def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-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):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
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Fee paid previously with preliminary materials. |
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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. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
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Filing Party: |
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Date Filed: |
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435 Devon Park Drive, Building 800
Wayne, PA 19087-1945
Phone:
610.293.0600
Toll-Free: 877.506.7371
Fax: 610.293.0601
Internet: www.safeguard.com
SAFEGUARD SCIENTIFICS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Dear Shareholder:
You are invited to attend the Safeguard Scientifics, Inc. 2007 Annual Meeting of Shareholders.
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DATE:
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May 24, 2007 |
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TIME:
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10:00 a.m. Eastern time |
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PLACE:
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The Desmond Hotel and Conference Center |
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1 Liberty Boulevard |
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Malvern, PA 19355 |
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610.296.9800 or 800.575.1776 |
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RECORD DATE:
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Only shareholders who owned stock at the close
of business on April 2, 2007, can vote at this
meeting and any adjournments that may take
place. |
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ITEMS OF BUSINESS:
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1. To elect 10 directors; |
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To consider a proposal to ratify the
appointment of KPMG LLP as Safeguards independent registered
public accounting firm for the fiscal year ending December 31,
2007; and |
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To consider such other business as
may properly come before the meeting. |
We also will report on Safeguards 2006 business results and other matters of interest to our
shareholders. You will have an opportunity at the meeting to ask questions, make comments and meet
our management team.
Your vote is very important. We encourage you to read the proxy statement and submit your proxy or
voting instructions as soon as possible to ensure your representation at the annual meeting,
regardless of whether you attend in person. You may vote by completing, signing, dating and
returning your proxy card or voting instruction form in the pre-addressed envelope provided, or, in
most cases, by using the telephone or the Internet. For specific instructions on how to vote your
shares, please refer to the section entitled Questions and Answers about the Meeting and the
Proposals beginning on page 1 of the proxy statement and the instructions on the proxy card or
voting instruction form.
This notice of annual meeting, proxy statement, accompanying proxy card, and 2006 annual report are
being mailed to shareholders beginning April 20, 2007, in connection with the solicitation of
proxies by the Board of Directors.
By Order of the Board of Directors,
Deirdre Blackburn
Secretary
April 18, 2007
TABLE OF CONTENTS
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
QUESTIONS AND ANSWERS ABOUT THE MEETING AND THE PROPOSALS
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When and where is the annual meeting? |
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Safeguards annual meeting is being held on Thursday,
May 24, 2007 at 10:00 a.m. at The Desmond Hotel and Conference
Center, 1 Liberty Boulevard, Malvern, PA 19355. |
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Do I need a ticket or proof of Safeguard ownership to attend the annual meeting? |
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You will not need a ticket to attend the annual meeting. However, only persons with evidence of stock ownership, or
who are guests of Safeguard, may attend and be admitted to the annual meeting. Photo identification, such as a valid
drivers license or passport, will be required. If you are not a shareholder of record but hold shares through a
broker, trust, bank or other nominee, you will need to provide proof of beneficial ownership on the record date, such
as a legal proxy from your broker, trust, bank or other nominee, your most recent brokerage account statement prior to
April 2, 2007, a copy of the voting instruction form provided by your broker, trustee or nominee, or other similar
evidence of ownership. If you do not have photo identification and proof that you own Safeguard shares, you will not be
admitted to the meeting. |
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Why am I receiving these materials? |
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You are receiving Safeguards annual report, notice of annual meeting, proxy statement and a proxy card or voting
instruction form because you owned shares of Safeguard stock on April 2, 2007, the record date for determining the
shareholders entitled to vote at the annual meeting. This proxy statement contains detailed information relating to
the proposals on which we would like you, as a shareholder, to vote. The proxy card or voting instruction form is used
for voting on the proposals. |
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How many shares must be present to hold the meeting? |
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To hold the meeting, a quorum must be present. A quorum is a majority of the outstanding shares, which may be
represented at the meeting either in person or by proxy. Proxies received but marked as abstentions or containing
broker non-votes on a particular matter will be included in the calculation of the number of shares entitled to vote
for the purpose of determining the presence of a quorum. |
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What am I voting on? |
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You are being asked to vote on: |
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the election of 10 directors who have been nominated to serve on Safeguards Board of
Directors (Board); and |
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a proposal to ratify the appointment of KPMG LLP as Safeguards independent registered
public accounting firm for the 2007 fiscal year. |
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We also will consider other business that properly comes before the annual meeting. |
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How does Safeguards Board of Directors recommend I vote? |
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Safeguards Board recommends a vote FOR each Board nominee and FOR the proposal to ratify the appointment of KPMG LLP as Safeguards
independent registered public accounting firm for the fiscal year ending December 31, 2007. Our Board also requests discretionary
authority to cumulate votes in the election of directors and to vote on any other matters that may properly arise at the meeting. |
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How many votes do I have? |
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Each share of Safeguard common stock outstanding on the record date is entitled to vote on all items being voted upon at the annual
meeting. On the record date, we had 120,771,313 shares of common stock issued and outstanding. |
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Every shareholder may cast one vote for each share owned on the record date. In the election of directors, shareholders may elect to
cumulate their votes as described below under What does cumulative voting mean? |
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What does cumulative voting mean? |
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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 10 directors are standing for election
at the annual meeting, if you hold 100 shares of Safeguard stock, you may cast 1,000 votes (10 times 100) in the election of directors.
You may distribute those votes among as few or as many of the 10 nominees as you wish. In other words, in the example provided, you may
cast all 1,000 votes FOR one nominee or allocate your 1,000 votes among two or more nominees, as long as the total equals 1,000 votes. |
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If you received a proxy card and wish to vote cumulatively, you must: |
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write the words cumulate for in the space provided under item 1 of the proxy card; and |
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write the name of each nominee and the number of votes to be cast for each nominee in that space. |
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If you vote cumulatively, please check to be sure that the votes you cast add up to the number
of shares you own multiplied by 10. If the number of votes does not add up correctly, your
votes will not be counted until a properly completed proxy card has been received. |
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The cumulative voting feature for the election of directors also is available by voting in
person at the annual meeting; however, it is not available by telephone or the Internet. If
you are the beneficial owner of shares held in street name and wish to vote cumulatively, you
will need to contact your broker, bank or other nominee holder of your shares. |
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What is the difference between holding shares as a shareholder of record and as a beneficial owner? |
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Most of Safeguards shareholders hold their shares through a broker, bank or other nominee rather than directly in their
own name. There are important distinctions between shares held of record and those owned beneficially. |
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Shareholder of Record |
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If your shares are registered directly in your name with Safeguards transfer agent, Mellon Investor Services LLC, you are
considered the shareholder of record with respect to those shares, and these proxy materials are being sent to you directly
by Safeguard. As a shareholder of record, you have the right to grant your voting proxy directly to Safeguard or to vote
in person at the meeting. If you are a shareholder of record, Safeguard has enclosed a proxy card for your use in voting
your shares. |
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Beneficial Owner |
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If your shares are held in street name (such as in a brokerage account or by another nominee, such as a bank or trust
company), you are considered the beneficial owner of the shares, and these proxy materials, together with a voting
instruction form, are being forwarded to you by your broker or other nominee. As the beneficial owner, you have the right
to direct your broker or other nominee how to vote your shares, but unless you receive a proxy from your broker, you cannot
vote your shares directly or by proxy you must instruct your broker or other nominee as to how to vote your shares. You
also are invited to attend the annual meeting. To vote your shares at the meeting, you will need a legal proxy from your
broker or other nominee authorizing you to vote at the meeting. |
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How do I vote my shares? |
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If you are a shareholder of record, there are three ways for you to vote by proxy: |
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Log on to the Internet at http://www.proxyvoting.com/sfe and follow the instructions at
that site; |
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Call 1.866.540.5760 and follow the instructions; or |
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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. |
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Telephone and Internet voting will close at 11:59 p.m. Eastern time the day prior to the annual
meeting date. |
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If you sign your proxy card but do not mark any boxes showing how you wish to vote, either
Steven J. Feder or Deirdre Blackburn, as the proxy designated by our Board to act on behalf of
shareholders, will vote your shares and cumulate your votes as recommended by our Board and, in
his or her discretion, will vote on any other matters which may properly arise at the meeting. |
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If you are the beneficial owner of shares held in street name, you will receive a voting
instruction form directly from your broker, bank or other nominee describing how to vote your
shares. This form will, in most cases, offer you three ways to vote: |
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via the Internet; |
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by telephone; or |
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by completing, signing and returning the voting instruction form in the accompanying
prepaid envelope. |
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Whether you are a shareholder of record or the beneficial owner of the shares, you will need to
have your proxy card or voting instruction form in hand when you call or log on to the Internet. |
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What do I do if I change my mind after I vote my shares? |
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If you are a shareholder of record, you may change your vote at any
time prior to the vote at the annual meeting by: |
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re-voting by telephone or via the Internet (only your latest vote will be counted); |
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submitting another proxy card with a later date (again, only your latest vote will be
counted); |
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sending written notice to our Secretary (which must be received at our corporate
headquarters on or before the business day prior to the annual meeting) stating that you
would like to revoke (that is, cancel) your proxy; or |
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voting in person at the annual meeting. |
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If you are the beneficial owner of shares held in street name, you may submit new voting
instructions by following the instructions provided by your broker, bank or other nominee. You
also may vote in person at the annual meeting if you obtain a legal proxy from your broker or
other nominee authorizing you to vote at the meeting. |
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Attendance at the annual meeting will not cause your previously granted proxy to be revoked
unless you specifically request so. If you are a shareholder of record and wish to vote at the
meeting, you may do so by |
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presenting your completed proxy card or ballot to the judge of
election. If you are a beneficial owner of shares held in street name and wish to vote at the
meeting, you must present a legal proxy from your broker or other nominee to the judge of
election along with your ballot. |
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What is the required vote for a proposal to pass? |
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In the election of directors, the 10 nominees who receive the highest number of FOR votes at the annual meeting will be
elected as directors. A properly executed proxy that withholds authority to vote with respect to the election of one or
more directors will not be voted with respect to the director or directors indicated and will not be taken into account in
determining the outcome of the election; however, it will be counted for purposes of determining whether there is a quorum. |
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The proposal to ratify the appointment of our independent registered public accounting firm requires the affirmative FOR
vote of a majority of the shares present in person or represented by proxy and entitled to vote on the proposal. |
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Broker non-votes (which are explained in the next question) and abstentions are not counted in the tally of votes FOR or
AGAINST a proposal and, therefore, have no effect on the proposal, assuming a quorum is present. |
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Will my shares be voted if I do not sign and return my proxy card or voting instruction form? |
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They could be. If you are a shareholder of record and do not provide a proxy, your shares will not be voted unless you
attend the meeting and vote your shares. If you are a beneficial owner of shares held in street name and do not provide
your broker with voting instructions, your broker or other nominee may either use its discretion to vote your shares on
routine matters (such as the election of directors or the ratification of our independent registered public accounting
firm) or leave your shares unvoted. However, for matters deemed non-routine by the New York Stock Exchange, your broker
or other nominee would not be able to vote without your instructions, in which case your shares would be considered broker
non-votes on that particular matter. |
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Who will count the votes? |
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A representative of Mellon Investor Services LLC, our registrar and transfer agent, will count the votes and act as the
judge of election. |
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What does it mean if I get more than one proxy card or voting instruction form? |
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It may mean that you have multiple accounts at the transfer agent or hold your shares in more than one brokerage account.
Please provide voting instructions for all proxy cards and voting instruction forms that you receive. If you are a
shareholder of record, we encourage you to contact our transfer agent to obtain information about how to combine your
accounts. You may contact our transfer agent at the following address and telephone numbers: |
Safeguard Scientifics, Inc.
c/o Mellon Investor Services LLC
P. O. Box 3315
South Hackensack, NJ 07606
Toll Free: 800.851.9677
TDD Hearing Impaired: 800.231.5469
International: 201.680.6578
International TDD Hearing Impaired: 201.680.6610
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If you are a shareholder of record, you also can find information on transferring shares and
other useful shareholder information on our transfer agents web site at www.melloninvestor.com. |
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What is householding and how does it affect me? |
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If you and other residents at your mailing address are the beneficial
owner of shares held in street name, your broker, bank or other
nominee may have notified you that your household will receive only
one annual report and proxy statement for each company in which you
hold stock through that broker, bank or other nominee. This practice
is commonly referred to as householding and potentially provides
extra convenience for shareholders and cost savings for companies.
Unless you responded that you did not want to participate in
householding, you were deemed to have consented to the process.
Therefore, your broker or other nominee will send only one copy of our
annual report and proxy statement to your address; however, each
shareholder in your household should continue to receive a separate
voting instruction form. |
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If you are the beneficial owner of shares held in street name and you would like to receive your
own set of our annual report and proxy statement in the future, or if you share an address with
another Safeguard shareholder and together both of you would like to receive only a single set
of Safeguard annual documents, please contact Broadridge by telephone at 800.542.1061. Be sure
to provide Broadridge with your name, the name of your brokerage firm, bank or other nominee,
and your account number. |
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If you are currently subject to householding and would like to receive an individual copy of
this years annual report or proxy statement, we will promptly send a copy to you if you send a
written request to Safeguard Scientifics, Inc., Attention: Investor Relations, 435 Devon Park
Drive, Building 800, Wayne, PA 19087-1945 or call 877.506.7371. |
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ELECTION OF DIRECTORS
Item 1 on Proxy Card
Directors are elected annually and serve until the next annual meeting of shareholders. There are 10 nominees for election this year. All of the nominees are currently serving as directors.
Each nominee has consented to serve until the next annual meeting if elected. You will find a
biography for 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 10 nominees
who receive the highest number of affirmative votes will be elected as directors.
Peter J. Boni, age 61, joined Safeguard as President and Chief Executive Officer and a member of
the Board in August 2005. Mr. Boni also is non-executive Chairman of the Board of Intralinks, Inc.
and a director of Clarient, Inc. Positions held include Operating Partner for Advent
International, Inc., a global private equity firm with $10 billion under management (April 2004 to
August 2005); Chairman and Chief Executive Officer of Surebridge, Inc., an applications outsourcer
serving the mid-market (March 2002 to April 2004); Managing Principal of Vested Interest LLC, a
management consulting firm (January 2001 to March 2002); and President and Chief Executive Officer
of Prime Response, Inc., an enterprise applications software provider (February 1999 to January
2001).
Michael J. Cody, age 57, has served on our Board since 2006. Positions held include Partner,
Meadowood Capital, LLC, a private equity firm specializing in technology companies (April 2007 to
present); Vice President of Corporate Development, responsible for mergers, acquisitions and
divestitures at EMC Corporation, a provider of products, services and solutions for information
storage and management (1998 until his retirement in March 2007); Director of Corporate Development
at United Technologies Corporation, a diversified technology company (1993 to 1998); Managing
Director of the investment banking group at Price Waterhouse (1990 to 1993); and Vice President of
Investment Banking at Kidder Peabody & Co. (1980 to 1989).
Julie A. Dobson, age 50, has served on our Board since 2003. Ms. Dobson also is a director of PNM
Resources, Inc. and non-executive Chairperson of the Board of LCC International, Inc. Positions
held include Chief Operating Officer (1998 until February 2002) of TeleCorp PCS, Inc., a
wireless/mobile phone company that was acquired by AT&T Wireless, Inc. in late 2001; President of
Bell Atlantic Corporations New York/ New Jersey Metro Region mobile phone operations (1997 to
1998); and a number of executive positions during her 18-year career with Bell Atlantic
Corporation, including sales, operations, and strategic planning and development in the chief
executive officers office.
Robert E. Keith, Jr., age 65, has served on our Board since 1996 and was appointed Chairman of the
Board in October 2001, prior to which he served as Vice Chairman since February 1999. Mr. Keith
also is a director of Internet Capital Group, Inc. and Millstream II Acquisition Corporation.
Positions held include Managing Director of TL Ventures, a group of venture capital funds, and its
predecessor funds (1988 to present); senior adviser to, and co-founder of, EnerTech Capital
Partners (1996 to present); member of the Office of the Chief Executive of Safeguard (April 2001 to
October 2001); and President (1991 to December 2002) and Chief Executive Officer (February 1996 to
December 2002), of Technology Leaders Management, Inc., a private equity capital management
company.
Andrew E. Lietz, age 68, has served on our Board since 2003. Mr. Lietz also is a director of
Amphenol Corporation and DDi Corp. and a member of the Board of Trustees of the University System
of New Hampshire. Positions held include Managing Director and Founder of Rye Capital Management,
LLC, a private equity investment firm (2001 to present); Executive Chairman (late 2000 until mid
2002) of Clare Corporation, a designer and manufacturer of integrated circuits, solid-state relays
and electronic switches, which was acquired by Ixys Corporation in June 2002; President and Chief
Executive Officer (1995 to 2000) of, and several other executive positions during his 16-year
career with, Hadco Corporation, a global manufacturer of electronic interconnect products and
services; and a variety of positions at IBM Corporation.
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George MacKenzie, age 58, has served on our Board since 2003. Mr. MacKenzie also is a director of
C&D Technologies, Inc. Positions held include non-executive Chairman of the Board (May 2006 to
present) and interim Chief Executive Officer (January 2006 to April 2006) of American Water, a
provider of water services in North America; interim Chief Executive Officer of C&D Technologies,
Inc., a technology company that produces and markets systems for the conversion and storage of
electrical power (March 2005 to July 2005); Executive Vice President and Chief Financial Officer
of P.H. Glatfelter Company, a manufacturer of specialty papers and engineered products (September
2001 to June 2002); Vice Chairman and Chief Financial Officer (1995 until his retirement in 2001)
of, and several other executive positions during his 22-year career with, Hercules, Incorporated, a
global chemical specialties manufacturer.
George D. McClelland, age 60, has served on our Board since 2006. Positions held include Chairman,
CEO and Founder of eSecLending, a provider of securities lending services to the pension industry
(2000 to 2001); a director of Riverstone Networks, Inc. and Storage Networks, Inc.; Senior Vice
President, responsible for managing many of the portfolio companies of United Asset Management
Corporation, a public holding company (1994-2001); multiple corporate management roles at FMR
Corp., a diversified financial services company (1987-1991); and Corporate Treasurer of Data
General Corporation, a technology company (1972-1987).
Jack L. Messman, age 67, has served on our Board since 1994. Mr. Messman also is a director of
RadioShack Corporation and Timminco Limited. Positions held include Chairman of the Board and
Chief Executive Officer of Novell, Inc., a provider of infrastructure software products focused
around Linux and identity management (2001 to 2006); Chief Executive Officer and President of
Cambridge Technology Partners (Massachusetts), Inc., an e-business systems integration company
(August 1999 until its acquisition by Novell, Inc. in July 2001); Chairman and Chief Executive
Officer of Union Pacific Resources Group Inc., an independent oil and gas exploration and
production company (April 1991 to August 1999); and Chairman and Chief Executive Officer of USPCI,
Inc., Union Pacifics environmental services company (May 1988 to April 1991).
Dr. John W. Poduska, Sr., age 69, has served on our Board since 1987. Dr. Poduska also is a
director of Novell, Inc. and Anadarko Petroleum Corporation. Positions held include Chairman of
Advanced Visual Systems, Inc., a provider of visualization software and solutions (January 1992 to
December 2001); President and Chief Executive Officer of Stardent Computer, Inc, a computer
manufacturer (December 1989 to December 1991); and Founder, Chairman and Chief Executive Officer of
Stellar Computer, Inc., a computer manufacturer and the predecessor of Stardent Computer, Inc.
(December 1985 to December 1989).
John J. Roberts, age 62, has served on our Board since 2003. Mr. Roberts also is a director of
Armstrong World Industries, Inc. and Vonage Holdings Corp. and a trustee of Pennsylvania Real
Estate Investment Trust. Mr. Roberts is a C.P.A. Positions held include Global Managing Partner
and a Member of the Leadership Team of PricewaterhouseCoopers LLP at the time of his retirement in
June 2002, completing a 35-year career with the professional services firm during which he served
in a variety of client service and operating positions.
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CORPORATE GOVERNANCE AND BOARD MATTERS
Safeguards Corporate Governance Guidelines, Code of Business Conduct and Ethics, and the
charters for the Boards Audit Committee, Compensation Committee and Nominating & Corporate
Governance Committee are available at www.safeguard.com/Governance. Shareholders also may obtain
a print copy of these documents, at no cost, by writing to our Secretary at 435 Devon Park Drive,
Building 800, Wayne, PA 19087-1945. The Code of Business Conduct and Ethics is applicable to all
employees of Safeguard, including each of our executive and financial officers, and the members of
our Board. Safeguard intends to post information regarding amendments to or waivers from our Code
of Business Conduct and Ethics (to the extent applicable to Safeguards directors or executive
officers) in the Corporate Governance section of our website. Our website is not part of this
proxy statement. All references to our website address are intended to be inactive textual
references only.
Board Independence. Safeguards common stock is listed on the New York Stock Exchange, which we
refer to below as the NYSE. To assist the Board in making independence determinations, the Board
has adopted categorical standards which are reflected in our Corporate Governance Guidelines.
Generally, under these standards, a director does not qualify as an independent director if any of
the following relationships exist:
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currently or within the previous three years, the director has
been employed by us, someone in the directors immediate family
has been one of our executive officers, or the director or someone
in the directors immediate family has been employed as an
executive officer of another company where any of our present
executive officers at the same time serves or served on that
companys compensation committee; |
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the director or someone in the directors immediate family is a
current partner of a firm that is our internal or external
auditor, the director is a current employee of the firm, someone
in the directors family is a current employee of the firm who
participates in the firms audit, assurance or tax compliance (but
not tax planning) practice, or the director or someone in the
directors immediate family is a former partner or employee of
such a firm and personally worked on our audit within the last
three years; |
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the director or someone in the directors immediate family
received, during any 12-month period within the last three years,
more than $100,000 in direct compensation from us (other than
director and committee fees and pension or other forms of deferred
compensation for prior service that are not contingent in any way
on continued service); |
|
|
|
the director is a current employee or holder of more than 10% of
the equity of another company, or someone in the directors
immediate family is a current executive officer or holder of more
than 10% of the equity of another company, that has made payments
to or received payments from us, in any of the last three fiscal
years of the other company, that exceeds the greater of $1 million
or 2% of such other companys consolidated gross revenues; or |
|
|
|
the director is a current executive officer of a charitable
organization to which we have made charitable contributions in any
of the charitable organizations last three fiscal years that
exceeds the greater of $1 million or 2% of that charitable
organizations consolidated gross revenues. |
The Board has determined that Michael Cody, Julie Dobson, Andrew Lietz, George MacKenzie, George
McClelland, Jack Messman, John Poduska and John Roberts have no direct or indirect material
relationships with us other than their directorship and, therefore, are independent within the
meaning of the NYSE listing standards and satisfy the categorical standards contained in our
Corporate Governance Guidelines. In reviewing Mr. Codys independence, the Board determined that
EMC Corporations purchases of IT consulting and software solutions from Alliance Consulting Group
Associates, Inc., a majority-owned subsidiary of Safeguard, did not exceed the threshold in our
categorical standards for determining independence and did not adversely impact Mr. Codys
independence, as the relationship was not material to either Safeguard or EMC.
Board Structure and Committee Composition. At the date of this proxy statement, Safeguards Board
has 10 members and four standing committees. The Board held eight meetings in 2006, one of which
was a joint meeting with the Compensation Committee. Each incumbent director attended at least 75%
of the total number of meetings of the Board and committees of which he or she was a member.
Directors are invited, but not required, to attend annual meetings of Safeguard shareholders. Six
directors attended the 2006 annual meeting of shareholders. Under our Corporate Governance Guidelines and NYSE listing standards, non-employee directors meet
in executive
8
session at each regularly scheduled Board meeting, outside of the presence of any
management directors and any other members of Safeguards management who may otherwise be present,
and during at least one session per year, only independent directors are present. The Chair of the
Nominating & Corporate Governance Committee presides at these sessions. The table below describes
the membership of each of the standing committees during 2006 and the number of meetings held by
each of these committees during 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominating & |
|
|
Acquisition |
|
Audit |
|
Compensation |
|
Corporate Governance |
|
|
|
Number of Meetings held in 2006 |
|
4 |
|
9 |
|
6 |
|
5 |
Membership: |
|
|
|
|
|
|
|
|
Peter J. Boni |
|
ü |
|
|
|
|
|
|
Michael J. Cody |
|
ü |
|
|
|
|
|
|
Julie A: Dobson |
|
|
|
ü |
|
Chair |
|
|
Robert E. Keith, Jr. |
|
Chair |
|
|
|
|
|
|
Andrew E. Lietz |
|
|
|
|
|
ü |
|
Chair |
George MacKenzie |
|
|
|
Chair |
|
|
|
|
George D. McClelland |
|
|
|
ü |
|
|
|
|
Jack L. Messman |
|
ü |
|
|
|
|
|
ü |
John W. Poduska, Sr. |
|
ü |
|
|
|
|
|
ü |
Robert Ripp |
|
|
|
|
|
|
|
|
John J. Roberts |
|
|
|
ü |
|
ü |
|
|
|
|
|
|
|
An denotes former committee member. Messrs. McClelland and Cody were appointed to committees
when they joined our Board in July 2006 and October 2006, respectively. Mr. Ripp retired from
our Board in May 2006. |
Acquisition Committee. The Board has delegated to the Acquisition Committee the authority to
approve, between regularly scheduled Board meetings, the following transactions:
|
|
follow-on transactions in existing partner companies involving amounts between $5 million and $20 million; |
|
|
|
new transactions involving amounts between $10 million and $20 million; and |
|
|
|
divestitures of existing partner companies involving amounts between $10 million and $20 million. |
Audit Committee. The Audit Committees responsibilities, which are described in detail
in its charter, include, among other duties, the responsibility to:
|
|
assist the Board in fulfilling its responsibilities for general oversight of the integrity of Safeguards financial
statements, Safeguards compliance with legal and regulatory requirements, and the performance of Safeguards internal
audit function; |
|
|
|
interact with and evaluate the performance, qualifications and independence of Safeguards independent registered
public accounting firm; |
|
|
|
review and approve related party transactions; and |
|
|
|
prepare the report required by SEC regulations to be included in the proxy statement. |
The Audit Committee has the sole authority to retain, set compensation and retention terms for,
terminate and oversee the relationship with Safeguards independent registered public accounting
firm (which reports directly to the Audit Committee). The Audit Committee also oversees the
activities of the internal auditor, reviews the effectiveness of the internal audit function and
approves the appointment of the internal auditor. The Audit Committee has the authority to obtain
advice, counsel and assistance from internal and external legal, accounting or other advisors as
the Audit Committee deems necessary to carry out its duties and to receive appropriate funding from
Safeguard for such advice and assistance. The full responsibilities of the Audit Committee are set
forth in the Audit Committee Charter, which is reviewed annually by the Committee. The Audit
Committee Charter is available through the Corporate Governance link on Safeguards website at
www.safeguard.com/Governance.
The Board has determined that each member of the Audit Committee meets the independence
requirements established by SEC regulations, the NYSE listing standards and our Corporate
Governance Guidelines. The Board has determined that Messrs. MacKenzie and Roberts are audit
committee financial experts within the meaning of
9
the SEC regulations, and the Board has
determined that each member of the Audit Committee has accounting and related financial management
expertise within the meaning of the NYSE listing standards. Mr. Roberts serves as a member of the
audit committee of the board of directors of four publicly-traded companies, including our Audit
Committee. The Board has determined that such simultaneous service does not impair Mr. Roberts
ability to effectively serve on our Audit Committee.
Compensation Committee. The Compensation Committees responsibilities, which are described in
detail in its charter, include, among other duties, the responsibility to:
|
|
approve the philosophy for compensation of our executive officers and other employees; |
|
|
|
establish compensation (including base salary, incentive compensation and equity-based programs) for our Chief
Executive Officer and other executive officers; |
|
|
|
administer the long- and short-term compensation and performance-based incentive plans (which are cash and equity
based); |
|
|
|
approve employment agreements and perquisites provided to our executive officers; |
|
|
|
review managements recommendations for our broad-based employee benefit plans; |
|
|
|
evaluate and recommend to the Board the compensation for all non-employee directors for service on the Board and its
committees; and |
|
|
|
review and discuss with management the Compensation Discussion and Analysis and recommend to the Board its inclusion in
our proxy statement. |
The Compensation Committee Charter is available through the Corporate Governance link on
Safeguards website at www.safeguard.com/Governance. The Board has determined that each member of
the Compensation Committee meets the independence requirements established in the NYSE listing
standards and our Corporate Governance Guidelines.
A discussion of some of the Compensation Committees processes and procedures for the consideration
and determination of executive compensation is contained in Compensation Discussion and
AnalysisSetting Executive Compensation. Additional processes and procedures include the
following:
|
|
Meetings. The Compensation Committee generally meets five times
each year, with additional meetings being scheduled as needed.
The annual committee calendar is established prior to the
beginning of each year, and agendas for each meeting are
established in consultation with the Compensation Committee Chair.
The Compensation Committee meets in executive session during or
prior to the end of each regularly scheduled meeting. |
|
|
|
Role of Independent Consultant. The Compensation Committee has
retained the services of an independent compensation consultant,
Hewitt Associates, to assist the Compensation Committee in its
deliberations regarding executive officer and director
compensation. Specifically, Hewitt Associates provided
information relating to competitiveness of pay levels,
compensation design, market trends and technical considerations
and assisted the Compensation Committee with the reporting of
executive compensation under the SECs proxy disclosure rules.
These services, which are provided in support of decision-making
by the Compensation Committee, are the only services that the
compensation consultant performs for Safeguard. Hewitt Associates
reports to and acts at the direction of, and attends selected
meetings as requested by, the Chair of the Compensation Committee.
The Compensation Committee, which has the sole authority to hire
and terminate the consultant, evaluates the performance of the
consultant annually. |
|
|
|
Role of Executive Team. The Compensation Committee discusses its
compensation views with the Chief Executive Officer. Management
provides the Compensation Committee with comprehensive tally
sheets on an annual basis to facilitate the Committees review of
the total compensation of our executive officers. The tally
sheets include the annual cash compensation (salary, target cash incentive award and
perquisites), the value of benefits provided to our executive officers, the potential severance
payments should an executive officers employment terminate under various scenarios, and the
outstanding equity awards held by each executive officer. The Chief Executive Officer also
makes recommendations to the Compensation Committee for salary adjustments and equity and
non-equity plan participation and awards to the named executive officers and other |
10
|
|
employees.
However, other than for compensation that has been established contractually or under
quantitative formulas established by the Compensation Committee each year under our management
incentive plan, the Compensation Committee exercises its own discretion in determining
compensation for the named executive officers. Additional information can be found in
Compensation Discussion and AnalysisRole of Executive Team in Compensation Decisions. |
Nominating & Corporate Governance Committee. The Nominating & Corporate Governance Committees
responsibilities, which are described in detail in its charter, include, among other duties, the
responsibility to:
|
|
establish criteria for the selection of directors; |
|
|
|
consider qualified Board candidates recommended by shareholders; |
|
|
|
recommend to the Board the nominees for director, including nominees for director in connection with Safeguards annual
meeting of shareholders; |
|
|
|
conduct an annual evaluation of the Board and its members and oversee the evaluations of each of the Board committees; |
|
|
|
take a leadership role in shaping Safeguards corporate governance policies, including developing and recommending to
the Board Safeguards Corporate Governance Guidelines and Code of Business Conduct and Ethics; |
|
|
|
evaluate the performance of the Chief Executive Officer; and |
|
|
|
monitor the process of succession planning for the Chief Executive Officer and executive management. |
The Nominating & Corporate Governance Committee Charter is available through the Corporate
Governance link on Safeguards website at www.safeguard.com/Governance. The Board has determined
that each member of the committee meets the independence requirements established in the NYSE
listing standards and our Corporate Governance Guidelines. During 2006, Mr. Boni recommended
Messrs. McClelland and Cody to the Nominating & Corporate Governance Committee as potential
candidates for Safeguards Board. Following completion of their consideration of these Board
candidates, the Nominating & Corporate Governance Committee recommended to our Board, and our Board
appointed, Messrs. McClelland and Cody as directors in July 2006 and October 2006, respectively.
The Nominating & Corporate Governance Committee recommended the nomination of, and our Board
nominated, Messrs. McClelland and Cody for election as directors by our shareholders at the 2007
annual meeting.
Annual Performance Evaluations. The directors and Nominating & Corporate Governance Committee
annually assess the performance of the Board based on input from all directors. The Audit
Committee, Compensation Committee and Nominating & Corporate Governance Committee also annually
assess their respective performance and committee processes.
Review and Approval of Transactions with Related Persons. The Board has adopted a written policy
which charges the Audit Committee with the responsibility of reviewing with management at each
regularly scheduled meeting and determining whether to approve any transaction (other than a
transaction that is available to all employees generally on a non-discriminatory basis) between us
and our directors, director nominees and executive officers or their immediate family members.
Between regularly scheduled meetings of the Audit Committee, management may preliminarily approve a
related party transaction, subject to ratification of the transaction by the Audit Committee. If
the Audit Committee does not ratify the transaction, management will make all reasonable efforts to
cancel the transaction.
Communications with Safeguards Board and Audit Committee. Any shareholder or other interested
party may communicate with our Board or any specified non-management director(s) by addressing the
communication in care of our Secretary as follows:
c/o Secretary
Safeguard Scientifics, Inc.
435 Devon Park Drive, Building 800
Wayne, PA 19087-1945
11
All communications are initially reviewed by our Secretary. The Chair of the Audit Committee is
advised promptly of any communication that alleges misconduct on the part of Safeguards management
or raises legal, ethical or compliance concerns about Safeguards policies or practices.
Safeguards Audit Committee also has established procedures for confidential, anonymous submission
of complaints by employees and for receipt, retention and treatment of complaints, from whatever
source, received by Safeguard, regarding accounting, internal accounting controls or auditing
matters. All such communications are initially sent to the Chair of the Audit Committee and, if
requested by the Chair, may be sent to the other members of the Audit Committee. Any person who
desires to contact the Audit Committee may do so by addressing correspondence to Chair, Audit
Committee, in care of our Secretary at the address noted above.
The Chair of the Audit Committee also receives updates on other communications to the Board, Audit
Committee or non-employee directors that raise issues related to the affairs of Safeguard but which
do not fall into the two prior categories. The Chair of the Audit Committee determines which of
these communications he would like to see.
Our Secretary maintains a log of all communications which are available for review upon request of
any member of the Board. Typically, we do not forward to our non-management directors
communications from our shareholders or other communications which are of a personal nature or not
related to the duties and responsibilities of the Board, including, without limitation, business
plan or other business opportunity submissions, inquiries related to products or services provided
by Safeguards companies, spam, junk mail and mass mailings, resumes and other forms of job
inquiries, surveys or polls, business solicitations or advertisements, and any material that
relates to improper or irrelevant topics or is unduly hostile, threatening, illegal or similarly
unsuitable.
Process for Submission of Shareholder Recommendations for Board Nominees. In considering
candidates, the Nominating & Corporate Governance Committee seeks the following attributes for a
director nominee:
|
|
a strong record of personal integrity and ethical conduct; |
|
|
|
a leader in the companies or institutions with which he or she is affiliated; |
|
|
|
competencies, skills and experiences that are complementary to the background and experience represented on Safeguards
Board and that meet the needs of Safeguards strategy and business; |
|
|
|
the willingness and ability to devote sufficient time to fulfill his or her responsibilities to Safeguard and our
shareholders; |
|
|
|
the ability to represent the long-term interests of our shareholders; and |
|
|
|
the ability to provide relevant advice and counsel to management and best perpetuate the success of Safeguards
business. |
The Nominating & Corporate Governance Committee considers properly submitted shareholder
recommendations of director candidates in substantially the same manner as it considers director
candidate recommendations from other sources. Any shareholder recommendation must include the
following: the nominees name and the information about the nominee that would be required in a
proxy statement under the SECs rules; information about the relationship between the nominee and
the nominating shareholder; proof of the number of shares of Safeguard common stock that the
nominating shareholder owns and the length of time the shares of Safeguard
common stock have been owned; and a letter from the nominee certifying his or her willingness to
serve, if elected, as a director.
Recommendations, which must be received not later than December 22, 2007, should be directed to:
Chair, Nominating & Corporate Governance Committee
c/o Secretary
Safeguard Scientifics, Inc.
435 Devon Park Drive, Building 800
Wayne, PA 19087-1945
12
Board Compensation. During 2006, each of our non-employee directors was compensated for his or her
service as a director as shown in the table below:
|
|
|
|
|
Compensation Item |
|
Amount |
|
Annual Board Retainers: |
|
|
|
|
Chairman of the Board |
|
$ |
50,000 |
|
Other Directors |
|
|
35,000 |
|
Additional Annual Chair Retainers: |
|
|
|
|
Audit Committee |
|
|
10,000 |
|
Compensation Committee |
|
|
7,500 |
|
Nominating & Corporate Governance Committee |
|
|
5,000 |
|
Meeting Attendance Fees: |
|
|
|
|
Board |
|
|
2,000 |
|
Committee |
|
|
1,500 |
|
We also reimburse our directors for expenses they incur to attend our Board and Committee
meetings.
Each director who is not an employee of Safeguard receives an initial option grant to purchase
50,000 shares of Safeguard common stock upon initial election to the Board. Each non-employee
director also receives an annual service option grant to purchase 25,000 shares. Directors
options have an eight-year term. Initial option grants vest as to 25% of the underlying shares on
each of the first four anniversaries of the grant date. Annual service option grants fully vest 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. Upon appointment to the Board, on July 26, 2006, Mr.
McClelland received an initial option grant to purchase 50,000 shares at an exercise price of
$1.9801 per share, and on October 25, 2006, Mr. Cody received an initial option grant to purchase
50,000 shares at an exercise price of $2.265 per share. On December 18, 2006, each non-employee
director (including Messrs. Cody and McClelland) received an annual service option grant to
purchase 25,000 shares at an exercise price of $2.30 per share.
Safeguard maintains a Group Deferred Stock Unit Program for Directors (Directors DSU Program)
which allows each director, at his or her election, to receive deferred stock units in lieu of
retainer and meeting fees paid to directors (Directors Fees). The deferral election applies to
Directors Fees to be received for the calendar year following the year in which the election is
made and remains in effect for each subsequent year unless the director elects otherwise by the end
of the calendar year prior to the year in which the services are rendered. The number of deferred
stock units awarded is determined by dividing the Directors Fees by the fair market value of
Safeguards stock on the date on which the director would have otherwise received the Directors
Fees. Each director also receives a number of matching share units, based on the same fair market
value calculation, equal to 25% of the Directors Fees deferred. A director is always fully vested
in Directors Fees deferred; the matching share units vest fully on the first anniversary of the
date the matching share units are credited to the directors account. Each deferred stock unit
entitles the director to receive one share of Safeguard common stock on or about the first
anniversary of the date upon which the director leaves the Safeguard Board. A director also may
elect to receive the stock in annual installments over a period of up to five years after leaving
the Board.
13
Director Compensation 2006. The following table provides information on compensation earned
during 2006 by each non-employee director who served on our Board at any time during 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or |
|
Stock |
|
Option |
|
|
|
|
Paid in Cash |
|
Awards |
|
Awards |
|
Total |
Name |
|
($)(1) |
|
($)(2)(3)(5) |
|
($)(3)(4)(5) |
|
($)(6) |
|
Michael J. Cody (7) |
|
|
10,756 |
|
|
|
|
|
|
|
4,266 |
|
|
|
15,022 |
|
Julie A. Dobson |
|
|
79,000 |
|
|
|
|
|
|
|
43,318 |
|
|
|
122,318 |
|
Robert E. Keith, Jr. |
|
|
68,500 |
|
|
|
23,882 |
|
|
|
64,389 |
|
|
|
156,771 |
|
Andrew E. Lietz |
|
|
72,500 |
|
|
|
|
|
|
|
80,207 |
|
|
|
152,707 |
|
George MacKenzie |
|
|
74,500 |
|
|
|
|
|
|
|
43,318 |
|
|
|
117,818 |
|
George D. McClelland (7) |
|
|
29,622 |
|
|
|
|
|
|
|
7,812 |
|
|
|
37,434 |
|
Jack L. Messman |
|
|
57,500 |
|
|
|
216 |
|
|
|
64,389 |
|
|
|
122,105 |
|
John W. Poduska, Sr. |
|
|
64,500 |
|
|
|
|
|
|
|
64,389 |
|
|
|
128,889 |
|
Robert Ripp (7) |
|
|
15,442 |
|
|
|
|
|
|
|
54,430 |
|
|
|
69,872 |
|
John J. Roberts |
|
|
70,000 |
|
|
|
2,932 |
|
|
|
43,318 |
|
|
|
116,250 |
|
|
|
|
(1) |
|
Mr. Keith deferred payment of all Directors Fees he earned for services provided during
2006. Mr. Keith received deferred stock units in lieu of Directors Fees that he deferred and
matching deferred stock units equal to 25% of the Directors Fees that he deferred. Directors
who defer fees and receive deferred stock units are essentially investing in common stock
equivalents that are initially valued based on the current market value of our common stock on
the date of issuance. As a result, the value of their deferred stock units will fluctuate
with the market value of our common stock. |
|
(2) |
|
The amounts in this column represent the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended December 31, 2006 for deferred stock units
awarded in and prior to 2006 in accordance with Statement of Financial Accounting Standards
No. 123 (revised), which we refer to as FAS 123(R), excluding the effect of estimated
forfeitures. The fair value of the matching deferred stock units is determined by multiplying
the number of shares underlying the matching deferred stock units by the average of the high
and low trading prices of Safeguards common stock, as reported on the New York Stock Exchange
consolidated tape, on the grant date. The grant date fair values of the matching deferred
stock units issued to Messrs. Keith and Roberts in 2006 were $16,251 and $1,095, respectively.
The matching deferred stock units issued to Mr. Roberts related to fees deferred by Mr.
Roberts that were earned during the fourth quarter of 2005. These were the only matching
deferred stock units issued to directors during 2006. For a discussion of valuation
assumptions, see footnote 2 to the Summary Compensation Table under the heading Executive
Compensation. |
|
(3) |
|
At December 31, 2006, each of the directors named below held the number of outstanding
deferred stock units and stock options to purchase the number of shares of our common stock
shown next to his or her name: |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Stock |
|
|
Name |
|
Units |
|
Stock Options |
|
Michael J. Cody |
|
|
|
|
|
|
75,000 |
|
Julie A. Dobson |
|
|
|
|
|
|
97,500 |
|
Robert E. Keith, Jr. |
|
|
122,546 |
|
|
|
213,500 |
|
Andrew E. Lietz |
|
|
|
|
|
|
130,000 |
|
George MacKenzie |
|
|
|
|
|
|
127,000 |
|
George D. McClelland |
|
|
|
|
|
|
75,000 |
|
Jack L. Messman |
|
|
20,654 |
|
|
|
138,500 |
|
John W. Poduska, Sr. |
|
|
|
|
|
|
138,500 |
|
Robert Ripp |
|
|
|
|
|
|
105,000 |
|
John J. Roberts |
|
|
26,779 |
|
|
|
130,000 |
|
|
|
|
(4) |
|
The amounts in this column represent the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended December 31, 2006 for stock options awarded in
and prior to 2006 in accordance with FAS 123(R), excluding the effect of estimated
forfeitures. The fair value of the stock options is estimated at the date of grant using the
Black-Scholes option-pricing model. The grant date fair values of the stock options issued
during 2006 were as follows: Mr. Cody $100,550; Mr. McClelland $94,900; and each of Ms.
Dobson and Messrs. Keith, Lietz, MacKenzie, Messman, Poduska and Roberts $33,860. For a
discussion of valuation assumptions, see footnote 2 to the Summary Compensation Table under
the heading Executive Compensation. |
14
|
|
|
(5) |
|
Our equity compensation plans provide for the accelerated vesting of deferred stock units and
stock options granted to non-employee directors upon retirement from the Board on or after
their 65th birthday. Messrs. Keith, Lietz, Messman and Poduska are currently
eligible for accelerated vesting if they retire. In accordance with FAS 123(R), the amounts
shown for these four directors include the entire expense for all grants issued to them during
2006. The amount shown for Mr. Ripp includes the remaining unamortized expense relating to
his options, which was accelerated when he retired from the Board in May 2006. |
|
(6) |
|
Directors also are eligible for reimbursement of expenses incurred in connection with
attendance at Board and Committee meetings. These amounts are not included in the table
above. |
|
(7) |
|
Mr. Cody joined our Board in October 2006, Mr. McClelland joined our Board in July 2006, and
Mr. Ripp retired from our Board in May 2006. |
Stock Ownership Guidelines. Our stock ownership guidelines provide that within five years of
December 31, 2005 (for directors who served on our Board at that date) or within five years of
joining our Board, each non-employee director should attain an equity position in our common stock
equal to two times the annual cash Board retainer. Shares counted toward these guidelines include:
|
|
shares beneficially owned by the director; |
|
|
|
vested shares of restricted stock; |
|
|
|
vested deferred stock units that have been credited to the director; and |
|
|
|
shares underlying vested, in-the-money options. |
At March 31, 2007, each non-employee director, other than directors newly appointed to our Board in
2006, had achieved this ownership goal.
15
RATIFICATION OF APPOINTMENT OF KPMG LLP
Item 2 on Proxy Card
The Audit Committee, composed entirely of independent, non-employee members of the Board,
approved the reappointment of KPMG LLP (KPMG) as Safeguards independent registered public
accounting firm for the fiscal year ending December 31, 2007, and the Board has recommended that
our shareholders ratify the appointment. If the shareholders do not ratify the appointment, the
Audit Committee may reconsider its recommendation and may retain KPMG or another accounting firm
without resubmitting the matter to shareholders. Even if the shareholders ratify the appointment
of KPMG, the Audit Committee may select another firm if it determines such selection to be in the
best interest of Safeguard and its shareholders.
Services provided to Safeguard and its subsidiaries by KPMG in fiscal 2006 and fiscal 2005 are
described below under Independent Registered Public Accounting FirmAudit Fees. Representatives
of KPMG are expected to attend the annual meeting. They will have an opportunity to make a
statement if they desire to do so and will be available to respond to appropriate questions.
The Board recommends a vote FOR the proposal to ratify the appointment of KPMG as Safeguards
independent registered public accounting firm for the year ending December 31, 2007. Ratification
requires the affirmative vote of a majority of those shares present in person or represented by
proxy and entitled to vote on the proposal.
Independent Registered Public Accounting FirmAudit Fees
The following table presents fees for professional services rendered by KPMG for the audit of
Safeguards consolidated financial statements for fiscal 2006 and fiscal 2005 and fees billed for
audit-related services, tax services and all other services rendered by KPMG for fiscal 2006 and
fiscal 2005. This table includes fees billed to Safeguards consolidated subsidiaries for services
rendered by KPMG.
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
Audit Fees (1) |
|
$ |
1,999,974 |
|
|
$ |
2,055,374 |
|
Audit-Related Fees
(2) |
|
|
99,786 |
|
|
|
32,200 |
|
Tax Fees (3) |
|
|
379,119 |
|
|
|
255,825 |
|
All Other Fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,478,879 |
|
|
$ |
2,343,399 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit fees include the aggregate fees for professional services rendered in connection with
the audit of the consolidated financial statements included in our Annual Report on Form
10-K, the review of the condensed consolidated financial statements included in our Quarterly
Reports on Form 10-Q, consents and other services related to SEC and other regulatory
filings, and KPMGs assurance services provided in connection with the assessment and testing
of internal controls over financial reporting pursuant to Section 404 of the Sarbanes Oxley
Act of 2002. |
|
(2) |
|
Audit-related fees include the aggregate fees billed by KPMG principally for audits of
financial statements of certain employee benefit plans, statutory audits of non-U.S.
subsidiaries and officer expense review. |
|
(3) |
|
Tax fees include the aggregate fees billed by KPMG for tax consultation and tax compliance
services. |
The Audit Committee pre-approves each service to be performed by KPMG at its regularly
scheduled meetings. For any service that may require pre-approval between regularly scheduled
meetings, the Audit Committee has delegated to the Chair of the Audit Committee the authority to
pre-approve services not prohibited by law to be performed by Safeguards independent registered
public accounting firm and associated fees up to a maximum for non-audit services of $100,000, and
the Chair communicates such pre-approvals to the Audit Committee at its next regularly scheduled
meeting.
16
AUDIT COMMITTEE REPORT
The Audit Committee assists the Board of Directors in fulfilling its responsibilities for
general oversight of the integrity of Safeguards financial statements, Safeguards
compliance with legal and regulatory requirements, the performance of Safeguards internal
audit function, review and approval of related party transactions, and the performance,
qualifications and independence of Safeguards independent registered public accounting
firm.
Safeguards management has primary responsibility for the financial reporting process, including
the system of internal controls, and for preparation of Safeguards consolidated financial
statements in accordance with accounting principles generally accepted in the United States.
Safeguards independent registered public accounting firm is responsible for auditing those
financial statements and issuing opinions as to the conformity of Safeguards audited financial
statements with accounting principles generally accepted in the United States, the effectiveness of
Safeguards internal control over financial reporting and managements assessment of the internal
control over financial reporting.
Throughout the year, the Audit Committee regularly meets with management of Safeguard, Safeguards
independent registered public accounting firm and the internal auditor. The Audit Committee also
regularly meets with these groups in closed sessions. In this context, the Audit Committee hereby
reports as follows:
|
1. |
|
The Audit Committee reviewed Safeguards audited consolidated financial statements for
fiscal year 2006 and met and held discussions with management and KPMG regarding the
audited financial statements. |
|
|
2. |
|
The Audit Committee discussed with KPMG the matters required to be discussed by
Statement on Auditing Standards No. 61 (AICPA, Professional Standards, Vol. 1, AU Section
380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. |
|
|
3. |
|
The Audit Committee received the written disclosures and the letter from KPMG required
by Independence Standards Board Standard No. 1 (Independence Standards Board Standard No.
1, Independence Discussions with Audit Committees) and discussed with KPMG its
independence. |
|
|
4. |
|
Based on the review and discussion referred to in paragraphs 1 through 3 above, the
Audit Committee recommended to the Board that the audited consolidated financial statements
be included in Safeguards Annual Report on Form 10-K for fiscal year 2006. |
Members of the Audit Committee:
George MacKenzie, Chair Julie A. Dobson George D. McClelland John J. Roberts
17
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
The following table shows the number of shares of Safeguard common stock beneficially owned
(unless otherwise indicated) as of March 31, 2007, by our directors, our executive officers named
in the Summary Compensation Table in this proxy statement, and our directors and executive officers
as a group. On March 31, 2007, there were no known beneficial owners of greater than 5% of our
common stock outstanding. For purposes of reporting total beneficial ownership, shares that may be
acquired within 60 days of March 31, 2007 through the exercise of Safeguard stock options are
included. On March 31, 2007, there were 120,771,313 shares of common stock outstanding and
3,698,804 shares underlying stock options held by current executive officers and directors that
were exercisable on or before May 30, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
Outstanding |
|
|
|
|
|
Beneficially |
|
|
|
|
|
|
Shares |
|
Options |
|
Owned Assuming |
|
Percent of |
|
Other Stock-Based |
|
|
Beneficially |
|
Exercisable |
|
Exercise of |
|
Outstanding |
|
Holdings (2) |
Name |
|
Owned |
|
Within 60 Days |
|
Options |
|
Shares (1) |
|
Vested |
|
Unvested |
|
Peter J. Boni |
|
|
190,000 |
|
|
|
1,129,556 |
|
|
|
1,319,556 |
|
|
|
1.1 |
% |
|
|
|
|
|
|
|
|
Michael J. Cody |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
|
|
Julie A. Dobson |
|
|
40,500 |
|
|
|
72,500 |
|
|
|
113,000 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
Robert E. Keith, Jr. |
|
|
153,366 |
|
|
|
188,500 |
|
|
|
341,866 |
|
|
|
* |
|
|
|
125,392 |
|
|
|
5,824 |
|
Andrew E. Lietz |
|
|
45,000 |
|
|
|
105,000 |
|
|
|
150,000 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
George MacKenzie |
|
|
3,000 |
|
|
|
102,000 |
|
|
|
105,000 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
George D. McClelland |
|
|
10,000 |
|
|
|
|
|
|
|
10,000 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
Jack L. Messman |
|
|
38,000 |
|
|
|
113.500 |
|
|
|
151,500 |
|
|
|
* |
|
|
|
20,654 |
|
|
|
|
|
John W. Poduska, Sr. |
|
|
12,500 |
|
|
|
113,500 |
|
|
|
126,000 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
John J. Roberts |
|
|
|
|
|
|
105,000 |
|
|
|
105,000 |
|
|
|
* |
|
|
|
26,779 |
|
|
|
|
|
James A. Datin |
|
|
60,072 |
|
|
|
596,725 |
|
|
|
656,797 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
John A. Loftus |
|
|
61,827 |
|
|
|
746,247 |
|
|
|
808,074 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
Steven J. Feder |
|
|
16,959 |
|
|
|
366,276 |
|
|
|
383,235 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
Stephen T. Zarrilli |
|
|
|
|
|
|
60,000 |
|
|
|
60,000 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
Christopher J. Davis |
|
|
177,426 |
|
|
|
789,514 |
|
|
|
966,940 |
|
|
|
* |
|
|
|
255,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive officers
and directors as a
group (14 persons)
(3) |
|
|
631,224 |
|
|
|
3,698,804 |
|
|
|
4,330,028 |
|
|
|
3.5 |
% |
|
|
172,825 |
|
|
|
5,824 |
|
|
|
|
(1) |
|
Each director and named executive officer has the sole power to vote and to dispose of the
shares (other than shares held jointly with an individuals spouse) except 900 shares held by
Mr. Keiths spouse, as to which Mr. Keith disclaims beneficial ownership, and 3,125 shares
held by Mr. Feders spouse. An * indicates ownership of less than 1% of the outstanding
shares. |
|
(2) |
|
The shares in this column represent deferred stock units that have been credited to each
individual. The deferred stock units, which may not be voted or transferred, are payable, on
a one-for-one basis, in shares of Safeguard common stock following an individuals termination
of employment with Safeguard or service on the Safeguard Board. See Corporate Governance and
Board MattersBoard Compensation. |
|
(3) |
|
Excludes Mr. Davis, who resigned in December 2006. |
As of March 31, 2007, the executive officers and directors of Safeguard owned less than 1% of
the shares of common stock outstanding of Clarient, Inc., a publicly-traded partner company of
Safeguard. The executive officers and directors of Safeguard did not own shares of any other
Safeguard subsidiary.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive
officers and greater than 10% holders of our common stock to file with the SEC reports of ownership
of our securities and changes in ownership of our securities. Based solely on our review of the
copies of reports we have received and upon written representations from the reporting persons that
no Form 5 reports were required to be filed by those persons, Safeguard believes there were no late
filings by our directors and executive officers during 2006. There were no known holders of
greater than 10% of our common stock during 2006.
18
COMPENSATION DISCUSSION AND ANALYSIS
Overview
The Compensation Committee (for purposes of this analysis, the Committee) is responsible for
establishing our compensation philosophy and determining the compensation provided to the
individuals who serve as our Chief Executive Officer, Chief Financial Officer and the other
individuals included in the Summary Compensation Table (referred to as the named executive
officers) and our other executive officers. The Committee reviews our compensation philosophy
each year to assure that its principles and objectives are aligned to our overall business strategy
and aligned with the interests of shareholders in increasing the value of our common stock over the
long-term.
Compensation Philosophy and Objectives
Our overall goals in compensating our executive officers are to:
|
|
attract, retain and motivate outstanding
executives who can thrive in a
competitive environment of continuous
change and whose experience and skills
can be leveraged across our partner
companies to facilitate their growth and
success; |
|
|
|
promote and reward the achievement of
short-term and long-term objectives that
our Board and management believe will
lead to long-term growth in shareholder
value; and |
|
|
|
encourage meaningful equity ownership and
the alignment of executive and
shareholder interests as an incentive to
increase shareholder value. |
We design our executive compensation program to provide an appropriate mix of fixed and variable,
at-risk pay; balance short-term performance with long-term shareholder value; and encourage
executive recruitment and retention. There is no pre-established target for the allocation between
either cash and non-cash or short-term and long-term compensation. Rather, the Committee reviews
information provided by management as well as its independent compensation consultant, Hewitt
Associates, to determine the appropriate level and mix of incentive compensation. During 2006, we
used the following principal elements of compensation to meet our overall goals:
|
|
|
|
|
Base Pay
|
|
à
|
|
fixed compensation based on competitive market practice that rewards an
executives core competencies relative to his skills, experience and
contributions to us and our partner companies; |
|
|
|
|
|
Annual Cash Incentives
|
|
à
|
|
variable, at-risk, performance-based incentive compensation that rewards an
executives contributions towards the achievement of short-term corporate
and individual performance objectives; |
|
|
|
|
|
Long-Term Incentives
|
|
à
|
|
equity awards that encourage executive ownership of our stock and promote
continued employment with us during the long-term vesting period, thereby
aligning executives interests with those of our shareholders to increase
shareholder value through improvement in our stock price over the long-term; |
|
|
|
|
|
Health and Welfare Benefits
|
|
à
|
|
benefits that are part of our broad-based employee benefit programs,
including medical, dental, life insurance, and disability plans, our 401(k)
plan and our nonqualified deferred compensation plan; |
|
|
|
|
|
Perquisites
|
|
à
|
|
limited additional benefits that are available to our executive officers; and |
|
|
|
|
|
Severance and
Change-in-Control
Arrangements
|
|
à
|
|
severance benefits that are payable in the event of a termination of
employment without cause or for good reason, either involuntarily or in
connection with a change-in-control, provide retention incentives for our
executive officers as well as continuity of executive management in the
event of an actual or threatened change in control. |
19
Role of Executive Team in Compensation Decisions
The Committee makes all compensation decisions with respect to the named executive officers.
In determining the compensation of the Chief Executive Officer, the Committee considers the results
of the performance assessment conducted each year by the Nominating & Corporate Governance
Committee, which includes the Chief Executive Officers self-assessment of achievement of his
individual objectives and the assessment of his performance by each Board member. The Committee
also discusses its compensation views with the Chief Executive Officer directly. The Chief
Executive Officer is not present when the Committee makes its final determinations concerning his
compensation.
The Chief Executive Officer assesses each other named executive officers performance and makes a
recommendation to the Committee concerning achievement of individual objectives. The Chief
Executive Officer also makes recommendations to the Committee concerning salary adjustments and
equity and non-equity grants to the named executive officers and other employees. In determining
the compensation of other executive officers, the Committee considers the Chief Executive Officers
assessment and recommendations. However, the Committee exercises its own discretion in determining
whether to accept or modify the Chief Executive Officers recommendations. These individuals are
not present when the Committee and the Chief Executive Officer review their performance, nor when
the Committee makes its final determinations concerning their compensation.
Setting Executive Compensation
In setting compensation of our executive officers, the Committee believes that a significant
portion of each officers total compensation should be variable or at-risk. These variable
components are not guaranteed to provide compensation they require achievement of strategic and
operating corporate objectives, as well as individual performance objectives, to earn annual cash
incentives and stock price appreciation for executive officers to realize value from stock options
and other equity incentive awards granted as long-term incentives.
Management provides the Committee with comprehensive tally sheets on an annual basis to facilitate
the Committees review of the total compensation of our executive officers. The tally sheets
include the annual cash compensation (salary and cash incentive target opportunity), the value of
benefits and other perquisites provided to our executive officers, and the potential severance
payments should an executive officers employment terminate under various scenarios, as well as the
outstanding equity awards held by each executive officer. The Committee has found these tally
sheets to be useful in its evaluation of the total compensation program for our executive officers.
The Committee from time to time has reviewed a comparison of each element of total compensation
against a group of specific companies and industries against which we believe we compete for talent
and for shareholder investment, including the private equity industry, as well as by reference to
industry-specific compensation surveys. However, we recognize that our business strategy, industry
focus and diverse array of partner companies make comparisons to other companies difficult. Also,
based on the inherent challenge in matching companies, job positions and skill sets, we have viewed
some of these comparisons as more appropriate for some positions than others. In recognition of
the historical nature of the benchmarking data and the challenge in matching not only companies but
also job positions and skill sets, we have looked to this data for general guidance rather than
rigid adherence to specific percentages.
We historically have targeted base pay levels generally at or near the 50th percentile
of base salaries for executives having comparable duties and responsibilities to our executive
officers. Total compensation, including both annual cash incentives and long-term incentives, was
targeted historically to fall at or near the 75th percentile of total compensation for
executives having substantially comparable duties and responsibilities to our executive officers,
assuming achievement of Safeguards business objectives. During the review of our compensation
philosophy for 2006, the Committee determined that we should continue to review compensation in
comparison to the historically targeted 50th and 75th percentiles for base
pay and total compensation, respectively, but that the overall objectives of our compensation
philosophy would be better achieved through flexibility in determining pay levels to address
20
differences in duties and responsibilities, individual experience, skill levels and achievements,
rather than rigid adherence to specific target percentiles.
In the prior year, the Committee approved employment agreements with Messrs. Boni and Datin that
established the terms of their respective compensation based on employment negotiations. The
Committee also approved increases in Mr. Loftus base salary and variable cash incentive target
under our management incentive plan in connection with his promotion in September 2005. See
Executive CompensationSummary Compensation Table 2006 for additional information regarding
employment agreements. Due to the limited number of changes in executive compensation contemplated
for 2006 (with most of the named executive officers, including our Chief Executive Officer, having
assumed their positions during 2005), the Committee did not ask Hewitt Associates to prepare a
compensation report comparing our executive compensation to other companies or surveys during the
latter part of 2005. Instead, the Committee reviewed management-gathered industry survey data on
compensation trends, including published compensation information from Internet Capital Group,
Inc., a holding company that acquires and builds Internet software companies, as well as several
private equity and industry-specific compensation surveys, and discussed with our Chief Executive
Officer his recommendations for compensation changes for 2006. During the second half of 2006,
Hewitt Associates prepared a report to provide the Committee with comparative data for reference in
its review and establishment of 2007 compensation levels and the Committees consideration of 2006
equity awards, which the Committee generally awards in December.
2006 Compensation Program
Base Pay. Base pay is established initially on the basis of several factors, including experience,
individual achievements, the level of responsibility assumed, and the level of skills and
experience that can be leveraged across our partner companies to facilitate their growth and
success. Each of our named executive officers has an employment agreement with us which sets his
initial base salary. Base salaries typically are reviewed annually by the Committee, as well as in
connection with a promotion or other changes in job responsibilities. In reviewing the appropriate
level of base pay for our executive officers for 2006, the Committee considered the compensation
comparisons, as described above, and the recommendations of the Chief Executive Officer. Based on
its review, in December 2005, the Committee left unchanged, or modified only slightly, base salary
levels for our named executive officers for 2006 as shown below:
|
|
|
|
|
|
|
|
|
|
Name |
|
2005 Base Salary |
|
2006 Base Salary |
|
Peter J. Boni |
|
$ |
600,000 |
|
|
$ |
600,000 |
|
James A. Datin |
|
$ |
375,000 |
|
|
$ |
375,000 |
|
John A. Loftus |
|
$ |
250,000 |
|
|
$ |
275,000 |
|
Steven J. Feder |
|
$ |
300,000 |
|
|
$ |
325,000 |
|
Christopher J. Davis |
|
$ |
375,000 |
|
|
$ |
375,000 |
|
In December 2006, Christopher Davis, our former Executive Vice President and Chief
Administrative & Financial Officer, resigned, and we entered into a consulting agreement with
Stephen Zarrilli pursuant to which he commenced service as Acting Senior Vice President, Acting
Chief Administrative Officer and Acting Chief Financial Officer. Mr. Zarrilli is a managing
partner of Penn Valley Group, a middle-market management advisory and private equity firm which he
co-founded in October 2004. Mr. Zarrilli will serve as our Acting Senior Vice President, Acting
Chief Administrative Officer and Acting Chief Financial Officer until a permanent replacement has
been identified and for up to a 30-day transition period following his successors commencement of
employment. Mr. Zarrilli receives a retainer of $2,500 per day, subject to a maximum monthly
retainer of $50,000 and a maximum retainer of $50,000 during the 30-day transition period following
his successors commencement of employment. During 2006, we paid Mr. Zarrilli $15,000 for his
services.
Cash Incentives. In February 2006, the Committee adopted the 2006 Management Incentive Plan (the
2006 MIP) to provide variable cash incentives to our executive officers and other employees based
on 2006 performance. The 2006 MIP program, which emphasized teamwork among members of management
to achieve key business objectives, was based:
|
|
80% on the achievement of corporate objectives; and |
|
|
|
20% on the achievement of individual objectives. |
21
We believe that short-term compensation (such as base salary and annual cash incentive awards)
should not be based on the short-term performance of our stock, whether favorable or unfavorable,
but rather on our executives management of the company towards achieving our goal of long-term
growth in shareholder value. The price of our stock should, in the long term, reflect our
performance, and the performance of our stock will directly affect the value of stock options and
other equity incentive awards provided to our executive officers as part of our compensation
program.
Therefore, to align the 2006 MIP with our 2006 business strategy, the Committee established the
following corporate objectives and weightings (representing 80% (or 80 points) of the total 2006
MIP target award):
|
|
|
Weighting |
|
Corporate Objectives |
|
35%
|
|
Achievement of specified levels of deployment of capital in acquisitions of new partner companies and/or
funding to support acquisitions or other similar strategic opportunities for existing partner companies,
with achievement being measured based on a formula for the amount of capital deployed and the number of
transactions completed; |
|
|
|
20%
|
|
Achievement of capital generation through asset sales, with achievement being measured based on a
formula for the amount of capital generated and the number of transactions completed; |
|
|
|
20%
|
|
Achievement of specified levels of revenues or profitability for partner companies reported as
consolidated in our financial statements and certain other minority holdings, with each measure selected
to reflect the respective partner companys stage of growth, and achievement being measured by the
Committee based on its subjective evaluation of achievement of partner company performance; and |
|
|
|
25%
|
|
Overall performance of Safeguard and our corporate staff, based on the Committees subjective evaluation. |
The Committee established targets for these objectives by taking into consideration the
anticipated level of difficulty in achieving our 2006 business plan and the Committees judgment of
acceptable performance. The award criteria were designed to provide management with a meaningful
opportunity to meet the criteria for a target award, but not guarantee achievement. The formula
was intended to provide increased economic incentives for exceeding the target award and some
economic recognition, albeit reduced, for near achievement of the target.
At the beginning of 2006, each executive officer also prepared written individual objectives that
were reviewed and approved by the Chief Executive Officer. The Chief Executive Officers
individual objectives were reviewed and approved by the Committee. The individual objectives
varied depending upon each participants roles and responsibilities.
Based on the factors set forth above, the Committee set the following variable cash target awards
for 2006 for our named executive officers (in accordance with the terms of their respective
agreements):
|
|
|
|
|
|
|
|
Target Variable |
Name |
|
Cash Incentive |
|
Peter J. Boni |
|
$ |
600,000 |
|
James A. Datin |
|
$ |
375,000 |
|
John A. Loftus |
|
$ |
275,000 |
|
Steven J. Feder |
|
$ |
175,000 |
|
Christopher J. Davis |
|
$ |
325,000 |
|
Mr. Zarrilli was not an eligible participant in our 2006 MIP.
There was no mandatory minimum award payable under the 2006 MIP. The actual cash incentive award
paid to a participant was determined based upon the level of achievement of the quantitative and
qualitative corporate and individual performance objectives and was measured in the aggregate on a
sliding scale basis (e.g., achievement of objectives totaling 50 points would result in payment of
50% of the target award, achievement of objectives totaling 100 points would result in payment of
100% of the target award and achievement of objectives totaling 150 points would result in payment
of 150% of the target award). Payments under the 2006 MIP were limited to 150% of each
individuals target award.
22
In February 2007, the Committee reviewed our performance against the quantitative and qualitative
corporate objectives set forth above and confirmed the following payout levels:
|
|
|
|
|
|
|
|
|
|
|
|
|
Target |
|
Payout |
|
|
|
|
Incentive |
|
Level |
|
|
Corporate Objectives |
|
(in points) |
|
(in points) |
|
Factors Affecting Determination |
|
Capital Deployment
|
|
|
28 |
|
|
|
26 |
|
|
Deployment of approximately $57 million of capital in a total of seven
transactions $46.5 million relating to acquisitions of new partner
companies (Advantedge Healthcare Solutions, Authentium, NuPathe, Portico
Systems and Rubicor Medical); the balance related to supporting acquisitions
by existing partner companies. |
|
|
|
|
|
|
|
|
|
|
|
Capital Generation
|
|
|
16 |
|
|
|
24 |
|
|
Generation of approximately $125 million of capital through asset sales,
primarily reflecting the proceeds of the sale of our holdings in Mantas, Inc. |
|
|
|
|
|
|
|
|
|
|
|
Partner Company
Performance
|
|
|
16 |
|
|
|
14 |
|
|
Achievement by most of our partner companies of specified levels of revenue
or profitability. |
|
|
|
|
|
|
|
|
|
|
|
Overall Corporate
Performance
|
|
|
20 |
|
|
|
20 |
|
|
Development and execution of strategic positioning, reigniting deal sourcing
efforts, augmenting the organization internally and externally, facilitating
growth of partner companies and management of core corporate functions, such
as financial reporting and other compliance responsibilities. In addition to
the transactions and financial performance described above, the Committee
specifically noted the following significant 2006 achievements in its review: |
|
|
|
achievement of key business milestones by our partner companies; |
|
|
|
|
key executive and staff recruiting successes; |
|
|
|
|
increased Safeguard analyst coverage and institutional share
ownership; |
|
|
|
|
increased investor conferences and meetings; |
|
|
|
|
successful roll-out of new corporate branding; |
|
|
|
|
creation of Advisory Boards for Technology and Life Sciences and recruitment of high-quality industry experts; and |
|
|
|
|
repurchase of a portion of our convertible debentures. |
At the end of the year, each executive officer also completed a self-assessment of his
achievement of individual objectives (representing 20% (or 20 points) of the total 2006 MIP target
award). The Chief Executive Officers self-assessment was a component of the annual performance
review conducted by the Nominating & Corporate Governance Committee. Based on the Committees
review with the Nominating & Corporate Governance Committee of its assessment of the performance of
the Chief Executive Officer, including his achievement of individual objectives, and the
Committees discussion with the Chief Executive Officer on his review of each other named executive
officers achievement of each officers specific individual objectives, the Committee approved the
following achievement levels for individual objectives:
|
|
|
|
|
|
|
|
Payout Level |
Name |
|
(in points) |
|
Peter J. Boni |
|
|
30 |
|
|
James A. Datin |
|
|
18 |
|
|
John A. Loftus |
|
|
28 |
|
|
Steven J. Feder |
|
|
22 |
|
|
Based on the Committees review of the 2006 MIP and the actual achievements of Safeguard and
our individual executive officers, in February 2007 the Committee approved the following 2006 MIP
payments to the named executive officers (which amounts are presented in the Summary Compensation
Table under Non-Equity Incentive Plan Compensation):
|
|
|
|
|
|
|
|
|
|
|
|
Payout Level |
|
Approved Variable |
Name |
|
(in points) |
|
Cash Incentive |
|
Peter J. Boni |
|
|
114 |
|
|
$ |
684,000 |
|
|
James A. Datin |
|
|
102 |
|
|
$ |
382,500 |
|
John A. Loftus |
|
|
112 |
|
|
$ |
308,000 |
| |
Steven J. Feder |
|
|
106 |
|
|
$ |
185,500 |
| |
23
Under the terms of his agreements with us (see Severance and Change-in-Control Arrangements
below), Mr. Davis will receive $338,000 (representing an amount equal to his 2006 MIP payment) as
part of his severance package.
In addition to the 2006 MIP, the Committee has the authority to award individual discretionary
bonus awards to executive officers. These awards typically relate to specific achievements during
the year and may be made in cash or equity awards. Recipients of discretionary bonuses, and the
amount of awards, are designated by the Committee, which may receive recommendations from the Chief
Executive Officer. In recognition of specific achievements during 2006, the Committee approved a
$275,000 special cash bonus and a restricted stock award (see Long-Term Incentives) to Mr. Loftus
for his exceptional performance in connection with our sale of Mantas in October 2006 and a $25,000
special cash bonus to Mr. Feder for his exceptional performance on certain projects during 2006.
These special performance bonuses are presented in the Summary Compensation Table under Bonus.
Long-Term Incentives. Our executive compensation programs include a significant equity component
in the form of stock options, restricted stock awards and such other equity awards as the Committee
may determine to be appropriate from time to time.
As noted above, we compete for executive talent with private equity firms, and we review
comparative information regarding private equity industry compensation practices. In the private
equity industry, executives (referred to as managing partners) have compensation programs that
include a share of the private equity funds profits (referred to as carry). We do not provide
our executives with a compensation program tied directly to gains from our partner company
holdings. Instead, we utilize our equity compensation plans as an alternative to approximate the
economic benefit that would be provided by a carry. The equity awards made in 2005 to our
executive officers were based on our assessment of the carry which would typically be provided to
our executives in positions of comparable responsibility at private equity firms. For example,
managing partners of a private equity firm would typically expect a carry ranging from about 1% to
5% of the amount of invested capital under management by the firm. We use stock options equal to
about 1% to 5% of our outstanding shares of common stock to provide a different, but somewhat
comparable, long-term economic benefit to our executive officers. The grants are intended by the
Committee to be competitive with those to comparable executives in the comparison data reviewed by
the Committee (as adjusted for the executive officers experience).
Since stock options are granted with an exercise price equal to the average of the high and low
trading prices of our common stock on the date of grant, the options will have value only if the
market price increases after that date and, in the case of options that vest upon achievement of a
specified improvement in market capitalization, only if the specified improvement is achieved. We
refer to grants of options that vest upon achievement of specified levels of improvement in market
capitalization as market-based vesting options.
Most of the options
granted during 2005 to
our Chief Executive
Officer, named executive
officers and other
employees were made
using the market-based
vesting model, in
addition to traditional
time-based vesting
options. The
market-based vesting
model conditions vesting
on our common stocks
achievement of specified
improvement in market
capitalization for a
specified number of
consecutive trading
days. The Committee
believes the use of
market-based vesting
helps to align the
long-term interests of
Safeguard management and
our shareholders since
our executive officers
will not benefit unless
the Safeguard stock
price achieves and
sustains a targeted
improvement for 20
consecutive trading
days. The market-based
vesting options granted
in 2005 vest
incrementally based upon
improvement in our
market capitalization
over the base market
capitalization of
$172,943,623. The base
market capitalization
was determined by
multiplying the average
per share closing price
for the 20 consecutive
trading days immediately
preceding August 3, 2005
(the date of issuance of
our press release
announcing the
appointment of Mr. Boni
as Safeguards President
and Chief Executive
Officer) by the total of
our outstanding shares
of common stock plus all
shares underlying
outstanding stock
options as of August 16,
2005 (the date Mr.
Bonis employment
commenced). The
market-based vesting
options granted to the
other executive officers
during 2005 used the
same market-based
vesting model as Mr.
Bonis equity award.
The following table
shows the market
capitalization levels at
which portions of the
shares underlying the
options will vest:
24
|
|
|
|
|
Percentage of Shares Underlying |
|
Achievement of Improvement in |
|
Per Share |
Options That Vest |
|
Market Capitalization |
|
Price Equivalent |
|
First 10% |
|
$100 million incremental over base |
|
$2.0359 |
Next 20% |
|
additional $150 million incremental |
|
$3.1548 |
Next 30% |
|
additional $200 million incremental |
|
$4.6466 |
Final 40% |
|
additional $250 million incremental |
|
$6.5114 |
In addition to vesting upon the achievement of a specified level of market capitalization
improvement, the shares underlying the options may vest on a pro rata basis every six months if the
market capitalization is between the levels set forth in the table. For example, if 10% of the
shares underlying the options have vested and, six months later, an additional $75 million
improvement was achieved over 20 consecutive trading days during the six-month period, an
additional 10% of the shares underlying the options will vest.
During 2006, the Committee reviewed the equity awards made to the named executive officers (other
than Mr. Zarrilli who joined in December 2006). The Committee determined that additional grants
were not necessary to achieve our compensation objectives, other than the restricted stock award
for 42,827 shares of our common stock which was awarded to Mr. Loftus in recognition of his
exceptional performance in connection with our sale of Mantas in October 2006 as described above.
We also granted options to Mr. Zarrilli to acquire up to 150,000 shares of our common stock under
the terms of his consulting agreement with us.
We expect to continue to use stock options and other equity awards as part of our compensation
program, including market-based vesting grants. We expect to make appropriate adjustments in the
base market capitalization, per share price equivalents and vesting schedules used for additional
market-based vesting option grants as our outstanding shares increase and based on our stock price
level.
Stock Option Granting Process. The Committee is responsible for equity grants under our equity
compensation plans. The Committee approves and grants all equity awards to our executive officers,
employees and advisory board members, with the exception of those grants for which the Committee
has delegated authority to the Chief Executive Officer which are described below. Equity grants to
directors are generally approved by the Board; however, in those cases where the Board has approved
the size and form of recurring annual service grants, the Committee may set the date of those
grants.
Generally, equity awards are made at the Committees December meeting, although specific grants may
be made at other regularly scheduled meetings or at special meetings convened to approve
compensation arrangements for newly hired executive officers or for executive officers who have
been promoted or are otherwise subject to changes in responsibilities.
The Committee has delegated to our Chief Executive Officer the authority to make equity grants
between regularly scheduled Committee meetings (primarily to new hires and advisory board members),
provided that the aggregate number of shares granted may not exceed 300,000 shares, the maximum
number of shares allocated to any one employee may not exceed 125,000 shares and the aggregate
number of shares allocated to any one advisory board member may not exceed 5,000 shares. The Chief
Executive Officer reports to the Compensation Committee at each of its regularly scheduled meetings
any grants that he has approved, following which the aggregate number of shares available is reset
to 300,000 shares. The Chief Executive Officer is not authorized to make equity grants to
executive officers or directors.
All grants approved by the Committee and Chief Executive Officer are made on the date the award is
approved except that grants to newly hired employees or newly retained consultants or advisors may
be effective on the later of the date the award is approved or the date of commencement of
employment or provision of services. The exercise price for all stock options granted under our
equity compensation plans is the average of the high and low trading prices of our common stock as
reported on the New York Stock Exchange consolidated tape on the date of grant, which we believe
reflects common practice.
25
Nonqualified Deferred Compensation. Our named executive officers may defer compensation under our
qualified 401(k) plan (subject to the limits imposed by the Internal Revenue Code) but are not
eligible to receive matching company contributions under that plan. Our named executive officers
are eligible to participate in our nonqualified deferred compensation plan, which is an unfunded
plan that does not allow deferral of compensation but does allow participants to obtain credits, in
the form of Safeguard contributions that are allocated to accounts for the benefit of an executive
officer. We offer this nonqualified deferred compensation plan to selected employees in light of
their inability to obtain a company matching contribution under our qualified 401(k) plan.
Additional information regarding this plan can be found below under Executive
CompensationNonqualified Deferred Compensation 2006.
Perquisites (fringes). Our executives are entitled to few benefits that are not otherwise
available to all of our employees. We do not provide a defined benefit pension arrangement,
post-retirement health coverage or similar benefits for our executive officers. The additional
perquisites we provided to our executive officers in fiscal 2006 consisted of the following:
|
|
$10,000 annual car allowance; |
|
|
|
$8,000 non-accountable annual expense allowance; |
|
|
|
universal life insurance coverage ranging from $750,000 to $1,000,000; |
|
|
|
up to $5,000 reimbursement annually for medical, vision or dental expenses not covered under our other benefit plans;
and |
|
|
|
relocation expenses for certain newly hired executive officers. |
These perquisites are provided to enable us to attract top talent and represent a relatively modest
portion of each named executive officers compensation. These perquisites are taken into
consideration by the Committee in determining total compensation payable to the named executive
officers and are reviewed annually by the Committee.
Severance and Change-in-Control Arrangements
Messrs. Boni, Datin, Loftus and Feder each have agreements with Safeguard which provide certain
benefits upon termination of employment without cause or for good reason (as defined in the
agreements) either involuntarily or in connection with a change in control.
Upon the occurrence of a termination event, each executive will be entitled to those benefits
outlined in his agreement with us, which may include a multiple of his current base salary, payment
of his pro rata bonus for the year of termination or a multiple of the greater of his target bonus
for the year of termination or the average of his actual bonuses for the last three years,
accelerated vesting of equity awards and extension of the post-termination exercise period within
which some or all of the equity awards held by the executive may be exercised, coverage under our
medical, health and life insurance plans for a designated period of time, and outplacement services
or office space. See Potential Payments upon Termination or Change in Control in this proxy
statement for a summary of the specific benefits that each executive will receive upon the
occurrence of a termination event.
Unlike single trigger change-in-control arrangements that pay out immediately upon a change in
control, most of the benefits to which our named executive officers are entitled under their
agreements require a double trigger, namely a change in control coupled with a loss of employment
or a substantial change in job duties. We believe a double trigger provides retention incentives
as well as continuity of management in the event of an actual or threatened change in control.
However, the acceleration of the vesting of the stock options that were granted to Mr. Boni when he
joined Safeguard in 2005 require only a single trigger to be effective that is, only a change
in control. Since equity represents a significant portion of Mr. Bonis total compensation, we
believe that this single trigger can be an important retention device during change in control
discussions.
On December 14, 2006, we announced that Christopher J. Davis, our former Executive Vice President
and Chief Administrative & Financial Officer, resigned effective December 15, 2006, to pursue other
interests. We and Mr. Davis agreed that Mr. Davis resignation would be treated as having been for good reason, as
defined in his
26
agreement with us, and Mr. Davis will receive the severance benefits described in
that agreement consisting of the following:
|
|
a payment equal to his 2006 MIP payout for the year of termination of $338,000, plus two times his base salary of
$375,000 plus two times his annual target bonus of $325,000, for an aggregate payment of $1,738,000; |
|
|
|
coverage under our medical, health and life insurance plans for 24 months; |
|
|
|
$15,000 for outplacement services; and |
|
|
|
full vesting of all time-vested stock options (which will remain exercisable for 36 months) and deferred stock units
that had not otherwise vested, and a 12-month period within which to exercise vested market-based stock options. |
Deductibility of Executive Compensation
The Committee considers the potential impact of Section 162(m) of the Internal Revenue Code in
structuring executive compensation. Section 162(m) disallows a tax deduction for any publicly-held
corporation for certain executive compensation exceeding $1,000,000 per person in any taxable year
unless it is performance based within the meaning of Section 162(m). We believe the stock
options awarded under our equity compensation plans are in compliance with the provisions of
Section 162(m). The portion of cash compensation paid to Mr. Boni for 2006 in excess of $1,000,000
was not performance-based compensation within the meaning of Section 162(m) and, therefore, was
not deductible by Safeguard. We believe that providing an appropriate level of cash compensation
and maintaining flexibility in determining compensation may be more important than preserving this
tax deduction. Therefore, the Committee does not currently plan to take any action to qualify any
of our cash incentive compensation plans under Section 162(m).
Stock Ownership Guidelines
Our Board established stock ownership guidelines, effective December 31, 2005, that are designed to
closely align the long-term interests of our executive officers with the long-term interests of our
shareholders. The guidelines provide that each executive officer should attain an equity position
in our common stock equal to two times annual base salary. These guidelines should be achieved
within five years and will be assessed annually. Shares counted toward these guidelines include:
|
|
shares beneficially owned by the executive officer; |
|
|
|
vested shares of restricted stock; |
|
|
|
vested deferred stock units that have been credited to the executive officer; and |
|
|
|
shares underlying vested, in-the-money options. |
Our named executive officers have either met the guidelines or, based on information they have
provided to us, are diligently working toward meeting the guidelines within the prescribed time
frame.
Prohibition on Speculation in Safeguard Stock
Our company policy on securities trading by company personnel prohibits our named executive
officers and other employees from engaging in activities with regard to our stock that can be
considered as speculative, including but not limited to, short selling (profiting if the market
price of our securities decreases); buying or selling publicly traded options (e.g., a put option,
which is an option or right to sell stock at a specific price prior to a specified date, or a call
option, which is an option or right to buy stock at a specific price prior to a specified date);
and hedging or any other type of derivative arrangement that has a similar economic effect.
27
COMPENSATION COMMITTEE REPORT
We have reviewed and discussed the foregoing Compensation Discussion and Analysis with
management. Based on our review and discussion with management, we have recommended to the Board
of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
Members of the Compensation Committee:
Julie A. Dobson, Chair Andrew E. Lietz John J. Roberts
28
EXECUTIVE COMPENSATION
Summary Compensation Table 2006
The table below is a summary of total compensation paid to or earned by our named executive
officers for the fiscal year ended December 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
Pension Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
Nonqualified |
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Option |
|
Compensa- |
|
Deferred |
|
Compen- |
|
|
Name and |
|
|
|
|
|
Salary |
|
Bonus |
|
Awards |
|
Awards |
|
tion |
|
Compensation |
|
sation |
|
Total |
Principal Position |
|
Year |
|
($) |
|
($)(1) |
|
($)(2) |
|
($)(2) |
|
($)(3) |
|
Earnings ($)(4) |
|
($)(5) |
|
($) |
|
Peter J. Boni
President and Chief
Executive Officer |
|
|
2006 |
|
|
|
600,000 |
|
|
|
|
|
|
|
|
|
|
|
1,185,249 |
|
|
|
684,000 |
|
|
|
|
|
|
|
248,935 |
|
|
|
2,718,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen Zarrilli (6)
Acting Senior Vice
President, Acting Chief
Administrative Officer
and Acting Chief
Financial Officer |
|
|
2006 |
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
|
25,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James A. Datin
Executive Vice President
and Managing Director,
Life Sciences |
|
|
2006 |
|
|
|
375,000 |
|
|
|
|
|
|
|
|
|
|
|
713,813 |
|
|
|
382,500 |
|
|
|
|
|
|
|
44,989 |
|
|
|
1,516,302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John A. Loftus
Executive Vice President
and Managing Director,
Technology |
|
|
2006 |
|
|
|
275,000 |
|
|
|
275,000 |
|
|
|
1,461 |
|
|
|
745,102 |
|
|
|
308,000 |
|
|
|
7,684 |
|
|
|
43,279 |
|
|
|
1,655,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven J. Feder
Senior Vice President
and General Counsel
|
|
|
2006 |
|
|
|
325,000 |
|
|
|
25,000 |
|
|
|
|
|
|
|
300,142 |
|
|
|
185,500 |
|
|
|
|
|
|
|
45,783 |
|
|
|
881,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher J. Davis (7)
Former Executive Vice
President and Chief
Administrative &
Financial Officer |
|
|
2006 |
|
|
|
375,000 |
|
|
|
|
|
|
|
194,997 |
|
|
|
534,967 |
|
|
|
|
|
|
|
7,684 |
|
|
|
1,797,863 |
|
|
|
2,910,511 |
|
|
|
|
(1) |
|
The amounts in this column represent special cash bonuses paid to Messrs. Loftus and Feder
for exceptional performance on certain projects during 2006. Amounts earned by Messrs. Loftus
and Feder under our 2006 Management Incentive Plan are reported under Non-Equity Incentive
Plan Compensation. |
|
(2) |
|
The amounts in these columns include amounts from awards granted in and prior to 2006 and
reflect the dollar amount recognized for financial statement reporting purposes for the fiscal
year ended December 31, 2006, in accordance with FAS 123(R), excluding the effect of estimated
forfeitures. FAS 123(R) requires us to estimate forfeitures when awards are granted and
reduce estimated compensation expense accordingly. Except for forfeitures that actually
occurred during 2006, the amounts in this table assume that none of the awards will be
forfeited. In December 2006, Mr. Davis forfeited 500,486 stock options that were subject to
market-based vesting upon his termination of employment. The fair value of each stock award
is determined by multiplying the number of shares subject to each award by the average of the
high and low trading prices of Safeguards common stock, as reported on the New York Stock
Exchange consolidated tape, on the grant date. The fair value of each stock option is
estimated on the date of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions for the years indicated: |
29
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|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2003 |
|
|
2002 |
|
|
|
|
Service-Based Awards: |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
Dividend yield |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
Expected volatility |
|
|
69 |
% |
|
|
84 |
% |
|
|
86 |
% |
|
|
95 |
% |
|
|
93 |
% |
Average expected |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
option life |
|
5 years |
|
|
5 years |
|
|
5 years |
|
|
5 years |
|
|
5 years |
|
|
Risk-free interest rate |
|
|
4.7 |
% |
|
|
4.4 |
% |
|
|
3.6 |
% |
|
|
3.0 |
% |
|
|
3.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market-Based Awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend yield |
|
|
0 |
% |
|
|
0 |
% |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Expected volatility |
|
|
62 |
% |
|
|
67 |
% |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Average expected |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
option life |
|
5 - 7 years |
|
|
5 - 7 years |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Risk-free interest rate |
|
|
4.8 |
% |
|
|
4.3 |
% |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
For information regarding the grant date fair value of awards granted in 2006, see the
Grants of Plan-Based Awards2006 below. |
|
(3) |
|
The amounts reported in this column represent payments made in March 2007 for awards earned
under our 2006 Management Incentive Plan, which is described in detail under Compensation
Discussion and Analysis2006 Compensation Program. |
|
(4) |
|
The amounts reported in this column represent the earnings on account balances under our
nonqualified deferred compensation plan for 2006; these amounts also are reported below under
Nonqualified Deferred Compensation 2006. |
|
(5) |
|
For 2006, All Other Compensation included the following amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perquisites |
|
Nonqualified |
|
|
|
|
|
Group Life |
|
|
|
|
and Personal |
|
Deferred |
|
Life Insurance |
|
Insurance |
|
Severance |
Name |
|
Benefits |
|
Compensation Plan |
|
Premiums |
|
Imputed Income |
|
Benefits |
|
Peter J. Boni |
|
$ |
198,362 |
|
|
$ |
16,500 |
|
|
$ |
30,509 |
|
|
$ |
3,564 |
|
|
|
|
|
James A. Datin |
|
|
21,169 |
|
|
|
16,500 |
|
|
|
6,930 |
|
|
|
390 |
|
|
|
|
|
John A. Loftus |
|
|
20,342 |
|
|
|
16,500 |
|
|
|
6,032 |
|
|
|
405 |
|
|
|
|
|
Steven J. Feder |
|
|
23,000 |
|
|
|
16,500 |
|
|
|
5,953 |
|
|
|
330 |
|
|
|
|
|
Christopher J. Davis |
|
|
19,726 |
|
|
|
16,500 |
|
|
|
7,740 |
|
|
|
897 |
|
|
$ |
1,753,000 |
|
|
|
|
|
|
The perquisites and personal benefits for each named executive officer include a $10,000 car
allowance, an $8,000 non-accountable annual expense allowance, and reimbursement of up to $5,000
for medical, vision or dental expenses not covered under our other benefit plans. The amount
reported for Mr. Boni also includes $106,282 for reimbursement of relocation expenses and
$69,710 for reimbursement of tax obligations to respect to such relocation reimbursement. Our
executive officers also have occasional personal use of tickets to various sporting events at no
incremental cost to us. |
|
|
|
The severance benefits reported for Mr. Davis represent the following lump sum payments that he
is entitled to receive on or about July 1, 2007, under his agreements with us dated August 17,
2004 and December 14, 2006: $1,400,000, representing two times his salary plus his target
variable cash incentive for 2006; $338,000, representing an amount equal to his 2006 MIP payout;
and $15,000 for outplacement fees. For further information, see Compensation Discussion and
AnalysisSeverance and Change-in-Control Arrangements. |
|
(6) |
|
Mr. Zarrilli commenced service in December 2006 under a consulting agreement with us that is
discussed above under Compensation Discussion and Analysis2006 Compensation Program. Mr.
Zarrilli will serve as our Acting Senior Vice President, Acting Chief Administrative Officer
and Acting Chief Financial Officer until a permanent replacement has been identified and for
up to a 30-day transition period following his successors commencement of employment. Mr.
Zarrilli is not covered under our health, welfare and other employee benefit plans (with the
exception of the stock option granted to him under his consulting agreement with us) and is
not entitled to any compensation upon his termination of service other than amounts earned
during his term of service under the terms of his consulting agreement with us. |
|
(7) |
|
Mr. Davis resigned in December 2006. |
Each of our named executive officers has an employment agreement with us that sets his initial
base salary and initial annual cash incentive target award. The initial base salary and initial
annual cash incentive target award for each named executive officer were as follows: Mr. Boni
($600,000 salary; $600,000 target award); Mr. Datin ($375,000 salary; $375,000 target award); Mr.
Loftus ($250,000 salary; $150,000 target award); and Mr. Feder ($300,000 salary; $150,000 target
award). Base salaries and annual cash incentive target awards, which are reviewed by the
Compensation Committee each year, currently exceed these contractual amounts. The primary focus of
these agreements is to provide our executive officers with severance benefits in the event of a
termination of employment involuntarily, for good reason or upon a change in control, as described
below under Potential Payments upon Termination or Change in Control. The components of
compensation reported in the Summary Compensation Table, including an explanation of the amount of
salary and cash incentive compensation in proportion to total compensation, are described in detail
under Compensation Discussion and Analysis.
30
Grants of Plan-Based Awards 2006
The following table shows non-equity incentive plan awards, stock awards and option awards granted
during 2006 to our named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
Awards: |
|
Exercise |
|
|
|
|
|
Grant Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Number of |
|
or Base |
|
|
|
|
|
Fair Value |
|
|
|
|
|
|
Estimated Possible Payouts Under |
|
Shares of |
|
Securities |
|
Price of |
|
Market |
|
of Stock |
|
|
|
|
|
|
Non-Equity Incentive Plan Awards (1) |
|
Stock or |
|
Underlying |
|
Option |
|
Price on |
|
and Option |
|
|
Grant |
|
Threshold |
|
Target |
|
Maximum |
|
Units |
|
Options |
|
Awards |
|
Grant Date |
|
Awards |
Name |
|
Date |
|
($) |
|
($) |
|
($) |
|
(#)(2) |
|
(#)(3) |
|
($/Sh) |
|
($/Sh)(4) |
|
($)(5) |
|
Peter J. Boni |
|
|
02/21/06 |
|
|
|
|
|
|
|
600,000 |
|
|
|
900,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen Zarrilli |
|
|
12/15/06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000 |
|
|
|
2.335 |
|
|
|
2.34 |
|
|
|
247,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James A. Datin |
|
|
02/21/06 |
|
|
|
|
|
|
|
375,000 |
|
|
|
562,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John A. Loftus |
|
|
02/21/06 |
|
|
|
|
|
|
|
275,000 |
|
|
|
412,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,827 |
|
|
|
|
|
|
|
|
|
|
|
2.34 |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven J. Feder |
|
|
02/21/06 |
|
|
|
|
|
|
|
175,000 |
|
|
|
262,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher J. Davis |
|
|
02/21/06 |
|
|
|
|
|
|
|
325,000 |
|
|
|
487,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These awards were made under the 2006 Management Incentive Plan. There is no mandatory
minimum award payable; the maximum award payable is 150% of the target amount. The amounts in
the table represent payouts that might have been achieved based on performance at target or
maximum performance levels. The amounts actually earned under this plan for 2006 have been
reported in the Summary Compensation Table under Non-Equity Incentive Plan Compensation.
For further information, see Compensation Discussion and Analysis2006 Compensation Program. |
|
(2) |
|
The stock award reported in this column vests in three equal annual installments commencing
on the first anniversary of the grant date. Upon Mr. Loftus death, permanent disability,
retirement on or after his 65th birthday, or termination of employment within 18
months following a change in control, the stock award will fully vest. |
|
(3) |
|
Mr. Zarrillis option vests as follows: |
|
|
|
as to 30,000 underlying shares on March 27, 2007; |
|
|
|
|
as to 15,000 underlying shares on April 1, 2007 and as to an additional 15,000
underlying shares on the first day of each calendar month thereafter; and |
|
|
|
|
upon the satisfactory completion of his services relating to the transition of his
duties and responsibilities to his successor, or upon his appointment as our Chief
Financial Officer (and the removal of the term Acting from his titles), as to all
remaining underlying shares that have not vested previously. |
|
|
|
|
|
Mr. Zarrilli will forfeit stock options that have not vested upon the termination of the
agreement. Vested stock options will remain exercisable until the earlier of December 15,
2014 and the third anniversary of his termination of services as our Acting Chief Financial
Officer or Chief Financial Officer. |
|
(4) |
|
The market price reported in this column is the closing price of Safeguard common stock as
reported on the New York Stock Exchange consolidated tape on the grant date. Under the terms
of Safeguards equity compensation plans, the exercise price of an option is determined based
upon the average of the high and low trading prices of Safeguards common stock, as reported
on the New York Stock Exchange consolidated tape, on the grant date. |
|
(5) |
|
The amounts in this column represent the grant date fair value of the awards computed in
accordance with FAS 123(R). For a discussion of the valuation assumptions, see footnote 2 to
the Summary Compensation Table. |
31
Outstanding Equity Awards at Fiscal Year-End 2006
The following table shows the equity awards we have made to our named executive officers that were
outstanding at December 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Number of |
|
Number of |
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
Securities |
|
Securities |
|
Securities |
|
|
|
|
|
|
|
|
|
Shares or |
|
Market Value |
|
|
Underlying |
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
|
Units of |
|
of Shares or |
|
|
Unexercised |
|
Unexercised |
|
Unexercised |
|
Option |
|
|
|
|
|
Stock That |
|
Units of Stock |
|
|
Options |
|
Options |
|
Unearned |
|
Exercise |
|
Option |
|
Have Not |
|
That Have |
|
|
(#)(1) |
|
(#)(1)(2) |
|
Options |
|
Price |
|
Expiration |
|
Vested |
|
Not Vested |
Name |
|
Exercisable |
|
Unexercisable |
|
(#)(2)(3) |
|
($) |
|
Date |
|
(#)(2)(4) |
|
($)(5) |
|
Peter J. Boni |
|
|
333,333 |
|
|
|
666,667 |
|
|
|
|
|
|
|
1.2750 |
|
|
|
08/16/13 |
|
|
|
|
|
|
|
|
|
|
|
|
597,674 |
(3) |
|
|
|
|
|
|
2,402,326 |
|
|
|
1.2750 |
|
|
|
08/16/13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen Zarrilli |
|
|
|
|
|
|
150,000 |
(6) |
|
|
|
|
|
|
2.3350 |
|
|
|
12/15/14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James A. Datin |
|
|
156,250 |
|
|
|
343,750 |
|
|
|
|
|
|
|
1.5600 |
|
|
|
09/07/13 |
|
|
|
|
|
|
|
|
|
|
|
|
298,836 |
(3) |
|
|
|
|
|
|
1,201,164 |
|
|
|
1.5600 |
|
|
|
09/07/13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John A. Loftus |
|
|
115,000 |
|
|
|
|
|
|
|
|
|
|
|
2.1700 |
|
|
|
05/13/10 |
|
|
|
42,827 |
|
|
|
103,641 |
|
|
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
|
1.6850 |
|
|
|
12/18/10 |
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
25,000 |
|
|
|
|
|
|
|
3.5600 |
|
|
|
12/19/11 |
|
|
|
|
|
|
|
|
|
|
|
|
112,500 |
|
|
|
112,500 |
|
|
|
|
|
|
|
2.1250 |
|
|
|
12/15/12 |
|
|
|
|
|
|
|
|
|
|
|
|
298,836 |
(3) |
|
|
|
|
|
|
1,201,164 |
|
|
|
1.5550 |
|
|
|
09/13/13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven J. Feder |
|
|
156,250 |
|
|
|
143,750 |
|
|
|
|
|
|
|
1.7800 |
|
|
|
11/17/12 |
|
|
|
|
|
|
|
|
|
|
|
|
58,333 |
|
|
|
141,667 |
|
|
|
|
|
|
|
1.3800 |
|
|
|
10/25/13 |
|
|
|
|
|
|
|
|
|
|
|
|
99,610 |
(3) |
|
|
|
|
|
|
400,390 |
|
|
|
1.3800 |
|
|
|
10/25/13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher J. Davis (7) |
|
|
60,000 |
|
|
|
|
|
|
|
|
|
|
|
5.2813 |
|
|
|
12/21/08 |
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
|
|
|
|
|
|
|
|
4.7850 |
|
|
|
06/19/09 |
|
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
|
3.5050 |
|
|
|
08/28/09 |
|
|
|
|
|
|
|
|
|
|
|
|
130,000 |
|
|
|
|
|
|
|
|
|
|
|
1.2500 |
|
|
|
12/31/09 |
|
|
|
|
|
|
|
|
|
|
|
|
250,000 |
|
|
|
|
|
|
|
|
|
|
|
2.1250 |
|
|
|
12/31/09 |
|
|
|
|
|
|
|
|
|
|
|
|
39,844 |
(3) |
|
|
|
|
|
|
|
|
|
|
1.3800 |
|
|
|
12/31/07 |
|
|
|
|
|
|
|
|
|
|
|
|
84,670 |
(3) |
|
|
|
|
|
|
|
|
|
|
1.9100 |
|
|
|
12/31/07 |
|
|
|
|
|
|
|
|
|
|
|
|
125,000 |
|
|
|
|
|
|
|
|
|
|
|
1.9100 |
|
|
|
12/31/09 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Unless otherwise identified by footnote, options vest as to 25% of the underlying shares on
the first anniversary of the grant date and in 36 equal installments on the same date of each
month thereafter. The vesting dates for each option are listed in the table below by
expiration date: |
|
|
|
|
|
|
|
|
|
|
Expiration Date |
|
Initial Vest Date |
|
Subsequent Monthly Vest Dates |
|
05/13/10 |
|
|
05/13/03 |
|
|
06/13/03 through 05/13/06 |
08/06/10 |
|
|
08/06/03 |
|
|
09/06/03 through 08/06/06 |
12/18/10 |
|
|
12/18/03 |
|
|
01/18/04 through 12/18/06 |
12/19/11 |
|
|
12/19/04 |
|
|
01/19/05 through 12/19/07 |
11/17/12 |
|
|
11/17/05 |
|
|
12/17/05 through 11/17/08 |
12/15/12 |
|
|
12/15/05 |
|
|
01/15/06 through 12/15/08 |
08/16/13 |
|
|
08/16/06 |
|
|
09/16/06 through 08/16/09 |
09/07/13 |
|
|
09/07/06 |
|
|
10/07/06 through 09/07/09 |
09/13/13 |
|
|
09/13/06 |
|
|
10/13/06 through 09/13/09 |
10/25/13 |
|
|
10/25/06 |
|
|
11/25/06 through 10/25/09 |
12/16/13 |
|
|
12/16/06 |
|
|
01/06/07 through 12/15/09 |
(2) |
|
Vesting of certain equity awards may be accelerated upon death, permanent disability,
retirement on or after 65th birthday, termination of employment for good reason or
without cause, or termination of employment in connection with a change in control, and, in
the case of Mr. Bonis equity awards, upon the occurrence of a change in control. Further
information regarding the equity awards that are subject to acceleration of vesting in each
circumstance can be found below under Potential Payments upon Termination or Change in
Control. |
32
(3) |
|
These options are market-based vesting options and vest only upon the achievement of
improvement in Safeguards market capitalization above the base market capitalization of
$172,943,623. The base market capitalization was determined by multiplying the average per
share closing price for the 20 consecutive trading days immediately preceding August 3, 2005
(the date of issuance of our press release announcing the appointment of Mr. Boni as
Safeguards President and Chief Executive Officer) by the total of our outstanding shares of
common stock plus all shares underlying outstanding stock options as of August 16, 2005 (the
date Mr. Bonis employment commenced). Achievement of market capitalization improvement is
measured based on the average daily closing price of Safeguard common stock as reported on the
New York Stock Exchange composite tape for 20 consecutive trading days. The following table
shows the market capitalization levels and per share price equivalents at which portions of
the shares underlying the options vest: |
|
|
|
|
|
|
|
|
|
|
Percentage of Shares Underlying Options that Vest |
|
Market Capitalization |
|
Per Share Price Equivalent |
|
10% |
|
$ |
272,943,623 |
|
|
$ |
2.0359 |
|
Additional 20% |
|
|
422,943,623 |
|
|
|
3.1548 |
|
Additional 30% |
|
|
622,943,623 |
|
|
|
4.6466 |
|
Remaining 40% |
|
|
872,943,623 |
|
|
|
6.5114 |
|
|
|
In addition to vesting upon the achievement of a specified level of market capitalization
improvement, the options may vest on a pro rata basis every six months following the grant date
if the market capitalization is between the levels of vesting in the above table. For example,
if options have vested as to 10% of the underlying shares and, at the next six-month anniversary
of a grant, an additional $75 million improvement was achieved over 20 consecutive trading days
during the six-month period, an additional 10% of the shares underlying the option will vest.
Options subject to market-based vesting that were vested at December 31, 2006 are included in
the exercisable options column in the above table. |
|
(4) |
|
Mr. Loftus stock award vests in three equal annual installments commencing on December 15,
2007. |
|
(5) |
|
Under SEC rules, the value is calculated based on the year-end closing stock price of $2.42
per share, as reported on the New York Stock Exchange consolidated tape, multiplied by the
number of shares that have not vested. |
|
(6) |
|
Mr. Zarrillis option vests as follows: |
|
|
|
as to 30,000 underlying shares on March 27, 2007; |
|
|
|
|
as to 15,000 underlying shares on April 1, 2007 and as to an additional 15,000
underlying shares on the first day of each calendar month thereafter; and |
|
|
|
|
upon the satisfactory completion of his services relating to the transition of his
duties and responsibilities to his successor, or upon his appointment as our Chief
Financial Officer (and the removal of the term Acting from his titles), as to all
remaining underlying shares that have not vested previously. |
|
|
Mr. Zarrilli will forfeit stock options that have not vested upon the termination of the
agreement. Vested stock options will remain exercisable until the earlier of December 15,
2014 and the third anniversary of his termination of services as our Acting Chief Financial
Officer or Chief Financial Officer. |
|
(7) |
|
Under the terms of Mr. Davis agreements with Safeguard, upon his separation from our
employment on December 31, 2006: |
|
|
|
he forfeited options to purchase 500,486 shares that were subject to market-based vesting; |
|
|
|
|
we accelerated the vesting of options to purchase 218,750 shares that were subject to time-based vesting; and |
|
|
|
|
we accelerated the vesting of 16,874 deferred stock units. |
|
|
Mr. Davis holds several limited partnership interests that were awarded to him under the terms
of our long-term incentive plan prior to 2002 which are not included in the table above. We
established these partnerships to hold all or a portion of our interests in partner companies
acquired by us during a particular year. Limited partners are eligible to receive a
distribution of shares (or cash equivalent) of a particular partner company based upon their
partnership interest upon the occurrence of certain liquidity events, but only if we receive a
return equal to at least two times the cost of our holding in that partner company. Mr. Davis
has not received any distributions related to his partnership interests, and we presently cannot
estimate whether he will receive any distributions in the future. As part of his agreements
with us, Mr. Davis will continue to hold those limited partnership interests following his
separation from employment with us. |
33
Option Exercises and Stock Vested 2006
The following table shows restricted stock awards and deferred stock units that vested during 2006.
There were no stock options exercised by the named executive officers during 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
|
Number of |
|
|
|
|
|
Number of |
|
|
|
|
Shares |
|
|
|
|
|
Shares |
|
|
|
|
Acquired |
|
Value Realized |
|
Acquired |
|
Value Realized |
|
|
on Exercise |
|
on Exercise |
|
on Vesting |
|
on Vesting |
Name |
|
(#) |
|
($) |
|
(#)(1) |
|
($)(2) |
|
Peter J. Boni |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen Zarrilli |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James A. Datin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John A. Loftus |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven J. Feder |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher J. Davis |
|
|
|
|
|
|
|
|
|
|
62,495 |
|
|
|
139,200 |
|
|
|
|
(1) |
|
Under the terms of the deferred stock units issued to Mr. Davis on January 12, 2004, and
April 5, 2004, he has deferred receipt of 59,374 of the shares until January 2, 2008. |
|
(2) |
|
The value realized on vesting is determined by multiplying the number of shares vested by the
average of the high and low trading prices of Safeguards common stock, as reported on the New
York Stock Exchange consolidated tape, on each vesting date. |
34
Nonqualified Deferred Compensation 2006
In 2003, Safeguard adopted the Executive Deferred Compensation Plan, which is a nonqualified,
unfunded plan that provides for a designated group of employees to obtain credits, in the form of
Safeguard contributions that are allocated to accounts for the benefit of each participant.
Participants may not defer compensation under the plan.
Contributions by Safeguard are discretionary and may vary from year to year. For 2006, we credited
each participants account with an amount equal to 4% of up to $220,000 of the participants 2006
salary and bonus (which amount was fully vested) and 3.5% of up to $220,000 of the participants
2006 base salary (which amount vests 20% for each year of service in which the participant has
attained 1,000 hours of service).
Lump sum distributions of the vested balance in a named executive officers account are made
following termination of employment as follows:
|
|
amounts that were earned and vested at December 31, 2004, are distributed within 30 business days following
termination; and |
|
|
the remaining amount is distributed six months following termination. |
A committee appointed by Safeguards Board selects the funds or indices that are used for purposes
of calculating the earnings that are credited to each participants account based on a notional
investment in the selected funds or indices. Since the plans inception, we have calculated
earnings based on the performance of the notional investment in the Principal Investors Fund, Inc.
Large-Cap S&P 500 Index Fund (PLFPX), which is one of the investment choices available to
participants in Safeguards 401(k) plan. The committee, in its discretion, may replace this fund
and add new funds.
The following table shows contributions and earnings for 2006 and account balances at December 31,
2006. There were no withdrawals or distributions during 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registrant |
|
|
|
|
|
|
|
|
Contributions in Last |
|
Aggregate Earnings |
|
Aggregate Withdrawals/ |
|
Aggregate Balance |
|
|
Fiscal Year |
|
in Last Fiscal Year |
|
Distributions |
|
at Last Fiscal Year End |
Name |
|
($)(1) |
|
($)(1) |
|
($) |
|
($)(2)(3) |
|
Peter J. Boni |
|
|
16,500 |
|
|
|
|
|
|
|
|
|
|
|
16,500 |
|
Stephen Zarrilli |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James A. Datin |
|
|
16,500 |
|
|
|
|
|
|
|
|
|
|
|
16,500 |
|
John A. Loftus |
|
|
16,500 |
|
|
|
7,684 |
|
|
|
|
|
|
|
66,856 |
|
Steven J. Feder |
|
|
16,500 |
|
|
|
|
|
|
|
|
|
|
|
16,500 |
|
Christopher J. Davis |
|
|
16,500 |
|
|
|
7,684 |
|
|
|
|
|
|
|
66,856 |
|
|
|
|
(1) |
|
Contributions are included in the Summary Compensation Table under All Other Compensation.
Earnings in the last fiscal year are included in the Summary Compensation Table under Change
in Pension Value and Nonqualified Deferred Compensation Earnings. |
|
(2) |
|
The balance in each named executive officers account consists of contributions credited by
us and notional accrued gains or losses. In prior years, the amounts credited by us under
this plan for the benefit of executive officers were reported in our proxy statement as
compensation in the Summary Compensation Table. |
|
(3) |
|
At December 31, 2006, Messrs. Loftus and Davis were fully vested, and Messrs. Boni, Datin and
Feder had vested account balances of $10,340, $10,340 and $11,880, respectively. |
35
Potential Payments upon Termination or Change in Control
Messrs. Boni, Datin, Loftus and Feder each have agreements with us which provide certain benefits
upon termination of employment without cause or for good reason, either involuntarily or in
connection with a change in control. Under these agreements, the following definitions apply:
|
|
|
|
|
Cause
|
|
à
|
|
violation of any of our written policies; appropriation of a material
business opportunity of our company; misappropriation of company
assets; conviction of a felony or any other crime with respect to which
imprisonment is a possible punishment; or breach of any material term
of the executives employment agreement or any other agreement with, or
duty owed to, us or any of our partner companies. |
|
|
|
|
|
Good Reason
|
|
à
|
|
a material diminution, without the executives consent, in the nature
or status of the executives position, title, reporting relationship,
duties, responsibilities or authority; a reduction of the executives
base salary or target bonus opportunity; a material breach by us of the
executives agreement; the relocation of our principal office by more
than 30 miles; or an executives assignment, without his consent, to be
based anywhere other than our principal office. |
|
|
|
|
|
Change in Control
|
|
à
|
|
A change in control generally occurs when: |
|
|
|
|
|
|
|
|
|
a person becomes the beneficial owner of securities having 50%
or more of the combined voting power of our securities; |
|
|
|
|
|
|
|
|
|
less than a majority of our Board consists of continuing
directors (which means a director who either is a member of the Board
as of the effective date of the change in control or is nominated or
appointed to serve as a director by a majority of the then continuing
directors); |
|
|
|
|
|
|
|
|
|
we are subject to a merger or other business combination
transaction as a result of which holders of a majority of our equity
securities do not own a majority of the equity securities of the
surviving company; |
|
|
|
|
|
|
|
|
|
we sell all or substantially all of our assets or are
liquidated. |
Mr. Zarrilli is not covered under our health, welfare and other employee benefit plans and is not
entitled to any compensation upon his termination of service other than amounts earned during his
term of service under the terms of his consulting agreement with us.
Payments Made upon Involuntary Termination of Employment without Cause or for Good Reason
Messrs. Boni, Datin, Loftus and Feder will receive the following benefits upon involuntary
termination of employment without cause or for good reason:
|
|
Messrs. Boni and Datin: |
|
o |
|
a lump sum payment equal to 12 months of the executives then current base salary and
the greater of the executives target bonus (not less than 100% of current base salary) for
the year of termination or the average of the executives actual bonuses for the last three
completed fiscal years; |
|
|
o |
|
all vested stock options will remain exercisable for 12 months; and |
|
|
o |
|
12 months continued coverage under our medical, health and life insurance plans. |
|
|
Messrs. Loftus and Feder: |
|
o |
|
a lump sum payment equal to the executives prorated bonus for the year of termination
and 1.5 times the executives then current base salary; |
|
|
o |
|
all time-vested stock options will fully vest and remain exercisable for 36 months and
vested market-based stock options will remain exercisable for 12 months; |
|
|
o |
|
12 months continued coverage under our medical, health and life insurance plans; and |
|
|
o |
|
up to $20,000 for outplacement services or office space. |
36
Payments Made upon a Change in Control or Involuntary Termination of Employment without Cause or
for Good Reason in Connection with a Change in Control
Upon a change in control, the stock options held by Mr. Boni that have not otherwise vested will
become fully vested. Our named executive officers will not be entitled to any other payments or
benefits (except those that are provided on a non-discriminatory basis to our employees generally
upon termination of employment) unless the change in control is coupled with a loss of employment
or a substantial change in job duties as described below.
Upon involuntary termination of employment without cause or for good reason within six months
before or 12 months following a change in control (for Messrs. Boni and Datin) or within 18 months
following a change in control (for Messrs. Loftus and Feder), Messrs. Boni, Datin, Loftus and Feder
will receive the following benefits:
|
|
Messrs. Boni and Datin: |
|
o |
|
a lump sum payment equal to a multiple of the executives then current base salary and
a multiple of the greater of the executives target bonus (not less than 100% of current
base salary) for the year of termination or the average of the executives actual bonuses
for the last three completed fiscal years (the multiple is three times for Mr. Boni and two
times for Mr. Datin); |
|
|
o |
|
all stock options that have not otherwise vested will fully vest and will remain
exercisable for three years for Mr. Boni and two years for Mr. Datin; and |
|
|
o |
|
continued coverage under our medical, health and life insurance plans for three years
for Mr. Boni and two years for Mr. Datin. |
|
|
Messrs. Loftus and Feder: |
|
o |
|
a lump sum payment equal to the executives prorated bonus for the year of termination
and 1.5 times the executives then current base salary; |
|
|
o |
|
all time-vested stock options will fully vest and remain exercisable for 36 months, all
market-based stock options that have not otherwise vested will vest and remain exercisable
for 24 months and restricted stock awards held by Mr. Loftus will fully vest; |
|
|
o |
|
12 months continued coverage under our medical, health and life insurance plans; and |
|
|
o |
|
up to $20,000 for outplacement services or office space. |
Other Payments Made upon Termination of Employment
Regardless of the manner in which a named executive officers employment terminates, he also
generally will receive payments and benefits that are provided on a non-discriminatory basis to our
employees upon termination of employment, including the following:
|
|
amounts earned during his term of employment; |
|
|
accrued unused vacation pay; |
|
|
amounts contributed by us for the year of termination under our 401(k) plan or nonqualified deferred compensation plan
(if he has completed the required hours of service, if any, and is an employee on the date as of which we make a
contribution); |
|
|
distribution of accrued and vested plan balances under our 401(k) plan and nonqualified deferred compensation plan; |
|
|
reimbursement of eligible dental expenses for services incurred prior to termination; |
|
|
upon his death, disability or retirement on or after his 65th birthday, accelerated vesting of stock options subject to
time-based vesting, deferred stock units and restricted stock awards that have not otherwise vested and extension of
the post-termination exercise period for all stock options from 90 days to 12 months; and |
|
|
upon his death or disability, payment of benefits under our other broad-based employee benefit programs, including
short-term and long-term disability plans, life insurance program, accidental death and dismemberment plan and business
travel insurance plan, as applicable. |
37
The following table shows the potential incremental payments and benefits which the named executive
officers would be entitled to receive upon termination of employment under their respective
agreements. The amounts shown in the table are based on an assumed termination as of December 31,
2006, exclude payments and benefits that are provided on a non-discriminatory basis to our
employees generally upon termination of employment, and represent estimates of the incremental
amounts that would be paid to each executive upon his termination based on 2006 base salary, 2006
target incentive awards and our current premium costs for their medical and welfare benefits. With
the exception of Mr. Davis, whose employment was terminated as of December 31, 2006, the actual
amounts to be paid would depend on the time and circumstances of an executives separation from
Safeguard. For Mr. Davis, the amounts included in the Summary Compensation Table under All Other
Compensation and the amounts shown in the table below reflect the actual severance benefits that
he will receive (with the exception of the medical and welfare benefits which are estimated based
on our current premium costs).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical and |
|
Acceleration |
|
Total |
|
|
Salary and |
|
Welfare |
|
of Equity |
|
Termination |
|
|
Bonus |
|
Benefits |
|
Awards |
|
Benefits |
Current |
|
($) |
|
($) |
|
($)(1) |
|
($) |
|
Peter J. Boni |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination without cause or for good reason |
|
|
1,200,000 |
|
|
|
48,541 |
|
|
|
|
|
|
|
1,248,541 |
|
Change in control |
|
|
|
|
|
|
|
|
|
|
3,513,997 |
|
|
|
3,513,997 |
|
Change-in-control termination, involuntarily or for good reason |
|
|
3,600,000 |
|
|
|
145,623 |
|
|
|
3,513,997 |
|
|
|
7,259,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James A. Datin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination without cause or for good reason |
|
|
750,000 |
|
|
|
27,970 |
|
|
|
|
|
|
|
777,970 |
|
Change-in-control termination, involuntarily or for good reason |
|
|
1,500,000 |
|
|
|
55,940 |
|
|
|
1,328,626 |
|
|
|
2,884,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John A. Loftus |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination without cause or for good reason |
|
|
687,500 |
|
|
|
47,072 |
|
|
|
33,188 |
|
|
|
767,760 |
|
Change-in-control termination, involuntarily or for good reason |
|
|
687,500 |
|
|
|
47,072 |
|
|
|
1,175,836 |
|
|
|
1,910,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven J. Feder |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination without cause or for good reason |
|
|
662,500 |
|
|
|
46,831 |
|
|
|
239,334 |
|
|
|
948,665 |
|
Change-in-control termination, involuntarily or for good reason |
|
|
662,500 |
|
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46,831 |
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655,739 |
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1,365,070 |
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Former |
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Christopher J. Davis |
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Termination for good reason |
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1,753,000 |
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67,534 |
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125,523 |
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1,946,057 |
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(1) |
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The value in this column was calculated based on (i) the number of shares underlying stock
options for which vesting would have been accelerated as of December 31, 2006, multiplied by
the difference between our year-end closing stock price of $2.42 per share, as reported on the
New York Stock Exchange consolidated tape, and the exercise price of stock options for which
vesting would have been accelerated, plus (ii) the number of deferred stock units and
restricted stock awards for which vesting would have been accelerated as of December 31, 2006,
multiplied by our year-end closing stock price of $2.42 per share. |
Relationships and Related Transactions with Management and Others
As part of our business, we participate in the management of private equity funds. Robert E.
Keith, Jr., Chairman of our Board, is the President and Chief Executive Officer of TL Ventures, the
management company for TL Ventures III, TL Ventures IV, and TL Ventures V, and the Chairman of the
management companies for EnerTech Capital Partners and EnerTech Capital Partners II. Mr. Keith and
Safeguard have partnership interests in the TL Ventures and EnerTech Capital Partners funds, and
they participate in the profits of these private equity funds. TL Ventures receives management
fees from the TL Ventures funds and indirectly from EnerTech. In December 2005, Safeguard sold
substantially all of its interests in the eight TL Ventures and EnerTech Capital Partners funds for
approximately $24 million in cash with the buyers also assuming approximately $9 million of
Safeguards remaining unfunded capital commitments to these funds. The funds did not receive any
of the proceeds received by Safeguard, other than reimbursement of customary transaction expenses.
38
OTHER MATTERS
Expenses of Solicitation
Safeguard will pay the entire cost of preparing, assembling, printing, mailing and distributing
these proxy materials and soliciting votes. Upon request, we will reimburse brokerage houses and
other custodians, nominees and fiduciaries for forwarding proxy materials to our shareholders. If
you choose to access the proxy materials and/or vote over the Internet, you are responsible for
Internet access charges you may incur. If you choose to vote by telephone, you are responsible for
telephone charges you may incur. In addition to the mailing of these proxy materials, the
solicitation of proxies or votes may be made in person, by telephone or by electronic communication
by our directors, officers and employees, who will not receive any additional compensation for such
solicitation.
Procedures for Submitting Shareholder Proposals
Proposals for Inclusion in the Proxy Statement. Under Rule 14a-8 under the Securities Exchange Act
of 1934, as amended, shareholders may present proper proposals for inclusion in Safeguards proxy
statement for consideration at our next annual meeting of shareholders by submitting the proposals
to Safeguard in a timely manner. To be included in our proxy statement for the 2008 annual
meeting, shareholder proposals must be received by Safeguard no later than December 22, 2007. Such
proposals should be sent to:
Safeguard Scientifics, Inc.
Attention: Secretary
435 Devon Park Drive, Building 800
Wayne, PA 19087-1945
Proposals not included in the Proxy Statement. Our bylaws provide that only proposals included in
the notice of the meeting may be considered at the annual meeting.
Additional Information
Safeguards annual report to shareholders for the year ended December 31, 2006, including
consolidated financial statements and the related notes thereto and other information with respect
to Safeguard and its companies, is being mailed, together with this proxy statement, on or about
April 20, 2007 to shareholders of record as of the close of business on April 2, 2007.
General
Our Internet website address included in this proxy statement is provided for the convenience of
our shareholders. The information contained therein or connected thereto are not intended to be
incorporated into this proxy statement. All references to our website address are intended to be
inactive textual references only.
Safeguard is not aware of any other business to be presented at the annual meeting. If matters
other than those described in this proxy statement should properly arise at the annual meeting, the
proxies will use their discretion to vote on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
Deirdre Blackburn
Secretary
April 18, 2007
39
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UNLESS OTHERWISE INSTRUCTED, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
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Please Mark Here for Address Change or Comments
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SEE REVERSE SIDE |
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The Board of Directors recommends a vote FOR all nominees. |
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The Board of Directors recommends a vote FOR Proposal 2. |
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1.
ELECTION OF DIRECTORS- Nominees: 01 Peter J. Boni 02 Michael J. Cody 03 Julie A. Dobson
04 Robert E. Keith, Jr.
05 Andrew E. Lietz 06 George MacKenzie 07 George D. McClelland 08 Jack L. Messman
09 John W. Poduska, Sr.
10 John J. Roberts |
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FOR ALL NOMINESSo |
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WITHHELD FROM ALL NOMINEESo |
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2. To ratify the appointment of KPMG LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2007.
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FOR o |
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AGAINST o |
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ABSTAIN o |
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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 "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.
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SIGNATURE(S) OF SHAREHOLDER(S) |
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Date |
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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.
5 FOLD AND DETACH HERE 5
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING.
BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
Internet voting and telephone voting are available through 11:59 PM Eastern
Time
the day prior to the annual meeting date.
Your Internet or telephone vote authorizes the named proxy to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
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INTERNET
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TELEPHONE
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http://www.proxyvoting.com/sfe
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1-866-540-5760 |
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Use the internet to vote your proxy. Have your proxy card in hand when you access the web site.
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OR
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Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call.
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If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.
To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.
Choose
MLinkSM for fast, easy and secure 24/7 online access to your future proxy materials and more. Simply log on to Investor ServiceDirect® at www.melloninvestor.com/isd where step-by-step instructions will prompt you through enrollment.
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PROXY |
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
No matter how many shares you hold, we consider your vote important and encourage you to vote as soon as possible.
When you sign and return this proxy card, you
appoint either Steven J. Feder or Deirdre Blackburn (or any substitutes they may appoint), as proxy to vote your shares, as you have instructed, at the annual meeting on May 24, 2007, and at any adjournments of that meeting;
authorize the proxy to vote, in his or her discretion, upon any other business properly presented at the meeting; and
revoke any previous proxies you may have signed.
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IF YOU DO NOT INDICATE HOW YOU
WISH TO VOTE, THE PROXY WILL VOTE FOR ALL NOMINEES TO THE BOARD OF DIRECTORS, FOR RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2007, AND AS HE OR SHE MAY DETERMINE, IN HIS OR HER DISCRETION, WITH REGARD TO ANY OTHER MATTER PROPERLY PRESENTED AT THE MEETING.
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(Continued, and to be marked, dated and signed, on the other side.)
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Address Change/Comments (Mark the corresponding box on the reverse side)
5FOLD AND DETACH HERE5
You can now access your Safeguard Scientifics, Inc. account online
via Investor ServiceDirect® (ISD).
Mellon Investor Services LLC, Transfer Agent for Safeguard Scientifics, Inc., now makes it easy and convenient
to get current information on your shareholder account.
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View account status |
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Make address changes |
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View certificate history |
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Establish/change your PIN |
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Consent to receive all future annual meeting materials and shareholder communications electronically |
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Access stock transfer forms and information |
Visit Mellon Investor Services LLC
at
http://www.melloninvestor.com.
For technical assistance,
call Mellon Investor Services at 1-877-978-7778
between 9:00 a.m.
and 7:00 p.m. Monday-Friday Eastern Time.
Investor ServiceDirect® is a
registered trademark of Mellon Investor Services LLC.