-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RfWBPWP2pUZwHhX4a8wWJoMlJ70v5qTCem26TqaaGN2djmFmns42LM22O3YJ342s e6paZt2QMnrvb1oR5AMCDw== 0001017062-98-000756.txt : 19980409 0001017062-98-000756.hdr.sgml : 19980409 ACCESSION NUMBER: 0001017062-98-000756 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980529 FILED AS OF DATE: 19980402 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAFEGUARD HEALTH ENTERPRISES INC CENTRAL INDEX KEY: 0000727303 STANDARD INDUSTRIAL CLASSIFICATION: 6324 IRS NUMBER: 521528581 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-12050 FILM NUMBER: 98586232 BUSINESS ADDRESS: STREET 1: 505 N EUCLID ST STREET 2: PO BOX 3210 CITY: ANAHEIM STATE: CA ZIP: 92803-3210 BUSINESS PHONE: 7147781005 PRE 14A 1 PRELIMINARY PROXY STATEMENT ================================================================================ 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: [X] Preliminary Proxy Statement [_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [_] Definitive Proxy Statement [_] Definitive Additional Materials [_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 Safeguard Health Enterprises, 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)(4) and 0-11. (1) Title of each class of securities to which transaction applies: ------------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): ------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: ------------------------------------------------------------------------- (5) Total fee paid: ------------------------------------------------------------------------- [_] Fee paid previously with preliminary materials. [_] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ------------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: ------------------------------------------------------------------------- (3) Filing Party: ------------------------------------------------------------------------- (4) Date Filed: ------------------------------------------------------------------------- Notes: SAFEGUARD HEALTH ENTERPRISES, INC. 505 North Euclid Street, Anaheim, California 92801 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To Be Held Friday, May 29, 1998 at 4:00 p.m. PDT Notice is hereby given that the Annual Meeting of Stockholders of SafeGuard Health Enterprises, Inc., a Delaware Corporation (the "Company") will be held at the executive offices of the Company, located at 505 North Euclid Street, Fourth Floor, Anaheim, California 92801 on Friday, May 29, 1998, at 4:00 o'clock p.m., Pacific Daylight Time, for the following purposes: 1. To elect three Class II directors to serve for a three-year term expiring in 2001 and until their respective successors are duly qualified and elected; and 2. To transact such other business as may properly come before the meeting or any adjournments thereof. In accordance with the Bylaws of the Company, the Board of Directors has fixed the close of business on Wedesday, April 1, 1998, as the record date for determination of stockholders entitled to notice of and to vote at the Annual Meeting or any adjournments thereof. Representation of at least a majority of all outstanding shares of the Company's Common Stock is required to constitute a quorum. Accordingly, it is important that your stock be represented at the meeting. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE TO BE SURE THAT YOUR SHARES ARE VOTED. No proxy will be used if the stockholder is personally present at the Annual Meeting and expresses a desire to vote such shares in person. BY ORDER OF THE BOARD OF DIRECTORS, RONALD I. BRENDZEL Secretary April 24, 1998 Anaheim, California PRINTING GROUPSAFEGUARD HEALTH ENTERPRISES, INC. 505 North Euclid Street, Anaheim, California 92801 PROXY STATEMENT ANNUAL MEETING: FRIDAY, MAY 29, 1998 GENERAL INFORMATION This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of SAFEGUARD HEALTH ENTERPRISES, INC., a Delaware corporation (the "Company"), of proxies to be voted at the Annual Meeting of Stockholders (the "Annual Meeting") which will be held at the executive offices of the Company located at 505 North Euclid Street, Fourth Floor, Anaheim, California 92801 on Friday, May 29, 1998, at 4:00 o'clock p.m., Pacific Daylight Time, and any adjournments or postponements thereof. This Proxy Statement, Notice of Annual Meeting of Stockholders and enclosed proxy card are being mailed to all stockholders of the Company ("Stockholders") on or about April 24, 1998. COSTS OF SOLICITATION OF PROXIES The entire cost of soliciting proxies will be borne by the Company. Arrangements may be made with brokerage houses and other custodians, nominees and fiduciaries to send proxies and proxy material to the beneficial owners of stock and such persons may be reimbursed for their expenses. Proxies may be solicited by directors, officers or employees of the Company in person or by telephone, facsimile or telegraph. No additional compensation will be paid to these individuals for such services. Except as described above, the Company does not intend to solicit proxies other than by mail. This Proxy is being solicited on behalf of the Board of Directors. The Company may also reimburse nominee holders and their agents for any direct costs that they may incur in obtaining from their stockholders authorizations to execute proxies. OUTSTANDING SECURITIES AND VOTING RIGHTS; REVOCABILITY OF PROXIES The close of business on Wednesday, April 1, 1998, was the record date for stockholders entitled to notice of and to vote at the Annual Meeting. As of that date, there were 4,747,498 shares of the Company's common stock, $.01 par value (the "common stock"), issued and outstanding, not including those shares held as treasury stock. All of the shares of the Company's common stock outstanding on the record date, are entitled to vote at the Annual Meeting. Under the General Corporation Law of the State of Delaware, each share is entitled to one (1) vote which means the affirmative vote of a simple majority of the voting shares shall be sufficient to elect directors pursuant to Proposal No. 1. The holders of a majority of the shares of the Company's common stock outstanding on the record date and entitled to be voted at the Annual Meeting, present in person or by proxy, will constitute a quorum for the transaction of business at the Annual Meeting and any adjournments and postponements thereof. Abstentions and broker non-votes are counted for the purposes of determining the presence or absence of a quorum for the transaction of business. Abstentions are counted in tabulations of the votes cast on proposals presented to stockholders, whereas broker non-votes are not counted for purposes of determining whether a proposal has been approved. A stockholder giving a proxy pursuant to the present solicitation may revoke it at any time before it is exercised by giving a subsequent proxy or by delivering to the Secretary of the Company a written notice of revocation prior to the voting of the proxy at the Annual Meeting. No proxy will be used if the stockholder is personally present at the Annual Meeting and expresses a desire to vote such shares in person. The purpose of the Annual Meeting and the matters to be acted upon are set forth in the preceding Notice of Annual Meeting of Stockholders. Shares of the Company's common stock represented by proxies in the accompanying form which are properly executed and returned will be voted at the Annual Meeting of Stockholders in accordance with the stockholders' instructions contained therein. In the absence of contrary instructions, shares represented by such proxies will be voted FOR all proposals herein. As of the date of this Proxy Statement, the Board of Directors knows of no other business which will be presented for consideration at the Annual Meeting other than what is set forth herein. However, if any such other business shall properly come before the Annual Meeting, votes will be cast pursuant to said proxies in respect of any such other business in accordance with the judgment of the persons acting thereunder. The enclosed proxy confers discretionary authority with respect to any other proposals which properly may be brought before the Meeting. 1 PROPOSAL NO. 1 - ELECTION OF DIRECTORS Board of Directors and Nominees. The nominees for the Board of Directors are Ronald I. Brendzel, J.D., Class II, a current Officer and Director, Michael M. Mann, Ph.D., Class II, a current Director, and Bradford M. Boyd, D.D.S., Class II, a current Director. The proxy holders intend to vote all proxies received by them in the accompanying form for the nominees unless otherwise instructed. In the event any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who shall be designated by the present Board of Directors to fill the vacancy. In the event that additional persons are nominated for election as directors, the proxy holders intend to vote all proxies received by them for Mr. Brendzel and Drs. Mann and Boyd. As of the date of this Proxy Statement, management has no reason to believe that any nominee will be unavailable to serve. The following information sets forth biographical information, as of April 1, 1998, for the nominees for director and of other directors who will continue in office after the Annual Meeting:
DIRECTOR CLASS AND YEAR NAME AGE PRINCIPAL OCCUPATION SINCE TERM EXPIRES ---- --- -------------------- ----- ------------ Steven J. Baileys, D.D.S. 44 Chairman of the Board of Directors and Chief 1974 Class III/ 1999 Executive Officer of the Company John E. Cox 46 President and Chief Operating Officer 1997 Class I/2000 of the Company Ronald I. Brendzel, J.D. 48 Senior Vice President, General Counsel and 1989 Class II/ 1998 Secretary of the Company William E. McKenna 78 General Partner, MCK Investment Company 1983 Class I/ 2000 Michael M. Mann, Ph.D. 58 President, Blue Marble Development Group, Inc. 1987 Class II/ 1998 George H. Stevens 44 President, Belle Haven Marina, Inc. 1989 Class III/ 1999 Bradford M. Boyd, D.D.S. 47 Dentist, Bradford M. Boyd, D.D.S. 1995 Class II/ 1998
Dr. Baileys is Chairman of the Board of Directors and Chief Executive Officer. He was President from 1981 until March 1997, Chief Executive Officer since May 1995 and Chairman of the Board of Directors since September 1995. He was Chief Operating Officer from 1981 until May 1995. From 1975 until 1981, Dr. Baileys served in a variety of executive and administrative capacities with the Company. Dr. Baileys is also an officer, director and fifty percent (50%) shareholder in the Islas Professional Dental Corporation which operates a dental practice under contract to a subsidiary of the Company. Dr. Baileys is licensed to practice dentistry in the State of California. He is also a member of the Southern California chapter of the Young Presidents' Organization. Dr. Baileys is the brother-in-law of Mr. Brendzel. Mr. Cox was appointed President and Chief Operating Officer in March 1997, and was elected as a Director of the Company in March 1997. He was Executive Vice President and Chief Operating Officer from May 1995 to March 1997. From 1985 to 1995, he served in various executive capacities for CIGNA Dental Health, including Vice President, National Sales and Account Services, Western Regional President, Chief Financial Officer and Controller. From 1981 to 1985, Mr. Cox served in various financial capacities for Southeastern Health Services/Prucare- Prudential Insurance Company's group model HMO in Atlanta, Georgia. He is the Company's representative to the National Association of Dental Plans, and served on the Board of the California Association of Dental Health Maintenance Organizations. Mr. Brendzel is Senior Vice President, General Counsel, Secretary and a Director of the Company. He was Chief Financial Officer from April 1988 to May 1996, Vice President-Corporate Development from August 1980 to April 1986, and held various executive and administrative positions from July 1978 until August 1980. Mr. Brendzel is a member of the California State Bar and is licensed to practice law in the State of California. He is also a member of the California Knox-Keene Health Care Service Plan Advisory Committee, which assists the California Department of Corporations (the "California Department") in regulating prepaid health care plans, and was the chairman of the Dental Quality of Care Task Force established by the California Department. Mr. Brendzel is also a former member of the Texas Health Maintenance Organization Solvency Surveillance Committee which assists the Texas Department of Insurance in regulating health maintenance organizations. 2 Mr. McKenna has been a Director of the Company since September 1983. Since December 1977, Mr. McKenna has been a general partner of MCK Investment Company, a private investment company. Mr. McKenna was Chairman of the Board of Directors of Technicolor, Inc. from 1970 to 1976 and was formerly Chairman of the Board of Directors and Chief Executive Officer of Hunt Foods & Industries, Inc. and its successor, Norton Simon, Inc. from 1960 to 1967, Mr. McKenna was associated with Litton Industries, Inc. as a Director and in various executive capacities. He is currently a Director of California Amplifier, Inc., Midway Games, Inc., Drexler Technology Company and WMS Industries, Inc. Dr. Mann has been a Director of the Company since May 1987. He is also Chairman, President and Chief Executive Officer of Blue Marble Development Group, Inc., and Chairman of Blue Marble Partners, international corporate development and consulting firms. During the period from September 1987 to July 1988, Dr. Mann was a Senior Consultant of Arthur D. Little, Inc. from August 1986 until September 1987, Dr. Mann was a partner of Mann, Kavanaugh, Chernove & Associates, a business development firm. He was President, Chief Executive Officer and a Director of Helionetics, Inc., a defense, energy and signal information processing company, from December 1984 to July 1986, and Executive Vice President from April to December 1984. Dr. Mann is currently a Director of Datum, Inc. and Management Technology, Inc. Mr. Stevens has been a Director of the Company since May 1989. Since 1982, he has been President of Belle Haven Marina, Inc., a privately held leisure and recreational organization located in Virginia. He is also President of Kingfish Company, a privately held corporation which is engaged in the business of chartering pleasure yachts in the mid Atlantic region. Mr. Stevens is also the owner of Mariner Sailing School located in Virginia. Mr. Stevens' combined organization is the largest operator of recreational vessels in the Washington D.C. area. Dr. Boyd has been a Director of the Company since May 1995. He is licensed to practice dentistry in the state of California and since 1983, has been the sole proprietor of Bradford M. Boyd, D.D.S. located in Lancaster, California. Dr. Boyd also is a private investor. He is a member of the American Dental Association, California Dental Association and San Fernando Valley Dental Society. Dr. Boyd is also an officer of the Dental Foundation of California and is a member of the Board of Directors of High Desert Children's Dental, a charity organization providing free dental services to underprivileged children. THE BOARD OF DIRECTORS AND COMMITTEES The Board of Directors conducted six (6) meetings during fiscal year 1997. All of the persons who were Directors of the Company during fiscal year 1997, and who are currently Directors of the Company, attended at least seventy-five percent (75%) of the aggregate of: (i) the total number of meetings of the board of directors, and (ii) the total number of meetings held by the committee on which they served during fiscal year 1997. Compensation of Directors. Directors who were not otherwise employed by the Company were paid an annual fee of $15,000 during fiscal year 1997. Each non-employee Board member, pursuant to the Company's Automatic Option Grant program, received an automatic option grant in november 1997 to purchase 4,000 shares of the company's common stock under its stock option plan with an exercise price of $12.563 per share, the market price of the common stock on the grant date. each option has a maximum term of ten (10) years and will become exercisable for all of the option shares upon the optionee's completion of one (1) year of continuous board of directors service measured from the grant date. Audit Committee. The Audit Committee is composed of Messrs. McKenna, Stevens, and Drs. Mann and Boyd, and is chaired by Mr. McKenna. The Audit Committee met three (3) times in fiscal year 1997. The functions performed by the Audit Committee included recommendations to the Board of Directors regarding the selection of independent accountants to serve the Company for the ensuing year, reviewing with the independent accountants and management the general scope and results of the company's annual audit, the fees charged by the independent accountants and other matters relating to internal control systems. In addition, the Audit Committee is responsible for reviewing and monitoring the performance of non- audit services by the Company's auditors and for recommending the engagement or discharge of the Company's independent accountants. 3 Nominating Committee. The Nominating Committee consists of Messrs. McKenna, Stevens, and Drs. Mann and Boyd, and is chaired by Dr. Mann. The primary responsibilities of the Nominating Committee are to consider and make recommendations to the full Board of Directors of candidates to serve as Directors of the Company. The Nominating Committee met in March 1998 and recommended Ronald I. Brendzel, J.D., Michael M. Mann, Ph.D., and Bradford M. Boyd, D.D.S. to serve as Directors of the Company. All members of the Nominating Committee attended this meeting. The Nominating Committee will not consider nominees recommended by stockholders. Compensation and Stock Option Committee. The Company's Compensation and Stock Option Committee is composed of Messrs. McKenna and Stevens, and Drs. Mann and Boyd, and is chaired by Mr. McKenna. All members of this Committee are non-employee directors. The Committee is responsible for reviewing the performance of the officers of the Company and, subject to any existing employment agreements, establishing the annual compensation for all officers, including salary and perquisites. The Committee is also primarily responsible for the administration of the Company's Employee Stock Option Plan. The Compensation and Stock Option Committee met two (2) times during fiscal year 1997. CERTAIN TRANSACTIONS In September 1996, the Company sold to Islas Professional Dental Corporation ("Islas"), a dental practice owned by a subsidiary of the Company in the aggregate amount of $1,131,000. Steven J. Baileys, D.D.S., the company's Chairman of the Board of Directors and Chief Executive Officer, owns a fifty percent (50%) interest in Islas, which secured two (2) promissory notes from a subsidiary of the Company in the amount of the purchase price. Said notes are payable in equal monthly installments over a thirty (30) year period and a five (5) year period, respectively, and bear interest at eight and one half percent (8.5%). The dental practice is also under contract to provide services to a subsidiary of the Company. During fiscal year 1997, the Company paid Islas $381,845 under said contract. The sale of the dental practice was reviewed and approved by the independent members of the Board of Directors on September 27, 1996, which took into consideration information provided to it by the Company's independent accountants and outside counsel concerning the value of the dental practice as an ongoing business owned by the Company contrasted to being owned by an independent dentist, the sale price of dental practices of similar size and scope, and the sale of other dental practices owned by the Company to unrelated parties. The action of the independent members of the Board of Directors in approving the sale of the dental practice was ratified by the full Board of Directors of the Company on September 27, 1996. SECURITY OWNERSHIP OF MANAGEMENT The following table sets forth the beneficial ownership of the common stock of the Company as of April 1, 1998, by each director, each executive officer named in the Summary Compensation Table below and all current directors and officers as a group. All shares are subject to the named person's sole voting and investment power, except where otherwise indicated.
Shares Beneficially Approximate Percent Name Owned (1) of Class - - ---- --------- -------- Steven J. Baileys, D.D.S. (2) 1,840,434 38.8 Ronald I. Brendzel, J.D. (3) 153,239 3.2 John E. Cox (4) 76,666 1.6 William E. McKenna (5) 32,500 * Michael M. Mann, Ph.D. (6) 25,000 * George H. Stevens (7) 20,350 * Herb J. Kaufman, D.D.S. (8) 8,435 * Bradford M. Boyd, D.D.S. (9) 7,080 * Kenneth E. Keating (10) 2,500 * All current directors and officers as a group (16 2,172,871 46.2 persons) - - -------------------------------------------------------
* Less than one percent (1%). (1) Some of the stockholders included in this table reside in states having community property laws under which the spouse of a stockholder in whose name securities are registered may be entitled to share in the management of their community property which may include the right to vote or dispose of such shares, and includes options to purchase 306,666 shares of common stock exercisable as of April 1, 1998, or within sixty (60) days thereafter. 4 (2) The shares indicated include options to purchase 191,667 shares of common stock, 700,767 shares of common stock representing 14.8% owned by the Baileys Family Trust, and 303,000 shares of common stock representing 6.4% held in various trusts for relatives of Dr. Baileys, for which Dr. Baileys is Trustee and for which Dr. Baileys has sole power to vote the securities, but for which Dr. Baileys disclaims beneficial ownership. The shares indicated do not include 150,000 shares of common stock representing 3.2% held by the Alvin and Geraldine Baileys Foundation, for which Dr. Baileys is an officer and director and for which Dr. Baileys has shared power to vote the securities, but for which Dr. Baileys disclaims beneficial ownership. (3) Includes options to purchase 38,333 shares of common stock. (4) Includes options to purchase 66,666 shares of common stock. (5) Includes options to purchase 25,000 shares of common stock. (6) Represents options to purchase 25,000 shares of common stock. (7) Includes options to purchase 20,000 shares of common stock. (8) Includes options to purchase 8,333 shares of common stock (9) Includes options to purchase 6,000 shares of common stock. (10) Represents options to purchase 2,500 shares of common stock. - - ------------------------------------- COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and persons who own more than ten percent (10%) of the Company's common stock, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission and the National Association of Securities Dealers. Officers, directors and greater than ten percent (10%) beneficial owners are required by the Securities and Exchange Commission regulations to furnish the Company with copies of all Section 16(a) forms they file. Specific due dates for these reports have been established and the Company is required to disclose in this Proxy Statement any late filings during the most recent fiscal year. To the Company's knowledge, based solely on its review of the copies of such reports required to be furnished to the Company during the most recent fiscal year, all of these reports were timely filed with the Securities and Exchange Commission and the National Association of Securities Dealers. PRINCIPAL STOCKHOLDERS The following table sets forth information with respect to those persons who, to the Company's knowledge, beneficially owned five percent (5%) or more of the Company's common stock as of April 1, 1998, except with respect to the Baileys Family Trust, T. Rowe Price Associates, Inc., FMR Corp. and Brinson Partners, Inc., which are stated as of December 31, 1997, based on filings made with the Securities and Exchange Commission. For purposes of this Proxy Statement, beneficial ownership of securities is defined in accordance with the rules and regulations of the Securities and Exchange Commission and generally means the power to vote or dispose of securities regardless of any economic interest therein.
Approximate Amount and Nature Name of Beneficial Owner of Beneficial Ownership (1) Percent of Class - - ------------------------ --------------------------- ---------------- Steven J. Baileys, D.D.S. (2) 1,840,434 38.8 Baileys Family Trust (3) 700,767 14.8 T. Rowe Price Associates, Inc. (4) 437,000 9.2 FMR Corp. (5) 431,400 9.1 Brinson Partners, Inc. (6) 414,092 8.7 All Principal Stockholders 3,823,693 80.6
5 _______________________________________ (1) Except as otherwise stated herein, the persons and entities named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable, and include all shares held of record on April 1, 1998, and shares subject to options outstanding and exercisable within sixty (60) days thereafter. (2) Steven J. Baileys, D.D.S., an officer and director of the Company, located at 505 North Euclid Street, P. O. Box 3210, Anaheim, California 92803- 3210, has sole voting and investment power with respect to the shares indicated. The shares indicated include options to purchase 191,667 shares of common stock, 700,767 shares of common stock representing 6.4% owned by the Baileys Family Trust, and 303,000 shares of common stock representing 6.4% held in various trusts for relatives of Dr. Baileys, for which Dr. Baileys is Trustee and for which Dr. Baileys has sole power to vote the securities, but for which Dr. Baileys disclaims beneficial ownership. The shares indicated do not include 150,000 shares of common stock representing 3.2% held by the Alvin and Geraldine Baileys Foundation, for which Dr. Baileys is an officer and director, and for which Dr. Baileys has shared power to vote the securities, but for which Dr. Baileys disclaims beneficial ownership. (3) The Baileys Family Trust of which Steven J. Baileys, D.D.S., is Trustee, located at 25985 Poker Flats Place, Laguna Hills, California 92653, has sole voting and investment power with respect to the shares indicated. The shares indicated do not include 150,000 shares of common stock representing 3.2%, held by the Alvin and Geraldine Baileys Foundation, for which Dr. Baileys is an officer and director, and for which Dr. Baileys has shared power to vote the securities, but which Dr. Baileys disclaims beneficial ownership. A Schedule 13G dated February 10, 1998, was filed with the Securities and Exchange Commission with respect to such shares. (4) These securities are owned by various individual and institutional investors including T. Rowe Price Small Cap Value Fund, Inc., which owns 400,000 shares of the Company's common stock, and T. Rowe Price Associates, Inc. which owns 37,000 shares of the Company's common stock, collectively representing 9.2% of the shares outstanding, for which T. Rowe Price Associates, Inc. ("Price Associates") serves as investment advisor with power to direct investments and/or sole power to vote the securities. For purposes of the reporting requirements of the Securities Exchange Act of 1934, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities. The address of T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, Maryland 21202. A Schedule 13G dated February 11, 1998, was filed with the Securities and Exchange Commission with respect to such shares. (5) These securities are owned by various individual and institutional investors including Fidelity Low-Priced Stock Fund, which owns 367,000 shares of the 431,400 shares of the Company's common stock indicated, representing 9.1% of the shares outstanding, for which Fidelity Management and Research Company ("Fidelity") serves as investment advisor with power to direct investments and/or sole power to vote the securities. For purposes of the reporting requirements of the Securities Exchange Act of 1934, Fidelity is deemed to be a beneficial owner of such securities. The address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts 02109. A Schedule 13G dated February 11, 1998, was filed with the Securities and Exchange Commission with respect to such shares. (6) Brinson Partners, Inc. ("BPI"), a wholly owned subsidiary of Brinson Holdings, Inc. ("BHI") and Brinson Trust Company ("BTC"), a wholly owned subsidiary of BPI, 209 South La Salle, Chicago, Illinois 60604-1295 have sole voting and dispositive power of the shares indicated. A Schedule 13G dated February 11, 1998, was filed with the Securities and Exchange Commission with respect to such shares. ________________________________________ 6 COMPENSATION OF EXECUTIVE OFFICERS The following table discloses compensation received by the Company's Chief Executive Officer and the four (4) remaining most highly paid executive officers who received total compensation in excess of $100,000 for the previous years ended December 31, 1997, 1996 and 1995. Summary Compensation Table
Long Term Annual Compensation Compensation Awards ---------------------------------------------------------------------- Name and Principal Position Year Salary ($) Bonus ($) Other ($)(4) Options - - ------------------------------------------------------------------------------------------------------------- Steven J. Baileys, D.D.S., 1997 400,000 * 1,260 50,000 Chairman of the Board of 1996 400,000 * 1,260 25,000 Directors and Chief Executive 1995 335,703 * 1,260 50,000 Officer John E. Cox, President and 1997 258,221 * * 25,000 Chief Operating Officer (1) 1996 200,000 * * 25,000 1995 136,059 * * 50,000 Ronald I. Brendzel, J.D., 1997 185,000 * 900 5,000 Senior Vice President, 1996 185,000 * 900 10,000 General Counsel and Secretary 1995 152,598 * 900 5,000 Herb J. Kaufman, D.D.S., 1997 153,907 * 249 25,000 Senior Vice President and 1996 * * * * Chief Dental Officer (2) 1995 * * * * Kenneth E. Keating, Vice 1997 150,000 * * 2,500 President-Imprimis and 1996 170,823 * * 7,500 Guards Operations (3) 1995 88,220 * * - - ---------------------------------------
* None. (1) Joined the Company on May 25, 1995. (2) Joined the Company on January 5, 1997. (3) Joined the Company on August 7, 1995. (4) Represents premiums paid for life insurance policies for the named individuals. __________________________________ Employment Agreements and Termination of Employment Arrangements The Company has written employment agreements with Steven J. Baileys, D.D.S., John E. Cox, Ronald I. Brendzel, J.D., and Herb J. Kaufman, D.D.S. The employment agreements for Dr. Baileys, Mr. Cox and Mr. Brendzel are for a term through May 31, 2000, and provide for an annual salary of $400,000, $275,000, and $185,000, respectively. The employment agreement for Dr. Kaufman is for a term through January 5, 2002, and provides for an annual salary of $155,000. The Company may terminate the agreements for cause. The employee may terminate his agreement for any reason. Should there be a change in control of the Company in that more than fifty percent (50%) of the Company's then outstanding common stock is purchased by a then non-existing stockholder, and newly elected Directors constitute a majority of the Company's Board of Directors, the employee, at his option, may terminate his employment. In such event, the Company would be obligated to pay Dr. Baileys, Mr. Cox and Mr. Brendzel an amount equal to three (3) times, and in the case of Dr. Kaufman, one (1) times the employee's then current salary and bonus, paid on or before the fifth (5th) day following such change in control, along with the continuance of all employee benefits for the length of the employment agreement. 7 STOCK OPTIONS The following table contains information concerning the grant of stock options during the fiscal year ended December 31, 1997, to the named executives: Option Grants In Last Fiscal Year
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation Individual Grants for Option Term(2) - - ------------------------------------------------------------------------------------------------------------------------- Percent of Number of Total Securities Options/SARs Underlying Granted to Exercise or Options/SARs Employees Base Price Expiration Name Granted(#)(1) In Fiscal Year ($/Share) Date 5%($) 10%($) - - ------------------------------------------------------------------------------------------------------------------------- Steven J. Baileys, D.D.S. 50,000 33.0 12.238 3/20/02 169,057 373,571 John E. Cox 25,000 16.9 11.125 3/20/07 174,911 443,260 Herb J. Kaufman, D.D.S. 25,000 16.9 18.00 1/4/07 124,327 717,184 Ronald I. Brendzel, J.D. 5,000 3.3 11.125 3/20/07 34,982 88,652 Kenneth E. Keating 2,500 1.7 11.125 3/20/07 17,491 44,326 - - ----------------------------------------------
(1) All options were granted under the Company's Stock Option Plan. The options described in this column vest in equal one-third (1/3) amounts over a three (3) year period following the date of grant. Unvested options terminate upon the employee's termination, for any reason. (2) Potential realizable value is based on an assumption that the market price of the stock of $13.50 as of December 31, 1997, appreciates at the stated rate, compounded annually, from the date of grant to the expiration date. These values are calculated based on requirements promulgated by the Securities and Exchange Commission and do not reflect the Company's estimate of future stock price appreciation. Actual gains, if any, are dependent on the future market price of the Company's common stock. Option Exercises and Holdings The following information is with respect to the named executive officers and indicated groups concerning the exercise of options during fiscal year December 31, 1997, and unexercised options held as of December 31, 1997. Aggregated Option Exercises In Last Fiscal Year And Fiscal Year End Option Values
Shares Number of Securities Value of Acquired Value Underlying Unexercised Unexercised In-the-Money Name on Exercise (#) Realized ($) Options at FY-End(#) Options at FY-End($)(1)(2) - - ------------------------------------------------------------------------------------------------------------------------------------ Exercisable Unexercisable Exercisable Unexercisable ----------- ------------- ----------- ------------- Steven J. Baileys, D.D.S. * * 186,667 83,333 1,066,425 123,100 John E. Cox * * 41,667 58,333 108,333 113,542 Ronald I. Brendzel, J.D. 30,000 296,250 26,667 13,333 63,700 19,375 Herb J. Kaufman, D.D.S. * * - 25,000 - - Kenneth E. Keating * * 2,500 10,000 - 5,938 All current executive officers as a group (12 persons) 30,000 296,250 275,500 229,500 1,269,708 319,329 All current directors who are not executive officers as a group (4 persons) * * 76,000 16,000 374,000 14,992 All employees who are not executive officers as a group (31 persons) 666 1,415 11,728 29,289 19,101 52,286 - - -------------------------------------------
* None. 8 (1) Assumes a price per share of $13.50 as of December 31, 1997. Gains are reported net of the option exercise price but before any taxes associated with exercise. Actual gains, if any, on stock option exercises are dependent on future performance of the common stock, as well as the optionee's continued employment throughout the vesting period. (2) No stock appreciation rights were outstanding at the end of the 1997 fiscal year or exercised during that year. REPORT OF COMPENSATION AND STOCK OPTION COMMITTEE ON EXECUTIVE COMPENSATION Compensation Philosophy. The Compensation and Stock Option Committee of the Board of Directors of the Company (the "Committee") consists of four (4) independent directors who are neither employees nor officers of the Company. The Committee reviews the Company's executive compensation program and policies, determines the compensation of the Company's Chief Executive Officer ("CEO"), and reviews and approves the CEO's recommendations for the compensation of the other senior executive officers of the Company. The Committee's philosophy regarding compensation of the Company's senior management is to link rewards to financial and operational performance, to encourage creation of stockholder value and to achieve the Company's strategic goals and objectives. Through its executive compensation policies, the Committee seeks to attract, retain and motivate highly qualified executives who will contribute to the Company's success. Thus, the Committee believes the Company's compensation arrangements must remain competitive with those offered by other companies of similar size and scope of operations, including other publicly-held managed dental care organizations. To achieve these goals, the executive compensation program consists of three (3) primary components which, taken together, constitute a flexible and balanced method of establishing total compensation for senior management. These components are: (i) base salary which reflects individual performance and contribution to the Company, (ii) discretionary annual bonus awards payable in cash and tied to the Company's achievement of financial targets, and (iii) long-term stock based incentive awards designed to strengthen the mutuality of interests between the Executive Officers and the Company's stockholders. Option grants to Executive Officers are made under the Company's Stock Option Plan by the Committee. Cash Based Compensation. Salary. Consistent with the Company's position, the Committee's approach to base compensation is to offer competitive salaries in comparison with market practices. Salary decisions are based on an annual review with the CEO, considering the decision-making responsibilities of each position and the experience, work performance, and team-building skills of position incumbents, subject to existing employment agreements. During 1997, the Committee determined that the salary of the CEO and the four (4) other most highly compensated individuals will remain unchanged for 1998, with the exception of John E. Cox, the Company's President and Chief Operating Officer whose compensation was increased in March 1997 to $275,000 annually upon his appointment as President and Chief Operating Officer. The cash salary of each of the other Executive Officers is determined by the individual's performance and past and potential contributions to the Company. This particular component of executive compensation is not affected to any significant extent by the Company's performance factors. However, the Committee believes that the Company's use of stock options as the main supplement to base salary results in the compensation of its Executive Officers and other key employees being related to the Company's performance. The Committee did not provide for any qualifying compensation to be paid to any Executive Officer for deductibility under Section 162(m) of the Internal Revenue Code for 1997. The Committee has not provided for such qualifying compensation and does not intend to provide for such qualifying compensation to its Executive Officers in the foreseeable future. Bonuses. The Committee has in the past and may in the future, authorize the payment of discretionary bonus compensation based upon an assessment of an individual's exceptional contributions to the Company. Bonuses are based upon the overall achievement in increasing the Company's revenue, its level of profitability and increasing the number of members covered by the benefit plans provided by the Company. In 1997, the Committee did not authorize any bonus to be paid to any Executive Officer. 9 As a general matter, the Committee endorses the philosophy that executive compensation should reflect company performance. The Company, to date, has not yet adopted any compensation plans which are tied directly to Company performance by formula. Equity Based Compensation. The Executive Officers have, from time to time, received option grants under the Company's Stock Option Plan. The purpose of this plan is to provide such individuals with additional incentives to maximize stockholder value. The Stock Option Plan also utilizes vesting periods to encourage key employees to continue in the employ of the Company. The size of the option grant to each Executive Officer is set at a level which is intended to create a meaningful opportunity for stock ownership based upon the individual's current position with the Company and may also be based in part upon Company performance factors such as earnings per share and revenue growth. However, the extent to which these latter factors are taken into consideration will vary from individual to individual at the Committee's sole discretion. In 1997, the Committee granted stock options to Executive Officers as listed in the previous table. Chief Executive Officer Compensation. The process of determining the compensation for the Company's CEO and the factors taken into consideration in such determination are generally the same as the process and factors used in determining the compensation of all of the executive officers of the Company, subject to an existing employment agreement. The Committee considers both the Company's overall performance and the CEO's individual performance. Bonuses for the CEO are based upon the overall achievements in increasing the Company's revenue, its level of profitability, and increasing the number of members covered by the benefit plans provided by the Company. In 1997, the Company did not pay the CEO a bonus. Dr. Baileys' salary was determined based on an analysis of salaries paid by peer companies and on Dr. Baileys' knowledge, experience and individual performance. The forgoing report has been furnished by the Compensation and Stock Option Committee of the Board of Directors of the Company. William E. McKenna, Chairman Michael M. Mann, Ph.D. George H. Stevens Bradford M. Boyd, D.D.S. 10 COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The following persons served on the Compensation and Stock Option Committee of the Company's Board of Directors during fiscal year 1997: William E. McKenna, Michael M. Mann, Ph.D., George H Stevens and Bradford M. Boyd, D.D.S. None of these persons is a current or former officer or employee of the Company. There are no "interlocks," as defined by the Securities and Exchange Commission, with respect to any member of the Compensation and Stock Option Committee. PERFORMANCE GRAPH The following graph compares the yearly percentage change in the Company's cumulative total stockholder return on stock with: (i) the cumulative total return of the NASDAQ market index, and (ii) the cumulative total return of the National Association of Securities Dealers Health Services Industry Index over the five (5) year period from January 1, 1993 through December 31, 1997. [PERFORMANCE GRAPH APPEARS HERE]
1992 1993 1994 1995 1996 1997 SFGD 100 141 94.9 119.2 179.5 138.5 NASDAQ 100 114.8 112.2 158.7 195.2 239.5 Health Srvc 100 115.4 123.8 157.2 157.3 160.3
The graph shall not be deemed incorporated by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or under the Exchange Act, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts. 11 FINANCIAL STATEMENTS The Company's audited consolidated financial statements and notes thereto, including selected financial data and management's discussion and analysis of financial condition and results of operations for the fiscal year ended December 31, 1997, are included in the Company's 1997 Annual Report, which was mailed concurrently with this Proxy Statement to all stockholders of record as of April 1, 1998. Additional copies of the 1997 Annual Report, and the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission are available without charge upon request. Such requests should be directed to Secretary, SafeGuard Health Enterprises, Inc., 505 North Euclid Street, P.O. Box 3210, Anaheim, California 92803-3210, or by telephone, (714) 778-1005, or by fax, (714) 758-4383. INDEPENDENT ACCOUNTANTS The Company's financial statements for the fiscal year ended December 31, 1997, have been audited by the independent accounting firm of Deloitte & Touche LLP. A representative of Deloitte & Touche LLP will be present at the Annual Meeting and will have the opportunity to make a statement if he or she so desires and will be available to respond to appropriate questions. The selection of independent accountants for the current year will be made by the Board of Directors upon the recommendation of the Audit Committee, consistent with its past practice of selecting independent accountants during the latter part of the Company's fiscal year. The Board of Directors believes that it appropriately represents the stockholders' interest in this matter. In connection with its annual audit of the Company's financial statements for the fiscal years ended December 31, 1996 and 1997, there have been no disagreements with Deloitte & Touche LLP on any matters of accounting principles or practices, financial statement disclosure, or auditing scope and procedures which, if not resolved to the satisfaction of Deloitte & Touche LLP, would have caused Deloitte & Touche LLP to make reference thereto in their reports on the financial statements for such years. The opinion of Deloitte & Touche LLP for the fiscal years ended December 31, 1996 and 1997, did not contain an adverse opinion or disclaimer of opinion and was not qualified or modified in anyway. STOCKHOLDER PROPOSALS Stockholder proposals for presentation at the 1999 Annual Meeting of Stockholders and to be considered for inclusion in next year's proxy statement must be received at the Company's principal executive offices on or before December 20, 1998. OTHER MATTERS The Company is not aware of any matters that may come before the Annual Meeting other than those referred to in the Notice of Annual Meeting of Stockholders. If any other matters shall properly come before the meeting, the persons named in the accompanying proxy form intend to vote thereon in accordance with their best judgment. ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. BY ORDER OF THE BOARD OF DIRECTORS, RONALD I. BRENDZEL Secretary April 24, 1998 Anaheim, California 12 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SAFEGUARD HEALTH ENTERPRISES, INC. Notice is hereby given that the Annual Meeting of Stockholders of SafeGuard Health Enterprises, Inc., a Delaware Corporation (the "Company") will be held at the executive offices of the Company, located at 505 North Euclid Street, Fourth Floor, Anaheim, California 92801 on Friday, May 29, 1998, at 4:00 o'clock p.m., Pacific Daylight Time, for the following purposes. IF NOT OTHERWISE MARKED, THE SHARES REPRESENTED BY THIS PROXY SHALL BE VOTED FOR PROPOSALS 1 AND 2. PLEASE COMPLETE, DATE, SIGN AND RETURN IN THE ENCLOSED ENVELOPE. (To be Signed on Reverse Side) --------- SEE REVERSE SIDE --------- Please date, sign and mail your proxy card back as soon as possible! Annual Meeting of Stockholders SAFEGUARD HEALTH ENTERPRISES, INC. v Please Detach and Mail in the Envelope Provided v - - -------------------------------------------------------------------------------- [X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS. FOR ALL WITHHELD AUTHORITY NOMINEES FOR ALL NOMINEES [_] [_] 1. To elect three Class II directors to serve for a three-year term expiring in 2001 and until their respective successors are duly qualified and elected; For, except vote withheld from the following nominee(s): ________________________________________________________ NOMINEES: Ronald I. Brendzel, J.D. Michael M. Mann, Ph.D. Bradford M. Boyd, D.D.S. FOR AGAINST ABSTAIN 2. To transact such other business as may properly come before the meeting or any adjournments thereof. In accordance with the Bylaws of the Company, the Board of Directors has fixed the close of business on Wednesday, April 1, 1998, as the record date for determination of stockholders entitled to notice of and to vote at the Annual Meeting or any adjournments thereof. REPRESENTATIONS OF AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES OF THE COMPANY'S COMMON STOCK IS REQUIRED TO CONSTITUTE A QUORUM. ACCORDINGLY, IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE TO BE SURE THAT YOUR SHARES ARE VOTED. NO PROXY WILL BE USED IF THE STOCKHOLDER IS PERSONALLY PRESENT AT THE ANNUAL MEETING AND EXPRESSES A DESIRE TO VOTE SUCH SHARES IN PERSON. SIGNATURE(S)__________________________________________ DATE ____________________ (NOTE): Please sign exactly as name appears hereon. If the stock is issued in the names of two or more persons, each of them should sign the proxy. If the proxy is executed by a corporation, it should be signed in the corporation's name by an authorized officer. -----END PRIVACY-ENHANCED MESSAGE-----