<PAGE>
================================================================================
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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
DIRECTOR CLASS AND YEAR
NAME AGE PRINCIPAL OCCUPATION SINCE TERM EXPIRES
---- --- -------------------- ----- ------------
<S> <C> <C> <C> <C>
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
</TABLE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
Shares Beneficially Approximate Percent
Name Owned (1) of Class
- - ---- --------- --------
<S> <C> <C>
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)
- - -------------------------------------------------------
</TABLE>
* 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
<PAGE>
(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.
<TABLE>
<CAPTION>
Approximate Amount and Nature
Name of Beneficial Owner of Beneficial Ownership (1) Percent of Class
- - ------------------------ --------------------------- ----------------
<S> <C> <C>
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
</TABLE>
5
<PAGE>
_______________________________________
(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
<PAGE>
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 $100,000 for the previous years
ended December 31, 1997, 1996 and 1995.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation
Compensation Awards
----------------------------------------------------------------------
Name and Principal Position Year Salary ($) Bonus ($) Other ($)(4) Options
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 * *
- - ---------------------------------------
</TABLE>
* 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 $155,000.
The Company may terminate the agreements for cause. The employee may terminate
his agreement for any reason. Should there be a change in control of the
Company in that more than fifty percent (50%) of the Company's then outstanding
common stock is purchased by a then non-existing stockholder, and newly elected
Directors constitute a majority of the Company's Board of Directors, the
employee, at his option, may terminate his employment. In such event, the
Company would be obligated to pay Dr. Baileys, Mr. Cox and Mr. Brendzel an
amount equal to three (3) times, and in the case of Dr. Kaufman, one (1) times
the employee's then current salary and bonus, paid on or before the fifth (5th)
day following such change in control, along with the continuance of all employee
benefits for the length of the employment agreement.
7
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options during the fiscal year ended December 31, 1997, to the named executives:
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term(2)
- - -------------------------------------------------------------------------------------------------------------------------
Percent of
Number of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees Base Price Expiration
Name Granted(#)(1) In Fiscal Year ($/Share) Date 5%($) 10%($)
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
- - ----------------------------------------------
</TABLE>
(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 $13.50 as of December 31, 1997, appreciates at the stated
rate, compounded annually, from the date of grant to the expiration date.
These values are calculated based on requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's
estimate of future stock price appreciation. Actual gains, if any, are
dependent on the future market price of the Company's common stock.
Option Exercises and Holdings
The following information is with respect to the named executive officers
and indicated groups concerning the exercise of options during fiscal year
December 31, 1997, and unexercised options held as of December 31, 1997.
Aggregated Option Exercises In Last Fiscal Year
And Fiscal Year End Option Values
<TABLE>
<CAPTION>
Shares Number of Securities Value of
Acquired Value Underlying Unexercised Unexercised In-the-Money
Name on Exercise (#) Realized ($) Options at FY-End(#) Options at FY-End($)(1)(2)
- - ------------------------------------------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
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
- - -------------------------------------------
</TABLE>
* None.
8
<PAGE>
(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
<PAGE>
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
<PAGE>
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]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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
<PAGE>
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
<PAGE>
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
---------
<PAGE>
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.
