3rd Officer to Leave : Safeguard Executive Resigns, Sells Back Stock

Larry Kay, a founder and a major stockholder in Safeguard Health Enterprises Inc., has resigned as an officer and director of the Anaheim-based dental care provider and has sold his stock back to the company for nearly $5 million.

Kay, who was a senior vice president and member of Safeguard’s board, is the third officer to leave the company in a little more than a year, the company said.

Senior Vice President Ronald I. Brendzel said Kay, 56, had assumed fewer responsibilities in recent years and chose to step down because he wanted to be “semi-retired.” Kay could not be reached for comment.

One analyst said that in the past, executives have left the company partly because of frustration caused by their working relationships with members of the Baileys family, which controls Safeguard operations.

The family members include Safeguard Chairman Alvin M. Baileys; his son and company President Dr. Steven J. Baileys, and Brendzel, who is related to the Baileyses by marriage.

Dorothy E. Ryan, an analyst at the brokerage of Swergold & Chefitz in San Francisco, said managers from outside the family have found it difficult to implement their own plans.

Safeguard, which has 830,000 members in dental plans in 13 states, reported earnings of $3.4 million last year, a 17% increase over earnings for the previous year. Revenue fell 4% to $67.8 million.

Aside from the elder Baileys, Kay was the last of the company’s four founders to have remained with the firm. Another founder left soon after the company was formed in 1974; a second, in 1985.

Brendzel said Kay will remain with the company for 1 year as a consultant and will be paid a figure that is “in line” with the $150,000 salary he received last year.

Safeguard said it purchased Kay’s 900,764 shares of company stock for $5.50 per share. It said he received an initial payment of $3 million, with the rest to be paid over the next 3 years with interest. The stock closed Friday at $5.50 per share, unchanged in over-the-counter trading.

Ryan said Safeguard’s purchase of Kay’s 17% stake may signify that the firm is moving “little by little” toward a total buyout, which would transform it into a privately owned company.

Including the purchase of Kay’s shares, Safeguard has bought 3.5 million of the 8 million shares that were outstanding 3 years ago. Brendzel said 4.5 million shares are now outstanding, with company officials holding about 39% of those. He said there are no plans for the company to become private.