<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
April 1, 1998
SafeGuard Health Enterprises, Inc.
--------------------------------------------------
(Exact Name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 0-12050 52-1528581
-------- -------- ----------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
</TABLE>
505 North Euclid Street, P. O. Box 3210, Anaheim, California 92803-3210
-----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 778-1005
--------------
<PAGE>
Item 2. Acquisition or Disposition of Assets
Effective as of April 1, 1998, Guards Dental, Inc., a California
corporation ("Guards"), a wholly-owned subsidiary of SafeGuard Health
Enterprises, Inc., a Delaware corporation ("Enterprises" or the "Company")
completed the sale of its thirtyfour (34) orthodontic practices and related
assets and liabilities (the "Practices") to Pacific Coast Dental, Inc. and
Associated Dental Services, Inc. (collectively the "Purchasers"). A copy of the
Press Release issued in connection with the sale of the Practices is attached
hereto and marked as Exhibit "A."
Pursuant to the terms of the definitive Master Asset Purchase Agreement
(the "Agreement") dated effective as of April 1, 1998, by and among Guards and
the Purchasers, the Practices were sold for total consideration of Fifteen
Million Dollars ($15,000,000.00) paid by an eight and one-half percent (8.5%),
thirty (30) year promissory note, secured by all current and future assets of
the Purchasers, including those assets transferred under the Agreement made by
the Purchasers and payable to Guards. The principle followed in determining the
amount of consideration was the fair market value of the assets. A copy of the
form of the Agreement and promissory note are attached hereto as Exhibits.
Among other provisions, the Agreement details the sale of associated assets and
liabilities of the Practices and a long term commitment to continue to provide
orthodontic services to the members of the Company's wholly-owned subsidiary,
SafeGuard Health Plans, Inc., a California corporation.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Financial information that may be material to investors as a result of the
discontinuance of the business activities of the Practices and the
disposition of assets described in Item 2 herein, was disclosed in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1998, and is hereby incorporated by reference.
-2-
<PAGE>
(c) Exhibits.
10.18 One Form of Master Asset Purchase Agreement effective
as of April 1, 1998, and Form of Promissory Note
without exhibits./12/
10.19 One Press Release dated April 1, 1998
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
NUMBER
EXHIBIT OF
NUMBER COLUMNS DESCRIPTION
- ------- ------- -----------
<C> <C> <S>
2.1 One Plans of Acquisition/7/
10.1 One 1984 Stock Option Plan/3/
10.2 One Stock Option Plan Amendment/1/
10.3 One Stock Option Plan Amendment/4/
10.4 One Stock Option Plan Amendment/5/
10.5 One Amended Stock Option Plan/9/
10.6 One Corporation Grant Deed, dated December 21, 1984,
relating to a property located at 505 North Euclid
Avenue, Anaheim, California/2/
10.7 One Employment Agreement, as Amended, dated May 25, 1995,
between Steven J. Baileys, D.D.S. and the Company./6/
10.8 One Employment Agreement, as Amended, dated May 25, 1995,
between Ronald I. Brendzel and the Company./6/
10.9 One Employment Agreement dated May 25, 1995, between John
E. Cox and the Company./6/
10.10 One Employment Agreement dated May 25, 1995, between Wayne
K. Butts and the Company./6/
10.11 One Form of Rights Agreement, dated as of March 22, 1996,
between the Company and American Stock Transfer and
Trust Company, as Rights Agent./6/
10.12 One Employment Agreement dated January 5, 1997,
between Herb J. Kaufman, D.D.S. and the Company./9/
10.13 One Credit Agreement dated September 25, 1996, between
Bank of America National Trust and Savings Association
and the Company./8/
10.14 One Stock Purchase Agreement between Consumers Life
Insurance Company and SafeGuard Health Enterprises,
Inc. dated March 6, 1997/10/
</TABLE>
-3-
<PAGE>
<TABLE>
<C> <C> <S>
10.15 One Purchase Agreement between Associated Dental Services,
Inc. and Guards Dental, Inc. dated August 1, 1997/10/
10.16 One Purchase agreement between Pacific Coast Dental, Inc.
and Guards Dental, Inc. dated August 1, 1997/10/
10.17 One Form of Note Purchase Agreement dated as of September
30, 1997, and form of Promissory Note/11/
10.18 One Form of Master Asset Purchase Agreement effective as
of April 1, 1998, and Form of Promissory Note without
exhibits./12/
10.19 One Press Release dated April 1, 1998.
- -------------------------------------
<CAPTION>
<C> <S>
1 Incorporated by reference herein to the exhibit of the same number filed as an exhibit to the Company's Registration
Statement on Form S- filed on September 12, 1983 (File No. 2-86472).
2 Incorporated by reference herein to the exhibit of the same number filed as an exhibit to the Company's Registration
Statement on Form S-1 filed on August 22, 1985 (File No. 2-99663).
3 Incorporated by reference herein to the exhibit of the same number filed as an exhibit to the Company's Registration
Statement on Form S-1 filed on July 3, 1984 (File No. 2-92013).
4 Incorporated by reference herein to the exhibit of the same number filed as an exhibit to the Company's Annual Report of
Form 10-K for the period ended December 31, 1989.
5 Incorporated by reference herein to the exhibit of the same number filed as an exhibit to the Company's Annual Report of
Form 10-K for the period ended December 31, 1992.
6 Incorporated by reference herein to the exhibit of the same number filed as an exhibit to the Company's Annual Report of
Form 10-K for the period ended December 31, 1995.
7 Incorporated by reference herein to Exhibit D filed as an exhibit to the Company's Report on Form 8-K dated September 27,
1996.
8 Incorporated by reference herein to Exhibit E filed as an exhibit to the Company's Report on Form 8-K dated September 27,
1996.
9 Incorporated by reference herein to the exhibit of the same number filed as an exhibit to the Company's Annual Report on
Form 10-K for the period ended December 31, 1996.
10 Incorporated by reference to the exhibit of the same number filed as an exhibit to the Company's quarterly statement on
Form 10-Q for the period ended June 30, 1997.
11 Incorporated by reference herein to Exhibit 99.1 filed as an exhibit to the Company's Report on Form 8-K dated October 7,
1997.
12 Enterprises agrees to furnish a supplemental copy of schedules and exhibits to the Securities and Exchange Commission upon
request.
</TABLE>
-4-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
SAFEGUARD HEALTH ENTERPRISES, INC.
By: /s/ JOHN E. COX
------------------------------------
JOHN E. COX
President and Chief Operating Officer
DATE: April 6, 1998 By: /s/ RONALD I. BRENDZEL
------------------------------------
RONALD I. BRENDZEL
Senior Vice President and Secretary
-5-
<PAGE>
EXHIBTI 10.18
PROMISSORY NOTE AND SECURITY INTEREST
$15,000,000 April 1, 1998
Irvine, California
FOR VALUE RECEIVED, the undersigned, PACIFIC COAST DENTAL, INC., a
California corporation ("PCD") and ASSOCIATED DENTAL SERVICES, INC., a
California corporation ("Associated"), hereby unconditionally promise to jointly
and severally pay to GUARDS DENTAL, INC., a California corporation ("Guards"),
or its successors and assigns, at its offices at 505 North Euclid Street,
Anaheim, CA 92803-4685, or at such other place as the holder of this promissory
note (this "Note") may from time to time designate in writing, the principal
amount of Fifteen Million Dollars ($15,000,000), together with interest from the
date hereof, at the rate of eight and one-half percent (8.5%) per annum or the
maximum rate allowed by law, whichever rate is lower (the "Coupon Rate"),
principal and interest payable in lawful money of the United States, without any
deduction whatsoever, including but not limited to any deduction for any set-off
or counterclaim over three hundred sixty (360) months (the "Term"), in monthly
installments beginning one (1) month from the date of this Note, and in
accordance with paragraphs 1 and 2 below.
1. Payments.
--------
1.1. Principal and Interest Payments. Commencing on January 1, 1999,
-------------------------------
PCD and Associated shall pay to Guards monthly principal and interest payments
of _________________________ Dollars and _______________ Cents ($____.__) and
payable thereafter on the first (1st) day of each month (a "Due Date") with the
final such payment due on April 1, 2028 (the "Payments").
1.2. Manner of Payments. All Payments due hereunder shall be made to
------------------
Guards by check delivered to the address set forth below (or such other address
as Guards may designate from time to time by written notice), or by wire
transfer of immediately available funds to such bank account as Guards may
designate. Interest payable with respect to any period that is less than a full
calendar month shall be calculated on the daily outstanding principal balance
according to the actual number of days in such period as a fraction of a 360 day
year.
2. Delinquent Payment. If any Payment is not paid within ten (10)
------------------
days after any Due Date, PCD and Associated shall pay to Guards, in addition to
the Payment and without any requirement of notice or demand by Guards, a late
payment charge equal to one percent (1%) per month of the amount of the Payment
or the maximum amount permitted under applicable law from such Due Date until
PCD and Associated pay the Payment and accrued interest. PCD and Associated
expressly acknowledge and agree that the foregoing late payment charge provision
is reasonable under the circumstances existing on the date of this Note, that it
would be extremely difficult and impractical to fix Guards' actual damages
arising out of any late
<PAGE>
payment and that the foregoing late payment charge shall be presumed to be the
actual amount of such damages incurred by Guards. No provision in this Note
(including without limitation the provisions for a late payment charge and for
interest on any amounts remaining unpaid after any Due Date) shall be construed
as in any way excusing PCD and Associated from their obligation to make any
Payment under this Note promptly when due.
3. Security Interest. As security for the payment of principal and
-----------------
accrued interest under this Note, PCD and Associated hereby grant to Guards a
security interest in and to all of PCD's assets and Associated's assets related
to or associated with the dental practices located on Schedule 3 attached
----------
hereto, or any other dental practices owned by PCD and Associated, now existing
or hereafter acquired and/or accrued, including any proceeds or replacements
relating to the same (the "Collateral"). The security interest hereby created
shall attach immediately upon execution of this Note and concurrently herewith,
PCD and Associated shall execute any financing statement or financing statements
requested by Guards to perfect the security interest created hereby. Such
financing statement or statements shall be on a form or forms approved by the
California Secretary of State and PCD and Associated shall forthwith pay to
Guards the filing fees required to file such statement or statements in the
manner required by the Uniform Commercial Code of California. In addition, PCD
and Associated shall pay from its own funds, as they become due, all taxes and
assessments levied or assessed against the Collateral, or any part of the
Collateral, prior to the final termination of this Note. Upon any event of
default hereunder, Guards shall be entitled to all the rights and remedies of a
secured creditor with respect to such Collateral as provided for in the Uniform
Commercial Code of California.
4. Presentment, Notice of Dishonor and Protest. PCD and Associated
-------------------------------------------
consent to renewals, replacements and extensions of time for any payment hereof,
before, at or after maturity and waives, to the fullest extent permitted by
applicable law, diligence, grace, presentment, exhibition, protest, demand,
dishonor, exemption rights, nonpayment and notice, of every kind with respect to
this Note or any payment hereunder. No delay or omission on the part of Guards
in exercising any power, right, privilege or remedy under this Note shall
operate as a waiver of such power, right, privilege or remedy or of any other
power, right, privilege or remedy hereunder. It is agreed that the granting to
PCD or Associated or any other party of an extension or renewal or extensions of
the time for the payment or renewal of any sum or sums due hereunder or under
any other instrument or for the performance of any covenant or stipulation
thereof or the taking of security shall not in any way release or effect the
liability of PCD and Associated on this Note.
5. Assignment. Guards shall have the right to sell, assign or
----------
otherwise transfer this Note, either in part or in its entirety, without PCD's
consent and Associated's consent. This Note may not be assigned by PCD and
Associated without the prior written consent of Guards or Guards' successors,
heirs, representatives or assigns.
6. Successors and Assigns. This Note and all of the covenants,
----------------------
promises and agreements contained in it shall be binding on and inure to the
benefit of the respective legal
2
<PAGE>
and personal representatives, devisees, heirs, successors and assigns of Guards
and PCD and Associated.
7. Modification. This Note may not be changed, modified, or
------------
terminated except by an agreement in writing signed by the parties or their
successors and assigns.
8. Severability. If any provision of this Note, or the application
------------
of it to any party or circumstance, is held to be invalid, illegal or
unenforceable, the remainder of this Note, and the application of such provision
to other parties or circumstances, shall not be affected thereby, the provisions
of this Note being severable in any such instance.
9. Attorneys' and Other Fees. PCD and Associated hereby agree to pay
-------------------------
all costs and expenses, including without limitation attorneys' fees and
disbursements incurred by Guards, or adjudged by a court, in connection with the
collection or enforcement of this Note or any portion of this Note, whether or
not a suit is filed. This provision is separate and severable and shall survive
any merger of this Note into any judgment.
10. Notice. Notice to either party provided for in this Note shall
------
be given by personal delivery or by mailing such notice by first class or
certified mail, return receipt requested, to the addresses stated below or such
other address as either party may hereafter specify in writing:
To PCD and Associated:
---------------------
25522 Marguerite Parkway
Mission Viejo, CA 92692
Attention: Robert Stalcup/Frank Pellkofer
To Guards:
---------
505 North Euclid Street
Anaheim, CA 92803-4685
Attention: Kenneth E. Keating
11. Governing Law. This Note shall be interpreted and construed in
-------------
accordance with, and governed by, the internal laws, and not the laws pertaining
to conflicts or choice of law, of the State of California. The exclusive forum
for the determination of any action relating to the validity and enforceability
hereof shall be either an appropriate court of said State or a court of the
United States which includes said State within its territorial jurisdiction.
12. Prepayment. PCD and Associated may prepay the principal amount
----------
outstanding in whole or in part at any time and from time to time without
penalty and without any discount.
3
<PAGE>
Executed at Irvine, California, on the 1st day of April, 1998.
PACIFIC COAST DENTAL, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ASSOCIATED DENTAL SERVICES, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
4
<PAGE>
MASTER ASSET PURCHASE AGREEMENT
-------------------------------
THIS MASTER ASSET PURCHASE AGREEMENT (this "Agreement") is made and
entered into effective as of the 1st day of April, 1998 (the "Effective Date"),
by and between GUARDS DENTAL, INC., a California corporation ("Guards"),
ASSOCIATED DENTAL SERVICES, INC., a California corporation ("Associated"), and
PACIFIC COAST DENTAL, INC., a California corporation ("PCD").
W I T N E S S E T H:
WHEREAS, Guards desires to sell and Associated and PCD desire to
purchase substantially all of the orthodontic practices of Guards and other
assets, as set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, promises, covenants and conditions contained herein, and for other
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. The Assets.
----------
1.1. Assets Transferred to PCD and Associated. The assets
----------------------------------------
transferred, assigned and sold hereunder by Guards to PCD shall consist of all
of the assets of Guards, including but not limited to, all Guards' orthodontic
practices and associated assets (the "Orthodontic Practices") at the 34
locations set forth on Schedule 1.1 attached hereto, including the related
------------
patient lists, charts, accounts receivable, and all supplies (the "PCD Assets").
The assets transferred, assigned and sold hereunder by Guards to Associated
shall consist of TRC Agency, Inc., Guards' 32 orthodontic subleases to the
premises set forth in Schedule 1.1(a), and the tangible assets owned by Guards
---------------
as of the Effective Date relating to the former Guards dental practices in
Orange and Fullerton and all the assets owned by Guards relating to the former
Guards dental practice in Rancho Cucamonga (the "Associated Assets") (the PCD
Assets and the Associated Assets are collectively referred to herein as the
"Assets").
1.2 Excluded Assets. Notwithstanding Section 1.1 of this
--------------- -----------
Agreement, all promissory notes payable to Guards relating to the sale of the
former Guards' dental practices, all of the 31 master lease agreements entered
into by Guards relating to all of Guards' dental practices, and the 31 original
sublease agreements made by Guards relating to its sale of dental practices at
the 31 locations set forth on Schedule 1.2 attached hereto, shall be excluded
------------
from the Assets (the "Excluded Assets").
<PAGE>
2. Consideration.
-------------
2.1 Purchase Price and Note.
-----------------------
(a) As payment for the transfer of the Assets by Guards to
PCD and Associated, PCD and Associated shall pay to Guards an aggregate purchase
price of Fifteen Million Dollars ($15,000,000) (the "Purchase Price"), which
aggregate amount shall be paid to Guards by PCD and Associated delivering to
Guards an eight and one-half percent (8.5%), thirty (30) year negotiable
promissory note in the principal amount of Fifteen Million Dollars ($15,000,000)
in the form of Exhibit A attached hereto, executed concurrently with this
---------
Agreement (the "Note"). The Note shall be secured by all current and future
assets of the PCD and Associated, including those transferred under this
Agreement.
(b) If prior to the close of business, Pacific Standard
Time, on 12/31/98 ("Payment Date"), PCD tenders to Guards the sum of $12,500,000
in cash or cash equivalent, Guards will cancel the principal and unpaid interest
amounts owed on the Note; provided, however, Guards shall retain its security
under the Note until all principal and accrued unpaid interest on all promissory
---
notes and credit line notes payable to Guards and/or SafeGuard Health
Enterprises, Inc., a Delaware corporation ("SafeGuard"), and/or their
affiliates, made by PCD and its affiliates including Associated (collectively
the "Previous Notes"), are paid in full.
If prior to the close of business, Pacific Standard Time on
12/31/98 ("Payment Date"), PCD tenders to Guards the sum of $10,000,000 in cash
or cash equivalent, plus pays in full all principal and accrued unpaid interest
---
on all the Previous Notes, Guards will cancel the Note and release its security
thereunder.
2.2 Election. Notwithstanding Section 2.1, PCD may, at its sole
-------- -----------
discretion, elect to amend and extend the Payment Date to June 30, 1999 if and
only if PCD provides to Guards an amount totaling at least $6,000,000 in cash or
cash equivalents on or before the Payment Date, of which amount the first
$1,000,000 received will be in consideration for extending the Payment Date and
all remaining amounts shall be applied to the Previous Notes on a first made
first paid basis.
2.3. Assumption of Liabilities.
-------------------------
(a) Pre and Post-Effective Date Liabilities Assumed. As a
-----------------------------------------------
material part of the consideration and payment for the transfer of the Assets by
Guards to PCD and Associated, PCD and Associated shall jointly and severally
assume, perform, discharge and pay when due any and all of the obligations and
liabilities of Guards relating to any and all patient requests for additional or
corrective treatment, patient refunds and orders/purchases made by unauthorized
non-Guards personnel that currently exist or may arise in the future, that may
arise from any and all claims made before or after the Effective Date and thus
----------------------------------
regardless of when the basis or right of such claim accrued (collectively, the
"Pre and Post-Effective Date Liabilities").
(b) Post-Effective Date Liabilities Assumed.
---------------------------------------
Notwithstanding Section 2.3(a), as a material part of the consideration and
--------------
payment for the transfer of the Assets by Guards to PCD and Associated, PCD and
Associated shall jointly and severally assume,
2
<PAGE>
perform, discharge and pay when due any and all of the obligations and
liabilities of Guards that are incurred and accrued after the Effective Date
------------------------
relating to all non-Pre and Post-Effective Date Liabilities, including but not
limited to cost of utilities, vendor contracts, costs relating to any and all
maintenance repairs of any type performed prior to the Effective Date, patient
claims and employee wages (collectively, the Post-Effective Liabilities).
2.4. Services to SafeGuard Members. As additional consideration
-----------------------------
for the Assets, PCD shall, for a five-year period following the Effective Date,
provide any and all SafeGuard plan members with orthodontic services at
SafeGuard's approved fee structure (attached hereto as Schedule 2.4) or patient
------------
co-payments, whichever amount is greater.
3. Condition Precedent to the Sale and Purchase of the Assets. The
----------------------------------------------------------
effectiveness of this Agreement and therefore the obligation of Guards to sell
and transfer the Assets shall be subject to the waiver by Guards or satisfaction
of the following conditions by PCD and/or Associated:
3.1. PCD shall have purchased the assets and assumed the
operation, obligations and liabilities relating to the former Guards dental
practices in Glendale and Rancho Cucamonga (the "Dental Practices") by executing
an Asset Purchase Agreement with each of the Dental Practices in the form of
Exhibit B attached hereto.
- ---------
3.2 Associated and PCD shall jointly and severally assume that
certain promissory note relating to the purchase of the former Guards dental
practice in Rancho Cucamonga made by Ralph Reyes, DDS ("Dr. Reyes") payable to
Guards by executing an Assignment and Assumption of Note Agreement with Dr.
Reyes in the form of Exhibit C prior to or concurrently with the execution of
---------
this Agreement;
3.3 Associated shall assume the obligations under that certain
promissory note relating to the purchase of equipment of the former Guards
dental practice in Glendale made by Islas Professional Dental Corporation
("Islas") payable to Guards dated March 31, 1997, in the principal amount of
$131,000 by executing an Assignment and Assumption of Note Agreement with Islas
in the form of Exhibit C prior to or concurrently with the execution of this
---------
Agreement;
3.4 PCD shall assume the obligations under that certain
promissory note relating to the purchase of the former Guards dental practice in
Glendale made by Islas payable to Guards dated March 31, 1997 in the principal
amount of $1,000,000 by executing an Assignment and Assumption of Note Agreement
with Islas in the form of Exhibit C prior to or concurrently with the execution
---------
of this Agreement
3.5 PCD and Associated shall execute the Note evidencing the
Purchase Price;
3.6 Associated shall assume all the 32 orthodontic subleases to
the premises set forth in Schedule 1.1(a), by executing the form of Orthodontic
---------------
Sublease Assignment and Assumption Agreement attached hereto as Exhibit D;
---------
3
<PAGE>
3.7 Associated shall sublease from Guards its interests in the
2 locations set forth on Schedule 1.1(b) and Associated shall assume Guards'
---------------
obligations under those certain subleases by and between Guards and the
purchasers of the former Guards dental practices set forth on Schedule 1.1(b) by
---------------
executing the applicable form of Sublease Agreement both attached hereto as
Exhibit E for each location; and
- ---------
3.8 PCD and Associated shall have executed a form of Mutual
Termination Agreement and General Release attached hereto as Exhibit F with
---------
Imprimis Practice Management Company, Inc. ("Imprimis") releasing Imprimis of
all of Imprimis' obligations under those certain Management Services Agreements
of August 1, 1997, including but not limited to computer hardware, software and
the installation of new computer systems in any of the practices presently
operated by PCD. Associated and PCD shall acquire the administrative
infrastructure that is currently managing Imprimis. Imprimis, PCD and
Associated will share all necessary infrastructure during the period of time
(such period of time to be reasonably determined by Guards and/or SafeGuard in
their sole discretion) required to discontinue all Imprimis and Guards
operations and shall share the costs of such transition as set forth on Schedule
--------
3.8. Computer hardware currently utilized to manage the accounting functions of
- ---
Imprimis shall be transferred to Associated and PCD and Guards shall assign the
computer software licenses to Associated and PCD if permitted under the
applicable license agreements.
4. Certain Guards and SafeGuard Actions.
-------------------------------------
Provided that the requirements delineated in Section 3 are
---------
satisfied or waived by Guards, Guards, SafeGuard and their affiliated companies
shall forgive all past unpaid interest amounts owed to them under the notes set
forth in Section 3 prior to the Effective Date. Guards shall cancel the Rancho
---------
Cucamonga equipment lease as of the Effective Date.
5. Moreno Valley.
-------------
5.1 Guards' former dental practice in Moreno Valley ("Moreno
Valley") and related assets are presently controlled by the bankruptcy estate of
Dr. Umali and are subject to such laws. As material consideration for Guards
entering into this Agreement, Guards, PCD and Associated shall use their
respective best efforts to obtain approval from the applicable bankruptcy court
of the following actions (collectively the "Bankruptcy Approval"):
(a) Upon Bankruptcy Approval, PCD and Associated shall
jointly and severally assume from the bankruptcy estate of Dr. Umali that
certain promissory note made by Dr. Umali (the "Moreno Notes") relating to the
purchase of the former Guards dental practice in Moreno Valley (the "Moreno
Dental Practice') by executing an Assignment and Assumption of Note Agreement in
the form of Exhibit C,
---------
(b) Upon Bankruptcy Approval, PCD and Associated shall
purchase the assets and assume the operation, obligations and liabilities
relating to the Moreno Dental Practice by executing an Asset Purchase Agreement
in the form of Exhibit B attached hereto; and
---------
(c) Upon Bankruptcy Approval, Associated shall assume all
the leases and subleases from Guards relating to the Moreno Dental Practice.
4
<PAGE>
5.2 Once the Bankruptcy Approval has been obtained, Guards,
SafeGuard and their affiliated companies shall forgive all past unpaid interest
owed to them under the Moreno Notes and unpaid Imprimis fees relating to the
Moreno Dental Practice prior to the Bankruptcy Approval.
6. The Credit Program.
------------------
6.1 Obligation to Lend. On the terms, and subject to the
------------------
conditions set forth herein, SafeGuard shall upon request by Associated, loan to
Associated up to Two Hundred Thousand Dollars ($200,000), plus any unused amount
from prior months, on a monthly basis (the "Credit Program") commencing on the
Effective Date and ending on the earlier of: (i) eighteen (18) months
thereafter; or (ii) when the aggregate outstanding amount loaned to Associated
under the Credit Program is equal to Six Hundred Thousand Dollars ($600,000).
6.2 Borrowings. Commencing on the Effective Date, Associated may
----------
submit to SafeGuard a notice (a "Borrowing Notice") specifying the total amount
of the loan (up to a maximum of $200,000 per calendar month plus any unused
amount from prior months) from SafeGuard or one of its affiliated companies (the
"Loan Amount"). The Borrowing Notice shall also specify (i) the desired date
for advance of the Loan Amount (the "Loan Date"), and (ii) a detailed breakdown
of the anticipated uses by Associated of the Loan Amount, which uses shall be
limited to the permitted uses listed on Schedule 6.2. SafeGuard shall advance
------------
to Associated the Loan Amount. Notwithstanding the above, Associated may, at
its discretion, draw up to $150,000 under the Credit Program prior to the
Effective Date by executing a Credit Note (defined below in Section 6.5).
-----------
6.3 Conditions Precedent to Loan. Notwithstanding anything
----------------------------
herein to the contrary, SafeGuard shall not be obligated to advance any Loan
Amount to Associated unless, at the time for such advance pursuant to this
Agreement, Associated and PCD is in full compliance with all of the terms of
this Agreement, the Note, the Credit Notes, all pre-existing notes payable to
Guards or SafeGuard made by PCD and/or Associated and any and all other
agreements, documents or instruments executed by Associated and/or PCD in
connection with this Agreement (collectively, the "Guards Agreements"), or such
non-compliance has been waived by Guards in the exercise of its sole and
unqualified discretion.
6.4 Interest. Each Loan Amount shall bear, and Associated shall
--------
pay, interest on all outstanding principal amounts thereof at a rate per annum
equal to ten percent (10%).
6.5 Repayment and Credit Notes. Each Loan Amount shall be
--------------------------
evidenced by, and repaid with interest by Associated in accordance with, a
promissory note in the form of Exhibit G, attached hereto (the "Credit Notes").
---------
Each Credit Note shall provide for monthly interest and principal payments on
each Loan Amount, with each Loan Amount to be fully paid up and amortized forty-
two (42) months following the Effective Date.
6.6 Deferral of Payments. Associated and/or PCD may defer
--------------------
payments on all outstanding notes payable to SafeGuard or Guards from January 1,
1998 through
5
<PAGE>
December 31, 1998 ("Deferral Period"). Said payments shall be deferred but not
forgiven, and at the end of the Deferral Period, payments are to resume on all
such notes then still outstanding, and the deferred sum shall be repaid in equal
monthly installments over the following sixty (60) months.
7. Representations and Warranties of Guards. As of the date hereof,
----------------------------------------
Guards represents and warrants to Associated and PCD as follows:
7.1 No Breach. This Agreement does not constitute a breach or
violation of any deed, agreement or other contract by which Guards may be bound.
7.2 Title to Assets. Guards is the owner of the Assets,
---------------
beneficially and of record, and has full right, power and authority to sell,
transfer and deliver the Assets to Associated upon consummation of the purchase
contemplated hereby. Associated shall acquire from Guards good and marketable
title to the Assets, free and clear of any and all covenants, conditions,
pledges, security agreements, voting trust arrangements, liens, charges, claims,
equities, restrictions, options and encumbrances, except as specified in Section
-------
12 hereof.
- --
7.3 Enforceability. This Agreement is a valid and binding
--------------
obligation of Guards, enforceable against Guards in accordance with its terms.
8. Representations, Warranties and Covenants of Associated. As of
-------------------------------------------------------
the date hereof, Associated represents and warrants to Guards and SafeGuard as
follows:
8.1 Organization and Good Standing. Associated is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of
California and it has all requisite power to own, lease and operate its assets,
properties and business and to carry on its business as now conducted and as
proposed to be conducted.
8.2 Authority to Execute and Perform Agreements. Associated has
-------------------------------------------
all requisite power, authority and approval required to enter into, execute and
deliver the Guards Agreements and to perform fully Associated's obligations
hereunder and thereunder.
8.3 Due Authorization; Compliance with Laws. Associated has
---------------------------------------
taken all actions necessary to authorize it to enter into and perform its
obligations under this Agreement and the Guards Agreements and to perform fully
Associated's obligations hereunder and thereunder. This Agreement and the Guards
Agreements constitute the legal, valid and binding obligations of Associated,
enforceable in accordance with their respective terms except as such
enforceability may be limited by any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws or by legal or equitable principles
relating to or limiting the rights of contracting parties generally. Associated
has complied with all applicable laws, orders, rules and regulations promulgated
by any federal, state, municipal or other governmental authority, including
without limitation, any of the foregoing applicable to Associated's activities
in connection with the Dental Practices.
8.4 No Breach. This Agreement and the Guards Agreements do not
---------
constitute a breach or violation of any deed, agreement or other contract by
which Associated may be bound.
6
<PAGE>
8.5 Enforceability. This Agreement and the Guards Agreements
--------------
are valid and binding obligations of Associated, enforceable against Associated
in accordance with their terms.
8.6 Covenant of Associated After Effective Date. Associated
-------------------------------------------
covenants and agrees that for as long as any of Associated's obligations and
duties remain outstanding under any Note or Credit Note, Associated shall comply
with all applicable laws, orders, rules and regulations promulgated by any
federal, state, municipal or other governmental authority, including without
limitation, any of the foregoing applicable to Associated's activities in
connection with the Dental Practices.
9. Representations and Warranties of PCD and Associated. As of the
----------------------------------------------------
date hereof, PCD and Associated jointly and severally represent and warrant to
Guards as follows:
9.1 Compliance with Laws; No Litigation. PCD and Associated
-----------------------------------
have complied with and is complying with all applicable laws, orders, rules and
regulations promulgated by any federal, state, municipal or other governmental
authority relating to PCD and Associated's activities in connection with the
dental practices of Associated and PCD and the Orthodontic Practices. PCD and
Associated have not received any notice of violation of any applicable
regulation or law or requirement relating to its operation regarding their
dental practices and the Orthodontic Practices and each dentist member of PCD
and Associated is duly qualified and licensed to practice dentistry within the
State of California.
9.2 No Breach. This Agreement does not constitute a breach or
---------
violation of any deed, agreement or other contract by which PCD and Associated
may be bound.
9.3 Enforceability. This Agreement is a valid and binding
--------------
obligation of PCD and Associated, and is enforceable against PCD and Associated
in accordance with its terms.
9.4 Organization and Good Standing. PCD and Associated are
------------------------------
corporations duly organized, validly existing and in good standing under the
laws of California and have all requisite power to own, lease and operate its
assets, properties and business and to carry on its business as now conducted
and as proposed to be conducted.
9.5 Authority to Execute and Perform Agreements. PCD and
-------------------------------------------
Associated have all requisite power, authority and approval required to enter
into, execute and deliver this Agreement and all other agreements and
instruments to be executed by PCD and Associated in connection herewith (the
"Guards Agreements") and to perform fully PCD and Associated's obligations
hereunder and thereunder.
9.6 Due Authorization; Compliance with Laws. PCD and Associated
---------------------------------------
have taken all actions necessary to authorize it to enter into and perform its
obligations under this Agreement and the Guards Agreements and to perform fully
PCD and Associated's obligations hereunder and thereunder. This Agreement and
the Guards Agreements constitute the legal, valid and binding obligations of PCD
and Associated, enforceable in accordance with their respective terms except as
such enforceability may be limited by any
7
<PAGE>
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws or
by legal or equitable principles relating to or limiting the rights of
contracting parties generally.
9.7 Covenant of PCD and Associated After Effective Date. PCD and
---------------------------------------------------
Associated covenants and agrees that for as long as any of PCD's obligations and
duties remain outstanding under the Note, PCD and any dentists under its control
shall comply with all applicable laws, orders, rules and regulations promulgated
by any federal, state, municipal or other governmental authority, including
without limitation, any of the foregoing applicable to PCD and any dentists
under its control regarding activities in connection with the dental practices
of PCD and Associated and the Orthodontic Practices.
10. Access to Records and Property of Dental Practice. Each party
-------------------------------------------------
agrees to cooperate with the other party's efforts in assessing the condition,
location and utilization, of the Assets, and to facilitate each party's and its
representatives' access to all contracts, books, records and all other
information concerning the Assets as such party may reasonably request. All such
data and information shall be kept confidential, except insofar as disclosure
may be necessary in order to comply with applicable legal requirements; and all
documents and other information supplied to Associated, PCD or their
representatives by Guards shall, upon request, be returned to Guards if such
information is not reasonably required for the ongoing utilization of the
Assets.
11. Execution of Documents. Each party shall execute and file, or
----------------------
join in the execution and filing of, any applications or other documents that
may be necessary in order to obtain the authorization, approval, or consent of
any governmental body that may be required or which the other party may
reasonably request in connection with the execution of this Agreement or
consummation of the transactions contemplated by this Agreement.
12. Additional Security. To secure the performance of Associated
-------------------
and/or PCD's duties and obligations under Guards Agreements, Associated and PCD
hereby collaterally assign and grant a security interest to Guards in and to all
of its assets, including without limitation the Assets transferred hereunder,
now existing or hereafter acquired and/or accrued, including any proceeds or
replacements relating to same. In connection with the granting of this security
interest, Associated and PCD shall, immediately upon the request of Guards,
execute appropriate Form UCC-l and/or financing statements necessary to perfect
Guards' security interest as granted hereunder. Upon the event of breach of this
Agreement or any of the Guards Agreements, Guards shall have all rights and
remedies available at law or in equity to the collateral herein described,
including but not limited to those afforded a secured creditor under the Uniform
Commercial Code as adopted by the State of California and may, at Guards' sole
discretion terminate any and/or all of the Guards Agreements.
13. Covenant Not to Compete.
-----------------------
13.1 Noncompetition. Associated and PCD shall not compete
--------------
directly or indirectly with SafeGuard or any of its affiliates in the business
of selling and/or marketing individual or group dental plans either directly or
through a broker; provided, however, upon SafeGuard's prior written consent, PCD
and/or Associated may sell or provide other types of dental plans not sold or
provided by SafeGuard. The phrase "compete directly or indirectly,"
8
<PAGE>
shall mean engaging or having a material interest, directly or indirectly
through an affiliated entity, as owner, partner, shareholder, independent
contractor (as seller or marketer, not provider of care), material capital
investor, renderer of consultation services or advice, in the operation of any
aspect of any type of business or enterprise competitive with SafeGuard.
Associated's and PCD's covenant not to compete shall be effective until such
time that all notes and monies owed to Guards and SafeGuard from PCD and
Associated have been paid in full.
13.2 Interpretation of Covenant. The parties hereto agree that
--------------------------
both the scope and nature of the covenant and the duration and area for which
the covenant not to compete set forth in this Section 13 are reasonable in light
----------
of all facts and circumstances. In the event that any provision of this Section
-------
13 shall to any extent be held invalid, unreasonable or enforceable in any
- --
circumstances, the parties hereto agree that the remainder of this Section 13
----------
and the application of such provision of this Section 13 to other circumstances
----------
shall be valid and enforceable to the fullest extent permitted by law. If any
provision of this Section 13, or any part thereof, is held to be unenforceable
----------
because of the scope or duration of or the area covered by such provision, the
parties hereto agree that the court making such determination shall reduce the
scope, duration and/or area of such provisions (and shall substitute appropriate
provisions for any such unenforceable provisions) in order to make such
provisions enforceable to the fullest extent permitted by law, and/or shall
delete specific words and phrases, and such modified provisions shall then be
enforceable and shall be enforced.
14. Indemnification by Associated and PCD. Associated and PCD shall
-------------------------------------
jointly and severally indemnify, defend and hold Guards, its directors,
officers, shareholders, attorneys, agents and representatives, and their
respective successors and assigns, harmless from and against any and all losses,
liabilities, obligations, judgments, settlements, damages, costs and expenses,
including without limitation, attorneys' fees, court costs and other expenses of
litigation (collectively "Losses") suffered by any of such parties and arising
out of, resulting from or due to: (i) any breach of any representation,
warranty, covenant or agreement of Associated and/or PCD contained in this
Agreement or any other instrument contemplated by this Agreement; (ii) any
misrepresentation contained in any statement or certificate furnished by
Associated and/or PCD pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement; (iii) the liabilities and
obligations assumed by Associated and/or PCD pursuant to this Agreement; or (iv)
any liability or obligation of Associated and/or PCD in connection with the
Assets.
15. Brokers. PCD and Associated, on the one hand, and Guards, on the
-------
other hand, represent to each other that there are no brokers' commissions or
finder's fees payable in connection with the transactions contemplated by this
Agreement and each party hereby agrees to indemnify and hold harmless the other
from and against any demand, claim and/or liability asserted or established by
or in favor of any third party for brokerage commission or finder's fee based on
an agreement with or the actions of such party. This provision shall survive the
consummation of the sale hereunder.
9
<PAGE>
16. Notices. All notices, requests, demands, consents and other
-------
communications hereunder shall be in writing and shall be given or made in
person, by fax or telecopy or by overnight delivery service, or mailed by first
class registered or certified mail, postage prepaid, return receipt requested
and addressed to the person and address set forth under each party's name on the
signature page. Any party may change its address hereunder by notice in writing
to the other party. Any notice, request, consent or other communication shall be
deemed to have been given or made as of the date sent or given.
17. Governing Law. This Agreement shall be interpreted and construed
-------------
in accordance with, and governed by, the internal laws, and not the laws
pertaining to conflicts or choice of law, of the State of California. The
exclusive forum for the determination of any action relating to the validity and
enforceability hereof shall be either an appropriate court of said State or a
court of the United States which includes said State within its territorial
jurisdiction.
18. Entire Agreement. This Agreement, including all exhibits
----------------
referenced herein and attached hereto, constitutes the entire agreement between
the parties hereto pertaining to the subject matter hereof (except for documents
executed contemporaneously herewith or pursuant hereto), and supersedes all
negotiations, preliminary agreements, and all prior and contemporaneous
agreements, representations and understandings of the parties hereto in
connection with the subject matters hereof. No supplement, modification,
amendment or termination of any of the terms, provisions, or conditions of this
Agreement shall be binding unless made in writing signed by all parties hereto,
their successors and assigns. No waiver of any of the provisions of this
Agreement shall be deemed to constitute a waiver of any other provision, whether
or not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing signed by the party making the
waiver.
19. Successors and Assigns. This Agreement shall be binding upon,
----------------------
and shall inure to the benefit of, the parties hereto and to their executors,
administrators, legatees, beneficiaries, personal representatives and assigns,
except that no assignment by Associated may be made without the prior written
consent of Guards.
20. Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs and subparagraphs of this Agreement are inserted for convenience only
and do not constitute a part of this Agreement.
21. Tax Matters. Associated and PCD shall be responsible for and pay
-----------
all sales, use, documentary and transfer taxes arising out of the sale of the
Assets hereunder. Associated and Pacific shall jointly and severally indemnify
Guards for any and all sales tax obligations relating to the Assets. Each of
the parties hereto further agrees that said party shall not file any return nor
make any other statement or submission to the Internal Revenue Service, any
comparable state agency, or any court or other judicial or administrative body,
which return, item, statement or submission is inconsistent in whole or in part
with Guards' allocation of the Assets, unless its tax counsel or tax advisors
advise it that to do so would be illegal.
10
<PAGE>
22. Severability. In the event that any provision of this Agreement
------------
is found to be invalid or otherwise unenforceable under any applicable law, such
invalidity or unenforceability shall not be construed as rendering other
provisions contained herein invalid or unenforceable, and all such other
provisions shall be given full force and effect as though the invalid or
unenforceable provision was not contained herein.
23. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the day and year first above written.
GUARDS DENTAL, INC.
By:
---------------------------------
Name: Kenneth E. Keating
Title: Vice President - Operations
Address: 505 North Euclid Street
Anaheim, CA 92803-4685
ASSOCIATED DENTAL SERVICES, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Address: 25522 Marguerite Parkway
Mission Viejo, CA 92692
PACIFIC COAST DENTAL, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Address: 25522 Marguerite Parkway
Mission Viejo, CA 92692
12
<PAGE>
EXHIBIT 10.19
CONTACTS: Thomas C. Tekulve
- --------- Chief Financial Officer
(714) 758-4381
Gary S. Maier/Roger S. Pondel
Pondel Parsons & Wilkinson
(310) 207-9300
FOR IMMEDIATE RELEASE
SAFEGUARD HEALTH ENTERPRISES, INC. COMPLETES SALE OF ORTHODONTIC PRACTICES
ANAHEIM, CALIFORNIA--April 2, 1998--Safeguard Health Enterprises, Inc.
(Nasdaq-NMS:SFGD) today announced the completion of the sale of its orthodontic
practices to Pacific Coast Dental, Inc./Associated Dental Services, Inc. and
affiliated dentists.
The practices were sold for $15 million in long-term notes, discounted for up to
$2.5 million for cash payment by the end of this year. The transaction includes
the sale of all assets and associated liabilities of the orthodontic practices
and a long-term commitment to continue to provide orthodontic services to
SafeGuard members.
Steven J. Baileys, D.D.S., chairman and chief executive officer of SafeGuard,
stated, "The sale of the orthodontic practices is a significant step in our
long-term strategy to focus all attention and resources on the continued growth
of our profitable core dental benefits business. This provides increased
shareholder value both through the gain recognized from the sale, as well as the
continued execution of our company's core strategy."
<PAGE>
SafeGuard is a multifaceted specialized health care marketing company providing
benefits to nearly 1.2 million members in 27 states and the District of
Columbia. The company offers a variety of managed and indemnity dental care
programs, as well as vision and life insurance products. In addition, SafeGuard
provides administrative and preferred provider organization services. SafeGuard
contracts with more than 5,500 client organizations and provides benefits
through nearly 14,000 contracting providers. The company's sales force sells its
various products through a network of independent brokers, agents and
consultants.
# # #
The statements contained in this release that relate to future plans, financial
results or performance are forward-looking statements. The company's actual
results could differ materially from those suggested as a result of various
risks and uncertainties, including without limitation, competition within the
industry, government regulation, fluctuating business and economic conditions,
the company's ability to retain its customers and continue growth, trends in
dental loss ratios and rising dental care costs. For additional information
regarding the risks and uncertainties that could affect the company's future
financial performance, see the company's Securities and Exchange Commission
filings
