<PAGE> 1
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
- --------------------------------------------------------------------------------
(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)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] 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:
- --------------------------------------------------------------------------------
<PAGE> 2
[COMPANY LOGO]
800 THE SAFEGUARD BUILDING
435 DEVON PARK DRIVE
WAYNE, PA 19087-1945
PHONE: (610) 293-0600
TOLL-FREE: (877) 506-7371
FAX: (610) 293-0601
AUTOMATED INVESTOR RELATIONS LINE: (888) SFE-1200
INTERNET: www.safeguard.com
SAFEGUARD SCIENTIFICS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Dear Safeguard Stockholder:
You are invited to attend the Safeguard Scientifics, Inc. 2000 Annual Meeting of
Stockholders.
DATE: Thursday, May 11, 2000
TIME: 4:00 p.m. Eastern time
PLACE: The Desmond Great Valley Hotel and Conference Center
One Liberty Boulevard
Malvern, Pennsylvania 19355
(610) 296-9800 or (800) 575-1776
DIRECTIONS: Included on the last page
No admission tickets are required. If you cannot attend the meeting in person,
you may listen to the meeting over the Internet through Vcall, Inc. at
http://www.vcall.com. Please go to this web site approximately fifteen minutes
early to register and download any necessary audio software.
Only stockholders who owned stock at the close of business on March 24, 2000,
can vote at this meeting or any adjournments that may take place.
At the meeting, we will elect 13 directors and attend to any other business
properly presented at the meeting.
We also will report on Safeguard's 1999 business results and other matters of
interest to our stockholders. You will have an opportunity at the meeting to ask
questions, make comments, and meet our management team.
OUR BOARD OF DIRECTORS IS A VITAL RESOURCE. MAKE YOUR VOTE COUNT! NO MATTER HOW
MANY SHARES YOU HOLD, WE CONSIDER YOUR VOTE IMPORTANT AND ENCOURAGE YOU TO VOTE
AS SOON AS POSSIBLE.
The proxy statement, accompanying proxy card, and 1999 annual report are being
mailed to stockholders beginning April 10, 2000, in connection with the
solicitation of proxies by the board of directors.
<PAGE> 3
Please contact Sandi Murtland, Investor Relations Coordinator, with any
questions or concerns.
Sincerely,
/s/ Warren V. Musser /s/ James A. Ounsworth
- --------------------------------- -------------------------
Warren V. Musser James A. Ounsworth
Chairman of the Board Secretary
and Chief Executive Officer
April 10, 2000
<PAGE> 4
QUESTIONS AND ANSWERS
Q: WHO IS ENTITLED TO VOTE?
A: Stockholders of record as of the close of business on March 24, 2000, may
vote at the annual meeting.
Q: HOW MANY SHARES CAN VOTE?
A: On March 24, 2000, there were 107,329,089 shares issued and outstanding.
Every stockholder may cast one vote for each share owned. In the election
of directors, stockholders have the right of cumulative voting (described
below).
Q: WHAT MAY I VOTE ON?
A: You may vote on the election of 13 directors who have been nominated to
serve on our board of directors and any other business that is properly
presented at the meeting
Q: HOW DOES THE BOARD RECOMMEND I VOTE ON EACH PROPOSAL?
A: The board recommends a vote FOR each board nominee. The board requests
discretionary authority to cumulate votes.
Q: HOW DO I VOTE?
A: Sign and date each proxy card you receive, mark the boxes indicating how
you wish to vote, and return the proxy card in the prepaid envelope
provided. In the election of directors, if you wish to vote cumulatively,
please follow the directions in the next question.
If you sign your proxy card but do not mark any boxes showing how you wish
to vote, Warren V. Musser, Harry Wallaesa, and James A. Ounsworth will vote
your shares as recommended by the board of directors.
Q: WHAT DOES CUMULATIVE VOTING MEAN?
A: Cumulative voting applies only in the election of directors. It means that
you may cast a number of votes equal to the number of Safeguard shares you
own multiplied by the number of directors to be elected. For example, since
13 directors are standing for election at this year's annual meeting, if
you hold 100 shares of Safeguard stock, you may cast 1,300 votes in the
election of directors. You may distribute those votes among the nominees as
you wish. In other words, in the example provided, you may cast all 1,300
votes for one nominee or allocate them among two or more nominees in any
amount you like, as long as the total equals 1,300 votes.
To vote cumulatively, you must
-- write the words "cumulate for" in the space provided under item 1 of the
proxy card, and
-- write the name of each nominee and the number of votes to be cast for
each nominee in that space.
If you vote cumulatively, please check to be sure that the number of votes
you cast adds up to the number of shares you own multiplied by 13. If the
number of votes does not add up correctly, our proxy tabulator will return
the proxy card to you for clarification and will not vote your shares until
a properly completed proxy card has been returned to them.
Q: WHAT IF I HOLD MY SAFEGUARD SHARES IN A BROKERAGE ACCOUNT?
A: If you hold your Safeguard shares through a broker, bank or other nominee,
you will receive a voting instruction form directly from them describing
how to vote your shares. This form will, in most cases, offer you three
ways to vote:
1. by telephone,
2. via the Internet, or
3. by returning the form.
Your vote by telephone or Internet will help Safeguard save money.
Remember, if you vote by telephone or Internet, do not return your voting
instruction form.
Q: WHAT IF I WANT TO CHANGE MY VOTE?
A: You may change your vote at any time before the meeting in any of the
following three ways:
1. notify our corporate secretary, James A. Ounsworth, in writing,
[COMPANY LOGO] 1
<PAGE> 5
QUESTIONS AND ANSWERS
2. vote in person at the meeting, or
3. submit a proxy card with a later date.
If you hold your shares through a broker, bank or other nominee and wish to
vote at the meeting, you must obtain a legal proxy from that nominee
authorizing you to vote at the meeting. We will be unable to accept a vote
from you at the meeting without that form. If you hold your shares directly
and wish to vote at the meeting, no additional forms will be required.
Q: HOW WILL DIRECTORS BE ELECTED?
A: The 13 nominees who receive the highest number of affirmative votes at a
meeting at which a quorum is present will be elected as directors.
Q: WHO WILL COUNT THE VOTES?
A: A representative of ChaseMellon Shareholder Services, L.L.C., our registrar
and transfer agent, will count the votes and act as the judge of election.
Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: Your shares may be registered differently or may be in more than one
account. We encourage you to have all accounts registered in the exact same
name and address (whenever possible). You may obtain information about how
to do this by contacting our transfer agent:
ChaseMellon Shareholder Services
85 Challenger Road
Ridgefield Park, NJ 07660
Toll-free telephone 800-526-0801.
If you provide ChaseMellon with photocopies of the proxy cards that you
receive or with the account numbers that appear on each proxy card, it will
be easier to accomplish this.
You also can find information on transferring shares and other useful
stockholder information on their web site at www.chasemellon.com.
Q: WHAT IS A QUORUM?
A: A quorum is a majority of the outstanding shares. The shares may be
represented at the meeting either in person or by proxy. To hold the
meeting, there must be a quorum present.
Q: WHAT IS THE EFFECT IF I ABSTAIN OR FAIL TO GIVE INSTRUCTIONS TO MY BROKER?
A: If you submit a properly executed proxy, your shares will be counted as
part of the quorum even if you abstain from voting or withhold your vote
for a particular director.
Broker non-votes also are counted as part of the quorum. A broker non-vote
occurs when banks, brokers or other nominees holding shares on behalf of a
stockholder do not receive voting instructions from the stockholder by a
specified date before the meeting. In this event, banks, brokers and other
nominees may vote those shares on matters deemed routine by the New York
Stock Exchange. The election of directors is considered a routine matter.
Broker non-votes and abstentions are not counted in the tally of votes FOR
or AGAINST a proposal. A WITHHELD vote is treated the same as an
abstention.
Q: WHO CAN ATTEND THE MEETING?
A: We encourage all stockholders to attend the meeting. Admission tickets are
not required.
Q: WHAT IF I CAN'T ATTEND THE MEETING?
A: If you cannot attend the meeting in person, you may listen to the
proceedings over the Internet through Vcall, Inc. at http://www.vcall.com.
Please go to this web site approximately fifteen minutes early to register
and download any necessary audio software. If you cannot listen to the live
broadcast, Vcall will have a replay of the meeting available on its web
site
[COMPANY LOGO] 2
<PAGE> 6
QUESTIONS AND ANSWERS
beginning immediately after the meeting and a transcript of the meeting
available by approximately May 16.
Q: ARE THERE ANY EXPENSES ASSOCIATED WITH COLLECTING THE STOCKHOLDER VOTES?
A: We will reimburse brokerage firms and other custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses for forwarding
proxy and other materials to our stockholders. We do not anticipate hiring
an agency to solicit votes at this time.
Q: WHAT IS A STOCKHOLDER PROPOSAL?
A: A stockholder proposal is your recommendation or requirement that Safeguard
or our board of directors take action on a matter that you intend to
present at a meeting of stockholders. However, under applicable rules we
have the ability to exclude certain matters proposed, including those that
deal with matters relating to our ordinary business operations.
Q: CAN ANYONE SUBMIT A STOCKHOLDER PROPOSAL?
A: To be eligible to submit a proposal, you must have continuously held at
least $2,000 in market value, or 1% of our common stock, for at least one
year by the date you submit your proposal. You also must continue to hold
those securities through the date of the meeting.
Q: IF I WISH TO SUBMIT A STOCKHOLDER PROPOSAL FOR THE ANNUAL MEETING IN 2001,
WHAT ACTION MUST I TAKE?
A: If you wish us to consider including a stockholder proposal in the proxy
statement for the annual meeting in 2001, you must submit the proposal, in
writing, so that our corporate secretary receives it no later than December
11, 2000. The proposal must meet the requirements established by the SEC.
Send your proposal to:
James A. Ounsworth, Sr. V.P.,
General Counsel and Secretary
Safeguard Scientifics, Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087-1945
Our bylaws provide that only proposals included in the proxy statement may
be considered at the annual meeting.
Q: CAN A STOCKHOLDER NOMINATE SOMEONE TO BE A DIRECTOR OF SAFEGUARD?
A: The Nominating Committee will consider qualified candidates recommended by
stockholders. You should submit your recommendation, including a detailed
statement of the individual's qualifications, to:
Nominating Committee
Safeguard Scientifics, Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Q: WHO ARE SAFEGUARD'S LARGEST STOCKHOLDERS?
A: Mr. Musser, our chairman and chief executive officer, beneficially owns
8.5% of Safeguard. Other directors and executive officers beneficially own
a total of approximately 4.8% of Safeguard. At December 31, 1999, no other
stockholder owned more than 5% of our stock.
[COMPANY LOGO] 3
<PAGE> 7
ELECTION OF DIRECTORS
ITEM 1 ON PROXY CARD
Directors are elected annually and serve a one-year term. There are 13 nominees
for election this year. Each nominee is currently serving as a director. Each
nominee has consented to serve until the next annual meeting if elected. You
will find detailed information on each nominee below. If any director is unable
to stand for re-election after distribution of this proxy statement, the board
may reduce its size or designate a substitute. If the Board designates a
substitute, proxies voting on the original director candidate will be cast for
the substituted candidate.
THE BOARD RECOMMENDS A VOTE FOR EACH NOMINEE. THE 13 NOMINEES WHO RECEIVE THE
HIGHEST NUMBER OF AFFIRMATIVE VOTES WILL BE ELECTED AS DIRECTORS.
WARREN V. MUSSER Director since 1953
Age 73
Mr. Musser has served as chairman and chief executive officer since 1953. Mr.
Musser is chairman of the board of Cambridge Technology Partners
(Massachusetts), Inc. He is also a director of CompuCom Systems, Inc., DocuCorp
International, Inc. and Sanchez Computer Associates, Inc. and a trustee of
Brandywine Realty Trust. Mr. Musser 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, vice chairman of The Eastern
Technology Council, and chairman of the Pennsylvania Partnership on Economic
Education.
ROBERT E. KEITH, JR. Director since 1996
Age 58
Mr. Keith was appointed vice chairman of the board in February 1999. Mr. Keith
has been a managing director of TL Ventures and its predecessor funds since
1988. He has served as president since 1991, and as chief executive officer
since February 1996, of Technology Leaders Management, Inc., a private equity
capital management company that is a subsidiary of Safeguard. Mr. Keith is
Chairman of the Board of Internet Capital Group, Inc., and a director of
Cambridge Technology Partners (Massachusetts), Inc., SunSource, Inc. and U.S.
Interactive, Inc.
HARRY WALLAESA Director since 1999
Age 49
Mr. Wallaesa became president and chief operating officer of Safeguard in March
1999. Before joining Safeguard, Mr. Wallaesa served as president and chief
executive officer of aligne incorporated, which he co-founded in 1996, until
Safeguard acquired a majority of the company in March 1999. From 1985 to 1995,
Mr. Wallaesa was the chief information officer and vice president of management
information systems at Campbell Soup Company, a global manufacturer and marketer
of branded food products. Mr. Wallaesa is chairman of the board of CompuCom
Systems, Inc. and a director of Bowne, Inc., Redleaf Group LLC, aligne
incorporated, iMedium, Inc., Allied Resource Corporation, Pennsylvania Academy
of Fine Arts, Atlas Commerce and University of Pennsylvania Health Systems.
VINCENT G. BELL, JR. Director since 1956
Age 74
Mr. Bell is president of Verus Corporation, a management investment firm he
formed in 1987.
[COMPANY LOGO] 4
<PAGE> 8
Before 1987, Mr. Bell was chairman of the board and chief executive officer of
Safeguard Business Systems, Inc., an information systems company.
WALTER W. BUCKLEY, III Director since 2000
Age 40
Walter W. Buckley, III is a co-founder and has served as president, chief
executive officer and a director of Internet Capital Group, Inc. since March
1996. Prior to co-founding Internet Capital Group, Mr. Buckley worked for
Safeguard as vice president of acquisitions from 1991 to February 1996. Mr.
Buckley is a director of Breakaway Solutions, Inc., e-Chemicals, Inc.,
PrivaSeek, Inc., Syncra Software, Inc., VerticalNet, Inc., and Who? Vision
Systems, Inc.
MICHAEL J. EMMI Director since 1998
Age 58
Mr. Emmi has been chairman of the board, president and chief executive officer
of Systems & Computer Technology Corporation, a provider of computer software
and services, since May 1985. Mr. Emmi is a director of CompuCom Systems, Inc.
and CDI Corp.
ROBERT A. FOX Director since 1981
Age 70
Mr. Fox has been chairman and chief executive officer of R.A.F. Industries,
Inc., a private investment company which acquires and manages a diversified
group of operating companies and venture capital investments, since 1980. Mr.
Fox is a director of Zany Brainy, Inc. He is a trustee of the University of
Pennsylvania and the Wistar Institute.
JACK L. MESSMAN Director since 1994
Age 60
Mr. Messman has been chief executive officer of Cambridge Technology Partners
(Massachusetts), Inc. since 1999. From April 1991 until 1999, Mr. Messman was
chairman and chief executive officer of Union Pacific Resources Group Inc., an
energy company. From May 1988 to April 1991, Mr. Messman was chairman and chief
executive officer of USPCI, Inc., a provider of hazardous waste services and a
subsidiary of Union Pacific Corporation. Mr. Messman is a director of Cambridge
Technology Partners (Massachusetts), Inc., Metallurg, Inc., Novell, Inc., Tandy
Corp., and USDATA Corporation.
RUSSELL E. PALMER Director since 1989
Age 65
Mr. Palmer is chairman and chief executive officer of The Palmer Group, a
corporate investment firm he organized in 1990. From 1983 to June 1990, Mr.
Palmer was dean of The Wharton School of the University of Pennsylvania. From
1972 to 1983, he was managing partner and chief executive officer of Touche Ross
& Co. (now Deloitte & Touche). Mr. Palmer is a director of Federal Home Loan
Mortgage Corporation, GTE Corporation, Honeywell International, Inc. and The May
Department Stores Company.
JOHN W. PODUSKA, SR., PH.D. Director since 1987
Age 62
Dr. Poduska has served as of chairman of Advanced Visual Systems, Inc., a
provider of visualization software, since 1992. Before 1992, Dr. Poduska was
president and chief executive officer of Stardent Computer, Inc, a computer
manufacturer, from December 1989 to
[COMPANY LOGO] 5
<PAGE> 9
December 1991. From December 1985 to December 1989, Dr. Poduska was founder,
chairman and chief executive officer of Stellar Computer, Inc., a computer
manufacturer and the predecessor of Stardent Computer, Inc. Dr. Poduska is a
director of Cambridge Technology Partners (Massachusetts), Inc., eMerge
Interactive, Inc., Union Pacific Resources Group, Inc., and XL Vision, Inc.
HEINZ C. SCHIMMELBUSCH, PH.D. Director since 1989
Age 55
Dr. Schimmelbusch has served as president and chief executive officer of
Safeguard International Group, Inc. since 1994. Dr. Schimmelbusch also serves as
managing director of Safeguard International Fund, L.P., a Safeguard affiliated
private equity fund, and is chairman of: Allied Resource Corporation, Wayne, PA,
a company pursuing technology-oriented, early-stage investment opportunities in
process industries; Metallurg, Inc., New York, a global producer and supplier of
high quality metal alloys and specialty metals; Becancour Silicon Inc.,
Montreal, Quebec, a silicon metal producer; and ALD Vacuum Technology AG,
Frankfurt, Germany, a global supplier of industrial vacuum technology. 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.
HUBERT J.P. SCHOEMAKER, Ph.D. Director since 1993
Age 50
Dr. Schoemaker is chairman, chief executive officer and founder of Neuronyx,
Inc., a biotechnology company he founded in 1999. Prior to that, Dr. Schoemaker
served as chairman of the board and co-founder of Centocor, Inc., a
biotechnology company, from 1987 to 1999.
CARL J. YANKOWSKI Director nominee
Age 51
Carl J. Yankowski has been chief executive officer and a director of Palm, Inc.,
a leading global provider of handheld computing devices, since December 1999.
Prior to joining Palm, he was president and chief executive officer of the
Reebok Division and executive vice president of Reebok International Ltd., a
leading worldwide designer, marketer and distributor of sports, fitness and
casual footwear, apparel and equipment. Before joining Reebok in September 1998,
from December 1993 to January 1998, Mr. Yankowski was president and chief
operating officer of Sony Electronics Inc., a diversified company that markets
electronic products for consumer, broadcast and industrial use in the United
States. From December 1988 to November 1993, Mr. Yankowski held various senior
management positions with Polaroid Corporation, his last position being that of
chairman of the Asia-Pacific region. Mr. Yankowski is a director of Avidyne,
Inc. and Vitts Networks, Inc.
[COMPANY LOGO] 6
<PAGE> 10
BOARD OF DIRECTORS -- ADDITIONAL INFORMATION
BOARD MEETINGS: The board of directors held six meetings in 1999. Each director
attended at least 75% of the total number of meetings of the board and
committees of which he or she was a member.
BOARD COMPENSATION: Directors employed by Safeguard or a wholly owned subsidiary
receive no additional compensation, other than their normal salary, for serving
on the board or its committees. Non-employee directors receive the following
compensation:
- - $17,500 annually
- - $1,000 annually for chairing a committee
- - $1,000 for each board meeting attended
- - $500 for each telephonic special meeting attended
- - $500 for each committee meeting attended
- - reimbursement of out-of-pocket expenses
Additionally, each director who is not an executive officer of Safeguard
currently receives a stock option to purchase shares of Safeguard common stock
upon initial election to the board. Each of these directors also receives
subsequent annual stock option grants. All grants are discretionary and may vary
as to the number of shares.
Directors' options generally have an eight-year term and vest 25% each year
starting on the first anniversary of the grant date. The exercise price is equal
to the fair market value of a share of our common stock on the grant date.
In May 1999, Mr. Yankowski received an initial grant to purchase 90,000 shares
at an exercise price of $30.9792 per share. In February 2000, Mr. Buckley
received an initial grant to purchase 90,000 shares at an exercise price of
$50.9792 per share. In December 1999, each director, other than Messrs. Musser
and Wallaesa, received an annual service grant to purchase 9,000 shares of
Safeguard common stock at an exercise price of $45.4687 per share.
DEFERRED CHARITABLE DONATION PROGRAM: Safeguard established this program to
promote charitable giving. It is available to all directors and certain officers
and is funded, in part, by life insurance policies on certain participants.
Following the death of a director, we will donate up to $1 million to one or
more designated charities in the Southeastern Pennsylvania area. Directors
derive no financial benefit from this program since all charitable deductions
accrue solely to Safeguard. We anticipate the program will result in nominal
cost to us over time.
DEFERRED COMPENSATION: Before 1989, we offered certain directors and officers a
deferred compensation plan. All contributions to the 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, each participant is entitled to receive,
as a level payment over 15 years or as a lump sum, an amount equal to the total
credits to his account plus an investment growth factor. Mr. Bell began
receiving a quarterly payment in February 1992 of $3,100, which was reduced to
$3,000 in February 1994. Safeguard is the beneficiary of the life insurance
contracts we purchased to cover our obligations under the plan. We expect to
recover an amount equal to all benefit payments under the plan, the premium
payments on the insurance contracts, and a portion of the interest earned on the
use of the premium payment.
BOARD COMMITTEE MEMBERSHIP ROSTER
<TABLE>
<CAPTION>
AUDIT COMPENSATION EXECUTIVE SPECIAL NOMINATING
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MEETINGS HELD IN 1999 4 1 1 1 0
- ------------------------------------------------------------------------------
Warren V. Musser X X
- ------------------------------------------------------------------------------
</TABLE>
[COMPANY LOGO] 7
<PAGE> 11
<TABLE>
<CAPTION>
AUDIT COMPENSATION EXECUTIVE SPECIAL NOMINATING
----- ------------ --------- ------- ----------
<S> <C> <C> <C> <C> <C>
Vincent G. Bell, Jr. X X X X
Robert A. Fox X * X X *
Jack L. Messman X
Russell E. Palmer X * X X X
John W. Poduska, Sr. X
Heinz C. Schimmelbusch X
Hubert J.P. Schoemaker X *
</TABLE>
* CHAIRPERSON
AUDIT COMMITTEE
- - recommends the hiring and retention of our independent certified public
accountants
- - discusses the scope and results of our audit with the independent
certified public accountants
- - reviews with management and the independent certified public
accountants the interim and year-end operating results
- - considers the adequacy of our internal accounting controls and audit
procedures
- - reviews the non-audit services to be performed by the independent
certified public accountants
COMPENSATION COMMITTEE
- - determines compensation levels for our officers, including incentive
compensation
- - administers our equity compensation plan and long-term incentive plan
EXECUTIVE COMMITTEE
- - acts upon all matters with respect to the management of our business
except policy matters
NOMINATING COMMITTEE
- - recommends nominees for election to our board of directors
- - considers qualified candidates recommended by stockholders
SPECIAL COMMITTEE
- - provides approval regarding specific matters previously presented to
the board which require final approval of certain items prior to implementation
[COMPANY LOGO] 8
<PAGE> 12
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
AS OF MARCH 24, 2000
<TABLE>
<CAPTION>
OUTSTANDING SHARES BENEFICIALLY
SHARES OPTIONS EXERCISABLE OWNED ASSUMING
NAME BENEFICIALLY OWNED WITHIN 60 DAYS EXERCISE OF OPTIONS PERCENT OF SHARES
<S> <C> <C> <C> <C>
Warren V. Musser 9,167,343 0 9,167,343 8.5%
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Robert E. Keith, Jr. 23,202 196,875 220,077 *
Harry Wallaesa 551,898 375,000 926,898 *
Vincent G. Bell, Jr. 1,429,704 25,875 1,455,579 1.4%
Walter W. Buckley, III 3,000 15,000 18,000 *
Michael J. Emmi 3,000 7,875 10,875 *
Robert A. Fox 243,375 7,500 250,875 *
Jack L. Messman 90,000 70,875 160,875 *
Russell E. Palmer 21,375 67,875 89,610 *
John W. Poduska, Sr. 540,375 7,500 547,875 *
Heinz C. Schimmelbusch 5,013 7,500 12,513 *
Hubert J.P. Schoemaker 137,370 0 137,370 *
Carl J. Yankowski 0 22,500 22,500 *
Stephen J. Andriole 36,291 52,500 88,791 *
John K. Halvey 600 0 600 *
Jerry L. Johnson 52,962 229,620 282,582 *
James A. Ounsworth 338,115 465,000 803,115 *
Executive officers and directors
as a group (21 persons) 12,767,664 1,688,835 14,456,499 13.3%
</TABLE>
* Less than 1% of Safeguard's outstanding shares of common stock
Each individual has the sole power to vote and to dispose of the shares (other
than shares held jointly with spouse) except as follows:
Warren V. Musser Includes 699,300 shares held by a charitable
foundation established by Mr. Musser and
346,500 shares held by a trust of which Mr.
Musser is a co-trustee.
Robert E. Keith, Jr. Includes 900 shares held by his spouse. Mr.
Keith disclaims beneficial ownership of the
shares held by his spouse.
Vincent G. Bell, Jr. Includes 337,704 shares held by a charitable
foundation established by Mr. Bell.
Robert A. Fox Includes 15,000 shares held by a charitable
foundation established by Mr. Fox.
SHARES OF SUBSIDIARY CORPORATIONS OWNED BY SAFEGUARD DIRECTORS AND OFFICERS:
CompuCom Systems, Inc. and Tangram Enterprise Solutions, Inc. are majority owned
subsidiaries of Safeguard. As of March 24, 2000, executive officers and
directors of Safeguard beneficially owned the following percentage of shares of
common stock outstanding in each of these subsidiaries:
- - COMPUCOM
Mr. Musser, 1.1%
All executive officers and directors of Safeguard as a group, other than
Mr. Musser, 1.2%
- - TANGRAM
All executive officers and directors of Safeguard as a group, less than 1%.
[COMPANY LOGO] 9
<PAGE> 13
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE: The rules of the SEC
require that we disclose late filings of reports of stock ownership by our
directors and executive officers. To the best of our knowledge, the only late
filings during 1999 were one transaction reported late on Form 4 by each of
Thomas C. Lynch, Jack L.
Messman, and Harry Wallaesa.
STOCK PERFORMANCE GRAPHS
The following graph compares the cumulative total return on $100 invested in our
common stock for the period from December 31, 1994, through December 31, 1999,
with the cumulative total return on $100 invested in the Russell 2000 and the
peer group index for the same period.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
Safeguard 100 430 552 546 477 2835
Russell 2000 100 128 150 183 178 181
Peer Group 100 137 178 203 270 401
</TABLE>
- - 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.
- - Assumes reinvestment of dividends. We have not distributed cash dividends
during this period. Assumes a value of zero for all rights issued in rights
offerings to our stockholders.
- - Assumes an investment of $100 on December 31, 1994.
The following graph compares the cumulative total return on $100 invested in our
common stock assuming additional investments (as described below) in the stock
offered in each of the rights offerings and Safeguard Subscription Programs to
our stockholders, with the cumulative total return on $100 invested in the
Russell 2000 and the peer group index, assuming equivalent additional
investments. Our primary method of providing investment returns to our
stockholders is through rights offerings and Safeguard Subscription Programs and
not through dividends. This graph, based on the assumptions described below,
should provide a better indication of the cumulative total return to our
stockholders since it includes both the value of Safeguard's common stock and
the value of the various common stocks a stockholder could have obtained in the
rights offerings and Safeguard Subscription Programs.
[COMPANY LOGO] 10
<PAGE> 14
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
Safeguard 100 451 594 710 636 4094
Russell 2000 100 137 177 264 273 306
Peer Group 100 145 206 279 391 644
</TABLE>
- - The peer group is the same as in the first graph.
- - 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, 1994, would have received in each rights offering made
to our stockholders since January 1, 1995 and the purchase of all shares
offered in each Safeguard Subscription Program to our stockholders during
1999.
- - Assumes additional investments in each comparison index are made at the end
of the month in which each rights offering or Safeguard Subscription
Program became effective in an amount equal to the amount of the assumed
cash investment in the Safeguard index.
- - Assumes an initial investment of $100 on December 31, 1994, and additional
investments totaling $132.77 as follows: $7.25 in June 1995, $7.25 in April
1996, $9.57 in November 1996, $9.57 in February 1997, $17.39 in July 1997,
$17.39 in October 1997, $17.39 in February 1998, $29.57 in August 1999, and
$17.39 in November 1999.
- - Although we believe 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.
[COMPANY LOGO] 11
<PAGE> 15
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
Safeguard's mission is to achieve maximum returns for our stockholders by
- - acquiring, incubating and operating leading companies in the Internet
infrastructure market
- - utilizing our extensive network to meet the strategic and operational
needs of our partner companies
- - enabling our stockholders to participate directly in our partner
companies via the Safeguard Subscription Program, and
- - proactively working with our public partner companies to continue to
build their value.
Our philosophy is to align the compensation of senior management and other
employees with our mission and the long-term interests of our stockholders. This
philosophy also helps us to
- - attract and retain outstanding employees who can thrive in a
competitive environment of continuous change,
- - promote among our employees the economic benefits of stock ownership in
Safeguard and our partner companies, and
- - motivate and reward employees who, by their hard work, loyalty and
exceptional service, make contributions of special importance to the success of
our business.
COMPENSATION STRUCTURE
The compensation of our executives consists of
- - base pay,
- - annual cash incentives,
- - stock options, and
- - awards under our long-term incentive plan.
BASE PAY
Base pay is established initially on the basis of subjective factors, including
experience, individual achievements, and the level of responsibility assumed at
Safeguard. Salary increases for our CEO and other executives for 1999 were based
on the following:
- - levels of individual responsibility,
- - the maintenance of an appropriate scale among executives based on
relative positions and responsibilities,
- - an evaluation during 1998 by an independent compensation consultant,
and
- - general inflation levels.
ANNUAL CASH INCENTIVES
Annual cash incentives are intended to motivate executives to achieve and exceed
annual corporate performance targets and strategic objectives. Our primary
objectives are to create or increase the value of our public and private partner
companies, capitalize on the value derived from our relationship with our
private equity funds, and acquire interests in new partner companies that can
help us achieve our business objectives and that will continue to build our
pipeline of potential IPOs. We measure our success by the market price of our
stock, the operating performance and market value of our public partner
companies, the operating performance of our private partner companies, and the
successful completion of IPOs with Safeguard Subscription Programs. Specific
annual financial and strategic objectives may include
- - positioning Safeguard to capitalize on emerging technology trends
- - adding a targeted number of new partner companies,
- - assisting our partner companies to access the public capital markets,
- - strengthening our network's capacity to support the growth of our
partner companies,
- - strengthening a partner company's management/marketing team,
- - building strategic alliances,
- - helping our partner companies grow through acquisitions, and
- - identifying and exploiting markets.
At the beginning of each year, the committee sets target levels of executive
cash incentives based on a percentage of base salary and the executive's ability
to impact
[COMPANY LOGO] 12
<PAGE> 16
Safeguard's performance.
At the end of each year, the committee reviews the level of achievement of the
financial and strategic objectives contained in Safeguard's plan and the plans
of our partner companies (including the publicly held partner companies) and
individual performance. Cash incentives are paid based on a percentage of target
amounts and may exceed target amounts when, in the judgment of the committee,
performance levels are deemed to be superior.
MR. MUSSER'S 1999 CASH INCENTIVE. Mr. Musser was awarded a cash incentive for
1999 equal to 200% of his target incentive. This decision was based on
Safeguard's extraordinary success in achieving its strategic objectives,
including:
- - successfully positioning Safeguard as a leading Internet company,
- - the successful completion of three IPOs with Safeguard Subscription
Programs (Internet Capital Group, U.S. Interactive and Pac-West Telecomm),
- - positioning several companies as future IPO candidates,
- - completing twelve new partner company acquisitions, and
- - assisting several partner companies with mergers and acquisitions.
OTHER HIGHLY COMPENSATED EXECUTIVES' 1999 CASH INCENTIVES. The committee
approved cash incentives for 1999 equal to 200% of the target amounts. The
committee considered the same factors they did in determining Mr. Musser's 1999
cash incentive as well as, to a lesser extent, each executive's individual
performance for the year.
STOCK OPTIONS
Stock options align the interests of executives and employees with the long-term
interests of our stockholders and motivate executives and employees to remain in
our employ. The committee awards stock options based on a number of factors,
including
- - the achievement of financial and strategic objectives,
- - an individual's contributions in providing strategic leadership and
oversight for Safeguard and our partner companies, and
- - the amount and term of options already held by each individual.
1999 STOCK OPTION AWARDS. The committee granted stock options during 1999 to
certain new employees and at year end to all executives and employees. The
number of options granted was based on each person's responsibilities.
Mr. Musser does not participate in stock option awards.
LONG-TERM INCENTIVE PLAN
Our long-term incentive plan supports our strategy of completing IPOs with
Safeguard Subscription Programs to our stockholders since the plan permits
participants to share directly in the growth of our partner companies. This
growth benefits our stockholders in two ways -- indirectly, by increasing the
value of Safeguard's holdings in the partner companies, and directly, by
increasing the value of the stock acquired by our stockholders through IPOs with
Safeguard Subscription Programs.
Each year, Safeguard has allocated a portion of the equity interests acquired
during the year for the benefit of the participants in the long-term incentive
plan. Reflecting the growth in senior management and professional staff required
to support our increasing number of partner companies, this allocation was
increased to 12.5% for 1999. The plan permits the committee to award grants in
the form of (i) interests in limited partnerships established by Safeguard to
hold the equity interests acquired by Safeguard in a given year, (ii) restricted
stock in a partner company, or (iii) share units which entitle a participant to
share in the appreciation of the value of the stock of a partner company above
established threshold levels. We intend primarily to grant limited partnership
interests to plan participants to more closely align the participants' interests
with Safeguard's interests.
Grants are subject to vesting over a period of four years and generally to the
condition that Safeguard's equity holdings must double in value before the
participants can receive their equity participation.
[COMPANY LOGO] 13
<PAGE> 17
Partnership interests are generally paid out in stock of the partner company
after a fixed period of years. The committee can accelerate vesting and payout
upon the attainment of the threshold value. Restricted stock awards are subject
to certain restrictions and are held in escrow until the attainment of the
established threshold levels. Share units are payable in cash or in stock of the
partner company after a fixed period of years, subject to acceleration by the
committee if the threshold levels are achieved.
The committee believes that this policy of aligning the interests of the
participants with the long-term interests of our stockholders has been
successful, as evidenced by the cumulative total return on Safeguard's common
stock, assuming participation in rights offerings and Safeguard Subscription
Programs, as shown in the second stock performance graph that appears on page
11.
1999 LONG-TERM INCENTIVE GRANTS. In 1999, the committee approved the allocation
of partnership interests to executives and key employees in two limited
partnerships that were established to hold all equity interests acquired by
Safeguard during 1999 in new and existing partner companies. These limited
partnership interests provided the participants, as a group, with the
opportunity to receive distributions of up to a total of 12.5% of the equity
interests held by each limited partnership if the value of the interest exceeds
the established thresholds. Distributions generally will be made in five years,
unless accelerated by the committee. The partnership interests were allocated to
the participants based on their positions at Safeguard. Mr. Musser did not
participate in the long-term incentive plan during 1999.
IRS LIMITS ON DEDUCTIBILITY OF COMPENSATION.
Section 162(m) of the Internal Revenue Code provides that publicly held
companies may not deduct in any taxable year compensation paid to any of the
individuals named in the Summary Compensation Table in excess of one million
dollars that is not "performance-based." To qualify as "performance-based"
compensation, the committee's discretion to grant incentive awards must be
strictly limited. Grants of stock options and SARs under our plans generally
will meet the requirements of "performance-based compensation." Restricted stock
grants generally will not qualify as, and performance units may not qualify as,
"performance-based compensation." The committee believes that the benefit of
retaining the ability to exercise discretion under Safeguard's incentive
compensation plans outweighs the limited risk of loss of tax deductions under
section 162(m). Therefore, the committee does not currently plan to take any
action to qualify any of the incentive compensation plans under section 162(m).
Submitted by the Compensation Committee:
Robert A. Fox
Vincent G. Bell, Jr.
Russell E. Palmer
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Ken Fox, the son of the chairman of our compensation committee, Robert Fox, is
an executive officer, director and a 4.2% stockholder of Internet Capital Group,
Safeguard owns approximately 14% of Internet Capital Group.
Our chief executive officer, Warren Musser, serves on the Management Resource
Committee (which performs the function of a compensation committee) of the Board
of Cambridge Technology Partners (Massachusetts), Inc., a Safeguard partner
company, The chief executive officer of Cambridge Technology Partners, Jack
Messman, serves on our board.
EXECUTIVE COMPENSATION & OTHER ARRANGEMENTS
1999 ANNUAL COMPENSATION
[COMPANY LOGO] 14
<PAGE> 18
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
OTHER SECURITIES ALL OTHER
ANNUAL RESTRICTED UNDERLYING LONG TERM COMPEN-
COMPEN- STOCK OPTIONS/ INCENTIVE SATION
SALARY BONUS SATION AWARD(S) SARS PAYOUTS ($)(6)
NAME AND POSITION YEAR ($)(1) ($)(2) ($)(3) ($)(4) (#) ($)(5)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Warren V. Musser, 1999 $ 413,731 $ 827,500 $ 53,920 0 0 0 $ 12,000
Chairman of the Board
and Chief 1998 305,000 305,000 60,193 0 0 0 12,000
Executive Officer
1997 290,000 290,000 63,004 0 0 0 12,000
Harry Wallaesa, 1999 $ 330,770 $1,386,176 -- 0 1,590,000 0 $ 10,970
President and Chief
Operating Officer (7) 1998 -- -- -- -- -- -- --
1997 -- -- -- -- -- -- --
Stephen J. Andriole, 1999 $ 260,577 $ 730,151 -- 0 90,000 $ 321,179 $ 20,746
Ph.D., Senior Vice
President and Chief 1998 -- -- -- -- -- -- --
Technology Officer (7)
1997 -- -- -- -- -- -- --
John K. Halvey, Senior 1999 $ 150,000 $ 635,713 -- 0 210,000 0 $ 8,398
Vice President (7)
1998 -- -- -- -- -- -- --
1997 -- -- -- -- -- -- --
Jerry L. Johnson, 1999 $ 283,462 $ 416,469 -- 0 60,000 $ 905,722 $ 19,896
Executive Vice President
1998 240,000 182,000 -- 0 60,000 38,258 19,895
1997 210,000 169,760 -- 0 90,000 0 19,620
James A. Ounsworth, 1999 $ 267,115 $ 610,498 -- 0 60,000 $ 905,722 $ 22,562
Senior Vice President,
General Counsel and 1998 221,000 154,700 -- 0 60,000 38,258 33,621
Secretary
1997 210,000 147,000 -- 0 60,000 0 23,009
</TABLE>
[COMPANY LOGO] 15
<PAGE> 19
NOTES TO ANNUAL COMPENSATION TABLE:
(1) Includes compensation that has been deferred by the named officers under
voluntary savings plans.
(2) Includes discretionary payouts under our Long-Term Incentive Plan which
were made to each of the named executive officers with the exception of Mr.
Musser.
(3) For Mr. Musser, this amount includes $38,772 for personal use of our plane
in 1999. Mr. Musser's use of the plane increased starting in 1997 following
a determination by the board of directors requiring him to travel on the
company plane instead of commercial aircraft whenever possible for safety
reasons.
(4) In May 1999, we released the shares of restricted stock of Internet Capital
Group, Inc. previously awarded to Mr. Johnson and Mr. Ounsworth upon the
satisfaction of the conditions of the grant.
(5) The 1999 payout represents the value of shares of Internet Capital Group,
Inc., U.S. Interactive, Inc. and Pac-West Telecomm, Inc. distributed to
Messrs. Andriole, Johnson and Ounsworth based on their limited partnership
interests in Safeguard 98 Capital L.P.
(6) For 1999, all other compensation includes the following amounts:
<TABLE>
<CAPTION>
Defined Contribution Company Match Life Insurance
Name Pension Plan Voluntary Savings Plan Premiums Paid
---- ------------ ---------------------- -------------
<S> <C> <C> <C>
Warren V. Musser $7,200 $4,800 $ --
Harry Wallaesa $7,200 $ -- $ 3,770
Stephen J. Andriole $7,200 $4,800 $ 8,746
John K. Halvey $6,750 $ -- $ 1,648
Jerry L. Johnson $7,200 $4,800 $ 7,896
James A. Ounsworth $7,200 $4,800 $10,562
</TABLE>
(7) Messrs. Wallaesa, Andriole and Halvey became executive officers in March
1999, January 1999 and June 1999, respectively.
[COMPANY LOGO] 16
<PAGE> 20
QUESTIONS AND ANSWERS
1999 STOCK OPTION GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
INDIVIDUAL GRANTS OF STOCK PRICE
APPRECIATION
FOR OPTION TERM(1)
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED TO
OPTIONS/ EMPLOYEES IN EXERCISE OR
SARS FISCAL YEAR BASE PRICE EXPIRATION 5% 10%
NAME GRANTED (#)(2) ($/SH)(3) DATE ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Warren V. Musser 0 0% -- -- -- --
Harry Wallaesa 1,500,000 37.65% $ 12.3542 3/1/07 $ 8,847,870 $ 21,192,187
90,000 2.26% 45.4687 12/15/07 1,953,835 4,679,775
Stephen J. Andriole, 30,000 .75% $ 26.3437 4/15/07 $ 377,338 $ 903,791
Ph.D. 60,000 1.51% 45.4687 12/15/07 1,302,557 3,119,850
John K. Halvey 150,000 3.76% $ 20.0938 6/15/07 $ 1,439,084 $ 3,446,857
60,000 1.51% 45.4687 12/15/07 1,302,557 3,119,850
Jerry L. Johnson 60,000 1.51% $ 45.4687 12/15/07 $ 1,302,557 $ 3,119,850
James A. Ounsworth 60,000 1.51% $ 45.4687 12/15/07 $ 1,302,557 $ 3,119,850
</TABLE>
(1) These values assume that the shares appreciate at the compounded annual
rate shown from the grant date until the end of the option term. These
values are not estimates of future stock price growth of Safeguard.
Executives will not benefit unless the common stock price increases above
the stock option exercise price.
(2) The options have an eight-year term and vest 25% each year commencing on
the first anniversary of the grant. If an executive retires on or after his
65th birthday, the options will become fully vested on his retirement date.
Certain of the options reported in the above table may be exercised at any
time. If an executive exercises unvested options and his employment is
terminated, we may repurchase the unvested shares at the exercise price.
The option exercise price may be paid in cash, by delivery of previously
acquired shares, subject to certain conditions, or same-day sales (that is,
a cashless exercise through a broker), or such other method as the
compensation committee may approve. The compensation committee may modify
the terms of outstanding options, including acceleration of the exercise
date.
(3) All options have an exercise price equal to the fair market value of the
shares subject to each option on the grant date.
[COMPANY LOGO] 17
<PAGE> 21
1999 STOCK OPTION EXERCISES AND YEAR-END STOCK OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
ACQUIRED ON AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
EXERCISE (#) VALUE
NAME REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Warren V. Musser 0 -- 0 0 -- --
Harry Wallaesa 0 -- 0 1,590,000 $ 0 $ 63,766,464
Stephen J. Andriole, 37,500 $ 462,952 45,000 187,500 $ 1,981,404 $ 5,675,622
Ph.D.
John K. Halvey 0 -- 0 210,000 $ 0 $ 5,667,801
Jerry L. Johnson 88,152 $ 1,847,211 229,620 150,000 $ 10,651,936 $ 4,537,812
James A. Ounsworth 240,000 $ 4,518,012 465,000 135,000 $ 23,501,028 $ 3,885,000
</TABLE>
(1) Value is calculated using the difference between the option exercise price
and the year-end stock price, multiplied by the number of shares subject to
an option. The year-end stock price was $54.3333 per share.
LONG-TERM INCENTIVE PLAN
Beginning in 1997, we established one or more limited partnerships to
hold all acquisitions approved and made by Safeguard during any given year.
Under our long-term incentive plan, participants may purchase interests in these
limited partnerships. We allocated up to a 10% interest for purchase by the
participants for 1997 and 1998 and up to a 12.5% interest for 1999. Safeguard,
through a wholly owned subsidiary acting as the general partner of each
partnership, retains approximately a 90% interest in each partnership for 1997
and 1998 and approximately an 87.5% interest in each partnership for 1999.
Partnership interests vest 25% each year, generally starting on July 1 in the
year following the acquisition. The compensation committee has the authority to
accelerate vesting. A partnership will generally distribute the securities it
holds to its partners after five to ten years, but may distribute securities
earlier if the company has completed an IPO or has been sold. We must receive
two times the cost of the equity securities of a company and repayment of any
loans to the company before the limited partners receive any of the securities
of the company. If that threshold is met, the limited partners will receive
distributions of approximately 10% to 12.5% of the equity securities of the
company depending upon the partnership which is distributing the securities. The
percentages allocated during 1999 to each named executive officer in each
partnership are included in the following table.
[COMPANY LOGO] 18
<PAGE> 22
<TABLE>
<CAPTION>
PERFORMANCE OR OTHER PERIOD
NAME/PARTNERSHIP PERCENTAGE INTEREST UNTIL MATURATION OR PAYOUT
---------------- ------------------- --------------------------
<S> <C> <C>
Warren V. Musser (1) 0% --
Harry Wallaesa
Safeguard 99 Capital L.P. 1.1250% 5 years
Safeguard Partners Capital II L.P. 1.1250% 10 years
Stephen J. Andriole, Ph.D.
Safeguard 99 Capital L.P. 0.8310% 5 years
Safeguard Partners Capital II L.P. 0.8310% 10 years
John K. Halvey
Safeguard 99 Capital L.P. (2) 0.5000% 5 years
Safeguard Partners Capital II L.P. (1) 0.5000% 10 years
Jerry L. Johnson
Safeguard 99 Capital L.P. 0.8310% 5 years
Safeguard Partners Capital II L.P. 0.8310% 10 years
James A. Ounsworth
Safeguard 99 Capital L.P. 0.8310% 5 years
Safeguard Partners Capital II L.P. 0.8310% 10 years
</TABLE>
NOTES TO LONG-TERM INCENTIVE PLAN TABLE:
(1) Mr. Musser did not participate in the plan prior to the year 2000, but
will participate in 2000 and thereafter.
(2) The percentage allocated to Mr. Halvey permits him to participate only
in those acquisitions approved and made by Safeguard on or after June
1, 1999.
EMPLOYMENT CONTRACTS; SEVERANCE AND CHANGE-IN-CONTROL ARRANGEMENTS
At the time he joined Safeguard, we agreed to pay John Halvey's salary for a
12-month period if his employment is terminated without cause prior to December
31, 2000.
RELATIONSHIPS AND RELATED TRANSACTIONS WITH MANAGEMENT AND OTHERS
In connection with various restricted stock awards made under our long-term
incentive plan, we loaned each recipient an amount equal to the related income
taxes on each award. Each of the loans is a full-recourse loan secured by a
pledge of the restricted shares. The interest rates and due dates on each loan
are as follows:
<TABLE>
<CAPTION>
Date of Loan Interest Rate Due Date
- ------------ ------------- --------
<S> <C> <C>
2/12/97 5.81% 2/12/00
6/11/99 4.90% 6/11/00
8/27/99 5.43% 8/31/00
11/3/99 5.57% 12/3/00
12/1/99 5.74% 12/31/00
2/3/00 6.20% 2/28/01
</TABLE>
The following table shows the largest aggregate loan amounts outstanding in
connection with these tax loans for each executive officer who owed us in excess
of $60,000 since January 1, 1999, and the aggregate amounts outstanding at March
17, 2000:
<TABLE>
<CAPTION>
Largest
Balance Since Balance at
Name 1/1/99 3/17/00
---- ------ -------
<S> <C> <C>
Harry Wallaesa $ 297,841 $297,841
Steve Andriole $ 77,634 $ 0
John Halvey $ 159,427 $159,427
Jerry Johnson $ 172,852 $ 0
Thomas Lynch $ 194,448 $ 0
Jim Ounsworth $ 159,195 $ 0
</TABLE>
In addition to the above loans, in December 1998, CompuCom loaned Thomas Lynch
the sum of $796,875 in connection with his exercise of stock options to acquire
500,000 shares of CompuCom common stock. The loan is evidenced by a full
recourse
[company logo]
19
<PAGE> 23
promissory note which bears interest at the annual rate of 4.33% and is secured
by the 500,000 shares of CompuCom common stock. Principal and accrued interest
on the note is due on December 31, 2001. We also loaned Mr. Lynch the sum of
$806,078 which is evidenced by a full recourse promissory note and contains the
same terms as the CompuCom note. This note is secured by securities and
partnership interests awarded to Mr. Lynch under our long-term incentive plan
and a negative pledge of certain real estate.
In July 1999, we loaned John Halvey the sum of $500,000 in connection with his
joining Safeguard. The loan is evidenced by a full recourse promissory note
which bears interest at the prime rate and is secured by a pledge of stock,
vested stock options, long-term incentive plan grants, and any other
compensation granted to Mr. Halvey by Safeguard. Principal and accrued interest
on the note is due on July 22, 2002.
In February 2000, we agreed to loan Gerald Blitstein the sum of $200,000 in
connection with his joining Safeguard. The loan will be evidenced by a full
recourse promissory note, will bear interest at the prime rate, and will be
payable on the fifth anniversary of the loan. The loan will be secured by a
pledge of his vested stock options and long-term incentive plan grants, and any
other awards of stock or options granted to Mr.
Blitstein by Safeguard.
In February 1999, we purchased a majority interest in aligne incorporated. Mr.
Wallaesa, our president and COO, was a co-founder and significant stockholder of
aligne. The purchase price for the interest in aligne was determined by
negotiations between us and aligne and was based on an analysis of aligne's
financial position and a comparison with other similarly situated companies. We
also obtained a written report indicating the reasonableness of the investment
by Howard Lawson & Co., an investment banking firm. This transaction was
approved by our board of directors prior to Mr. Wallaesa's appointment as
president, COO and a director. We exchanged 1,324,554 shares of Safeguard common
stock (as adjusted for the March 2000 three-for-one stock split), valued at
$17.6 million, for an 80% interest in aligne. Mr. Wallaesa received 551,898 of
the Safeguard shares, valued at $7.3 million, for his aligne shares. One-half of
the Safeguard shares issued in this transaction were delivered to the aligne
stockholders at closing, and the remaining shares were issued in their names but
held in escrow pending achievement of established revenue targets for 1999 and
2000. Upon the achievement of the established revenue targets for 1999, one-half
of the escrowed shares were released. The remaining shares will be retained by
Safeguard until the established revenue targets for 2000 have been achieved. If
aligne fails to achieve the revenue targets for 2000, the remaining shares will
be returned to Safeguard.
In connection with our acquisition of a minority ownership interest in
MegaSystems, Inc. in 1998, we guaranteed a $1.5 million loan. In March 1999, we
loaned MegaSystems $1,555,556. The loan bears interest at the annual rate of 8%
and is secured by the assets of MegaSystems. Payment of the outstanding
principal and accrued interest, originally due in March 2000, was extended until
September 2000. The loan is initially convertible into 1,555,556 shares of
common stock of MegaSystems. In connection with this loan, MegaSystems also
issued to Safeguard warrants to purchase 518,518 shares of MegaSystems preferred
stock at an exercise price of $.01. In June 1999, we guaranteed $1.6 million in
performance bonds posted by MegaSystems with connection with a theatre
construction project. Warren Musser, the chairman, CEO and an 8.5% stockholder
of Safeguard, has a personal relationship with the chief executive officer of
MegaSystems.
We currently intend to acquire for $1 million a 6% equity position in Neuronyx,
Inc., a biotechnology company founded by one of our directors, Hubert J.P.
Schoemaker. Dr. Schoemaker is president, chairman and a significant stockholder
of Neuronyx.
We participate in the management of nine
[company logo]
20
<PAGE> 24
private equity funds and have limited partnership interests in two additional
private equity funds.
Robert Keith, vice chairman of our board of directors, is the president and CEO
of TL Ventures, the management company for TL Ventures III, TL Ventures IV,
EnerTech Capital Partners I, and EnerTech Capital Partners II. Mr. Keith and
Safeguard are general partners of the TL Ventures and EnerTech Capital Partners
funds, and they participate in the profits of these funds. TL Ventures receives
management fees from the TL Ventures funds and indirectly from EnerTech. TL
Ventures paid Safeguard $400,000 in 1999 for management and operational services
to TL Ventures and the funds and approximately $190,000 for the rental of office
space. Safeguard has invested or committed a total of $40.2 million in the six
TL Ventures and EnerTech Capital funds. Safeguard owns less than 7% of the
partnership interests of each of these funds.
Heinz Schimmelbusch, a Safeguard director, is a general partner of Safeguard
International Fund and participates in the profits of the fund. He also is one
of three members of the management company of the fund. Safeguard has invested
or committed $29 million to date in this fund and owns 10% of the limited
partnership interests.
In May 1999, we loaned $2.5 million to Allied Resource Corporation. The loan
bears interest at an annual rate equal to the prime rate plus 1% and is due on
the earlier of May 4, 2000 or 60 days following demand for payment. In
connection with this loan, Allied Resource issued to Safeguard warrants to
purchase 62,500 shares of class A common stock at an exercise price of $10.00.
Dr. Schimmelbusch is chairman and a significant stockholder of Allied Resource
Corporation.
Safeguard is organizing Pennsylvania Early Stage Partners II as a newly formed
private equity fund, and has committed to invest up to $25 million in this fund.
Michael Bolton, a Safeguard executive officer, is a managing director of
Pennsylvania Early Stage Partners II. Mr. Bolton will participate in the profits
of this fund along with Safeguard.
Ken Fox, the son of Safeguard director, Robert Fox, is an executive officer,
director and 4.2% stockholder of Internet Capital Group. Walter Buckley, a
director of Safeguard, is an executive officer, director and 4.6% stockholder of
Internet Capital Group. Safeguard has invested $29.25 million in Internet
Capital Group and owns approximately 14% of the company.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP has been our independent public accountants since 1986. We intend to
retain them for 2000. Representatives of KPMG LLP are expected to be present at
the annual meeting, will have an opportunity to make a statement at the meeting
if they desire to do so, and will be available to respond to appropriate
questions.
[company logo]
21
<PAGE> 25
[COMPANY LOGO]
800 THE SAFEGUARD BUILDING
435 DEVON PARK DRIVE
WAYNE, PA 19087
(610) 293-0600
AUTOMATED INVESTOR RELATIONS LINE: (888) SFE-1200
TOLL-FREE NUMBER (877) 506-7371
FOR MORE INFORMATION ABOUT SAFEGUARD, PLEASE VISIT OUR WEBSITE AT
www.safeguard.com
DIRECTIONS TO THE DESMOND GREAT VALLEY HOTEL AND CONFERENCE CENTER
One Liberty Boulevard
Malvern, PA 19355
(610) 296-9800
<TABLE>
<CAPTION>
<S> <C>
FROM PHILADELPHIA FROM WILMINGTON AND POINTS SOUTH (DELAWARE AND
MARYLAND)
Take the Schuylkill Expressway (I-76) West. Follow I-76
West to Route 202 South. Take Route 202 South to the Take I-95 to Route 202 North. Follow Route 202
Great Valley/Route 29 North Exit. At the end of the North to the Great Valley/Route 29 North Exit. Turn
ramp, proceed straight through the traffic light onto right onto Route 29 North. Turn right at the second
Liberty Boulevard. The hotel will be on the right. light onto Liberty Boulevard. The hotel will be on
the left.
FROM SOUTH NEW JERSEY
FROM HARRISBURG AND POINTS WEST
Take I-95 South to Route 322 West. Take 322 West to US
Route 1 South to Route 202 North. Take Route 202 North Take PA Turnpike East to Exit 24, Valley Forge.
to Great Valley/Route 29 North Exit. Turn right onto Take Route 202 South to Great Valley/Route 29 North
Route 29 North. Turn right at second light onto Exit. At the end of the ramp, proceed straight
Liberty Boulevard. The hotel will be on the left. through traffic light onto Liberty Boulevard. The
hotel will be on the right.
FROM PHILADELPHIA AIRPORT
FROM NEW YORK AND POINTS NORTH
Take I-95 South to 476 North. Follow 476 North to the
Schuylkill Expressway (I-76) West to Route 202 South. Take the New Jersey Turnpike South to Exit 6, the
Take Route 202 South to the Great Valley/Route 29 North Pennsylvania Turnpike extension. Follow the
Exit. At the end of the ramp, proceed straight through Turnpike West to Exit 24, Valley Forge. Take Route
the traffic light onto Liberty Boulevard. The hotel 202 South to the Great Valley/Route 29 North Exit.
will be on the right. At the end of the ramp, proceed through the light
onto Liberty Boulevard. The hotel is on the right.
</TABLE>
<PAGE> 26
PROXY
SAFEGUARD SCIENTIFICS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Please sign and date this proxy, and indicate how you wish to vote, on the back
of this card. Please return this card promptly in the enclosed envelope. YOUR
VOTE IS IMPORTANT.
When you sign and return this proxy card, you
- - appoint Warren V. Musser, Harry Wallaesa, and James A. Ounsworth, and
each of them (or any substitutes they may appoint), as proxies to vote your
shares, as you have instructed, at the annual meeting on May 11, 2000, and at
any adjournments of that meeting,
- - authorize the proxies to vote, in their discretion, upon any other
business properly presented at the meeting, and
- - revoke any previous proxies you may have signed.
IF YOU DO NOT INDICATE HOW YOU WISH TO VOTE, THE PROXIES WILL VOTE FOR ALL
NOMINEES TO THE BOARD OF DIRECTORS, AND AS THEY MAY DETERMINE, IN THEIR
DISCRETION, WITH REGARD TO ANY OTHER MATTER PROPERLY PRESENTED AT THE MEETING.
- FOLD AND DETACH HERE -
[COMPANY LOGO]
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087-1945
Phone: (610) 293-0600
Toll-Free: (877) 506-7371
Fax: (610) 293-0601
Automated Investor Relations Line: (888) SFE-1200
For more information about Safeguard, please visit our website at
www.safeguard.com
If you cannot attend the meeting in person, you may listen to the meeting over
the Internet through Vcall, Inc. at http://www.vcall.com.
Please go to this web site approximately fifteen
minutes early to register and download any
necessary audio software.
<PAGE> 27
Please mark [X]
your votes as
indicated in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL DIRECTORS.
<TABLE>
<CAPTION>
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR [ ] WITHHELD [ ]
Nominees: FOR ALL
Warren V. Musser Jack L. Messman TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WHILE
Vincent G. Bell, Jr. Russell E. Palmer VOTING FOR THE REMAINDER, STRIKE A LINE THROUGH THE NOMINEE'S NAME
Walter W. Buckley III John W. Poduska Sr. IN THE LIST.
Michael J. Emmi Heinz Schimmelbusch
Robert A. Fox Hubert J.P. Schoemaker
Robert E. Keith, Jr. Harry Wallaesa
Carl J. Yankowski TO CUMULATE VOTES, WRITE "CUMULATE FOR" IN THE SPACE BELOW, FOLLOWED BY
THE NAME OF THE NOMINEE(S) AND THE NUMBER OF VOTES TO BE CAST FOR EACH
NOMINEE.
</TABLE>
SIGNATURE(S)
DATE: , 2000
YOU MUST SIGN EXACTLY AS YOUR NAME APPEARS ON THIS CARD. If shares are jointly
owned, you must both sign. Include title if you are signing as an attorney,
executor, administrator, trustee or guardian, or on behalf of a corporation or
partnership.
- FOLD AND DETACH HERE -
[COMPANY LOGO]
Safeguard's Automated Investor Relations Line
(888-SFE-1200) provides 24-hour access to the most
frequently requested investor information.
The main menu options are as follows:
Press 1 to receive printed company materials, such as an investor's
kit, by mail.
Press 2 to hear frequently asked questions regarding the Safeguard
Subscription Program.
Press 3 to receive a fax of the frequently asked questions.
Press 4 to hear highlights of our latest news releases for pending
IPOs, including pricing and ratio information, and other
significant announcements. The most current news release is
always the first item in this menu, and you have the option of
listening to, or receiving a fax of, up to six recent news
releases.
Press 5 for the address and telephone number for Safeguard's transfer
agent.
Press 6 to be connected to Safeguard's investor relations department.
