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STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT (the "Agreement") is made and entered into
on June 29, 1999 by and between CAI Partners and Company II, L.P., a Canadian
limited partnership, CAI Capital Partners and Company II, L.P., a Canadian
limited partnership, and Xxxx X. Xxxxxxxx (collectively the "Investors"), and
The Baileys Family Trust, a trust pursuant to a trust agreement dated July 22,
1989 acting through its duly authorized trustee, Xxxxxx X. Xxxxxxx, D.D.S. (the
"Stockholder").
WHEREAS the Investors and SafeGuard Health Enterprises, Inc., a
Delaware corporation (the "Company"), propose to enter into a Debenture and Note
Purchase Agreement dated as of the date hereof (as the same may be amended or
supplemented, the "Debenture and Note Purchase Agreement"), providing for the
sale to Investors of Debentures of the Company in the aggregate principal amount
of $20,000,000, shares of Preferred Stock of the Company and Senior Notes of the
Company in the aggregate principal amount of $20,000,000 together with
detachable Warrants for the purchase of 2,500,000 shares of Common Stock of the
Company (collectively, the "Transaction") upon the terms and subject to the
conditions set forth in the Debenture and Note Purchase Agreement; and
WHEREAS the Stockholder is the record and beneficial owner (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of such number of shares of Common Stock, par value $0.01 per
share, of the Company (the "Company Common Stock") set forth opposite his name
on Schedule A attached hereto (such shares of Company Common Stock, together
with any other shares of capital stock of the Company acquired by such
Stockholder after the date hereof and during the term of this Agreement being
collectively referred to herein as the "Subject Shares"); and
WHEREAS, as a condition to its willingness to enter into the Debenture
and Note Purchase Agreement, Investors have requested that the Stockholder enter
into this Agreement;
NOW, THEREFORE, to induce Investors to enter into, and in consideration
of the Investors entering into, the Debenture and Note Purchase Agreement, and
in consideration of the premises and the representations, warranties and
agreements contained herein, the parties agree as follows:
1. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Investors as of the date hereof as follows:
(a) Authority. The Stockholder has all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by the
Stockholder and constitutes a valid and binding obligation of the Stockholder
enforceable in accordance with its terms. The execution and delivery of this
Agreement do not, and the consummation of the transaction contemplated hereby
and compliance with the terms hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time or both) under
any provision of, any trust agreement, loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise, license, judgment, order, notice, decree, statute, law, ordinance,
rule or
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regulation applicable to the Stockholder or to the Stockholder's property or
assets. If the Stockholder is married and the Stockholder's Subject Shares
constitute community property or the Stockholder otherwise needs spousal or
other approval for this Agreement to be legal, valid and binding, this Agreement
has been duly authorized, executed and delivered by, and constitutes a valid and
binding agreement of, the Stockholder's spouse, enforceable against such spouse
in accordance with its terms. The Stockholder agrees to deliver to Investor upon
request a proxy substantially in the form attached hereto as Exhibit A, which
proxy shall be coupled with an interest and irrevocable to the extent permitted
under Delaware law, with the total number of such Stockholder's Subject Shares
correctly indicated thereon.
(b) The Subject Shares. The Stockholder is the record and beneficial
owner of, and has good and marketable title to, the Subject Shares set forth
opposite his name on Schedule A attached hereto, free and clear of any claims,
liens, encumbrances and security interests whatsoever; except that the Subject
Shares are subject to a federal estate tax lien securing the payment of
inheritance taxes. The Stockholder does not own, of record or beneficially, any
shares of capital stock of the Company other than the Subject Shares set forth
opposite his name on Schedule A attached hereto. The Stockholder has the sole
right to vote the Subject Shares, and none of the Subject Shares is subject to
any voting trust or other agreement, arrangement or restriction with respect to
the voting of such Subject Shares, except as contemplated by this Agreement. The
Stockholder does not own any options or warrants to acquire any shares of
Company Common Stock or any other securities convertible into or exchangeable
for Company Common Stock.
2. Representations and Warranties of Investors. The Investors hereby
represent and warrant to the Stockholder that Investors have all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Investors, and the consummation of the transactions contemplated hereby, have
been duly authorized by all necessary corporate action on the part of Investors.
This Agreement has been duly executed and delivered by Investors and constitutes
a valid and binding obligation of Investors enforceable in accordance with its
terms. The execution and delivery of this Agreement do not, and the consummation
of the transactions contemplated hereby and compliance with the terms hereof
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time or both) under any provision of, the certificate
of incorporation or by-laws of Investor, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to Investors or
to Investors' property or assets.
3. Covenants of the Stockholder. Until the termination of this
Agreement in accordance with Section 6, the Stockholder agrees as follows:
(a) At any meeting of stockholders of the Company called to vote upon
the Debenture and Note Purchase Agreement, as the same may be amended, and the
transactions contemplated by the Debenture and Note Purchase Agreement, or at
any adjournment thereof or in any other circumstances upon which a vote, consent
or other approval (including by written consent) with respect to the Debenture
and Note Purchase Agreement and the transactions contemplated thereby is sought,
the Stockholder shall vote (or cause to be voted) the Subject Shares in favor of
the Debenture and Note Purchase Agreement and the approval of the terms thereof
and each of the transactions contemplated by the Debenture and Note Purchase
Agreement.
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(b) At any meeting of stockholders of the Company or at any other
adjournment thereof or in any other circumstances upon which the Stockholder's
vote, consent or other approval is sought, the Stockholder shall vote (or cause
to be voted) the Subject Shares against (i) any merger agreement or merger,
consolidation, combination, sale or substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or by the Company or
any other takeover proposal, as such term is defined in the Debenture and Note
Purchase Agreement (a "Takeover Proposal") or (ii) any amendment of the
Company's certificate of incorporation or bylaws or other proposal (including
with respect to the election of directors) or transaction involving the Company
or any of its subsidiaries, which amendment or other proposal or transaction
would in any manner impede, frustrate, prevent or nullify the Debenture and Note
Purchase Agreement or any of the transactions contemplated by the Debenture and
Note Purchase Agreement. Subject to Section 8, the Stockholder further agrees
not to commit or agree to take any action inconsistent with the foregoing.
(c) Except with respect to the estate tax lien to which the Subject
Shares are currently subject, the Stockholder agrees not to (i) sell, transfer,
pledge, assign or otherwise dispose of (including by gift) (collectively,
"Transfer"), or enter into any contract, option or other arrangement (including
any profit sharing arrangement) with respect to the Transfer of, the Subject
Shares to any person, or (ii) enter into any voting arrangement, whether by
proxy, voting agreement or otherwise, in connection with, directly or
indirectly, any Takeover Proposal. Notwithstanding the foregoing, the
Stockholder shall have the right to transfer the Subject Shares to a trust which
is the beneficiary of the Stockholder entitled to a distribution of the Subject
Shares to it; provided, however, that in the event of such a transfer, the
transferee shall take the Subject Shares subject to the terms of this Agreement
and following the due execution and delivery to Investors by each such
transferee shall execute and deliver to the Investors a counterpart to this
Agreement. It is expressly understood that, if the Subject Shares are acquired
upon a foreclosure of the estate tax lien to which they are currently subject,
the transferee shall acquire such shares free and clear of the provisions of
this Agreement.
(d) Subject to the terms of Section 8 hereof, during the term of this
Agreement, the Stockholder shall not, in its capacity as an individual
stockholder of the Company with respect to the Subject Shares, nor shall it
permit any investment banker, attorney or other adviser or representative of the
Stockholder in its capacity as an individual stockholder of the Company with
respect to the Subject Shares to, (i) directly or indirectly solicit, initiate
or encourage the submission of, any Takeover Proposal or (ii) directly or
indirectly participate in any discussions or negotiations regarding, or furnish
to any person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal, except to the extent
such actions are by the trustee of the Stockholder in his capacity as a director
of the Company in connection with actions permitted to the Company under Section
6.2 of the Debenture and Note Purchase Agreement.
(e) Until after the closing contemplated by the Debenture and Note
Purchase Agreement is consummated or the Debenture and Note Purchase Agreement
is terminated, the Stockholder shall use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the Company and Investors in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by the Debenture and Note
Purchase Agreement.
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4. Further Assurances. Stockholder will, from time to time, execute and
deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as Investors may reasonably request
for the purpose effectively carrying out the transactions contemplated by this
Agreement.
5. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties without the
prior written consent of the other parties, except that Investors may assign, in
its sole discretion, any or all of its rights, interests and obligations
hereunder to any permitted assigns under the Debenture and Note Purchase
Agreement. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
6. Termination. This Agreement shall terminate upon the earlier of (a)
the termination of the Debenture and Note Purchase Agreement in accordance with
the terms thereof and (b) the Closing under the Debenture and Note Purchase
Agreement.
7. General Provisions.
(a) Amendments. This Agreement may not be amended, altered or
supplemented except by an instrument in writing signed by each of the parties
hereto.
(b) Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or sent by overnight
courier (providing proof of delivery) to Investors in accordance with Section
15.3 of the Debenture and Note Purchase Agreement and to the Stockholder at his
address set forth on Schedule A attached hereto (or at such other address for a
party as shall be specified by like notice).
(c) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Wherever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation."
(d) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
each party need not sign the same counterpart.
(e) Entire Agreement: No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (ii) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
(f) Defined Terms. Capitalized terms used but not defined herein shall
have the meanings set forth in the Debenture and Note Purchase Agreement.
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(g) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
8. Stockholder Capacity. No person executing this Agreement who is or
becomes during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his capacity as such director or officer.
Stockholder signs solely in its capacity as the record holder and beneficial
owner of such Stockholder's Subject Shares and nothing herein shall limit or
affect any actions taken by a trustee of the Stockholder in his capacity as an
officer or director of the Company to the extent specifically permitted by the
Debenture and Note Purchase Agreement or in his capacity as a trustee of any
other trust or as an officer of any foundation which holds shares of Company
Common Stock.
9. Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in a Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (i) consents to submit such party to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that such party will not
bring any action relating to this Agreement or the transactions contemplated
hereby in any court other than a Federal court sitting in the state of Delaware
or a Delaware state court and (iv) waives any right to trial by jury with
respect to any claim or proceeding related to or arising out of this Agreement
or any of the transactions contemplated hereby.
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IN WITNESS WHEREOF, Investors have signed this Agreement and the
Stockholder has signed this Agreement, all as of the date first written above.
INVESTORS:
CAI PARTNERS AND COMPANY II, L.P.
By: CAI PARTNERS GP & CO., L.P.,
the General Partner
By: /s/ XXXXXX X. XXXXXXX
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Xxxxxx X. Xxxxxxx, President of
XXXX XX Co., a General Partner
CAI CAPITAL PARTNERS AND COMPANY II, L.P.
By: CAI CAPITAL PARTNERS GP & CO., L.P.,
the General Partner
By: /s/ XXXXXX X. XXXXXXX
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Xxxxxx X. Xxxxxxx, President of
XXXX XX Co., a General Partner
/s/ XXXX X. XXXXXXXX
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Xxxx X. Xxxxxxxx
STOCKHOLDER:
THE BAILEYS FAMILY TRUST
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By: /s/ XXXXXX X. XXXXXXX
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Xxxxxx X. Xxxxxxx, D.D.S., Trustee
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SCHEDULE A
Shares of Company
Name and Address of Stockholder Common Stock
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The Baileys Family Trust 700,767
c/o Xxxxxx X. Xxxxxxx, D.D.S., Trustee
00 Xxxxxxxxxx
Xxxxx Xxxxx, XX 00000
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Exhibit A to Stockholder Agreement
FORM OF IRREVOCABLE PROXY, COUPLED WITH AN INTEREST
_____________, 1999
The undersigned, The Baileys Family Trust, a trust pursuant to a trust
agreement dated July 22, 1989 acting through Xxxxxx X. Xxxxxxx, D.D.S., Trustee
(the "Stockholder"), hereby irrevocably (to the extent provided in Section 212
of the Delaware General Corporation Law) appoints Xxxxxx X. Xxxxxxx and Xxxx X.
Xxxxxxxx, the attorneys and proxies of Stockholder, with full power of
substitution and resubstitution, to the full extent of the undersigned's voting
rights with respect to the shares of common stock, par value $.01 per share (the
"Company Common Stock"), of SafeGuard Health Enterprises, Inc. a Delaware
corporation (the "Company"), owned of record by the Stockholder (such shares of
Company Common Stock, together with any other shares of capital stock of the
Company acquired by such Stockholder after the date hereof and during the term
of this Agreement, being collectively referred to herein as the "Subject
Shares"). Upon the execution hereof, all prior proxies given by the undersigned
with respect to the Subject Shares are hereby revoked and no subsequent proxies
will be given with respect to the Subject Shares. This proxy is irrevocable (to
the extent provided in Section 212 of the Delaware General Corporation Law) and
is granted in consideration of the Company and the Investors (named therein)
entering into the Debenture and Note Purchase Agreement, dated as of June __,
1999 (as the same may be amended or supplemented, the "Debenture and Note
Agreement"). The attorneys and proxies named above are empowered, at any time
prior to the termination of the Debenture and Note Purchase Agreement, dated as
of June __, 1999, between Investors and Stockholder in accordance with its
terms, to exercise all voting and other related rights (including, without
limitation, the power to execute and deliver written consents with respect to
the Subject Shares) of Stockholder at every annual, special or adjourned meeting
of the Company's stockholders, and in every written consent in lieu of such a
meeting, or otherwise, (a) in favor of approval of the Debenture and Note
Purchase Agreement and the transactions contemplated thereby and (b) against any
(i) Takeover Proposal, as defined in the Debenture and Note Purchase Agreement,
or (ii) any amendment of the Company's certificate of incorporation or bylaws or
other proposal (including with respect to the election of directors) or
transaction involving the Company or any of its subsidiaries, which amendment or
other proposal or transaction would in any manner impede, frustrate, prevent or
nullify the Debenture and Note Purchase Agreement or any of the other
transactions contemplated by the Debenture and Note Purchase Agreement.
Stockholder retains the right to vote the Subject Shares on all matters other
than the matters described in the preceding sentence. This proxy is subject to
the terms of that certain Stockholder Agreement of even date herewith, including
without limitation, Section 8 thereof, and this Proxy shall automatically
terminate upon termination of the Debenture and Note Purchase Agreement.
STOCKHOLDER SIGNATURE: THE BAILEYS FAMILY TRUST
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Xxxxxx X. Xxxxxxx, D.D.S., Trustee
Dated: ______________________, 1999.
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