internal
controls, and the overall quality of the Company's financial reports.
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, 2005, for filing with the
Securities and Exchange Commission.
THE AUDIT COMMITTEE
Thomas D. Wolf (Chairman)
Brooks G. O'Neil
Paul E. Valuck D.D.S.
- -------------------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
Securities and Exchange Commission 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.
5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of April 10, 2006, 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 the Company's address, 3801 East Florida Avenue, Suite 508, Denver,
Colorado 80210.
Number of Shares Percent of Class
Name of Beneficial Owner Beneficially Owned (1)(2)
- -------------------------------------------------------------- --------------------------- ------------------
Frederic W.J. Birner (3) 368,198 14.9%
Mark A. Birner, D.D.S. (4) 435,581 17.8%
Dennis N. Genty (5) 323,552 13.2%
Brooks G. O'Neil (6) 38,001 1.6%
Lee Schlessman (7) 189,656 8.0%
Paul E. Valuck, D.D.S (8) 42,552 1.8%
Thomas D. Wolf (9) 51,014 2.1%
--------------------------- ------------------
All executive officers and directors (six persons) (10) 1,258,898 47.2%
(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 currently exercisable or exercisable within 60 days of
April 10, 2006, 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 shares of
Common Stock outstanding at April 10, 2006 plus any options currently
exercisable or exercisable within 60 days of April 10, 2006, computed
separately for each beneficial owner using information provided in the
following footnotes.
(3) Includes 93,334 shares of Common Stock that are issuable upon the
exercise of options that are currently exercisable.
(4) Includes 66,666 shares of Common Stock that are issuable upon the
exercise of options that are currently exercisable.
(5) Includes 66,666 shares of Common Stock that are issuable upon the
exercise of options that are currently exercisable. Includes 119,386
shares of Common Stock owned by Mr. Genty's wife. Mr. Genty disclaims
beneficial ownership of all shares held by his wife.
(6) Includes 26,000 shares of Common Stock that are issuable upon the
exercise of options that are currently exercisable.
(7) The address for Mr. Schlessman is 1301 Pennsylvania Street, Suite 800,
Denver, CO 80203.
(8) Includes 12,000 shares of Common Stock that are issuable upon the
exercise of options that are currently exercisable.
(9) Includes 24,000 shares of Common Stock that are issuable upon the
exercise of options that are currently exercisable.
(10) Includes 288,666 shares of Common Stock issuable upon the exercise of
options held by all executive officers and directors as a group that are
currently exercisable or are exercisable within 60 days of April 10,
2006.
6
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 outstanding and
available for granting as of December 31, 2005:
(a) (b) (c)
Number of securities
remaining available for
future issuance under
Number of securities to Weighted-average equity compensation plans
Plan be issued upon exercise exercise price of (excluding securities
category of outstanding options outstanding options reflected in column (a))
- ------------------------- -------------------------- -------------------------- --------------------------
Equity compensation
plans approved by
security holders 715,382 $9.54 70,000
Equity compensation
plans not approved by
security holders - - -
-------------------------- -------------------------- --------------------------
Total 715,382 $9.54 70,000
========================== ========================== ==========================
Options are issued for a period of five to seven years and vest one of several
different ways including 33% each year for three years and 20% each year for
five years, provided that, upon a sale of the Company, all options automatically
become vested.
7
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning each of the directors and
executive officers of the Company. All directors will 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 48 Chairman of the Board, Chief Executive Officer and Director
Mark A. Birner, D.D.S. 46 President and Director
Dennis N. Genty 48 Chief Financial Officer, Secretary and Treasurer
Brooks G. O'Neil 49 Director
Paul E. Valuck, D.D.S. 49 Director
Thomas D. Wolf 51 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 and Treasurer since September 1995.
Brooks G. O'Neil was appointed as a director of the Company on January 23, 2003,
and elected by the shareholders of the Company at the 2005 Annual Meeting. Mr.
O'Neil joined Avondale Partners, LLC as a Senior Research Analyst for health
care services in January 2006. He was employed by Dougherty & Co. as a Senior
Research Analyst covering health care services from January 2004 until January
2006. From March 2002 until January 2004, 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 at Piper
Jaffray where for 15 years he served as an institutional equity salesman, health
care research analyst and investment banker.
Paul E. Valuck, D.D.S. was appointed as a director of the Company on April 10,
2001 and elected by the shareholders of the Company at the 2001 Annual Meeting.
Dr. Valuck has been in private dental practice in Denver, Colorado since January
1998.
Thomas D. Wolf was appointed as a director of the Company on June 8, 2004. Mr.
Wolf joined Shield Security Systems, LLC., a privately held company in the
security business, in December 1997 and is currently the Chief Executive Officer
and Chief Financial Officer.
8
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. Outside
directors currently are 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) $200 per quarterly Audit
Committee meeting, 5) $1,000 per annual Audit Committee meeting and 6) $1,000
quarterly retainer for the Chairman of the Audit committee. During 2005,
director compensation consisted of $11,050 paid to Mr. O'Neil, $11,800 paid to
Dr. Valuck and $16,800 paid to Mr. Wolf.
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, 2005 (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 Compensation
- --------------------------- ----------- ------ ----- ---------- --------------
Frederic W.J. Birner 2003 $260,000 $234,508 66,668 (1) -
Chairman of the Board, 2004 $260,000 $187,000 - -
Chief Executive Officer and 2005 $260,000 $389,023 80,000 (2) (3) 1,384,222 (4)
Director
Mark A. Birner, D.D.S. 2003 $185,000 $234,507 66,666 (1) -
President and Director 2004 $185,000 $231,554 - -
2005 $185,000 $320,584 20,000 (3) -
Dennis N. Genty 2003 $185,000 $234,506 66,666 (1) -
Chief Financial Officer 2004 $185,000 $231,554 - -
Treasurer and Secretary 2005 $185,000 $320,584 20,000 (3) -
- --------------
(1) Represents shares of Common Stock issuable upon exercise of options that
were granted on January 2, 2003 with an exercise price of $5.84 per share.
(2) Represents 60,000 shares of Common Stock issuable upon exercise of options
that were granted on January 24, 2005 with an exercise price of $9.75 per
share.
(3) Represents 20,000 shares of Common Stock issuable upon exercise of options
that were granted on November 28, 2005 with an exercise price of $19.37 per
share.
(4) Represents the value of 60,000 shares of restricted Common Stock granted on
July 1 2005, plus reimbursement for employee taxes associated with the
grant paid by the Company. Of the 60,000 shares granted, 20,000 shares
vested on January 1, 2006, 20,000 shares vest on January 1, 2007, and
20,000 shares vest on January 1, 2008.
9
Option Grants
The following table sets forth each grant of options made during the fiscal year
ended December 31, 2005 to each Named Executive Officer:
Option Grants in Last Fiscal Year
Individual Grants
-----------------------------------------------------------------
Potential Realizable Value at
Number of Percent of Assumed annual Rates of Stock
Securities Total Options Price Appreciation for Option
Underlying Granted to Exercise or Term (2)
Options Employees in Base Price Expiration --------------------------------
Name Granted Fiscal Year ($/Sh) (1) Date 5% 10%
- ------------------------ --------------- ---------------- -------------- --------------- --------------- ---------------
Frederic W.J. Birner 60,000 15.71% $9.75 1/24/2010 $161,625 $357,148
20,000 5.24% $19.37 11/28/2010 $107,031 $236,512
Mark A. Birner, D.D.S. 20,000 5.24% $19.37 11/28/2010 $107,031 $236,512
Dennis N. Genty 20,000 5.24% $19.37 11/28/2010 $107,031 $236,512
- ----------------
(1) 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.
(2) The potential realizable value is calculated based on the term of the option
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 of Directors
appreciates at the indicated annual rate compounded annually for the entire
term of the option and that the option 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.
Restricted Stock Grant
On July 1, 2005, the Company granted 60,000 shares of restricted stock to the
Company's Chairman and Chief Executive Officer (the "Employee"). In connection
with the grant of restricted stock, the Company agreed to reimburse the Employee
an amount equal to the tax liability associated with the grant. Such
reimbursement was made by the Company and totaled approximately $586,000, which
was recognized as an expense during the third quarter of 2005.
10
Warrant Exercises and Option Holdings
The following table sets forth for the Named Executive Officers the number and
value of securities underlying unexercised in-the-money options held and
warrants exercised as of December 31, 2005.
Aggregated Warrant Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Number of Securities
Underlying
Unexercised Options Value of Unexercised,
Warrants Exercised During Held at December 31, In-the-Money Options at
Fiscal Year 2005 2005 December 31, 2005 (1)
---------------------------- ----------------------- --------------------------
Name Shares Acquired Value Exercisable Unexercisable Exercisable Unexercisable
On Exercise Realized
----------------------------------------------------------------------------------------------------------------------
Frederic W.J. Birner 10,000 $107,701 93,334 20,000 $1,393,312 $17,600
Mark A. Birner, D.D.S. 20,000 $223,402 66,666 20,000 $960,657 $17,600
Dennis N. Genty 20,000 $221,402 66,666 20,000 $960,657 $17,600
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(1) In-the-money value is based on the difference between the stock option
exercise price and the closing price of the Common Stock on the Nasdaq
Capital Market on December 31, 2005 of $20.25 per share.
Compensation Committee Interlocks and Insider Participation
No executive officer of the Company currently serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Board of Directors or as an executive
officer of the Company. See "Director and Executive Compensation" and "Certain
Transactions" for a description of transactions between the Company and members
of the Board of Directors.
Compensation Committee Report on Executive Compensation(2)
The following report is submitted by the 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, and for setting
compensation for executive officers of 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.
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(2) This Section is not "soliciting material," is not deemed "filed" with the
Securities and Exchange Commission 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.
11
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 competitive base salaries, short-term
cash bonus incentives and equity-based long-term incentives. 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.
Bonus. Cash bonuses may be paid to the Company's executive officers based on the
Company's financial performance. In 2005, the potential bonus pool was equal to
20% of pre-tax profits of the Company and was payable quarterly if certain
revenue and net income goals were met. The Compensation Committee granted
bonuses of $389,023, $320,584 and $320,584 to Mr. Frederic W.J. Birner, Mark A.
Birner, D.D.S. and Mr. Dennis N. Genty, respectively, during 2005.
Long-Term Incentives. The Company's long-term compensation strategy has been
focused on the grant of stock options and other awards under the stock option
plans, 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 2005, the Compensation Committee granted
80,000 options and 60,000 shares of restricted stock to Mr. Frederic W.J.
Birner, 20,000 options to Mark A. Birner, D.D.S. and 20,000 options to Mr.
Dennis N. Genty.
Chief Executive Officer Compensation for 2005. The compensation for Frederic
W.J. Birner during 2005 consisted of his $260,000 base salary, which was
established in 2003, cash bonuses of $389,023, $789,222 of equity-based
incentives and $586,000 for the reimbursement of the income taxes associated
with the equity-based incentive award. The Compensation Committee determined Mr.
Birner's compensation based on the policies described above.
THE COMPENSATION COMMITTEE
Brooks G. O'Neil
Paul E. Valuck D.D.S.
Thomas D. Wolf
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PERFORMANCE GRAPH(3)
The following line graph compares the percentage change from December 31, 2000
through December 31, 2005 for (i) the Common Stock, (ii) the Nasdaq Composite
Index, (iii) the S&P Healthcare Sector and (iv) the S&P 500 Composite Index.
Historical stock price performance is not necessarily indicative of future stock
price performance.
Comparison of 5-Year Cumulative Total Return *
Assumes Initial Investment of $100
[Insert Graph Here]
12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
Description
-----------
BIRNER DENTAL $ 100.00 $ 236.67 $ 354.98 $389.60 $443.11 $553.83
NASDAQ Composite - Total Returns 100.00 78.95 47.42 97.43 106.02 107.39
S&P - Healthcare 100.00 87.06 67.08 80.40 80.63 85.48
S&P 500 Index - Total Return 100.00 88.22 63.38 90.14 99.50 102.36
- -------------
*Total return based on $100 initial investment and reinvestment of dividends.
- -------------------
(3) This Section is not "soliciting material," is not deemed "filed" with the
Securities and Exchange Commission 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.
13
RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Independent Registered Public Accounting Firm
Hein has acted as the Company's independent registered public accounting firm
since November 2001. The Company expects that 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.
Hein was selected by the Audit Committee to perform the audit function for 2005.
No independent registered public accounting firm has been selected to perform
the audit function for 2006. It is expected that the Audit Committee will
approve the engagement of an independent registered public accounting firm later
in 2006.
Audit Fees
For the year ended December 31, 2005, the aggregate fees billed by Hein 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,
2005 were $54,200.
For the year ended December 31, 2004, the aggregate fees billed by Hein 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,
2004 were $49,210.
Audit Related Fees
For the year ended December 31, 2005, the aggregate fees billed by Hein for
professional services rendered to the Company were $13,576 for the audit of the
401(k) retirement savings plan and review of the Company's Form S-8. For the
year ended December 31, 2004, the aggregate fees billed by Hein for professional
services rendered to the Company were $8,000 for the audit of the 401(k)
retirement savings plan. The Audit Committee reviews and pre-approves
audit-related and permissible non-audit services to be performed by our
independent registered public accounting firm. The fees shown above for 2005
were approved in advance by the Audit Committee.
Tax Fees
None.
All Other Fees
For the year ended December 31, 2005, the aggregate fees billed by Hein for
professional services rendered to the Company were $688 for Sarbanes-Oxley
preparation. The fees shown above for 2005 were approved in advance by the Audit
Committee.
14
SECTION 16 REPORTS
Section 16(a) of the Securities Exchange Act of 1934, 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
initial reports of ownership and 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, the following
individuals were late in filing a Statement of Changes in Beneficial Ownership
on Form 4 for a November 28, 2005 transaction: Mr. Frederic W.J. Birner, Mark A.
Birner, D.D.S., Mr. Dennis N. Genty, Mr. Brooks G. O'Neil, Paul E. Valuck,
D.D.S., and Mr. Tom D. Wolf. All other Section 16(a) reports were filed on a
timely basis.
SHAREHOLDER PROPOSALS
The Company must receive shareholder proposals for inclusion in the Company's
proxy materials relating to the next annual meeting of shareholders on or before
December 16, 2006. Proposals received after March 1, 2007 will be deemed
untimely and will not be considered at the meeting.
2005 ANNUAL REPORT ON FORM 10-K
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2005
ACCOMPANIES THIS PROXY STATEMENT AND WAS FILED ELECTRONICALLY WITH THE
SECURITIES AND EXCHANGE COMMISSION. THIS REPORT IS NOT PART OF THE COMPANY'S
PROXY SOLICITING MATERIALS. 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
April 28, 2006
15