<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For use of the
Commission Only (as permitted
by Rule 14a-6(e)(2)
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SAFEGUARD SCIENTIFICS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
<PAGE>
(5) Total fee paid
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
2
<PAGE>
[LOGO] SAFEGUARD SCIENTIFICS, INC.
April 2, 1998
Dear Fellow Shareholders:
Enclosed you will find Safeguard Scientifics' 1997 Annual Report and a proxy
statement containing the order of business for our upcoming Annual Meeting of
Shareholders. The meeting will take place on Thursday, May 7, 1998, at 4:00
p.m. in The Desmond Hotel and Conference Center Ballroom, Malvern, Pennsylvania.
The directions are provided on the back of this letter. We certainly hope you
can join us. We are arranging for several of our private partnership companies
to be available at the meeting to demonstrate their technology.
Shareholders who cannot attend the meeting in person will have the opportunity
to listen to the meeting over the Internet through Vcall, Inc. at
http://www.vcall.com. To listen to the live meeting, please go to the web site
approximately fifteen minutes early to register and download any necessary audio
software. For those who cannot listen to the live broadcast, a replay will be
available immediately after the meeting and a transcript will be available 24 to
48 hours after the meeting.
The single item on our agenda this year is the election of members to the Board
of Directors for a one-year term. There are no new members up for election.
1997 was a great year. Safeguard completed three rights offerings--Diamond in
February, ChromaVision in July, and OAO Technology in November; all have
produced impressive returns. We anticipate being able to complete three rights
offerings in 1998. The first one, DocuCorp, was successfully completed on March
31, 1998. Our pipeline of private partnership companies is very strong as
Safeguard's experienced, well-rounded management team helps them to grow and
develop into future rights offering candidates.
SAFEGUARD'S BOARD OF DIRECTORS IS A VITAL RESOURCE, AND IT IS IMPORTANT, NO
MATTER HOW MANY SHARES YOU HOLD, THAT YOU VOTE BY COMPLETING AND RETURNING YOUR
PROXY CARD AS SOON AS POSSIBLE.
Please contact Sandi Murtland, Investor Relations Coordinator, at (610) 293-0600
with any questions or concerns.
Sincerely,
/s/ Pete Musser
Pete Musser
Chairman of the Board and Chief Executive Officer
/s/ Don Caldwell
Don Caldwell
President and Chief Operating Officer
<PAGE>
DIRECTIONS TO THE DESMOND GREAT VALLEY HOTEL
One Liberty Boulevard
Malvern, PA 19355
(610) 296-9800
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
DIRECTIONS FROM PHILADELPHIA DIRECTIONS FROM WILMINGTON AND POINTS SOUTH
(DELAWARE AND MARYLAND)
Take the Schuylkill Expressway (I-76) West.
Follow I-76 West to Route 202 South. Take Take I-95 to Route 202 North. Follow Route
Route 202 South to the Great Valley/Route 29 202 North to the Great Valley/Route 29 North
Exit. At the end of the ramp, proceed Exit. Turn right onto Route 29 North. Turn
straight through the traffic light onto right at the second light onto Liberty
Liberty Boulevard. The hotel will be on the Boulevard. The hotel will be on the left.
right.
DIRECTIONS FROM SOUTH NEW JERSEY DIRECTIONS FROM HARRISBURG AND POINTS WEST
Take I-95 South to Route 322 West. Take 322 Take PA Turnpike East to Exit 24, Valley Forge.
West to US Route 1 South to Route 202 North. Take Route 202 South to Great Valley/Route 29
Take Route 202 North to Great Valley/Route North Exit. At the end of the ramp, proceed
29 North Exit. Turn right onto Route 29 straight through traffic light onto Liberty
North. Turn right at second light onto Boulevard. The hotel will be on the right.
Liberty Boulevard. The hotel will be on the
left.
DIRECTIONS FROM PHILADELPHIA AIRPORT DIRECTIONS FROM NEW YORK AND POINTS NORTH
Take I-95 South to 476 North. Follow 476 Take the New Jersey Turnpike South to Exit 6,
North to the Schuylkill Expressway (I-76) the Pennsylvania Turnpike extension. Follow
West to Route 202 South. Take Route 202 the Turnpike West to Exit 24, Valley Forge.
South to the Great Valley/Route 29 North Take Route 202 South to the Great Valley/Route
Exit. At the end of the ramp, proceed 29 North Exit. At the end of the ramp, proceed
straight through the traffic light onto through the light onto Liberty Boulevard. The
Liberty Boulevard. The hotel will be on the hotel will be on the right.
right.
</TABLE>
SAFEGUARD SCIENTIFICS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 7, 1998
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, Malvern, Pennsylvania 19355 on Thursday, May 7, 1998, at
4:00 p.m., local time, for the following purposes:
1. to elect thirteen directors; and
2. 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, 1998
as the record date for the determination of shareholders entitled to receive
notice of, and to vote at, the meeting or any adjournments thereof. In order
that the meeting can be held and a maximum number of shares can be voted,
whether or not you plan to be present at the meeting in person, please complete,
date and sign, and promptly return the enclosed Proxy in the return envelope
provided for your use. No postage is required if mailed in the United States.
By order of the Board of Directors,
/s/ James A. Ounsworth
JAMES A. OUNSWORTH
Secretary
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
April 2, 1998
<PAGE>
SAFEGUARD SCIENTIFICS, INC.
800 The Safeguard Building
435 DEVON PARK DRIVE
WAYNE, PENNSYLVANIA 19087
PROXY STATEMENT
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of Safeguard Scientifics, Inc. (the "Company") for use at the Annual
Meeting of Shareholders to be held on May 7, 1998 (such meeting and any
adjournment or adjournments thereof referred to as the "Annual Meeting") for the
purposes set forth in the accompanying Notice of Annual Meeting of Shareholders
and in this Proxy Statement. This Proxy Statement and the enclosed Proxy are
being mailed to shareholders on or about April 2, 1998.
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,
1998 (the "Shares") are entitled to receive notice of, and to vote at, the
Annual Meeting. On that date, there were 31,955,366 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 thirteen nominees receiving the highest number of affirmative votes of the
Shares present or represented and entitled to be voted shall be elected as
directors. 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 or by telephone.
<PAGE>
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholders intending to present proposals at the next Annual Meeting of
Shareholders to be held in 1999 must notify the Company of the proposal no later
than December 2, 1998.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 20, 1998, 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 executive 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)........................ 3,124,144 9.8%
Judith Areen................................. 100 *
Vincent G. Bell, Jr.(3)...................... 477,818 1.5%
Donald R. Caldwell(4)........................ 440,482 1.4%
Robert A. Fox(5)............................. 163,250 *
Delbert W. Johnson(6)........................ 121,543 *
Robert E. Keith, Jr.(7)...................... 38,724 *
Peter Likins, Ph.D.(8)....................... 37,470 *
Jack L. Messman(8)........................... 76,250 *
Russell E. Palmer(9)......................... 24,868 *
John W. Poduska, Sr., Ph.D.(8)............... 171,250 *
Heinz Schimmelbusch, Ph.D.(8)................ 5,250 *
Hubert J. P. Schoemaker, Ph.D.(8)............ 70,250 *
Jerry L. Johnson(10)......................... 87,480 *
Thomas C. Lynch(11).......................... 61,019
Edward R. Anderson........................... 1,200 *
Executive officers and directors as a group
(19 persons)(12).......................... 5,355,632 16.4%
- ---------
</TABLE>
* Less than 1% of the outstanding Common Stock.
(1) Except as otherwise disclosed, the nature of beneficial ownership is the
sole power to vote and to dispose of the shares (except for shares held
jointly with spouse).
(2) Includes 280,000 shares held by a charitable foundation of which Mr. Musser
is a director and an executive officer, and 40,000 shares held by the Claire
V. Sams Trust, of which Mr. Musser is the trustee.
(3) Includes 49,568 shares held by a charitable foundation and 1,250 shares that
may be acquired pursuant to stock options that are currently exercisable or
that will become exercisable within 60 days of March 20, 1998. Mr. Bell
shares voting and dispositive power of the shares held by the charitable
foundation.
(4) Includes 300 shares held in a custodial account for a minor child, 6,250
shares held in trust for the benefit of his spouse, and 185,000 shares that
may be acquired pursuant to stock options that are currently exercisable or
that will become exercisable within 60 days of March 20, 1998. Mr. Caldwell
disclaims beneficial ownership of the shares held in the custodial account
and in the trust for the benefit of his spouse.
<PAGE>
(5) Includes 50,000 shares held by a charitable foundation and 1,250 shares
that may be acquired pursuant to stock options that are currently
exercisable or that will become exercisable within 60 days of March 20,
1998. Mr. Fox shares voting and dispositive power of the shares held by the
charitable foundation.
(6) Includes 23,900 shares held by a remainder trust and 11,050 shares that may
be acquired pursuant to stock options that are currently exercisable or
that will become exercisable within 60 days of March 20, 1998.
(7) Includes 300 shares held by Mr. Keith's spouse and 31,250 shares that may
be acquired pursuant to stock options that are currently exercisable or
that will become exercisable within 60 days of March 20, 1998. Mr. Keith
disclaims beneficial ownership of the shares owned by his spouse.
(8) Includes for Messrs. Likins, Messman, Poduska, Schimmelbusch, and
Schoemaker, 1,250 shares, 16,250 shares, 1,250 shares, 4,250 shares, and
4,250 shares that may be acquired pursuant to stock options that are
currently exercisable or that will become exercisable within 60 days of
March 20, 1998.
(9) Includes 3,000 shares held by Mr. Palmer's spouse and 16,250 shares that
may be acquired pursuant to stock options that are currently exercisable or
that will become exercisable within 60 days of March 20, 1998. Mr. Palmer
disclaims beneficial ownership of the shares owned by his spouse.
(10) Includes an aggregate of 24,000 shares held by two trusts, of which Mr.
Jerry Johnson is a co-trustee, and 60,000 shares that may be acquired
pursuant to stock options that are currently exercisable or that will
become exercisable within 60 days of March 20, 1998.
(11) Includes 1,000 shares held by Mr. Lynch's spouse and 59,400 shares that may
be acquired pursuant to stock options that are currently exercisable or
that will become exercisable within 60 days of March 20, 1998. Mr. Lynch
disclaims beneficial ownership of the shares owned by his spouse.
(12) Includes 668,700 shares that may be acquired pursuant to stock options that
are currently exercisable or that will become exercisable within 60 days of
March 20, 1998.
CompuCom Systems, Inc. ("CompuCom") and Tangram Enterprise Solutions, Inc.
("Tangram") are majority owned subsidiaries of the Company. As of March 20,
1998, executive 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, 2.1%; all officers and directors of the Company as a
group, other than Mr. Anderson, less than 1%; and (ii) Tangram: all officers
and directors as a group, 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 thirteen nominees as
directors of the Company to hold office until the Annual Meeting of Shareholders
in 1999 and until their successors are elected and have qualified. All of the
nominees are presently serving as directors of the Company. Each of the
nominees has consented to serve if elected. However, if any of the nominees
should become unavailable prior to the election, the holders of the Proxies may
vote the Proxies for the election of such other persons as the Board may
recommend, unless the Board reduces the number of directors to be elected.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
ELECTION OF THE SLATE OF NOMINEES SET FORTH IN THIS PROPOSAL. PROXIES WILL BE SO
VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE ON THEIR PROXY CARDS. THE THIRTEEN
NOMINEES RECEIVING THE HIGHEST NUMBER OF AFFIRMATIVE VOTES OF THE SHARES PRESENT
OR REPRESENTED AND ENTITLED TO BE VOTED SHALL BE ELECTED AS DIRECTORS.
<PAGE>
<TABLE>
<CAPTION>
HAS BEEN A
PRINCIPAL OCCUPATION AND BUSINESS DIRECTOR
NAME EXPERIENCE DURING LAST FIVE YEARS SINCE AGE
- ------------------------------- ------------------------------------------- ----------------- ---
<S> <C> <C> <C>
Warren V. Musser Chairman of the Board and Chief
Executive Officer of the Company(1)(4)(5)..... 1953 71
Judith Areen Executive Vice President for Law Center
Affairs and Dean of the Law Center,
Georgetown University, and Professor
of Law, Georgetown University(3)(6)........... 1997 53
Vincent G. Bell, Jr. President, Verus Corporation, a
management investment firm (1)(2)(4).......... 1956 72
Donald R. Caldwell President and Chief Operating Officer
of the Company(7)............................. 1996 51
Robert A. Fox President, R.A.F. Industries, Inc. and
affiliates, diversified manufacturing,
distribution and service companies(2)(4)(8)... 1981 68
Delbert W. Johnson Vice President of the Company(9).............. 1992 59
Robert E. Keith, Jr. President and Chief Executive Officer,
Technology Leaders Management, Inc.,
a venture capital management
company and a subsidiary of the
Company(10)................................... 1996 56
Peter Likins, Ph.D. President, University of Arizona(3)(11)....... 1988 61
Jack L. Messman Chairman and Chief Executive Officer,
Union Pacific Resources Group Inc., an
energy company(3)(12)......................... 1994 58
Russell E. Palmer Chairman and Chief Executive Officer,
The Palmer Group, a corporate
investment firm(2)(3)(4)(13).................. 1989 63
John W. Poduska, Sr., Ph.D. Chairman, Advanced Visual Systems, Inc.,
a provider of visualization software(3)(14)... 1987 60
Heinz Schimmelbusch, Ph.D. Managing Director, Safeguard
International Fund, L.P., a private equity
fund; President and Chief Executive
Officer of Allied Resource Corporation,
pursuing technology-oriented investment
opportunities in process industries; and
CEO, Safeguard International Group,
Inc., a subsidiary of the Company(1)(15)...... 1989 53
Hubert J.P. Schoemaker, Ph.D. Chairman of the Board and co-founder of
Centocor, Inc., a biotechnology
company (1)(16)............................... 1993 48
</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.
<PAGE>
(5) Mr. Musser is Chairman of the Board of Cambridge Technology Partners
(Massachusetts), Inc., a director of Coherent Communications Systems
Corporation, CompuCom Systems, Inc., DocuCorp International, Inc., National
Media Corporation and Sanchez Computer Associates, Inc., and a trustee of
Brandywine Realty Trust. Mr. Musser also serves on a variety of civic,
educational and charitable Boards of Directors and serves as Vice
President/Development, Cradle of Liberty Council, Boy Scouts of America, as
Vice Chairman of The Eastern Technology Council, and as Chairman of the
Pennsylvania Partnership on Economic Education.
(6) Ms. Areen has been a Professor of Law at Georgetown University since 1976
and Executive Vice President for Law Center Affairs and Dean of the Law
Center, Georgetown University, since 1989. Ms. Areen is a director of MCI
Communications Corp.
(7) Mr. Caldwell served as Executive Vice President of the Company from November
1993 until February 1996, when he was promoted to President and Chief
Operating Officer. From 1991 through 1993, Mr. Caldwell was President of
Valley Forge Capital Group, Ltd., a business mergers and acquisition
advisory firm that he founded. Mr. Caldwell is a director of CompuCom
Systems, Inc., Diamond Technology Partners Incorporated, Integrated Systems
Consulting Group, Inc. and Quaker Chemical Company of Philadelphia. Mr.
Caldwell also serves on a variety of civic and charitable boards, including
The Philadelphia Orchestra and The Pennsylvania Academy of Fine Arts, of
which he is Chairman.
(8) Mr. Fox is a director of Prime Bancorp, Inc.
(9) Mr. Johnson has served as a Vice President of Safeguard since 1980. Mr.
Johnson served as the President and Chief Executive Officer of Pioneer Metal
Finishing from 1978 until October 1994, and as Chairman of the Board and
Chief Executive Officer until October 1997. Mr. Johnson is a director of
CompuCom Systems, Inc., Ault, Inc., US Bancorp and Tennant Company, Inc.
Mr. Johnson was the Chairman of the Ninth District Federal Reserve Bank from
1991 to 1993 and was the 1993 Chairman of the Federal Reserve Board
Conference of Chairmen. Mr. Johnson is the brother of Jerry L. Johnson, an
executive officer of the Company.
(10) Mr. Keith served as President and Chief Operating Officer of Technology
Leaders Management, Inc. from 1991 until February 1996, when he was
promoted to President and Chief Executive Officer. Mr. Keith is a director
of Cambridge Technology Partners (Massachusetts), Inc., National Media
Corporation, and SunSource, Inc.
(11) Dr. Likins is a former President of Lehigh University, a position which he
held from 1982 to 1997, and a former Provost and Dean of Engineering at
Columbia University. Dr. Likins also has served as a technical consultant
for a number of companies, including Boeing Aerospace Co. and the Jet
Propulsion Laboratory, 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, Comsat Corporation,
Parker-Hannifin Corp. and Dynacs Engineering Co.
(12) Mr. Messman is a director of Cambridge Technology Partners (Massachusetts),
Inc., Novell, Inc., Tandy Corp., Union Pacific Resources Group Inc. and
USDATA Corporation.
(13) Prior to organizing The Palmer Group in June 1990, Mr. Palmer was Dean of
The Wharton School of the University of Pennsylvania from 1983 to June
1990. He was managing partner and Chief Executive Officer of Touche Ross &
Co. (now Deloitte & Touche) from 1972 to 1983. Mr. Palmer is a director of
Allied-Signal, Inc., Bankers Trust New York Corporation, Federal Home Loan
Mortgage Corporation, GTE Corporation, and The May Department Stores
Company.
(14) Dr. Poduska is a director of Cambridge Technology Partners (Massachusetts),
Inc. and Union Pacific Resources Group, Inc.
(15) From 1973 to 1993, Dr. Schimmelbusch was associated with Metallgesellschaft
AG, a raw materials company of which he served as Chairman of the Executive
Board from March 1989 to December 1993 and as Deputy Chairman of the Board
of Management from July 1988 to March 1989. Dr. Schimmelbusch is a
director of Arthur Treacher's Seafood Grille.
(16) Dr. Schoemaker is also a co-founder and a director of Tocor II, Inc.
<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board held seven meetings in 1997. The Company's Board of
Directors has appointed standing Audit, Compensation, Executive and Nominating
Committees. The Compensation Committee, which met twice in 1997, 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 1997. 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 once during 1997, is authorized to act upon
all matters with respect to the management of the business and affairs of the
Company, except that its authority to authorize and approve investments by the
Company, other than investments made in the normal course of business, is
limited to investments of up to $5 million per transaction in respect of any
particular company, entity or person, and up to $10 million in the aggregate
between Board meetings. The Nominating Committee, which was established by the
Board in February 1996, is responsible for recommending nominees for election to
the Company's Board of Directors. The Nominating Committee will consider
qualified candidates recommended by shareholders, who should submit any such
recommendations, including a detailed statement of qualifications, to the
Nominating Committee, c/o the Corporate Secretary, Safeguard Scientifics, Inc.,
800 The Safeguard Building, 435 Devon Park Drive, Wayne, PA 19087-1945. All of
the directors, with the exception of Dr. Poduska, attended at least 75% of the
total number of Board and Committee meetings of which they were members during
the period in which they served as a director.
DIRECTORS' COMPENSATION
In 1997, directors who were not employees received an annual cash
retainer of $17,500, plus $1,000 for each Board meeting attended and $500 for
each Committee meeting attended on a date other than a Board meeting date. In
addition, Mr. Fox and Mr. Palmer, as Chairman of the Compensation Committee and
Audit Committee, respectively, received an annual cash retainer of $1,000.
The Company has deferred compensation plans ("Deferred Compensation
Plan") covering certain of its directors and a limited number of officers. All
contributions to the Deferred Compensation Plan were completed by the end of
1988. Upon retirement (or an earlier date in certain cases) or upon termination
of service as a director, the participant is entitled to receive (as a level
payment over 15 years or as a lump sum) an amount equal to the aggregate credits
to the participant's account plus an investment growth factor. Under the
Deferred Compensation Plan, Mr. Bell began receiving quarterly payments of
$3,100 in February 1992, which was reduced to $3,000 in February 1994. These
payments will continue, subject to adjustment in accordance with the terms of
the Deferred Compensation Plan, for a period of 15 years. The Company has
purchased life insurance contracts to provide it with funds estimated to be
sufficient to cover its obligations under the Deferred Compensation Plan, and
the Company is the owner and beneficiary of such contracts. If assumptions as
to mortality experience, future policy dividends and other factors are realized,
the Company will recover an amount equal to all benefit payments under the
Deferred Compensation Plan, the premium payments on the insurance contracts, and
a portion of the interest earned on the use of the premium payments.
<PAGE>
DIRECTORS' STOCK OPTIONS
Upon her election to the Board on August 12, 1997, Ms. Areen received
an option to purchase 30,000 shares of the Company's common stock at an exercise
price of $26.125. On December 11, 1997, each director of the Company, other
than Messrs. Musser and Caldwell, received an option to purchase 2,500 shares of
the Company's common stock at an exercise price of $32.4375. The options vest
25% each year commencing on the first anniversary of the grant date and have a
term of eight years.
REPORT OF THE BOARD COMPENSATION COMMITTEE
The Compensation Committee of the Board (the "Committee") reviews and
approves management recommendations for compensation levels, including incentive
compensation, for the executives of the Company, and administers the Company's
stock option plans and long term incentive plan. The current members of the
Committee are all outside directors of the Company.
One of the executive officers named in the compensation tables, Edward
R. Anderson, is employed and compensated by CompuCom, a publicly traded company
that is a majority owned subsidiary of the Company and its largest partnership
company. Mr. Anderson has not and does not participate in any of the Company's
compensation plans and his compensation arrangements are not reviewed by the
Committee. Consequently, the report of this Committee does not relate to the
compensation of Mr. Anderson.
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 relative to
compensation levels within the technology sector, 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 consideration of individual performance. 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 public 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
<PAGE>
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. Historically, grants have not been made every year. However,
it is expected that annual grants will be made in the future 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
distributions 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. The long term incentive plan was amended in 1997 to
permit grants to be made in the form of interests in a limited partnership which
holds the Company's shares in a partnership company, restricted stock in a
partnership company, or of share units which entitle a grantee to participate in
the appreciation of the value of the stock of a partnership company above set
threshold levels. The amendment will permit the interests of the participants
to be more closely aligned with the interests of the Company. It is the
Company's intent primarily to sell limited partnership interests to plan
participants at their fair value. The Company allocates up to an aggregate of
10% of the partnership for plan participants. All partnership interests and
share unit grants under the plan are subject to vesting over a period of years
and the attainment of certain threshold levels. Partnership interests are
generally paid out in stock of the partnership company after a fixed period of
years (subject to acceleration) subject to the attainment of a threshold value
of the stock. 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. Share units are payable after a fixed period of years
(subject to acceleration) in cash or in stock of the partnership company if the
threshold levels are achieved.
The Committee believes that its policy of aligning the interests of
executives and key employees with the long-term interests of the Company's
shareholders has been successful, as evidenced by the cumulative total return on
the Company's common stock, assuming participation in rights offerings, as shown
in the second stock performance graph that appears on page 15.
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
<PAGE>
"performance-based" as defined in Section 162(m). In order for incentive
compensation to qualify as "performance-based" compensation under Section
162(m), the Committee's discretion to grant awards must be strictly limited. The
Company believes that its 1990 Stock Option Plan meets the performance-based
exception under Section 162(m). The Committee believes that the benefit to the
Company of retaining the ability to exercise discretion under the Company's
remaining incentive compensation plans outweighs the limited risk of loss of tax
deductions under Section 162(m). Therefore, the Committee does not currently
intend to seek to qualify any of its other incentive compensation plans under
Section 162(m).
CEO Compensation
Mr. Musser's base salary for 1997 was fixed by the Committee in
December 1996 and represented a 5% 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 1997
equal to 200% of his target bonus. This decision was based on the successful
completion of three rights offerings during the year by Diamond Technology
Partners Incorporated, ChromaVision Medical Systems, Inc. and OAO Technology
Solutions, Inc. and on the Company achieving many other strategic objectives,
including the completion of a $265 million fund-raising for SCP Private Equity
Partners L.P. to pursue post-venture stage opportunities; closing of fund-
raising efforts for TL Ventures III, a $285 million venture fund; completion of
several mergers and acquisitions for certain private partnership companies; and
the sale of three non-strategic partnership companies.
OTHER EXECUTIVE COMPENSATION
The Committee approved executive cash bonuses for 1997 equal to 200%
of the target bonus amounts. As noted above under discussion of the CEO's
compensation, these decisions were based on the Company and its partnership
companies achieving a large portion of their financial and strategic objectives
as outlined above. Also considered to a lesser extent in awarding bonuses was
each executive's individual performance for the year. The Committee granted
options under the Company's 1990 Stock Option Plan to all of its executives,
except Mr. Musser, and employees. The relative number of options granted was
based on each such individual's responsibilities.
In December 1997, the Committee approved an award of limited
partnership interests to key executives and key employees under the Company's
long term incentive plan in connection with new or additional investments made
by the Company during 1997. These limited partnership interests will provide
the participants under the long term incentive plan with the opportunity to
receive distributions, as a group, of up to an aggregate of 10% of the shares of
stock held by each limited partnership if the value of the shares exceeds
certain thresholds established by the Committee. Distributions on account of
the partnership interests awarded under the long term incentive plan will be
made in five years (subject to achievement of the threshold values and subject
to acceleration by the Committee). 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
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning compensation
paid during the last three fiscal years to the Chief Executive Officer and each
of the other four most highly compensated executive officers of the Company
whose salary and bonus exceeded $100,000 in 1997.
<TABLE>
<CAPTION>
Long Term Compensation
----------------------------------
Annual Compensation Awards Payouts
---------------------------------------------------------------------------------------------------------
Securities
Other Restricted Underlying Long Term
Annual Stock Options/ Incentive All Other
Name and Principal Salary Bonus Compen- Award(s) SARS Payouts Compen-
Position Year ($)(1) ($)(2) sation($)(3) ($)(4)(5) (#)(6) ($) sation ($)(7)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Warren V. Musser, 1997 $290,000 $290,000 $63,004 -- -- -- $12,000
Chairman of the Board and
Chief 1996 275,000 137,500 -- -- -- -- 11,250
Executive Officer(8)
1995 275,000 206,000 -- -- -- -- 11,250
- ------------------------------------------------------------------------------------------------------------------------------------
Donald R. Caldwell, 1997 $252,000 $226,800 -- $ 0 30,000 -- $16,149
President and Chief
Operating Officer 1996 240,000 117,998 -- 413,739 20,000 -- 15,398
1995 240,000 278,305 -- 276,540 -- -- 11,250
- ------------------------------------------------------------------------------------------------------------------------------------
Jerry L. Johnson, Senior 1997 $210,000 $169,760 -- $ 0 30,000 -- $19,620
Vice President, Operations
1996 200,000 154,039 46,110 379,079 -- -- 15,582
1995 50,000 20,000 -- 62,297 100,000 -- 0
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas C. Lynch, Senior 1997 $210,000 $169,760 -- $ 0 20,000 -- $24,484
Vice President(9)
- ------------------------------------------------------------------------------------------------------------------------------------
Edward R. Anderson, 1997 $360,000 $530,122 -- -- 300,000(10) -- $11,875
President and Chief
Executive Officer of 1996 310,000 360,907 -- -- -- -- 2,673
CompuCom Systems, Inc.
1995 310,000 416,020 -- -- -- -- 3,750
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes annual compensation that has been deferred by Messrs. Musser,
Caldwell, Johnson and Lynch pursuant to the Company's stock savings plan and
by Mr. Anderson pursuant to the CompuCom Systems, Inc. 401(k) matched
savings plan.
(2) With respect to each of Messrs. Johnson and Lynch, the bonus paid in 1997
includes the value of 2,000 shares of Diamond Technology Partners
Incorporated common stock awarded as a bonus.
(3) The amount stated for Mr. Musser includes $51,822 for personal use of the
Company plane. Mr. Musser's use of the Company plane increased in 1997
following a determination by the Board of Directors requiring him to travel
by Company plane instead of commercial aircraft whenever possible for safety
reasons. While other named executives enjoy certain perquisites, for fiscal
year 1997, 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) In January 1998, Messrs. Caldwell, Johnson and Lynch purchased for their
fair value a 0.975%, 0.725% and 0.725% limited partnership interest,
respectively, in Safeguard 97 Capital L.P. and a 0.9256%, 0.6925% and
0.6925% limited partnership interest, respectively, in Safeguard XL Capital
L.P. These partnerships were organized by the Company to hold equity
securities purchased by the Company during 1997.
<PAGE>
(5) Any dividends that become payable will be paid on restricted stock awards at
the same rate as paid to all shareholders. At December 31, 1997, Mr.
Caldwell held the following shares of restricted stock granted in prior
years with a value of approximately $765,200: 34,137 shares of MultiGen,
Inc., 4,603 shares of Professional Training Services, Inc., 28,600 shares of
Intellisource, Inc., 30,956 shares of Sentry Technology, 19,906 shares of
DocuCorp International, Inc., 39,375 shares of XL Vision, Inc., 17,910
shares of New Paradigm Ventures, Inc., 130,000 shares of Internet Capital
Group L.L.C., 73,710 shares of Mikros Systems Corp., 150 shares of Mobile
Broadcasting Corporation, 9,338 shares of Diablo Research and 9,338 shares
of Whisper Communications; and each of Messrs. Johnson and Lynch held the
following shares of restricted stock granted in prior years with a value of
approximately $287,700: 14,929 shares of restricted stock of DocuCorp
International, Inc., 97,500 shares of Internet Capital Group L.L.C., 55,283
shares of Mikros Systems Corp., 112.50 shares of Mobile Broadcasting
Corporation, 14,960 shares of Sentry Technology, 7,004 shares of Diablo
Research and 7,004 shares of Whisper Communications. At December 31, 1997,
Mr. Caldwell also held share units entitling him to participate in a
percentage of distributions made by Technology Leaders II L.P. to the
Company in excess of $10,028,000, and Messrs. Caldwell, Johnson and Lynch
each held share units entitling them to participate in a percentage of
distributions made by Enertech Capital Partners in excess of $6.0 million,
SCP Private Equity Partners, L.P. in excess of $40.0 million and TL Ventures
III in excess of $20.6 million. The aggregate value of the share unit
holdings is indeterminate until the payment date for each award.
Restrictions on grants of shares of restricted stock of Diamond Technology
Partners Incorporated and OAO Technology Solutions, Inc. awarded to Mr.
Caldwell, and restrictions on grants of shares of restricted stock of
ChromaVision Medical Systems, Inc. and OAO Technology Solutions, Inc.
awarded to Messrs. Johnson and Lynch, were released during 1997 upon the
satisfaction of the conditions of the respective grants.
(6) Except as otherwise indicated in individual footnotes, options in this table
are to acquire Common Stock of the Company.
(7) The stated amounts for fiscal 1997 include the following amounts: $7,200
for each of Messrs. Musser, Caldwell, Johnson and Lynch as Company
contributions under the Company's Money Purchase Pension Plan; $4,800 for
each of Messrs. Musser, Caldwell, Johnson and Lynch as Company matching
contributions under the Company's Stock Savings Plan; and $4,149, $7,620,
and $12,484 for Messrs. Caldwell, Johnson and Lynch, respectively, for life
insurance premiums. The amount stated for Mr. Anderson represents $9,500
for life insurance premiums and $2,375 for matching contributions made by
CompuCom under its 401(k) matched savings plan.
(8) Mr. Musser does not participate in the Company's stock option plans or long
term incentive plan.
(9) Mr. Lynch has been an executive officer of the Company since March 1997.
(10) Option granted by CompuCom Systems, Inc. to acquire common stock of
CompuCom, a subsidiary of the Company.
<PAGE>
STOCK OPTIONS
The following tables set forth information with respect to options granted
and exercised during fiscal year 1997 and the number of unexercised options and
the value of unexercised in-the-money options at December 31, 1997.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- -----------------------------------------------------------------------------------------------------------------------------------
Potential
Realizable Value
Individual Grants At Assumed Annual
Rates Of Stock
Price Appreciation
For Option Term(1)
- -----------------------------------------------------------------------------------------------------------------------------------
% of Total
Options/
SARS
Options/ Granted To Exercise Or
SARs Employees In Base Price Expiration 5% 10%
Name Granted (#)(2) Fiscal Year ($/Sh)(3) Date ($) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Warren V. Musser 0 -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Donald R. Caldwell 30,000 10.0% $32.4375 12/11/05 $ 464,624 $1,112,855
- -----------------------------------------------------------------------------------------------------------------------------------
Jerry L. Johnson 30,000 10.0% $32.4375 12/11/05 $ 464,624 $1,112,855
- -----------------------------------------------------------------------------------------------------------------------------------
Thomas C. Lynch 20,000 6.7% $32.4375 12/11/05 $ 309,749 $ 741,903
- -----------------------------------------------------------------------------------------------------------------------------------
Edward R. Anderson 300,000 (4) 18.8% $ 7.625 5/13/07 $1,438,596 $3,645,686
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The potential realizable values are based on an assumption that the stock
price of the shares of Common Stock of the Company appreciates at the annual
rate shown (compounded annually) from the date of grant until the end of the
option term. These values do not take into account amounts required to be
paid as income taxes under the Internal Revenue Code of 1986, as amended,
and any applicable state laws or option provisions providing for termination
of an option following termination of employment, nontransferability, or
vesting over periods of four or more 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) All options, with the exception of options granted to Edward R. Anderson
which are covered by footnote 4 below, are to acquire Common Stock of the
Company. The options vest 25% each year commencing on December 11, 1998 and
have an eight-year term. The options continue vesting and remain
exercisable so long as employment with the Company or one of its
subsidiaries continues. The option exercise price may be paid in cash, by
delivery of previously acquired shares, subject to certain conditions, or
same day sales (i.e. cashless broker's exercises). The Compensation
Committee has the authority to modify the terms of outstanding options,
including acceleration of the exercise date of outstanding options.
(3) All options have an exercise price at least equal to the fair market value
of the shares subject to each option on the date of grant.
(4) The option granted to Mr. Anderson by CompuCom Systems, Inc. vests 20% each
year commencing on January 2, 1998 and has a ten-year term. The option
continues vesting and remains exercisable so long as employment with
CompuCom Systems, Inc. or one of its subsidiaries continues. The option
exercise price may be paid in cash, by delivery of previously acquired
shares, subject to certain conditions, or same day sales (i.e. cashless
broker's exercises). CompuCom's Compensation Committee has the authority to
modify the terms of outstanding options, including acceleration of the
exercise date of outstanding options.
<PAGE>
<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
Options/SARs Options/SARs
Shares At Fiscal Year-End (#) At Fiscal Year-End ($)(1)
Acquired On Value
Name Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Warren V. Musser 0 - 0 0 - -
- -------------------------------------------------------------------------------------------------------------------------
Donald R. Caldwell 214,470 $3,455,123 90,000 140,000 $2,471,247 $2,478,747
- -------------------------------------------------------------------------------------------------------------------------
Jerry L. Johnson 0 - 60,000 70,000 $603,750 $ 402,500
- -------------------------------------------------------------------------------------------------------------------------
Thomas C. Lynch 600 $ 3,300 59,400 60,000 $ 556,875 $ 375,000
- -------------------------------------------------------------------------------------------------------------------------
Edward R. Anderson
CompuCom Options 0 - 620,000 455,000 $3,177,500 $ 981,875
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The value of unexercised in-the-money options is calculated based upon (i)
the fair market value of the stock at December 31, 1997, less the option
exercise price, multiplied by (ii) the number of shares subject to an
option. On December 31, 1997, the per share fair market values utilized in
calculating the values in this table were $31.375 for Company Common Stock
and $8.25 for CompuCom common stock.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS.
In 1997, CompuCom Systems, Inc. entered into an employment agreement with
Edward R. Anderson providing for his employment through October 24, 1999,
subject to annual renewals, as an executive officer of CompuCom at a minimum
monthly salary of $30,000. The agreement provides for Mr. Anderson's
participation in management bonuses at a target rate of 120% of base salary and
an additional lump sum bonus of $175,000 payable on May 15 in 1998 and 1999 and,
if the agreement is extended, on May 15, 2000. The Company is required to
obtain a renewable term life insurance policy in the amount of $1,000,000
payable to Mr. Anderson's designated beneficiary and a comprehensive long-term
disability insurance policy, and to afford him other standard benefits awarded
to other senior management. Upon termination of Mr. Anderson's employment by
CompuCom without cause, or if CompuCom demotes him or reduces his salary or
benefits below the level described in his employment agreement, Mr. Anderson
will be entitled to receive compensation in an amount equal to the salary that
would have been paid for the remainder of the Agreement. Mr. Anderson has
agreed to refrain from competing with CompuCom for two years after his voluntary
termination of employment, and in the event of his termination for any reason
other than due cause, for the same period of time for which he receives
compensation pursuant to the terms of his employment agreement. In the event of
a change in control, all unvested stock options to purchase shares of CompuCom
or ClientLink, Inc. will be vested within ten days of the change in control,
and, if Mr. Anderson voluntarily terminates his employment within six months of
such change in control, he will be entitled to receive in a lump sum payment all
payments due to him for the remainder of the agreement.
<PAGE>
STOCK PERFORMANCE GRAPHS
The following graph compares the cumulative total return on the Company's
Common Stock for the period from December 31, 1992 through December 31, 1997
with the cumulative total return on the Russell 2000 and the peer group index
for the same period.
COMPARISON OF CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Safeguard 100 132 189 814 1044 1032
- -------------------------------------------------------------------------------------------
Russell 2000 100 119 117 150 175 214
- -------------------------------------------------------------------------------------------
Peer Group 100 131 121 166 215 245
- -------------------------------------------------------------------------------------------
</TABLE>
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, 1992.
The following graph compares the cumulative total return on the Company's
Common Stock assuming an investment (as described below) in the stock offered in
each of the rights offerings to the Company's shareholders, with the cumulative
total return on the Russell 2000 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.
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURNS
Assuming Investment in Rights Offerings
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Safeguard 100 175 309 1152 1541 1887
- -------------------------------------------------------------------------------------------
Russell 2000 100 135 152 210 278 431
- -------------------------------------------------------------------------------------------
Peer Group 100 148 158 231 333 463
- -------------------------------------------------------------------------------------------
</TABLE>
1. The peer group is the same as in the prior graph.
2. The cumulative total return for Safeguard assumes a cash investment to
exercise all of the rights a holder of Safeguard common stock valued at $100
on December 31, 1992 would have received in each rights offering made to the
Company's shareholders since January 1, 1993.
3. Assumes additional investments in each comparison index are made at the end
of the month in which each Safeguard rights offering became effective in an
amount equal to the amount of the assumed cash investment in the Safeguard
index.
4. Assumes an initial investment of $100 on December 31, 1992, and additional
investments totaling $161.29 as follows: $13.70 in April 1993, $18.27 in
June 1994, $13.70 in June 1995, $13.70 in April 1996, $18.08 in November
1996, $18.08 in February 1997, $32.88 in July 1997, and $32.88 in October
1997.
5. Although the Company believes the assumptions made in calculating the values
of the chart are reasonable, other assumptions could be used that would
result in different cumulative total returns.
<PAGE>
CERTAIN TRANSACTIONS
In connection with restricted stock awards made under the Company's long
term incentive plan in December 1995 and February 1997, the Company made
available to the recipients of those grants two-year, full recourse loans to pay
the related income taxes that the Company was required to withhold on the
compensation resulting from the acquisition of such shares. The promissory
notes delivered to the Company in connection with the December 1995 awards
("December 1995 Note") and the February 1997 awards ("February 1997 Note") bear
interest at the rate of 5.57% per annum and 5.81% per annum, respectively, with
principal and accrued interest payable on the second anniversary of the
respective notes. Each of these notes is secured by a pledge of the restricted
shares granted to each individual. The principal and accrued interest under the
December 1995 Note were paid in full by each note holder in December 1997. The
highest outstanding total balance since January 1, 1997 under the notes
delivered by each of Messrs. Caldwell, Johnson and Lynch, named executive
officers of the Company, Michael W. Miles, James A. Ounsworth, and Glenn T.
Rieger, executive officers of the Company, and Delbert W. Johnson, a director of
the Company, was $401,825, $205,177, $205,177, $180,883, $242,276, $180,883, and
$115,010, respectively, and the aggregate balance at December 31, 1997, was
$190,700, $174,725, $174,725, $114,421, $143,028, $114,421, and $57,212,
respectively.
In August 1994, Edward R. 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 was secured by a pledge of the 350,000 CompuCom
shares. The terms of the note were renegotiated, and in February 1997, Mr.
Anderson delivered to CompuCom a new note in the amount of $1,181,250 which
extended the payment of the principal to February 15, 1999. Interest on the
note accrues at the rate of 6% per annum and is payable annually on January 1.
In March 1997, Mr. Anderson delivered $281,250 as a payment against principal,
and CompuCom released 83,333 of the CompuCom shares that secured the note.
The Company has a minority ownership interest in Educational Marketing
Concepts, Inc. ("EMC") pursuant to an aggregate equity investment of
approximately $1.2 million. The Company has guaranteed a $1.5 million loan to
EMC. EMC is in the process of combining with two other companies to form a new
entity under a holding company named MegaMax Systems, Inc. The Company is
presently intending to invest $7 million in a $9 million private equity
financing by MegaMax Systems. The additional $2 million will be provided by an
independent third party investor. Part of this investment is to be used by
MegaMax Systems to satisfy a bank line of credit of up to $5 million to a wholly
owned subsidiary of EMC. Approximately $2.8 million of this line of credit has
been drawn as of March 31, 1998. The loan is secured in part by a pledge of up
to 250,000 shares of the Company by Warren V. Musser, Chairman of the Board and
Chief Executive Officer of the Company. This pledge is to be released upon
satisfaction of the loan. Mr. Musser also has a personal relationship with the
Chief Executive Officer of EMC.
INDEPENDENT PUBLIC ACCOUNTANTS
Since 1986, the Company has retained KPMG Peat Marwick LLP as its
independent public accountants and it intends to retain KPMG Peat Marwick LLP
for the current year ending December 31, 1998. Representatives of KPMG Peat
Marwick LLP are expected to be present at the Annual Meeting, will have an
opportunity at the Annual Meeting to make a statement if they desire to do so,
and will be available to respond to appropriate questions.
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 ("1934 Act") requires
the Company's directors and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity securities ("10%
Shareholders"), to file reports of ownership and changes in ownership of Common
Stock and other equity securities of the Company with the Securities and
Exchange Commission ("SEC") and the New York Stock Exchange. Officers,
directors and 10% Shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on its
review of the copies of such forms received by it and written representations
from certain reporting persons that no other reports were required for those
persons, the Company believes that during the period January 1, 1997 through
December 31, 1997, its officers, directors and 10% Shareholders complied with
all applicable Section 16(a) filing requirements, except for one transaction
that was reported late by Mr. Anderson.
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 1997, including financial statements and
other information with respect to the Company and its subsidiaries, is being
mailed simultaneously to the shareholders but is not to be regarded as proxy
solicitation material.
Dated: April 2, 1998
<PAGE>
FOLD AND DETACH HERE
- --------------------------------------------------------------------------------
P R O X Y
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 1998 Annual Meeting of Shareholders of
Safeguard Scientifics, Inc. to be held on May 7, 1998, 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 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.
<PAGE>
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE Please mark
FOR PROPOSAL 1. [X] your votes as indicated
in this example
WITHHELD
1. ELECTION OF DIRECTORS FOR FOR ALL
Nominees: [_] [_]
Warren V. Musser Peter Likins
Judith Areen Jack L. Messman
Vincent G. Bell, Jr. Russell E. Palmer
Donald R. Caldwell John W. Poduska, Sr.
Robert A. Fox Heinz Schimmelbusch
Delbert W. Johnson Hubert J.P. Schoemaker
Robert E. Keith, Jr.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WHILE VOTING FOR THE
REMAINDER, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST.
TO CUMULATE VOTES, WRITE THE NAME OF THE NOMINEE(S) AND THE NUMBER OF VOTES TO
BE CAST FOR EACH NOMINEE IN THE SPACE PROVIDED BELOW, FOLLOWED BY "CUMULATE
FOR."
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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.
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FOLD AND DETACH HERE
