UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported)                     February 21, 2006                    
Safeguard Scientifics, Inc.
 
(Exact Name of Registrant as Specified in Its Charter)
Pennsylvania
 
(State or Other Jurisdiction of Incorporation)
 	 	 	
1-5620	 	23-1609753	
 	
(Commission File Number)	 	(IRS Employer Identification No.)	
 	 	 	
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA	 	19087	
 	
(Address of Principal Executive Offices)	 	(Zip Code)	
610-293-0600
 
(Registrant’s Telephone Number, Including Area Code)
Not applicable
 
(Former Name or Former Address, if Changed Since Last Report)
     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 	 	o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
 		
 	 	o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
 		
 	 	o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
 		
 	 	o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

 

 
ITEM 1.01 . Entry into a Material Definitive Agreement.
Approval of Variable Portion of Total 2005 Compensation for Executive Officers
     On February 21, 2006, the Compensation Committee of the Board of Directors approved payment of the variable cash incentive for the eligible executive officers for the 2005 fiscal year under the Registrant’s 2005 Management Incentive Plan (“2005 Plan”). The terms of the 2005 Plan, including the corporate objectives established by the Compensation Committee, were described in, and the 2005 Plan was filed as an exhibit to, the Registrant’s Current Report on Form 8-K filed on April 29, 2005.
     In addition to its review of the quantitative achievement of the corporate objectives under the 2005 Plan, the Compensation Committee considered the qualitative performance of the Registrant and management as part of the determination of incentive payments as well as the achievement of the individual objectives by each participant. The key accomplishments during 2005 that the Compensation Committee considered in its determination included the addition and promotion of key executive officers in August and September 2005, as well as new hires made to supplement the Registrant’s deal sourcing, marketing and support capabilities; the adoption by the newly-enhanced management team of strategic objectives, including repositioning the Registrant from an operating company to a holding company; the acquisition of Acsis for approximately $26 million in December 2005; the sale of substantially all of the Registrant’s interests in eight TL Ventures and EnerTech Capital Partners private equity funds for approximately $24 million in cash and the buyers’ assumption of approximately $9 million of Registrant’s unfunded capital commitments; the December 2005 sale by Laureate Pharma of its Totowa, New Jersey operations to Discovery Laboratories for $16 million in cash; the support of Clarient’s growth plans by purchasing $9 million of the $15 million of common stock offered by Clarient in a private placement financing, providing strategic, analytical and administrative support in July 2005 in connection with Clarient’s obtaining a five-year exclusive distribution agreement with Dako A/S, and providing essential project management support during the selection, negotiation, build-out and move-in phases of Clarient’s transition to a new integrated facility; and the support of the capital needs of Traffic.com (in advance of its initial public offering, which was completed in January 2006); Ventaira Pharmaceuticals and NexTone Communications, by providing an aggregate of $4.1 million in equity financing.
     The Compensation Committee approved the payment of 2005 cash incentives for each eligible executive officer in the amounts stated below:
 	 	 	 	 	
 	 	 	 	2005 Variable	
Name of Officer	 	Position	 	Compensation	
Christopher J. Davis	 	Executive Vice President and Chief Administrative & Financial Officer	 	$287,500	
John A. Loftus	 	Executive Vice President and Managing Director, Information Technology	 	$195,000	
Steven J. Feder	 	Senior Vice President and General Counsel	 	$142,500	
     Peter J. Boni, who joined the Registrant in August 2005 as President and Chief Executive Officer, and James A. Datin, who joined the Registrant in September 2005 as Executive Vice President and Managing Director, Life Sciences, each received on his respective hire date a guaranteed pro rata portion of his respective target incentive for 2005 based upon start date, 100% of which (net of standard deductions) was used by each of them to purchase Registrant’s stock in orderly open market purchases.
     The Employment Transition and Retirement Agreement entered into with Anthony L. Craig, Registrant’s former Chief Executive Officer, (which was filed as an exhibit to the Registrant’s Form 8-K on April 15, 2005) sets forth the basis for the determination of the amount of variable cash incentive payable to Mr. Craig for 2005, which was based on the 2005 Plan (as described above) with a declining minimum payment based upon the date of his transition in August 2005. Pursuant to the terms of that agreement, on February 21, 2006, the Compensation Committee approved a payment to Mr. Craig of $366,386.

 

Adoption of 2006 Management Incentive Plan
     On February 21, 2006, the Compensation Committee of the Board of Directors of the Registrant adopted the 2006 Management Incentive Plan (the “2006 Plan”) to provide short-term cash incentives for the Registrant’s executive officers and certain other employees. The 2006 Plan provides the short-term, variable, at-risk component of the Registrant’s overall compensation program, which also includes base salary, long-term equity participation, and fringe benefits. The 2006 Plan is intended to assist the Registrant in attracting, retaining and motivating highly qualified and experienced managers. The 2006 Plan rewards corporate and individual performance with a goal of helping to align the total compensation of the participants with the interests of the Registrant’s shareholders.
     Under the 2006 Plan, variable cash incentives, if any, will be paid based on the achievement of specified corporate and individual objectives. The variable cash incentive component of each participant’s total compensation is based on a target amount. The Compensation Committee confirmed the following target variable cash incentives for 2006 for the Registrant’s executive officers (in accordance with the terms of their respective agreements with the Registrant):
 	 	 	
Name	 	Target Variable Cash Incentive	
Peter J. Boni	 	$600,000	
James A. Datin	 	$375,000	
Christopher J. Davis	 	$325,000	
John A. Loftus	 	$275,000	
Steven J. Feder	 	$175,000	
     There is no mandatory minimum award payable under the 2006 Plan. The actual cash incentive paid to a participant in the 2006 Plan may be adjusted based upon the achievement of corporate and individual objectives and will be measured on a sliding scale basis (e.g. 50% achievement would result in payment of 50% of target incentives, 100% achievement would result in payment of 100% of target incentives and 150% achievement would result in payment of 150% of target incentives). Payments earned in the 2006 Plan will be paid on or before March 15, 2007.
     The Compensation Committee administers the 2006 Plan. On February 21, 2006, the Compensation Committee also approved the corporate objectives for the 2006 Plan. The quantitative corporate objectives focus on achieving 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; capital generation through asset sales; and specified measures of partner company performance such as revenue or EBITDA improvement. The 2006 Plan also requires the Compensation Committee to subjectively evaluate the overall performance of the Registrant and its corporate staff. Factors which the Compensation Committee anticipates considering in this evaluation include, without limitation, 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, individual objectives have been established for each participant and vary depending upon each participant’s roles and responsibilities.
     The 2006 Plan is filed with this Current Report on Form 8-K as Exhibit 99.1. The foregoing description is subject to, and qualified in its entirety by, the 2006 Plan, which is incorporated by reference herein.
ITEM 9.01. Financial Statements and Exhibits

(c)	 	Exhibits .	

 	99.1	 	2006 Management Incentive Plan	

 

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 	 	 	 	 	
 	Safeguard Scientifics, Inc.
 	 	
Dated: February 24, 2006 	By:  	     STEVEN J. FEDER  	 	
 	 	     Steven J. Feder 	 	
 	 	     Senior Vice President and General Counsel 	 	

 

Exhibit Index

99.1	 	2006 Management Incentive Plan	

 

EXHIBIT 99.1
SAFEGUARD SCIENTIFICS, INC.
2006 MANAGEMENT INCENTIVE PLAN
      1. BACKGROUND AND PURPOSE
          Safeguard Scientifics, Inc., a Pennsylvania corporation, hereby adopts the Safeguard Scientifics, Inc. 2006 Management Incentive Plan (the “Plan”), effective as of January 1, 2006. The purpose of the Plan is to provide a short-term, performance-based, variable, at-risk compensation program for executive officers and certain other employees of Safeguard Scientifics, Inc. (the “Company”), in accordance with the terms outlined herein. This Plan is intended to serve as one component of the Company’s overall compensation program. The purpose of this Plan, together with the Company’s overall compensation program, is to assist the Company in motivating and retaining highly-qualified, experienced employees.
      2. DEFINITIONS
          (a) “ Administrator ” means the President or such other appropriate officer of the Company as may be appointed from time to time by the Chief Executive Officer of the Company.
          (b) “ Award ” means a proposed cash incentive granted under the Plan, which will be paid to a Grantee if the terms and conditions of this Plan are satisfied.
          (c) “ Base Salary ” means an individual’s regular, annual rate of compensation, but does not include any amounts paid by the Company to any Grantee as overtime pay, signing bonuses, one-time incentive or other bonus payments or any other non-regular payments.
          (d) “ Board ” means the Board of Directors of the Company.
          (e) “ Committee ” means the Compensation Committee of the Board or such other committee of the Board assigned by the Board to administer the Plan.
          (f) “ Company ” means Safeguard Scientifics, Inc., a Pennsylvania corporation, including any successor thereto by merger, consolidation, acquisition of all or substantially all the assets thereof, or otherwise.
          (g) “ Corporate Objectives ” means annual performance objectives for the Company and its Consolidated Subsidiaries and other objectives relevant to the Company’s business as may be established by the Committee.
          (h) “ Corporate Performance ” means the Committee’s determination of the percentage achievement of the annual Corporate Objectives, after adjustment, if any, in the discretion of the Committee.
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          (i) “ Consolidated Subsidiaries ” means corporations, the voting stock of which is majority-owned by the Company.
          (j) “ Eligible Employee ” means any employee of the Company, as determined by the Committee (or, if applicable, the Administrator).
          (k) “ Executive ” shall mean any Eligible Employee who has the title of Chief Executive Officer, Executive Vice President or Senior Vice President of the Company.
          (l) “ Grantee ” means an Eligible Employee who is granted an Award.
          (m) “ Individual Objectives ” means, with respect to a given Grantee, annual performance objectives relevant to the Company’s business and such Grantee’s position and responsibilities with the Company or responsibilities with respect to any Consolidated Subsidiaries, as may be established by the Committee (or, if applicable, the Administrator).
          (n) “ Individual Performance ” means for a given Grantee, the percentage achievement of the annual Individual Objectives of such Grantee as the Committee (or, if applicable, the Administrator) determines, in its discretion.
          (o) “ Person ” means an individual, a corporation, a partnership, an association, a trust or any other entity or organization.
          (p) “ Performance Targets ” means, the annual Corporate Objectives and the annual Individual Objectives established by the Committee. Corporate Objectives and Individual Objectives and the weighting of such objectives may differ among Grantees or classes of Grantees.
          (q) “ Plan ” means the Safeguard Scientifics, Inc. 2006 Management Incentive Plan, as set forth herein, and as amended from time to time.
      3. ADMINISTRATION OF THE PLAN
          (a) Administration . The Plan shall be administered by the Committee. The Committee shall have the power and duty to do all things necessary or convenient to effect the intent and purposes of the Plan and not inconsistent with any of the provisions hereof, whether or not such powers and duties are specifically set forth herein, and, by way of amplification and not limitation of the foregoing, the Committee shall have the power to:
               (i) provide rules and regulations for the management, operation and administration of the Plan, and, from time to time, to amend or supplement such rules and regulations;
               (ii) construe the Plan, which construction, as long as made in good faith, shall be final and conclusive upon all parties hereto;
               (iii) correct any defect, supply any omission, or reconcile any inconsistency in the Plan in such manner and to such extent as it shall deem expedient to carry
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the same into effect, and it shall be the sole and final judge of when such action shall be appropriate; and
               (iv) determine whether the conditions to the payment of a cash incentive pursuant to an Award have been satisfied.
The resolution of any questions with respect to payments and entitlements pursuant to the provisions of the Plan shall be determined by the Committee, and all such determinations shall be final and conclusive.
          (b) Grants . Subject to the express terms and conditions set forth in the Plan, and, if applicable, subject to contractual obligations between the Company and a Grantee, the Committee shall have the power, from time to time, to select those Eligible Employees to whom Awards shall be granted under the Plan, to determine the amount of cash to be paid pursuant to each Award, and, pursuant to the provisions of the Plan, to determine the terms and conditions of each Award.
          (c) Delegation of Authority . The Committee hereby delegates to the Administrator, its authority under the Plan, including, but not limited to, its authority to grant an Award and its authority to determine whether the conditions to the payment of a cash incentive pursuant to an Award have been satisfied, with respect to any employee of the Company who is not an Executive. Such delegation of authority shall continue in effect until the earliest of (i) such time as the Committee shall, in its discretion, revoke such delegation of authority, (ii) its delegate shall cease to be an employee of the Company for any reason or (iii) its delegate shall notify the Committee that he declines to continue exercise such authority.
          (d) Grantee Information . The Company shall furnish to the Committee and the Administrator in writing all information the Company deems appropriate for the Committee and the Administrator to exercise their respective powers and duties in administration of the Plan. Such information shall be conclusive for all purposes of the Plan and the Committee and the Administrator shall be entitled to rely thereon without any investigation thereof; provided, however, that the Committee and the Administrator may correct any errors discovered in any such information.
      4. ELIGIBILITY
          Awards may be granted only to Eligible Employees of the Company, as determined by the Committee.
      5. AWARDS
          The Committee may grant Awards in accordance with the Plan. The terms and conditions of Awards shall be as determined from time to time by the Committee, consistent, however, with the following:
          (a) Time of Grant . Awards may be granted at any time from the date of adoption of the Plan by the Board until the Plan is terminated by the Board or the Committee.
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          (b) Non-uniformity of Awards . The provisions of Awards need not be the same with respect to each Grantee.
          (c) Establishment of Performance Targets and Conditions to Payment of Awards .
               (i) An Award shall be expressed as either a fixed target dollar amount or as a percentage of a Grantee’s Base Salary and shall become payable for a given calendar year to the extent that the Performance Targets established by the Committee are satisfied.
               (ii) The Committee shall establish annual Performance Targets for each annual period, and the weighting of individual Performance Targets for each year and among Grantees or classes of Grantees.
               (iii) Each Grantee shall be entitled to receive payment of an annual Award only after review by the Committee of the final annual operating results and determination by the Committee of the extent to which the annual Performance Targets established by the Committee have been satisfied.
               (iv) The Company shall pay the Awards under the Plan to each Grantee as soon as practicable with respect to a given annual period, but in no event later than March 15 th of the year following such period.
          (d) Termination of Grantee’s Employment . Upon termination of a Grantee’s employment with the Company, all of such Grantee’s rights to Awards shall cease and no further payments shall be made with respect thereto, subject to contractual obligations between the Company and such Grantee, or unless the Committee in its discretion shall determine otherwise.
      6. AMENDMENT AND TERMINATION
          The Plan may be terminated by the Board or the Committee at any time. The Plan may be amended by the Board or the Committee at any time. No Award shall be affected by any such termination or amendment without the written consent of the Grantee.
      7. MISCELLANEOUS PROVISIONS
          (a) Unsecured Creditor Status . A Grantee entitled to payment of an Award hereunder shall rely solely upon the unsecured promise of the Company, as set forth herein, for the payment thereof, and nothing herein contained shall be construed to give to or vest in a Grantee or any other person now or at any time in the future, any right, title, interest, or claim in or to any specific asset, fund, reserve, account, insurance or annuity policy or contract, or other property of any kind whatever owned by the Company, or in which the Company may have any right, title, or interest, nor or at any time in the future.
          (b) Non-Assignment of Awards . The Grantee shall not be permitted to sell, transfer, pledge or assign any amount payable pursuant to the Plan or an Award, provided that the right to payment under an Award may pass by will or the laws of descent and distribution.
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          (c) Other Company Plans . It is agreed and understood that any benefits under this Plan are in addition to any and all benefits to which a Grantee may otherwise be entitled under any other contract (other than any employment contract entered into by and between the Company and any Grantee), arrangement, or voluntary pension, profit sharing or other compensation plan of the Company, whether funded or unfunded, and that this Plan shall not affect or impair the rights or obligations of the Company or a Grantee under any other such contract, arrangement, or voluntary pension, profit sharing or other compensation plan.
          (d) Separability . If any term or condition of the Plan shall be invalid or unenforceable to any extent or in any application, then the remainder of the Plan, with the exception of such invalid or unenforceable provision, shall not be affected thereby, and shall continue in effect and application to its fullest extent.
          (e) Continued Employment . Neither the establishment of the Plan, any provisions of the Plan, nor any action of the Committee shall be held or construed to confer upon any Grantee the right to a continuation of employment by the Company. The Company reserves the right to dismiss any employee (including a Grantee), or otherwise deal with any employee (including a Grantee) to the same extent as though the Plan had not been adopted.
          (f) Incapacity . If the Committee determines that a Grantee is unable to care for his affairs because of illness or accident, any benefit due such Grantee under the Plan may be paid to his spouse, child, parent, or any other person deemed by the Committee to have incurred expense for such Grantee (including a duly appointed guardian, committee, or other legal representative), and any such payment shall be a complete discharge of the Company’s obligation hereunder.
          (g) Withholding . The Company shall withhold the amount of any federal, state, local or other tax, charge or assessment attributable to the grant of any Award or lapse of restrictions under any Award as it may deem necessary or appropriate, in its sole discretion.
      8. GOVERNING LAW
          The Plan and all determinations made and actions taken pursuant to the Plan shall be governed in accordance with Pennsylvania law.
      9. EFFECTIVE DATE
          The effective date of this Plan is as of January 1, 2006.
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