SAFEGUARD SCIENTIFICS INC ET AL, 10-K, 1996-04-01

SAFEGUARD SCIENTIFICS INC ET AL
10-K, 1996-04-01
COMPUTERS & PERIPHERAL EQUIPMENT & SOFTWARE

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1995 Commission File Number 1-5620
- - -------------------------------------------

SAFEGUARD SCIENTIFICS, INC.
- - -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)

Pennsylvania 23-1609753
- - ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

800 The Safeguard Building
435 Devon Park Drive, Wayne, PA 19087
- - --------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (610) 293-0600

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of Each Class on which registered
----------------------------- -------------------------
Common Stock ($.10 par value) New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

Yes X No
----- -----

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
----

Aggregate market value of voting stock held by non-affiliates (based on the
closing price on the New York Stock Exchange) on March 20, 1996 was
approximately $ 606 million. For purposes of determining this amount only,
Registrant has defined affiliates as including (a) the executive officers
named in Part III of this 10-K report, (b) all directors of Registrant, and
(c) each shareholder that has informed Registrant by March 20, 1996 that it is

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the beneficial owner of 10% or more of the outstanding common stock of
Registrant.

Indicate the number of shares outstanding of each of the Registrant's classes
of Common Stock, as of March 20, 1996:

Common Stock: 14,750,557 shares

DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated by reference in this Form 10-K:

PART I

Item 1(b) Page 30 of the Annual Report to Shareholders for the year ended
December 31, 1995, which page is filed as part of Exhibit 13
hereto.

PART II

Items 5, 6,
7 and 8 Pages 25 to 43 of the Annual Report to Shareholders for the year
ended December 31, 1995, which pages are filed as part of Exhibit
13 hereto.

PART III

Items 10, 11,
12 and 13 Definitive Proxy Statement relative to the May 9, 1996 annual
meeting of shareholders of registrant, to be filed within 120
days after the end of the year covered by this Form 10-K Report.

PART IV

Item 14(a) Pages 30 to 43 of the Annual Report to Shareholders for the
Consolidated year ended December 31, 1995, which pages are filed as
Financial part of Exhibit 13 hereto.
Statements

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PART I

ITEM 1. BUSINESS

(a) GENERAL DEVELOPMENT OF THE BUSINESS

OVERVIEW

Safeguard Scientifics, Inc. ("Safeguard" or the "Company") is engaged
primarily in the business of identifying, acquiring interests in, and
developing partnership companies, most of which are engaged in information
technology businesses, broadly defined to include all activities related to
the acquisition, processing and dissemination of information and related
technology to improve business and personal productivity. The most
significant of Safeguard's partnership companies are engaged in the
distribution of micro computer hardware, software and related services. In
addition, partnership companies in the information technology industry are
engaged in the development and sale of strategic business applications
systems software and services, imaging equipment and software and
telecommunications technology. Other partnership companies provide specialty
metal finishing and commercial real estate ownership and services.

Safeguard develops these partnership companies by providing active strategic
management, operating guidance, acquisition and disposition assistance, board
and management recruitment, and innovative financing. The Company realizes
value for its shareholders by the appreciation of the Company's Common Stock,
by taking partnership companies public (generally through an offer to
Safeguard shareholders of rights to purchase stock of the partnership company
in its initial public offering), through the continued operations of
partnership companies and through the sale of partnership companies. Even
after taking a partnership company public, Safeguard generally retains a
significant ownership interest and board representation, and continues to
provide strategic, managerial, operational, and financial support. During the
three years ended December 31, 1995, Safeguard's shareholders were given the
opportunity to participate in rights offerings for Cambridge Technology
Partners (Massachusetts), Inc., Coherent Communications Systems Corporation
and USDATA Corporation. In January 1996, Integrated Systems Consulting Group,
Inc. filed a registration statement for a rights offering to Safeguard's
shareholders, which is anticipated to be completed during the first half of
1996.

STRATEGY

Safeguard seeks to identify companies which are capable of being market
leaders in segments of the information technology industry and which are at a
stage of development that would benefit from Safeguard's business development
and management support and financing. Safeguard gains exposure to these
companies through its reputation as a historically-successful developer of
technology companies, its relationship with three venture capital funds,
Radnor Venture Partners, Technology Leaders I and Technology Leaders II, as
well as through its sponsorship of such organizations as the Eastern
Technology Council and entrepreneurial centers at Lehigh University, Temple
University and the University of Pennsylvania. Safeguard considers its access
to potential attractive partnership company candidates to be good.

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Start-up and development stage companies traditionally seek financing for
growth and development from two primary sources: independent private venture
capital funds and corporate strategic investors. Each of these sources has
disadvantages for the emerging company. Venture capital funds generally are
established for a term of approximately ten years and their primary goal is
the maximization of financial return on a fund's investments within that time
frame. In order to facilitate the distribution of assets upon dissolution of
the venture capital fund and maximize distributable proceeds, the venture
capital fund may seek to liquidate its investment in the emerging company
within the remaining term of the venture capital fund by encouraging either
an initial public offering or a sale. These liquidation alternatives may take
place at a time that is more compatible with the term of the venture capital
fund, rather than the state of the emerging company's development. In
addition, traditional venture capital funds generally have limited resources
available to provide strategic and operational support to an emerging company.

Corporate strategic investors include large corporations that invest in
emerging companies which have developed a product or technology complementary
to the business of the strategic investor. Often these investments involve
both financing support to the emerging company as well as an arrangement
under which the strategic investor obtains access to the products or
technology of the emerging company. The strategic investor's rationale for
these investments is generally to obtain access to a promising product or
technology without incurring the initial cost of development or the diversion
of managerial time and attention necessary to develop new products or
technologies. While strategic investors are generally able to provide
business development support, the rationale behind the investment of a
strategic investor may be incompatible with the development of the emerging
company. In addition, capital constraints of the strategic investor may also
constrain the emerging company, and strategic investors often discourage the
emerging company from completing an initial public offering and becoming a
public company.

Safeguard believes that its relationship with its partnership companies
offers the benefits of both the venture capital model and the strategic
investor model without the related drawbacks. Safeguard has both the capital
and managerial resources to provide financing and strategic and operational
support as needed by an emerging company. In addition, Safeguard encourages
emerging companies to achieve the superior returns on investment generally
provided by public offerings, but only if and when it is appropriate for the
development of the business of that emerging company. Because Safeguard's
relationship with its partnership companies is intended to be long-term, it
has the flexibility to maximize the value of the partnership company through
a public offering at the appropriate time, through a sale of the company to a
third party, through a combination of the company with another partnership
company or through the retention of the company as an operating unit of
Safeguard. In addition, Safeguard is committed to the use of management stock
ownership and equity incentives as the principal means of aligning the
interests of management of its partnership companies and Safeguard with the
interests of its shareholders.

Safeguard evaluates partnership company candidates from a number of
perspectives. Safeguard looks for companies that are capable of becoming
leaders in a segment of the information technology industry. Safeguard

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generally seeks companies that have a well-regarded management team in place,
are producing and delivering products and/or services, and have growing
revenues. Safeguard has occasionally established relationships with companies
in earlier stages of development, and with later-stage companies that may not
meet all of the above criteria, but that have the potential to achieve these
goals with Safeguard's assistance.

Once a relationship is established with a partnership company, Safeguard's
corporate staff provides hands-on assistance to the managers of the
partnership company in the areas of management, financial, marketing, tax,
risk management, human resources, legal and technical services. In recent
transactions, Safeguard has assisted partnership companies by providing or
locating and structuring financing, identifying and implementing strategic
initiatives, providing marketing assistance, identifying and recruiting
executives, assisting in the development of equity incentive arrangements for
executives and employees, and providing assistance in structuring,
negotiating, documenting, financing, implementing and integrating mergers and
acquisitions.

Safeguard's goal is to maximize the value of its partnership companies for
Safeguard's shareholders, often through taking its partnership companies
public through a rights offering at the appropriate time. A rights offering
is an initial public offering of the partnership company, directed to
Safeguard's shareholders. It involves the grant to Safeguard's shareholders
of transferable rights to buy shares of the partnership company's stock in
the company's initial public offering at a price established by the
partnership company, Safeguard, and the underwriter. Safeguard shareholders
are able to exercise the rights, thereby participating in initial public
offerings of high-growth technology companies which are usually reserved for
large institutional investors, or they may sell the rights at the prevailing
market price. Safeguard's previous rights offerings include Novell, Machine
Vision International Corporation (now CompuCom), Cambridge, Coherent, USDATA,
Rabbit Software Corporation (now Tangram Enterprise Solutions) and CenterCore
(now Core Technologies). Growth in the value of the public partnership
companies benefits Safeguard and also directly benefits its shareholders who
continue to hold the shares purchased in the rights offering. However, not
all partnership companies are taken public. Some companies are combined with
other operating units, some are sold and some are retained as private
companies. For example, during 1994, MicroDecisionware, a Safeguard
partnership company, was merged with Sybase, and Safeguard and the other
shareholders of MicroDecisionware received Sybase stock.

RECENT DEVELOPMENTS

Consolidated net sales for 1995 were $1.5 billion, a 7% increase over 1994.
The increase was primarily due to the growth of CompuCom Systems, Inc., the
Company's largest business unit. CompuCom's share of the Company's
consolidated net sales has risen steadily from 76% in 1990 to 95% in 1995.
CompuCom is a leading provider of personal computer ("PC") products and
services to large- and medium-sized businesses throughout the United States.
The Company took CompuCom public through a rights offering in 1985, and
currently owns approximately 50% of the common stock and up to 60% of the
voting interests in CompuCom.

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In 1995, Safeguard acquired interests in 8 new partnership companies, for an
average investment of approximately $3 million. Safeguard has determined that
beginning in 1996 it will seek to establish fewer relationships with
partnership companies each year, and that new partnership companies generally
will be larger companies in later stages of development than previous
transactions. In addition, Safeguard will generally seek to acquire a larger
equity interest in new partnership companies than in the past and to maintain
a larger equity interest in its partnership companies which have completed
initial public offerings.

The Company successfully completed a rights offering in 1995 for USDATA
Corporation, a leading developer of software tools which customers use to
configure, without programming, a wide range of real-time information capture
and management functions.

In January 1996, Integrated Systems Consulting Group, Inc. filed a
registration statement for a rights offering, which is anticipated to be
completed in the first half of 1996.

Safeguard's stock price increased 330%, as adjusted for the impact of a
3-for-2 stock split, during 1995, making it one of the top gainers for the
year on the New York Stock Exchange.

On February 6, 1996, Safeguard completed the private placement of $115
million of 6% Convertible Subordinated Notes due February 1, 2006 to J.P.
Morgan Securities, Inc. The Notes are convertible into Safeguard Common
Stock at $57.97 per share. J.P. Morgan resold the Notes to institutional
buyers and in offshore transactions.

The Company's new associated venture capital fund, Technology Leaders II
L.P., completed its fund-raising efforts in 1995 with $113 million of
committed capital.

The Company increased its bank credit facility from $50 million to $100
million in 1995, and reduced the interest rate on its London Interbank
Offered Rate ("LIBOR") based borrowings by .5%.

In September 1995, CompuCom called for redemption its $18.5 million of
outstanding 9% Convertible Subordinated Notes, which were converted into 8.4
million shares of CompuCom common stock prior to their redemption. In order
to assist the holders to sell a portion of these shares, CompuCom registered
4.8 million of these shares, which were sold by the holders in an
underwritten public offering. CompuCom also increased the availability under
its revolving credit facility from $150 million to $175 million, and
negotiated reductions in the floating rate portion of its revolving interest
rate to 1.5% above the London Interbank Offered Rate, and/or the prime rate,
subject to certain limitations. The fixed interest rate portion of the
credit facility ($60 million at 7.18%) remained unchanged.

The Company is negotiating the sale of the Phoenix, Arizona facility of its
Pioneer Metal Finishing unit.

In March 1996, the Company entered into a non-binding letter of intent with
Brandywine Realty Trust (the "REIT") and The Nichols Company ("Nichols") for a

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proposed transaction in which the Company would contribute to the REIT its
investment in an existing real estate partnership and cash, with a total
value of $4.36 million, in exchange for common stock and warrants in the
REIT. The real estate partnership currently owns eight suburban
office/industrial buildings. Safeguard, Nichols and certain other affiliates
would also contribute 10 additional properties into a partnership with the
REIT (the "Partnership") in exchange for units in the Partnership, which
units would be convertible after two years into common stock of the REIT,
subject to certain conditions. In addition, Nichols would give the REIT an
option to acquire five additional properties in exchange for additional
Partnership units. The letter also contemplates merging Nichols' real estate
management operations into an affiliate of the REIT. The REIT's Common Stock
is publicly traded on the American Stock Exchange. The proposed transactions
are subject to significant conditions, and there is no assurance that any of
the transactions will be consummated.

Premier Solutions Ltd., a majority-owned subsidiary which develops and
markets sophisticated asset management solutions and professional services to
the financial industry, continued its project to transform its GLOBAL_PLUS
product to operate on a UNIX-based client/server architecture and Windows
platform in order to make its products available to a broader segment of the
market.

The Company completed its plan to reduce its involvement in Core
Technologies ("Core") during 1995. It contributed a portion of its stock to
Core, sold a significant portion of its stock to Core management, and
provided certain advances and standby letters of credit to address current
funding requirements of Core. The Company's ownership in Core was reduced to
significantly less than 50%. In addition, Core completed the downsizing of
its business.

ITEM 1 (b). FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

Information on net sales, operating profit, depreciation and amortization,
capital expenditures and assets employed for each segment of the Company's
business for the three-year period ended December 31, 1995 is contained under
the caption "Financial Information--Industry Segments" on page 30 of the
Company's Annual Report to Shareholders for the year ended December 31, 1995,
which page is filed as part of Exhibit 13 hereto and is incorporated herein
by reference.

ITEM 1 (c). NARRATIVE DESCRIPTION OF BUSINESS

OVERVIEW OF BUSINESS SEGMENTS

Safeguard and its majority owned subsidiaries have operations in three
industry segments: Information Technology, Metal Finishing and Commercial
Real Estate. Over 97% of the Company's sales in 1995 were in the Information
Technology segment, which consists of: Microcomputer Systems and Services
(the delivery of personal computer services, including procurement and
configuration of personal computers, application software and related
products, network integration, and technical support); and Information
Solutions (the design, development and sale of strategic business
applications systems software solutions). In Microcomputer Systems and
Services, the Company operates through its majority-owned subsidiary,
CompuCom Systems, Inc. and its subsidiaries ("CompuCom"). In Information
Solutions, the Company

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operates through its majority-owned subsidiaries, Premier Solutions Ltd. and
its subsidiaries ("Premier"), and Tangram Enterprise Solutions, Inc.
("Tangram"). CompuCom and Tangram are both publicly-held companies, while
Premier is privately held. The Company also actively participates in numerous
additional private and public information technology companies in which it
holds significant minority ownership interests.

The Company's Metal Finishing segment provides specialty metal finishing
services to a variety of industries. The Commercial Real Estate segment owns
and leases income-producing commercial real estate properties. Safeguard also
has an investment in The Nichols Company, a real estate firm that owns,
manages and leases commercial office and industrial properties. The Company
also provides venture capital management services.

INFORMATION TECHNOLOGY SEGMENT

Microcomputer Systems and Services

CompuCom is a leading provider of personal computer ("PC") products and
services to large- and medium-sized businesses throughout the United States.
CompuCom teams with its customers, which include primarily Fortune 1000
companies and other large businesses, to apply PC technology to meet their
business objectives, which range from product procurement and configuration
to network project management and support. Products and services are sold by
a direct sales force to over 2,000 business customers through approximately
40 sales and service centers located in and serving large metropolitan areas
nationwide.

CompuCom is an authorized dealer of major personal computer products for a
number of manufacturers, including Compaq Computer Corporation, International
Business Machines Corporation, Hewlett-Packard Company, Toshiba America
Information Systems, and Apple Computer Corporation. CompuCom also offers a
broad selection of networking and related products, computer-related
peripheral equipment and a range of computer equipment and software from a
number of vendors, including 3Com Corporation, Digital Equipment Corporation,
Intel Corporation, Kingston Technology Corporation, Lotus Development
Corporation, Microsoft Corporation, NEC Technologies, Inc., and Novell, Inc.
To further meet the needs of its customers, CompuCom provides a variety of
services including custom configuration of PC systems, field engineering,
network management, help desk services and network project management
utilizing network applications such as Novell Netware, Windows NT Server,
Windows and Windows 95, IBM's OS/2 Warp and LAN Server.

Net revenues for CompuCom have grown at a compounded rate of 29% over the
past five years, while net earnings have grown by 42% compounded annually
over the same period. CompuCom's strong revenue and net earnings performance
is a result of its continued focus on customer satisfaction, along with the
enhancement of its product and services capabilities resulting from a
strategy of growth through existing operations and strategic acquisitions.
CompuCom's target customers are becoming increasingly dependent on
information technology to compete effectively in today's markets. As a
result, the decision making process that organizations face when planning,
selecting and implementing technology solutions is becoming more complex and
requires many of these organizations to outsource the management and support
of their PC technology needs. In an effort to enhance CompuCom's ability to
provide customers with value-added services designed to meet their PC
technology service requirements, CompuCom acquired several small regional
service companies during 1994 and 1995. These acquisitions have broadened the
variety of

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network management platform offerings, increased remote network monitoring
capabilities and greatly expanded CompuCom's systems engineer resources.

Customer support, prompt delivery, product variety and availability, and
price are key elements in attracting new and retaining current customers. In
particular, knowledgeable, experienced sales and services personnel who
understand customer needs are important factors in the growth of CompuCom's
services business. During 1995, CompuCom continued to place emphasis on
expanding the service portion of its business through internal and external
growth. In 1996, CompuCom expects to continue to expand its services and
support organization, train sales and services personnel, and develop its
vendor relationships to provide customer-driven product lines at competitive
prices. In addition, CompuCom plans to continue its expansion of its
integrated, comprehensive information system to enable CompuCom to track and
respond to its customers' requirements more efficiently.

CompuCom markets its product procurement, configuration, field engineering,
network management, help desk services, network project management and
hardware maintenance services primarily through its direct sales force and
service personnel, operating through approximately 40 sales and service
centers located near major metropolitan areas. CompuCom focuses on meeting
the needs of large corporate businesses, which accounted for the majority of
CompuCom's net revenues in 1995. However, no one customer accounted for in
excess of 10% of such revenues.

CompuCom provides support to its customers primarily through the CompuCom
Customer Center, located in Dallas, Texas. Customer center personnel, called
inside sales representatives ("ISRs"), work closely with the customer and
CompuCom sales representatives to keep up to date on the business needs of
each customer, and provide the customers with information about product
availability, services, pricing, shipping and invoicing via a toll-free
telephone number. The primary goal of the customer center is to provide
greater support to CompuCom's customers while allowing CompuCom's direct
sales force to focus on soliciting new business and providing the necessary
support for the customer's more complex service needs.

As of December 31, 1995, CompuCom employed 258 full-time direct sales
representatives and 338 ISRs.

During 1995, services net revenues increased approximately 80% due to
CompuCom's continued efforts to focus on increased sales of services to meet
customer needs and to improve profitability. CompuCom also emphasized the
hiring of quality services personnel, increasing the number of its services
employees from approximately 800 at the end of 1994 to almost 1,200 by
year-end 1995. Although CompuCom's revenues from its services business
currently represent 7% of total revenues, such services business is an
integral part of CompuCom's strategy to provide customers with the
value-added service solutions to meet their technology needs. CompuCom
intends to continue to make strategic acquisitions and make investments
internally to enhance its ability to satisfy the constantly changing
technology requirements of its customers.

Order backlog is not considered to be a meaningful indicator of CompuCom's
future business prospects due to the short order fulfillment cycle.

CompuCom has two product distribution centers, one located in Woolwich, New
Jersey (near Philadelphia) and the second in Stockton, California (near San
Francisco). These bi-coastal distribution centers are highly automated, and
allow CompuCom to efficiently service its nationwide customers, reducing both
shipment time and expense. Also located in the distribution centers on both
coasts is the Project Integration Networking Group ("PING"), which provides

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high-end configuration services and project management to meet customers'
complex network and configuration needs.

In 1995, the distribution, configuration, PING, and product services
departments completed ISO 9002 certification. ISO 9002 is part of the ISO
9000 set of standards developed by the International Organization of
Standardization ("ISO") which represent common international business quality
standards designed to help demonstrate the capability of a supplier to
control the processes that determine the acceptability of the product being
delivered. In 1996, CompuCom plans to complete ISO 9002 certification for
its returned merchandise center.

During 1995, CompuCom's principal suppliers were Compaq, IBM and HP.
CompuCom's agreements with these vendors contain provisions providing for
periodic renewals and permitting termination by the vendor without cause,
generally upon 30 to 90 days written notice, depending upon the vendor.
Since 1987, Compaq, IBM and HP have regularly renewed their respective dealer
agreements with CompuCom, although there can be no assurance that the regular
renewals of CompuCom's dealer agreements will continue. The termination, or
non-renewal, of CompuCom's Compaq dealer agreement or IBM dealer agreement,
or both, would materially adversely affect CompuCom's business. The loss of
HP as a supplier would adversely affect CompuCom's ability to continue its
expansion. CompuCom, however, is not aware of any reason for the
termination, or non-renewal, of any of those dealer agreements and believes
that its relationships with Compaq, IBM and HP are satisfactory.

CompuCom purchases products from Compaq, IBM and HP at pricing levels which
CompuCom believes are the lowest prices available to those vendors'
respective dealers with the exception of special bid pricing for specific
large customer accounts. All of CompuCom's principal suppliers require that
CompuCom purchase certain minimum volumes of products in a specified period
to maintain favorable pricing levels. CompuCom also obtains favorable terms
from Compaq, IBM and HP by participating in certain vendor programs offered
by those suppliers. CompuCom has certain selling, promotional and related
expenses reimbursed by vendors under dealer programs offered by those and
other suppliers. However, there can be no assurance that any of these
programs will continue in 1996 or that CompuCom will continue to participate
in any of these programs at the same level as in 1995.

Sales of Compaq, IBM and HP products accounted for approximately 27%, 15% and
10%, respectively, of 1995 net revenues in the Information Technology segment
compared to 24%, 18% and 10%, respectively, in 1994 and 21%, 21% and 9%,
respectively, in 1993.

Due to rapid delivery requirements of customers and to assure itself of
continuous allotment of products from suppliers, CompuCom maintains adequate
levels of inventory funded through its line of credit and vendor credit.
These major suppliers at times provide price protection programs to CompuCom
which are intended to reduce the risk of inventory devaluation by absorbing
temporary price reductions and long-term price declines associated with aging
product life cycles. CompuCom also has the option of returning a certain
percentage of its current product inventories each quarter to these principal
suppliers as it assesses each product's current and forecasted demand
schedule. If such returns exceed certain specified levels, CompuCom may be
charged restocking fees of up to 5%. CompuCom did not incur any significant
restocking fees in 1995.

CompuCom is dependent upon the continued supply of products from its
suppliers, particularly Compaq, IBM and HP. Historically, certain suppliers
occasionally experience shortages of select components which render products
unavailable or necessitate product allocations among resellers. While certain

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shortages existed throughout 1995, CompuCom believes the product availability
issues are a result of the present dynamics of the PC industry as a whole,
which include high customer product demand, shortened product life cycles and
increased frequency of new product introductions into the marketplace. While
there can be no assurance that product unavailability or product allocations,
or both, will not increase in 1996, the impact of such an interruption is not
expected to be unduly troublesome because of the breadth of alternative
product lines available to CompuCom and CompuCom's established programs to
accelerate configuration and delivery times when such events occur.

CompuCom is engaged in fields within the computer industry characterized by a
high level of competition. Many established personal computer manufacturers
(including some of CompuCom's own vendors), systems integrators and other
resellers of personal computer or networking products including AmeriData
Technologies, Inc., Entex Information Services Inc., InaCom Corp., Microage,
Inc. and Vanstar Corporation, compete with CompuCom in the configuration and
distribution of computer systems and equipment. In addition, the PC reseller
industry is characterized by intense competition primarily in the areas of
price, product availability and breadth of product line. In the highly
fragmented computer services area, CompuCom competes with several larger
competitors, other corporate resellers pursuing high-end services
opportunities, as well as several smaller computer services companies. Some
of these competitors have financial, technical, manufacturing, sales,
marketing and other resources which are substantially greater than those of
CompuCom. Although CompuCom believes it currently competes favorably within
the PC reseller industry, there can be no assurance that CompuCom will be
able to continue to compete successfully with new or existing competition.

CompuCom experienced an improvement in product margins during the first half
of 1995, partially due to CompuCom's decision not to do business with the
lowest margin customers as well as certain manufacturer price reductions.
Product margins declined in the second half of the year compared to the first
half, reacting to increasing pricing pressure from competition. CompuCom
believes that gross margins will continue to be reflective of industry-wide
changes. Future improved profitability will depend upon competition,
increased focus on providing technical services and support to customers,
CompuCom's ability to retain and hire quality service personnel, vendor
product pricing changes and product availability, as well as CompuCom's
operating efficiencies and cost containment measures, and effective
utilization of vendor programs.

Information Solutions

The Company has two majority-owned subsidiaries in the Information Solutions
field at December 31, 1995: Tangram and Premier.

Tangram develops and markets enterprise network software, professional
services and turnkey solutions enabling automated enterprise-wide information
system management. Tangram markets to Fortune 1000 companies and their
foreign equivalents requiring enterprise-wide management of computer assets
and heterogeneous computing networks.

Tangram's software and services cover both enterprise information systems
management and connectivity. The AM:PM-Registered Mark- family of products
is a leading software solution for asset tracking and distribution, allowing
customers to manage heterogeneous computer resources across an entire
enterprise. AM:PM allows companies with thousands of remote workstations and
servers to accomplish tasks unattended. Such tasks include software
distribution, data

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distribution and collection, and resource and asset management. AM:PM offers
a variety of connectivity options for workstations, LANs and servers, and
supports numerous operating platforms and communications protocols.

Tangram offers implementation services to major corporations designed to
facilitate implementation of AM:PM and maximize the customers' use of the
product. Service offerings include project planning, product customization,
custom application development and hands-on training. Tangram formed The
Consulting Services Group in late 1994 to provide its customers with turnkey
solutions of its software.

Product development resources are allocated between products according to the
need for enhancement of existing products and the development of new products
in proportion to existing revenue streams and market trends. Existing
products are enhanced to keep them current with market requirements and to
allow them to support new standards and environments. New products are
developed that are complementary to existing products and exploit new markets
for Tangram. In 1995, development efforts were concentrated primarily on new
releases of existing products. In late 1995, development began on certain
new product offerings, including a product that automatically tracks and
analyzes computer hardware and software assets over the enterprise.

The market for Tangram's products is highly competitive and is characterized
by rapid changes in technology and user needs. Many of Tangram's actual and
potential competitors have substantially greater financial, marketing and
technological resources than Tangram. Tangram believes that the principal
competitive factors in the industry are the compatibility of products with
the customer's computer hardware and software, ease of use, price, and the
substantial base of technology that is required to join together the various
platforms in today's heterogeneous enterprises.

At March 22, 1996, Safeguard owns approximately 72% of Tangram's outstanding
common stock.

Premier markets sophisticated asset management systems solutions to the
financial services industry worldwide. Premier's GLOBAL-PLUS-Registered Mark-
software provides complete multi-currency accounting and global custody
processing capabilities, two of the demanding functions required by
international asset management organizations. Premier's MAXIMIS-RM- software
provides a wide range of asset management and investment accounting solutions
on multiple platforms and is targeted at investment advisors, insurance
companies and pension funds.

Premier markets its products through a direct sales force based at its
headquarters in Pennsylvania and regional offices in Dallas, New York,
Chicago and Toronto. A significant portion of Premier's 1995 sales were in
Canada. Target industries are major financial institutions, including
traditional trust organizations, investment advisory firms, domestic and
global custodians, international asset management organizations, insurance
companies and large pension funds. An in-house design and development team is
responsible for product development.

Premier is proceeding with its strategic plan to re-engineer its GLOBAL-PLUS
product line to operate on the Windows platform and in a UNIX-based

<PAGE>

client/server environment on the IBM RS6000 platform. This process will
occur in staged deliverables to allow both existing clients and future
clients to take advantage of new technology in an orderly fashion and without
disruption to their existing operations. Premier expects these projects to
be completed in mid-1996 and late 1996, respectively. Some potential
customers have deferred purchase decisions in 1995 in anticipation of the
completion of these projects. Premier signed an agreement in 1995 with a
major financial institution as its first customer for the UNIX-based
client/server product. The MAXIMIS product line is utilizing state of the
art technology through the use of CASE tools and data modeling.

Although certain of Premier's competitors offer multi-currency capabilities,
Premier believes that its GLOBAL-PLUS product is currently the only
full-featured, installed and proven global asset management system. Certain
of Premier's domestic competitors have a significantly larger installed
domestic customer base; however, these competitors have only limited
multi-currency functionality. In those markets where global investment
management is required, Premier has been successful. Premier's ability to
remain competitive will be partially dependent on the success of its
conversion to a client/server environment.

In late 1995, Premier acquired a majority interest in National Investor Data
Services, Inc., a provider of software products for investment management
companies, including a portfolio management and accounting system, a
portfolio modeling and optimization product and mutual fund management
systems.

At March 22, 1996, Safeguard owns approximately 94% of Premier's common stock.

Product Development Expenses

For the Information Solutions continuing product lines in the aggregate, the
Company spent $10.0 million, or approximately 25% of Information Solutions
net sales, for product development in 1995, compared to $10.3 million or
approximately 19% of net sales in 1994 and $6.8 million or 10% of net sales
in 1993. The 1994 amount includes $2 million expended by Coherent for the
first six months of the year before its rights offering after which the
Company ceased consolidating Coherent's results. The increased development
expenditures in 1994 compared to 1993 reflected significant development
projects commenced by Tangram and Premier, both of which continued in 1995.
Premier's significant development projects are expected to be completed
during mid-to-late 1996, and Tangram is continuing to develop new products
and product extensions. Only an immaterial amount of product development
expenditures were customer-sponsored.

Other Segment Information

Export sales in the Information Technology segment for the three-year period
ended December 31, 1995 were less than 5% of the segment's total sales in
each of these years. Backlog for this segment, most of which was accounted
for at year-end by CompuCom, is not considered to be a meaningful indication
of future business prospects due to CompuCom's relatively quick order
fulfillment cycle.

<PAGE>

METAL FINISHING SEGMENT

Pioneer Metal Finishing is engaged in the finishing of aluminum and other
metal parts through operations conducted in Minneapolis, Minnesota, Green
Bay, Wisconsin and Phoenix, Arizona. Pioneer is in the process of selling
its Arizona facility, which generally has been unprofitable for Pioneer.
Major technical processes include sulfuric, hardcoat and R-5 bright dip
anodizing, chromate conversion, electroless nickel and the application of
other specialty coatings. Pioneer provides insulation, heat dispersal,
decoration and protection to a wide range of metal parts, including highly
sophisticated equipment and small parts with precision tolerance requirements
for the computer, ordnance, automotive, cookware and recreational industries,
electronic components and other applications.

Metal finishing services are sold to a wide range of customers and industries
by a direct sales force and independent representatives. Finishing is usually
performed on customer-owned material. Because of transportation costs, most
customers are located within a 200-300 mile radius of the finishing
facilities. Pioneer is exploring geographic expansion in the Midwest to
better service and expands its customer base. Pioneer refurbished and
upgraded its Minneapolis production line during the first quarter of 1995 at
a cost of approximately $1 million.

Pioneer competes with many other metal finishers serving its geographical
areas, but Pioneer has established itself as a reputable industry leader and
quality metal finisher. Prompt service, quality of work performed and
geographic location are the most important competitive factors.

Backlog is not considered material to this business as work is generally
processed in a one- to two-week period.

The Company believes that all facilities comply with existing environmental
pollution control regulations, compliance with which in recent years has been
an important competitive factor in the industry.

Safeguard owns 100% of Pioneer Metal Finishing.

COMMERCIAL REAL ESTATE SEGMENT

As of March 22, 1996, Safeguard owns and leases approximately 254,000 square
feet of commercial office and industrial space in 8 commercial real estate
properties in suburban Philadelphia. The properties are carried at a book
value, after depreciation, of approximately $18 million subject to related
mortgage debt, primarily non-recourse, of approximately $20 million. During
1995, Safeguard turned over three commercial properties to its mortgage
lenders in satisfaction of related non-recourse debt.

Safeguard also holds a 40% interest in The Nichols Company, a real estate
company that owns, manages and leases commercial office and industrial space.

<PAGE>

Competition in the commercial real estate market in the suburban Philadelphia
area is intense, due in part to the level of available commercial space.
Safeguard's occupancy rate was approximately 97% at February 29, 1996.
Location, building design and rental rates are the most important competitive
factors for attracting tenants.

Safeguard believes that its real estate holdings are quality commercial
properties in well-positioned suburban locations. The Company's real estate
operations typically generate pre-tax losses because of depreciation, but are
approximately break-even on a cash basis.

Safeguard and The Nichols Company have entered into a non-binding letter of
intent to transfer their real estate holdings to a publicly-traded REIT in
exchange for common stock and warrants in the REIT and units in a partnership
with the REIT. There is no assurance the proposed transactions will be
consummated. See "RECENT DEVELOPMENTS" above.

The operations of the Company and its partnership companies, particularly the
Metal Finishing and Commercial Real Estate segments, are subject to
environmental laws and regulations. The Company does not believe that
expenditures relating to those laws and regulations will have a material
adverse effect on the business, financial condition or results of operations
of the Company.

OTHER PARTNERSHIP COMPANIES

Public Companies

Cambridge Technology Partners (Massachusetts), Inc. provides information
technology and management consulting and software development and evaluation
services to organizations with large scale information processing and
distribution needs that are utilizing or migrating to open systems computing
environments. In performing these services, Cambridge employs a rapid
development methodology utilizing client/server architectures. Cambridge
provides its software design and development services on a fixed-price,
fixed-timetable basis with client involvement at all stages of the process.
Open systems computing environments offer end-users a more flexible and more
easily accessible computing environment than centralized, mainframe-based
computer systems. Cambridge believes that businesses will continue to migrate
to open systems computing environments and continue to utilize information
technology service organizations to address challenges presented by this
transition.

Cambridge's information technology and management consulting services are
offered at the enterprise-wide, specific business process and application
software levels of an organization. Upon the completion of consulting
services, Cambridge designs and develops one or more strategic software
applications and then rolls-out such applications to the organization's
end-users. These software applications are designed to achieve a competitive
advantage, enhance the efficiency and functionality of specific business
processes, and support financial goals. Cambridge may also assist its clients
in providing end-user training for managing the organizational changes that
accompany the roll-out of new applications and the assimilation of such
applications into production environments. Cambridge provides network

<PAGE>

analysis, design and deployment services to assist its clients in
successfully implementing the applications in an open systems environment.
To date, Cambridge's revenues have been generated principally from its custom
software design and development activities.

In the second half of 1995, Cambridge strengthened its service offerings
through the acquisitions of The Systems Consulting Group, Inc. and Axiom
Management Consulting, Inc. These companies provide evaluation and
implementation of package software and "business process re-engineering"
consulting services, respectively.

At March 22, 1996, Safeguard owns approximately 20% of Cambridge's
outstanding common stock, and warrants which could increase its ownership to
22%.

Coherent Communications Systems Corporation develops, manufactures and
markets voice quality enhancement products for wireless (including digital
cellular and Personal Communication Systems ("PCS")), satellite-based,
Cable Communication Systems, and wireline telecommunications systems
throughout the world. Coherent's principal products are echo canceller
products and teleconference products. Coherent's echo cancellers and
teleconference products utilize a proprietary high speed reduced instruction
set computer ("RISC") microchip along with its proprietary software to
enhance the quality of voice communications during a telephone call.
Coherent's products are compatible with domestic and foreign
telecommunications systems.

Coherent's echo canceller products enhance voice quality in several ways,
including eliminating electrical and acoustic echoes inherent in modern
telecommunications systems. The technological advances incorporated into
these telecommunications systems, such as wireless and digital transmission
technology, speech compression, fiber optic transmission lines and satellite
links, make echo canceller products an essential component of most digital
telecommunications networks.

Coherent sells its echo canceller products to network operators and other
end-users through its direct sales force and third-party distributors, and to
telecommunications equipment manufacturers through its direct sales force.
Users of Coherent's echo canceller products include telecommunications
network operators throughout the world, such as British Telecommunications
PLC ("British Telecom"), Deutsche Bundespost, AT&T Wireless, Kokusai Denshin
Denwa Co., Ltd. , Telefonos de Mexico, SA, Teleglobe Canada Inc., PTT Telecom
Logistics (Netherlands) and Telia Mobitel (Sweden). Competition in
international markets is based principally on the technological
characteristics of the product, rather than price. During 1995, however,
Coherent has begun a program to expand direct sales throughout the United
States, in which competition is more price sensitive.

In October 1995, Coherent purchased the technology and related assets for the
Consortium conference bridge teleconferencing product line. The Consortium
is a modestly priced, user friendly teleconferencing bridge targeted to the
corporate customer and other large organizations.

At March 22, 1996, Safeguard owns approximately 37% of Coherent's outstanding
common stock.

<PAGE>

USDATA Corporation provides a wide range of software components, hardware
systems and services, design consulting and maintenance support used by its
customers to improve the overall productivity of their businesses and to
monitor automated processes. The real-time information provided by USDATA's
products enables customers to reduce operating costs, improve product quality
and increase overall throughput and productivity. USDATA believes its core
strengths include multi-platform software development, systems integration,
customer support and a worldwide direct sales force.

USDATA produces automation software tools that enable an organization's
information systems to supervise, monitor and control manufacturing and other
automated processes and to interface with management information systems.
USDATA's family of software products, marketed under the name
FactoryLink-Registered Mark-, provides a powerful set of software tools
designed for users who are technically competent but who may not be
experienced software programmers.

USDATA is also engaged in the design and turnkey implementation of integrated
third-party data collection systems that allow remote, real-time data
collection using a variety of automatic identification techniques. USDATA
employs various technologies in connection with such data collection systems,
including supervisory and network management software, to add value to the
hardware components of its turnkey solutions.

USDATA recently received the largest contract in its history, from AEG
Schneider Automation, a large industrial automation provider, who will
purchase and resell USDATA'a FactoryLink systems throughout the world.

At March 22, 1996, Safeguard owns approximately 21% of USDATA's outstanding
common stock, and warrants which could increase its ownership to 26%.

National Media Corporation is the world's largest infomercial company, using
transactional television to sell innovative consumer products. With its
international subsidiary, Quantum International, Ltd., the company reaches
257 million television households in more than 60 countries.

At March 22, 1996, Safeguard owns preferred stock convertible into 3% of
National Media's outstanding common stock and warrants which could increase
its ownership to 14%.

Private Companies

Diamond Technology Partners, Inc. provides business consulting services from
strategic planning and redesigning business processes to implementation of
recommendations through organizational changes, information systems design
and integration, and custom software applications development.

At March 22, 1996, Safeguard owns approximately 19% of Diamond's outstanding
common stock, and warrants which could increase its ownership to 24%.

FormMaker Software, Inc. provides multi-platform, enterprise-wide document
automation solutions for document-intensive industries with mission-critical,
complex and high-volume needs. FormMaker also provides consulting,
implementation, training and outsourcing services.

<PAGE>

At March 22, 1996, Safeguard owns approximately 42% of FormMaker's
outstanding common stock, and warrants which could increase its ownership to
44%.

Integrated Systems Consulting Group, Inc. is an information services firm
that specializes in systems integration, applications development, and
network consulting services for the pharmaceutical, chemical, and
manufacturing industries. ISCG is committed to maintaining a group of highly
motivated and talented technical professionals by providing them with
continuous training, challenging assignments and the opportunity for
involvement in the Company's business process.

At March 22, 1996, Safeguard owns approximately 19% of ISCG's outstanding
common stock, and warrants which could increase its ownership to 21%. ISCG
anticipates commencing an initial public offering through a rights offering
to Safeguard's shareholders in the first half of 1996, which would reduce
Safeguard's percentage ownership.

MultiGen, Inc. develops and markets the leading real-time 3D authoring
software that is used to create, edit, and view scenes for visual simulation,
entertainment, CAD visualization, and virtual reality applications. The
company's newest products include the MultiGen-Registered Mark- Series II and
its innovative real-time 3D virtual reality scene builder, SmartScene-TM-.

At March 22, 1996, Safeguard owns approximately 28% of MultiGen's outstanding
common stock.

XL Vision, Inc. specializes in producing application-specific imaging
solutions to meet specific customer needs and identifiable market needs. XL
Vision's product lines under development include MicroVision-TM-, an
automated intelligent microscope for use in advanced medical diagnostics;
PhotoVision-TM-, an automatic identification system for use with credit
cards, ATM cards and ID cards; Enhanced Vision Systems-TM-, proprietary
thermal imaging systems capable of "seeing" in darkness, fog or haze; and
OrthoVision-TM-, high-speed 3D geographical information systems scanners.

At March 22, 1996, Safeguard owns 18% of XL Vision's outstanding common
stock, and convertible preferred stock which could increase its ownership to
76%.

Safeguard's ownership percentages in certain of the partnership companies
described above include shares which Safeguard has granted to certain of its
executives under its long term incentive plan. These grants are subject to
certain restrictions, and Safeguard continues to control the voting of these
shares until the restrictions lapse.

Safeguard also participates in companies which provide enterprise-wide
applications software, including DLB Systems, Inc. and Sanchez Computer
Associates, Inc.; innovative marketing service companies including
Interactive Marketing Ventures, LLC, New Paradigm Ventures, Inc. and Sky
Alland Marketing, Inc.; and outsourcing services companies such as
Intellisource, Inc. and The Value Sourcing Group, Inc.

Safeguard also participates in managing three venture capital funds. These
funds invest in early stage, rapidly growing and/or established businesses,

<PAGE>

and have co-invested in certain of the Company's partnership companies. The
following table lists the venture capital funds which are managed by a
subsidiary of Safeguard. While Safeguard's focus is on the information
technology industry, the venture capital funds also invest in health care,
life sciences and service-related companies. Both Radnor Venture Partners
and Technology Leaders I are fully invested.

Venture Capital Funds

Capital % Owned by Year
Name of Fund Commitments Safeguard(1) Established
- - ------------ ------------- ------------ ------------
Radnor Venture Partners $ 33,000,000 13.7 1988
Technology Leaders I 61,000,000 3.3 1991
Technology Leaders II 113,000,000 4.4 1994

- - ---------------------
(1) Represents the percentage of the outstanding limited partnership
interests in the fund owned by Safeguard.

EMPLOYEES

Safeguard and its consolidated subsidiaries have approximately 3,600
employees, of which approximately 72% are employed by CompuCom. The Company
believes relations with employees are good.

ITEM 1(d). FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT SALES

The Company does not believe that foreign or geographic area revenues are
material or significant to an understanding of its business and operations
during the three-year period ended December 31, 1995. Where appropriate,
information concerning the Company's export sales is discussed in Item 1(c)
"Narrative Description of Business."

ITEM 1(e). EXECUTIVE OFFICERS

Information about the Company's executive officers can be found in Part III
of this report under "Item 10. Directors and Executive Officers of
Registrant." None of the officers has fixed term employment agreements.

ITEM 2. PROPERTIES

The Company owns its corporate headquarters and administrative offices
located in Wayne, Pennsylvania. The headquarters building is subject to a
$3.6 million mortgage bearing interest at 9.75%, which amortizes over a 30
year terms, and is callable by the lender at any time beginning in 2002.
The principal properties of the Company consisted of the following as of
March 22, 1996:

INDUSTRY SEGMENT/LOCATION TYPE OF FACILITY LEASE EXPIRES
- - ------------------------- ---------------- -------------
INFORMATION TECHNOLOGY

MICROCOMPUTER SYSTEMS AND SERVICES (COMPUCOM)

<PAGE>

Dallas, TX Executive/Admin. Offices *
Woolwich, NJ Distribution Center 1998(1)
Stockton, CA Distribution Center 1999(2)
Dallas, TX Customer Center 2000
Fort Worth, TX Distribution Center 2000(3)

INFORMATION SOLUTIONS
Raleigh, NC Office/Data Center 1997
Malvern, PA Office/Distribution 1998(4)
Dallas, TX Sales and Service Center 1998
Dallas, TX Office/Distribution 2000
Malvern, PA Office/Distribution 2001

METAL FINISHING
Minneapolis, MN Manufacturing/Office *
Green Bay, WI Manufacturing/Office *

COMMERCIAL REAL ESTATE
Horsham Business Center Commercial Office Space *
Horsham, PA

Iron Run Warehouse/Commercial *
Allentown, PA Office Space

Meetinghouse Business Center Commercial Office Space *
Plymouth Meeting, PA
(5 buildings)

Whiteland Business Center Warehouse/ *
Exton, PA Commercial Office Space

- - ----------------

(*) Owned facility.

(1) CompuCom has a cancellation option exercisable at any time after February
1996.

(2) CompuCom has a cancellation option exercisable beginning May 1995 and each
year thereafter.

(3) CompuCom has a cancellation option exercisable at any time after
April 1998.

(4) Premier has a cancellation option exercisable at any time beginning April
1996.

CompuCom's executive office building in Dallas, Texas is subject to a $3.9
million ten-year mortgage which matures in 2003.

<PAGE>

Pioneer has a variable rate industrial revenue bond mortgage on its Green Bay
property with a principal balance of $2.2 million as of December, 31, 1995,
which matures in 2002. The mortgages on the Commercial Real Estate are
described in Note 4 - Commercial Real Estate Debt to the Financial
Statements, contained on page 39 of the Company's Annual Report to
Shareholders for the year ended December 31, 1995 filed herewith as part of
Exhibit 13 and incorporated herein by reference.

In the opinion of management, the properties and plants are in good condition
and repair and are adequate for the particular operations for which they are
used. The extent of utilization of manufacturing facilities varies from
plant to plant. CompuCom is currently reviewing alternatives to expand its
distribution center capacity. In addition, CompuCom may require additional
office space in Dallas, Texas during late 1996 or early 1997 to accommodate
growth in its service business. The other existing facilities generally are
capable of supporting increased activity without any significant capital
expenditures.

ITEM 3. LEGAL PROCEEDINGS

The Company and its subsidiaries are involved in various claims and legal
actions arising in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not have a
material adverse effect on the Company's consolidated financial position or
results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of 1995.

<PAGE>

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company incorporates by reference the information contained under the
caption "Common Stock Data" on page 43 of its Annual Report to Shareholders
for the year ended December 31, 1995 which page is filed as part of Exhibit
13 hereto.

ITEM 6. SELECTED FINANCIAL DATA

The Company incorporates by reference the information contained under this
caption on page 25 of its Annual Report to Shareholders for the year ended
December 31, 1995 which page is filed as part of Exhibit 13 hereto.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The Company incorporates by reference the information contained under this
caption on pages 25 through 29 of its Annual Report to Shareholders for the
year ended December 31, 1995 which pages are filed as part of Exhibit 13
hereto.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company incorporates by reference the information on pages 30 through 43
of its Annual Report to Shareholders for the year ended December 31, 1995
which pages are filed as part of Exhibit 13 hereto.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

EXECUTIVE OFFICERS:

The following persons were executive officers of the Registrant at March 22,
1996:

HAS BEEN AN
OFFICER
NAME AGE SINCE POSITION
- - ---- --- ----------- ----------
Warren V. Musser 69 1953 Chairman of the Board and
Chief Executive Officer
Donald R. Caldwell(1) 49 1993 President and Chief Operating
Officer
Charles A. Root 63 1984 Executive Vice President
Gerald M. Wilk 59 1973 Senior Vice President
- Finance
Edward R. Anderson(2) 49 1994 President and Chief Executive
Officer, CompuCom Systems,
Inc.
Jerry L. Johnson(3) 48 1995 Senior Vice President
- Operations

- - -----------------

(1) Mr. Caldwell has served as President of the Company since February 1996
and as Executive Vice President from March 1993 to February 1996. Prior
to joining the Company, 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.

(2) Mr. Anderson has served as President and Chief Executive Officer of
CompuCom Systems, Inc. since January 1994 and served as Chief Operating
Officer from August 1993 through December 1993. Prior to joining
CompuCom, Mr. Anderson served from May 1988 to July 1993 as President
and Chief Operating Officer of Computerland Corporation (now known as
Vanstar), a computer reseller.

(3) Mr. Johnson served at US West, a Regional Bell Operating Company, from
1985 through 1995, most recently as Vice President of Network Technology
Services.

<PAGE>

DIRECTORS:

The Company incorporates by reference the information contained under the
caption "ELECTION OF DIRECTORS" in its definitive Proxy Statement relative to
its May 9, 1996 annual meeting of shareholders, to be filed within 120 days
after the end of the year covered by this Form 10-K Report pursuant to
Regulation 14A under the Securities Exchange Act of l934, as amended.

DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K:

The Company incorporates by reference the information contained under the
caption "COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF
1934" in its definitive Proxy Statement relative to its May 9, 1996 annual
meeting of shareholders, to be filed within 120 days after the end of the
year covered by this Form 10-K Report pursuant to Regulation 14A under the
Securities Exchange Act of l934, as amended.

ITEM 11. EXECUTIVE COMPENSATION

The Company incorporates by reference the information contained under the
captions "Directors' Compensation," "Compensation Committee Interlocks and
Insider Participation" and "EXECUTIVE COMPENSATION" in its definitive Proxy
Statement relative to its May 9, 1996 annual meeting of shareholders, to be
filed within 120 days after the end of the year covered by this Form 10-K
Report pursuant to Regulation 14A under the Securities Exchange Act of l934,
as amended.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The Company incorporates by reference the information contained under the
caption "SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in
its definitive Proxy Statement relative to its May 9, 1996 annual meeting of
shareholders, to be filed within 120 days after the end of the year covered
by this Form 10-K Report pursuant to Regulation 14A under the Securities
Exchange Act of l934, as amended.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company incorporates by reference the information contained under the
captions "Compensation Committee Interlocks and Insider Participation" and
"CERTAIN TRANSACTIONS" in its definitive Proxy Statement relative to its May
9, 1996 annual meeting of shareholders, to be filed within 120 days after the
end of the year covered by this Form 10-K Report pursuant to Regulation 14A
under the Securities Exchange Act of l934, as amended.

<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Financial Statements and Schedules

CONSOLIDATED FINANCIAL STATEMENTS *
INDUSTRY SEGMENTS
OPERATIONS - years ended December 31, 1995, 1994, and 1993
BALANCE SHEETS - December 31, 1995 and 1994
CASH FLOWS - years ended December 31, 1995, 1994, and 1993
SHAREHOLDERS' EQUITY - years ended December 31, 1995, 1994,
and 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
STATEMENT OF MANAGEMENT'S FINANCIAL RESPONSIBILITY
QUARTERLY FINANCIAL DATA

FINANCIAL STATEMENT SCHEDULES**
INDEPENDENT AUDITORS' REPORT
Schedule I - Condensed Financial Information of
Registrant
Schedule II - Valuation and Qualifying Accounts

- - -----------------
* Incorporated by reference from pages 30 through 43 of the Company's Annual
Report to Shareholders for the year ended December 31, 1995, which pages
are filed as part of Exhibit 13 hereto.

** Filed herewith.

(b) Reports on Form 8-K

On February 16, 1996, the Company filed a Form 8-K disclosing under Item 5
the closing of the private placement through J.P. Morgan of $115 million in
6% Convertible Subordinated Notes due February 1, 2006.

The following is a list of exhibits required by Item 601 of Regulation S-K
filed as part of this Report. Where so indicated by footnote, exhibits which
were previously filed are incorporated by reference. For exhibits
incorporated by reference, the location of the exhibit in the previous filing
is indicated in parentheses.

<PAGE>

EXHIBIT NO. EXHIBIT
- - ----------- -------
2.1 Asset Purchase Agreement between Texas Instruments Incorporated and
Premier Solutions Ltd. dated as of September 30, 1994 (excluding
schedules and exhibits) (13) (Exhibit 2.1)

2.2 Services Agreement between Texas Instruments Incorporated and
Premier Solutions Ltd. dated as of September 30, 1994 (13)
(Exhibit 2.2)

3.1 Articles of Incorporation of the Company, as amended (6)
(Exhibit 3.1)

3.2 By-laws of the Company, as amended (6)(Exhibit 3.2)

4.2 Rights Agreement dated March 31, 1988 between Safeguard Scientifics,
Inc. and Mellon Bank (East) N.A., as Rights Agent (3)(Exhibit 1)

4.3 Form of letter sent to shareholders regarding adoption of
Shareholder Rights Plan (3)(Exhibit 2)

4.4 Form of certificate of Safeguard Scientifics, Inc. Common Stock, par
value $.10 per share (5)(Exhibit 4.3)

4.5** 1979 Stock Option Plan (1)(Exhibit 10)

4.6** 1980 Stock Option Plan (1)(Exhibit 10)(5)(Exhibit 10.5)

4.7** 1990 Stock Option Plan (11) (Exhibit 4.7)

4.8** Stock Option Plan for Non-Employee Directors (11) (Exhibit 4.8)

4.9** Safeguard Scientifics, Inc. Amended and Restated Stock Savings
Plan (14) (Exhibit 4.9)

4.10** Safeguard Scientifics, Inc. Stock Savings Plan Trust Agreement
(5)(Exhibit 4.2)

10.1** Safeguard Scientifics Money Purchase Pension Plan (6)(Exhibit
10.3)

10.2** First Amendment to Safeguard Scientifics Money Purchase Pension
Plan (11) (Exhibit 10.2)

10.3** Second Amendment to Safeguard Scientifics Money Purchase Pension
Plan (14) (Exhibit 10.3)

10.4** Third Amendment to Safeguard Scientifics Money Pension Plan*

10.5** Safeguard Scientifics Money Purchase Pension Plan Trust Agreement
(6)(Exhibit 10.4)

<PAGE>

EXHIBIT NO. EXHIBIT
- - ----------- -------

10.6** Safeguard Management Incentive Compensation Plan (7)(Exhibit
10.3)

10.7** Safeguard Scientifics, Inc. Long Term Incentive Plan, as amended
and restated effective June 15, 1994 (14) (Exhibit 10.6)

10.8** Form of Promissory Notes dated December 22, 1994 given by certain
executives for advances by the Company of income tax withholdings
on restricted stock grants (14) (Exhibit 10.7)

10.9** Form of Promissory Notes dated January 3, 1995 given by certain
executives for advances by the Company of income tax withholdings
on restricted stock grants (14) (Exhibit 10.8)

10.10** Form of Promissory Notes dated December 12, 1995 and December 20,
1995 given by certain executives for advances by the Company of
income tax withholdings on restricted stock grants.*

10.11** Safeguard Scientifics, Inc. Deferred Compensation Plan
(2)(Exhibit 10.12)

10.12** Amended and Restated Credit Agreement dated June 30, 1994 by and
among Safeguard Scientifics, Inc., Safeguard Scientifics
(Delaware), Inc., and Midlantic Bank (excluding schedules and
exhibits) (12) (Exhibit 10)

10.13** Amended and Restated Revolving Note dated June 30, 1994 made by
Safeguard Scientifics, Inc., Safeguard Scientifics (Delaware),
Inc. (12) (Exhibit 10)

10.14 Term Note dated June 30, 1994 from Safeguard Scientifics, Inc.
and Safeguard Scientifics (Delaware), Inc. (12) (Exhibit 10)

10.15 Second Amended and Restated Credit Agreement dated February 1,
1995 by and among Safeguard Scientifics, Inc., Safeguard
Scientifics (Delaware), Inc. and Midlantic Bank (excluding
schedules and exhibits) (14) (Exhibit 10.13)

10.16 Second Amended and Restated Revolving Loan Note dated February 1,
1995 made by Safeguard Scientifics, Inc., and Safeguard
Scientifics (Delaware), Inc. (14) (Exhibit 10.14)

10.17 Amendment to Second Amended and Restated Loan and Security
Agreement dated August 3, 1995 by and among Safeguard
Scientifics, Inc., Safeguard Scientifics (Delaware), Inc. and
Midlantic Bank (excluding schedules and exhibits) (16) (Exhibit
10.1)

10.18 Revolving Credit Financing and Security Agreement dated as
of August 4, 1993 between CompuCom Systems, Inc. and

<PAGE>

EXHIBIT NO. EXHIBIT
- - ----------- -------

NationsBank of Texas, N.A.(excluding schedules and exhibits) (11)
(Exhibit 10.12)

10.19 First Amendment to Financing and Security Agreement dated as of
March 31, 1994 between CompuCom Systems, Inc. and NationsBank of
Texas, N.A. (14) (Exhibit 10.17)

10.20 Third Amendment to Financing and Security Agreement dated as of
April 26, 1995 between CompuCom Systems, Inc. and NationsBank of
Texas, N.A.(excluding schedules and exhibits) (15) (Exhibit 10.2)

10.21 Fourth Amendment to Financing and Security Agreement dated as of
October 1, 1995 between CompuCom Systems, Inc. and NationsBank of
Texas, N.A.*

10.22 $175,000,000 Master Revolving Note from CompuCom Systems, Inc. to
NationsBank of Texas, N.A. dated as of April 26, 1995 (15)
(Exhibit 10.3)

10.23 [intentionally omitted]

10.24** Letter agreement between Safeguard Scientifics, Inc. and Jean C.
Tempel dated November 5, 1993 (11) (Exhibit 10.20)

10.25** Letter agreements among Continental Capital Partners,
Charterhouse North America Securities, Inc., Valley Forge Capital
Group Ltd., MIG Securities, Inc. and Safeguard Scientifics, Inc.
dated September 6, 1991 (11) (Exhibit 10.21)

10.26** Memo of Understanding between Valley Forge Capital Group, Ltd.
and Safeguard Scientifics, Inc. dated as of October 15, 1992 (11)
(Exhibit 10.22)

10.27** Letter agreement dated August 13, 1991 between Valley Forge
Capital Group, Ltd. and CenterCore, Inc. (11) (Exhibit 10.23)

10.28 Stock Purchase Agreement between CompuCom Systems, Inc. and
Rosetta Stone Corporation dated January 5, 1994, regarding sale
of common stock of PC Parts Express, Inc. (exhibits omitted) with
attached $3,500,000 Promissory Note, Pledge and Security
Agreement, and PC Parts Express, Inc. Common Stock Purchase
Warrant (11) (Exhibit 10.24)

10.29 Asset Purchase Agreement among Rosetta Stone Corporation,
Teknowlogy Corp. and CompuCom Acquisition Corporation, d/a/a
Micro Solutions, dated January 5, 1994, regarding sale of
MicroSolutions' Network Training Group division (exhibits
omitted), with attached $1,000,000 Installment Promissory Note
and Pledge and Security Agreement (11) (Exhibit 10.25)

<PAGE>

EXHIBIT NO. EXHIBIT
- - ----------- -------

10.30** Resignation Agreement, effective January 1, 1994, between Avery
More and CompuCom Systems, Inc. (11) (Exhibit 10.26)

10.31** Promissory Note dated August 31, 1994 from Edward Anderson to
CompuCom Systems, Inc. (14) (Exhibit 10.26)

10.32** Pledge Agreement dated August 31, 1994 between Edward Anderson
and CompuCom Systems, Inc. (14) (Exhibit 10.27)

10.33** Promissory Note dated January 5, 1995 from James Dixon to
CompuCom Systems, Inc. (14) (Exhibit 10.28)

10.34 Trust Indenture Agreement dated February 1, 1996*

10.35 Purchase Agreement dated February 1, 1996 between Safeguard
Scientifics, Inc. and JP Morgan Securities, Inc.*

10.36 Stock Purchase Agreement, Secured Term Note, and Pledge Agreement
dated July 15, 1995 by and between CompuCom Systems, Inc. and
James Dixon*

11 Computation of Per Share Earnings*

13 Pages 25 to 43 of Annual Report to Shareholders for year ended
December 31, 1995*

21 List of Subsidiaries*

23 Consent of KPMG Peat Marwick LLP, independent auditors*

27 Financial Data Schedule*

- - ------------------

* Filed herewith.

** These exhibits relate to compensatory plans, contracts or arrangements
in which directors and/or executive officers of the registrant may
participate.

<PAGE>

(8) Filed on April 9, 1993 as an exhibit to Form 8 Amendment to Form 10-K
(No. 1-5620) and incorporated herein by reference.
(9) Filed on October 22, 1993 as an exhibit to Form 8-K (No. 1-5620) and
incorporated herein by reference.
(10) Filed on November 15, 1993 as an exhibit to Form 10-Q (No. 1-5620) and
incorporated herein by reference.
(11) Filed on March 30, 1994 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(12) Filed on August 15, 1994 as an exhibit to Form 10-Q (No. 1-5620) and
incorporated herein by reference.
(13) Filed on October 17, 1994 as an exhibit to Form 8-K (No. 1-5620) and
incorporated herein by reference.
(14) Filed on March 30, 1995 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(15) Filed on August 14, 1995 as an exhibit to Form 10-Q (No. 1-5620) and
incorporated herein by reference.
(16) Filed on November 14, 1995 as an exhibit to Form 10-Q (No. 1-5620) and
incorporated by reference herein.

30
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Safeguard Scientifics, Inc.:

Under date of February 12, 1996, we reported on the consolidated balance sheets
of Safeguard Scientifics, Inc. and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of operations, cash flows and
shareholders' equity for each of the years in the three-year period ended
December 31, 1995, as contained in the 1995 annual report to shareholders.
These consolidated financial statements and our report thereon are incorporated
by reference in the annual report on Form 10-K for the year 1995. In connection
with our audits of the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedules as listed in the
accompanying index. These financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statement schedules based on our audits.

In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.

As discussed in note 1 to the consolidated financial statements, the Company
changed its method of accounting for investments by adopting the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" as of January 1, 1994.

/s/ KPMG Peat Marwick LLP

Philadelphia, Pennsylvania
February 12, 1996

<PAGE>

Safeguard Scientifics, Inc.
Schedule I
Condensed Consolidated Balance Sheets
December 31, 1995 and 1994
(In thousands)

ASSETS

1995 1994
-------- --------
<S> <C> <C>

Current Assets
Cash $ 1,999 $ 2,264
Receivables less allowances
($136 - 1995; $103 - 1994) 3,538 3,733
Notes and other receivables 4,259 11,127
Inventories 1,262 1,291
Other current assets 8,562 2,240
-------- --------
Total current assets 19,620 20,655

Property, Plant & Equipment, net 20,852 20,940
Commercial Real Estate, net 17,787 18,433

Other Assets
Investments in unconsolidated
subsidiaries and affiliates 224,890 147,380
Notes and other receivables 6,147 4,527
Other 1,873 2,587
-------- --------
232,910 154,494
-------- --------
$291,169 $214,522
-------- --------
-------- --------

LIABILITIES AND SHAREHOLDERS' EQUITY

1995 1994
-------- --------
<S> <C> <C>
Current Liabilities
Current commercial real estate debt $ 3,103 $ 3,120
Current debt obligations 1,815 2,108
Accounts payable 1,162 3,040
Accrued expenses 10,113 13,658
-------- --------
Total current liabilities 16,193 21,926
-------- --------

Long-Term Debt 79,216 57,882
Commercial Real Estate Debt 17,380 17,594
Deferred Taxes on Income 22,899 5,404
Other Liabilities 1,172 1,169

Shareholders' Equity
Common stock 1,640 1,640
Additional paid-in capital 22,349 25,122
Retained earnings 110,043 91,780
Treasury stock (10,471) (13,228)
Net unrealized appreciation on investments 30,748 5,233
-------- --------
154,309 110,547
-------- --------
$291,169 $214,522
-------- --------
-------- --------

</TABLE>

<PAGE>

Safeguard Scientifics, Inc.
Schedule I
Condensed Consolidated Statements of Operations
December 31, 1995, 1994 and 1993
(In thousands except per share amounts)

1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>

Revenues
Net sales $ 35,628 $ 35,024 $ 32,380
Gains on sales of securities, net 18,925 21,789 9,574
Other income 9,210 7,323 6,088
-------- -------- --------
Total revenues 63,763 64,136 48,042

Costs and Expenses
Cost of sales 23,899 22,054 20,289
Selling 1,378 1,307 1,338
General and administrative 17,683 14,334 12,562
Depreciation and amortization 4,536 4,383 4,287
Interest 6,643 5,141 4,404
Equity in income of unconsolidated
subsidiaries and affiliates, net of taxes (11,194) (2,378) (2,060)
-------- -------- --------
Total costs and expenses 42,945 44,841 40,820
-------- -------- --------

Earnings Before Taxes on Income 20,818 19,295 7,222

Provision for Taxes on Income 2,555 3,555 3,369
-------- -------- --------

Net Earnings $ 18,263 $ 15,740 $ 3,853
-------- -------- --------
-------- -------- --------

Earnings Per Share
Primary $1.14 $1.03 $.21
Fully Diluted $1.07 $.94 $.14

Average Common Shares Outstanding
Primary 15,367 14,720 15,069
Fully Diluted 15,454 14,840 15,204

</TABLE>

<PAGE>

Safeguard Scientifics, Inc.
Schedule I
Condensed Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
(In thousands)

1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>

Operating Activities
Net earnings $ 18,263 $ 15,740 $ 3,853
Adjustments to reconcile net earnings to
cash from operating activities
Depreciation and amortization 4,536 4,383 4,287
Deferred income taxes 1,891 3,006 2,690
Equity in income of unconsolidated
subsidiaries and affiliates, net (11,194) (2,378) (2,060)
Gains on sales of securities, net (18,925) (21,789) (9,574)
-------- -------- --------
(5,429) (1,038) (804)

Cash provided (used) by changes in working
capital items
Receivables 422 (5,239) 1,741
Inventories 29 (103) (504)
Other current assets (2,840) (361) (785)
Accounts payable and accrued expenses (4,747) 1,493 718
-------- -------- --------
(7,136) (4,210) 1,170
-------- -------- --------

Cash provided (used) by operating activities (12,565) (5,248) 366

Proceeds from sales of securities, net 24,952 16,953 20,129
-------- -------- --------

Cash provided by operating activities
and sales of securities, net 12,387 11,705 20,495

Other Investing Activities
Investments and notes acquired (28,638) (49,343) (7,775)
Capital expenditures (3,068) (2,375) (5,487)
Other, net (1,302) 80
-------- -------- --------
Cash (used) by other investing activities (31,706) (53,020) (13,182)

Financing Activities
Net borrowings on revolving credit facilities 16,351 17,927 6,200
Net borrowings (repayments) on term debt (1,035) 21,717 (7,735)
Repurchase of common stock (33) (551) (8,000)
Stock options exercised 3,771 1,358 1,229
-------- -------- --------
Cash provided (used) by financing activities 19,054 40,451 (8,306)
-------- -------- --------

Decrease in Cash (265) (864) (993)
Cash - beginning of year 2,264 3,128 4,121
-------- -------- --------

Cash - End of Year $ 1,999 $ 2,264 $ 3,128
-------- -------- --------
-------- -------- --------

</TABLE>

<PAGE>

NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - DEBT

1995 1994
------- -------
($000 omitted)
<S> <C> <C>

Revolving credit facility $47,800 $44,100
Notes payable to equity investee companies 23,589 6,975
Other 9,642 8,915
------- -------
81,031 59,990
Current debt obligations (1,815) (2,108)
------- -------
Long-term debt $79,216 $57,882
------- -------
------- -------

</TABLE>

Aggregate maturities of long-term debt at December 31, 1995 during future years
are as follows (in millions): $1.8 - 1996; $2.8 - 1997; $71.8 - 1998;
$0.4 - 1999; $0.4 - 2000 and $3.8 - thereafter.

Interest paid in 1995, 1994 and 1993 was $6.6 million, $4.9 million, and $4.8
million, respectively, of which $2.0 million, $2.7 million and $3.5 million in
1995, 1994 and 1993, respectively, related to commercial real estate debt.

In connection with investments in certain unconsolidated subsidiaries and
investee companies, the Company is contingently obligated for approximately $29
million in bank loan and other guarantees and $3 million for possible future
investments.

<PAGE>

SAFEGUARD SCIENTIFICS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)

Balance Additions
Beginning Charged to Balance
DECSCRIPTION of Year Operations Deductions Other End of Year
- - ------------ ---------- ---------- ---------- ----- -----------
(1)
<S> <C> <C> <C> <C> <C>

ALLOWANCE FOR DOUBTFUL ACCOUNTS

Year ended December 31, 1993 $ 3,020 $ 1,276 $ 676 $ 1,860 (2) $ 5,480

Year ended December 31, 1994 $ 5,480 $ 3,378 $ 1,669 $ (723) (3) $ 6,466

Year ended December 31, 1995 $ 6,466 $ 1,277 $ 968 $(4,131) (4) $ 2,644

INVENTORY RESERVES

Year ended December 31, 1993 $12,390 $11,838 $ 8,828 $15,400

Year ended December 31, 1994 $15,400 $15,049 $18,627 $(1,148) (3) $10,674

Year ended December 31, 1995 $10,674 $13,333 $13,581 $ (902) (4) $ 9,524

<FN>

(1) Net write-offs.

(2) Maris Equipment Co. valuation reserve at acquisition date.

(3) Sale and deconsolidation of Micro Decisionware and Coherent, respectively.

(4) Deconsolidation of Center Core.

</TABLE>
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated: March 26, 1996 SAFEGUARD SCIENTIFICS, INC.

By: /s/ Warren V. Musser
----------------------------------------
Warren V. Musser, Chairman and Chief
Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Dated: March 26, 1996 /s/ Warren V. Musser
----------------------------------------------
Warren V. Musser, Chairman and Chief Executive
Officer (Principal Executive Officer)

Dated: March 26, 1996 /s/ Gerald M. Wilk
----------------------------------------------
Gerald M. Wilk, Senior Vice President-Finance
(Principal Financial and Accounting Officer)

Dated: March 26, 1996 /s/ Vincent G. Bell
----------------------------------------------
Vincent G. Bell, Jr., Director

Dated: March 26, 1996 /s/ Robert A. Fox
----------------------------------------------
Robert A. Fox, Director

Dated: March 28, 1996 /s/ Delbert W. Johnson
----------------------------------------------
Delbert W. Johnson, Director

Dated: March 26, 1996 /s/ Peter Likins
----------------------------------------------
Peter Likins, Director

Dated: March 28, 1996 /s/ Russell E. Palmer
----------------------------------------------
Russell E. Palmer, Director

Dated: March 28, 1996 /s/ John W. Poduska, Jr.
----------------------------------------------
John W. Poduska Sr., Director

Dated: March 26, 1996 /s/ Hubert J. P. Schoemaker
----------------------------------------------
Hubert J. P. Schoemaker, Director

Dated: March 28, 1996 /s/ Heinz Schimmelbusch
----------------------------------------------
Heinz Schimmelbusch, Director

Dated: March 26, 1996 /s/ Jean C. Tempel
----------------------------------------------
Jean C. Tempel, Director

Dated: March 26, 1996 /s/ Jack L. Messman
----------------------------------------------
Jack L. Messman, Director

<PAGE>

EXHIBIT INDEX

The following is a list of exhibits required by Item 601 of Regulation S-K filed
as part of this Report. Where so indicated by footnote, exhibits which were
previously filed are incorporated by reference. For exhibits incorporated by
reference, the location of the exhibit in the previous filing is indicated in
parentheses.

2.1 Asset Purchase Agreement between Texas Instruments Incorporated and
Premier Solutions Ltd. dated as of September 30, 1994 (excluding
schedules and exhibits) (13) (Exhibit 2.1)

2.2 Services Agreement between Texas Instruments Incorporated and Premier
Solutions Ltd. dated as of September 30, 1994 (13) (Exhibit 2.2)

3.1 Articles of Incorporation of the Company, as amended (6)(Exhibit 3.1)

3.2 By-laws of the Company, as amended (6)(Exhibit 3.2)

4.2 Rights Agreement dated March 31, 1988 between Safeguard Scientifics,
Inc. and Mellon Bank (East) N.A., as Rights Agent (3)(Exhibit 1)

4.3 Form of letter sent to shareholders regarding adoption of Shareholder
Rights Plan (3)(Exhibit 2)