SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Filed by the Registrant X
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Filed by a Party other than the Registrant
---
Check the appropriate box:
X Preliminary Proxy Statement
- ---
- --- 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):
X $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:
- --- 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
[GRAPHIC OMITTEED: SAFEGUARD LOGO]
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 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 1, 1996
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 6, 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 1, 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
[14,749,582 at 2/23] 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.
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, by mail, 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 2, 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.
<TABLE>
<CAPTION>
Number of
Shares Percent of
Owned(1) Class
------------- ------------
<S> <C> <C>
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. 3,452 *
Peter Likins, Ph.D. 16,500 *
Jack L. Messman(3) 19,500 *
Russell E. Palmer(5) 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(6) 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)(7) 3,096,215 20.5%
- -------------
</TABLE>
(*) 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).
(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 Clair 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 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.
(6) 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.
(7) 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, 2.3%; Mr. Dixon, 1.5%; all officers and directors of the
Company as a group, other than Messrs. Anderson and Dixon, less than 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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)(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 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. General Partner, Technology Leaders Management L.P.
and Technology Leaders II Management L.P., venture
capital partnerships(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., a subsidiary of the Company,
and President and Chief Executive Officer of Allied
Resource Corporation(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.
(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 has served as President of the Company since
February 1996 and as Executive Vice President of the Company from
November 1993 to February 1996. 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 has served as a managing director of Radnor Venture
Management Company, a venture capital partnership, since 1989, a
Managing Director since 1991 and a General Partner since 1995 of
Technology Leaders Management, L.P., and a Managing Director and
General Partner of Technology Leaders II Management, L.P. since
1994. 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 Xylogics, 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.
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 of
the 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.
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 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 in 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 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 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, National Media Corporation, 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.
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 $100,000 in 1995.
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------------------------
Annual Compensation Awards Payouts
---------------------------------------------------------------------------------------
Securities Long
Other Underlying Term
Annual Restricted Options/ Incentive All Other
Name and Principal Salary Bonus Compen- Stock SARS Payouts Compen-
Position Year ($)(1) ($)(2) sation($)(3) Award(s)($)(4) (#)(5) ($)(6) sation ($)(7)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Warren V. Musser, 1995 275,000 206,000 -- -- -- -- 11,250
Chairman of the
Board and Chief 1994 250,000 125,000 -- -- -- -- 12,375
Executive Officer(8)
1993 235,000 135,000 -- -- -- -- 11,098
- ---------------------------------------------------------------------------------------------------------------------------
Donald R. Caldwell, 1995 240,000 163,493 -- $391,345(10) -- -- 11,250
President(9)
1994 225,000 108,800 -- 77,841 225,000 -- 6,750
- ---------------------------------------------------------------------------------------------------------------------------
Charles A. Root, 1995 240,000 144,000 -- $391,345(10) -- $69,009 13,911
Executive 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, 1995 310,000 416,020 201,467 -- 300,000(12) -- 3,750
Former Chairman
of the Board of 1994 310,000 310,000 -- -- -- -- 3,143
CompuCom
Systems (13) 1993 310,000 471,200 -- -- -- -- 4,497
- ---------------------------------------------------------------------------------------------------------------------------
Eward R. Anderson, 1995 310,000 416,020 -- -- -- -- 3,750
President and Chief
Executive Officier 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, a portion of the
cash bonus paid and included above for services rendered in each year
was not paid until the following year. 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.
(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.
(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 $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.
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.
(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 USDATA Corporation, 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 on February 14, 1996 to serve as
Chairman and Chief Executive Officer of ClientLink, Inc., a
subsidiary of CompuCom.
(14) Mr. Edward Anderson joined CompuCom in August 1993.
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.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
- ------------------------------------------------------------------------------------------------------------
Potential Realizable Value
At Assumed Annual
Individual Grants Rates Of Stock Price
Appreciation
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 300,000 21.6% $3.50 02/09/05 $660,339 $1,673,429
Option(4)
- ------------------------------------------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
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
Shares Options/SARs Options/SARs
Acquired On Value At Fiscal Year-End (#) At Fiscal Year-End ($)(1)
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 0
- ------------------------------------------------------------------------------------------------------------
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.
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.
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.
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.
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.
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
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 an
aggregate of $206,375, $206,375, $150,792 and $27,400, respectively, for
each of such officers, and the balance at January 31, 1996 was an
aggregate of $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 balance since January 1,
1995 was $1,181,250, and the 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 balance since January 1, 1995 was
$210,000, and the balance at January 31, 1996 was $140,000.
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 and accrued interest of $_________
were repaid on __________, 1995.
In July 1995, Mr. Dixon purchased from CompuCom 150,000 shares of
common stock of ClientLink, Inc. at a cost of $.75 per share, which 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 [1,650,089 at 2/23]
shares of Common Stock were held in treasury, [1,910,990 at 2/23] 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 Board of Directors also could use the additional shares of
Common Stock in connection with the Company's Shareholders' Rights Plan,
which management has recommended to the Board for its approval (the
"Rights Plan"). As part of the Rights Plan, the Board of Directors is
expected to declare a dividend of one right (a "Right") for each share
of Common Stock of the Company held of Record on March 20, 1996. If a
person or group acquires or commences a tender offer for 20% or more of
the outstanding shares of Common Stock, within 20 days thereafter each
Right will become exercisable until March 20, 2006, subject to certain
exceptions, and will entitle each holder (other than the acquiring
person or group) to buy one share of Common Stock of the Company at an
exercise price of $180.00 per share. If (i) any person or group acquires
20% or more of the Common Stock in a transaction that has not been
approved by the Board of Directors or upon the occurrence of certain
other specific events and (ii) the Board of Directors does not redeem
the Rights within 20 days thereafter, a holder of the Right (other than
the acquiring person or group) will be able to (i) buy, for the exercise
price, the number of shares of Common Stock which has an aggregate value
of twice the exercise price, or (ii) at the discretion of the Company
and upon surrender of the Right by the holder, receive shares of Common
Stock with a value equal to 50% of the exercise price. Similarly, if
the Company is involved in certain mergers or major sales of its assets,
a holder of the Right will be able to (i) purchase, for the exercise
price, the number of shares of the acquiring company's common stock
which has an aggregate value of twice the exercise price of the Right,
or (ii) at the discretion of the Company and upon surrender of the Right
by the holder, receive shares of Common Stock of the acquiring company
with a value equal to 50% of the exercise price. A summary of the
Shareholders' Rights Plan will be distributed to all holders of the
Company's Common Stock of Record on March 20, 1996.
The Rights Plan is designed to deal with the problem of coercive or
unfair takeover actions by hostile acquirors. The Rights Plan is not
intended to prevent an acquisition of the Company if the terms are
favorable and fair to all shareholders, and will not interfere with a
merger or other business combination approved by the Board of Directors.
The adoption of the Rights Plan was not subject to approval by the
shareholders. The shareholders' approval or disapproval of the proposal
to increase the number of authorized shares does not have any effect on
the adoption by the Board of Directors of the Rights Plan, and a vote on
the proposal will not be considered a measure of approval or disapproval
of the Rights Plan. However, in the absence of the proposed increase in
the Company's authorized Common Stock, the Company does not currently
have sufficient authorized shares of Common Stock available to satisfy
the exercise of all of the Rights under the Rights Plan.
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.
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 Peat Marwick 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 1, 1996
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.
FOLD AND DETACH HERE
<TABLE>
Please mark
your votes as
indicated in
this example
<CAPTION>
The Board of Directors recommends a vote FOR proposals 1 and 2.
1.ELECTION OF DIRECTORS FOR WITHHELD
Nominees: --- FOR ALL ---
<S> <C> <C>
Warren V. Musser Peter Likins TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WHILE VOTING FOR
Vincent G. Bell, Jr. Jack L. Messman THE REMAINDER, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST.
Donald R. Caldwell Russell E. Palmer
Robert A. Fox John W. Poduska Sr. To cumulate votes, write the name of the nominee(s) and the number of
Delbert W. Johnson Heinz Schimmelbusch votes to be cast for each nominee in the space provided below, followed
Robert E. Keith, Jr. Hubert J.P. Schoemaker by "cumulate for."
------------------------------------------------------------------------
2. AMENDMENT TO ARTICLES OF INCORPORATION 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.
</TABLE>
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.
