<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ___)
Filed by the Registrant X
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
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)
SAFEGUARD SCIENTIFICS, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(a)(1)(ii), 14a-6(i)(l), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14(a)-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(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(1):
(4) Proposed maximum aggregate value of transaction:
X 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 From or Schedule and the date of its filing.
(1) Amount previously paid: $125
(2) Form, Schedule or Registration
Statement No.: PRE 14A
(3) Filing Party: Safeguard Scientifics, Inc.
(4) Date Filed: 2/28/96
Notes:
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
SAFEGUARD SCIENTIFICS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 9, 1996
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 9, 1996 at 4:00 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
Articles of Incorporation to increase the number of authorized shares of
common stock from 20,000,000 to 100,000,000; 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 20, 1996 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 2, 1996
<PAGE>
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 9, 1996 (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 2, 1996.
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 20,
1996 (the "Shares") are entitled to receive notice of, and to vote at, the
Annual Meeting. On that date, there were 14,750,557 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 Articles of
Incorporation requires a majority of the votes cast by all shareholders entitled
to vote thereon. 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.
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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 1997 ANNUAL MEETING
Shareholders intending to present proposals at the next Annual Meeting of
Shareholders to be held in 1997 must notify the Company of the proposal no later
than December 3, 1996.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 20, 1996, 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). . . . . . . . 1,843,346 12.5%
Vincent G. Bell, Jr.(3) . . . . . . 232,284 1.6%
Donald R. Caldwell(4). . . . . . . . 100,868 *
Robert A. Fox. . . . . . . . . . . . 91,500 *
Delbert W. Johnson(3). . . . . . . . 89,643 *
Robert E. Keith, Jr.(5). . . . . . . 3,602 *
Peter Likins, Ph.D.. . . . . . . . . 16,500 *
Jack L. Messman(3) . . . . . . . . . 19,500 *
Russell E. Palmer(6) . . . . . . . . 7,268 *
John W. Poduska, Sr., Ph.D.. . . . . 76,500 *
Heinz Schimmelbusch, Ph.D.(3). . . . 46,671 *
Hubert J. P. Schoemaker, Ph.D.(3). . 24,000 *
Jean C. Tempel(7). . . . . . . . . . 184,112 1.2%
Charles A. Root(3) . . . . . . . . . 187,838 1.3%
Edward R. Anderson . . . . . . . . . 1,200 *
James W. Dixon . . . . . . . . . . . 0
Executive officers and directors as a group
(18 persons)(8) . . . . . . . . . 3,097,665 20.5%
- ----------
(*) Less than 1%.
(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).
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(2) Includes 75,000 shares held by a charitable foundation of which Mr. Musser
is a director and an executive officer, 20,000 shares held by the Claire V.
Sams Trust, of which Mr. Musser is the trustee, and 31,338 shares held by
Mr. Musser's spouse. Mr. Musser disclaims beneficial ownership of the
shares owned by the charitable foundation, the Claire V. Sams Trust, and
his spouse.
(3) Includes for Messrs. Bell, Johnson, Messman, Schimmelbusch, Schoemaker and
Root, 4,500 shares, 13,200 shares, 16,500 shares, 46,500 shares, 9,000
shares, and 60,600 shares that may be acquired pursuant to stock options
that are currently exercisable or that will become exercisable by May 19,
1996.
(4) Includes 150 shares held in a custodial account for a minor child, 2,700
shares held in trust for the benefit of his spouse, and 67,235 shares that
may be acquired pursuant to stock options that are currently exercisable or
that will become exercisable by May 19, 1996.
(5) Includes 150 shares held by Mr. Keith's spouse. Mr. Keith disclaims
beneficial ownership of the shares owned by his spouse.
(6) Includes 1,500 shares held by Mr. Palmer's spouse and 2,500 shares that may
be acquired pursuant to stock options that are currently exercisable or
that will become exercisable by May 19, 1996. Mr. Palmer disclaims
beneficial ownership of the shares owned by his spouse.
(7) Includes 3,000 shares held by Ms. Tempel's spouse and 68,082 shares that
may be acquired pursuant to stock options that are currently exercisable or
that will become exercisable by May 19, 1996. Ms. Tempel disclaims
beneficial ownership of the shares owned by her spouse.
(8) Includes 340,717 shares that may be acquired pursuant to stock options that
are currently exercisable or that will become exercisable by May 19, 1996.
As of March 20, 1996, CompuCom Systems, Inc. ("CompuCom") and Tangram
Enterprise Solutions, Inc. ("Tangram") are majority owned subsidiaries of the
Company. As of March 20, 1996, 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, 1.5%; all
officers and directors of the Company as a group, other than Mr. Anderson,
approximately 2.1%; and (ii) Tangram: all officers and directors as a group,
less than 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 1997
and until their successors are elected and have qualified. All of the nominees,
with the exception of Donald R. Caldwell and Robert E. Keith, Jr., 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.
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<TABLE>
<CAPTION>
HAS BEEN A
PRINCIPAL OCCUPATION AND BUSINESS DIRECTOR
NAME EXPERIENCE DURING LAST FIVE YEARS SINCE AGE
- ---------------------------- ------------------------------------------- ----------- ---
<S> <C> <C> <C>
Warren V. Musser Chairman of the Board and Chief
Executive Officer of the Company(1)(2)(4)(5) 1953 69
Vincent G. Bell, Jr. President, Verus Corporation, a
management investment firm (1)(2)(4)(6) 1956 70
Donald R. Caldwell President and Chief Operating Officer
of the Company(7) . . . . . . 49
Robert A. Fox President, R.A.F. Industries, Inc. and
affiliates, diversified manufacturing,
distribution and service companies(2)(4) 1981 66
Delbert W. Johnson Chairman and Chief Executive Officer,
Pioneer Metal Finishing, a specialty
metal finishing company(8). . 1992 57
Robert E. Keith, Jr. President and Chief Executive Officer,
Technology Leaders Management, Inc.,
a venture capital management
company(9). . . . . . . . . . 54
Peter Likins, Ph.D. President, Lehigh University(3)(10) 1988 59
Jack L. Messman President and Chief Executive Officer,
Union Pacific Resources Group Inc., an
energy company and a subsidiary of
Union Pacific Corporation(3)(11) 1994 56
Russell E. Palmer Chairman and Chief Executive Officer,
The Palmer Group, a corporate investment
firm(2)(3)(4)(12) . . . . . . 1989 61
John W. Poduska, Sr., Ph.D. Chairman, Advanced Visual Systems, Inc.,
a provider of visualization software(3)(13) 1987 58
Heinz Schimmelbusch, Ph.D. President and Chief Executive Officer,
Safeguard International Group, Inc.,
an international arm of the Company,
and President and Chief Executive Officer
of Allied Resource Corporation, pursuing
technology-oriented investment
opportunities in process industries,
including environmental services(1)(14) 1989 51
Hubert J.P. Schoemaker, Ph.D. Chairman of the Board and co-founder of
Centocor, Inc., a biotechnology
company (1)(15) . . . . . . . 1993 46
</TABLE>
__________
(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.
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(5) Mr. Musser is Chairman of the Board of Cambridge Technology Partners
(Massachusetts), Inc. and a director of Coherent Communications Systems
Corporation and CompuCom Systems, Inc. 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 and as Vice Chairman of The Eastern
Technology Council.
(6) Mr. Bell is a director of BHC Financial Corp. and Hunt Manufacturing Co.,
Inc.
(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.
(8) Mr. Johnson served as the President and Chief Executive Officer of Pioneer
Metal Finishing, which includes a division and a subsidiary of the Company,
from 1978 until October 1994, when he assumed the position of Chairman of
the Board and Chief Executive Officer of Pioneer Metal Finishing. Mr.
Johnson is a director of Coherent Communications Systems Corporation,
CompuCom Systems, Inc., Ault, Inc., First Bank Systems, Inc. and Tennant
Company. 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.
(9) 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., Gandalf
Technologies, Inc., and Wave Technologies International, Inc.
(10) 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.
(11) 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 Corporation, Union Pacific Resources Group Inc. and USDATA
Corporation.
(12) Prior to organizing The Palmer Group in June 1990, Mr. Palmer was Dean of
The Wharton School of the University of Pennsylvania from 1982 to June
1990. He was managing partner and Chief Executive Officer of Touche Ross
& Co. (now Deloitte & Touche) from 1972 to 1982. Mr. Palmer is a director
of Allied-Signal, Inc., Bankers Trust New York Corporation, Federal Home
Loan Mortgage Corporation, GTE Corporation, Imasco Limited, and The May
Department Stores Company.
(13) 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.
(14) 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. Dr. Schimmelbusch is a director
of Northfield Minerals, Inc.
(15) Dr. Schoemaker is also a co-founder and a director of Tocor II, Inc.
5
<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board held five meetings in 1995. The Company's Board of Directors has
appointed standing Audit, Compensation, Executive and Nominating Committees.
The Compensation Committee, which met once in 1995, 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 1995. 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 met three times during 1995, 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 $2.5 million per transaction in respect of any
particular company, entity or person, and up to $5 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 stockholders, 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 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 1995, 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 and key
employees. 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.
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During the first half of 1995, the Company had a consulting arrangement
with The Palmer Group, of which Mr. Palmer serves as Chairman and Chief
Executive Officer. Under this arrangement, the Company received guidance and
assistance in organizing and moderating strategic planning seminars for the
Company's management team and had access to the resources of The Palmer Group,
including research as to certain industries, companies and other aspects of
business. The Palmer Group received a total of $12,000 under this consulting
arrangement during 1995.
DIRECTORS' STOCK OPTIONS
Non-Employee Directors of the Company also participate in the Stock Option
Plan for Non-Employee Directors ("Directors' Plan"). Pursuant to the Directors'
Plan, as amended, each Eligible Director receives an option to purchase 30,000
shares of the Company's Common Stock upon his election. Thereafter, each
Eligible Director received or will receive (i) a Service Grant to purchase 6,000
shares of Common Stock on December 31, 1994; (ii) a Service Grant to purchase
6,000 shares of Common Stock on the December 31st next occurring after the end
of every two years' service thereafter provided that an Eligible Director has
completed two years of additional service since the immediately preceding grant;
and (iii) an option to purchase 1,500 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"); provided,
however, that each Service Grant to which an Eligible Director would be entitled
would be reduced by the number of shares subject to any Incentive Grant made as
of the same date. The exercise price of each option is equal to the fair market
value of the shares on the date of grant. The maximum number of shares of
Common Stock subject to options granted to an Eligible Director under the
Directors' Plan cannot exceed 60,000 shares. No options were granted under this
plan during 1995.
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 members of the Committee are all outside directors of the Company
except for Mr. Musser, who is Chairman of the Board and Chief Executive Officer
of the Company. 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 does not participate in decisions regarding his
compensation.
Two of the executive officers named in the compensation tables, James W.
Dixon and Edward R. Anderson, are employed and compensated by CompuCom, a
publicly traded company that is a majority owned subsidiary of the Company and
its largest partnership company. Messrs. Dixon and Anderson have not and do
not participate in any of the Company's compensation plans and their
compensation arrangements are not reviewed by the Committee. Consequently, the
report of this Committee does not relate to the compensation of Messrs. Dixon
and Anderson.
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
7
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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
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
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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 adjustment by the Committee in certain circumstances) 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's 1990 Stock Option Plan qualifies as a
"performance-based" compensation plan under currently effective rules. 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
Mr. Musser's base salary for 1995 was fixed by the Committee in December
1994 and represented a 10% increase from his prior base salary. The increase
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 1995 equal to 150%
of his target bonus. This decision was based on the 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 increases for the Company
as well as its public partnership companies; and on the Company and its
partnership companies achieving or exceeding a large portion of their strategic
objectives, the most significant of which were: substantial achievement of
management's operating goals and objectives for 1995; the increase in the
Company's earnings per share; the continued strong sales and profitability
growth of CompuCom in a constantly changing marketplace; the successful rights
offering of stock in USDATA Corporation; continued strong sales and
profitability growth by Cambridge Technology Partners and Coherent
Communications Systems Corporation; the consummation of several strategic
acquisitions; the successful completion of a $113 million funding for Technology
Leaders II; and the positioning of several partnership companies for significant
future growth.
OTHER EXECUTIVE COMPENSATION
The Committee approved executive cash bonuses for 1995 equal to 150% of the
target bonus amounts. As noted above under discussion of the CEO's
compensation, these decisions were based on the significant stock price
increases for the Company and its public partnership companies, and on the
Company and its partnership companies achieving or exceeding a large
9
<PAGE>
portion of their financial and strategic objectives as outlined above, and
reflect the Committee's policy of providing superior compensation for
superior performance. 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 to many of its current executives and
employees. The relative number of options granted to new executives and
employees was based on each such individual's current responsibilities.
The Committee approved restricted stock awards and share unit grants during
1995 to key executives and key employees under the Company's long term incentive
plan in USDATA Corporation, Technology Leaders II, Integrated Systems Consulting
Group, Inc., Interactive Marketing Ventures, L.L.C., MultiGen, Inc., New
Paradigm Ventures, Inc., nu.millennia|inc., Professional Training Services,
Inc., Intellisource, Inc., DLB Systems, Inc., Value Sourcing Group, Inc., RMS
Technologies, Inc. and FormMaker Software, Inc. 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 each of these partnership
companies. 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 will be payable in four to five years
(subject to adjustment by the Committee). 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 exceeds certain threshold levels established by the Committee,
based on the amount of the excess value 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 Warren V. Musser
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors Fox, Bell, Palmer and Musser comprise the Compensation Committee.
Mr. Musser is Chairman of the Board and Chief Executive Officer of the Company.
Mr. Musser does not participate in discussions regarding his compensation and
does not participate in the Company's stock option plans or long term incentive
plan.
10
<PAGE>
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 $100,000 in 1995.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------- -------------------------- ----------
SECURITIES LONG
OTHER UNDERLYING TERM ALL
ANNUAL RESTRICTED OPTIONS/ INCENTIVE OTHER
SALARY BONUS COMPENSATION STOCK SARS PAYOUTS COMPENSA-
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($)(3) AWARD(S)($)(4) (#)(5) ($)(6) TION($)(7)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Warren V. Musser, Chairman of the 1995 $275,000 $206,000 -- -- -- $11,250
Board and Chief Executive 1994 250,000 125,000 -- -- -- 12,375
Officer(8) 1993 235,000 135,000 -- -- -- 11,098
- ----------------------------------------------------------------------------------------------------------------------------------
Donald R. Caldwell, President 1995 $240,000 $278,305 -- $276,540(10) -- -- $11,250
and Chief Operating Officer(9) 1994 225,000 108,800 -- 77,841 225,000 -- 6,750
- ----------------------------------------------------------------------------------------------------------------------------------
Charles A. Root, Executive 1995 $240,000 $258,805 -- $276,540(10) -- $ 69,009 $13,911
Vice President 1994 225,000 78,800 -- 77,841 200,000(11) 106,877 15,907
1993 210,000 85,000 -- -- 9,000 -- 17,908
- ----------------------------------------------------------------------------------------------------------------------------------
James W. Dixon, Former Chairman 1995 $310,000 $416,020 $197,211 -- 300,000(12) -- $ 3,750
of the Board of CompuCom Systems, 1994 310,000 310,000 -- -- -- -- 3,143
Inc.(13) 1993 310,000 471,200 -- -- -- -- 4,497
- ----------------------------------------------------------------------------------------------------------------------------------
Edward R Anderson, President and 1995 $310,000 $416,020 -- -- -- -- $ 3,750
Chief Executive Officer of 1994 310,000 310,000 $608,874 -- 350,000(12) -- 1,938
CompuCom Systems, Inc.(14) 1993 121,022 235,600 -- -- 775,000(12) -- 0
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes annual compensation that has been deferred by Messrs. Musser,
Caldwell and Root pursuant to the Company's stock savings plan and by
Messrs. Dixon and Anderson pursuant to the CompuCom Systems, Inc.
401(k) matched savings plan.
(2) With respect to Messrs. Dixon and Anderson, approximately 9% of the bonus
earned for services rendered during 1995 has been deferred. Of this
deferred amount, 50% will be paid in February 1997 and 25% will be paid in
each of February 1998 and 1999, subject to forfeiture upon termination of
employment with CompuCom or its subsidiaries. With respect to Mr.
Caldwell, the bonus paid in 1995 includes the value of 863 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 37,984 shares of
restricted stock of USDATA Corporation awarded in January 1995 under the
Company's Long Term Incentive Plan. With respect to Mr. Root, the bonus
paid in 1995 includes the value of 37,984 shares of restricted stock of
USDATA Corporation awarded in January 1995 under the Company's Long Term
Incentive Plan. Restrictions on grants of shares of USDATA Corporation
to Messrs. Caldwell and Root were released during 1995 upon the
satisfaction of the conditions of the grants.
(3) The amount reported for Mr. Dixon includes, among other things, relocation
expenses totaling $176,240. While other named executives enjoy certain
perquisites, for fiscal year 1995, 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
<PAGE>
(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, 1995, each of
Messrs. Caldwell and Root held the following shares of restricted stock
with a value of approximately $354,381: 34,137 shares of MultiGen, Inc.,
11,000 shares of nu.millennia|inc., 4,603 shares of Professional Training
Services, Inc., 13,309 shares of Integrated Systems Consulting Group, Inc.,
7,150 shares of Intellisource, Inc., 13,943 shares of DLB Systems, Inc.,
48,661 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. At December 31, 1995, Mr. Root also held
23,156 share units in Premier Solutions, Ltd. and 22,540 share units in
Micro Dynamics Ltd. The aggregate value of the share unit holdings is
indeterminate until the payment date for each award.
(5) Except as otherwise indicated in individual footnotes, options in this
table are to acquire Common Stock of the Company.
(6) This amount represents the value of 3,055 shares of Sybase, Inc. common
stock distributed to Mr. Root as payment of share units in Micro
Decisionware, Inc. previously awarded under the Company's long term
incentive plan.
(7) The stated amounts for fiscal 1995 include the following amounts: $6,750
for each of Messrs. Musser, Caldwell and Root as Company contributions
under the Company's Money Purchase Pension Plan; $4,500 for each of Messrs
Musser, Caldwell and Root as Company matching contributions under the
Company's Stock Savings Plan; and as to Mr. Root, $2,661 of above-market
earnings on deferred compensation. With respect to Messrs. Dixon and
Anderson, the stated amounts are 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) Mr. Caldwell has been an executive officer of the Company since November
1993, but was not on the Company's payroll until January 1994.
(10) This amount represents the fair market value on the grant date of shares of
restricted stock in Integrated Systems Consulting Group, Inc., MultiGen,
Inc., New Paradigm Ventures, Inc. nu.millennia|inc., Professional Training
Services, Inc., Intellisource, Inc., DLB Systems, Inc., Value Sourcing
Group, Inc., and FormMaker Software, Inc. awarded to Messrs. Caldwell and
Root under the Company's long term incentive plan. Restricted stock
awarded under the long term incentive plan generally vests 25% each year,
subject to acceleration of vesting upon the attainment of certain
thresholds and an initial public offering or sale of the subject company.
(11) Options granted by Coherent Communications Systems Corporation to acquire
shares of common stock of Coherent Communications Systems Corporation, an
affiliate of the Company.
(12) Options granted by CompuCom Systems, Inc. to acquire shares of common stock
of CompuCom, a subsidiary of the Company.
(13) Mr. Dixon resigned as Chairman in 1996 to serve as Chairman and Chief
Executive Officer of ClientLink, Inc., a subsidiary of CompuCom.
(14) Mr. Anderson joined CompuCom in August 1993.
12
<PAGE>
STOCK OPTIONS
The following tables set forth information with respect to options granted
and exercised during fiscal year 1995 and the number of unexercised options and
the value of unexercised in-the-money options at December 31, 1995. 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
<TABLE>
<CAPTION>
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(#) YEAR(2) ($/Sh)(3) DATE ($) ($)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Warren V. Musser 0 -- -- -- -- --
Donald R. Caldwell 0 -- -- -- -- --
Charles A. Root 0 -- -- -- -- --
James W. Dixon
CompuCom Options(4) 300,000 21.6% $3.50 02/09/05 $660,339 $1,673,429
Edward R. Anderson 0 -- -- -- -- --
</TABLE>
(1) The potential realizable values are based on an assumption that the stock
price of the shares of Common Stock of the Company, or shares of common
stock of the subsidiary or affiliate for which the options were granted,
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) Based upon options granted by CompuCom to its employees in 1995 to purchase
a total of 1,387,500 shares of CompuCom common stock.
(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.
(4) The option vests 20% each year commencing on January 2, 1996 and has an
ten-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, or, in the discretion of
CompuCom's Compensation Committee, by (i) delivery of previously acquired
shares, subject to certain conditions, (ii) same day sales, i.e. cashless
broker's exercises, or (iii) by delivery of a note, and CompuCom's
Compensation Committee, in its discretion at the time of exercise, may elect
to cash out all or a portion of the option by paying Mr. Dixon an amount, in
cash or shares, equal to the excess of the fair market value of the shares
over the exercise price. CompuCom's Compensation Committee has the
authority to modify the terms of outstanding options, including acceleration
of the exercise date of outstanding options.
13
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
--------------------------- ---------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Warren V. Musser 0 -- 0 0 -- --
Donald R. Caldwell
Company Options 22,765 $ 530,665 67,235 135,000 $2,801,461 $5,625,005
Charles A. Root
Company Options 0 -- 60,600 26,400 $2,679,899 $1,146,474
Coherent Options 40,000 $ 371,000 0 160,000 0 2,680,000
Tangram Options 0 -- 120,000 30,000 30,000 7,500
Gandalf SARs 0 -- 0 7,980 0 106,932
James W. Dixon
CompuCom Options 222,999 $1,078,149 238,251 300,000 $1,891,258 $1,800,000
Edward R. Anderson
CompuCom Options 0 -- 310,000 465,000 $1,976,250 $2,964,375
</TABLE>
(1) The value of unexercised in-the-money options is calculated based upon (i)
the fair market value of the stock at December 29, 1995 less the option
exercise price, multiplied by (ii) the number of shares subject to an
option. On December 29, 1995, the per share fair market values utilized in
calculating the values in this table were as follows: Company Common Stock,
$49.50; Coherent common stock, $19.25; Tangram common stock, $1.25; CompuCom
common stock, $9.50; and Gandalf Technologies, Inc. common stock, $17.00.
14
<PAGE>
STOCK PERFORMANCE GRAPHS
The following graph compares the cumulative total return on the Company's
Common Stock for the period from December 31, 1990 through December 31, 1995
with the cumulative total return on the Russell 2000 index and the peer group
index for the same period.
COMPARISON OF CUMULATIVE TOTAL RETURNS
1990 1991 1992 1993 1994 1995
Safeguard 100 150 187 246 354 1523
Russell 2000 100 146 173 206 202 259
Peer Group 100 184 203 270 252 353
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, 1990.
15
<PAGE>
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 returns 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.
COMPARISON OF CUMULATIVE TOTAL RETURN
ASSUMING INVESTMENT IN RIGHTS OFFERINGS
1990 1991 1992 1993 1994 1995
Safeguard 100 150 187 327 579 2156
Russell 2000 100 146 173 235 267 371
Peer Group 100 184 203 302 320 477
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, 1991. 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 share of Company Common Stock held on the date
of each respective rights offering, a shareholder is assumed to have
acquired: (a) 0.5 shares of Cambridge Technology Partners (Massachusetts),
Inc. for $2.50 on May 13, 1993; (b) 0.667 shares of Coherent Communications
Systems Corporation for $3.33 on July 21, 1994; and (c) 0.25 shares of USDATA
Corporation for $1.25 on July 21, 1995. During the comparison period, the
Company's Common Stock was split two-for-one to holders of record on
September 7, 1994 and three-for-two to holders of record on August 31, 1995,
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 calendar quarter immediately
preceding each Safeguard rights offering 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, 1990.
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
<PAGE>
CERTAIN TRANSACTIONS
In connection with restricted stock awards made under the Company's long
term incentive plan in December 1994, January 1995 and December 1995, 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. Each
individual who accepted this offer in connection with the December 1994 awards
delivered to the Company a promissory note ("December 1994 Note") that bears
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; each individual who accepted this offer in connection with
the January 1995 awards delivered to the Company a promissory note ("January
1995 Note") that bears interest at the rate of 7.07% per annum, with principal
and accrued interest repayable on the second anniversary of the January Note;
and each individual who accepted this offer in connection with the December 1995
awards delivered to the Company a promissory note ("December 1995 Note") that
bears interest at the rate of 5.57%, with principal and accrued interest
repayable on the second anniversary of the December 1995 Note. Each December
1994 Note, January 1995 Note and December 1995 Note is secured by a pledge of
the restricted shares granted to each individual. The highest outstanding total
balance since January 1, 1995 under the December 1994 Note, the January 1995
Note and the December 1995 Note delivered by each of Messrs. Caldwell and Root,
and by Gerald M. Wilk and Jerry L. Johnson, executive officers of the Company,
was $206,375, $206,375, $150,792 and $27,400, respectively, and the aggregate
balance at January 31, 1996, was $189,309, $164,138, $120,046 and $27,400,
respectively, for each of such officers.
In January 1996, Safeguard International Group, Inc. ("SIG"), a majority
owned subsidiary of the Company, merged with a wholly-owned subsidiary of Allied
Resource Corporation ("ARC"). As a result of the merger, the Company's shares
in SIG were exchanged for shares of ARC at a rate determined on the basis of
relative net book values (which were $2.45 million for SIG and $2.22 million for
ARC), except that ownership of SIG's Austrian subsidiary was retained by the
Company. The Company also granted ARC a five-year option to purchase the
Company's shares of ARC at fair market value. Heinz Schimmelbusch, who is a
director of the Company, is President, Chief Executive Officer and a director of
both SIG and ARC, and was a 40% stockholder of SIG and a 45% stockholder of ARC
prior to the merger. Immediately after the merger, the Company formed a new
subsidiary under the name Safeguard International Group, Inc. to continue the
Company's international business.
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 is payable
annually beginning January 1, 1996. Principal is payable in two equal annual
installments on August 31 in each of 1996 and 1997. The highest outstanding
principal balance since January 1, 1995, and the principal balance at January
31, 1996, was $1,181,250.
In November 1994, CompuCom provided Mr. Dixon with a loan of $210,000
evidenced by a promissory note and secured by a lien on Mr. Dixon's home in
Dallas, Texas. The promissory note bears interest at the prime rate. One-third
of the principal amount of the note, together with accrued interest became
payable on March 31, 1995, and the remaining unpaid principal together with
accrued interest is payable on the earlier of December 31, 1996 or Mr. Dixon's
termination of employment. The highest outstanding principal balance since
January 1, 1995 was $210,000, and the outstanding principal balance at February
15, 1996 was $70,000.
17
<PAGE>
In January 1995, CompuCom provided Mr. Dixon with a bridge loan of $217,000
that was evidenced by a promissory note bearing interest at 1% in excess of the
prime rate and was secured by a second mortgage on his Georgia residence. The
principal was repaid in two installments during the first half of 1995, and the
accrued interest of approximately $6,200 is expected to be repaid in May 1996.
In July 1995, Mr. Dixon purchased from CompuCom 150,000 shares of common
stock of ClientLink, Inc. at a cost of $.75 per share. The purchase price,
which was based upon a third party valuation, was paid by delivery of a $112,500
full recourse promissory note with a five-year term and is secured by a pledge
of the 150,000 shares as collateral. The note bears interest at the rate of 8%
per annum. Interest will accrue and be due and payable on July 15 in each
year, commencing in 1996. Principal and unpaid accrued interest under the note
will become payable in full on the earlier of July 15, 2000 or Mr. Dixon's
termination of employment.
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, 1995 under the line of credit, and the balance at December 31, 1995,
was $230,000. This line of credit will be repaid from future fees, if any,
earned by Valley Forge Capital Group in connection with the 1993 agreement with
the Company regarding its real estate properties.
II. PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK
THE BOARD BELIEVES THAT THE FOLLOWING PROPOSAL TO ADOPT A RESOLUTION
PROVIDING FOR AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 20,000,000 TO
100,000,000 IS IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSAL. PROXIES RECEIVED
BY THE BOARD WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE ON THEIR
PROXY CARDS.
BACKGROUND AND PROPOSED AMENDMENT
The Company's Board of Directors has adopted, and is recommending to the
shareholders for their approval at the Annual Meeting, a resolution to amend
Article 5th of the Company's Articles of Incorporation to increase the number of
authorized shares of Common Stock of the Company from 20,000,000 to 100,000,000
(the "Amendment"). Under the proposal, the number of authorized shares of
preferred stock of the Company will remain unchanged at 55,423. The applicable
text of the Board's resolution is as follows:
RESOLVED, that the first sentence of Article 5th of the Company's
Articles of Incorporation be amended to read in its entirety as
follows:
5th. The Corporation shall be authorized to issue
100,055,423 shares of capital stock, which shall be divided
into 100,000,000 shares of Common Stock, with a par value of
ten cents ($.10) per share (the "Common Stock"), and 55,423
shares of Preferred Stock, with a par value of ten dollars
($10.00) per share (the "Preferred Stock").
As of the close of business on March 20, 1996, 16,399,671 shares of Common
Stock were issued and outstanding, of which 1,649,114 shares of Common Stock
were held in
18
<PAGE>
treasury, 1,910,015 shares of Common Stock were reserved for issuance
pursuant to the exercise of options granted or to be granted under the
Company's various stock option plans, and 1,983,785 shares of Common Stock
were reserved for issuance upon the conversion of the Company's 6%
Convertible Subordinated Notes due 2006. No shares of Preferred Stock are
issued and outstanding or reserved for issuance.
The additional shares of Common Stock for which authorization is sought
will be identical to the shares of Common Stock of the Company now authorized.
Holders of Common Stock do not have preemptive rights to subscribe to additional
securities that may be issued by the Company.
PURPOSE AND EFFECT OF AMENDMENT
The purpose of the proposed Amendment is to give the Board the flexibility
and authority to issue additional shares of Common Stock from time to time for
such purposes, to such persons and for such consideration as the Board may
approve. No further vote of the shareholders will be required prior to such
issuance, except as may otherwise be required by applicable law or the rules of
any national securities exchange or registered national securities association
on which the Company's shares are then listed. For example, the New York Stock
Exchange, on which the Company's shares of Common Stock are presently listed,
currently specifies shareholder approval as a prerequisite for issuing shares in
several instances, including (i) the issuance of Common Stock or securities
convertible into Common Stock if the Common Stock has or will have upon issuance
voting power equal to or in excess of 20% of the voting power outstanding before
the issuance of such Common Stock or securities convertible into such Common
Stock or where the number of shares of Common Stock to be issued is or will be
equal to or in excess of 20% of the number of shares of Common Stock outstanding
before the issuance and (ii) the issuance of Common Stock or securities
convertible into Common Stock exceeding one percent of the shares of Common
Stock or one percent of the voting power outstanding before the issuance in
connection with the acquisition of a business, company, tangible or intangible
assets, properties or securities from a director, officer or substantial
security holder of the Company.
The additional shares of Common Stock being authorized could be issued
publicly or privately for a variety of corporate purposes, including, without
limitation, in connection with financings, acquisitions, stock splits, stock
dividends, employment agreements, warrants, stock options, employee benefit
plans, or for purposes of augmenting the capital of the Company. The Company
currently has no plans, understandings or arrangements to issue any of the
additional shares of Common Stock authorized by the Amendment. However, because
the need to issue shares can arise when it would be inconvenient or impossible
to hold a shareholders' meeting, the Board believes that it is prudent business
planning to authorize the issuance of an additional 80,000,000 shares of Common
Stock. Nonetheless, there may be certain disadvantages to the additional
flexibility afforded the Company as a result of the authorization of additional
shares of Common Stock.
The proposed Amendment is not intended to have an anti-takeover effect.
However, the availability of additional shares of Common Stock could make any
attempt to gain control of the Company or the Board of Directors more difficult,
costly or time-consuming. Under certain circumstances, the additional shares
could be used to frustrate persons seeking to effect a takeover that the Board
of Directors determines is not in the best interests of the Company and its
shareholders, if such shares were issued to a holder or holders who might oppose
the takeover bid.
The issuance of additional shares of Common Stock, whether or not in
connection with a contest for control, will, in most instances, dilute the
voting power of each shareholder, and may dilute earnings and book value on a
per share basis.
19
<PAGE>
APPROVAL BY THE SHAREHOLDERS
Approval of this proposal requires the affirmative vote of a majority of
the votes cast by the holders of the Company's outstanding shares of Common
Stock entitled to vote thereon. If approved by the shareholders, the Amendment
to the Articles of Incorporation will become effective upon the filing with the
Secretary of State of the Commonwealth of Pennsylvania of Articles of Amendment
to the Company's Articles of Incorporation, which filing the Company presently
intends undertaking promptly after the Annual Meeting. If the Amendment to the
Company's Articles of Incorporation is not approved, the Articles of Amendment
will not be filed.
INDEPENDENT PUBLIC ACCOUNTANTS
Since 1986, the Company has retained KPMG Peat Marwick as its independent
public accountants and it intends to retain KPMG for the current year ending
December 31, 1996. Representatives of KPMG 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.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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, 1995 through
December 31, 1995, its officers, directors and 10% Shareholders complied with
all applicable Section 16(a) filing requirements, except for one late report
involving two transactions that were reported late by Mr. Caldwell.
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 1995, 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 2, 1996
20
<PAGE>
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 1996 Annual Meeting of Shareholders of
Safeguard Scientifics, Inc. to be held on May 9, 1996, 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
AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION, 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.
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- FOLD AND DETACH HERE -
DIRECTIONS TO THE DESMOND GREAT VALLEY
HOTEL AND CONFERENCE CENTER
One Liberty Boulevard, Malvern, PA 19355
(610) 296-9800
----------------------------------------
DIRECTIONS FROM PHILADELPHIA
Take the Schuylkill Expressway (I-76) West. Follow I-76 West to Route 202 South.
Take Route 202 South to the Great Valley/Route 29 North Exit. At the end of the
ramp, proceed through the light onto Liberty Blvd. The Hotel will be on the
right.
DIRECTIONS FROM SOUTH JERSEY
Take I-95 South to Route 322 West. Take 322 West to US Route 1 South to Route
202 North. Take Route 202 North to Great Valley/Route 29 North Exit. Turn right
onto Route 29 North. Turn right at second light onto Liberty Blvd. Hotel will be
on the left.
DIRECTIONS FROM PHILADELPHIA AIRPORT
Take I-95 South to 476 North. Follow 476 North to the Schuylkill Expressway (I-
76) West to Route 202 South. Take Route 202 South to the Route 29 North Exit. At
the end of the ramp, proceed through the light onto Liberty Boulevard. The Hotel
will be on the right.
DIRECTIONS FROM WILMINGTON AND POINTS SOUTH (DELAWARE AND MARYLAND)
Take I-95 North to Route 202 North. Follow Route 202 North to the Great
Valley/Route 29 North Exit. Turn right onto Route 29 North. Turn right at second
light onto Liberty Blvd. Hotel will be on the left.
DIRECTIONS FROM NEW YORK AND POINTS NORTH
Take the New Jersey Turnpike South to Exit 6, the Pennsylvania Turnpike
extension. Follow the Turnpike West to Exit 24, Valley Forge. Take Route 202
South to the Great Valley/Route 29 North Exit. At the end of the ramp, proceed
through the light onto Liberty Blvd. The Hotel will be on the right.
DIRECTIONS FROM HARRISBURG AND POINTS WEST
Take PA Turnpike East to Exit 24, Valley Forge. Take Route 202 South to Great
Valley/Route 29 North Exit. At end of ramp, proceed through light onto Liberty
Blvd. The Hotel will be on the right.
<PAGE>
- --------------------------------------------------------------------------------
Please mark
your votes as
indicated in
this example /X/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
1. ELECTION OF DIRECTORS
Nominees:
Warren V. Musser Peter Likins
Vincent G. Bell, Jr. Jack L. Messman
Donald R. Caldwell Russell E. Palmer
Robert A. Fox John W. Poduska, Sr.
Delbert W. Johnson Heinz Schimmelbusch
Robert E. Keith, Jr. Hubert J.P. Schoemaker
WITHHELD
FOR FOR ALL
/ / / / TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE WHILE VOTING FOR THE REMAINDER, STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST.
TO CUMULATE VOTES, WRITE THE NAME OF THE NOMINEE(S) AND
THE NUMBER OF VOTES TO BE CAST FOR EACH NOMINEE IN THE
SPACE PROVIDED BELOW, FOLLOWED BY "CUMULATE FOR."
-------------------------------------------------------
FOR WITHHELD ABSTAIN
2. AMENDMENT TO ARTICLES OF INCORPORATION / / / / / /
Signature(s) Dated: ,1996
------------------------------------------- -----------
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.
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- FOLD AND DETACH HERE -
