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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For use of the
Commission Only (as permitted
by Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
SAFEGUARD SCIENTIFICS, 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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800 THE SAFEGUARD BUILDING
435 DEVON PARK DRIVE
WAYNE, PA 19087-1945
PHONE: (610) 293-0600
TOLL-FREE: (877) 506-7371
FAX: (610) 293-0601
AUTOMATED INVESTOR RELATIONS LINE: (888) SFE-1200
INTERNET: WWW.SAFEGUARD.COM
SAFEGUARD SCIENTIFICS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Dear Safeguard Stockholder:
You are invited to attend the Safeguard Scientifics, Inc. 2001 Annual Meeting of
Stockholders.
DATE: May 23, 2001
TIME: 9:00 a.m. Eastern time
PLACE: The Desmond Great Valley Hotel and Conference Center
One Liberty Boulevard
Malvern, Pennsylvania 19355
(610) 296-9800 or (800) 575-1776
DIRECTIONS: Included on the last page
No admission tickets are required. For those of you unable to attend the meeting
in person, we invite you to participate over the Internet through our website at
http://www.safeguard.com.
Only stockholders who owned stock at the close of business on April 6, 2001, can
vote at this meeting or any adjournments that may take place.
At the meeting, we will elect 13 directors and attend to any other business
properly presented at the meeting.
We also will report on Safeguard's 2000 business results and other matters of
interest to our stockholders. You will have an opportunity at the meeting to ask
questions, make comments, and meet our management team.
OUR BOARD OF DIRECTORS IS A VITAL RESOURCE. MAKE YOUR VOTE COUNT! NO MATTER HOW
MANY SHARES YOU HOLD, WE CONSIDER YOUR VOTE IMPORTANT AND ENCOURAGE YOU TO VOTE
AS SOON AS POSSIBLE.
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The proxy statement, accompanying proxy card, and 2000 annual report are being
mailed to stockholders beginning April 23, 2001, in connection with the
solicitation of proxies by the board of directors.
Please contact Mona Zeehandelaar, Director, Investor Relations, with any
questions or concerns.
Sincerely,
/s/ Warren Musser /s/ Deirdre Blackburn
Warren V. Musser Deirdre Blackburn
Chairman of the Board Secretary
April 17, 2001
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QUESTIONS AND ANSWERS
Q: WHO IS ENTITLED TO VOTE?
A: Stockholders of record as of the close of business on April 6, 2001, may
vote at the annual meeting.
Q: HOW MANY SHARES CAN VOTE?
A: On April 6, 2001, there were 117,299,573 shares issued and outstanding.
Every stockholder may cast one vote for each share owned. In the election
of directors, stockholders have the right of cumulative voting (described
below).
Q: WHAT MAY I VOTE ON?
A: You may vote on the election of 13 directors who have been nominated to
serve on our board of directors and any other business that is properly
presented at the meeting
Q: HOW DOES THE BOARD RECOMMEND I VOTE?
A: The board recommends a vote FOR each board nominee. The board requests
discretionary authority to cumulate votes.
Q: HOW DO I VOTE?
A: Sign and date each proxy card you receive, mark the boxes indicating how
you wish to vote, and return the proxy card in the prepaid envelope
provided. In the election of directors, if you wish to vote cumulatively,
please follow the directions in the next question.
If you sign your proxy card but do not mark any boxes showing how you wish
to vote, Warren V. Musser, Harry Wallaesa, and N. Jeffrey Klauder will
vote your shares and will cumulate your votes as recommended by the board
of directors.
Q: WHAT DOES CUMULATIVE VOTING MEAN?
A: Cumulative voting applies only in the election of directors. It means that
you may cast a number of votes equal to the number of Safeguard shares you
own multiplied by the number of directors to be elected. For example,
since 13 directors are standing for election at this year's annual
meeting, if you hold 100 shares of Safeguard stock, you may cast 1,300
votes in the election of directors. You may distribute those votes among
the nominees as you wish. In other words, in the example provided, you may
cast all 1,300 votes for one nominee or allocate them among two or more
nominees in any amount you like, as long as the total equals 1,300 votes.
To vote cumulatively, you must
- write the words "cumulate for" in the space provided under item 1 of
the proxy card, and
- write the name of each nominee and the number of votes to be cast
for each nominee in that space.
If you vote cumulatively, please check to be sure that the number of votes
you cast adds up to the number of shares you own multiplied by 13. If the
number of votes does not add up correctly, our proxy tabulator will return
the proxy card to you for clarification and will not vote your shares
until a properly completed proxy card has been returned to them.
Q: WHAT IF I HOLD MY SAFEGUARD SHARES IN A BROKERAGE ACCOUNT?
A: If you hold your Safeguard shares through a broker, bank or other nominee,
you will receive a voting instruction form directly from them describing
how to vote your shares. This form will, in most cases, offer you three
ways to vote:
1. by telephone,
2. via the Internet, or
3. by returning the form.
Your vote by telephone or Internet will help Safeguard save money.
Remember, if you vote by telephone or
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QUESTIONS AND ANSWERS
Internet, do not return your voting instruction form.
Q: WHAT IF I WANT TO CHANGE MY VOTE?
A: A registered stockholder may change his or her vote at any time before the
meeting in any of the following three ways:
1. notify our corporate secretary, Deirdre Blackburn, in writing,
2. vote in person at the meeting, or
3. submit a proxy card with a later date.
If you hold your shares through a broker, bank or other nominee and wish
to change your vote, you must deliver your change to that nominee. Also,
if you wish to vote at the meeting, you must obtain a legal proxy from
that nominee authorizing you to vote at the meeting. We will be unable to
accept a vote from you at the meeting without that form. If you are a
registered stockholder and wish to vote at the meeting, no additional
forms will be required.
Q: HOW WILL DIRECTORS BE ELECTED?
A: The 13 nominees who receive the highest number of affirmative votes at a
meeting at which a quorum is present will be elected as directors.
Q: WHO WILL COUNT THE VOTES?
A: A representative of Mellon Investor Services, our registrar and transfer
agent, will count the votes and act as the judge of election.
Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: Your shares may be registered under different names or addresses. We
encourage you to have all accounts registered in the exact same name and
address (whenever possible). You may obtain information about how to do
this by contacting our transfer agent:
Safeguard Scientifics, Inc.
c/o Mellon Investor Services
P. O. Box 3315
South Hackensack, NJ 07606
If you provide Mellon Investor Services with photocopies of the proxy
cards that you receive or with the account numbers that appear on each
proxy card, it will be easier to accomplish this.
You also can find information on transferring shares and other useful
stockholder information on their web site at www.mellon-investor.com.
Q: WHAT IS A QUORUM?
A: A quorum is a majority of the outstanding shares. The shares may be
represented at the meeting either in person or by proxy. To hold the
meeting, there must be a quorum present.
Q: WHAT IS THE EFFECT IF I ABSTAIN OR FAIL TO GIVE INSTRUCTIONS TO MY BROKER?
A: If you submit a properly executed proxy, your shares will be counted as
part of the quorum even if you abstain from voting or withhold your vote
for a particular director.
Broker non-votes also are counted as part of the quorum. A broker non-vote
occurs when banks, brokers or other nominees holding shares on behalf of a
stockholder do not receive voting instructions from the stockholder by a
specified date before the meeting. In this event, banks, brokers and other
nominees may vote those shares on matters deemed routine by the New York
Stock Exchange. The election of directors is considered a routine matter.
Broker non-votes and abstentions are not counted in the tally of votes FOR
or AGAINST a proposal. A WITHHELD vote is treated the same as an
abstention.
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QUESTIONS AND ANSWERS
Q: WHO CAN ATTEND THE MEETING?
A: We encourage all stockholders to attend the meeting. Admission tickets are
not required.
Q: WHAT IF I CAN'T ATTEND THE MEETING?
A: If you are unable to attend the meeting in person, we invite you to
participate over the Internet through our website at
http://www.safeguard.com. Please go to our web site approximately fifteen
minutes early to register and download any necessary audio software.
Q: ARE THERE ANY EXPENSES ASSOCIATED WITH COLLECTING THE STOCKHOLDER VOTES?
A: We will reimburse brokerage firms and other custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses for forwarding
proxy and other materials to our stockholders. We do not anticipate hiring
an agency to solicit votes at this time.
Q: WHAT IS A STOCKHOLDER PROPOSAL?
A: A stockholder proposal is your recommendation or requirement that
Safeguard or our board of directors take action on a matter that you
intend to present at a meeting of stockholders. However, under applicable
rules we have the ability to exclude certain matters proposed, including
those that deal with matters relating to our ordinary business operations.
Q: CAN ANYONE SUBMIT A STOCKHOLDER PROPOSAL?
A: To be eligible to submit a proposal, you must have continuously held at
least $2,000 in market value, or 1% of our common stock, for at least one
year by the date you submit your proposal. You also must continue to hold
those securities through the date of the meeting.
Q: IF I WISH TO SUBMIT A STOCKHOLDER PROPOSAL FOR THE ANNUAL MEETING IN 2002,
WHAT ACTION MUST I TAKE?
A: If you wish us to consider including a stockholder proposal in the proxy
statement for the annual meeting in 2002, you must submit the proposal, in
writing, so that we receive it no later than December 25, 2001. The
proposal must meet the requirements established by the SEC. Send your
proposal to:
N. Jeffrey Klauder, Executive Vice President and General Counsel
Safeguard Scientifics, Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087-1945
Our bylaws provide that only proposals included in the proxy statement may
be considered at the annual meeting.
Q: CAN A STOCKHOLDER NOMINATE SOMEONE TO BE A DIRECTOR OF SAFEGUARD?
A: The Nominating Committee will consider qualified candidates recommended by
stockholders. You should submit your recommendation, including a detailed
statement of the individual's qualifications, to:
Nominating Committee
Safeguard Scientifics, Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Q: WHO ARE SAFEGUARD'S LARGEST STOCKHOLDERS?
A: At December 31, 2000, no stockholder owned more than 5% of our stock. In
the aggregate, our directors and executive officers beneficially own a
total of approximately 5.19% of Safeguard.
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ELECTION OF DIRECTORS
ITEM 1 ON PROXY CARD
Directors are elected annually and serve a one-year term. There are 13 nominees
for election this year. Each nominee is currently serving as a director. Each
nominee has consented to serve until the next annual meeting if elected. You
will find detailed information on each nominee below. If any director is unable
to stand for re-election after distribution of this proxy statement, the board
may reduce its size or designate a substitute. If the Board designates a
substitute, proxies voting on the original director candidate will be cast for
the substituted candidate.
THE BOARD RECOMMENDS A VOTE FOR EACH NOMINEE. THE 13 NOMINEES WHO RECEIVE THE
HIGHEST NUMBER OF AFFIRMATIVE VOTES WILL BE ELECTED AS DIRECTORS.
WARREN V. MUSSER Director since 1953
Age 74
Mr. Musser has served as chairman of Safeguard since 1953. Mr. Musser was chief
executive officer of Safeguard from 1953 to April 2001. Mr. Musser is chairman
of the board of Cambridge Technology Partners (Massachusetts), Inc. He is also a
director of CompuCom Systems, Inc., Internet Capital Group, Inc., and TyCom,
Ltd. and a trustee of Brandywine Realty Trust. Mr. Musser serves on a variety of
civic, educational and charitable boards of directors, and serves as vice
president/development, Cradle of Liberty Council, Boy Scouts of America, vice
chairman of The Eastern Technology Council, and chairman of the Pennsylvania
Partnership on Economic Education.
ROBERT E. KEITH, JR. Director since 1996
Age 59
Mr. Keith was appointed vice chairman of the board of Safeguard in February 1999
and became a member of the Office of the Chief Executive of Safeguard in April
2001. Mr. Keith has been a managing director of TL Ventures and its predecessor
funds since 1988. He has served as president since 1991, and as chief executive
officer since February 1996, of Technology Leaders Management, Inc., a private
equity capital management company that is a subsidiary of Safeguard. Mr. Keith
is Chairman of the Board of Internet Capital Group, Inc., and a director of
Cambridge Technology Partners (Massachusetts), Inc. and SunSource, Inc.
HARRY WALLAESA Director since 1999
Age 50
Mr. Wallaesa became president and chief operating officer of Safeguard in March
1999 and became a member of the Office of the Chief Executive of Safeguard in
April 2001. Before joining Safeguard, Mr. Wallaesa served as president and chief
executive officer of aligne incorporated, which he co-founded in 1996, until
Safeguard acquired a majority of the company in March 1999. From 1985 to 1995,
Mr. Wallaesa was the chief information officer and vice president of management
information systems at Campbell Soup Company, a global manufacturer and marketer
of branded food products. Mr. Wallaesa is chairman of the board of CompuCom
Systems, Inc. and a director of Bowne, Inc., Redleaf Group LLC, aligne
incorporated, Atlas Commerce, Pennsylvania Academy of the Fine Arts, and
University of Pennsylvania Health Systems.
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VINCENT G. BELL, JR. Director since 1956
Age 75
Mr. Bell is president of Verus Corporation, a management investment firm he
formed in 1987. In April 2001, Mr. Bell became the acting chief executive
officer of Safeguard and a member of the Office of the Chief Executive. Before
1987, Mr. Bell was chairman of the board and chief executive officer of
Safeguard Business Systems, Inc., an information systems company.
WALTER W. BUCKLEY, III Director since 2000
Age 41
Mr. Buckley is a co-founder and has served as president, chief executive officer
and a director of Internet Capital Group, Inc. since March 1996. Prior to
co-founding Internet Capital Group, an Internet holding company, Mr. Buckley
worked for Safeguard as vice president of acquisitions from 1991 to February
1996. Mr. Buckley is a director of VerticalNet, Inc., PaperExchange.com, Inc.,
and XL Vision, Inc.
MICHAEL J. EMMI Director since 1998
Age 59
Mr. Emmi has been chairman of the board, president and chief executive officer
of Systems & Computer Technology Corporation, a provider of computer software
and services, since May 1985. Mr. Emmi is a director of CompuCom Systems, Inc.
and CDI Corporation.
ROBERT A. FOX Director since 1981
Age 71
Mr. Fox has been chairman and chief executive officer of R.A.F. Industries,
Inc., a private investment company that acquires and manages a diversified group
of operating companies and venture capital investments, since 1980. Mr. Fox is a
director of Zany Brainy, Inc. He is a trustee of the University of Pennsylvania
and the Wistar Institute.
JACK L. MESSMAN Director since 1994
Age 61
Mr. Messman has been chief executive officer and president of Cambridge
Technology Partners (Massachusetts), Inc., a global eBusiness services provider,
since 1999. From April 1991 until 1999, Mr. Messman was chairman and chief
executive officer of Union Pacific Resources Group Inc., an energy company. From
May 1988 to April 1991, Mr. Messman was chairman and chief executive officer of
USPCI, Inc., a provider of hazardous waste services and a subsidiary of Union
Pacific Corporation. Mr. Messman is a director of Cambridge Technology Partners
(Massachusetts), Inc., Metallurg, Inc., Novell, Inc., RadioShack Corporation,
and USDATA Corporation.
RUSSELL E. PALMER Director since 1989
Age 66
Mr. Palmer is chairman and chief executive officer of The Palmer Group, a
corporate investment firm he organized in 1990. From 1983 to June 1990, Mr.
Palmer was dean of The Wharton School of the University of Pennsylvania. From
1972 to 1983, he was managing partner and chief executive officer of Touche Ross
& Co. (now Deloitte & Touche). Mr. Palmer is a director
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of Federal Home Loan Mortgage Corporation, Verizon Communications, Honeywell
International, Inc. and The May Department Stores Company.
JOHN W. PODUSKA, SR., PH.D. Director since 1987
Age 63
Dr. Poduska has served as chairman of Advanced Visual Systems, Inc., a provider
of visualization software and solutions, since 1992. Before 1992, Dr. Poduska
was president and chief executive officer of Stardent Computer, Inc, a computer
manufacturer, from December 1989 to December 1991. From December 1985 to
December 1989, Dr. Poduska was founder, chairman and chief executive officer of
Stellar Computer, Inc., a computer manufacturer and the predecessor of Stardent
Computer, Inc. Dr. Poduska is a director of Cambridge Technology Partners
(Massachusetts), Inc., eMerge Interactive, Inc., and Anadarko Petroleum
Corporation.
HEINZ C. SCHIMMELBUSCH, PH.D. Director since 1989
Age 56
Dr. Schimmelbusch has served as president and chief executive officer of
Safeguard International Group, Inc. since 1994. Dr. Schimmelbusch also serves as
managing director of Safeguard International Fund, L.P., a Safeguard affiliated
private equity fund, and is chairman of Allied Resource Corporation, Wayne, PA,
a company pursuing technology-oriented, early-stage investment opportunities in
process industries, and Metallurg, Inc., New York, a global producer and
supplier of high quality metal alloys and specialty metals. From 1973 to 1993,
Dr. Schimmelbusch was associated with Metallgesellschaft AG, a raw materials
company of which he served as chairman of the executive board from March 1989 to
December 1993.
HUBERT J.P. SCHOEMAKER, PH.D. Director since 1993
Age 51
Dr. Schoemaker is chairman, chief executive officer and founder of Neuronyx,
Inc., a biotechnology company he founded in 1999. Prior to that, Dr. Schoemaker
served as chairman of the board and co-founder of Centocor, Inc., a
biotechnology company, from 1987 to 1999.
CARL J. YANKOWSKI Director since 2000
Age 52
Mr. Yankowski has been chief executive officer and a director of Palm, Inc., a
leading global provider of handheld computing devices, since December 1999.
Prior to joining Palm, he was president and chief executive officer of the
Reebok Division and executive vice president of Reebok International Ltd., a
leading worldwide designer, marketer and distributor of sports, fitness and
casual footwear, apparel and equipment. Before joining Reebok in September 1998,
from December 1993 to January 1998, Mr. Yankowski was president and chief
operating officer of Sony Electronics Inc., a diversified company that markets
electronic products for consumer, broadcast and industrial use in the United
States. From December 1988 to November 1993, Mr. Yankowski held various senior
management positions with Polaroid Corporation, his last position being that of
chairman of the Asia-Pacific region. Mr. Yankowski is a director of Avidyne,
Inc. and Boston College Business School.
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BOARD OF DIRECTORS -- ADDITIONAL INFORMATION
BOARD MEETINGS: The board of directors held nine meetings in 2000. Each director
except Messrs. Buckley and Yankowski attended at least 75% of the total number
of meetings of the board and committees of which he was a member.
BOARD COMPENSATION: Directors employed by Safeguard or a wholly owned subsidiary
receive no additional compensation, other than their normal salary, for serving
on the board or its committees. Non-employee directors receive the following
compensation:
- - $17,500 annually
- - $1,000 annually for chairing a committee
- - $1,000 for each board meeting attended
- - $500 for each telephonic special meeting attended
- - $500 for each committee meeting attended
- - reimbursement of out-of-pocket expenses
Additionally, each director who is not a current executive officer of Safeguard
receives a stock option to purchase shares of Safeguard common stock upon
initial election to the board. Each of these directors also receives subsequent
annual stock option grants. All grants are discretionary and may vary as to the
number of shares.
Directors' options generally have an eight-year term and vest 25% each year
starting on the first anniversary of the grant date. The exercise price is equal
to the fair market value of a share of our common stock on the grant date.
During 2000, Mr. Buckley received an initial grant in February 2000 to purchase
90,000 shares of Safeguard common stock at an exercise price of $50.9792 and
each director, other than Messrs. Musser and Wallaesa, received a grant to
purchase 10,500 shares of Safeguard common stock. Messrs. Bell, Messman,
Poduska, Schimmelbusch and Schoemaker each received a grant of all 10,500 shares
on July 28, 2000. Messrs. Buckley and Yankowski received a grant of 5,250 shares
on each of July 28, 2000 and September 29, 2000. Mr. Keith received a grant of
5,250 shares on each of July 28, 2000 and December 29, 2000. Messrs. Emmi and
Fox received a grant of 3,500 shares on each of July 28, 2000, September 29,
2000 and December 29, 2000. Mr. Palmer received a grant of 5,250 shares on July
28, 2000 and grants of 2,625 on each of September 29, 2000 and December 29,
2000. The exercise price for all options granted on July 28, 2000 was $30.4688
per share, for all options granted on September 29, 2000 was $20.00 per share,
and for all options granted on December 29, 2000 was $6.5313 per share. Each
director also received a stock option grant in December 2000 to purchase 12,000
shares of Safeguard common stock at an exercise price of $5.2813 per share.
DEFERRED CHARITABLE DONATION PROGRAM: Safeguard established this program to
promote charitable giving. It is available to certain directors and officers and
is funded, in part, by life insurance policies on certain participants.
Following the death of a director, we will donate up to $1 million to one or
more designated charities in the Southeastern Pennsylvania area. Directors
derive no financial benefit from this program since all charitable deductions
accrue solely to Safeguard. We anticipate the program will result in nominal
cost to us over time.
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DEFERRED COMPENSATION: Before 1989, we offered certain directors and officers a
deferred compensation plan. All contributions to the plan were completed by the
end of 1988. Upon retirement (or an earlier date in certain cases) or upon
termination of service as a director, each participant is entitled to receive,
as a level payment over 15 years or as a lump sum, an amount equal to the total
credits to his account plus an investment growth factor.
Mr. Bell began receiving a quarterly payment in February 1992 of $3,100, which
was reduced to $3,000 in February 1994. Safeguard is the beneficiary of the life
insurance contracts we purchased to cover our obligations under the plan. We
expect to recover an amount equal to all benefit payments under the plan, the
premium payments on the insurance contracts, and a portion of the interest
earned on the use of the premium payment.
BOARD COMMITTEE MEMBERSHIP ROSTER
The Board of Directors has four standing committees. The following table
describes the membership of and number of meetings held by each of these
committees.
AUDIT(1) COMPENSATION EXECUTIVE NOMINATING
-------- ------------ --------- ----------
MEETINGS HELD IN 2000 4 3 3 0
Warren V. Musser x* x
Vincent G. Bell, Jr. x x x x
Michael J. Emmi x
Robert A. Fox x* x x*
Russell E. Palmer x* x x x
John W. Poduska, Sr. x
(1) Each member of the Audit Committee qualifies as independent under the
rules of the New York Stock Exchange (the "NYSE").
* Chairperson
AUDIT COMMITTEE
- - operates under a written Audit Committee Charter adopted by the board of
directors, a copy of which is attached as Exhibit A to this Proxy
Statement
- - recommends the hiring and retention of our independent certified public
accountants
- - discusses the scope and results of our audit with the independent
certified public accountants
- - reviews with management and the independent certified public accountants
the interim and year-end operating results
- - considers the adequacy of our internal accounting controls and audit
procedures
- - reviews the non-audit services to be performed by the independent
certified public accountants
COMPENSATION COMMITTEE
- - determines compensation levels for our officers, including incentive
compensation
- - administers our equity compensation plan and long-term incentive plan
EXECUTIVE COMMITTEE
- - acts upon all matters with respect to the management of our business
except policy matters
NOMINATING COMMITTEE
- - recommends nominees for election to our board of directors
- - considers qualified candidates recommended by stockholders
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STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
AS OF APRIL 6, 2001
SHARES
BENEFICIALLY
OUTSTANDING OPTIONS OWNED
SHARES EXERCISABLE ASSUMING
BENEFICIALLY WITHIN EXERCISE PERCENT
NAME OWNED 60 DAYS OF OPTIONS OF SHARES
---- ----- ------- ---------- ---------
Warren V. Musser 483,849 1,000,000 1,483,849 1.27%
Robert E. Keith, Jr. 23,366 206,625 229,991 *
Harry Wallaesa 562,040 872,500 1,434,540 1.19%
Vincent G. Bell, Jr. 1,438,704 26,625 1,465,329 1.22%
Walter W. Buckley, III 3,000 37,500 40,500 *
Michael J. Emmi 3,000 34,500 37,500 *
Robert A. Fox 250,875 9,750 260,625 *
Jack L. Messman 90,000 80,625 170,625 *
Russell E. Palmer 34,235 62,625 96,860 *
John W. Poduska, Sr. 0 17,250 17,250 *
Heinz C. Schimmelbusch 5,453 17,250 22,703 *
Hubert J.P. Schoemaker 137,370 9,750 147,120 *
Carl J. Yankowski 0 47,250 47,250 *
Gerald A. Blitstein 45,900 156,250 202,150 *
John K. Halvey 906 127,500 128,406 *
Jerry L. Johnson 60,894 282,120 343,014 *
N. Jeffrey Klauder 7,500 112,500 120,000 *
Executive officers and
directors as a group
(18 persons)
3,147,392 3,100,620 6,248,012 5.19%
* Less than 1% of Safeguard's outstanding shares of common stock
Each individual has the sole power to vote and to dispose of the shares (other
than shares held jointly with spouse) except as follows:
Warren V. Musser Includes 220,500 shares held by a trust of which Mr.
Musser is a co-trustee. Safeguard has a security
interest in the shares of common stock and the common
stock purchase options owned by Mr. Musser, excluding
the 220,500 shares held by the trust of which Mr. Musser
is a co-trustee.
Robert E. Keith, Jr. Includes 900 shares held by his spouse. Mr. Keith
disclaims beneficial ownership of the shares held by his
spouse.
Vincent G. Bell, Jr. Includes 337,704 shares held by a charitable foundation
established by Mr. Bell.
Robert A. Fox Includes 15,000 shares held by a charitable foundation
established by Mr. Fox.
John K. Halvey Includes 600 shares held in trust by his spouse for his
minor children.
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SHARES OF SUBSIDIARY CORPORATIONS OWNED BY SAFEGUARD DIRECTORS AND OFFICERS:
CompuCom Systems, Inc. and Tangram Enterprise Solutions, Inc. are majority owned
subsidiaries of Safeguard. As of April 6, 2001, executive officers and directors
of Safeguard beneficially owned the following percentage of shares of common
stock outstanding in each of these subsidiaries:
- - COMPUCOM
Mr. Musser, 1%
All executive officers and directors of Safeguard as a group, other than
Mr. Musser, less than 1%
- - TANGRAM
All executive officers and directors of Safeguard as a group, less than
1%.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE: The rules of the SEC
require that we disclose late filings of reports of stock ownership by our
directors and executive officers. To the best of our knowledge, there were no
late filings by our directors and executive officers during 2000, except for one
late filing by Mr. Blitstein and four transactions reported late on Form 5 by
Dr. Poduska.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return on $100 invested in our
common stock for the period from December 31, 1995, through December 31, 2000,
with the cumulative total return on $100 invested in the Russell 2000 and the
peer group index for the same period.
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
Safeguard 100.00 128.28 126.77 110.86 658.58 80.38
Russell 2000 100.00 116.61 142.66 138.66 165.82 158.66
Peer Group 100.00 130.24 147.66 197.23 331.06 180.78
- - The peer group consists of SIC Code 737 -- Computer Programming & Data
Processing Services and SIC Code 5045 -- Computer, Peripheral Equipment
and Software Wholesalers, with a 50% weighting for each SIC Code.
- - Assumes reinvestment of dividends. We have not distributed cash dividends
during this period. Assumes a value of zero for all rights issued in
rights offerings to our stockholders and all opportunities made available
to our shareholders to participate in Safeguard Subscription Programs.
- - Assumes an investment of $100 on December 31, 1995.
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REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
Safeguard's mission is to achieve maximum returns for our stockholders by
- - acquiring and operating leading companies in the infrastructure technology
market
- - utilizing our extensive network to meet the strategic and operational
needs of our partner companies
- - enabling our stockholders to participate directly in our partner companies
via the Safeguard Subscription Program, and
- - proactively working with our public partner companies to continue to build
their value.
Our philosophy is to align the compensation of senior management and other
employees with our mission and the long-term interests of our stockholders. This
philosophy also helps us to
- - attract and retain outstanding employees who can thrive in a competitive
environment of continuous change,
- - promote among our employees the economic benefits of stock ownership in
Safeguard and our partner companies, and
- - motivate and reward employees who, by their hard work, loyalty and
exceptional service, make contributions of special importance to the
success of our business.
COMPENSATION STRUCTURE
The compensation of our executives consists of
- - base pay,
- - annual cash incentives,
- - stock options, and
- - awards under our long-term incentive plan.
BASE PAY
Base pay is established initially on the basis of subjective factors, including
experience, individual achievements, and the level of responsibility assumed at
Safeguard. Salary increases for our CEO and other executives for 2000 were based
on the following:
- - levels of individual responsibility,
- - the maintenance of an appropriate scale among executives based on relative
positions and responsibilities, and
- - general inflation levels.
ANNUAL CASH INCENTIVES
Annual cash incentives are intended to motivate executives to achieve and exceed
annual corporate performance targets and strategic objectives. Our primary
objectives are to create or increase the value of our public and private partner
companies, capitalize on the value derived from our relationship with our
private equity funds, and acquire interests in new partner companies that can
help us achieve our business objectives and that will continue to build our
pipeline of potential IPOs. We measure our success by the market price of our
stock, the financial condition and operations of our company, the operating
performance and market value of our public partner companies, the operating
performance of our private partner companies, the development of the Safeguard
network of partner companies, and the successful completion of IPOs with
Safeguard Subscription Programs or of other liquidity events involving our
partner companies. Specific annual financial and strategic objectives may
include
- - positioning Safeguard to capitalize on emerging technology trends
- - adding a targeted number of new partner companies,
- - assisting our partner companies to access the public capital markets,
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- - strengthening our network's capacity to support the growth of our partner
companies,
- - strengthening a partner company's management/marketing team,
- - building strategic alliances,
- - helping our partner companies grow through acquisitions, and
- - identifying and exploiting markets.
At the beginning of each year, the committee sets target levels of executive
cash incentives based on a percentage of base salary and the executive's ability
to impact Safeguard's performance.
At the end of each year, the committee reviews the level of achievement of the
financial and strategic objectives contained in Safeguard's plan and the plans
of our partner companies (including the publicly held partner companies) and
individual performance. Cash incentives are paid based on a percentage of target
amounts and may exceed target amounts when, in the judgment of the committee,
performance levels are deemed to be superior.
MR. MUSSER'S 2000 CASH INCENTIVE. Mr. Musser was awarded a cash incentive for
2000 equal to 100% of his target incentive. This decision was based on
Safeguard's success in achieving its strategic objectives, including:
- - completing a follow-on public offering in April 2000 which raised
approximately $414 million
- - completing common stock placements with three strategic investors raising
$200 million
- - completing the sales of three partner companies for total proceeds to the
company of more than $50 million
- - completing two IPOs with Safeguard Subscription Programs (eMerge and Opus
360),
- - positioning several companies as future IPO candidates,
- - announcing eighteen new partner company acquisitions,
- - assisting several partner companies with mergers and acquisitions, and
- - expanding Safeguard's information technology operating businesses (aligne,
K Consulting and Palarco).
The Committee also established an incentive arrangement for Mr. Musser under
which Mr. Musser received $500,000 on January 15, 2001 and will receive another
$500,000 unless he resigns from all his positions with Safeguard prior to
January 15, 2002.
OTHER HIGHLY COMPENSATED EXECUTIVES' 2000 CASH INCENTIVES. The committee
approved cash incentives for 2000 equal to 100% of the target amounts. The
committee considered the same factors they did in determining Mr. Musser's 2000
cash incentive as well as, to a lesser extent, each executive's individual
performance for the year. In addition, the Committee adopted incentive
arrangements, similar to that adopted for Mr. Musser, for Messrs. Wallaesa,
Blitstein, Halvey and Klauder.
STOCK OPTIONS
Stock options align the interests of executives and employees with the long-term
interests of our stockholders and motivate executives and employees to remain in
our employ. The committee awards stock options based on a number of factors,
including
- - the achievement of financial and strategic objectives,
- - an individual's contributions in providing strategic leadership and
oversight for Safeguard and our partner companies, and
- - the amount and term of options already held by each individual.
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2000 STOCK OPTION AWARDS. The committee granted stock options during 2000 to
certain new employees and to all executives and employees. The number of options
granted was based on each person's responsibilities. Although Mr. Musser
historically has not participated in stock option awards, in December 2000 as
part of the incentive arrangement with Mr. Musser, the committee made a special
grant to Mr. Musser of options to purchase 1,000,000 shares of Safeguard common
stock.
LONG-TERM INCENTIVE PLAN
Our long-term incentive plan supports our strategy of completing IPOs with
Safeguard Subscription Programs to our stockholders since the plan permits
participants to share directly in the growth of our partner companies. This
growth benefits our stockholders in two ways -- indirectly, by increasing the
value of Safeguard's holdings in the partner companies, and directly, by
increasing the value of the stock acquired by our stockholders through IPOs with
Safeguard Subscription Programs.
Each year, Safeguard has allocated a portion of the equity interests acquired
during the year for the benefit of the participants in the long-term incentive
plan. The plan permits the committee to award grants in the form of (i)
interests in limited partnerships established by Safeguard to hold the equity
interests acquired by Safeguard in a given year, (ii) restricted stock in a
partner company, or (iii) share units which entitle a participant to share in
the appreciation of the value of the stock of a partner company above
established threshold levels. We intend primarily to grant limited partnership
interests to plan participants to more closely align the participants' interests
with Safeguard's interests.
Grants are subject to vesting over a period of four years and generally to the
condition that Safeguard's equity holdings must double in value before the
participants can receive their equity participation. Partnership interests are
generally paid out in stock of the partner company after a fixed period of
years. The committee can accelerate vesting and payout upon the attainment of
the threshold value. Restricted stock awards are subject to certain restrictions
and are held in escrow until the attainment of the established threshold levels.
Share units are payable in cash or in stock of the partner company after a fixed
period of years, subject to acceleration by the committee if the threshold
levels are achieved.
The committee believes that this policy of aligning the interests of the
participants with the long-term interests of our stockholders has been
successful.
2000 LONG-TERM INCENTIVE GRANTS. In 2000, the committee approved the acquisition
of partnership interests by executives and key employees in limited partnerships
that were established to hold all equity interests acquired by Safeguard during
2000 in new and existing partner companies. These limited partnership interests
provided the participants, as a group, with the opportunity to receive
distributions of up to a total of 15% of the equity interests held by each
limited partnership if the value of the interest exceeds the established
thresholds. Distributions generally will be made in five years, unless
accelerated by the committee. The partnership interests were allocated to the
participants based primarily on their positions at Safeguard.
IRS LIMITS ON DEDUCTIBILITY OF COMPENSATION.
Section 162(m) of the Internal Revenue Code provides that publicly held
companies may not deduct in any taxable year compensation paid to any of the
individuals named in the Summary Compensation Table in excess of one million
dollars that is not "performance-based." To qualify as "performance-based"
compensation, the committee's discretion to grant incentive awards must be
strictly limited. Grants of stock options and SARs under our plans generally
will meet the requirements of "performance-based compensation." Restricted stock
grants generally will not qualify as, and performance units may not qualify as,
"performance-based compensation." The committee believes that the benefit of
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retaining the ability to exercise discretion under Safeguard's incentive
compensation plans outweighs the limited risk of loss of tax deductions under
section 162(m). Therefore, the committee does not currently plan to take any
action to qualify any of the incentive compensation plans under section 162(m).
Submitted by the Compensation Committee:
Robert A. Fox
Vincent G. Bell, Jr.
Russell E. Palmer
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Kenneth Fox, the son of the chairman of our compensation committee, Robert Fox,
is an executive officer, director and a 4.5% stockholder of Internet Capital
Group. Safeguard owns approximately 14% of Internet Capital Group.
Our chairman, Warren Musser, serves on the Management Resource Committee (which
performs the function of a compensation committee) of the Board of Cambridge
Technology Partners (Massachusetts), Inc., a Safeguard partner company. The
chief executive officer of Cambridge Technology Partners, Jack Messman, serves
on our board.
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EXECUTIVE COMPENSATION & OTHER ARRANGEMENTS
2000 ANNUAL COMPENSATION
LONG TERM COMPENSATION
-----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------------- --------------------------- ----------
SECURITIES ALL
OTHER UNDERLYING LONG TERM OTHER
ANNUAL RESTRICTED OPTIONS/ INCENTIVE COMPEN-
COMPEN- STOCK SARS PAYOUTS SATION
SALARY BONUS SATION AWARD(S) (#) ($) ($)(4)
NAME AND POSITION YEAR ($)(1) ($)(2) ($)(3) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Warren V. Musser, 2000 $430,000 $1,130,000 $ -- -- 1,000,000 $ 36,032 $22,144
Chairman of the
Board and Chief 1999 413,731 827,500 53,920 -- -- -- 12,000
Executive Officer
1998 305,000 305,000 60,193 -- -- -- 12,000
Harry Wallaesa, 2000 $400,000 $1,260,000 -- -- 380,000 $ 909,126 $13,645
President and Chief
Operating Officer (5) 1999 330,770 1,386,176 -- -- 1,590,000 -- 10,970
1998 -- -- -- -- -- -- --
Gerald A. Blitstein, 2000 $248,076 $ 905,000 $141,435 $3,434,250(6) 525,000 $ 14,033 $12,382
Executive Vice
President and Chief 1999 -- -- -- -- -- -- --
Financial Officer (5)
1998 -- -- -- -- -- -- --
John K. Halvey, 2000 $300,000 $1,047,700 $322,175 -- 275,000 $ 200,475 $12,539
Executive Vice
President (5) 1999 150,000 635,713 -- -- 210,000 -- 8,398
1998 -- -- -- -- -- -- --
Jerry L. Johnson, 2000 $310,000 $ 217,000 -- -- 200,000 $1,320,961 $21,362
Executive Vice
President 1999 283,462 416,469 -- -- 60,000 905,722 19,896
1998 240,000 182,000 -- -- 60,000 38,258 19,895
N. Jeffrey Klauder, 2000 $198,153 $ 705,000 -- -- 425,000 $ 14,033 $18,159
Executive Vice
President and General 1999 -- -- -- -- -- -- --
Counsel (5)
1998 -- -- -- -- -- -- --
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NOTES TO ANNUAL COMPENSATION TABLE:
(1) Includes compensation that has been deferred by the named officers under
voluntary savings plans.
(2) Includes discretionary payouts under our Long-Term Incentive Plan. Also
includes for Messrs. Musser, Wallaesa, and Blitstein incentive bonuses of
$500,000 each, and for Messrs. Halvey and Klauder incentive bonuses of
$375,000 each, which were payable if the individual had not resigned prior
to January 15, 2001. An equal amount for each of the individuals will be
paid in 2002 if the individual has not resigned prior to January 15, 2002.
(3) Mr. Musser uses Safeguard's plane and charter aircraft from time to time
for personal use as a result of determination by the board of directors in
1997 requiring him to travel on Safeguard's plane instead of commercial
aircraft whenever possible for safety reasons. Mr. Musser reimburses
Safeguard for the price of a commercial airline ticket for these personal
flights. In the case of Messrs. Blitstein and Halvey, the amounts
disclosed as other annual compensation include moving expenses of
approximately $134,000 and $313,000 respectively.
(4) For 2000, all other compensation includes the following amounts:
Defined Contribution Company Match Life Insurance
Name Pension Plan Voluntary Savings Plan Premiums Paid
---- ------------ ---------------------- -------------
Warren V. Musser $ 7,650 $ 5,100 $ 9,394
Harry Wallaesa $ 7,650 $ 4,315 $ 4,399
Gerald A. Blitstein $ 7,650 $ -- $ 4,732
John K. Halvey $ 7,650 $ 2,942 $ 1,947
Jerry L. Johnson $ 7,650 $ 5,100 $ 8,612
N. Jeffrey Klauder $ 7,650 $ -- $ 10,509
(5) Messrs. Wallaesa, Halvey, Blitstein and Klauder became executive officers
in March 1999, June 1999, February 2000 and April 2000, respectively.
(6) Shares valued at market price on date of grant ($45.79 per share). The
year-end market price was $6.625 per share.
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2000 STOCK OPTION GRANTS
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
----------------------------------------------------------------- --------------------------------
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED TO
OPTIONS/ EMPLOYEES EXERCISE OR
SARS IN FISCAL BASE PRICE EXPIRATION 5% 10%
NAME GRANTED (#)(2) YEAR ($/SH)(3) DATE ($) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Warren V. Musser 1,000,0000(4) 18.13% $ 5.2813 12/21/08 $2,521,585 $ 6,039,636
Harry Wallaesa 130,000 2.36% $30.4688 7/28/08 $1,891,174 $ 4,529,691
150,000 2.72% 5.2813 12/21/08 378,238 905,945
100,000(4) 1.81% 5.2813 12/21/08 252,159 603,964
Gerald A. Blitstein 225,000 4.08% $48.2083 2/28/08 $5,178,896 $12,404,356
25,000 .45% 30.4688 7/28/08 363,687 871,094
25,000 .45% 20.0000 9/29/08 238,728 571,794
125,000 2.27% 5.2813 12/21/08 315,198 754,954
100,000(4) 1.81% 5.2813 12/21/08 252,159 603,964
25,000 .45% 6.5313 12/29/08 77,960 186,728
John K. Halvey 75,000 1.36% $30.4688 7/28/08 $1,091,062 $ 2,613,283
125,000 2.27% 5.2813 12/21/08 315,198 754,954
75,000(4) 1.36% 5.2813 12/21/08 189,119 452,973
Jerry L. Johnson 75,000 1.36% $30.4688 7/28/08 $1,091,062 $ 2,613,283
125,000 2.27% 5.2813 12/21/08 315,198 754,954
N. Jeffrey Klauder 150,000 2.72% $32.5000 4/17/08 $2,327,595 $ 5,574,995
75,000 1.36% 30.4688 7/28/08 1,091,062 2,613,283
125,000 2.27% 5.2813 12/21/08 315,198 754,954
75,000(4) 1.36% 5.2813 12/21/08 189,119 452,973
(1) These values assume that the shares appreciate from the market price on
the grant date (which may be significantly in excess of the current market
price) at the compounded annual rate shown from the grant date until the
end of the option term. These values are not estimates of future stock
price growth of Safeguard. Executives will not benefit unless the common
stock price increases above the stock option exercise price.
(2) Unless otherwise disclosed, the options have an eight-year term and vest
25% each year commencing on the first anniversary of the grant. If an
executive retires on or after his 65th birthday, the options will become
fully vested on his retirement date. Certain of the options vest
immediately in full upon the death or disability of the grantee or upon a
change of control. Certain of the options reported in the above table may
be exercised at any time. If an executive exercises unvested options and
his employment is terminated, we may repurchase the unvested shares at the
exercise price. The option exercise price may be paid in cash, by delivery
of previously acquired shares, subject to certain conditions, or same-day
sales (that is, a cashless exercise through a broker), or such other
method as the compensation committee may approve. The compensation
committee may modify the terms of outstanding options, including
acceleration of the exercise date.
(3) All options have an exercise price equal to the fair market value of the
shares subject to each option on the grant date.
(4) These options have an eight-year term and vested immediately upon grant.
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2000 STOCK OPTION EXERCISES AND YEAR-END STOCK OPTION VALUES
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
SHARES AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
ACQUIRED ON VALUE --------------------------------- ---------------------------------
NAME EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------------------------------------------------------------------------
Warren V. Musser 0 -- 1,000,000 0 $1,343,700 $ 0
Harry Wallaesa 0 -- 497,500 1,472,500 $ 134,370 $201,555
Gerald A. Blitstein 0 -- 100,000 425,000 $ 134,370 $170,305
John K. Halvey 0 -- 127,500 357,500 $ 100,778 $167,963
Jerry L. Johnson 0 -- 282,120 297,500 $ 0 $167,963
N. Jeffrey Klauder 0 -- 75,000 350,000 $ 100,778 $167,963
(1) Value is calculated using the difference between the option exercise price
and the year-end stock price, multiplied by the number of shares subject
to an option. The year-end stock price was $6.625 per share.
LONG-TERM INCENTIVE PLAN
Beginning in 1997, we established one or more limited partnerships
to hold all acquisitions approved and made by Safeguard during any given year.
Under our long-term incentive plan, participants may purchase interests in these
limited partnerships. We allocated up to a 15% interest for purchase by the
participants for 2000. Safeguard, through a wholly owned subsidiary acting as
the general partner of each partnership, retains approximately an 85% interest
in the partnerships established for 2000. Partnership interests vest 25% each
year, generally starting on July 1 in the year following the acquisition. The
compensation committee has the authority to accelerate vesting. A partnership
will generally distribute the securities it holds to its partners after five to
ten years, but may distribute securities earlier if the company has completed an
IPO or has been sold. We must receive two times the cost of the equity
securities of a company and repayment of any loans to the company before the
limited partners receive any of the securities of the company. If that threshold
is met, the limited partners will receive distributions of approximately 15% of
the equity securities of the company. The percentages allocated during 2000 to
each named executive officer in each partnership are included in the following
table.
PERCENTAGE INTEREST
-------------------
NAME 1/1/00 TO 3/27/00 3/28/00 TO 12/31/00
---- ----------------- -------------------
Warren V. Musser 1.80% 1.530%
Harry Wallaesa 1.10% 0.935%
Gerald A. Blitstein 0.70% 0.595%
John K. Halvey 0.70% 0.595%
Jerry L. Johnson 0.70% 0.595%
N. Jeffrey Klauder -- 0.595%
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EMPLOYMENT CONTRACTS; SEVERANCE AND CHANGE-IN-CONTROL ARRANGEMENTS
At the time he joined Safeguard, we agreed to pay John Halvey's salary for a
12-month period if his employment is terminated without cause prior to December
31, 2000. At the time he joined Safeguard, we agreed to pay Gerald Blitstein's
salary for a 12-month period if his employment is terminated without cause.
RELATIONSHIPS AND RELATED TRANSACTIONS WITH MANAGEMENT AND OTHERS
In connection with various restricted stock awards made under our long-term
incentive plan, we loaned each recipient an amount equal to the related income
taxes on each award. Each of the loans is a full-recourse loan secured by a
pledge of the restricted shares. The interest rates and due dates on each loan
are as follows:
Interest
Date of Loan Rate Due Date
------------ ---- --------
6/11/99 4.90% 6/11/00
8/27/99 5.43% 8/31/00
11/3/99 5.57% 12/3/01
12/1/99 5.74% 12/31/01
2/3/00 6.20% 2/28/02
4/6/00 6.46% 5/6/02
4/13/00 6.46% 5/13/02
The following table shows the largest aggregate loan amounts outstanding in
connection with these tax loans for each executive officer who owed us in excess
of $60,000 since January 1, 2000, and the aggregate amounts outstanding at March
17, 2001:
Largest
Balance
Since Balance at
Name 1/1/00 3/17/01
---- ------ -------
Harry Wallaesa $303,998 $105,469
John Halvey $201,092 $164,434
In July 1999, we loaned John Halvey the sum of $500,000 in connection with his
joining Safeguard. The loan is evidenced by a full recourse promissory note
which bears interest at the prime rate and is secured by a pledge of stock,
vested stock options, long-term incentive plan grants, and any other
compensation granted to Mr. Halvey by Safeguard. Principal and accrued interest
on the note is due on July 22, 2002. In July 2000, we advanced Mr. Halvey a
$500,000 swing loan, bearing interest at the prime rate, in connection with his
purchase and sale of a house. The loan was repaid within 15 days.
During October 2000, Safeguard extended a $10 million loan to Mr. Musser and
guaranteed a $35 million loan to Musser, each in connection with his margin loan
arrangements. Mr. Musser had incurred margin debt and obligations with respect
to margin debt at several brokerage firms. The securities subject to the margin
account included approximately 8,000,000 shares of Safeguard common stock. With
the goal of maintaining an orderly trading market for Safeguard's stock,
Safeguard extended the guarantee and advanced the loan. The $10 million loan
bore interest at the prime rate and was payable in full on March 15, 2001. On
December 3, 2000, Mr. Musser repaid in full the principal and accrued interest
on the $10 million loan. Mr. Musser's obligations to Safeguard under both the
$10 million loan and the guarantee arrangements are secured by interests in
securities and real estate. In April 2001, Safeguard entered into a definitive
agreement with Mr. Musser providing for the extinguishment of the $35 million
Safeguard guarantee and for Safeguard to loan Mr. Musser approximately $28
million to repay in full Mr. Musser's margin loans which were guaranteed by
Safeguard and to pay certain tax obligations and expenses. The amount of the
loan may be increased at closing to approximately $35 million if certain real
estate assets have not been monetized at that time by Mr. Musser. The loan will
bear interest at an annual rate of 7% and be payable on demand at any time after
January 1, 2003. Mr. Musser will grant Safeguard security interests in
securities and real estate collateral. Until April 30, 2006, Safeguard will have
recourse only against the collateral. After April 30, 2006, Safeguard will have
recourse against Mr. Musser personally, except with respect to certain ongoing
compensation to be received by Mr. Musser. Safeguard has the
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right to sell the collateral at any time and apply the net after-tax proceeds
from the sales of collateral against amounts outstanding on the loan. There can
be no assurance that the proceeds realized by Safeguard from dispositions of the
collateral will be sufficient to repay the loan in full. The arrangements with
Mr. Musser were approved by the Board of Directors of Safeguard or a special
committee thereof, with Mr. Musser recusing himself from the proceedings.
In 1998, Safeguard acquired shares of Series A Convertible Preferred Stock of
MegaSystems, Inc. for approximately $7.1 million. MegaSystems provides large
format motion picture equipment and related consulting services. During 1999 and
2000, Safeguard provided debt financing to MegaSystems in the aggregate amount
of approximately $2.1 million, bearing interest at 8% per annum. In connection
with these financings, Safeguard also received warrants to purchase preferred or
common stock at a weighted average price per common share of $0.69. All of the
debt was due by March 3, 2001 and has not been repaid. Safeguard has also
guaranteed approximately $6.1 million of MegaSystem's performance obligations
under various agreements. The chief executive officer of MegaSystems is Mr.
Musser's spouse, Hilary Grinker Musser. Mrs. Musser owns common stock of
MegaSystems representing approximately 15% of the fully converted common equity
of MegaSystems. She received a salary from MegaSystems during 2000 of
approximately $156,000.
In May 2000, we acquired for $1 million a 4.7% equity position in Neuronyx,
Inc., a biotechnology company founded by one of our directors, Hubert J.P.
Schoemaker. Dr. Schoemaker is president, chairman and a significant stockholder
of Neuronyx.
As part of our business, we participate in the management of private equity
funds.
Robert Keith, vice chairman of our board of directors, is the president and CEO
of TL Ventures, the management company for TL Ventures III, TL Ventures IV, TL
Ventures V, EnerTech Capital Partners I, and EnerTech Capital Partners II. Mr.
Keith and Safeguard are general partners of the TL Ventures and EnerTech Capital
Partners funds, and they participate in the profits of these private equity
funds. TL Ventures receives management fees from the TL Ventures funds and
indirectly from EnerTech. During 2000, Safeguard paid to TL Ventures management
fees of approximately $1 million in respect of Safeguard's capital contribution
to the various funds managed by TL Ventures. TL Ventures paid Safeguard $200,000
in 2000 for management and operational services to TL Ventures and the funds and
approximately $224,964 for the rental of office space. Safeguard has invested or
committed a total of $66.3 million in the seven TL Ventures and EnerTech Capital
funds. Safeguard owns less than 7% of the partnership interests of each of these
funds.
Heinz Schimmelbusch, a Safeguard director, is a general partner of Safeguard
International Fund and participates in the profits of this private equity fund.
He also is one of three members of the management company of the fund. Safeguard
has invested or committed $29 million to date in this fund and owns 10% of the
limited partnership interests. During 2000, Safeguard paid to the fund's
management company fees of approximately $600,000 in respect of Safeguard's
capital contribution to the fund. The management company paid Safeguard $300,000
in 2000 for management and operational services provided by Safeguard and
$239,338 for the rental of office space.
In May 1999, we loaned $2.5 million to Allied Resource Corporation. The loan
bears interest at an annual rate equal to the prime rate plus 1% and is due on
the earlier of May 4, 2000 or 60 days following demand for payment. The loan and
accrued interest was repaid in full on its due date in May 2000. In connection
with this loan, Allied Resource issued to Safeguard warrants to purchase 62,500
shares of class A common stock at an exercise price of $10.00. Dr. Schimmelbusch
is chairman and a significant stockholder of Allied Resource Corporation.
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Safeguard owns approximately 14% of the outstanding common stock of Internet
Capital Group, Inc. and received $377,782 in rent for office space leased to
Internet Capital during 2000. Walter Buckley, a director of Safeguard, and
Kenneth Fox, the son of a director of Safeguard, are executive officers of
Internet Capital Group, Inc.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the "Audit Committee") has
reviewed and discussed Safeguard's audited consolidated financial statements for
fiscal 2000 with our management. The Audit Committee has discussed with KPMG LLP
("KPMG"), our independent auditors, the matters required to be discussed by
Statement on Auditing Standards No. 61. The Audit Committee has received the
written disclosures and the letter from KPMG required by Independence Standards
Board Standard No. 1 and has discussed with KPMG its independence. Based on the
review and discussions described above, among other things, the Audit Committee
recommended to the Board of Directors that the audited consolidated financial
statements be included in Safeguard's Annual Report on Form 10-K for fiscal
2000.
Audit Fees. The aggregate fees billed by Safeguard's independent auditors for
professional services rendered in connection with the audit of our consolidated
financial statements included in our Annual Report on Form 10-K for fiscal year
2000, as well as for the review of our consolidated financial statements
included in Safeguard's Quarterly Reports on Form 10-Q during 2000, totaled
$558,600 (excluding expenses reimbursed by Safeguard).
Financial Information Systems Design and Implementation Fees. No fees other than
those described above under the caption "Audit Fees" and those described below
under the caption "All Other Fees" were billed to Safeguard by our independent
auditors for professional services in 2000.
All Other Fees. The only fees billed to Safeguard by its principal auditors
during 2000 other than those described above related to services provided with
regard to Safeguard's equity offering pursuant to a registration statement on
Form S-3 and various miscellaneous matters, and such fees totaled $661,000. The
Audit Committee believes that the foregoing expenditures are compatible with
maintaining the independence of our principal auditors.
AUDIT COMMITTEE
Russell E. Palmer, Chairman
Vincent G. Bell, Jr.
Michael J. Emmi
John W. Poduska, Sr.
The foregoing Audit Committee Report shall not be deemed to be incorporated by
reference into any of Safeguard's previous or future filings with the Securities
and Exchange Commission, except as otherwise explicitly specified by Safeguard
in any such filing.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP has been our independent certified public accountants since 1986. We
intend to retain them for 2001. Representatives of KPMG LLP are expected to be
present at the annual meeting, will have an opportunity to make a statement at
the meeting if they desire to do so, and will be available to respond to
appropriate questions.
[SAFEGUARD LOGO]
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25
EXHIBIT A
SAFEGUARD SCIENTIFICS, INC.
AUDIT COMMITTEE CHARTER
The Audit Committee (the "Committee") is a committee of the board of directors.
Its primary function is to assist the board in fulfilling its oversight
responsibilities by reviewing the financial information which will be provided
to the shareholders and others, the systems of internal controls which
management and the board of directors have established, and the audit process.
In meeting its responsibilities, the Audit Committee is expected to:
1. Provide an open avenue of communication between the independent accountant
and the board of directors, as the independent accountant is ultimately
accountable to the board of directors and the committee.
2. Review and update the Committee's charter annually.
3. Select and evaluate the independent accountants to be nominated, approve
the compensation of the independent accountant, and if necessary, replace
the independent accountants. The Committee will inform the board of
directors of its decisions.
4. Assess the independence of the independent accountant, including obtaining
from the accountants a written statement identifying all relationships
between the accountant and the Company, and discussing with the auditor
any disclosed relationships that may impact objectivity and independence
of the auditor, and take any other actions deemed necessary to assure the
independence of the auditor.
5. Inquire of management and the independent accountant about significant
risks or exposures and assess the steps management has taken to minimize
such risk to the Company, and whether the independent accountants concur.
Management will continue to communicate with the Committee on a timely
basis concerning issues which could have a material effect on the Company.
6. Review subsidiary Audit Committee minutes annually.
7. Review the audit scope and plan of the independent accountant for the
Company and major subsidiaries.
8. Review with the independent accountant the coordination of audit effort to
assure completeness of coverage, reduction of redundant efforts, and the
effective use of audit resources.
9. Consider and review with the independent accountant:
a. The adequacy of the Company's internal controls including
computerized information system controls and security where
applicable.
b. Any related significant findings and recommendations of the
independent accountant together with management's responses thereto,
including the Company's subsidiaries.
10. Review with management and the independent accountant at the completion of
the annual examination:
a. Any significant accounting or financial reporting issues, including
significant adjustments, management judgments and accounting
estimates, significant new accounting policies and disagreements
with management.
A-1
26
b. Any significant changes in the financial statements and accounting
disclosures.
c. The independent accountant's audit of the financial statements and
its report thereon.
d. Any significant changes required in the independent accountant's
audit plan.
e. Any significant difficulties or disputes with management encountered
during the course of the audit.
f. Other matters related to the conduct of the audit which are to be
communicated to the Committee under generally accepted auditing
standards.
11. Review Annual Report and SEC year-end filings, prior to issuance when
possible, and consider whether the information contained in these
documents is consistent with the information contained in the financial
statements.
12. Review and discuss with management and the independent accountant, any
significant accounting or financial reporting issues, including
significant adjustments, management judgments and accounting estimates,
significant new accounting policies and disagreements with management
prior to filing interim financial reports with the SEC or other
regulators.
13. [Effective January 1, 2001] Review disclosures in the Company's Annual
Proxy Statement regarding the independence of Audit Committee members, and
adoption of a formal written Audit Committee charter, and approve the
Audit Committee charter for inclusion in the proxy statement (every 3
years).
14. [Effective January 1, 2001] Review and approve a report to be included
annually in the proxy statement, which includes the following:
a. Statement that the Audit Committee has reviewed and discussed the
audited financial statements with management
b. Statement that the Audit Committee has discussed with the
independent auditors matters covered by SAS No. 61
c. Statement that the Audit Committee has received and discussed with
the auditors disclosures regarding the auditors independence.
15. Management will review policies and procedures with respect to officers'
expense accounts and perquisites, including use of corporate assets and
will report to the Committee once a year on its findings. The Audit
Committee also will consider the results of any review of these areas by
the independent accountant.
16. Management will monitor compliance with the Company's code of conduct and
report to the Committee once a year.
17. Review legal and regulatory matters that may have a material impact on the
financial statements, related company compliance policies, and programs
and reports received from regulators. The Company's general counsel will
meet with the Committee once a year.
18. Meet with the independent accountant, and management in separate executive
sessions to discuss any matters that the Committee or these groups believe
should be discussed privately with the Audit Committee.
19. Report Committee actions to the board of directors with such
recommendations as the Committee may deem appropriate.
A-2
27
20. The Audit Committee shall have the power to conduct or authorize
investigations into any matters within the Committee's scope of
responsibilities. The Committee shall be empowered to retain independent
counsel, accountants, or others to assist it in the conduct of any
investigation.
21. The Committee shall meet at least three times per year or more frequently
as circumstances require. The Committee may ask members of management or
others to attend the meeting and provide pertinent information as
necessary.
22. The Committee will perform such other functions as assigned by law, the
Company's charter or bylaws, or the board of directors.
The membership of the Audit Committee shall consist of three independent members
of the board of directors who shall serve at the pleasure of the board of
directors. Audit Committee members and the Committee chairman shall be
designated by the full board of directors upon the recommendation of the
nominating committee.
The duties and responsibilities of a member of the Audit Committee are in
addition to those duties set out for a member of the board of directors.
A-3
28
[SAFEGUARD LOGO]
800 THE SAFEGUARD BUILDING
435 DEVON PARK DRIVE
WAYNE, PA 19087
(610) 293-0600
AUTOMATED INVESTOR RELATIONS LINE: (888) SFE-1200
TOLL-FREE NUMBER (877) 506-7371
FOR MORE INFORMATION ABOUT SAFEGUARD, PLEASE VISIT OUR WEBSITE
AT WWW.SAFEGUARD.COM
DIRECTIONS TO THE DESMOND GREAT VALLEY HOTEL AND CONFERENCE CENTER
One Liberty Boulevard
Malvern, PA 19355
(610) 296-9800
FROM PHILADELPHIA
Take the Schuylkill Expressway (I-76) West. Follow I-76 West to Route 202 South.
Take Route 202 South to the Great Valley/Route 29 North Exit. At the end of the
ramp, proceed straight through the traffic light onto Liberty Boulevard. The
hotel will be on the right.
FROM SOUTH NEW JERSEY
Take I-95 South to Route 322 West. Take 322 West to US Route 1 South to Route
202 North. Take Route 202 North to Great Valley/Route 29 North Exit. Turn right
onto Route 29 North. Turn right at second light onto Liberty Boulevard. The
hotel will be on the left.
FROM PHILADELPHIA AIRPORT
Take I-95 South to 476 North. Follow 476 North to the Schuylkill Expressway
(I-76) West to Route 202 South. Take Route 202 South to the Great Valley/Route
29 North Exit. At the end of the ramp, proceed straight through the traffic
light onto Liberty Boulevard. The hotel will be on the right.
FROM WILMINGTON AND POINTS SOUTH (DELAWARE AND MARYLAND)
Take I-95 to Route 202 North. Follow Route 202 North to the Great
Valley/Route 29 North Exit. Turn right onto Route 29 North. Turn right
at the second light onto Liberty Boulevard. The hotel will be on the
left.
FROM HARRISBURG AND POINTS WEST
Take PA Turnpike East to Exit 24, Valley Forge. Take Route 202 South to
Great Valley/Route 29 North Exit. At the end of the ramp, proceed
straight through traffic light onto Liberty Boulevard. The hotel will be
on the right.
FROM NEW YORK AND POINTS NORTH
Take the New Jersey Turnpike South to Exit 6, the Pennsylvania Turnpike
extension. Follow the Turnpike West to Exit 24, Valley Forge. Take
Route 202 South to the Great Valley/Route 29 North Exit. At the end of
the ramp, proceed through the light onto Liberty Boulevard. The hotel is
on the right.
29
PROXY
SAFEGUARD SCIENTIFICS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Please sign and date this proxy, and indicate how you wish to vote, on the back
of this card. Please return this card promptly in the enclosed envelope. OUR
BOARD OF DIRECTORS IS A VITAL RESOURCE. MAKE YOUR VOTE COUNT! NO MATTER HOW MANY
SHARES YOU HOLD, WE CONSIDER YOUR VOTE IMPORTANT AND ENCOURAGE YOU TO VOTE AS
SOON AS POSSIBLE.
When you sign and return this proxy card, you
- - appoint Warren V. Musser, Harry Wallaesa, and N. Jeffrey Klauder, and each
of them (or any substitutes they may appoint), as proxies to vote your
shares, as you have instructed, at the annual meeting on May 23, 2001, and
at any adjournments of that meeting,
- - authorize the proxies to vote, in their discretion, upon any other
business properly presented at the meeting, and
- - revoke any previous proxies you may have signed.
IF YOU DO NOT INDICATE HOW YOU WISH TO VOTE, THE PROXIES WILL VOTE FOR ALL
NOMINEES TO THE BOARD OF DIRECTORS AND AS THEY MAY DETERMINE, IN THEIR
DISCRETION, WITH REGARD TO ANY OTHER MATTER PROPERLY PRESENTED AT THE MEETING.
FOLD AND DETACH HERE
[SAFEGUARD LOGO]
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087-1945
Phone: (610) 293-0600
Toll-Free: (877) 506-7371
Fax: (610) 293-0601
Automated Investor Relations Line: (888) SFE-1200
For those of you unable to attend the meeting in person, we invite you to
participate over the Internet through our website at http://www.safeguard.com.
30
Please mark [X]
your votes as
indicated in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL DIRECTORS.
1. ELECTION OF DIRECTORS
Nominees:
Warren V. Musser Jack L. Messman
Vincent G. Bell, Jr. Russell E. Palmer
Walter W. Buckley, III John W. Poduska, Sr.
Michael J. Emmi Heinz Schimmelbusch
Robert A. Fox Hubert J.P. Schoemaker
Robert E. Keith, Jr. Harry Wallaesa
Carl J. Yankowski
FOR [ ] WITHHELD [ ]
ALL FOR ALL
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WHILE VOTING FOR THE
REMAINDER, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST.
TO CUMULATE VOTES, WRITE "CUMULATE FOR" IN THE SPACE BELOW, FOLLOWED BY THE NAME
OF THE NOMINEE(S) AND THE NUMBER OF VOTES TO BE CAST FOR EACH NOMINEE.
- --------------------------------------------------------------------------------
SIGNATURE(S) DATE: , 2001
-------------------------------------- -------------------
YOU MUST SIGN EXACTLY AS YOUR NAME APPEARS ON THIS CARD. If shares are jointly
owned, you must both sign. Include title if you are signing as an attorney,
executor, administrator, trustee or guardian, or on behalf of a corporation or
partnership.
FOLD AND DETACH HERE