UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): March 10, 2010
Safeguard Scientifics, Inc.
(Exact name of registrant as specified in its charter)
 	 	 	 	 	
Pennsylvania	 	1-5620	 	23-1609753	
 	 	 	 	 	
(State or other jurisdiction
of incorporation)	 	(Commission File Number)	 	(IRS Employer Identification No.)	
 	 	 	
435 Devon Park Drive,
Building 800, Wayne, PA	 	 
19087	
 	 	 	
(Address of principal executive offices)	 	(Zip Code)	
Registrant’s telephone number, including area code: 610-293-0600
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:

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 .	
The disclosure set forth in Item 2.03 of this Current Report on Form 8-K is incorporated herein by reference.

ITEM 2.03	 	Creation Of A Direct Financial Obligation Or An Obligation Under An Off-Balance Sheet Arrangement Of A Registrant .	
On March 10, 2010, Safeguard Scientifics, Inc. (the “Company”) announced that it has entered into exchange agreements (the “Exchange Agreements”) with certain holders (the “Holders”) of its 2.625% Convertible Senior Subordinated Notes due March 2024 (the “Old Debentures”). Pursuant to the terms of the Exchange Agreements, the Holders will exchange (the “Exchange”) an aggregate of approximately $47,000,000 principal amount of the Old Debentures held by the Holders (the “Exchange Debentures”) in exchange for the Company’s new 10.125% Convertible Senior Subordinated Debentures due March 2014 (the “New Debentures”) in principal amount equal to the principal amount of the Exchange Debentures plus accrued and unpaid interest thereon to the closing of the Exchange.
The Exchange is subject to certain conditions including effectiveness of the Company’s Application for Qualification on Form T-3 filed with the Securities and Exchange Commission on March 11, 2010 (the “Form T-3”).
A copy of the Company’s press release announcing the Exchange is filed as an Exhibit to this Current Report on Form 8-K. Copies of the Exchange Agreements are also filed as Exhibits to this Current Report on Form 8-K and are incorporated herein by reference.
The New Debentures will be issued under an indenture (the “Indenture”) to be entered into between the Company and U.S. Bank National Association, as trustee.
The New Debentures will bear interest at the annual rate of 10.125%, accruing from the closing date of the Exchange. The Company will pay interest on the New Debentures on March and September 15 of each year, beginning on September 15, 2010. The New Debentures will mature on March 15, 2014.
The New Debentures will be convertible, at the option of the holders of the New Debentures, unless previously redeemed or repurchased, subject to the following restrictions, at any time until the close of business on the last business day prior to maturity at a conversion price equal to $16.50 per share of our common stock, subject to adjustment (“Conversion Price”), which equates to a conversion rate of 60.6061 shares of our common stock per $1,000 principal amount of the New Debentures, subject to adjustment (“Conversion Rate”). Prior to March 15, 2013, holders of the New Debentures may convert their New Debentures only under the following circumstances:

 	•	 	During any fiscal quarter after June 30, 2010, if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter is greater than or equal to 120% of the Conversion Price on each such trading day;	

 

 	•	 	During the five business-day period after any ten consecutive trading-day period (the “Measurement Period”) in which the “trading price” per $1,000 principal amount of the New Debentures for each day of such measurement period was less than 100% of the product of the last reported sale price of our common stock and the Conversion Rate on each such day;	
 		
 	•	 	Upon the occurrence of specified corporate transactions; or	
 		
 	•	 	If the Company has exercised its Mandatory Conversion Option, as defined below.	
The Company has the right to force conversion of the New Debentures on or after March 15, 2012 if the closing sale price of then Company’s common stock has exceeded 130% of the Conversion Price for at least 20 of the 30 consecutive trading days ending the day prior to the notice date of such mandatory conversion. If the Company elects to mandatorily force conversion of some or all of the New Debentures as described above, the Company will make an additional make-whole payment on the New Debentures equal to the aggregate total amount of coupons that would have accrued and become payable on the New Debentures from the date of the final indenture until maturity less any coupons already paid on the New Debentures.
Upon conversion, the Company may satisfy its conversion obligation by delivering, at the Company’s election, shares of the Company’s common stock, cash or a combination of cash and shares. If the Company elects to settle its obligation in cash or cash and shares of common stock, the amount of cash or cash and shares of common stock will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 20 trading-day observation period.
Following a “make-whole fundamental change”, as defined, the Company will, in some cases, increase the Conversion Rate for a holder who elects to convert its New Debentures in connection with such make-whole fundamental change. The number of additional shares by which the Conversion Rate will be increased will be determined by reference to a table, based on the date on which the make-whole fundamental change occurs or becomes effective and the price paid (or deemed paid) per share of our common stock in connection with the make-whole fundamental change transaction.
If a designated event, as defined, occurs at any time prior to the maturity of the New Debentures, then each holder of the New Debentures will have the right to require the Company to repurchase all of the that holder’s New Debentures, or any part that is a multiple of $1,000 principal amount, on a date that is between 20 and 35 business days, as defined, after the date of notice from the Company of the designated event. The Company will repurchase the New Debentures at a repurchase price equal to 100% of the principal amount of the New Debentures, together with any unpaid interest on the New Debentures.
Upon the closing of the Exchange, the Company will place into escrow an amount of cash equal to the full interest due on the New Debentures through maturity. Interest will be paid out of such escrow account as it becomes due and payable.

 

A copy of the form of Indenture is filed as Exhibit T3C to the Form T-3 and is incorporated herein by reference.

ITEM 3.02	 	Unregistered Sales Of Equity Securities.	
The disclosure set forth in Item 2.03 of this Current Report on Form 8-K is incorporated herein by reference. The New Debentures will be issued to the Holders pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended, contained in Section 3(a)(9) thereof on the basis that the Exchange constitutes an exchange with existing holders of the Company’s securities and no commission or other remuneration will be paid or given directly or indirectly to any party for soliciting the Exchange.

ITEM 9.01	 	Financial Statements and Exhibits	
(d) Exhibits
 	 	 	 	 	
 	10.1	 	 	Exchange Agreement, dated as of March 10, 2010, by and between the Company and First Manhattan Co.	
 	10.2	 	 	Exchange Agreement, dated as of March 10, 2010, by and between the Company and the holders of the Old Debentures set forth on the schedules thereto	
 	10.3	 	 	Exchange Agreement, dated as of March 10, 2010, by and between the Company and each of Prism Partners I, L.P., Prism Partners III Leverage, L.P. and Weintraub Capital Management, L.P., as attorney-in-fact for Prism Partners IV Leveraged Offshore Fund	
 	10.4	 	 	Exchange Agreement , dated as of March 10, 2010, by and between the Company and Zazove Associates LLC	
 	10.5	 	 	Form of Indenture by and between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit TC3 filed with Form T-3 on March 11, 2010 by the Registrant)	
 	99.1	 	 	Press Release dated March 11, 2010	
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: March 11, 2010 	By:  	/s/ BRIAN J. SISKO  	 	
 	 	Brian J. Sisko 	 	
 	 	Senior Vice President and General Counsel 	 	

 

Exhibit Index
 	 	 	 	 	
 	10.1	 	 	Exchange Agreement, dated as of March 10, 2010, by and between the Company and First Manhattan Co.	
 	10.2	 	 	Exchange Agreement, dated as of March 10, 2010, by and between the Company and the holders of the Old Debentures set forth on the schedules thereto	
 	10.3	 	 	Exchange Agreement, dated as of March 10, 2010, by and between the Company and each of Prism Partners I, L.P., Prism Partners III Leverage, L.P. and Weintraub Capital Management, L.P., as attorney-in-fact for Prism Partners IV Leveraged Offshore Fund	
 	10.4	 	 	Exchange Agreement , dated as of March 10, 2010, by and between the Company and Zazove Associates LLC	
 	10.5	 	 	Form of Indenture by and between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit TC3 filed with Form T-3 on March 11, 2010 by the Registrant)	
 	99.1	 	 	Press Release dated March 11, 2010.	

Exhibit 10.1
EXCHANGE AGREEMENT
This Exchange Agreement (this “ Agreement ”), dated as of March 10, 2010, is entered into by and between Safeguard Scientifics, Inc., a Pennsylvania corporation (the “ Company ”), and First Manhattan Co., a New York limited partnership (“ FMC ”).
BACKGROUND
A. On February 18, 2004, the Company issued senior debentures due 2024 and convertible into shares of the Company’s common stock, par value $0.10 per share (“ Common Stock ”), with an initial aggregate original principal amount of $150 million and accruing interest at a rate of 2.625% per annum pursuant to that certain Purchase Agreement, dated as of February 11, 2004, by and between the Company and Wachovia Capital Markets, LLC (such debentures collectively, the “ Old Debentures ”); such Old Debentures being in the form of beneficial interests in a global note held by The Depository Trust Company (“ DTC ”).
B. The entities for which DTC directions are provided pursuant to Section 1(b) hereof (each a “ Holder ” and collectively, the “ Holders ”) are the lawful and beneficial owners of $7,031,000 in aggregate principal amount of the Old Debentures (“ Original Principal Amount ”).
C. The Company desires to exchange certain of the Old Debentures for newly-issued senior debentures due 2014 and convertible into shares of the Company’s Common Stock in a form substantially similar to that attached hereto as Exhibit A (the “ New Debentures ”) in accordance with the terms of Exchange Agreements to be entered into between the Company and the holders of such Old Debentures in a form substantially similar to this Agreement.
D. The New Debentures shall have terms substantially similar to the terms of the Old Debentures, subject to certain exceptions, including, without limitation, that such New Debentures shall accrue interest at a rate of 10.125% per annum and the principal amount of such New Debentures shall be an amount equal to the Original Principal Amount (the “ Exchange Amount ”). Accrued interest on the Old Debentures through the day prior to the Closing Date (as defined below) shall be paid in a one-time cash payment to each Holder. There shall be no minimum number of holders of New Debentures.
E. FMC, on behalf of the Holders, and pursuant to its sole investment discretion and dispositive power to assign, transfer and dispose of the Old Debentures held by the Holders, wishes to exchange each of the Holders’ Old Debentures for New Debentures on the terms and conditions described herein (the “ Exchange ”).
F. The Exchange is being made pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended (the “ Securities Act ”).

 

AGREEMENT
In consideration of the premises and the mutual covenants and undertakings set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
1. The Exchange .
(a)  Exchange of Old Debentures . Subject to the satisfaction of the conditions set forth in Article 4 and Article 5 hereof, FMC, on behalf of each Holder, shall take such action as in necessary to transfer and deliver the Old Debentures (or cause to be delivered) to U.S. Bank National Association, as successor to Wachovia Bank, National Association, as trustee, the Old Debentures via electronic delivery in exchange for New Debentures in the Exchange Amount in accordance with the terms hereof and the applicable procedures of DTC. The Company shall furnish to FMC the name of the Company’s broker or other exchange agent who is a DTC participant and such broker or exchange agent’s account number prior to the Closing Date in order to effect such delivery.
(b)  Issuance of New Debentures . The Company shall cause U.S. Bank National Association, as trustee for the New Debentures, to credit each Holder’s DTC account(s) as set forth in a direction substantially in the form of Schedule A hereto, or such other DTC account as FMC may direct in writing at least four business days before the Closing Date, with New Debentures in the Exchange Amount against transfer and delivery to the Company of the Holder’s Old Debentures in accordance with the terms of Article 1 hereof.
(c)  Certain Acknowledgements of the Parties . Each of the Company and FMC hereby acknowledges that:
(i) the issuance of the New Debentures in the Exchange constitutes satisfaction in full of any and all amounts (including, without limitation, principal, interest and any other fees or amounts, subject to the payment by the Company of all accrued interest on the Old Debentures through the day prior to the Closing Date) owed by the Company to the Holders under the Holders’ Old Debentures; and
(ii) subject to the accuracy of the representations and warranties of the other party in this Agreement, the New Debentures are being issued without registration under the Securities Act in reliance upon Section 3(a)(9) thereof.
2.  Closing . The consummation of the transactions contemplated by this Agreement (the “ Closing ”) shall occur at 10:00 a.m. (New York City local time), or at such other time as the parties agree upon, on March 30, 2010 or, if the conditions to Closing set forth in Article 4 and Article 5 hereof (other than conditions that by their terms can only be satisfied on the Closing Date) have not been satisfied or waived by such date, then on the second business day after the last of such conditions to Closing has been satisfied or waived by the party entitled to waive the same or on any such other date as to which the parties mutually agree in writing (the “ Closing Date ”).
 
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3. Representations and Warranties .
(a)  Representations and Warranties of the Company . The Company hereby represents and warrants to FMC and the Holders as follows:
(i)  Organization; Authority . The Company is duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania and has all requisite corporate power and authority to enter into this Agreement and to carry out the transactions contemplated hereby and to perform its obligations hereunder.
(ii)  No Conflicts . The execution, delivery and performance by the Company of this Agreement and, at the Closing, the New Debentures, does not and shall not (A) violate (1) any provision of law, order, rule or regulation applicable to the Company or any of its subsidiaries, or (2) the articles of incorporation or bylaws or the organizational documents of the Company or any of its subsidiaries, or (B) conflict with, result in the breach of or constitute (with due notice or lapse of time or both) a default under any material contractual obligations to which the Company or any of its subsidiaries is a party.
(iii)  Authorization; Binding Obligation . This Agreement and, at the Closing Date, the New Debentures have been duly authorized, executed and delivered by the Company, the indenture relating to the New Debentures (the “ New Indenture ”) shall be duly and validly qualified under the Trust Indenture Act of 1939, as amended (the “ Trust Indenture Act ”), and, assuming the due execution and delivery of this Agreement and the New Debentures by the Holders, this Agreement and the New Debentures are legally valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, moratorium, reorganization or other laws of general application relating to or affecting creditors’ rights generally.
(iv)  Governmental Authorization . The execution, delivery and performance by the Company of this Agreement and, at the Closing, the New Debentures, does not contravene any existing filing with any governmental authority and does not and shall not require any registration or filing with, the consent or approval of, notice to, or any other action with respect to, any federal, state or other governmental authority or regulatory body, except for (A) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the issuance of the New Debentures, and (B) such other filings as may be necessary or required by the Securities and Exchange Commission (the “ SEC ”).
(v)  Representation by Counsel . The Company has been represented by counsel in connection with the execution of this Agreement and the New Debentures and the transactions contemplated hereby and thereby.
(vi)  No Brokers . The Company has not engaged any broker, finder or other entity that is entitled to any commission or other fee in connection with the Exchange that does not meet all requirements of Section 3(a)(9) of the Securities Act.
 
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(vii)  Issuance of the New Debenture Shares . The shares of the Company’s Common Stock issuable upon conversion of the New Debentures (“ New Debenture Shares ”) are duly authorized and, upon issuance in accordance with the terms of this Agreement and the New Debentures, will be duly and validly issued and free from all taxes, liens and charges with respect to the issue thereof and the New Debenture Shares shall be fully paid and nonassessable.
(viii)  No Default under Old Debentures . No Default or Event of Default has occurred or is continuing under the terms of the Old Debentures.
(ix)  No Litigation . There are no (A) actions, suits or proceedings pending or overtly threatened against the Company or any of its properties before or by any court or arbitrator or any governmental body, agency or official, or (B) judgments, injunctions, orders, or decrees binding upon the Company or any of its properties.
(x)  SEC Filings . The Company’s Annual Report on Form 10-K most recently filed with the SEC and all subsequent reports which have been filed by the Company with the SEC pursuant to the Securities Exchange Act of 1934, as amended, when filed, did not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(b)  Representations and Warranties of FMC and the Holders . FMC, in its capacity as investment advisor for each Holder, hereby represents and warrants to the Company as follows:
(i)  Organization; Authority . FMC is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite corporate power and authority to enter into this Agreement and to carry out the transactions contemplated hereby and to perform its obligations hereunder.
(ii)  No Conflicts . The execution, delivery and performance of this Agreement and the New Debentures does not and shall not to the best of FMC’s knowledge (A) violate (1) any provision of law, order, rule or regulation applicable to FMC, the Holders or any of their respective affiliates, or (2) the respective certificate of incorporation, bylaws or other organizational documents of FMC, the Holders or any of their respective affiliates, or (B) conflict with, result in the breach of or constitute (with due notice or lapse of time or both) a default under any material contractual obligations to which FMC, the Holders or any of their respective affiliates is a party.
(iii)  Authorization; Binding Obligation . This Agreement has been duly authorized, executed and delivered by FMC and, assuming the due execution and delivery of this Agreement by the Company, this Agreement is a legally valid and binding obligation, enforceable against FMC and each Holder in accordance with its terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, moratorium, reorganization or other laws of general application relating to or affecting creditors’ rights generally.
 
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(iv)  Governmental Authorization . The execution, delivery and performance by FMC of this Agreement does not and shall not require any registration or filing with, the consent or approval of, notice to, or any other action with respect to, any federal, state or other governmental authority or regulatory body, except for (A) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the issuance of the New Debentures, and (B) such other filings as may be necessary or required by the SEC.
(v)  Representation by Counsel . FMC has been represented by counsel in connection with the execution of this Agreement and the transactions contemplated hereby.
(vi)  Title and Ownership . FMC has sole investment discretion and dispositive power to assign, transfer and dispose of the Old Debentures held by the Holders. Each Holder is the lawful and beneficial owner of its Old Debentures. The Holders’ Old Debentures are owned by the Holders free and clear of any liens, encumbrances, equities or claims and the transfer, assignment and delivery of such Old Debentures in accordance with this Agreement will convey to the Company good title to such Old Debentures, free and clear of liens, claims, equities and encumbrances.
(vii)  Not an Affiliate or 5% Beneficial Owner . Neither FMC nor, to FMC’s knowledge, any of the Holders, together with any of their affiliates, (A) is at present, or has been during the preceding three months, an “affiliate” of the Company as that term is defined in paragraph (a)(1) of Rule 144 promulgated under the Securities Act, (B) immediately after giving effect to the Exchange and assuming issuance of the New Debenture Shares, will beneficially own 5% or more of the outstanding shares of the Company’s Common Stock, and (C) immediately after giving effect to the Exchange and assuming issuance of the New Debenture Shares, will hold in its accounts shares of the Company’s Common Stock amounting to 5% or more of the outstanding shares of the Company’s Common Stock.
(viii)  Not Registered; No Registration Obligations . FMC acknowledges that (A) neither the New Debentures nor the New Debenture Shares have been, nor will be, registered under the Securities Act, and that any sales by such Holders of the New Debentures or any New Debenture Shares shall be conducted in accordance with an available exemption under the Securities Act, and (B) the Company shall have no obligation whatsoever to register the New Debentures or New Debenture Shares under the Securities Act pursuant to this Agreement, any other agreement to which the Holders and the Company are a party or otherwise.
(ix)  No Brokers . Neither FMC nor any Holder has engaged any broker, finder or other entity acting under the authority of FMC or any Holder or any of their affiliates that is entitled to any commission or other fee in connection with the Exchange.
(x)  FMC’s Knowledge and Experience . FMC has the requisite knowledge and experience in financial and business matters so that it is capable of evaluating the merits and risks of the Exchange and acquiring the New Debentures and the New Debenture Shares and, in connection therewith, FMC acknowledges that (A) the Company makes no representation regarding the value of the Old Debentures, the New Debentures or the New Debenture Shares, (B) the rights and privileges of holders of shares of the Company’s Common Stock are substantially different from the rights of holders of the Old Debentures (described in the indenture relating to the Old Debentures), and (C) FMC has independently, and without reliance upon the Company or its representatives, made its own analysis and decision to enter into the Exchange and exchange the Old Debentures for the New Debentures.
 
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(xi)  Acting Independently . In entering into this Agreement and the transactions contemplated hereby, FMC acknowledges that it is acting on behalf of the Holders pursuant to its discretionary authority and not at the direction or instruction of the Company or its representatives, and FMC has not and will not hold itself out as an agent of the Company in connection with the transactions contemplated hereby or in connection with any subsequent sale of the New Debentures or the New Debenture Shares.
(xii)  Accredited Investor . FMC and each Holder is an “accredited investor” as defined in Rule 501 promulgated under the Securities Act.
(xiii)  No Advice Regarding Tax Treatment . Neither the Company nor its representatives has made any representation to FMC or any Holder regarding the tax treatment of the Exchange on the Holders, and FMC, on behalf of each Holder, has independently, and without reliance upon the Company or its representatives, reached its own conclusions regarding such tax treatment.
4.  Conditions to the Company’s Obligations . The obligations of the Company at the Closing are subject to the satisfaction of each of the following conditions, provided that these conditions are for the sole benefit of the Company and may be waived by the Company at any time in its sole discretion by providing FMC with prior written notice thereof:
(a)  Execution of the Agreement . FMC shall have executed this Agreement and delivered the same to the Company.
(b)  Transfer of the Old Debentures . FMC, on behalf of each Holder, shall take such action as is necessary to have duly and validly transferred and delivered the Old Debentures owned by the Holders to the Company or its order in accordance with the terms of Article 1 hereof.
(c)  Representations and Warranties . The representations and warranties of FMC and the Holders in this Agreement shall be true and correct as of the date when made and as of the Closing Date as though made at that time.
(d)  No Prohibition . No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
(e)  Necessary Filings . The Company shall have made all filings under all applicable federal or state securities laws and rules of the New York Stock Exchange necessary to consummate the issuance of the New Debentures (including all filings necessary to qualify the New Indenture under the Trust Indenture Act) pursuant to this Agreement in compliance with such laws and requirements and shall have obtained all authorizations, approvals and acceptances necessary to consummate the transactions contemplated hereby and such authorizations, approvals and acceptances shall be effective as of the Closing Date.
 
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5.  Conditions to FMC’s Obligations . The obligations of FMC at the Closing are subject to the satisfaction of each of the following conditions, provided that these conditions are for the sole benefit of each Holder and may be waived by FMC on behalf of each Holder at any time in its sole discretion by providing the Company with prior written notice thereof:
(a)  Execution of the Agreement . The Company shall have executed this Agreement and delivered the same to FMC.
(b)  Delivery of the New Debentures . The Company shall have caused the New Debentures to be delivered to the Holders against delivery by FMC of the Holders’ Old Debentures in accordance with the terms of Article 1 hereof.
(c)  Payments under the Old Debentures . The Holders shall have been paid in full for all interest accruing on the Old Debentures through the day prior to the Closing Date.
(d)  Escrow Agreement . The Company shall have executed that certain Escrow Agreement to be entered into by and among the Company, as depositor, U.S. Bank National Association, as trustee under the New Indenture, and U.S. Bank National Association, as escrow agent (the “ Escrow Agreement ”), and the Escrow Account (as defined in the Escrow Agreement) shall be fully funded with all payments due on the New Debentures through the maturity.
(e)  Representations and Warranties . The representations and warranties of the Company in this Agreement shall be true and correct as of the date when made and as of the Closing Date as though made at that time.
(f)  No Prohibition . No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
6.  Fees and Expenses . Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.
 
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7.  Notices . All notices, requests, demands, claims and other communications hereunder shall be in writing and shall be (a) transmitted by hand delivery, (b) mailed by first class, registered or certified mail, postage prepaid, (c) transmitted by overnight courier, or (d) transmitted by facsimile, and in each case,
if to the Company, to:
Safeguard Scientifics, Inc.
435 Devon Park Drive, Building 800
Wayne, PA 19087
Attention: General Counsel
Facsimile: (610) 975-4984
with a copy to (which shall not constitute notice):
Morgan, Lewis and Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103
Attention: Justin W. Chairman
Facsimile: 215.963.5001
if to FMC or a Holder, to:
First Manhattan Co.
437 Madison Avenue, 28th Floor
NY, NY 10022
Attention: Arthur Stainman
Facsimile: 212.751.3959
with a copy to (which shall not constitute notice):
First Manhattan Co.
437 Madison Avenue, 31st Floor
NY, NY 10022
Attention: David Muccia
Facsimile: 212.832.4730
8.  Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflicts of law thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
 
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9.  Entire Agreement . This Agreement and the New Debentures constitute the entire agreement among the parties pertaining to the Exchange and supersedes the parties’ prior agreements, understandings, negotiations and discussions, whether oral or written, on such matters, and this Agreement shall not be amended, changed, supplemented, waived or otherwise modified or terminated except by instrument in writing signed by each of the parties hereto.
10.  Miscellaneous . The representations, warranties, covenants and agreements contained in this Agreement shall survive the execution and delivery of this Agreement and the closing of the transactions contemplated hereby and shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any party hereto. This Agreement is intended to bind and inure to the benefit of the signatories to this Agreement and their respective successors, permitted assigns, heirs, executors, administrators and representatives. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page by facsimile or as an attachment to an electronic mail message in PDF or similar format shall be as effective as delivery of a manually executed counterpart. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. This Agreement shall be solely for the benefit of the signatories to this Agreement, and no other person or entity shall be a third-party beneficiary hereof. No failure or delay by any party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
[ Remainder of Page Intentionally Left Blank ]
 
 9 

 

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly executed on its behalf as of the date first written above.
SAFEGUARD SCIENTIFICS, INC.
 	 	 	 	 	
By:	 	/s/ Brian J. Sisko	 	 	
 	 	 
Name:  Brian J. Sisko	 	 	
 	 	Title:    Senior Vice President and General Counsel	
FIRST MANHATTAN CO.
 	 	 	 	 	
By:	 	/s/ Arthur Stainman	 	 	
 	 	 
Name:  Arthur Stainman	 	 	
 	 	Title:    Senior Managing Director	
[ FMC Exchange Agreement ]

 

SCHEDULE A
DTC DIRECTION
Delivery of Old Debentures
Old Debentures will be delivered by DTC from the following account(s) of the Holder(s):
 	 	 	 	 	
Par	 	 	 	 	
Institution	 	 	 	 	
DTC No.	 	 	 	 	
Credit Account No.	 	 	 	 	
 	 	 	 	 	
Issuance of New Debentures
New Debentures will be delivered by DTC from the following account of the Trustee:
 	 	 	 	 	
Par	 	 	 	 	
Institution	 	 	 	 	
DTC No.	 	 	 	 	
Credit Account No.	 	 	 	 	
 	 	 	 	 	
To the following account(s) of the Holder(s):
 	 	 	 	 	
Par	 	 	 	 	
Institution	 	 	 	 	
DTC No.	 	 	 	 	
Credit Account No.	 	 	 	 	

   

 

EXHIBIT A
FORM OF NEW DEBENTURE
[See attached]

Exhibit 10.2
EXCHANGE AGREEMENT
This Exchange Agreement (this “ Agreement ”), dated as of March 10, 2010, is entered into by and between Safeguard Scientifics, Inc., a Pennsylvania corporation (the “ Company ”), and each of the holders of the Old Debentures (as defined below) set forth on each of Schedule 1 , Schedule 2 and Schedule 3 hereto, severally and not jointly (collectively, the “ Holders ”).
BACKGROUND
A. On February 18, 2004, the Company issued senior debentures due 2024 and convertible into shares of the Company’s common stock, par value $0.10 per share (“ Common Stock ”), with an initial aggregate original principal amount of $150 million and accruing interest at a rate of 2.625% per annum pursuant to that certain Purchase Agreement, dated as of February 11, 2004, by and between the Company and Wachovia Capital Markets, LLC (such debentures collectively, the “ Old Debentures ”); such Old Debentures being in the form of beneficial interests in a global note held by The Depository Trust Company (“ DTC ”).
B. The Holders are the lawful and beneficial owners of $12,737,000 in aggregate principal amount of the Old Debentures (“ Original Principal Amount ”).
C. The Company desires to exchange certain of the Old Debentures for newly-issued senior debentures due 2014 and convertible into shares of the Company’s Common Stock in a form substantially similar to that attached hereto as Exhibit A (the “ New Debentures ”) in accordance with the terms of Exchange Agreements to be entered into between the Company and the holders of such Old Debentures in a form substantially similar to this Agreement.
D. The New Debentures shall have terms substantially similar to the terms of the Old Debentures, subject to certain exceptions, including, without limitation, that such New Debentures shall accrue interest at a rate of 10.125% per annum and the principal amount of such New Debentures shall be an amount equal to the Original Principal Amount (the “ Exchange Amount ”). Accrued interest on the Old Debentures through the day prior to the Closing Date (as defined below) shall be paid in a one-time cash payment to each Holder. There shall be no minimum number of holders of New Debentures.
E. The Holders wish to exchange each of their Old Debentures for New Debentures on the terms and conditions described herein (the “ Exchange ”).
F. The Exchange is being made pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended (the “ Securities Act ”).

 

AGREEMENT
In consideration of the premises and the mutual covenants and undertakings set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
1. The Exchange .
(a)  Exchange of Old Debentures . Subject to the satisfaction of the conditions set forth in Article 4 and Article 5 hereof, each Holder shall transfer and deliver its Old Debentures (or cause to be delivered) to U.S. Bank National Association, as successor to Wachovia Bank, National Association, as trustee for the Old Debentures, via electronic delivery in exchange for New Debentures in the Exchange Amount in accordance with the terms hereof and the applicable procedures of DTC. The Company shall furnish to the Holders the name of the Company’s broker or other exchange agent who is a DTC participant and such broker or exchange agent’s account number prior to the Closing Date in order to effect such delivery.
(b)  Issuance of New Debentures . The Company shall cause U.S. Bank National Association, as trustee for the New Debentures, to credit each Holder’s DTC account(s) as set forth in a direction substantially in the form of Schedule A hereto, or such other DTC account as each such Holder may direct in writing at least four business days before the Closing Date, with New Debentures in the Exchange Amount against transfer and delivery to the Company of the Holders’ Old Debentures in accordance with the terms of Article 1 hereof.
(c)  Certain Acknowledgements of the Parties . Each of the Company and the Holders hereby acknowledges that:
(i) the issuance of the New Debentures in the Exchange constitutes satisfaction in full of any and all amounts (including, without limitation, principal, interest and any other fees or amounts, subject to the payment by the Company of all accrued interest on the Old Debentures through the day prior to the Closing Date) owed by the Company to the Holders under the Holders’ Old Debentures; and
(ii) subject to the accuracy of the representations and warranties of the other party in this Agreement, the New Debentures are being issued without registration under the Securities Act in reliance upon Section 3(a)(9) thereof.
2.  Closing . The consummation of the transactions contemplated by this Agreement (the “ Closing ”) shall occur at 10:00 a.m. (New York City local time), or at such other time as the parties agree upon, on March 30, 2010 or, if the conditions to Closing set forth in Article 4 and Article 5 hereof (other than conditions that by their terms can only be satisfied on the Closing Date) have not been satisfied or waived by such date, then on the second business day after the last of such conditions to Closing has been satisfied or waived by the party entitled to waive the same or on any such other date as to which the parties mutually agree in writing (the “ Closing Date ”).
3. Representations and Warranties .
(a)  Representations and Warranties of the Company . The Company hereby represents and warrants to the Holders as follows:
(i)  Organization; Authority . The Company is duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania and has all requisite corporate power and authority to enter into this Agreement and to carry out the transactions contemplated hereby and to perform its obligations hereunder.
 
 2 

 

(ii)  No Conflicts . The execution, delivery and performance by the Company of this Agreement and, at the Closing, the New Debentures, does not and shall not (A) violate (1) any provision of law, order, rule or regulation applicable to the Company or any of its subsidiaries, or (2) the articles of incorporation or bylaws or the organizational documents of the Company or any of its subsidiaries, or (B) conflict with, result in the breach of or constitute (with due notice or lapse of time or both) a default under any material contractual obligations to which the Company or any of its subsidiaries is a party.
(iii)  Authorization; Binding Obligation . This Agreement and, at the Closing Date, the New Debentures have been duly authorized, executed and delivered by the Company, the indenture relating to the New Debentures (the “ New Indenture ”) shall be duly and validly qualified under the Trust Indenture Act of 1939, as amended (the “ Trust Indenture Act ”), and, assuming the due execution and delivery of this Agreement and the New Debentures by each Holder, this Agreement and the New Debentures are legally valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, moratorium, reorganization or other laws of general application relating to or affecting creditors’ rights generally.
(iv)  Governmental Authorization . The execution, delivery and performance by the Company of this Agreement and, at the Closing, the New Debentures, does not contravene any existing filing with any governmental authority and does not and shall not require any registration or filing with, the consent or approval of, notice to, or any other action with respect to, any federal, state or other governmental authority or regulatory body, except for (A) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the issuance of the New Debentures, and (B) such other filings as may be necessary or required by the Securities and Exchange Commission (the “ SEC ”).
(v)  Representation by Counsel . The Company has been represented by counsel in connection with the execution of this Agreement and the New Debentures and the transactions contemplated hereby and thereby.
(vi)  No Brokers . The Company has not engaged any broker, finder or other entity that is entitled to any commission or other fee in connection with the Exchange that does not meet all requirements of Section 3(a)(9) of the Securities Act.
(vii)  Issuance of the New Debenture Shares . The shares of the Company’s Common Stock issuable upon conversion of the New Debentures (“ New Debenture Shares ”) are duly authorized and, upon issuance in accordance with the terms of this Agreement and the New Debentures, will be duly and validly issued and free from all taxes, liens and charges with respect to the issue thereof and the New Debenture Shares shall be fully paid and nonassessable.
 
 3 

 

(viii)  No Default under Old Debentures . No Default or Event of Default has occurred or is continuing under the terms of the Old Debentures.
(ix)  No Litigation . There are no (A) actions, suits or proceedings pending or overtly threatened against the Company or any of its properties before or by any court or arbitrator or any governmental body, agency or official, or (B) judgments, injunctions, orders, or decrees binding upon the Company or any of its properties.
(x)  SEC Filings . The Company’s Annual Report on Form 10-K most recently filed with the SEC and all subsequent reports which have been filed by the Company with the SEC pursuant to the Securities Exchange Act of 1934, as amended, when filed, did not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(b)  Representations and Warranties of the Holders . Each Holder hereby represents and warrants to the Company as follows:
(i)  Organization; Authority . Such Holder is duly organized or established, as the case may be, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite corporate or other power and authority to enter into this Agreement and to carry out the transactions contemplated hereby and to perform its obligations hereunder.
(ii)  No Conflicts . (A) Putnam Investment Management, LLC, the Putnam Advisory Company, LLC or Putnam Fiduciary Trust Company, as the case may be, has the authority to execute this Agreement on behalf of such Holder as such Holder’s investment advisor, and (B) the execution, delivery and performance by such Holder of this Agreement and the New Debentures does not and shall not (1) violate ( a ) any provision of law, order, rule or regulation applicable to such Holder or any of its affiliates, or ( b ) the respective certificates of incorporation, bylaws or other organizational or constitutional documents of such Holder or those of any of its affiliates, or (B) conflict with, result in the breach of or constitute (with due notice or lapse of time or both) a default under any material contractual obligations to which such Holder or any of its affiliates is a party.
(iii)  Authorization; Binding Obligation . This Agreement has been duly authorized, executed and delivered by such Holder and, assuming the due execution and delivery of this Agreement by the Company, this Agreement is a legally valid and binding obligation of such Holder, enforceable against such Holder in accordance with its terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, moratorium, reorganization or other laws of general application relating to or affecting creditors’ rights generally.
(iv)  Governmental Authorization . The execution, delivery and performance by such Holder of this Agreement does not and shall not require any registration or filing with, the consent or approval of, notice to, or any other action with respect to, any federal, state or other governmental authority or regulatory body, except for (A) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the issuance of the New Debentures, and (B) such other filings as may be necessary or required by the SEC.
 
 4 

 

(v)  Representation by Counsel . Such Holder has been, or has had the opportunity to be, represented by counsel in connection with the execution of this Agreement and the transactions contemplated hereby.
(vi)  Title and Ownership . Such Holder is the lawful and beneficial owner of its Old Debentures with the requisite power and authority to assign, transfer and dispose of such Old Debentures. Such Holder’s Old Debentures are owned by such Holder free and clear of any liens, encumbrances, equities or claims and the transfer, assignment and delivery of such Old Debentures in accordance with this Agreement will convey to the Company good title to such Old Debentures, free and clear of liens, claims, equities and encumbrances.
(vii)  Not an Affiliate or 5% Beneficial Owner . Such Holder, together with its affiliates, (A) is not at present, and have not been during the preceding three months, an “affiliate” of the Company as that term is defined in paragraph (a)(1) of Rule 144 promulgated under the Securities Act, (B) immediately after giving effect to the Exchange and assuming issuance of the New Debenture Shares, will not beneficially own 5% or more of the outstanding shares of the Company’s Common Stock, and (C) immediately after giving effect to the Exchange and assuming issuance of the New Debenture Shares, will not hold in its accounts shares of the Company’s Common Stock amounting to 5% or more of the outstanding shares of the Company’s Common Stock.
(viii)  Not Registered; No Registration Obligations . Such Holder acknowledges that (A) neither the New Debentures nor the New Debenture Shares have been, nor will be, registered under the Securities Act, and that any sales by such Holder of the New Debentures or any New Debenture Shares shall be conducted in accordance with an available exemption under the Securities Act, and (B) the Company shall have no obligation whatsoever to register the New Debentures or New Debenture Shares under the Securities Act.
(ix)  No Brokers . Such Holder has not engaged any broker, finder or other entity acting under the authority of such Holder or any of its affiliates that is entitled to any commission or other fee in connection with the Exchange.
(x)  Holders’ Knowledge and Experience . Such Holder has the requisite knowledge and experience in financial and business matters so that it is capable of evaluating the merits and risks of the Exchange and acquiring the New Debentures and the New Debenture Shares and, in connection therewith, such Holder acknowledges that (A) the Company makes no representation regarding the value of the Old Debentures, the New Debentures or the New Debenture Shares, (B) the rights and privileges of holders of shares of the Company’s Common Stock are substantially different from the rights of holders of the Old Debentures (described in the indenture relating to the Old Debentures), and (C) such Holder has independently, and without reliance upon the Company or its representatives, made its own analysis and decision to enter into the Exchange and exchange the Old Debentures for the New Debentures.
 
 5 

 

(xi)  Acting Independently . In entering into this Agreement and the transactions contemplated hereby, such Holder acknowledges that such Holder has and is acting for itself and not at the direction or instruction of the Company or its representatives, and such Holder has not held and will not hold itself out as an agent of the Company in connection with the transactions contemplated hereby or in connection with any subsequent sale of the New Debentures or the New Debenture Shares.
(xii)  Accredited Investor . Such Holder is an “accredited investor” as defined in Rule 501 promulgated under the Securities Act.
(xiii)  No Advice Regarding Tax Treatment . Neither the Company nor its representatives has made any representation to the Holders regarding the tax treatment of the Exchange on such Holder, and such Holder has independently, and without reliance upon the Company or its representatives, reached its own conclusions regarding such tax treatment.
4.  Conditions to the Company’s Obligations . The obligations of the Company at the Closing are subject to the satisfaction of each of the following conditions, provided that these conditions are for the sole benefit of the Company and may be waived by the Company at any time in its sole discretion by providing each Holder with prior written notice thereof:
(a)  Execution of the Agreement . Each Holder shall have executed this Agreement and delivered the same to the Company.
(b)  Transfer of the Old Debentures . Each Holder shall have duly and validly transferred and delivered its Old Debentures to the Company or its order in accordance with the terms of Article 1 hereof.
(c)  Representations and Warranties . The representations and warranties of the Holders in this Agreement shall be true and correct as of the date when made and as of the Closing Date as though made at that time.
(d)  No Prohibition . No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
(e)  Necessary Filings . The Company shall have made all filings under all applicable federal or state securities laws and rules of the New York Stock Exchange necessary to consummate the issuance of the New Debentures (including all filings necessary to qualify the New Indenture under the Trust Indenture Act) pursuant to this Agreement in compliance with such laws and requirements and shall have obtained all authorizations, approvals and acceptances necessary to consummate the transactions contemplated hereby and such authorizations, approvals and acceptances shall be effective as of the Closing Date.
 
 6 

 

5.  Conditions to the Holders’ Obligations . The obligations of the Holders at the Closing are subject to the satisfaction of each of the following conditions, provided that these conditions are for the sole benefit of each Holder and may be waived by such Holder at any time in its sole discretion by providing the Company with prior written notice thereof:
(a)  Execution of the Agreement . The Company shall have executed this Agreement and delivered the same to the Holders.
(b)  Delivery of the New Debentures . The Company shall have caused the New Debentures to be delivered to each Holder against delivery by such Holder of the Holders’ Old Debentures in accordance with the terms of Article 1 hereof.
(c)  Payments under the Old Debentures . Each Holder shall have been paid in full for all interest accruing on its Old Debentures through the day prior to the Closing Date.
(d)  Escrow Agreement . The Company shall have executed that certain Escrow Agreement to be entered into by and among the Company, as depositor, U.S. Bank National Association, as trustee under the New Indenture, and U.S. Bank National Association, as escrow agent (the “ Escrow Agreement ”), and the Escrow Account (as defined in the Escrow Agreement) shall be fully funded with all payments due on the New Debentures through the maturity.
(e)  Representations and Warranties . The representations and warranties of the Company in this Agreement shall be true and correct as of the date when made and as of the Closing Date as though made at that time.
(f)  No Prohibition . No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
6.  Fees and Expenses . Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.
7.  Notices . All notices, requests, demands, claims and other communications hereunder shall be in writing and shall be (a) transmitted by hand delivery, (b) mailed by first class, registered or certified mail, postage prepaid, (c) transmitted by overnight courier, or (d) transmitted by facsimile, and in each case,
if to the Company, to:
Safeguard Scientifics, Inc.
435 Devon Park Drive, Building 800
Wayne, PA 19087
Attention: General Counsel
Facsimile: (610) 975-4984
 
 7 

 

with a copy to (which shall not constitute notice):
Morgan, Lewis and Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103
Attention: Justin W. Chairman
Facsimile: 215.963.5001
if to a Holder, to:
Putnam Investments
One Post Office Square
Boston, MA 02109
Attention: Robert Salvin
with a copy to (which shall not constitute notice):
Putnam Investment Management, LLC
One Post Office Square
Boston, MA 02109
Attention: General Counsel
Facsimile: 617.760.1625
Notices mailed or transmitted in accordance with the foregoing shall be deemed to have been given upon receipt by the addressee.
8.  Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflicts of law thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
9.  Entire Agreement . This Agreement and the New Debentures constitute the entire agreement among the parties pertaining to the Exchange and supersedes the parties’ prior agreements, understandings, negotiations and discussions, whether oral or written, on such matters, and this Agreement shall not be amended, changed, supplemented, waived or otherwise modified or terminated except by instrument in writing signed by each of the parties hereto.
 
 8 

 

10.  Miscellaneous . The representations, warranties, covenants and agreements contained in this Agreement shall survive the execution and delivery of this Agreement and the closing of the transactions contemplated hereby and shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any party hereto. This Agreement is intended to bind and inure to the benefit of the signatories to this Agreement and their respective successors, permitted assigns, heirs, executors, administrators and representatives. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page by facsimile or as an attachment to an electronic mail message in PDF or similar format shall be as effective as delivery of a manually executed counterpart. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. This Agreement shall be solely for the benefit of the signatories to this Agreement, and no other person or entity shall be a third-party beneficiary hereof. No failure or delay by any party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
11.  Obligations Limited . In the event that any Holder is a Putnam Investments registered investment company, a copy of the Declaration of Trust of each such Holder (each, a “ Putnam Fund ”) is on file with the Secretary of State of the Commonwealth of Massachusetts. Notice is given that this Agreement is executed on behalf of the Trustees of each Putnam Fund as Trustees, and not individually, and that the obligations of this Agreement are not binding on any of the Trustees or Officers or shareholders of such Putnam Fund individually, but are binding only on the assets and property of such Putnam Fund with respect to its obligations hereunder.
[ Remainder of Page Intentionally Left Blank ]
 
 9 

 

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly executed on its behalf as of the date first written above.
 	 	 	 	 	
SAFEGUARD SCIENTIFICS, INC.
 	 	 	
By:  	/s/ Brian J. Sisko	 	 	
 	Name:  	Brian J. Sisko	 	 	
 	Title: 	Senior Vice President and General Counsel	 		
 	
EACH HOLDER LISTED ON SCHEDULE 1 HERETO
BY: PUTNAM INVESTMENT MANAGEMENT, LLC, as Investment Adviser
 	 	 	
By:  	/s/ Robert L. Salvin	 	 	
 	Name:  	Robert L. Salvin	 	 	
 	Title:  	Managing Director	 	 	
 	
EACH HOLDER LISTED ON SCHEDULE 2 HERETO
BY: THE PUTNAM ADVISORY COMPANY, LLC, as Investment Adviser
 	 	 	
By:  	/s/ Robert L. Salvin	 	 	
 	Name:  	Robert L. Salvin	 	 	
 	Title:  	Managing Director	 	 	
 	
EACH HOLDER LISTED ON SCHEDULE 3 HERETO
BY: PUTNAM FIDUCIARY TRUST COMPANY, as Investment Adviser
 	 	 	
By:  	/s/ Robert L. Salvin	 	 	
 	Name:  	Robert L. Salvin	 	 	
 	Title:  	Managing Director	 	 	
[ Putnam Exchange Agreement ]

 
SCHEDULE 1
Putnam Investment Management, LLC
 	 	 	 	 	 	 	 	 	
Sleeve	 	Parent	 	Name	 	Original Principal Amount	 	
008	 	008	 	Putnam Convertible Income-Growth Trust	 	 	8,600,000	 	
205	 	014	 	Putnam High Yield Trust	 	 	382,000	 	
409	 	061	 	Putnam High Income Securities Fund (formerly Putnam High Income Bond Fund)	 	 	200,000	 	
409	 	061	 	Putnam High Income Securities Fund (formerly Putnam High Income Bond Fund)	 	 	1,600,000	 	
7HS	 	7BF	 	Putnam Income Strategies Fund (formerly Putnam Income Opportunities Fund)	 	 	55,000	 	
FJ3	 	EE9	 	Ohio Tuition Trust Authority — Ohio Variable College Savings Trust Fund — Putnam CollegeAdvantage GAA Conservative Portfolio	 	 	7,000	 	
FK9	 	EF3	 	Ohio Tuition Trust Authority — Ohio Variable College Savings Trust Fund — Putnam CollegeAdvantage GAA Growth Portfolio	 	 	17,000	 	
FG8	 	ER4	 	Ohio Tuition Trust Authority — Ohio Variable College Savings Trust Fund — Putnam CollegeAdvantage GAA Balanced Portfolio	 	 	19,000	 	

 
SCHEDULE 2
The Putnam Advisory, LLC
 	 	 	 	 	 	 	 	 	
Sleeve	 	Parent	 	Name	 	Original Principal Amount	 	
3NW	 	1BS	 	Putnam High Yield Fixed Income Fund, LLC	 	 	9,000	 	
DU5	 	DU5	 	IG Putnam U.S. High Yield Income Fund	 	 	25,000	 	
DZ9	 	DZ9	 	Stichting Pensioenfonds voor Fysiotherapeuten	 	 	30,000	 	
8SC	 	8SC	 	LGT Capital Invest (SC3) Limited — U.S. High Yield Convertible	 	 	1,480,000	 	
AH8	 	AH8	 	Interpolis Pensioenen Global High Yield Pool	 	 	105,000	 	
3YB	 	3YA	 	Marsh & McLennan Companies, Inc. U.S. Retirement Plan — High Yield	 	 	108,000	 	

 
SCHEDULE 3
Putnam Fiduciary Trust Company
 	 	 	 	 	 	 	 	 	
Sleeve	 	Parent	 	Name	 	Original Principal Amount	 	
BJ2	 	BC3	 	Putnam Retirement Advantage GAA Income Strategies Portfolio	 	 	100,000	 	

 

SCHEDULE B
DTC DIRECTION
Delivery of Old Debentures
Old Debentures will be delivered by DTC from the following account(s) of the Holder(s):
 	 	 	 	 	
Par	 	 	 	 	
Institution	 	 	 	 	
DTC No.	 	 	 	 	
Credit Account No.	 	 	 	 	
 	 	 	 	 	
Issuance of New Debentures
New Debentures will be delivered by DTC from the following account of the Trustee:
 	 	 	 	 	
Par	 	 	 	 	
Institution	 	 	 	 	
DTC No.	 	 	 	 	
Credit Account No.	 	 	 	 	
 	 	 	 	 	
To the following account(s) of the Holder(s):
 	 	 	 	 	
Par	 	 	 	 	
Institution	 	 	 	 	
DTC No.	 	 	 	 	
Credit Account No.	 	 	 	 	

   

 

EXHIBIT A
FORM OF NEW DEBENTURE
[See attached]

Exhibit 10.3
EXCHANGE AGREEMENT
This Exchange Agreement (this “ Agreement ”), dated as of March 10, 2010, is entered into by and between Safeguard Scientifics, Inc., a Pennsylvania corporation (the “ Company ”), and each of Prism Partners I, L.P., Prism Partners III Leverage, L.P. and Weintraub Capital Management, L.P., as attorney-in-fact for Prism Partners IV Leveraged Offshore Fund (each a “ Holder ” and collectively, the “ Holders ”).
BACKGROUND
A. On February 18, 2004, the Company issued senior debentures due 2024 and convertible into shares of the Company’s common stock, par value $0.10 per share (“ Common Stock ”), with an initial aggregate original principal amount of $150 million and accruing interest at a rate of 2.625% per annum pursuant to that certain Purchase Agreement, dated as of February 11, 2004, by and between the Company and Wachovia Capital Markets, LLC (such debentures collectively, the “ Old Debentures ”); such Old Debentures being in the form of beneficial interests in a global note held by The Depository Trust Company (“ DTC ”).
B. The Holders are the lawful and beneficial owner of $18,966,000 in aggregate principal amount of the Old Debentures (“ Original Principal Amount ”).
C. The Company desires to exchange certain of the Old Debentures for newly-issued senior debentures due 2014 and convertible into shares of the Company’s Common Stock in a form substantially similar to that attached hereto as Exhibit A (the “ New Debentures ”) in accordance with the terms of Exchange Agreements to be entered into between the Company and the holders of such Old Debentures in a form substantially similar to this Agreement.
D. The New Debentures shall have terms substantially similar to the terms of the Old Debentures, subject to certain exceptions, including, without limitation, that such New Debentures shall accrue interest at a rate of 10.125% per annum and the principal amount of such New Debentures shall be an amount equal to the Original Principal Amount (the “ Exchange Amount ”). Accrued interest on the Old Debentures through the day prior to the Closing Date (as defined below) shall be paid in a one-time cash payment to each Holder. There shall be no minimum number of holders of New Debentures.
E. Each of the Holders wishes to exchange its Old Debentures for New Debentures on the terms and conditions described herein (the “ Exchange ”).
F. The Exchange is being made pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended (the “ Securities Act ”).

 

AGREEMENT
In consideration of the premises and the mutual covenants and undertakings set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
1. The Exchange .
(a)  Exchange of Old Debentures . Subject to the satisfaction of the conditions set forth in Article 4 and Article 5 hereof, each Holder shall transfer and deliver its Old Debentures (or cause to be delivered) to U.S. Bank National Association, as successor to Wachovia Bank, National Association, as trustee for the Old Debentures, via electronic delivery in exchange for New Debentures in the Exchange Amount in accordance with the terms hereof and the applicable procedures of DTC. The Company shall furnish to the Holders the name of the Company’s broker or other exchange agent who is a DTC participant and such broker or exchange agent’s account number prior to the Closing Date in order to effect such delivery.
(b)  Issuance of New Debentures . The Company shall cause U.S. Bank National Association, as trustee for the New Debentures, to credit each Holder’s DTC account(s) as set forth in a direction substantially in the form of Schedule A hereto, or such other DTC account as each such Holder may direct in writing at least four business days before the Closing Date, with New Debentures in the Exchange Amount against transfer and delivery to the Company of the Holders’ Old Debentures in accordance with the terms of Article 1 hereof.
(c)  Certain Acknowledgements of the Parties . Each of the Company and the Holders hereby acknowledges that:
(i) the issuance of the New Debentures in the Exchange constitutes satisfaction in full of any and all amounts (including, without limitation, principal, interest and any other fees or amounts, subject to the payment by the Company of all accrued interest on the Old Debentures through the day prior to the Closing Date) owed by the Company to the Holders under the Holders’ Old Debentures; and
(ii) subject to the accuracy of the representations and warranties of the other party in this Agreement, the New Debentures are being issued without registration under the Securities Act in reliance upon Section 3(a)(9) thereof.
2.  Closing . The consummation of the transactions contemplated by this Agreement (the “ Closing ”) shall occur at 10:00 a.m. (New York City local time), or at such other time as the parties agree upon, on March 30, 2010 or, if the conditions to Closing set forth in Article 4 and Article 5 hereof (other than conditions that by their terms can only be satisfied on the Closing Date) have not been satisfied or waived by such date, then on the second business day after the last of such conditions to Closing has been satisfied or waived by the party entitled to waive the same or on any such other date as to which the parties mutually agree in writing (the “ Closing Date ”).
 
 2 

 

3. Representations and Warranties .
(a)  Representations and Warranties of the Company . The Company hereby represents and warrants to the Holders as follows:
(i)  Organization; Authority . The Company is duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania and has all requisite corporate power and authority to enter into this Agreement and to carry out the transactions contemplated hereby and to perform its obligations hereunder.
(ii)  No Conflicts . The execution, delivery and performance by the Company of this Agreement and, at the Closing, the New Debentures, does not and shall not (A) violate (1) any provision of law, order, rule or regulation applicable to the Company or any of its subsidiaries, or (2) the articles of incorporation or bylaws or the organizational documents of the Company or any of its subsidiaries, or (B) conflict with, result in the breach of or constitute (with due notice or lapse of time or both) a default under any material contractual obligations to which the Company or any of its subsidiaries is a party.
(iii)  Authorization; Binding Obligation . This Agreement and, at the Closing Date, the New Debentures have been duly authorized, executed and delivered by the Company, the indenture relating to the New Debentures (the “ New Indenture ”) shall be duly and validly qualified under the Trust Indenture Act of 1939, as amended (the “ Trust Indenture Act ”), and, assuming the due execution and delivery of this Agreement and the New Debentures by each Holder, this Agreement and the New Debentures are legally valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, moratorium, reorganization or other laws of general application relating to or affecting creditors’ rights generally.
(iv)  Governmental Authorization . The execution, delivery and performance by the Company of this Agreement and, at the Closing, the New Debentures, does not contravene any existing filing with any governmental authority and does not and shall not require any registration or filing with, the consent or approval of, notice to, or any other action with respect to, any federal, state or other governmental authority or regulatory body, except for (A) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the issuance of the New Debentures, and (B) such other filings as may be necessary or required by the Securities and Exchange Commission (the “ SEC ”).
(v)  Representation by Counsel . The Company has been represented by counsel in connection with the execution of this Agreement and the New Debentures and the transactions contemplated hereby and thereby.
(vi)  No Brokers . The Company has not engaged any broker, finder or other entity that is entitled to any commission or other fee in connection with the Exchange that does not meet all requirements of Section 3(a)(9) of the Securities Act.
 
 3 

 

(vii)  Issuance of the New Debenture Shares . The shares of the Company’s Common Stock issuable upon conversion of the New Debentures (“ New Debenture Shares ”) are duly authorized and, upon issuance in accordance with the terms of this Agreement and the New Debentures, will be duly and validly issued and free from all taxes, liens and charges with respect to the issue thereof and the New Debenture Shares shall be fully paid and nonassessable.
(viii)  No Default under Old Debentures . No Default or Event of Default has occurred or is continuing under the terms of the Old Debentures.
(ix)  No Litigation . There are no (A) actions, suits or proceedings pending or overtly threatened against the Company or any of its properties before or by any court or arbitrator or any governmental body, agency or official, or (B) judgments, injunctions, orders, or decrees binding upon the Company or any of its properties.
(x)  SEC Filings . The Company’s Annual Report on Form 10-K most recently filed with the SEC and all subsequent reports which have been filed by the Company with the SEC pursuant to the Securities Exchange Act of 1934, as amended, when filed, did not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(b)  Representations and Warranties of the Holders . Each Holder hereby represents and warrants to the Company as follows:
(i)  Organization; Authority . Such Holder is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite corporate power and authority to enter into this Agreement and to carry out the transactions contemplated hereby and to perform its obligations hereunder.
(ii)  No Conflicts . The execution, delivery and performance by the such Holder of this Agreement and the New Debentures does not and shall not (A) violate (1) any provision of law, order, rule or regulation applicable to such Holder or any of its affiliates, or (2) the respective certificates of incorporation, bylaws or other organizational documents of such Holder or those of any of its affiliates, or (B) conflict with, result in the breach of or constitute (with due notice or lapse of time or both) a default under any material contractual obligations to which such Holder or any of its affiliates is a party.
(iii)  Authorization; Binding Obligation . This Agreement has been duly authorized, executed and delivered by such Holder and, assuming the due execution and delivery of this Agreement by the Company, this Agreement is a legally valid and binding obligation of such Holder, enforceable against such Holder in accordance with its terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, moratorium, reorganization or other laws of general application relating to or affecting creditors’ rights generally.
 
 4 

 

(iv)  Governmental Authorization . The execution, delivery and performance by such Holder of this Agreement does not and shall not require any registration or filing with, the consent or approval of, notice to, or any other action with respect to, any federal, state or other governmental authority or regulatory body, except for (A) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the issuance of the New Debentures, and (B) such other filings as may be necessary or required by the SEC.
(v)  Representation by Counsel . Such Holder has had the opportunity to be represented by counsel in connection with the execution of this Agreement and the transactions contemplated hereby.
(vi)  Title and Ownership . Such Holder is the lawful and beneficial owner of its Old Debentures with the requisite power and authority to assign, transfer and dispose of such Old Debentures. Such Holder’s Old Debentures are owned by such Holder free and clear of any liens, encumbrances, equities or claims and the transfer, assignment and delivery of such Old Debentures in accordance with this Agreement will convey to the Company good title to such Old Debentures, free and clear of liens, claims, equities and encumbrances.
(vii)  Not an Affiliate or 5% Beneficial Owner . Such Holder, together with its affiliates, is not at present, and have not been during the preceding three months, an “affiliate” of the Company as that term is defined in paragraph (a)(1) of Rule 144 promulgated under the Securities Act.
(viii)  Not Registered; No Registration Obligations . Such Holder acknowledges that (A) neither the New Debentures nor the New Debenture Shares have been, nor will be, registered under the Securities Act, and that any sales by such Holder of the New Debentures or any New Debenture Shares shall be conducted in accordance with an available exemption under the Securities Act, and (B) the Company shall have no obligation whatsoever to register the New Debentures or New Debenture Shares under the Securities Act pursuant to this Agreement, any other agreement to which such Holder and the Company are a party or otherwise.
(ix)  No Brokers . Such Holder has not engaged any broker, finder or other entity acting under the authority of such Holder or any of its affiliates that is entitled to any commission or other fee in connection with the Exchange.
(x)  Holders’ Knowledge and Experience . Such Holder has the requisite knowledge and experience in financial and business matters so that it is capable of evaluating the merits and risks of the Exchange and acquiring the New Debentures and the New Debenture Shares and, in connection therewith, such Holder acknowledges that (A) the Company makes no representation regarding the value of the Old Debentures, the New Debentures or the New Debenture Shares, (B) the rights and privileges of holders of shares of the Company’s Common Stock are substantially different from the rights of holders of the Old Debentures (described in the indenture relating to the Old Debentures), and (C) such Holder has independently, and without reliance upon the Company or its representatives, made its own analysis and decision to enter into the Exchange and exchange the Old Debentures for the New Debentures.
 
 5 

 

(xi)  Acting Independently . In entering into this Agreement and the transactions contemplated hereby, such Holder acknowledges that such Holder has and is acting for itself and not at the direction or instruction of the Company or its representatives, and such Holder has not held and will not hold itself out as an agent of the Company in connection with the transactions contemplated hereby or in connection with any subsequent sale of the New Debentures or the New Debenture Shares.
(xii)  Accredited Investor . Such Holder is an “accredited investor” as defined in Rule 501 promulgated under the Securities Act.
(xiii)  No Advice Regarding Tax Treatment . Neither the Company nor its representatives has made any representation to the Holders regarding the tax treatment of the Exchange on such Holder, and such Holder has independently, and without reliance upon the Company or its representatives, reached its own conclusions regarding such tax treatment.
4.  Conditions to the Company’s Obligations . The obligations of the Company at the Closing are subject to the satisfaction of each of the following conditions, provided that these conditions are for the sole benefit of the Company and may be waived by the Company at any time in its sole discretion by providing each Holder with prior written notice thereof:
(a)  Execution of the Agreement . Each Holder shall have executed this Agreement and delivered the same to the Company.
(b)  Transfer of the Old Debentures . Each Holder shall have duly and validly transferred and delivered its Old Debentures to the Company or its order in accordance with the terms of Article 1 hereof.
(c)  Representations and Warranties . The representations and warranties of the Holders in this Agreement shall be true and correct as of the date when made and as of the Closing Date as though made at that time.
(d)  No Prohibition . No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
(e)  Necessary Filings . The Company shall have made all filings under all applicable federal or state securities laws and rules of the New York Stock Exchange necessary to consummate the issuance of the New Debentures (including all filings necessary to qualify the New Indenture under the Trust Indenture Act) pursuant to this Agreement in compliance with such laws and requirements and shall have obtained all authorizations, approvals and acceptances necessary to consummate the transactions contemplated hereby and such authorizations, approvals and acceptances shall be effective as of the Closing Date.
 
 6 

 

5.  Conditions to the Holders’ Obligations . The obligations of the Holders at the Closing are subject to the satisfaction of each of the following conditions, provided that these conditions are for the sole benefit of the Holders and may be waived by the Holders at any time in their sole discretion by providing the Company with prior written notice thereof:
(a)  Execution of the Agreement . The Company shall have executed this Agreement and delivered the same to the Holders.
(b)  Delivery of the New Debentures . The Company shall have caused the New Debentures to be delivered to the Holders against delivery by the Holders of the Holders’ Old Debentures in accordance with the terms of Article 1 hereof.
(c)  Payments under the Old Debentures . The Holders shall have been paid in full for all interest accruing on the Old Debentures through the day prior to the Closing Date.
(d)  Escrow Agreement . The Company shall have executed that certain Escrow Agreement to be entered into by and among the Company, as depositor, U.S. Bank National Association, as trustee under the New Indenture, and U.S. Bank National Association, as escrow agent (the “ Escrow Agreement ”), and the Escrow Account (as defined in the Escrow Agreement) shall be fully funded with all payments due on the New Debentures through the maturity.
(e)  Representations and Warranties . The representations and warranties of the Company in this Agreement shall be true and correct as of the date when made and as of the Closing Date as though made at that time.
(f)  No Prohibition . No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
6.  Fees and Expenses . Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.
7.  Notices . All notices, requests, demands, claims and other communications hereunder shall be in writing and shall be (a) transmitted by hand delivery, (b) mailed by first class, registered or certified mail, postage prepaid, (c) transmitted by overnight courier, or (d) transmitted by facsimile, and in each case,
if to the Company, to:
Safeguard Scientifics, Inc.
435 Devon Park Drive, Building 800
Wayne, PA 19087
Attention: General Counsel
Facsimile: (610) 975-4984
 
 7 

 

with a copy to (which shall not constitute notice):
Morgan, Lewis and Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103
Attention: Justin W. Chairman
Facsimile: 215.963.5001
if to the Holders, to:
Weintraub Capital Management L.P.
44 Montgomery Street, Suite 4100
San Francisco, 94104
Attention: Nancy DeSchane
Facsimile: 415.288.8960
Notices mailed or transmitted in accordance with the foregoing shall be deemed to have been given upon receipt by the addressee.
8.  Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflicts of law thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
 
 8 

 

9.  Entire Agreement . This Agreement and the New Debentures constitute the entire agreement among the parties pertaining to the Exchange and supersedes the parties’ prior agreements, understandings, negotiations and discussions, whether oral or written, on such matters, and this Agreement shall not be amended, changed, supplemented, waived or otherwise modified or terminated except by instrument in writing signed by each of the parties hereto.
10.  Miscellaneous . The representations, warranties, covenants and agreements contained in this Agreement shall survive the execution and delivery of this Agreement and the closing of the transactions contemplated hereby and shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any party hereto. This Agreement is intended to bind and inure to the benefit of the signatories to this Agreement and their respective successors, permitted assigns, heirs, executors, administrators and representatives. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page by facsimile or as an attachment to an electronic mail message in PDF or similar format shall be as effective as delivery of a manually executed counterpart. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. This Agreement shall be solely for the benefit of the signatories to this Agreement, and no other person or entity shall be a third-party beneficiary hereof. No failure or delay by any party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
[ Remainder of Page Intentionally Left Blank ]
 
 9 

 

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly executed on its behalf as of the date first written above.
 	 	 	 	 	
SAFEGUARD SCIENTIFICS, INC.
 	 	 	
By:  	/s/ Brian J. Sisko	 	 	
 	Name: Brian J. Sisko	 	 	
 	Title:   Senior Vice President and General Counsel	 	 	
 	
PRISM PARTNERS I, L.P.
PRISM PARTNERS III LEVERAGED, L.P.
 	 	 	
By:  	Weintraub Capital Management, L.P.  	 	 	
 	General Partner 	 	 	
 	
 	By:  	/s/ Jerald Weintraub	 	 	
 	  	Name:  Jerald Weintraub 	 	 	
 	  	Title:    President 	 	 	
 	
PRISM PARTNERS IV LEVERAGED OFFSHORE FUND
 	 	 	
By:  	Weintraub Capital Management, L.P.  	 	 	
 	Attorney-in-fact 	 	 	
 	
 	By:  	/s/ Jerald Weintraub	 	 	
 	  	Name:  Jerald Weintraub 	 	 	
 	  	Title:    President 	 	 	
[ Weintraub Exchange Agreement ]

 

SCHEDULE A
DTC DIRECTION
Delivery of Old Debentures
Old Debentures will be delivered by DTC from the following account(s) of the Holder(s):
 	 	 	 	 	
Par	 	 	 	 	
Institution	 	 	 	 	
DTC No.	 	 	 	 	
Credit Account No.	 	 	 	 	
 	 	 	 	 	
Issuance of New Debentures
New Debentures will be delivered by DTC from the following account of the Trustee:
 	 	 	 	 	
Par	 	 	 	 	
Institution	 	 	 	 	
DTC No.	 	 	 	 	
Credit Account No.	 	 	 	 	
 	 	 	 	 	
To the following account(s) of the Holder(s):
 	 	 	 	 	
Par	 	 	 	 	
Institution	 	 	 	 	
DTC No.	 	 	 	 	
Credit Account No.	 	 	 	 	

   

 

EXHIBIT A
FORM OF NEW DEBENTURE
[See attached]

Exhibit 10.4
EXCHANGE AGREEMENT
This Exchange Agreement (this “ Agreement ”), dated as of March 10, 2010, is entered into by and between Safeguard Scientifics, Inc., a Pennsylvania corporation (the “ Company ”), and Zazove Associates LLC, a Delaware limited liability company (“ Zazove ”).
BACKGROUND
A. On February 18, 2004, the Company issued senior debentures due 2024 and convertible into shares of the Company’s common stock, par value $0.10 per share (“ Common Stock ”), with an initial aggregate original principal amount of $150 million and accruing interest at a rate of 2.625% per annum pursuant to that certain Purchase Agreement, dated as of February 11, 2004, by and between the Company and Wachovia Capital Markets, LLC (such debentures collectively, the “ Old Debentures ”); such Old Debentures being in the form of beneficial interests in a global note held by The Depository Trust Company (“ DTC ”).
B. The entities for which DTC directions are provided pursuant to Section 1(b) hereof (each a “ Holder ” and collectively, the “ Holders ”) are the lawful and beneficial owners of $8,202,000 in aggregate principal amount of the Old Debentures (“ Original Principal Amount ”).
C. The Company desires to exchange certain of the Old Debentures for newly-issued senior debentures due 2014 and convertible into shares of the Company’s Common Stock in a form substantially similar to that attached hereto as Exhibit A (the “ New Debentures ”) in accordance with the terms of Exchange Agreements to be entered into between the Company and the holders of such Old Debentures in a form substantially similar to this Agreement.
D. The New Debentures shall have terms substantially similar to the terms of the Old Debentures, subject to certain exceptions, including, without limitation, that such New Debentures shall accrue interest at a rate of 10.125% per annum and the principal amount of such New Debentures shall be an amount equal to the Original Principal Amount (the “ Exchange Amount ”). Accrued interest on the Old Debentures through the day prior to the Closing Date (as defined below) shall be paid in a one-time cash payment to each Holder. There shall be no minimum number of holders of New Debentures.
E. Zazove, on behalf of the Holders, and pursuant to its sole investment discretion and dispositive power to assign, transfer and dispose of the Old Debentures held by the Holders, wishes to exchange each of the Holders’ Old Debentures for New Debentures on the terms and conditions described herein (the “ Exchange ”).
F. The Exchange is being made pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended (the “ Securities Act ”).

 

AGREEMENT
In consideration of the premises and the mutual covenants and undertakings set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
1. The Exchange .
(a)  Exchange of Old Debentures . Subject to the satisfaction of the conditions set forth in Article 4 and Article 5 hereof, Zazove, on behalf of each Holder, shall take such action as in necessary to (i) transfer and deliver the Old Debentures (or cause to be delivered) to U.S. Bank National Association, as successor to Wachovia Bank, National Association, as trustee, the Old Debentures via electronic delivery in exchange for New Debentures in the Exchange Amount in accordance with the terms hereof, and (ii) write-down each of the Holder’s positions in the Old Debentures at DTC in accordance with the terms of the indenture relating to the Old Debentures (the “ Old Indenture ”) and the applicable procedures of DTC. The Company shall furnish to Zazove the name of the Company’s broker or other exchange agent who is a DTC participant and such broker or exchange agent’s account number prior to the Closing Date in order to effect such delivery.
(b)  Issuance of New Debentures . The Company shall cause U.S. Bank National Association, as trustee for the New Debentures, to credit each Holder’s DTC account(s) as set forth in a direction substantially in the form of Schedule A hereto, or such other DTC account as Zazove may direct in writing at least four business days before the Closing Date, with New Debentures in the Exchange Amount against transfer and delivery to the Company of the Holder’s Old Debentures in accordance with the terms of Article 1 hereof.
(c)  Certain Acknowledgements of the Parties . Each of the Company and Zazove hereby acknowledges that:
(i) the issuance of the New Debentures in the Exchange constitutes satisfaction in full of any and all amounts (including, without limitation, principal, interest and any other fees or amounts, subject to the payment by the Company of all accrued interest on the Old Debentures through the day prior to the Closing Date) owed by the Company to the Holders under the Holders’ Old Debentures; and
(ii) subject to the accuracy of the representations and warranties of the other party in this Agreement, the New Debentures are being issued without registration under the Securities Act in reliance upon Section 3(a)(9) thereof.
2.  Closing . The consummation of the transactions contemplated by this Agreement (the “ Closing ”) shall occur at 10:00 a.m. (New York City local time), or at such other time as the parties agree upon, on March 30, 2010 or, if the conditions to Closing set forth in Article 4 and Article 5 hereof (other than conditions that by their terms can only be satisfied on the Closing Date) have not been satisfied or waived by such date, then on the second business day after the last of such conditions to Closing has been satisfied or waived by the party entitled to waive the same or on any such other date as to which the parties mutually agree in writing (the “ Closing Date ”).
 
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3. Representations and Warranties .
(a)  Representations and Warranties of the Company . The Company hereby represents and warrants to Zazove and the Holders as follows:
(i)  Organization; Authority . The Company is duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania and has all requisite corporate power and authority to enter into this Agreement and to carry out the transactions contemplated hereby and to perform its obligations hereunder.
(ii)  No Conflicts . The execution, delivery and performance by the Company of this Agreement and, at the Closing, the New Debentures, does not and shall not (A) violate (1) any provision of law, order, rule or regulation applicable to the Company or any of its subsidiaries, or (2) the articles of incorporation or bylaws or the organizational documents of the Company or any of its subsidiaries, or (B) conflict with, result in the breach of or constitute (with due notice or lapse of time or both) a default under any material contractual obligations to which the Company or any of its subsidiaries is a party.
(iii)  Authorization; Binding Obligation . This Agreement and, at the Closing Date, the New Debentures have been duly authorized, executed and delivered by the Company, the indenture relating to the New Debentures (the “ New Indenture ”) shall be duly and validly qualified under the Trust Indenture Act of 1939, as amended (the “ Trust Indenture Act ”), and, assuming the due execution and delivery of this Agreement and the New Debentures by the Holders, this Agreement and the New Debentures are legally valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, moratorium, reorganization or other laws of general application relating to or affecting creditors’ rights generally.
(iv)  Governmental Authorization . The execution, delivery and performance by the Company of this Agreement and, at the Closing, the New Debentures, does not contravene any existing filing with any governmental authority and does not and shall not require any registration or filing with, the consent or approval of, notice to, or any other action with respect to, any federal, state or other governmental authority or regulatory body, except for (A) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the issuance of the New Debentures, and (B) such other filings as may be necessary or required by the Securities and Exchange Commission (the “ SEC ”).
(v)  Representation by Counsel . The Company has been represented by counsel in connection with the execution of this Agreement and the New Debentures and the transactions contemplated hereby and thereby.
 
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(vi)  No Brokers . The Company has not engaged any broker, finder or other entity that is entitled to any commission or other fee in connection with the Exchange that does not meet all requirements of Section 3(a)(9) of the Securities Act.
(vii)  Issuance of the New Debenture Shares . The shares of the Company’s Common Stock issuable upon conversion of the New Debentures (“ New Debenture Shares ”) are duly authorized and, upon issuance in accordance with the terms of this Agreement and the New Debentures, will be duly and validly issued and free from all taxes, liens and charges with respect to the issue thereof and the New Debenture Shares shall be fully paid and nonassessable.
(viii)  No Default under Old Debentures . No Default or Event of Default has occurred or is continuing under the terms of the Old Debentures.
(ix)  No Litigation . There are no (A) actions, suits or proceedings pending or overtly threatened against the Company or any of its properties before or by any court or arbitrator or any governmental body, agency or official, or (B) judgments, injunctions, orders, or decrees binding upon the Company or any of its properties.
(x)  SEC Filings . The Company’s Annual Report on Form 10-K most recently filed with the SEC and all subsequent reports which have been filed by the Company with the SEC pursuant to the Securities Exchange Act of 1934, as amended, when filed, did not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(b)  Representations and Warranties of Zazove and the Holders . Zazove, in its capacity as investment advisor for each Holder, hereby represents and warrants to the Company as follows:
(i)  Organization; Authority . Zazove is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite corporate power and authority to enter into this Agreement and to carry out the transactions contemplated hereby and to perform its obligations hereunder.
(ii)  No Conflicts . The execution, delivery and performance of this Agreement and the New Debentures does not and shall not to the best of Zazove’s knowledge (A) violate (1) any provision of law, order, rule or regulation applicable to Zazove, the Holders or any of their respective affiliates, or (2) the respective certificate of incorporation, bylaws or other organizational documents of Zazove, the Holders or any of their respective affiliates, or (B) conflict with, result in the breach of or constitute (with due notice or lapse of time or both) a default under any material contractual obligations to which Zazove, the Holders or any of their respective affiliates is a party.
(iii)  Authorization; Binding Obligation . This Agreement has been duly authorized, executed and delivered by Zazove and, assuming the due execution and delivery of this Agreement by the Company, this Agreement is a legally valid and binding obligation, enforceable against Zazove and each Holder in accordance with its terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, moratorium, reorganization or other laws of general application relating to or affecting creditors’ rights generally.
 
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(iv)  Governmental Authorization . The execution, delivery and performance by Zazove of this Agreement does not and shall not require any registration or filing with, the consent or approval of, notice to, or any other action with respect to, any federal, state or other governmental authority or regulatory body, except for (A) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the issuance of the New Debentures, and (B) such other filings as may be necessary or required by the SEC.
(v) [Reserved.]
(vi)  Title and Ownership . Zazove has sole investment discretion and dispositive power to assign, transfer and dispose of the Old Debentures held by the Holders. Each Holder is the lawful and beneficial owner of its Old Debentures. The Holders’ Old Debentures are owned by the Holders free and clear of any liens, encumbrances, equities or claims and the transfer, assignment and delivery of such Old Debentures in accordance with this Agreement will convey to the Company good title to such Old Debentures, free and clear of liens, claims, equities and encumbrances.
(vii)  Not an Affiliate or 5% Beneficial Owner . Neither Zazove nor any of the Holders, together with any of their affiliates, (A) is at present, or has been during the preceding three months, an “affiliate” of the Company as that term is defined in paragraph (a)(1) of Rule 144 promulgated under the Securities Act, (B) immediately after giving effect to the Exchange and assuming issuance of the New Debenture Shares, will beneficially own 5% or more of the outstanding shares of the Company’s Common Stock, and (C) immediately after giving effect to the Exchange and assuming issuance of the New Debenture Shares, will hold in its accounts shares of the Company’s Common Stock amounting to 5% or more of the outstanding shares of the Company’s Common Stock.
(viii)  Not Registered; No Registration Obligations . Zazove acknowledges that (A) neither the New Debentures nor the New Debenture Shares have been, nor will be, registered under the Securities Act, and that any sales by such Holders of the New Debentures or any New Debenture Shares shall be conducted in accordance with an available exemption under the Securities Act, and (B) the Company shall have no obligation whatsoever to register the New Debentures or New Debenture Shares under the Securities Act pursuant to this Agreement, any other agreement to which the Holders and the Company are a party or otherwise.
(ix)  No Brokers . Neither Zazove nor any Holder has engaged any broker, finder or other entity acting under the authority of Zazove or any Holder or any of their affiliates that is entitled to any commission or other fee in connection with the Exchange.
 
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(x)  Zazove’s Knowledge and Experience . Zazove has the requisite knowledge and experience in financial and business matters so that it is capable of evaluating the merits and risks of the Exchange and acquiring the New Debentures and the New Debenture Shares and, in connection therewith, Zazove acknowledges that (A) the Company makes no representation regarding the value of the Old Debentures, the New Debentures or the New Debenture Shares, (B) the rights and privileges of holders of shares of the Company’s Common Stock are substantially different from the rights of holders of the Old Debentures (described in the Old Indenture), and (C) Zazove has independently, and without reliance upon the Company or its representatives, made its own analysis and decision to enter into the Exchange and exchange the Old Debentures for the New Debentures.
(xi)  Acting Independently . In entering into this Agreement and the transactions contemplated hereby, Zazove acknowledges that it is acting on behalf of the Holders pursuant to its discretionary authority and not at the direction or instruction of the Company or its representatives, and Zazove has not and will not hold itself out as an agent of the Company in connection with the transactions contemplated hereby or in connection with any subsequent sale of the New Debentures or the New Debenture Shares.
(xii)  Accredited Investor . Zazove and each Holder is an “accredited investor” as defined in Rule 501 promulgated under the Securities Act.
(xiii)  No Advice Regarding Tax Treatment . Neither the Company nor its representatives has made any representation to Zazove or any Holder regarding the tax treatment of the Exchange on the Holders, and Zazove, on behalf of each Holder, has independently, and without reliance upon the Company or its representatives, reached its own conclusions regarding such tax treatment.
4.  Conditions to the Company’s Obligations . The obligations of the Company at the Closing are subject to the satisfaction of each of the following conditions, provided that these conditions are for the sole benefit of the Company and may be waived by the Company at any time in its sole discretion by providing Zazove with prior written notice thereof:
(a)  Execution of the Agreement . Zazove shall have executed this Agreement and delivered the same to the Company.
(b)  Transfer of the Old Debentures . Zazove, on behalf of each Holder, shall take such action as is necessary to have duly and validly transferred and delivered the Old Debentures owned by the Holders to the Company or its order in accordance with the terms of Article 1 hereof.
(c)  Representations and Warranties . The representations and warranties of Zazove in this Agreement shall be true and correct as of the date when made and as of the Closing Date as though made at that time.
(d)  No Prohibition . No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
 
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(e)  Necessary Filings . The Company shall have made all filings under all applicable federal or state securities laws and rules of the New York Stock Exchange necessary to consummate the issuance of the New Debentures (including all filings necessary to qualify the New Indenture under the Trust Indenture Act) pursuant to this Agreement in compliance with such laws and requirements and shall have obtained all authorizations, approvals and acceptances necessary to consummate the transactions contemplated hereby and such authorizations, approvals and acceptances shall be effective as of the Closing Date.
5.  Conditions to Zazove’s Obligations . The obligations of Zazove at the Closing are subject to the satisfaction of each of the following conditions, provided that these conditions are for the sole benefit of each Holder and may be waived by Zazove on behalf of each Holder at any time in its sole discretion by providing the Company with prior written notice thereof:
(a)  Execution of the Agreement . The Company shall have executed this Agreement and delivered the same to Zazove.
(b)  Delivery of the New Debentures . The Company shall have caused the New Debentures to be delivered to the Holders against delivery by Zazove of the Holders’ Old Debentures in accordance with the terms of Article 1 hereof.
(c)  Payments under the Old Debentures . The Holders shall have been paid in full for all interest accruing on the Old Debentures through the day prior to the Closing Date.
(d)  Escrow Agreement . The Company shall have executed that certain Escrow Agreement to be entered into by and among the Company, as depositor, U.S. Bank National Association, as trustee under the New Indenture, and U.S. Bank National Association, as escrow agent (the “ Escrow Agreement ”), and the Escrow Account (as defined in the Escrow Agreement) shall be fully funded with all payments due on the New Debentures through the maturity.
(e)  Representations and Warranties . The representations and warranties of the Company in this Agreement shall be true and correct as of the date when made and as of the Closing Date as though made at that time.
(f)  No Prohibition . No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
6.  Fees and Expenses . Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.
 
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7.  Notices . All notices, requests, demands, claims and other communications hereunder shall be in writing and shall be (a) transmitted by hand delivery, (b) mailed by first class, registered or certified mail, postage prepaid, (c) transmitted by overnight courier, or (d) transmitted by facsimile, and in each case,
if to the Company, to:
Safeguard Scientifics, Inc.
435 Devon Park Drive, Building 800
Wayne, PA 19087
Attention: General Counsel
Facsimile: (610) 975-4984
with a copy to (which shall not constitute notice):
Morgan, Lewis and Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103
Attention: Justin W. Chairman
Facsimile: 215.963.5001
if to Zazove or a Holder, to:
Zazove Associates LLC
1033 Skokie Blvd., Suite 310
Northbrook, IL 60062
Attention: Steven M. Kleiman
Facsimile: 847.239.7101
Notices mailed or transmitted in accordance with the foregoing shall be deemed to have been given upon receipt by the addressee.
8.  Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflicts of law thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
 
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9.  Entire Agreement . This Agreement and the New Debentures constitute the entire agreement among the parties pertaining to the Exchange and supersedes the parties’ prior agreements, understandings, negotiations and discussions, whether oral or written, on such matters, and this Agreement shall not be amended, changed, supplemented, waived or otherwise modified or terminated except by instrument in writing signed by each of the parties hereto.
10.  Miscellaneous . The representations, warranties, covenants and agreements contained in this Agreement shall survive the execution and delivery of this Agreement and the closing of the transactions contemplated hereby and shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any party hereto. This Agreement is intended to bind and inure to the benefit of the signatories to this Agreement and their respective successors, permitted assigns, heirs, executors, administrators and representatives. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page by facsimile or as an attachment to an electronic mail message in PDF or similar format shall be as effective as delivery of a manually executed counterpart. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. This Agreement shall be solely for the benefit of the signatories to this Agreement, and no other person or entity shall be a third-party beneficiary hereof. No failure or delay by any party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
[ Remainder of Page Intentionally Left Blank ]
 
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly executed on its behalf as of the date first written above.
 	 	 	 	 	
SAFEGUARD SCIENTIFICS, INC.
 	 	 	
By:  	/s/ Brian J. Sisko	 	 	
 	Name:  	Brian J. Sisko	 	 	
 	Title: 	Senior Vice President and General Counsel		
 	
ZAZOVE ASSOCIATES LLC
 	 	 	
By:  	/s/ Steven M. Kleiman	 	 	
 	Name:  	Steven M. Kleiman 	 	 	
 	Title:  	Chief Operating Officer 	 	 	
[ Zazove Exchange Agreement ]

 

SCHEDULE A
DTC DIRECTION
Century National Insurance Company
Old Debentures Principal Amount $1,000,000
Union Bank
DTC #2145
For Credit to Account # 240002130-04
Contact: Denise Wong 415-705-7326
Qwest Occupational Health Trust
Old Debentures Principal Amount $200,000
BNY Mellon
DTC #954
For Credit to Account USVF7011002
Contact: Andrew Rensko 412-236-0172
Qwest Pension Trust
Old Debentures Principal Amount $870,000
BNY Mellon
DTC #954
For Credit to Account USWF353002
Contact: Andrew Rensko 412-236-0172
Virginia Retirement System
Old Debentures Principal Amount $3,930,000
BNY Mellon
DTC #954
For Credit to Account VRSF46420002
Contact: Andrew Rensko 412-236-0172
The Washington University
Old Debentures Principal Amount $1,152,000
BNY Mellon
DTC #954
For Credit to Account WUSF1018002
Contact: Andrew Rensko 412-236-0172
Zazove Aggressive Growth Fund, L.P.
Old Debentures Principal Amount $1,050,000
Citgroup
DTC #418
For Credit to Account #522-9075R
Contact: Doreen Pappas 212-723-4270

 

EXHIBIT A
FORM OF NEW DEBENTURE
[See attached]

Exhibit 99.1

FOR IMMEDIATE RELEASE
CONTACT:
John E. Shave
Vice President, Business Development and Corporate Communications
610.975.4952
SAFEGUARD SCIENTIFICS ANNOUNCES $47 MILLION DEBT EXCHANGE
Wayne, PA, March 11, 2010 — Safeguard Scientifics, Inc. (NYSE: SFE), a holding company that builds value in growth-stage life sciences and technology companies, today announced that it has entered into privately negotiated agreements with certain institutional holders of an aggregate of approximately $47 million in face value of its 2.625% senior convertible debentures due 2024 to exchange the debentures held by such holders for a like face amount of newly issued 10.125% senior convertible debentures, due 2014. The remaining $31 million outstanding face amount of the 2024 debentures will remain outstanding.
“This exchange transaction is an important element in the continued strengthening of our balance sheet,” said Peter J. Boni , Safeguard President and Chief Executive Officer. “As we have previously stated, we have been considering restructuring, refinancing or repaying our existing 2024 debentures on or before March 2011, the first put date for such instruments. This transaction gives us enhanced financial flexibility prior to that date.”
In 2004, Safeguard issued $150 million of the 2024 debentures with a maturity date of March 15, 2024. Holders of the 2004 debentures have the right to require repurchase of the debentures at face value, plus accrued and unpaid interest, in March of 2011, 2014 or 2019. Since 2006, Safeguard has repurchased $71.8 million in face value of the debentures at an average 21% discount to face value.
The new debentures will mature in March 2014, bear interest at an annual rate of 10.125% and are convertible, subject to certain restrictions, into shares of Safeguard common stock. The effective conversion price per share is $16.50. Upon a conversion of these debentures, the Company has the right to settle the conversion in stock, cash or a combination thereof.
“By establishing a 2014 maturity date for the new debentures, we are better matching our long term debt obligations with our exit expectations regarding our partner company interests, our continuing cash deployment plans and other pursuits of ancillary sources of capital. We also feel that the flexibility to settle all or a part of these obligations using stock, cash or combination thereof in the event of a conversion is advantageous to our shareholders in managing potential dilution,” said Stephen T. Zarrilli , Safeguard Senior Vice President and Chief Financial Officer.
Under certain circumstances, the Company has the right to force the conversion of these instruments after the second anniversary should it be appropriate for the Company. The forced conversion would require that the Company compensate the holders for any interest due through maturity.
The transaction is exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) pursuant to Section 3(a)(9) of the Securities Act. It is intended that the exchange transaction will close in late March or early April following the qualification of the related indenture under the Trust Indenture Act of 1939. The Company will file an Application for Qualification of the Indenture under the Trust Indenture Act on Form T-3 with the SEC. The form of the indenture will be attached thereto. All material terms of the new debentures will be set forth in, and the exchange agreements will be attached as exhibits to, a Current Report on Form 8-K to be filed by the Company with the SEC.

 

Stifel Nicolaus & Company, Inc. is acting as the Company’s exclusive financial advisor in connection with the exchange transaction.
No Solicitation
This press release shall not constitute an offer to sell or a solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
About Safeguard Scientifics
Founded in 1953 and based in Wayne, PA, Safeguard Scientifics, Inc. (NYSE: SFE) provides growth capital for entrepreneurial and innovative life sciences and technology companies. Safeguard targets life sciences companies in Molecular and Point-of-Care Diagnostics, Medical Devices, Regenerative Medicine and Specialty Pharmaceuticals, and technology companies in Internet / New Media, Financial Services IT and Healthcare IT with capital requirements of up to $25 million. Safeguard participates in expansion financings, corporate spin-outs, management buyouts, recapitalizations, industry consolidations and early-stage financings. For more information, please visit our website at www.safeguard.com or our blog at blog.safeguard.com .
Forward-looking Statements
Except for the historical information and discussions contained herein, statements contained in this release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Our forward-looking statements are subject to risks and uncertainties. The risks and uncertainties that could cause actual results to differ materially, include, among others, managing rapidly changing technologies, limited access to capital, competition, the ability to attract and retain qualified employees, the ability to execute our strategy, the uncertainty of the future performance of our companies, acquisitions and dispositions of companies, the inability to manage growth, compliance with government regulations and legal liabilities, additional financing requirements, the effect of economic conditions in the business sectors in which our companies operate, and other uncertainties described in the Company’s filings with the Securities and Exchange Commission. Many of these factors are beyond our ability to predict or control. In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. The Company does not assume any obligation to update any forward-looking statements or other information contained in this press release.
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