<PAGE> 1
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
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
BIRNER DENTAL MANAGEMENT SERVICES, INC.
- --------------------------------------------------------------------------------
(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) 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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(4) Proposed maximum aggregate value of transaction:
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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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<PAGE> 2
BIRNER DENTAL MANAGEMENT SERVICES, INC.
3801 EAST FLORIDA AVENUE, SUITE 508
DENVER, COLORADO 80210
May 6, 1998
TO THE SHAREHOLDERS OF BIRNER
DENTAL MANAGEMENT SERVICES, INC.:
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders (the "Meeting") of Birner Dental Management Services, Inc. (the
"Company"), to be held on Wednesday, May 27, 1998, 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 American Securities Transfer & Trust, 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
<PAGE> 3
BIRNER DENTAL MANAGEMENT SERVICES, INC.
3801 EAST FLORIDA AVENUE, SUITE 508
DENVER, COLORADO 80210
___________________________
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD MAY 27, 1998
___________________________
TO OUR SHAREHOLDERS:
The 1998 Annual Meeting of Shareholders (the "Meeting") of Birner
Dental Management Services, Inc., a Colorado corporation (the "Company"), will
be held on Wednesday, May 27, 1998, 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 one Class I director to serve for a term of three
years or until his or her successor is duly elected and
qualified;
(2) to consider and vote upon a proposal to approve and ratify the
appointment of Arthur Andersen LLP as the Company's
independent auditors for 1998; and
(3) to consider such other matters as may properly come before the
Meeting, and at any and all adjournments thereof.
Only shareholders of record at the close of business on May 1, 1998
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 6, 1998
A PROXY CARD IS ENCLOSED. YOUR VOTE IS IMPORTANT NO MATER 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 AMERICAN SECURITIES TRANSFER & TRUST.
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.
<PAGE> 4
BIRNER DENTAL MANAGEMENT SERVICES, INC.
3801 EAST FLORIDA AVENUE, SUITE 508
DENVER, COLORADO 80210
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 27, 1998
___________________________
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 1998 Annual Meeting of Shareholders
(the "Meeting") to be held at 10:00 a.m., Mountain Time, on Wednesday, May 27,
1998, at the Company's offices, 3801 East Florida Avenue, Suite 508, Denver,
Colorado, 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 6, 1998.
The Company's Annual Report on Form 10-K (the "Annual Report"), which
includes audited financial statements for the fiscal year ended December 31,
1997, 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 May 1,
1998, the record date for shareholders entitled to vote at the Meeting,
6,668,451 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 American
Securities Transfer & Trust, Inc., Proxy Department, P.O. Box 5096, Denver,
Colorado 80201-9975. The common stock represented by each effective proxy will
be voted at the Meeting in accordance with the instruction 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 nominee named in the proxy as the Class
I director, FOR the approval and ratification of the appointment of Arthur
Andersen LLP as the Company's independent auditors, 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.
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When a quorum is present, in the election of a director, the nominee
having the highest number of votes cast in favor of his or her election will be
elected to the Company's Board of Directors. With respect to any other matter
which may properly come before the Meeting, unless a greater number of votes is
required by law or by the Company's Amended and Restated Articles of
Incorporation, a matter will be approved by the shareholders if the votes cast
in favor of the matter exceed the votes cast in opposition.
Abstentions, broker non-votes (i.e., shares held by brokers or
nominees as to which the broker or nominee indicates on a proxy that it does
not have discretionary authority to vote) and any other shares not voted will
be treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. However, for purposes of determining the
outcome of the election of the Class I director, the approval and ratification
of Arthur Andersen LLP as the Company's independent auditors, 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 I director, the approval and ratification
of Arthur Andersen LLP as the Company's independent auditors, 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 American
Securities Transfer & Trust, Inc. to assist in distributing proxy materials to
brokerage houses, banks, custodians and other nominee holders. The estimated
cost of such services is approximately $700 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, telegraph 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 DIRECTOR
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, which currently is composed of five members, is divided into three
classes. One class stands for re-election at each annual meeting of
shareholders. The Board of Directors currently is classified into one Class I
director (James M. Ciccarelli), two Class II directors (Dennis N. Genty and
Steven M. Bathgate) and two Class III directors (Frederic W.J. Birner and Mark
A. Birner, D.D.S.), whose terms will expire upon the election and qualification
of directors at the annual meetings of shareholders held in 1998, 1999 and
2000, respectively. 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.
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 nominee for director named below. If, at
the time of the Meeting, the 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
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determine in their discretion. If elected, the nominee will hold office until
the year 2001 annual meeting of shareholders or until his or her successor is
elected and qualified.
CLASS I DIRECTOR NOMINEE
The Board of Directors unanimously recommends that the shareholders
vote FOR election of the following nominee as Class I director of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
---- --- -------- --------------
<S> <C> <C> <C>
James M. Ciccarelli 45 Director 1996
</TABLE>
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 directors.
CLASS II - TERM EXPIRES IN 1999
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
---- --- -------- --------------
<S> <C> <C> <C>
Dennis N. Genty 40 Chief Financial Officer, Secretary, 1995
Treasurer and Director
Steven M. Bathgate 43 Director 1998
</TABLE>
CLASS III - TERM EXPIRES IN 2000
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
---- --- -------- --------------
<S> <C> <C> <C>
Frederic W.J. Birner 40 Chairman of the Board, Chief 1995
Executive Officer and Director
Mark A. Birner, D.D.S. 38 President and Director 1995
</TABLE>
PROPOSAL TWO: RATIFICATION OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has selected the firm of
Arthur Andersen LLP as independent auditors of the Company for the fiscal year
ended December 31, 1998, subject to the approval and ratification of
shareholders. The Board of Directors unanimously recommends that shareholders
vote to approve and ratify the appointment of Arthur Andersen LLP as the
Company's Independent Auditors for 1998. Arthur Andersen LLP has served as the
independent auditors of the Company since the Company's formation in May 1995.
Representatives of Arthur Andersen LLP are expected to be present at the
Meeting, will have an opportunity to make a statement if they desire, and will
be available to respond to appropriate questions.
The affirmative vote of the holders of a majority of the shares
present or represented at the Meeting and entitled to vote is needed to ratify
the appointment of Arthur Andersen LLP as independent auditors of the Company
for 1998. If the appointment is not approved, the matter will be referred to
the Audit Committee for further review.
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<PAGE> 7
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 April 24, 1998, by (i)
all persons known by the Company to be the beneficial owners of 5% or more of
the Common Stock, (ii) each director, (iii) each of the executive officers, and
(iv) all executive officers and directors as a group. Unless otherwise
indicated, the address of each of the persons named below is in care of the
Company, 3801 East Florida Avenue, Suite 508, Denver, Colorado 80210.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS(1)(2)
------------------------ ------------------ ------------------------
<S> <C> <C>
Frederic W.J. Birner(3) . . . . . . . . . 825,941 12.3%
Mark A. Birner, D.D.S.(4) . . . . . . . . 785,466 11.7
Dennis N. Genty(5) . . . . . . . . . . . . 522,380 7.8
James M. Ciccarelli(6) . . . . . . . . . . 22,467 *
Steven M. Bathgate(7). . . . . . . . . . . 55,012 *
Lee Schlessman(8) . . . . . . . . . . . . 536,315 8.0
All executive officers and directors
as a group (five persons)(9) . . . . . 2,211,266 32.2%
</TABLE>
__________________________
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options, warrants and convertible debentures currently
exercisable or convertible, or exercisable or convertible within 60 days
of April 24, 1998, are deemed outstanding for computing the percentage of
the person or entity holding such securities but are not outstanding for
computing the percentage of any other person or entity. Except as
indicated by footnote, and subject to community property laws where
applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Percentage of ownership is based on 6,668,451 shares of Common Stock
outstanding at April 24, 1998.
(3) Includes 27,510 shares of Common Stock that are issuable upon exercise of
an option having an exercise price of $2.40 per share, 27,510 shares of
Common Stock that are issuable upon exercise of a warrant having an
exercise price of $4.36 per share, and 9,170 shares of Common Stock that
are issuable upon exercise of a warrant having an exercise price of $6.00
per share, all of which are vested.
(4) Includes 26,099 shares of Common Stock that are issuable upon exercise of
an option having an exercise price of $2.40 per share, 27,510 shares of
Common Stock that are issuable upon exercise of a warrant having an
exercise price of $4.36 per share, and 9,170 shares of Common Stock that
are issuable upon exercise of a warrant having an exercise price of $6.00
per share, all of which are vested.
(5) Includes 16,930 shares of Common Stock issuable upon exercise of an option
having an exercise price of $2.40 per share, 27,510 shares of Common Stock
issuable upon exercise of a warrant having an exercise price of $4.36 per
share, and 9,170 shares of Common Stock issuable upon exercise of a
warrant having an exercise price of $6.00 per share, all of which are
vested.
(6) Includes 20,633 shares of Common Stock issuable upon exercise of a warrant
having an exercise price of $3.82 per share, that are vested or which will
vest within 60 days of the date of this Prospectus, and 1,834 shares of
Common Stock issuable upon exercise of a fully vested warrant having an
exercise price of $6.54 per share. Does not include 20,632 shares of
Common Stock issuable upon exercise of a warrant having an exercise price
of $3.82 per share that will vest more than 60 days after April 24, 1998.
(7) Does not include 10,000 shares of Common Stock issuable pursuant to an
option granted by the Company to Mr. Bathgate in connection with his
election to the Board. This option has an exercise price of $7.00 per
share, and will vest over a three year period beginning on February 11,
1999.
(8) Includes 298,388 shares over which Mr. Schlessman has sole voting power
pursuant to certain powers of attorney, but for which he disclaims
beneficial ownership. The address of Mr. Schlessman is c/o Greeley Gas
Company, 1301 Pennsylvania Avenue, Suite 800, Denver, CO 80203.
(9) Includes 203,046 shares issuable upon the exercise of options and warrants
held by all executive officers and directors as a group that are vested or
that will vest within 60 days of April 24, 1998. Does not include 20,632
shares of Common Stock issuable upon exercise of a warrant that will vest
more than 60 days after April 24, 1998.
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<PAGE> 8
There has been no change in control of the Company since the beginning
of its last fiscal year, and there are no arrangements known to the Company,
including any pledge of securities of the Company, the operation of which may
at a subsequent date result in a change in control of the Company.
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth information concerning each of the
directors, executive officers and key employees 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.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Frederic W.J. Birner 40 Chairman of the Board, Chief Executive Officer and Director
Mark A. Birner, D.D.S. 38 President and Director
Dennis N. Genty 40 Chief Financial Officer, Secretary, Treasurer and Director
James M. Ciccarelli 45 Director
Steven M. Bathgate 43 Director
James Abramowitz, D.D.S. 52 Colorado Dental Director
Pamela K. Bernardini 41 Vice President, Controller
Susan E. Carwin 28 Field Representative
Cheryl A. Strom 27 Manager of Information Systems
Teresa J. Cooper 39 Director of Human Resources
</TABLE>
BUSINESS BIOGRAPHIES
Frederic W.J. Birner is a founder of the Company and has served as
Chairman of the Board and Chief Executive Officer since the Company's inception
in May 1995. From May 1992 to September 1995, he was employed as a Senior Vice
President in the Corporate Finance Department at Cohig & Associates, Inc., an
investment banking firm. From 1983 to February 1992, Mr. Birner held various
positions with Hanifen, Imhoff, Inc., an investment banking firm, most recently
as Senior Vice President in the Corporate Finance Department. Mr. Birner
received his M.S. degree from Columbia University and his B.A. degree from The
Colorado College. Mr. Birner is the brother of Mark A. Birner, D.D.S.
Mark A. Birner, D.D.S. is a founder of the Company and has served as
President, and as a director, since the Company's inception in May 1995. From
February 1994 to October 1995, Dr. Birner was the owner and operator of three
individual dental practices. From 1986 to February 1994, he was an associate
dentist with the Family Dental Group. Dr. Birner received his D.D.S. and B.A.
degrees from the University of Colorado and completed his general practice
residency at the University of Minnesota in Minneapolis. Dr. Birner is the
brother of Frederic W.J. Birner.
Dennis N. Genty is a founder of the Company and has served as Secretary
since May 1995, and as Chief Financial Officer, Treasurer, and as a director,
since September 1995. From October 1992 to September 1995, he was employed as
a Vice President in the Corporate Finance Department at Cohig & Associates,
Inc., an investment banking firm. From May 1990 to October 1992, he was a Vice
President in the Corporate Finance Department at Hanifen, Imhoff, Inc., an
investment banking firm. Mr. Genty received his M.B.A. degree from Columbia
University and his B.S. degree from the Colorado School of Mines.
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<PAGE> 9
James M. Ciccarelli joined the Company as a consultant in August 1996 and
has served as a director since November 1996. Mr. Ciccarelli is the Chairman
of the Board and Chief Executive Officer of Wireless Telecom, Inc., a wireless
data and network service provider. From September 1990 to March 1993, Mr.
Ciccarelli was a Vice President of Intelligent Electronics, a high technology
distribution and services company, and the President and CEO of its Reseller
Network Division. From November 1988 to September 1990, Mr. Ciccarelli was the
President of Connecting Point of America, a franchisor of retail computer
stores.
Steven M. Bathgate became a director of the Company effective upon
consummation of the Company's initial public offering in February 1998. Mr.
Bathgate has served as a principal of Bathgate McColley Capital Corp. LLC, an
investment banking firm, since its formation in January 1996. Mr. Bathgate
held a number of positions from 1985 to 1996 at Cohig & Associates, Inc., an
investment banking firm, including Chairman and Chief Executive Officer.
James Abramowitz, D.D.S. was the founder, owner and operator of Gentle
Dental, a nine practice dental practice management company which he began
developing in 1972. In September 1997, Dr. Abramowitz became Colorado Dental
Director of the Company in connection with the Gentle Dental Acquisition. Dr.
Abramowitz has served on the Ethics Committee and in other positions with the
Denver Dental Society. Dr. Abramowitz received his D.D.S. degree from St. Louis
University.
Pamela K. Bernardini has served as Vice President and Controller of the
Company since August 1997. From August 1986 to April 1995, Ms. Bernardini
served in several positions with Basin Exploration, Inc., an oil and gas
exploration and production company, most recently as Controller and Principal
Accounting Officer. Ms. Bernardini received her M.B.A. degree from the
University of Denver and her B.S. degree from Metropolitan State College. She
is a Certified Public Accountant.
Susan E. Carwin joined the Company in October 1995 as a field
representative. From June 1993 to October 1995, Ms. Carwin served as the
office manager at the Bow Mar Office, which was acquired by the Company in
October 1995. From September 1991 to June 1993, Ms. Carwin was an office
manager for a private orthodontic practice.
Cheryl A. Strom joined the Company as Manager of Information Systems in
August 1997. From 1988 to July 1997, Ms. Strom worked at Geneva
Pharmaceuticals, Inc., a pharmaceutical company, most recently as a Systems
Analyst.
Teresa J. Cooper joined the Company as Director of Human Resources in
January, 1998. From February 1989 to January 1998, Ms. Cooper served in
various positions with Intelligent Electronics, Inc., a high technology
distribution and services company, most recently as Director of Human
Resources. Ms. Cooper received her B.S. degree from the University of
Colorado.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Amended and Restated Articles of Incorporation provide
that, to the fullest extent permitted by Colorado law, the Company's directors
shall not be personally liable for monetary damages for breach of fiduciary
duty to the Company and its shareholders. This provision in the Amended and
Restated Articles of Incorporation does not eliminate or limit the liability of
a director to the Company or to its shareholders for monetary damages otherwise
existing for: (i) any breach of the director's duty of loyalty to the Company
or to its shareholders; (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) acts
specified in Section 7-108-403 of the Colorado Business Corporation Act
relating to any unlawful distribution; or (iv) any transaction from which the
director directly or indirectly derived any improper personal benefit.
In addition, the Company's Amended and Restated Bylaws provide that
the Company will indemnify its directors and executive officers and may
indemnify its other officers, employees and
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<PAGE> 10
agents to the fullest extent permitted by Colorado law. In addition, the
Company must advance or reimburse directors and executive officers for expenses
incurred by them in connection with certain claims. The Company is also
empowered under its Amended and Restated Bylaws to enter into indemnification
contracts with its directors and officers and to purchase insurance on behalf
of any person it is required or permitted to indemnify. Pursuant to this
provision, the Company has entered into indemnification agreements with each of
its directors and executive officers.
There is no pending litigation or proceeding involving a director or
officer of the Company as to which indemnification is being sought, nor is the
Company aware of any pending or threatened litigation that may result in claims
for indemnification by any director or officer.
CERTAIN TRANSACTIONS
On October 31, 1997, the Company issued to (i) Frederic W.J. Birner,
the Chairman of the Board and Chief Executive Officer of the Company, an option
to purchase 12,000 shares of Common Stock, (ii) Mark A. Birner, D.D.S., the
President and a director of the Company, an option to purchase 12,000 shares of
Common Stock, and (iii) Dennis N. Genty, the Chief Financial Officer,
Treasurer, Secretary and a director of the Company, an option to purchase
12,000 shares of Common Stock. Each of the options has an exercise price of
$9.90 per share and expires in October 2002.
On September 24, 1997, pursuant to authority granted in the Company's
Amended and Restated Bylaws, the Company entered into indemnification
agreements (the "Indemnification Agreements") with its directors and executive
officers. Subject to the terms and conditions of the Indemnification
Agreements, the Company shall indemnify and advance expenses to such directors
and executive officers in connection with their involvement in any event or
occurrence which arises in their capacity as, or as a result of, their position
with the Company.
On July 15, 1997, James M. Ciccarelli, a director and consultant of
the Company, was issued a fully exercisable warrant to purchase 18,340 shares
of Common Stock of the Company, at an exercise price of $6.54 per share, in
consideration for his services as a director. Pursuant to an agreement dated as
of September 1, 1997 between the Company and Mr. Ciccarelli, Mr. Ciccarelli
forfeited his right to acquire 16,506 of the 18,340 shares of Common Stock that
he is entitled to purchase under the warrant issued to him on July 15, 1997.
On June 30, 1997, the Company issued to (i) Frederic W.J. Birner, the
Chairman of the Board, Chief Executive Officer and a director of the Company, a
warrant to purchase 9,170 shares of Common Stock, (ii) Mark A. Birner, D.D.S.,
the President and a director of the Company, a warrant to purchase 9,170 shares
of Common Stock, and (iii) Dennis N. Genty, the Chief Financial Officer,
Treasurer, Secretary and a director of the Company, a warrant to purchase 9,170
shares of Common Stock. Each of the warrants has an exercise price of $6.00
per share and expires in June 2002. These warrants were issued to the above
individuals in their capacity as employees of the Company.
The Company's President, Mark A. Birner, D.D.S., is the sole
shareholder of most of the professional corporations ("P.C.s") in Colorado.
Dr. Birner is the brother of the Company's Chairman of the Board and Chief
Executive Officer, Frederic W.J. Birner. All of the P.C.s owned by Dr. Birner
have entered into Management Agreements on substantially the same terms as the
Management Agreements with the P.C.s which are owned by dentists who are not
employees of the Company. Dr. Birner has also entered into agreements with the
Company for each P.C. owned by him pursuant to which the Company may require
him to sell his interest in the P.C. to a third party designated by the Company
for nominal value upon the occurrence of certain events. Dr. Birner's
ownership of these P.C.s and his family relationships could result in potential
conflicts of interest in certain matters, including but not limited to, matters
related to the Management Agreements. The Company will require that any
transactions with Dr. Birner which relate to his ownership of the stock of a
P.C. (other than in connection with the acquisition of a new practice) or with
any P.C. of which he is the sole
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<PAGE> 11
shareholder be approved by a majority of the members of its Board of Directors
other than Frederic W.J. Birner and Dr. Birner.
The Company believes that the foregoing transactions were on terms no
less favorable to the Company than could be obtained from unaffiliated third
parties.
DIRECTORS' MEETINGS AND COMMITTEES
The entire Board of Directors met 22 times during the year ended
December 31, 1997, including 22 actions by unanimous consent. Each incumbent
director attended 100% of the board meetings. The Company's Board of Directors
has appointed an Audit Committee and the full Board of Directors acts as the
Company's Compensation Committee.
AUDIT COMMITTEE
The Audit Committee has as its primary responsibilities the
recommendation of an independent public accountant to audit the annual
financial statements of the Company, the review of internal and external audit
functions, the review of internal accounting controls, the review of annual
financial statements, and a review at its discretion of compliance with
corporate policies and codes of conduct. The Audit Committee is comprised of
outside directors. The current members of the Audit Committee are Steven M.
Bathgate and James M. Ciccarelli. The Audit Committee did not meet in 1997.
COMPENSATION COMMITTEE
Currently, the full Board of Directors is acting as the Compensation
Committee. The Compensation Committee determines officers' salaries and
bonuses and administers the grant of stock options and other awards pursuant to
the Birner Dental Management Services, Inc. 1995 Employee Plan (the "Employee
Plan") and the Birner Dental Management Services, Inc. 1995 Stock Option Plan
for Managed Dental Centers. The Compensation Committee did not meet in 1997.
NOMINATING COMMITTEE
The Board of Directors has no standing Nominating Committee.
DIRECTOR AND EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Directors currently do not receive any cash compensation from the
Company for their services as directors and are not presently reimbursed for
expenses in connection with attendance at Board of Directors and committee
meetings.
In October 1996, the Company entered into an agreement with James
Ciccarelli, a director of the Company, setting forth the terms and conditions
of Mr. Ciccarelli's service as a director. Pursuant to such agreement, Mr.
Ciccarelli is to serve as a director of the Company until August 1, 1998. In
consideration for his service as a director, Mr. Ciccarelli received a warrant
dated as of August 1, 1996, to purchase 41,265 shares of Common Stock of the
Company at an exercise price of $3.82 per share. This warrant expires on
August 1, 2001. Of the 41,265 shares underlying the warrant, 20,633 shares of
Common Stock became vested on August 1, 1997, and the remaining 20,632 shares
of Common Stock will become vested on August 1, 1998. If Mr. Ciccarelli
resigns as a director of the Company prior to
8
<PAGE> 12
August 1, 1998, all shares underlying the warrant, other than those shares
which have already vested, will be forfeited. If Mr. Ciccarelli's service as a
director is terminated by the Company prior to August 1, 1998, the shares of
Common Stock underlying the warrant will vest in the ratio of the number of
months or portions of a month in which he served as a director of the Company
compared to a total of 24 months. If a "Change of Control," as such term is
defined in the Employee Plan, occurs while Mr. Ciccarelli is serving as a
member of the Board of Directors, all unvested shares of Common Stock granted
under the warrant will accelerate and become vested and fully exercisable.
This agreement also contains a confidentiality provision relating to
proprietary information of the Company. On July 15, 1997, the Board of
Directors granted a second warrant to Mr. Ciccarelli as consideration for
serving on the Board of Directors, which warrant gave Mr. Ciccarelli the right
to purchase 18,340 shares of Common Stock at an exercise price of $6.54 per
share, which warrant expires in July 2002. Pursuant to an agreement dated as
of September 1, 1997 between the Company and Mr. Ciccarelli, Mr. Ciccarelli
agreed to continue as an independent director of the Company, to cease
providing any further marketing services to the Company, and to forfeit his
right to acquire 16,506 of the 18,340 shares of Common Stock that he is
entitled to purchase under the warrant issued to him on July 15, 1997.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
During the fiscal year ended December 31, 1997, the only executive
officer of the Company who was paid a total salary and bonus exceeding $100,000
was Frederic W.J. Birner, the Company's Chairman of the Board and Chief
Executive Officer (the "Named Executive Officer"). The following table sets
forth the compensation paid by the Company to the Named Executive Officer for
services rendered to the Company during the fiscal year ended December 31,
1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------- ----------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS/WARRANTS (#) COMPENSATION
- --------------------------- -------- ------- -------------------- --------------
<S> <C> <C> <C> <C>
Frederic W.J. Birner.......................... $110,185 -- 21,170(1) --
Chairman of the Board and
Chief Executive Officer
</TABLE>
__________________________
(1) Represents shares of Common Stock issuable upon (i) exercise of an option
to purchase 12,000 shares of Common Stock granted on October 31, 1997
pursuant to the Employee Plan, with an exercise price of $9.90 per share
and (ii) exercise of a warrant to purchase 9,170 shares of Common Stock
awarded on June 30, 1997, with an exercise price of $6.00 per share.
OPTION GRANTS
The following table sets forth each grant of stock options made during
the fiscal year ended December 31, 1997 to the Named Executive Officer:
9
<PAGE> 13
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM (4)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SH) (3) DATE 5% 10%
- ---- -------------- ----------- ---------- ---------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Frederic W.J. Birner 12,000 8.0% $ 9.90 10/31/02 $19,038 $55,135
</TABLE>
__________________________
(1) Represents an option to purchase shares of Common Stock granted on
October 31, 1997, pursuant to the Employee Plan.
(2) Based on an aggregate of 150,115 shares subject to options granted to
employees pursuant to the Employee Plan during the fiscal year ended
December 31, 1997.
(3) 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.
(4) 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
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.
OPTION EXERCISES AND HOLDINGS
The following table sets forth for the Named Executive Officer the
number and value of securities underlying unexercised in-the-money options held
as of December 31, 1997. The Named Executive Officer did not exercise any
options during the fiscal year ended December 31, 1997.
AGGREGATED OPTION EXERCISES IN 1997
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED,
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997 (1)
------------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C>
Frederic W. J. Birner ................. 27,510 -- $181,566 --
</TABLE>
__________________________
(1) There was no public trading market for the Common Stock at December 31,
1997. Accordingly, these values have been calculated based on the
difference between the fair market value of the underlying securities at
December 31, 1997 of $9.00 per share, as determined by the Company's Board
of Directors, and the exercise price of $2.40 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of the Company currently serves as a member of
the board of directors or compensation committee of any entity that has one or
more executive officers serving as a member of the Board of Directors or as an
executive officer of the Company. See "Director and Executive Compensation"
and "Certain Transactions"' for a description of transactions between the
Company and members of the Board of Directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Currently, the entire Board of Directors makes all determinations with
respect to executive officer compensation. The following report is submitted
by the Board of Directors of the Company, in its capacity as Compensation
Committee, pursuant to rules established by the Securities and Exchange
10
<PAGE> 14
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.
Annual Bonus. Annual bonuses may be paid to the Company's executive
officers at the discretion of the Compensation Committee. The Compensation
Committee did not grant any such bonuses to executive officers during 1997.
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 1997, the Compensation Committee granted
stock options to purchase 12,000 shares of Common Stock under the Company's
Employee Stock Option Plan and warrants to purchase 9,170 shares of Common
Stock to each of the Company's three executive officers (Frederic W.J. Birner,
Mark A. Birner, D.D.S. and Dennis N. Genty).
Chief Executive Officer Compensation for Fiscal Year 1997. The
compensation for Frederic W.J. Birner during 1997 consisted of grants of stock
options and warrants, as well as a base salary. Based upon a subjective
assessment of the performance of the Company and of Mr. Birner's contribution
to that performance, in 1997 the Compensation Committee granted Mr. Birner an
option to purchase 12,000 shares of Common Stock pursuant to the Company's
Employee Stock Option Plan. Mr. Birner did not receive a cash bonus or salary
increase during 1997.
COMPENSATION COMMITTEE
Frederic W.J. Birner
Mark A. Birner, D.D.S.
Dennis N. Genty
James M. Ciccarelli
Steven M. Bathgate
11
<PAGE> 15
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, each of the Company's
executive officers and directors (other than Mr. Bathgate) were late in filing
their respective Initial Statements of Beneficial Ownership of Securities on
Form 3.
SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in the Company's proxy materials
relating to the next annual meeting of shareholders must be received by the
Company on or before January 6, 1999.
1997 ANNUAL REPORT ON FORM 10-K
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR 1997 CONSISTS, IN PART,
OF CROSS REFERENCES TO INFORMATION IN 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 ON FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 1997, INCLUDING THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997, 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.
OTHER BUSINESS
As of the date of this Proxy Statement, Management was not aware of
any business not described above 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 6, 1998
12
<PAGE> 16
APPENDIX
PROXY PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD MAY 27, 1998
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 Wednesday, May 27,
1998, 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 Director:
FOR the nominee listed below (except as marked to the contrary below)
- ---------
WITHHOLD AUTHORITY to vote for the nominee listed below
- ---------
James M. Ciccarelli
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THE NOMINEE'S NAME ON THE LINE IMMEDIATELY BELOW.)
- -------------------------------------------------------------
(2) Approval and Ratification of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year Ending December 31, 1998:
FOR AGAINST ABSTAIN
--------------- ------------------ -----------------
(3) In their discretion, the proxies are authorized to vote upon such
other business as properly may come before the Meeting.
13
<PAGE> 17
(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
NOMINEE FOR DIRECTOR AS SELECTED BY THE BOARD OF DIRECTORS AND "FOR" APPROVAL
AND RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT AUDITORS.
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
-------------------------------, 1998
----------------------------------------
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 AMERICAN
SECURITIES TRANSFER & TRUST, 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.
