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:
[GRAPHIC OMITTED] Safeguard Scientifics, Inc.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 8, 1997
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of Safeguard Scientifics, Inc. (the
"Company") will be held at the Desmond Great Valley Hotel and Conference Center,
One Liberty Boulevard, Routes 202 and 29, Malvern, Pennsylvania 19355 on
Thursday, May 8, 1997 at 2:00 p.m., local time, for the following purposes:
1. to elect twelve directors;
2. to consider and vote on a proposal to amend the Company's
1990 Stock Option Plan; and
3. to transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
The Board of Directors has established the close of business on March
21, 1997 as the record date for the determination of shareholders entitled to
receive notice of, and to vote at, the meeting or any adjournments thereof. In
order that the meeting can be held and a maximum number of shares can be voted,
whether or not you plan to be present at the meeting in person, please complete,
date and sign, and promptly return the enclosed Proxy in the return envelope
provided for your use. No postage is required if mailed in the United States.
By order of the Board of Directors,
JAMES A. OUNSWORTH
Secretary
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
April 3, 1997
SAFEGUARD SCIENTIFICS, INC.
800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087
PROXY STATEMENT
The enclosed Proxy is solicited on behalf of the Board of Directors
(the "Board") of Safeguard Scientifics, Inc. (the "Company") for use at the
Annual Meeting of Shareholders to be held on May 8, 1997 (such meeting and any
adjournment or adjournments thereof referred to as the "Annual Meeting") for the
purposes set forth in the accompanying Notice of Annual Meeting of Shareholders
and in this Proxy Statement. This Proxy Statement and the enclosed Proxy are
being mailed to shareholders on or about April 3, 1997.
Voting Securities
Only the holders of shares of common stock, par value $.10 per share
(the "Common Stock"), of the Company of record at the close of business on March
21, 1997 (the "Shares") are entitled to receive notice of, and to vote at, the
Annual Meeting. On that date, there were 31,424,983 Shares outstanding and
entitled to be voted at the Annual Meeting. It is the intention of the persons
named in the Proxy to vote as instructed by the shareholders or, if no
instructions are given, to vote as recommended by the Board. Each holder of
Shares entitled to vote will have the right to one vote for each Share standing
in his name on the books of the Company, except that in the election of
directors, each shareholder will have the right of cumulative voting. In such
election, each holder of Shares entitled to vote will have a number of votes
equal to the number of Shares he owns multiplied by the total number of
directors to be elected, and he may cast the whole of such votes for one
candidate, or distribute them among any two or more candidates. To vote
cumulatively, a shareholder must write the name of the nominee or nominees
selected and the number of votes to be cast for each nominee, followed by the
words "cumulate for," on the line provided under Item 1 of the Proxy.
Discretionary authority to cumulate votes is hereby solicited by the Board.
The twelve nominees receiving the highest number of affirmative votes
of the Shares present or represented and entitled to be voted shall be elected
as directors. The approval of the proposal to amend the Company's 1990 Stock
Option Plan requires a majority of the votes cast at a meeting at which a quorum
representing a majority of all outstanding voting stock of the Company is
present, either in person or by proxy, and voting on such proposed amendment.
Votes withheld from any director, broker non-votes and abstentions are counted
for purposes of determining the presence of a quorum for the transaction of
business at the Annual Meeting. Only those votes that are cast as affirmative or
negative will be treated as voting on any matter presented at the Annual
Meeting.
Revocability of Proxy
Execution of the enclosed Proxy will not affect a shareholder's right
to attend the Annual Meeting and vote in person. A shareholder, in exercising
his right to vote in person at the Annual Meeting, effectively revokes all
previously executed Proxies. In addition, the Proxy is revocable at any time
prior to the effective exercise thereof by filing notice of revocation with the
Secretary of the Company or by filing a duly executed Proxy bearing a later
date.
1
Persons Making the Solicitation
The cost of soliciting Proxies, including the actual expenses incurred
by brokerage houses, nominees and fiduciaries in forwarding Proxy materials to
beneficial owners, will be borne by the Company. In addition to solicitation by
mail, certain officers and other employees of the Company may solicit Proxies in
person or by telephone.
Shareholder Proposals for 1998 Annual Meeting
Shareholders intending to present proposals at the next Annual Meeting
of Shareholders to be held in 1998 must notify the Company of the proposal no
later than December 4, 1997.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 21, 1997, the Company's
Common Stock beneficially owned by each person known to the Company to be the
beneficial owner of more than 5% of the outstanding Shares, the Company's only
class of equity securities outstanding. The table also shows the number of
Shares owned beneficially by each director or nominee, by each named executive
officer, and by all directors and officers as a group.
Number of
Shares Percent of
Owned (1) Class
--------- ----------
Warren V. Musser
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087(2)........................... 3,124,021 9.9%
Vincent G. Bell, Jr.(3) ........................ 473,568 1.5%
Donald R. Caldwell(4)........................... 254,684 *
Robert A. Fox(5)................................ 169,000 *
Delbert W. Johnson(5)........................... 135,999 *
Robert E. Keith, Jr.(6)......................... 22,338 *
Peter Likins, Ph.D.............................. 36,694 *
Jack L. Messman(5).............................. 57,000 *
Russell E. Palmer(7)............................ 21,094 *
John W. Poduska, Sr., Ph.D...................... 162,000 *
Heinz Schimmelbusch, Ph.D.(5)................... 42,691 *
Hubert J. P. Schoemaker, Ph.D.(5)............... 66,000 *
Jerry L. Johnson(5)............................. 43,128 *
Charles A. Root(5).............................. 391,409 1.2%
Edward R. Anderson.............................. 2,400 *
Executive officers and directors as a group
(19 persons)(8).............................. 5,426,514 17.0%
- ---------
* Less than 1% of the outstanding Common Stock.
(1) Except as otherwise disclosed, the nature of beneficial ownership is the
sole power to vote and to dispose of the shares (except for shares held
jointly with spouse).
2
(2) Includes 280,000 shares held by a charitable foundation of which Mr. Musser
is a director and an executive officer, and 40,000 shares held by the
Claire V. Sams Trust, of which Mr. Musser is the trustee. Mr. Musser
disclaims beneficial ownership of the shares owned by the charitable
foundation and the Claire V. Sams Trust. The reduction in Mr. Musser's
ownership interest from 12.5% in May 1996 to 9.9% presently is a result of
a transfer of shares made pursuant to a property settlement in a divorce
proceeding. Those shares are now held by Betty Musser, whose present
intention is to retain control of the stock.
(3) Includes 10,000 shares held by a charitable foundation. Mr. Bell shares
voting and dispositive power of these shares.
(4) Includes 300 shares held in a custodial account for a minor child and 6,250
shares held in trust for the benefit of his spouse.
(5) Includes for Messrs. Fox, Delbert Johnson, Messman, Schimmelbusch,
Schoemaker, Jerry Johnson and Root, 9,000 shares, 31,300 shares, 15,000
shares, 42,000 shares, 15,000 shares, 40,000 shares and 104,800 shares
that may be acquired pursuant to stock options that are currently
exercisable or that will become exercisable by May 20, 1997.
(6) Includes 300 shares held by Mr. Keith's spouse and 15,000 shares that may
be acquired pursuant to stock options that are currently exercisable or
that will become exercisable by May 20, 1997. Mr. Keith disclaims
beneficial ownership of the shares owned by his spouse.
(7) Includes 3,000 shares held by Mr. Palmer's spouse and 12,000 shares that
may be acquired pursuant to stock options that are currently exercisable
or that will become exercisable by May 20, 1997. Mr. Palmer disclaims
beneficial ownership of the shares owned by his spouse.
(8) Includes 537,500 shares that may be acquired pursuant to stock options that
are currently exercisable or that will become exercisable by May 20, 1997.
As of March 21, 1997, CompuCom Systems, Inc. ("CompuCom") and Tangram
Enterprise Solutions, Inc. ("Tangram") are majority owned subsidiaries of the
Company. As of March 21, 1997, officers and directors of the Company
beneficially owned the following percentage of shares of common stock
outstanding in each such company: (i) CompuCom: Mr. Anderson, 1.8%; all officers
and directors of the Company as a group, other than Mr. Anderson, less than 1%;
and (ii) Tangram: all officers and directors as a group, approximately 1%.
I. ELECTION OF DIRECTORS
It is intended that the persons named as Proxies for the Annual Meeting
will vote in favor of the election of the following twelve nominees as directors
of the Company to hold office until the Annual Meeting of Shareholders in 1998
and until their successors are elected and have qualified. All of the nominees
are presently serving as directors of the Company. Each of the nominees has
consented to serve if elected. However, if any of the nominees should become
unavailable prior to the election, the holders of the Proxies may vote the
Proxies for the election of such other persons as the Board may recommend,
unless the Board reduces the number of directors to be elected.
The Board unanimously recommends that shareholders vote FOR the
election of the slate of nominees set forth in this Proposal. Proxies will be so
voted unless shareholders specify otherwise on their proxy cards. The twelve
nominees receiving the highest number of affirmative votes of the Shares
present or represented and entitled to be voted shall be elected as directors.
3
Has Been a
Principal Occupation and Business Director
Name Experience During Last Five Years Since Age
- ------------------------- ------------------------------------------- ---------- ---
Warren V. Musser Chairman of the Board and Chief
Executive Officer of the Company(1)(4)(5)........ 1953 70
Vincent G. Bell, Jr. President, Verus Corporation, a
management investment firm (1)(2)(4)(6).......... 1956 71
Donald R. Caldwell President and Chief Operating Officer
of the Company(7)................................ 1996 50
Robert A. Fox President, R.A.F. Industries, Inc. and
affiliates, diversified manufacturing,
distribution and service companies(2)(4)(8)...... 1981 67
Delbert W. Johnson Chairman and Chief Executive Officer,
Pioneer Metal Finishing, a specialty
metal finishing division
of the Company(9)................................ 1992 58
Robert E. Keith, Jr. President and Chief Executive Officer,
Technology Leaders Management, Inc.,
a venture capital management
company(10)...................................... 1996 55
Peter Likins, Ph.D. President, Lehigh University(3)(11).............. 1988 60
Jack L. Messman Chairman and Chief Executive Officer,
Union Pacific Resources Group Inc., an
energy company(3)(12)............................ 1994 57
Russell E. Palmer Chairman and Chief Executive Officer,
The Palmer Group, a corporate
investment firm(2)(3)(4)(13)..................... 1989 62
John W. Poduska, Sr., Ph.D. Chairman, Advanced Visual Systems, Inc.,
a provider of visualization software(3)(14)...... 1987 59
Heinz Schimmelbusch, Ph.D. Managing Director, Safeguard
International Fund, L.P., a
private equity fund, and President and
Chief Executive Officer of Allied
Resource Corporation, pursuing
technology-oriented investment
opportunities in process industries (1)(15)...... 1989 52
Hubert J.P. Schoemaker, Ph.D. Chairman of the Board and co-founder of
Centocor, Inc., a biotechnology
company (1)(16).................................. 1993 47
- ----------
(1) Member of the Executive Committee, of which Dr. Schoemaker is Chairman.
(2) Member of the Compensation Committee, of which Mr. Fox is Chairman.
(3) Member of the Audit Committee, of which Mr. Palmer is Chairman.
(4) Member of the Nominating Committee, of which Mr. Fox is Chairman.
4
(5) Mr. Musser is Chairman of the Board of Cambridge Technology Partners
(Massachusetts), Inc. and a director of Coherent Communications Systems
Corporation, CompuCom Systems, Inc. and National Media Corporation, and a
trustee of Brandywine Realty Trust. Mr. Musser also serves on a variety of
civic, educational and charitable Boards of Directors including The
Franklin Institute and the Board of Overseers of The Wharton School of the
University of Pennsylvania and serves as Vice President/Development, Cradle
Liberty Council, Boy Scouts of America, as Vice Chairman of The Eastern
Technology Council, and as Chairman of the Pennsylvania Council on Economic
Education.
(6) Mr. Bell is a director of BHC Financial Corp.
(7) Mr. Caldwell served as Executive Vice President of the Company from
November 1993 until February 1996, when he was promoted to President and
Chief Operating Officer. From 1991 through 1993, Mr. Caldwell was President
of Valley Forge Capital Group, Ltd., a business mergers and acquisition
advisory firm that he founded. From 1990 through 1991, Mr. Caldwell was
Chief Administrative Officer of Cambridge Technology Partners
(Massachusetts), Inc., a provider of systems integration, consulting and
custom system development services. Mr. Caldwell is a director of
Integrated Systems Consulting Group, Inc. and Diamond Technology Partners
Incorporated and is a nominee for election as a director of CompuCom
Systems, Inc. and Quaker Chemical Company of Philadelphia. Mr. Caldwell
also serves on a variety of civic and charitable boards, including The
Philadelphia Orchestra and The Pennsylvania Academy of Fine Arts, of which
he is Chairman.
(8) Mr. Fox is a director of Prime Bancorp, Inc.
(9) Mr. Johnson served as the President and Chief Executive Officer of Pioneer
Metal Finishing from 1978 until October 1994, when he assumed the position
of Chairman of the Board and Chief Executive Officer. Mr. Johnson is a
director of Coherent Communications Systems Corporation, CompuCom Systems,
Inc., Ault, Inc., First Bank Systems, Inc. and Tennant Company, Inc. Mr.
Johnson was the Chairman of the Ninth District Federal Reserve Bank from
1991 to 1993 and was the 1993 Chairman of the Federal Reserve Board
Conference of Chairmen. Mr. Johnson is the brother of Jerry L. Johnson, an
executive officer of the Company.
(10) Mr. Keith served as President and Chief Operating Officer of Technology
Leaders Management, Inc. from 1991 until February 1996, when he was
promoted to President and Chief Executive Officer. Mr. Keith is a director
of Cambridge Technology Partners (Massachusetts), Inc., National Media
Corporation and Wave Technologies International, Inc.
(11) Dr. Likins also has served as a technical consultant for a number of
companies, including Boeing Aerospace Co., the Jet Propulsion Laboratory
and Dynacs Engineering Co. and was a member of the President's Council of
Advisors for Science and Technology from 1989 to 1993. Dr. Likins is a
director of Consolidated Edison Company of New York, Communications
Satellite Corporation and Parker-Hannifin Corp.
(12) Prior to joining Union Pacific Resources Group Inc. in 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,
from May 1988 until April 1991. Mr. Messman is a director of Cambridge
Technology Partners (Massachusetts), Inc., Novell, Inc., Tandy Corp., Union
Pacific Resources Group Inc. and USDATA Corporation.
(13) Prior to organizing The Palmer Group in June 1990, Mr. Palmer was Dean of
The Wharton School of the University of Pennsylvania from 1983 to June
1990. He was managing partner and Chief Executive Officer of Touche Ross &
Co. (now Deloitte & Touche) from 1972 to 1983. Mr. Palmer is a director of
Allied-Signal, Inc., Bankers Trust New York Corporation, Federal Home Loan
Mortgage Corporation, GTE Corporation, and The May Department Stores
Company.
(14) Prior to joining Advanced Visual Systems, Inc. in January 1992, Dr. Poduska
was President and Chief Executive Officer of Stardent Computer, Inc., a
computer manufacturer, from December 1989 to December 1991. Dr. Poduska is
a director of Cambridge Technology Partners (Massachusetts), Inc. and Union
Pacific Resources Group, Inc.
(15) 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 and as Deputy Chairman of the Board
of Management from July 1988 to March 1989.
(16) Dr. Schoemaker is also a co-founder and a director of Tocor II, Inc.
5
Committees and Meetings of the Board of Directors
The Board held six meetings in 1996. The Company's Board of Directors
has appointed standing Audit, Compensation, Executive and Nominating Committees.
The Compensation Committee, which met once in 1996, fixes compensation levels
including incentive compensation for all officers and other principal employees,
and administers the stock option plans and the long term incentive plan. The
Audit Committee met four times during 1996. The Audit Committee recommends the
firm to be appointed as independent certified public accountants to audit the
Company's financial statements, discusses the scope and results of the audit
with the independent certified public accountants, reviews with management and
the independent certified public accountants the Company's interim and year-end
operating results, considers the adequacy of the internal accounting controls
and audit procedures of the Company, and reviews the non-audit services to be
performed by the independent certified public accountants. The Executive
Committee, which acted by unanimous consent during 1996, is authorized to act
upon all matters with respect to the management of the business and affairs of
the Company, except that its authority to authorize and approve investments by
the Company, other than investments made in the normal course of business, is
limited to investments of up to $5 million per transaction in respect of any
particular company, entity or person, and up to $10 million in the aggregate
between Board meetings. The Nominating Committee, which was established by the
Board in February 1996, is responsible for recommending nominees for election to
the Company's Board of Directors. The Nominating Committee will consider
qualified candidates recommended by shareholders, who should submit any such
recommendations, including a detailed statement of qualifications, to the
Nominating Committee, c/o the Corporate Secretary, Safeguard Scientifics, Inc.,
800 The Safeguard Building, 435 Devon Park Drive, Wayne, PA 19087-1945. All of
the directors, with the exception of Mr. Keith and Dr. Schoemaker, attended at
least 75% of the total number of Board and Committee meetings of which they were
members during the period in which they served as a director.
Directors' Compensation
In 1996, directors who were not employees received an annual cash
retainer of $17,500, plus $1,000 for each Board meeting attended and $500 for
each Committee meeting attended on a date other than a Board meeting date. In
addition, Mr. Fox and Mr. Palmer, as Chairman of the Compensation Committee and
Audit Committee, respectively, received an annual cash retainer of $1,000.
The Company has deferred compensation plans ("Deferred Compensation
Plan") covering certain of its directors and a limited number of officers. All
contributions to the Deferred Compensation 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, the participant is entitled to receive (as a level
payment over 15 years or as a lump sum) an amount equal to the aggregate credits
to the participant's account plus an investment growth factor. Under the
Deferred Compensation Plan, Mr. Bell began receiving quarterly payments of
$3,100 in February 1992, which was reduced to $3,000 in February 1994. These
payments will continue, subject to adjustment in accordance with the terms of
the Deferred Compensation Plan, for a period of 15 years. The Company has
purchased life insurance contracts to provide it with funds estimated to be
sufficient to cover its obligations under the Deferred Compensation Plan, and
the Company is the owner and beneficiary of such contracts. If assumptions as to
mortality experience, future policy dividends and other factors are realized,
the Company will recover an amount equal to all benefit payments under the
Deferred Compensation Plan, the premium payments on the insurance contracts, and
a portion of the interest earned on the use of the premium payments.
6
Directors' Stock Options
In 1989, the Company adopted the Stock Option Plan for Non-Employee
Directors ("Directors' Plan"). Pursuant to the formula contained in the
Directors' Plan, as amended, each Eligible Director was entitled to receive an
option to purchase 60,000 shares of the Company's Common Stock upon his initial
election to the Board, a Service Grant to purchase 12,000 shares of Common Stock
on the December 31st next occurring after the end of every two years' service
thereafter, and an option to purchase 3,000 shares of Common Stock for each $500
increase in directors' compensation in excess of 10% over the fee in effect
immediately before the date of such grant ("Incentive Grant"), subject to
reduction for any Service Grant made as of the same date. Pursuant to the terms
of the formula contained in the Directors' Plan, each Eligible Director would
have been entitled to receive an option to purchase 12,000 shares of Common
Stock on December 31, 1996. In light of recent amendments to Section 16 of the
Securities Exchange Act of 1934 eliminating the requirement that options granted
to directors be made pursuant to a formula plan, the Board determined that it
would be in the best interests of the Company to terminate the Directors' Plan
upon receipt of shareholder approval of the proposal contained in Item II of
this Proxy Statement. In lieu of the formula grant of 12,000 options under the
Directors' Plan that was to be made to each director, on December 31, 1996, each
director of the Company, other than Messrs. Musser and Caldwell, received an
option to purchase 5,000 shares of the Company's common stock at an exercise
price of $31.00. The options vest 25% each year commencing on the first
anniversary of the grant date and have a term of eight years.
REPORT OF THE BOARD COMPENSATION COMMITTEE
The Compensation Committee of the Board (the "Committee") reviews and
approves management recommendations for compensation levels, including incentive
compensation, for the executives of the Company, and administers the Company's
stock option plans and long term incentive plan.
The current members of the Committee are all outside directors of the
Company. Warren V. Musser, who is Chairman of the Board and Chief Executive
Officer of the Company, was a member of the Committee until October 1996. Mr.
Musser, who is also the largest single shareholder of the Company, does not
participate in the Company's stock option plans or long term incentive plan. Mr.
Musser did not participate in decisions regarding his compensation.
One of the executive officers named in the compensation tables, Edward
R. Anderson, is employed and compensated by CompuCom, a publicly traded company
that is a majority owned subsidiary of the Company and its largest partnership
company. Mr. Anderson has not and does not participate in any of the Company's
compensation plans and his compensation arrangements are not reviewed by the
Committee. Consequently, the report of this Committee does not relate to the
compensation of Mr. Anderson.
7
Executive Compensation Policies
The Company's executive compensation program is designed to support the
Company's mission to achieve maximum returns for its shareholders by providing
active strategic management, operating guidance and innovative financing to its
partnership companies and transferring that value to shareholders via rights
offerings. The Company's objectives are to attract and retain outstanding
executives, to promote among them the economic benefits of stock ownership in
Safeguard and its partnership companies, and to motivate and reward executives
who, by their industry, loyalty and exceptional service, make contributions of
special importance to the success of the business of the Company.
Base compensation levels are initially established for new executives
on the basis of subjective factors, with reference to the experience and
achievements of the individual and the level of responsibility to be assumed in
the Company. Salary increases are awarded each year based on increased levels of
individual responsibility, to maintain an appropriate scale among company
executives based on relative positions and responsibilities, and on general
levels of inflation. Annual cash bonuses are intended to motivate executives to
achieve and exceed annual corporate performance targets and strategic
objectives. Target levels of executive bonuses are determined in advance for
each year as a percentage of base salary, which percentages are based on the
executive's ability to impact Company performance. Bonuses are awarded at
year-end based on a review of the level of achievement of financial and
strategic objectives as defined in the Company's plan and the plans of the
partnership companies (including the publicly held partnership companies) as
approved by the Company, and individual performance. Company performance, rather
than individual performance, is given the greatest weight in bonus
determinations. The Company's primary objective is to create and increase the
value of the Company and its partnership companies. Value creation at the
Safeguard level is reflected in the market price of its stock and the operating
performance and market value of its partnership companies. A significant mark of
the Company's success in creating value in partnership companies is the
successful completion of a rights offering of the partnership company's stock to
the Company's shareholders. Specific financial and strategic objectives may
include achievement of pre-tax operating earnings targets, strengthening a
partnership company's management/marketing team, building strategic alliances,
identifying and exploiting markets, increasing existing market share and
penetration, and obtaining additional financing. Based on the foregoing review,
bonuses are paid as a percentage of target amounts. Bonuses may exceed target
amounts when, in the judgment of the Committee, performance levels are deemed to
be superior.
Grants of Company stock options are intended to align the interests of
executives and key employees with the long-term interests of the Company's
shareholders and to encourage executives and key employees to remain in the
Company's employ. Generally, grants are not made every year, but are awarded
subjectively, based on a number of factors, including the Company's achievement
of financial and strategic objectives, the individual's contributions in
providing strategic leadership and oversight for the Company and its partnership
companies, and the amount and term of options already held by the individual.
The Company's long term incentive plan is intended to support the
Company's strategy of rewarding shareholders through rights offerings or other
dispositions to shareholders of selected Safeguard partnership companies. The
plan is designed to channel the energies of executives and key employees into
efforts that create shareholder value over the long term by enabling
participants to share in the results of their contributions through direct
participation in the growth of Safeguard's partnership companies. Growth of the
partnership companies benefits the Company's shareholders indirectly, by
increasing the value of the Company's ownership interest in the partnership
companies, and directly, by increasing the value of the stock in the publicly
held partnership companies previously distributed to the Company's shareholders
through rights offerings. Grants to executives under the long term incentive
plan may be made in the form of restricted stock in a partnership company or in
8
share units which entitle a grantee to participate in the appreciation of the
book value or the fair market value, at the Committee's discretion, of the stock
of a partnership company above set threshold levels. All share unit grants under
the plan are subject to vesting over a period of years and the attainment of
certain threshold levels. Shares subject to restricted stock awards are subject
to certain restrictions and are held in escrow by the Company until the
attainment of certain threshold levels. Book value and market value share units
are payable after a fixed period of years (subject to acceleration) in cash or
in stock of the partnership company if the threshold levels are achieved.
The Committee believes that its policy of aligning the interests of
executives and key employees with the long-term interests of the Company's
shareholders has been successful, as evidenced by the cumulative total return on
the Company's common stock, assuming investment in rights offerings, as shown in
the second stock performance graph that appears on page 16.
Company Policy on Qualifying Compensation
Internal Revenue Code Section 162(m), adopted in 1993, provides that
publicly held companies may not deduct in any taxable year compensation in
excess of one million dollars paid to any of the individuals named in the
Summary Compensation Table that is not "performance-based" as defined in Section
162(m). In order for incentive compensation to qualify as "performance-based"
compensation under Section 162(m), the Committee's discretion to grant awards
must be strictly limited. The Company believes that its 1990 Stock Option Plan,
as amended and described in Item II of this Proxy Statement, meets the
performance-based exception under Section 162(m). The Committee believes that
the benefit to the Company of retaining the ability to exercise discretion under
the Company's remaining incentive compensation plans outweighs the limited risk
of loss of tax deductions under Section 162(m). Therefore, the Committee does
not currently intend to seek to qualify any of its other incentive compensation
plans under Section 162(m).
CEO Compensation
The Committee determined in December 1995 that no increase would be
made for 1996 in base salary for Mr. Musser or any other executive officers of
the Company. The decision was based in part on a review of CEO compensation
among the largest companies in the Philadelphia metropolitan area in order to
keep Mr. Musser in the middle one-third of that group. Mr. Musser was awarded a
bonus for 1996 equal to 100% of his target bonus. This decision was based on the
continued success of the management team in conveying to the investment
community the value being created by the Company, as reflected in the
substantial stock price increase for the Company in 1996; and on the Company and
its partnership companies achieving a large portion of their strategic
objectives, the most significant of which were: the successful completion of two
rights offerings by Integrated Systems Consulting Group, Inc. and Sanchez
Computer Associates, Inc.; the announcement and filing of a registration
statement for a third rights offering by Diamond Technology Partners,
Incorporated; the completion of a $40 million fund-raising for Internet Capital
Group, LLC to pursue internet opportunities; an initial closing of over $80
million for SCP Capital Partners L.P. to pursue post-venture stage
opportunities; commencement of fund-raising efforts for TL Ventures III, a $285
million venture fund; completion of several mergers and acquisitions for certain
private partnership companies; the transfer of the Company's real estate
properties to a publicly traded REIT; and the successful completion of the
Company's $115 million convertible debt offering.
9
Other Executive Compensation
The Committee approved executive cash bonuses for 1996 equal to 100% of
the target bonus amounts. As noted above under discussion of the CEO's
compensation, these decisions were based on the significant stock price increase
for the Company and on the Company and its partnership companies achieving a
large portion of their financial and strategic objectives as outlined above.
Also considered to a lesser extent in awarding bonuses was each executive's
individual performance for the year. The Committee granted options under the
Company's 1990 Stock Option Plan to certain of its new executives and employees
and also granted options to certain executives and employees for exceptional
performance during 1996. The relative number of options granted to new
executives and employees was based on each such individual's responsibilities
assumed.
In February 1997, the Committee approved restricted stock awards and
share unit grants to key executives and key employees under the Company's long
term incentive plan in connection with investments made by the Company during
1996 in OAO International Corporation, Internet Capital Group, LLC, Mikros
Systems Corporation, Mobile Broadcasting Corporation, Sentry Technology Group,
Diablo Research Corporation, Whisper Communications, Micro Vision Medical
Systems, Inc., SCP Private Equity Partners, TL Ventures III, and Enertech
Capital Partners. These restricted stock awards and share unit grants will
provide the participants under the long term incentive plan with the opportunity
to acquire a maximum aggregate amount equal to 10% of the shares of stock held
by the Company in OAO International Corporation, Internet Capital Group, LLC,
Mikros Systems Corporation, Mobile Broadcasting Corporation, Sentry Technology
Group, Diablo Research Corporation, Whisper Communications, Micro Vision Medical
Systems, Inc., and up to 10% of the distributions made to the Company by SCP
Private Equity Partners, TL Ventures III, and Enertech Capital Partners in
excess of certain thresholds established by the Committee. Restricted stock
awarded under the long term incentive plan is held in escrow by the Company and
will be released to the grantee upon the attainment of certain thresholds and an
initial public offering or sale of the subject company, or in any event after 10
years if the grantee remains an employee of the Company. The share unit awards
are generally payable in four to five years (subject to adjustment by the
Committee), with the exception of share unit awards in venture funds which are
generally payable in ten years. Share unit awards may be paid in either cash or
in shares of stock of each of these companies, at the Committee's discretion,
and will be paid only if the market value of the shares of the subject company
or the distributions by a venture fund to the Company exceed certain threshold
levels established by the Committee, and payouts are based on the amount of the
excess value or distributions above the threshold level at the time of payout.
The awards under the long term incentive plan were allocated among the
executives and key employees based on their relative positions in the Company.
Mr. Musser does not participate in the long term incentive plan.
By the Compensation Committee:
Robert A. Fox Vincent G. Bell, Jr. Russell E. Palmer
Compensation Committee Interlocks and Insider Participation
Directors Fox, Bell and Palmer comprise the Compensation Committee. Mr.
Musser served on the Compensation Committee until October 1996, and is Chairman
of the Board and Chief Executive Officer of the Company. Mr. Musser did not
participate in discussions regarding his compensation and does not participate
in the Company's stock option plans or long term incentive plan.
10
EXECUTIVE COMPENSATION
Summary Compensation of Executive Officers
The following table sets forth information concerning compensation paid
during the last three fiscal years to the Chief Executive Officer and each of
the other four most highly compensated executive officers of the Company whose
salary and bonus exceeded $100,000 in 1996.
____________________________________________________________________________________________________________________________________
Long Term Compensation
---------------------------------------
Annual Compensation Awards Payouts
------------------------------------------------ ---------------------------------------
Securities Long
Other Underlying Term
Annual Restricted Options Incentive All Other
Name and Principal Salary Bonus Compen- Stock SARS Payouts Compen-
Position Year ($)(1) ($)(2) sation($)(3) Award(s)($)(4) (#)(5) ($)(6) sation ($)(7)
- ------------------ ---- -------- -------- ------------ -------------- ---------- --------- ------------
Warren V. Musser, 1996 $275,000 $137,500 -- -- -- -- $11,250
Chairman of the
Board and Chief 1995 275,000 206,000 -- -- -- -- 11,250
Executive Officer(8)
1994 250,000 125,000 -- -- -- -- 12,375
____________________________________________________________________________________________________________________________________
Donald R. Caldwell, 1996 $240,000 $117,998 -- $413,739 (9) 20,000 -- $15,398
President and Chief
Operating Officer 1995 240,000 278,305 -- 276,540 -- -- 11,250
1994 225,000 108,800 -- 77,841 450,000 -- 6,750
____________________________________________________________________________________________________________________________________
Charles A. Root, 1996 $240,000 $ 96,000 -- $413,739 (9) -- $ 87,561 $24,226
Executive Vice
President 1995 240,000 258,805 -- 276,540 200,000(10) 69,009 13,911
1994 225,000 78,800 -- 77,841 -- 106,877 15,907
____________________________________________________________________________________________________________________________________
Jerry L. Johnson, 1996 $200,000 $154,039 $ 46,110 $379,079 (9) -- -- $15,582
Senior Vice
President 1995 50,000 20,000 -- 62,297 100,000 -- 0
Operations(11)
____________________________________________________________________________________________________________________________________
Edward R. Anderson, 1996 $310,000 $360,907 -- -- -- -- $ 2,673
President and Chief
Executive Officer of 1995 310,000 416,020 -- -- -- -- 3,750
CompuCom Systems, Inc.
1994 310,000 310,000 $608,874 -- 350,000(12) -- 1,938
- ------------------------ --------- ----------- ----------- ------------ --------------- -------------- ----------- ------------
(1) Includes annual compensation that has been deferred by Messrs. Musser,
Caldwell, Root and Johnson pursuant to the Company's stock savings plan and
by Mr. Anderson pursuant to the CompuCom Systems, Inc. 401(k) matched
savings plan.
(2) With respect to Mr. Caldwell, the bonus paid in 1996 includes the value of
909 shares of Sybase, Inc. common stock awarded as a bonus in connection
with the Company's earn-out provisions resulting from the sale of Micro
Decisionware, Inc. to Sybase, Inc. With respect to Mr. Johnson, the bonus
paid in 1996 includes the value of 310 shares of Sybase, Inc. common stock
awarded as a bonus in connection with the Company's earn-out provisions
resulting from the sale of Micro Decisionware, Inc. to Sybase, Inc., and
the value of 1,163 shares of USDATA Corporation and 3,061 shares of
Integrated Systems Consulting Group, Inc. awarded as a bonus.
(3) The amount stated for Mr. Johnson includes, among other things, $34,034
for club dues and initiation fees. While other named executives enjoy
certain perquisites, for fiscal year 1996, perquisites and other personal
benefits for such executive officers did not exceed the lesser of $50,000
or 10% of any executive officer's salary and bonus and accordingly have
been omitted from the table as permitted by the rules of the Securities and
Exchange Commission.
11
(4) Any dividends that become payable will be paid on restricted stock
awards at the same rate as paid to all shareholders. At December 31, 1996,
each of Messrs. Caldwell and Root held the following shares of restricted
stock granted in prior years with a value of approximately $462,800: 34,137
shares of MultiGen, Inc., 4,603 shares of Professional Training Services,
Inc., 7,150 shares of Intellisource, Inc., 13,943 shares of DLB Systems,
Inc., 11,010 shares of Sentry Technology, 24,331 shares of FormMaker
Software, Inc., 39,375 shares of XL Vision, Inc., 17,000 shares of Diamond
Technology Partners, Inc., and 17,910 shares of New Paradigm Ventures,
Inc., and Mr. Johnson held 18,248 shares of restricted stock of FormMaker
Software, Inc. with a value of approximately $62,300. At December 31, 1996,
Messrs. Caldwell and Root each also held share units entitling them to
participate in a percentage of distributions made by Technology Leaders II
L.P. to the Company in excess of $10,028,000, and Mr. Root held share units
entitling him to participate in a percentage of distributions made by
Radnor Venture Partners, L.P. in excess of $9.6 million. The aggregate
value of the share unit holdings is indeterminate until the payment date
for each award. Restrictions on grants of shares of restricted stock of
Integrated Systems Consulting Group, Inc. awarded to Messrs. Caldwell and
Root in 1995 were released during 1996 upon the satisfaction of the
conditions of the grant.
(5) Except as otherwise indicated in individual footnotes, options in this
table are to acquire Common Stock of the Company.
(6) This amount represents distributions to Mr. Root equal to the value of
3,230 shares of Sybase, Inc. common stock as payment of share units in
Micro Decisionware, Inc. and $9,395 as payment for share units entitling
him to participate in a percentage of distributions made by Radnor Venture
Partners, L.P. previously awarded under the Company's long term incentive
plan.
(7) The stated amounts for fiscal 1996 include the following amounts:
$6,750 for each of Messrs. Musser, Caldwell, Root and Johnson as Company
contributions under the Company's Money Purchase Pension Plan; $4,500 for
each of Messrs. Musser, Caldwell and Root and $1,212 for Mr. Johnson as
Company matching contributions under the Company's Stock Savings Plan;
$4,148, $10,016, and $7,620 for each of Messrs. Caldwell, Root and Johnson,
respectively, for life insurance premiums; and as to Mr. Root, $2,960 of
above-market earnings on deferred compensation. With respect to Mr.
Anderson, the stated amount is for matching contributions made by CompuCom
under its 401(k) matched savings plan.
(8) Mr. Musser does not participate in the Company's stock option plans or long
term incentive plan.
(9) This amount represents the fair market value on the grant date of
February 12, 1997 of shares of restricted stock in OAO International
Corporation, Internet Capital Group, LLC, Mikros Systems Corporation,
Mobile Broadcasting Corporation, Sentry Technology Group, Diablo Research
Corporation, and Whisper Communications awarded to Messrs. Caldwell, Root
and Johnson and shares of restricted stock in Micro Vision Medical Systems,
Inc. awarded to Mr. Johnson. Messrs. Caldwell, Root and Johnson each also
received share units entitling them to participate in a percentage of
distributions made to the Company by Enertech Capital Partners in excess of
$6 million, by SCP Private Equity Partners, L.P. in excess of $40 million,
and by TL Ventures III in excess of $20.6 million. These share units have
an indeterminate value until the payment date for each award.
(10) Options granted by Coherent Communications Systems Corporation to acquire
shares of common stock of Coherent Communications Systems Corporation, an
affiliate of the Company.
(11) Mr. Johnson joined the Company in October 1995.
(12) Options granted by CompuCom Systems, Inc. to acquire shares of common stock
of CompuCom, a subsidiary of the Company.
12
Stock Options
The following tables set forth information with respect to options
granted and exercised during fiscal year 1996 and the number of unexercised
options and the value of unexercised in-the-money options at December 31, 1996.
The information set forth in these tables relates to options granted to the
named individuals by the Company to purchase shares of Company Common Stock,
stock appreciation rights granted in affiliated companies under the Company's
long term incentive plan, and options granted to certain of the named executives
by subsidiaries and affiliates of the Company to purchase shares of each such
subsidiary or affiliate.
__________________________________________________________________________________________________________________________
Option/SAR Grants in Last Fiscal Year
__________________________________________________________________________________________________________________________
Potential Realizable
Value
At Assumed Annual
Rates Of Stock Price
Appreciation
Individual Grants For Option Term(1)
__________________________________________________________________________________________________________________________
% of Total
Options/
SARS
Granted To
Options/ Employees Exercise Or
SARs In Fiscal Base Price Expiration 5% 10%
Name Granted (#)(2) Year ($/Sh)(3) Date ($) ($)
__________________________________________________________________________________________________________________________
Warren V. Musser 0 -- -- -- -- --
__________________________________________________________________________________________________________________________
Donald R. Caldwell 20,000 13.3% $31.00 12/12/04 $ 296,022 $709,025
__________________________________________________________________________________________________________________________
Charles A. Root 0 -- -- -- -- --
__________________________________________________________________________________________________________________________
Jerry L. Johnson 0 -- -- -- -- --
__________________________________________________________________________________________________________________________
Edward R. Anderson 0 -- -- -- -- --
__________________________________________________________________________________________________________________________
(1) The potential realizable values are based on an assumption that the
stock price of the shares of Common Stock of the Company appreciates at the
annual rate shown (compounded annually) from the date of grant until the
end of the option term. These values do not take into account amounts
required to be paid as income taxes under the Internal Revenue Code of
1986, as amended, and any applicable state laws or option provisions
providing for termination of an option following termination of employment,
nontransferability, or vesting over periods of up to five years. These
amounts are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's
estimate of future stock price growth of the shares of common stock of the
Company or any of its subsidiaries or affiliates.
(2) The option vests 25% each year commencing on January 2, 1998 and has an
eight-year term. The option continues vesting and remains exercisable so
long as employment with the Company or one of its subsidiaries continues.
The option exercise price may be paid in cash, by delivery of previously
acquired shares, subject to certain conditions, or same day sales (i.e.
cashless broker's exercises). The Compensation Committee has the authority
to modify the terms of outstanding options, including acceleration of the
exercise date of outstanding options.
(3) All options have an exercise price at least equal to the fair market value
of the shares subject to each option on the date of grant.
13
__________________________________________________________________________________________________________________________
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
__________________________________________________________________________________________________________________________
Number Of Securities Value Of Unexercised
Underlying Unexercised In-The-Money
Options/SARs 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 -- 0 0 -- --
__________________________________________________________________________________________________________________________
Donald R. Caldwell
Company Options 10,000 $ 283,958 214,470 200,000 $5,969,408 $5,024,994
__________________________________________________________________________________________________________________________
Charles A. Root
Company Options 62,000 $1,992,930 104,800 7,200 $3,026,235 $ 197,550
Coherent Options 40,000 735,651 0 120,000 -- 2,040,000
Tangram Options 0 -- 150,000 0 $ 750,000 --
Gandalf SARs 6,296 46,433 0 0 -- --
__________________________________________________________________________________________________________________________
Jerry L. Johnson
Company Options 0 -- 40,000 60,000 $ 417,500 $ 626,250
__________________________________________________________________________________________________________________________
Edward R. Anderson
CompuCom Options 0 -- 465,000 310,000 $3,545,625 $2,363,750
__________________________________________________________________________________________________________________________
(1) The value of unexercised in-the-money options is calculated based upon
(i) the fair market value of the stock at December 31, 1996 less the option
exercise price, multiplied by (ii) the number of shares subject to an
option. On December 31, 1996, the per share fair market values utilized in
calculating the values in this table were as follows: Company Common Stock,
$31.75; Coherent common stock, $19.50; Tangram common stock, $6.00; and
CompuCom common stock, $10.75.
14
STOCK PERFORMANCE GRAPHS
The following graph compares the cumulative total return on the
Company's Common Stock for the period from December 31, 1991 through December
31, 1996 with the cumulative total return on the Russell 2000 index and the peer
group index for the same period.
________________________________________________________________________________________________
1991 1992 1993 1994 1995 1996
________________________________________________________________________________________________
Safeguard 100 125 164 236 1015 1303
________________________________________________________________________________________________
Russell 2000 100 118 141 138 178 207
________________________________________________________________________________________________
Peer Group 100 111 147 138 194 250
________________________________________________________________________________________________
1. 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.
2. Assumes reinvestment of dividends. The Company has not distributed cash
dividends during this period. Assumes a value of zero for all rights issued
in rights offerings to the Company's shareholders.
3. Assumes an investment of $100 on December 31, 1991.
The following graph compares the cumulative total return on the
Company's Common Stock assuming an investment (as described below) in the stock
offered in each of the rights offerings to the Company's shareholders, with the
cumulative total return on the Russell 2000 index and the peer group index. The
Company's primary method of providing investment returns to its shareholders is
through rights offerings, and not through dividends. This graph, based on the
assumptions described below, should provide a more comprehensive indication of
the cumulative total return to the Company's shareholders by including both the
value of the Company's Common Stock and the value of the various common stocks a
shareholder could have obtained in the Company's rights offerings.
15
________________________________________________________________________________________________
1991 1992 1993 1994 1995 1996
________________________________________________________________________________________________
Safeguard 100 125 218 386 1437 1923
________________________________________________________________________________________________
Russell 2000 100 118 160 181 252 335
________________________________________________________________________________________________
Peer Group 100 111 168 178 271 391
________________________________________________________________________________________________
1. The peer group is the same as in the prior graph.
2. The cumulative total return on the Company's Common Stock assumes a cash
investment to exercise all of the rights received in each rights offering
made to the Company's shareholders since January 1, 1992. The subsequent
cumulative returns on such stock holdings are included in the cumulative
total return on the Company's Common Stock for the remainder of the
comparison period. For each one share of Company Common Stock held on
December 31, 1991, and taking into account stock splits, a shareholder is
assumed to have acquired: (a) in 1993, 0.5 shares of Cambridge Technology
Partners (Massachusetts), Inc. for $2.50; (b) in 1994, 0.667 shares of
Coherent Communications Systems Corporation for $3.33; (c) in 1995, 0.50
shares of USDATA Corporation for $2.50; and (d) in 1996, 0.5 shares of
Integrated Systems Consulting Group, Inc. for $2.50 and 0.60 shares of
Sanchez Computer Associates, Inc. for $3.30. During the comparison period,
the Company's Common Stock was split two-for-one to holders of record on
September 7, 1994, three-for-two to holders of record on August 31, 1995, and
two-for-one to holders of record on July 17, 1996; Cambridge Technology
Partners (Massachusetts), Inc. Common Stock was split three-for-one to
holders of record on May 29, 1996; and Coherent Communications Systems
Corporation Common Stock was split two-for-one to holders of record on June
9, 1995.
3. Assumes reinvestment of dividends for each comparison index and an additional
investment at the end of the month in which each Safeguard rights offering
became effective in an amount equal to the amount of the assumed cash
investment in the Safeguard index.
4. Assumes an initial investment of $100 on December 31, 1991.
5. Although the Company believes the assumptions made in calculating the values
of the chart are reasonable, other assumptions could be used that may cause
the graph of the Company's cumulative total return to be altered.
16
CERTAIN TRANSACTIONS
In connection with restricted stock awards made under the Company's
long term incentive plan in December 1994, January 1995, December 1995, and
February 1997, the Company made available to the recipients of those grants
two-year, full recourse loans to pay the related income taxes that the Company
was required to withhold on the compensation resulting from the acquisition of
such shares. The promissory notes delivered to the Company in connection with
the December 1994 awards ("December 1994 Note") bear interest at the rate of
6.55% per annum, with principal and accrued interest repayable in two
installments on each of the first and second anniversaries of the December Note.
The promissory notes delivered to the Company in connection with the January
1995 awards ("January 1995 Note"), the December 1995 awards ("December 1995
Note"), and the February 1997 awards ("February 1997 Note") bear interest at the
rate of 7.07% per annum, 5.57% per annum and 5.81% per annum, respectively, with
principal and accrued interest repayable on the second anniversary of the
respective notes. Each of these notes is secured by a pledge of the restricted
shares granted to each individual. The principal and accrued interest under the
December 1994 Note and January 1995 Note were paid in full by each note holder
in December 1996 and January 1997, respectively. The highest outstanding total
balance since January 1, 1996 under the notes delivered by each of Messrs.
Caldwell, Root, and Johnson, named executive officers of the Company, Thomas C.
Lynch, Michael W. Miles, James A. Ounsworth, and Glenn T. Rieger, executive
officers of the Company, and Delbert W. Johnson, a director of the Company, was
$204,335, $173,751, $28,926, $28,926, $86,927 $127,132, $86,932, and $63,301,
respectively, and the aggregate balance at February 28, 1997, was $313,002,
$313,002, $197,016, $197,016, $173,596, $232,491, $173,596 and $99,579,
respectively.
In March 1995, Robert E. Keith Jr., a director of the Company,
delivered to the Company a full recourse promissory note in the amount of
$275,288 in payment of certain taxes that were due upon Mr. Keith's exercise of
an option to purchase shares of Cambridge Technology Partners (Massachusetts),
Inc. Interest on the note accrues at the rate of 7.19% per annum and the
principal and accrued interest is payable on March 31, 1997. In March 1997, Mr.
Keith delivered to the Company $315,479 in full payment of the principal and
accrued interest on the note.
In August 1994, Mr. Anderson delivered to CompuCom, in payment of the
purchase price of 350,000 shares of common stock of CompuCom that he acquired
upon exercise of stock options, a full recourse, four-year promissory note in
the amount of $1,181,250 which is secured by a pledge of the 350,000 CompuCom
shares. Interest on the note accrues at the rate of 6% per annum and became
payable annually beginning January 1, 1996. Mr. Anderson made interest payments
of $100,584 and $65,050 in 1996 and 1997, respectively. In 1996, Mr. Anderson
undertook to renegotiate the terms of the note, and in February 1997, delivered
to CompuCom a new note in the amount of $1,181,250 which extended the payment of
the principal to February 15, 1999. In March 1997, Mr. Anderson delivered
$281,250 as a payment against principal, and CompuCom released 83,333 of the
CompuCom shares that secured the note.
The Company had extended to Valley Forge Capital Group, Ltd. ("VFCG"),
a business mergers and acquisition advisory firm owned by Donald R. Caldwell, an
interest-free $300,000 line of credit. The highest outstanding balance since
January 1, 1996 under the line of credit was $230,000. In connection with the
transfer by the Company of its real estate operations to Brandywine Realty Trust
in the fourth quarter 1996, the outstanding balance of $230,000 under the line
of credit was repaid through fees earned by VFCG in connection with the 1993 fee
agreement between the Company and VFCG regarding its real estate properties.
17
II. PROPOSAL TO AMEND THE COMPANY'S 1990 STOCK OPTION PLAN
The Board believes that the following proposal to adopt a resolution
providing for an amendment to the Company's 1990 Stock Option Plan is in the
best interests of the Company and its shareholders and unanimously recommends a
vote FOR approval of this proposal. Proxies received by the Board will be so
voted unless shareholders specify otherwise on their Proxy cards.
Background and Proposed Amendment
At the Annual Meeting, the shareholders will be asked to approve
amendments to the Company's 1990 Stock Option Plan which was originally approved
by the shareholders at the 1991 Annual Meeting and amended by the shareholders
at the 1993 Annual Meeting.
The proposed amendments are intended to simplify the 1990 Stock Option
Plan as permitted by recent changes in the rules applicable to stock option
plans under the federal securities laws. These rules generally provide an
exemption from certain adverse consequences that would otherwise befall stock
option plan participants under the federal securities laws, and most public
companies structure their stock option plans to take advantage of this
exemption. Among other things, the availability of an exemption under the new
rules no longer requires that stock option plans be administered by a
disinterested committee of the Board or that stock options be granted to
directors only pursuant to a plan that sets forth a formula pursuant to which a
director may be granted stock options.
In particular, the Board adopted amendments to the 1990 Stock Option
Plan, effective as of October 1996, (i) increasing the number of shares
authorized for issuance upon exercise of options granted or to be granted under
the 1990 Stock Option Plan by 250,000 shares, from 4,500,000 shares to 4,750,000
shares in the aggregate; (ii) adding non-employee directors and consultants as
participants under the 1990 Stock Option Plan; and (iii) limiting the maximum
aggregate number of shares of stock that shall be subject to Options granted
under the Plan to any optionee to 1,000,000 shares. The amendments also
eliminate the requirement for shareholder approval unless such approval is
otherwise required by the New York Stock Exchange or the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), permit the Committee to
terminate an employee's stock options in the event of an employee's termination
of employment for cause, and permit transferability of non-qualified stock
options in the Committee's discretion. The main purpose of the amendments set
forth under (i) and (ii) above was to eliminate the necessity of maintaining a
separate stock option plan for directors. Thus, upon receipt of shareholder
approval of this proposal, the Stock Option Plan for Non-Employee Directors (the
"Directors' Plan") will be terminated, and the 216,000 shares that remain
available for grant under the Directors' Plan will no longer be available for
future issuance. The additional shares that will be made available for the
granting of options under the 1990 Plan are intended primarily to replace the
shares that remain available at present under the Directors' Plan. The 1990
Stock Option Plan, as proposed to be amended, is hereinafter referred to as the
"1990 Plan."
Features of the 1990 Plan
Purpose of the 1990 Plan
The purpose of the 1990 Plan is to provide additional incentive to
employees, non-employee directors and independent consultants and advisors of
the Company and its subsidiaries and to increase their proprietary interest in
the success of the enterprise to the benefit of the Company and its
shareholders.
18
Shares Subject to the 1990 Plan
As of March 21, 1997, after giving effect to the proposed increase in
shares, there were 2,505,207 shares of Common Stock reserved for issuance upon
the exercise of incentive stock options ("ISOs"), as defined in Section 422 of
the Code, and non-qualified stock options ("NQSOs") under the 1990 Plan. Of the
shares reserved for issuance, 1,395,723 are subject to outstanding options and
1,109,484 remain available for future grant. Shares subject to options which
remain unexercised upon expiration or earlier termination of such options will
again become available for issuance in connection with stock options awarded
under the 1990 Plan. The closing price of the Company's Common Stock on the New
York Stock Exchange on March 21, 1997 was $19.00 per share.
Administration
The 1990 Plan is administered by the Compensation Committee (the
"Committee"), which currently is composed of Messrs. Fox, Bell and Palmer. The
Committee has the authority to interpret the 1990 Plan; to establish appropriate
rules and regulations for the proper administration of the 1990 Plan; to select
the persons to whom options should be granted; to determine the number of shares
to be covered by such options, the times and dates at which such options shall
be granted, and whether the options shall be ISOs or NQSOs; and generally to
administer the 1990 Plan.
Eligibility
Employees (including any directors who are also employees),
non-employee directors and independent consultants or advisors of the Company or
of any subsidiary who are significant contributors to the business of the
Company and its subsidiaries are eligible to participate in the 1990 Plan. On
March 21, 1997, there were approximately 90 persons eligible to participate in
the 1990 Plan.
Stock Options
The 1990 Plan requires that each optionee enter into a stock option
agreement with the Company which incorporates the terms of the options and such
other terms, conditions and restrictions, not inconsistent with the 1990 Plan,
as the Committee may determine. The maximum aggregate number of shares of stock
that shall be subject to options granted under the Plan to any optionee shall
not exceed 1,000,000 shares.
The option price will be determined by the Committee, but may not, with
respect to ISOs, be less than the greater of 100% of the fair market value of
the optioned shares of Common Stock or the par value thereof on the date of
grant. If the grantee of an ISO under the 1990 Plan owns more than 10% of the
total combined voting power of all shares of stock of the Company or of any
parent or subsidiary of the Company, the option price cannot be less than 110%
of the fair market value at the date of grant and the term of such option cannot
be more than five years.
The term of any other option granted under the 1990 Plan may not exceed
ten years. Options will become exercisable in such installments and on such
dates as the Committee may specify. The Committee may accelerate the exercise
date of any outstanding options, in its discretion, if it deems such
acceleration desirable. Any option held by an individual who dies while employed
by the Company or any subsidiary, or whose employment with the Company and all
subsidiaries is terminated, prior to the expiration date of such option, will
remain exercisable by the former employee or his personal representative for a
period of time following the employee's termination of employment or death as
provided for in the 1990 Plan and the applicable option agreement, provided,
however, that in the event of termination of employment
19
for cause, the Committee, in its discretion, may terminate all Options held by
an optionee at the date of termination and may require the optionee to forfeit
all shares underlying any exercised portion of an Option for which the Company
has not yet delivered the share certificates upon refund by the Company of the
exercise price paid by the optionee for such shares. Options are generally not
transferable, except at death, provided, however, that the Committee, in its
discretion, may permit the transfer of NQSOs pursuant to a domestic relations
order or to family members or other persons or entities on such terms as the
Committee may determine.
The 1990 Plan provides that the aggregate fair market value (determined
as of the time the ISO is granted) of the shares with respect to which ISOs are
exercisable for the first time by an optionee during any calendar year, under
the 1990 Plan and any other ISO plan of the Company, or any parent or subsidiary
of the Company, cannot exceed $100,000.
The option price is payable (i) in cash or its equivalent; (ii) in
shares of Common Stock of the Company previously acquired by the optionee,
provided that if such shares were acquired through exercise of an ISO, such
shares have been held by the optionee for a period of not less than the holding
period described in section 422(a)(1) of the Code on the date of exercise, and
that, in any case, such shares have been held by the optionee for the requisite
period of time necessary to avoid a charge to the Company's earnings for
financial reporting purposes and adverse accounting consequences to the Company
with respect to the option, and provided further that each optionee may use the
procedure described in this clause (ii) only once during any six-month period;
(iii) in any combination of (i) and (ii) above; or (iv) by delivering a properly
executed notice of exercise of the option to the Company and a broker, with
irrevocable instructions to the broker to promptly sell the underlying shares of
Common Stock and deliver to the Company the amount of sale proceeds necessary to
pay the exercise price of the option.
Adjustments Upon Changes in Capitalization, Mergers and Other Events
The number of shares issuable under the 1990 Plan and upon the exercise
of options outstanding thereunder, and the exercise price of such options, are
subject to adjustment in the event of a stock split, stock dividend or similar
change in the capitalization of the Company. In the event of a merger,
consolidation or other specified corporate transaction, options will be assumed
by the surviving or successor corporation, if any. However, in the event of such
a corporate transaction, the 1990 Plan also authorizes the Committee to
terminate options to the extent they are not exercised prior to consummation of
such a transaction, and to accelerate the vesting of options so that they are
immediately exercisable prior to the consummation of the transaction.
Duration and Amendment of the 1990 Plan
The Board has the power, without the consent of the shareholders, to
discontinue, amend or revise the terms of the 1990 Plan, provided, however, that
the Board shall not amend the Plan without shareholder approval if such approval
is required pursuant to the Code or the rules of any national securities
exchange or over-the-counter market on which the Company's shares are then
listed or included. The 1990 Plan will terminate on August 8, 2000 unless
terminated earlier by the Board. No options may be granted after such
termination, but options outstanding at the time of termination will remain
exercisable in accordance with their terms.
Federal Income Tax Consequences
Based on the advice of counsel, the Company believes that the normal
operation of the 1990 Plan should generally have, under the Code, and the
regulations and rulings thereunder, all as in effect on March 21, 1997, the
federal income tax consequences described below.
20
Incentive Stock Options
ISOs under the 1990 Plan are afforded favorable federal income tax
treatment under the Code. If an option is treated as an ISO, the optionee will
recognize no income upon the grant of the option and will recognize no income
upon the exercise of the option except to the extent provided by the alternative
minimum tax rules.
Upon an optionee's sale of the shares (assuming that the sale occurs no
sooner than two years after grant of the option and one year after exercise of
the option), any gain will be taxed to the optionee as long-term capital gain.
Under current law, capital gain is fully included in gross income and is taxed
at the same rate as ordinary income, to the extent such tax rate on capital gain
does not exceed 28%. Any loss on such sale will be treated as capital loss and
thus may be used to offset up to $3,000 per year ($1,500 in the case of a
married individual filing separately) of ordinary income.
If the optionee disposes of the shares prior to the expiration of the
one-year and two-year holding periods, the optionee will recognize ordinary
income in an amount generally measured as the difference between the exercise
price and the lower of the fair market value of the shares at the exercise date
or the sale price of the shares. Any gain recognized on such a premature sale of
the shares in excess of the amount treated as ordinary income will be
characterized as long-term capital gain if the sale occurs more than one year
after the exercise or as short-term capital gain if the sale is made earlier. If
an option is treated as an ISO and the optionee does not sell the shares prior
to the expiration of the one-year and two-year holding periods, the Company is
not entitled to any federal income tax deduction with respect to the ISO.
Non-qualified Stock Options
All other options granted under the 1990 Plan are NQSOs and will not
qualify for any special tax benefits to the optionee. Under present Treasury
Regulations, the Company's stock options are not deemed to have a readily
ascertainable value. Accordingly, an optionee will not recognize any taxable
income at the time he or she is granted an NQSO. However, upon exercise of the
option, the optionee will recognize ordinary income for federal income tax
purposes in an amount generally measured as the excess of the then fair market
value of the shares over the exercise price, which amount is subject to federal
income tax withholding. Upon an optionee's resale of such shares, any difference
between the sale price and the fair market value of such shares on the date of
exercise will be treated as capital gain or loss and will qualify for long-term
capital gain or loss treatment if the shares have been held for more than one
year.
The Company will be entitled to a tax deduction in the amount and at
the time that an optionee recognizes ordinary income with respect to the option,
but generally only if the Company withholds the required amounts under the Code.
Any required withholding in connection with the exercise of stock options under
the 1990 Plan may, with the consent of the Committee, be satisfied by the
optionee surrendering to the Company a portion of the shares issued upon
exercise of his option or by delivering to the Company other shares of Common
Stock of the Company.
The 1990 Plan is not qualified under Section 401(a) of the Code and is
not subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended to date. The comments set forth in the above paragraphs are
only a summary of certain of the federal income tax consequences relating to the
1990 Plan. No consideration has been given to the effects of state, local and
other tax laws on the optionee or the Company. The summary also
21
does not reflect the special tax rules applicable to optionees who could be
subject to liability under Section 16(b) of the Securities Exchange Act of 1934.
Approval by Shareholders
Approval of the amendments to the 1990 Plan requires the affirmative
vote of a majority of the votes cast at a meeting at which a quorum representing
a majority of all outstanding voting stock of the Company is present, either in
person or by proxy, and voting on the 1990 Plan. If not so approved, then (i)
the 1990 Plan in the form as approved by the shareholders at the 1993 Annual
Meeting will remain in full force and effect, (ii) the aggregate number of
shares of Common Stock that are subject to options granted under the 1990 Plan
will not exceed 4,500,000 shares of Common Stock; and (iii) options to purchase
an aggregate of 45,000 shares issued to non-employee directors of the Company on
December 31, 1996 will remain outstanding outside of the 1990 Plan and will be
governed by the terms of the individual stock option agreements.
INDEPENDENT PUBLIC ACCOUNTANTS
Since 1986, the Company has retained KPMG Peat Marwick LLP as its
independent public accountants and it intends to retain KPMG Peat Marwick LLP
for the current year ending December 31, 1997. Representatives of KPMG Peat
Marwick LLP are expected to be present at the Annual Meeting, will have an
opportunity at the Annual Meeting to make a statement if they desire to do so,
and will be available to respond to appropriate questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 ("1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities
("10% Shareholders"), to file reports of ownership and changes in ownership of
Common Stock and other equity securities of the Company with the Securities and
Exchange Commission ("SEC") and the New York Stock Exchange. Officers, directors
and 10% Shareholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on its review of the
copies of such forms received by it and written representations from certain
reporting persons that no other reports were required for those persons, the
Company believes that during the period January 1, 1996 through December 31,
1996, its officers, directors and 10% Shareholders complied with all applicable
Section 16(a) filing requirements, except for five transactions that were
reported late by Mr. Caldwell and one transaction that was reported late by
Mr. Root.
OTHER BUSINESS
The Company is not aware of any other business to be presented at the
Annual Meeting. If any other matter should properly come before the Annual
Meeting, however, the enclosed Proxy confers discretionary authority with
respect thereto.
The Company's Annual Report for 1996, including financial statements
and other information with respect to the Company and its subsidiaries, is being
mailed simultaneously to the shareholders but is not to be regarded as proxy
solicitation material.
Dated: April 3, 1997
22
SAFEGUARD SCIENTIFICS, INC.
1990 STOCK OPTION PLAN
As adopted by the Board of Directors on August 8, 1990, as amended by the Board
of Directors on February 25, 1991, and as approved by the shareholders on May 1,
1991; as amended by the Board of Directors on December 16, 1992, and as approved
by the shareholders on May 11, 1993; as amended by the Board of Directors on
October 25, 1996 and as approved by the shareholders on May ___, 1997. (Adjusted
for 9/7/94 [2-for-1], 8/31/95 [3-for-2] and 7/17/96 [2-for-1] stock splits)
1. Purpose. The purpose of this Stock Option Plan (the "Plan") is to
provide additional incentive, in the form of stock options which may be either
incentive stock options or non-qualified stock options, to employees (including
employees who are also officers or directors), non-employee directors and
Eligible Independent Contractors (as hereinafter defined) of Safeguard
Scientifics, Inc., a Pennsylvania corporation (the "Corporation"), and its
subsidiaries whose judgment, initiative and efforts contribute significantly to
the successful operation of the Corporation's business, and to increase their
proprietary interest in the success of the enterprise to the benefit of the
Corporation and its shareholders.
2. Definitions. When used in this Plan, unless the context otherwise
requires:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Cause" shall mean, except to the extent otherwise specified by
the Committee, a finding by the Committee that the Optionee has breached his or
her employment or service contract, non-competition agreement, or other
obligation with the Corporation, or has been engaged in disloyalty to the
Corporation, including without limitation, fraud, embezzlement, theft,
commission of a felony or proven dishonesty in the course of his or her
employment or service, or has disclosed trade secrets or confidential
information of the Corporation to persons not entitled to receive such
information.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
(d) "Committee" shall mean the Committee designated by the Board to
administer the Plan.
(e) "Eligible Independent Contractor" shall mean an independent
consultant or advisor hired by the Corporation to provide bona fide services for
the Corporation that are not in connection with the offer or sale of securities
in a capital-raising transaction.
1
(f) "Employed by the Corporation" shall mean employment as an
employee or Eligible Independent Contractor or member of the Board so that for
purposes of exercising Stock Options, an Optionee shall not be considered to
have terminated employment until the Optionee ceases to be an employee, Eligible
Independent Contractor or member of the Board, unless the Committee determines
otherwise.
(g) "ISO" shall mean a stock option which, at the time such option
is granted, qualifies as an incentive stock option, as defined in Section 422 of
the Code.
(h) "NQSO" shall mean a stock option which, at the time such option
is granted, does not qualify as an ISO as defined in the Code.
(i) "Optionee" shall mean an employee, non-employee director
or Eligible Independent Contractor to whom an award is granted pursuant to the
Plan.
(j) "Options" shall mean all ISOs and NQSOs which from time to time
may be granted under this Plan.
(k) "Share" shall mean a share of the common stock, $.10 par value,
of the Corporation.
(l) "Parent" shall mean any corporate parent of the Corporation, as
defined in Section 424(e) of the Code.
(m) "Plan" shall mean the Safeguard Scientifics, Inc. 1990 Stock
Option Plan, as amended from time to time.
(n) "Subsidiary" shall mean any corporate subsidiary of the
Corporation, as defined in Section 424(f) of the Code.
3. Administration. The Plan shall be administered by a Committee of the
Board of Directors, which shall consist of not less than two members of the
Board of the Corporation, who shall be appointed by, and shall serve at the
pleasure of, the Board. Each member of such Committee, while serving as such,
shall be deemed to be acting in his capacity as a director of the Corporation.
The Committee shall have full authority, subject to the terms of the
Plan, to select the persons to whom ISOs or NQSOs may be granted under the Plan,
to grant Options on behalf of the Corporation, and to set the number of Shares
to be covered by such Options, the times and dates at which such Options shall
be granted and exercisable and the other terms of such Options. The Committee
also shall have the authority to establish such rules and regulations, not
inconsistent with the provisions of the Plan, for the proper administration of
the Plan, and to amend, modify or rescind any such rules and regulations, and to
make such determinations and interpretations under, or in connection with, the
Plan, as it deems necessary or advisable. All such rules, regulations,
determinations and interpretations shall be binding and conclusive upon the
Corporation, its shareholders and all employees, and upon their respective legal
representatives, beneficiaries, successors and assigns and upon all other
persons claiming under or through any of them.
2
No member of the Board or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Option
granted under it. Nothing herein shall be deemed to expand the personal
liability of a member of the Board or Committee beyond that which may arise
under any applicable standards set forth in the Corporation's by-laws and
Pennsylvania law, nor shall anything herein limit any rights to indemnification
or advancement of expenses to which any member of the Board or the Committee may
be entitled under any by-law, agreement, vote of the shareholders or directors,
or otherwise.
4. Eligibility. The class of persons who shall be eligible to receive
Options under the Plan shall be the employees (including any employees who are
also officers or directors ), non-employee directors and Eligible Independent
Contractors of the Corporation or of any Subsidiary. More than one Option may be
granted to an Optionee under the Plan.
The Committee may require that the exercise of the Option shall be
subject to the satisfaction of conditions relating to the Optionee's position
and duties with the Corporation and the performance thereof.
5. Amount of Stock. The stock to be offered for purchase pursuant to
Options granted under this Plan shall be treasury or authorized but unissued
Shares, and the total number of such Shares which may be issued pursuant to
Options under this Plan shall not exceed 4,750,000 Shares, subject to adjustment
as provided in Section 16 hereof. The maximum aggregate number of shares of
Stock that shall be subject to Options granted under the Plan to any Optionee
shall not exceed 1,000,000. If any unexercised Options lapse or terminate for
any reason, the Shares covered thereby may again be optioned.
6. Stock Option Agreement. Each Option granted under this Plan shall be
evidenced by an appropriate stock option agreement ("Agreement"), which
Agreement shall expressly specify whether such Option is an ISO or NQSO and
shall be executed by the Corporation and by the Optionee. The Agreement shall
contain such terms and provisions, not inconsistent with the Plan, as shall be
determined by the Committee. Such terms and provisions may vary between
Optionees or as to the same Optionee to whom more than one Option may be
granted.
7. Option Price The exercise price under each Option granted hereunder
shall be determined by the Committee in its discretion, provided, however, that
the exercise price of an ISO shall in no event be less than an amount equal to
the fair market value of the Shares subject to the ISO on the date of grant.
8. Ten Percent Shareholders. If an Optionee owns more than ten percent
of the total combined voting power of all shares of stock of the Corporation or
of a Parent or Subsidiary at the time an ISO is granted to him, the Option price
for the ISO shall be not less than 110% of the fair market value of the Shares
subject to the ISO on the date the ISO is granted, and such ISO, by its terms,
shall not be exercisable after the expiration of five years from the date the
ISO is granted. The conditions set forth in this Section 8 shall not apply to
NQSOs.
3
9. Term and Exercise of Option.
(a) Term. Each Option shall expire on such date as may be determined
by the Committee with respect to such Option, but in no event shall any Option
expire more than ten years from the date it is granted. The date on which an
Option shall be granted shall be the date of the Committee's authorization of
the Option or such later date as may be determined by the Committee at the time
the Option is authorized.
(b) Exercise. Options shall be exercisable in such installments and on
such dates, and/or upon the occurrence of such events, as the Committee may
specify. The Committee may accelerate the exercise date of any outstanding
Options, in its discretion, if it deems such acceleration to be desirable.
Except as provided in Section 11, no Option shall be exercised unless at the
time of such exercise the Optionee is then employed by the Corporation or any
Subsidiary. Exercisable Options may be exercised, in whole or in part, from time
to time, by giving written notice of exercise to the Corporation at its
principal office, specifying the number of Shares to be purchased and
accompanied by payment in full of the aggregate Option price for such Shares.
Only full Shares shall be issued under the Plan, and any fractional Share which
might otherwise be issuable upon exercise of an Option granted hereunder shall
be forfeited.
(c) Payment of Option Price. The Option price shall be payable (i) in
cash or its equivalent; (ii) in the discretion of the Committee, in Shares
previously acquired by the Optionee (including Shares acquired in connection
with the exercise of an Option, subject to such restrictions as the Committee
deems appropriate), provided that, if such Shares were acquired through exercise
of an ISO, such Shares have been held by the Optionee for a period of not less
than the holding period described in section 422(a)(1) of the Code on the date
of exercise, and that, in any case, such Shares have been held by the Optionee
for the requisite period of time necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and adverse accounting
consequences to the Corporation with respect to the Option; (iii) in the
discretion of the Committee, in any combination of (i) and (ii) above; or (iv)
in the discretion of the Committee, by delivering a properly executed notice of
exercise of the Option to the Corporation and a broker, with irrevocable
instructions to the broker to deliver to the Corporation on the settlement date
the amount of sale proceeds necessary to pay the exercise price of the Option.
(d) Replacement Options. The Committee may, in its sole discretion and
at the time of the original option grant, authorize the Optionee to receive
automatically replacement Options pursuant to this part of the Plan. Any such
replacement Option shall be granted upon such terms and subject to such
conditions and limitations as the Committee may deem appropriate. Any
replacement Option shall cover a number of shares determined by the Committee,
but in no event more than the number of shares of the original Option exercised.
The per share exercise price of any replacement Option shall equal the then
current Fair Market Value of a Share, and shall have a term as determined by the
Committee at the time of grant of the original Option.
4
The Committee shall have the right, and may reserve the right in any
Option grant, in its sole discretion and at any time, to discontinue the
automatic grant of replacement Options if it determines the continuance of such
grants to no longer be in the best interest of the Corporation.
10. Maximum Value of ISOs. The aggregate fair market value of the
Shares, determined as of the date of grant, with respect to which ISOs first
become exercisable during any calendar year by an Optionee (under this Plan and
any other plan of the Corporation or any parent or Subsidiary) shall not exceed
$100,000.
11. Termination of Employment.
(a) Except as set forth below, and unless otherwise determined by
the Committee at or after grant, in the event of termination (voluntary or
involuntary) for any reason of an Optionee's employment by the Corporation or
any subsidiary, all Options granted hereunder to such Optionee, to the extent
exercisable on the date of termination, or to any greater extent permitted by
the Committee, may be exercised by the Optionee at any time within ninety days
after the date of such termination, provided, however, that in no event shall
any Option be exercisable after the expiration of its term.
(b) Unless otherwise determined by the Committee at or after
grant, if the termination of employment is due to disability (as defined in
Section 22(e)(3) of the Code), the Optionee shall have the privilege of
exercising the unexercised Option to the extent such Option was exercisable on
the date of such termination due to disability, or to any greater extent
permitted by the Committee, within one year of such date, provided, however,
that in no event shall any Option be exercisable after the expiration of its
term.
(c) Unless otherwise determined by the Committee at or after
grant, if the Optionee dies within three months of termination of employment or
the termination of employment is due to the death of the Optionee while in the
employ of the Corporation or a subsidiary, the estate of the holder or the
person or persons who acquired the right to exercise such Option by bequest or
inheritance, shall have the privilege of exercising the unexercised Option to
the extent such Option was exercisable on the date of such termination, or to
any greater extent permitted by the Committee, within one year of the earlier of
the date of termination or the date of death, but in no event shall any Option
be exercisable after the expiration of its term.
5
(d) Unless otherwise determined by the Committee at or after
grant, if the Corporation terminates the employment of the Optionee for Cause,
any Option held by such Optionee shall terminate as of the date the Optionee
ceases to be employed by the Corporation, and the Optionee shall automatically
forfeit all Shares underlying any exercised portion of an Option for which the
Corporation has not yet delivered the share certificates upon refund by the
Corporation of the exercise price paid by the Optionee for such Shares.
(e) Notwithstanding the provisions of subparagraphs 11(a), 11(b),
11(c) and 11(d) above, the Committee may determine with respect to any NQSO that
such NQSO shall terminate at a time later than the expiration of such
three-month or one-year periods, as set forth in the Agreement.
12. Withholding and Use of Shares to Satisfy Tax Obligations.
(a) Required Withholding. The obligation of the Corporation to
deliver Shares upon the exercise of any Option shall be subject to applicable
federal (including FICA), state and local tax withholding requirements. The
Corporation may require the Optionee or other person receiving such Shares to
pay to the Corporation the amount of any such taxes that the Corporation is
required to withhold with respect to such Options, or the Corporation may deduct
from other wages paid by the Corporation the amount of any withholding taxes due
with respect to such Options.
(b) Election to Withhold Shares. If the Committee so permits, an
Optionee may elect to satisfy the Corporation's income tax withholding
obligation with respect to an Option by having shares withheld up to an amount
that does not exceed the Grantee's maximum marginal tax rate for federal
(including FICA), state and local tax liabilities. The election must be in a
form and manner prescribed by the Committee and shall be subject to the prior
approval of the Committee.
13. Non-Assignability. Each Option granted under the Plan shall be
non-transferable by the Optionee except by will or the laws of descent and
distribution, and each Option shall be exercisable during the Optionee's
lifetime only by him. Notwithstanding the foregoing, the Committee may provide,
at or after grant, that an Optionee may transfer NQSOs pursuant to a domestic
relations order or to family members or other persons or entities on such terms
as the Committee may determine.
14. Issuance of Shares and Compliance with Securities Acts. Within a
reasonable time after exercise of an Option, the Corporation shall cause to be
delivered to the Optionee a certificate for the Shares purchased pursuant to the
exercise of the Option. At the time of any exercise of any Option, the
Corporation may, if it shall deem it necessary and desirable for any reason
connected with any law or regulation of any governmental authority relative to
the regulation of securities, require the Optionee to represent in writing to
the Corporation that it is his then intention to acquire the Common Stock for
investment and not with a view to distribution thereof and that such Optionee
will not dispose of such shares in any manner that would involve a violation of
applicable securities laws. In such event, no shares shall be issued to such
holder unless and until the Corporation is satisfied with such representation.
Certificates for Shares issued pursuant to the exercise of Options may bear an
appropriate securities law legend.
6
15. Rights as a Shareholder. An Optionee shall have no rights as a
shareholder with respect to Shares covered by his Option until the date of the
issuance or transfer of the Shares to him and only after such Shares are fully
paid. No adjustment shall be made for dividends or other rights for which the
record date is prior to the date of such issuance or transfer.
16. Stock Adjustments. In the event of a reorganization,
recapitalization, change of shares, stock split, or spinoff, stock dividend,
reclassification, subdivision or combination of shares, merger, consolidation,
rights offering, or any other change in the corporate structure or shares of the
Corporation, the Committee shall make such adjustment as it, in its sole
discretion, deems appropriate in the number and kind of shares authorized by the
Plan, in the number and kind of shares covered by grants made under the Plan or
in the purchase prices of outstanding Options, and such adjustments shall be
effective and binding on the Optionee and the Corporation for all purposes of
the Plan, provided, however, that no such adjustments shall be made to any ISO
without the Optionee's consent if such adjustment would cause such ISO to fail
to qualify as such under Section 422 of the Code.
In the event of a corporate transaction (as that term is described
in Section 424(a) of the Code and the Treasury Regulations issued thereunder as,
for example, a merger, consolidation, acquisition of property or stock,
separation, reorganization, or liquidation), each outstanding Option shall be
assumed by the surviving or successor corporation, provided, however, that in
the event of a proposed corporate transaction, the Committee may terminate all
or a portion of the outstanding Options if it determines that such termination
is in the best interests of the Corporation. If the Committee decides to
terminate outstanding Options, the Committee shall give each Optionee holding an
Option to be terminated not less than seven days' notice prior to any such
termination by reason of such a corporate transaction, and any such outstanding
Option which is to be so terminated may be exercised (if and only to the extent
that it is then exercisable) up to and including the date immediately preceding
such termination. Notwithstanding the preceding sentence, as provided in Section
9 hereof, the Committee, in its discretion, may accelerate, in whole or in part,
the date on which any or all Options become exercisable.
17. Adoption by Board and Approval by Shareholders. This Plan becomes
effective on August 8, 1990 (the date the Plan was adopted by the Board),
provided, however, that if the Plan is not approved by a majority of the votes
cast at a duly held meeting at which a quorum representing a majority of all
outstanding voting stock of the Corporation is, either in person or by proxy,
present and voting on the Plan, within 12 months after said date, the Plan and
all Options granted hereunder shall be null and void and no additional Options
shall be granted hereunder.
7
18. Termination and Amendment of the Plan. Subject to the right of the
Board to terminate the Plan prior thereto, the Plan shall terminate on, and no
Options shall be granted hereunder after, August 8, 2000. The Board shall have
power at any time, in its discretion, to amend, abandon or terminate the Plan,
in whole or in part, provided that no such action shall affect any Options
theretofore granted and then outstanding under the Plan. Nothing contained in
this Section 18, however, shall terminate or affect the continued existence of
rights created under Options issued hereunder and outstanding on August 8, 2000,
which by their terms extend beyond such date.
The Board may amend or terminate the Plan at any time or from time
to time, but no amendment or termination shall be made which would impair the
rights of an Optionee under an Option theretofore granted without the Optionee's
consent; and provided, further that the Board shall not amend the Plan without
shareholder approval if such approval is required pursuant to the Code or the
rules of any national securities exchange or over-the-counter market on which
the Corporation's Shares are then listed or included.
19. Interpretation. A determination of the Committee as to any
question which may arise with respect to the interpretation of the provisions of
this Plan or any Options shall be final and conclusive, and nothing in this
Plan, or in any regulation hereunder, shall be deemed to give any Optionee, his
legal representatives, assigns or any other person any right to participate
herein except to such extent, if any, as the Committee may have determined or
approved pursuant to this Plan. The Committee may consult with legal counsel who
may be counsel to the Corporation and shall not incur any liability for any
action taken in good faith in reliance upon the advice of such counsel.
20. Governing Law. With respect to any ISOs granted pursuant to the
Plan and the Agreements thereunder, the Plan, such Agreements and any ISOs
granted pursuant thereto shall be governed by the applicable Code provisions to
the maximum extent possible. Otherwise, the laws of the Commonwealth of
Pennsylvania shall govern the operation of, and the rights of Optionees under,
the Plan, the Agreements and any Options granted thereunder.
21. Rule 16b-3 Compliance. Unless an Optionee could otherwise transfer
Shares issued hereunder without incurring liability under Section 16(b) of the
Exchange Act, at least six months must elapse from the date of grant of an
Option to the date of disposition of the Shares issued upon exercise of the
Option.
8
PROXY
SAFEGUARD SCIENTIFICS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I hereby constitute and appoint Warren V. Musser, Donald R. Caldwell and
James A. Ounsworth, and each of them, my true and lawful agents and proxies
with full power of substitution in each, to vote all shares held of record by
me as specified on the reverse side and, in their discretion, on all other
matters which may properly come before the 1997 Annual Meeting of
Shareholders of Safeguard Scientifics, Inc. to be held on May 8, 1997, and at
any adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL NOMINEES TO THE BOARD OF DIRECTORS, FOR THE APPROVAL OF
THE AMENDMENTS TO THE COMPANY'S 1990 STOCK OPTION PLAN, AND AS THE PROXIES
MAY DETERMINE IN THEIR DISCRETION WITH REGARD TO ANY OTHER MATTER PROPERLY
BROUGHT BEFORE THE MEETING.
PLEASE MARK, SIGN AND DATE THE PROXY CARD ON THE REVERSE SIDE AND
RETURN PROMPTLY USING THE ENCLOSED ENVELOPE.
FOLD AND DETACH HERE
Please mark [X]
your votes as
indicated in
this example
The Board of Directors recommends a vote FOR proposals 1 and 2.
WITHHELD
1. ELECTION OF DIRECTORS FOR FOR ALL
Nominees: [ ] [ ]
Warren V. Musser Peter Likins TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
Vincent G. Bell, Jr. Jack L. Messman WITHHELD NOMINEE WHILE VOTING FOR THE REMAINDER, STRIKE A
Donald R. Caldwell Russell E. Palmer FOR FOR ALL LINE THROUGH THE NOMINEE'S NAME IN THE LIST.
Robert A. Fox John W. Poduska Sr. [ ] [ ] TO CUMULATE VOTES, WRITE THE NAME OF THE
Delbert W. Johnson Heinz Schimmelbusch NOMINEE(S) AND THE NUMBER OF VOTES TO BE CAST FOR
Robert E. Keith, Jr. Hubert J.P. Schoemaker EACH NOMINEE IN THE SPACE PROVIDED BELOW,
FOLLOWED BY "CUMULATE FOR."
2. AMENDMENT TO 1990 STOCK OPTION PLAN
FOR WITHHELD ABSTAIN
[ ] [ ] [ ]
SIGNATURE(S)____________________________________ DATE:___________________
THIS PROXY MUST BE SIGNED EXACTLY AS NAME APPEARS HEREIN. Joint tenants must both sign. When signing as attorney, executor,
administrator, trustee or guardian, or for a corporation or partnership, please give full title.
FOLD AND DETACH HERE
Your Proxy vote is important,
regardless of the number of shares you own.
Whether or not you plan to attend the meeting in person,
please complete, date and sign the above Proxy card and
return it without delay in the enclosed envelope.