UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

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Safeguard Scientifics, Inc.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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435 Devon Park Drive, Building 800
Wayne, PA 19087-1945

Phone:		610-293-0600
Toll-Free:		877-506-7371
Fax:		610-293-0601

Internet: www.safeguard.com

SAFEGUARD SCIENTIFICS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

Dear Shareholder:

You are invited to attend the Safeguard Scientifics, Inc. 2010 Annual Meeting of Shareholders.

DATE:		May 13, 2010
TIME:		8:00 a.m. Prevailing Eastern Time
PLACE:		Dolce Valley Forge
		301 West DeKalb Pike
		King of Prussia, PA 19406
		610-337-1200
RECORD DATE:		Only shareholders who owned stock at the close of business on March 26, 2010, can vote at this meeting and any adjournments that may take place.
ITEMS OF BUSINESS:		1.   To elect eight directors;
		2.   To consider and vote upon a proposal to ratify the appointment of KPMG LLP as Safeguard’s independent registered public accounting firm for the fiscal year ending December 31, 2010; and
		3.   To consider such other business as may properly come before the meeting.

We also will report on Safeguard’s business results and other matters of interest to our shareholders. You will have an opportunity at the meeting to ask questions, make comments and meet our management team.

Commencing in 2010, rule changes enacted by the New York Stock Exchange have changed the manner in which shares held in brokerage accounts may be voted in director elections. If you do not vote your shares on proposal one (Election of Directors), your brokerage firm is no longer able to vote your shares for you. As a result, your shares will remain unvoted. Therefore, it is more important than ever that you vote your shares for all proposals, including the Election of Directors.

We encourage you to read the proxy statement and submit your proxy or voting instructions as soon as possible to ensure your representation at the annual meeting, regardless of whether you plan to attend in person. You may vote:

(1) by completing, signing, dating and returning your proxy card or voting instruction form in the prepaid envelope provided; or (in most cases)

(2) by telephone as follows:

Shareholders of Record: call 1-866-540-5760

Owners of shares held in street name: call the number indicated in the box at the top left hand side of your voting instruction form;

or

(3) by Internet as follows:

Shareholders of Record: go to http://www.proxyvoting.com/sfe

Owners of shares held in street name: go to www.proxyvote.com.

For specific instructions on how to vote your shares, please refer to the section entitled “Questions and Answers about the Meeting and the Proposals” beginning on page 1 of the proxy statement and the instructions on the proxy card or voting instruction form.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 13, 2010

The proxy statement and our annual report for the fiscal year ended December 31, 2009, are available at www.safeguard.com/proxy.

This notice of annual meeting, proxy statement, accompanying proxy card, and 2009 annual report will be mailed to shareholders beginning on or about April 7, 2010, in connection with the solicitation of proxies by the Board of Directors.

By Order of the Board of Directors,

Deirdre Blackburn
Secretary

April 1, 2010

PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS

QUESTIONS AND ANSWERS ABOUT THE MEETING AND THE PROPOSALS

Q:

When and where is the annual meeting?

A:		Safeguard’s annual meeting is being held on May 13, 2010, at 8:00 a.m. prevailing Eastern Time at the Dolce Valley Forge, 301 West DeKalb Pike, King of Prussia, PA 19406. You may obtain directions to the meeting at www.safeguard.com/dolce.
Q:		Do I need a ticket or proof of Safeguard ownership to attend the annual meeting?
A:		You will not need a ticket to attend the annual meeting. However, only persons with evidence of stock ownership, or who are guests of Safeguard, may attend and be admitted to the annual meeting. Photo identification, such as a valid driver’s license or passport, will be required. If you are not a shareholder of record but hold shares through a broker, trust company, bank or other nominee, you will need to provide proof of beneficial ownership on the record date, such as a legal proxy from your broker, trust company, bank or other nominee, your most recent brokerage account statement prior to March 26, 2010, a copy of the voting instruction form provided by your broker, trustee or other nominee, or other similar evidence of ownership. If you do not have photo identification and proof that you own Safeguard shares, you will not be admitted to the meeting.
Q:		Why am I receiving these materials?
A:		You are receiving Safeguard’s annual report, notice of annual meeting, proxy statement and a proxy card or voting instruction form because you owned shares of Safeguard stock on March 26, 2010, the record date for determining the shareholders entitled to vote at the annual meeting. This proxy statement contains detailed information relating to the proposals on which we would like you, as a shareholder, to vote. The proxy card or voting instruction form is used for voting on the proposals. The annual report, notice of annual meeting and proxy statement also are available on the Internet at www.safeguard.com/proxy.
Q:		How many shares must be present to hold the meeting?
A:		To hold the meeting, a quorum must be present. A quorum is a majority of our outstanding shares, which may be represented at the meeting either in person or by proxy. Proxies received but marked as abstentions or containing broker non-votes on a particular matter will be included in the calculation of the number of shares entitled to vote for the purpose of determining the presence of a quorum.
Q:		What am I voting on?
A:		You are being asked to vote on:

1.

The election of eight directors who have been nominated to serve on Safeguard’s Board of Directors (“Board”); and

2.

A proposal to ratify the appointment of KPMG LLP as Safeguard’s independent registered public accounting firm for the 2010 fiscal year.

We also will consider other business that properly comes before the annual meeting.

Q:		How does Safeguard’s Board of Directors recommend I vote?
A:		Unless you instruct otherwise on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of Safeguard’s Board. The Board recommends a vote:

	•		“FOR” the election of each Board nominee; and
	•		“FOR” the proposal to ratify the appointment of KPMG LLP as Safeguard’s independent registered public accounting firm for the fiscal year ending December 31, 2010.

Our Board also requests discretionary authority to cumulate votes in the election of directors and to vote on any other matters that may properly arise at the meeting. If our Board gives no recommendation on any such matter, the proxy holders will vote in their own discretion.

Q:		How many votes do I have?
A:		Each share of Safeguard common stock outstanding on the record date is entitled to vote on all items being voted upon at the annual meeting. On the record date, we had 20,474,286 shares of common stock issued and outstanding.
		Every shareholder may cast one vote for each share owned on the record date. In the election of directors, shareholders may elect to cumulate their votes as described below under “What does cumulative voting mean?”
Q:		What does cumulative voting mean?
A:		Cumulative voting applies only in the election of directors. It means that you may cast a number of votes equal to the number of Safeguard shares you own multiplied by the number of directors to be elected. For example, since eight directors are standing for election at the annual meeting, if you hold 100 shares of Safeguard stock, you may cast 800 votes (eight times 100) in the election of directors. You may distribute those votes among as few or as many of the eight nominees as you wish. In other words, in the example provided, you may cast all 800 votes “FOR” one nominee or allocate your 800 votes among two or more nominees, as long as the total equals 800 votes.
		If you received a proxy card and wish to vote cumulatively, you must:

	•		Write the words “cumulate for” in the space provided under item 1 of the proxy card; and
	•		Write the name of each nominee and the number of votes to be cast for each nominee in that space.

If you vote cumulatively, please check to be sure that the votes you cast add up to the number of shares you own multiplied by eight. If the number of votes does not add up correctly, your votes will not be counted until a properly completed proxy card has been received.

The cumulative voting feature for the election of directors also is available by voting in person at the annual meeting; however, it is not available if you vote by telephone or the Internet. If you are the beneficial owner of shares held in street name and wish to vote cumulatively, you will need to contact your broker, bank or other nominee holder of your shares.

Q:		What is the difference between holding shares as a “shareholder of record” and as a “beneficial owner”?
A:		Most of Safeguard’s shareholders hold their shares through a broker, bank or other nominee rather than directly in their own name. There are important distinctions between shares held of record and those owned beneficially.
		Shareholder of Record
		If your shares are registered directly in your name with Safeguard’s transfer agent, BNY Mellon Shareowner Services, you are considered the shareholder of record with respect to those shares, and these proxy materials are being sent to you directly by Safeguard. As a shareholder of record, you have the right to grant your voting proxy directly to Safeguard or to vote in person at the meeting. If you are a shareholder of record, Safeguard has enclosed a proxy card for your use in voting your shares.

		Beneficial Owner
		If your shares are held in street name (such as in a brokerage account or by another nominee, such as a bank or trust company), you are considered the beneficial owner of the shares, and these proxy materials, together with a voting instruction form, are being forwarded to you by your broker or other nominee. As a beneficial owner, you have the right to direct your broker or other nominee how to vote your shares, but unless you receive a proxy from your broker, you cannot vote your shares directly or by proxy — you must instruct your broker or other nominee as to how to vote your shares. You also are invited to attend the annual meeting. To vote your shares at the meeting, you will need a legal proxy from your broker or other nominee authorizing you to vote at the meeting.
Q:		How do I vote my shares?
A:		If you are a shareholder of record, there are three ways for you to vote by proxy:

	1.		Log on to the Internet at http://www.proxyvoting.com/sfe and follow the instructions at that site;
	2.		Call 1-866-540-5760 and follow the instructions; or

3.

Sign and date each proxy card you receive, mark the boxes indicating how you wish to vote, and return the proxy card in the prepaid envelope provided.

Telephone and Internet voting will close at 11:59 p.m. prevailing Eastern Time the day prior to the annual meeting date.

If you sign your proxy card but do not mark any boxes showing how you wish to vote, Brian J. Sisko and Deirdre Blackburn, as the proxies designated by our Board to act on behalf of shareholders, will vote your shares and cumulate your votes as recommended by our Board and, in their discretion, will vote on any other matters which may properly arise at the meeting.

If you are the beneficial owner of shares held in street name, you will receive a voting instruction form directly from your broker, bank or other nominee describing how to vote your shares. This form will, in most cases, offer you three ways to vote:

1.

Via the Internet at www.proxyvote.com;

2.

By telephone (call the number indicated in the box at the top left hand side of your voting instruction form); or

3.

By completing, signing and returning the voting instruction form in the accompanying prepaid envelope.

You should carefully follow any instructions sent by your broker, bank or other nominee to ensure that your instructions are received and your votes are cast as directed.

Whether you are a shareholder of record or the beneficial owner of the shares, you will need to have your proxy card or voting instruction form in hand when you call or log on to the Internet.

Q:		What do I do if I change my mind after I vote my shares?
A:		If you are a shareholder of record, you may change your vote at any time prior to the vote at the annual meeting by:

1.

Re-voting by telephone or via the Internet (only your latest vote will be counted);

2.

Submitting another proxy card with a later date (again, only your latest vote will be counted);

	3.		Sending written notice to our Secretary (which must be received at our corporate headquarters on or before the business day prior to the annual meeting) stating that you would like to revoke (that is, cancel) your proxy; or
	4.		Voting in person at the annual meeting.

If you are the beneficial owner of shares held in street name, you may submit new voting instructions by following the instructions provided by your broker, bank or other nominee. You also may vote in person at the annual meeting if you obtain a legal proxy from your broker or other nominee authorizing you to vote at the meeting.

Attendance at the annual meeting will not cause your previously granted proxy to be revoked unless you specifically request such a revocation. If you are a shareholder of record and wish to vote at the meeting, you may do so by presenting your completed proxy card or ballot to the judge of election. If you are a beneficial owner of shares held in street name and wish to vote at the meeting, you must present a legal proxy from your broker or other nominee to the judge of election along with your ballot.

Q:		What is the required vote for a proposal to pass?
A:		Election of Directors. The eight nominees who receive the highest number of “FOR” votes at the annual meeting will be elected as directors. A properly executed proxy that withholds authority to vote with respect to the election of one or more directors will not be voted with respect to the director or directors indicated and will not be taken into account in determining the outcome of the election; however, it will be counted for purposes of determining whether there is a quorum.
		Other Proposals. For the ratification of the appointment of our independent registered public accounting firm, and any other proposal that may be properly brought before the meeting, the affirmative vote of a majority of the votes cast by all the shareholders entitled to vote for the proposal will be required, so long as a quorum representing a majority of our outstanding voting stock is present, either in person or by proxy.
		A properly executed proxy marked “ABSTAIN” with respect to any proposal will be counted for purposes of determining whether there is a quorum. However, under Pennsylvania law, a proxy marked “ABSTAIN” is not considered a vote cast. Accordingly, an abstention will have no effect on either proposal included in this proxy statement. Broker non-votes (which are explained in the next question) are not counted in the tally of votes “FOR” or “AGAINST” a proposal and, therefore, have no effect on the proposal, assuming a quorum is present.
Q:		Will my shares be voted if I do not sign and return my proxy card or voting instruction form?
A:		They could be. If you are a shareholder of record and do not provide a proxy, your shares will not be voted unless you attend the meeting and vote your shares. If you are a beneficial owner of shares held in street name and you do not provide your broker with voting instructions, your broker or other nominee may either use its discretion to vote your shares on “routine” matters or leave your shares unvoted. The ratification of the appointment of our independent registered public accounting firm is considered “routine” by the New York Stock Exchange (“NYSE”). However, for matters deemed “non-routine” by the NYSE, such as the election of directors, your broker or other nominee would not be able to vote without your instructions, in which case your shares would be considered “broker non-votes” on that particular matter.
Q:		Who will count the votes?
A:		A representative of Safeguard will count the votes and act as the judge of election.

Q:		What does it mean if I get more than one proxy card or voting instruction form?
A:		It may mean that you have multiple accounts at the transfer agent or hold your shares in more than one brokerage account. Please provide voting instructions for all proxy cards and voting instruction forms that you receive. If you are a shareholder of record, we encourage you to contact our transfer agent to obtain information about how to combine your accounts. You may contact our transfer agent at the following address and telephone numbers:
		Safeguard Scientifics, Inc. c/o BNY Mellon Shareowner Services P. O. Box 358015 Pittsburgh, PA  15252-8015

Toll Free:		1-800-851-9677
TDD Hearing Impaired:		1-800-231-5469
International:		1-201-680-6578
International TDD Hearing Impaired:		1-201-680-6610

If you are a shareholder of record, you also can find information on transferring shares and other useful shareholder information on our transfer agent’s web site at www.bnymellon.com/shareowner/isd.

Q:		What is “householding” and how does it affect me?
A:		If you and other residents at your mailing address are the beneficial owner of shares held in street name, your broker, bank or other nominee may have notified you that your household will receive only one annual report and proxy statement for each company in which you hold stock through that broker, bank or other nominee. This practice is commonly referred to as “householding” and potentially provides extra convenience for shareholders and cost savings for companies. Unless you responded that you did not want to participate in householding, you were deemed to have consented to the process. Therefore, your broker or other nominee will send only one copy of our annual report and proxy statement to your address; however, each shareholder in your household should continue to receive a separate voting instruction form.
		If you are the beneficial owner of shares held in street name and you would like to receive your own set of our annual report and proxy statement in the future, or if you share an address with another Safeguard shareholder and together both of you would like to receive only a single set of Safeguard annual documents, please contact Broadridge by telephone at 1-800-542-1061. Be sure to provide Broadridge with your name, the name of your brokerage firm, bank or other nominee, and your account number.
		If you are currently subject to householding and would like to receive an individual copy of this year’s annual report or proxy statement, we will promptly send a copy to you if you send a written request to Safeguard Scientifics, Inc., Attention: Investor Relations, 435 Devon Park Drive, Building 800, Wayne, PA 19087-1945 or call 1-877-506-7371.

ELECTION OF DIRECTORS

Item 1 on Proxy Card

Our directors are elected annually and serve until the next annual meeting of shareholders. It has been determined by our Nominating & Corporate Governance Committee that, effective as of the annual meeting, our Board will consist of eight members; therefore, there are eight nominees for election this year. Michael Cody, a current member of our Board, informed the Board in March that, based on his other professional obligations, he would not stand for re-election to our Board. The determination was then made to decrease the size of our Board to eight effective at the upcoming annual meeting. All of the nominees for this year’s election are currently serving as directors. Each nominee has consented to serve until the next annual meeting if elected. If any director is unable to stand for re-election after distribution of this proxy statement, the Board may reduce its size or designate a substitute. If the Board designates a substitute, proxies voting on the original director candidate will be cast for the substituted candidate.

The Board believes that the Board should collectively possess a broad range of skills, expertise, industry and other knowledge, and business experience that meets the needs of our corporate strategy and provides effective oversight of our business. The Nominating & Corporate Governance Committee does not have a formal policy with respect to diversity; however, the Nominating & Corporate Governance Committee’s charter provides in relevant part that the committee shall “seek members from diverse backgrounds” and goes on to say that the committee will evaluate nominees for election to our Board “with the objective of recommending a group that through its diversity of experience can provide relevant advice and counsel to management.” The Board and the Nominating & Corporate Governance Committee believe that it is essential that our Board members have diverse professional experience and differences in viewpoints and skills. In considering whether to recommend any candidate for inclusion in the Board’s slate of recommended director nominees, the Nominating & Corporate Governance Committee considers the needs of the Board as a whole as well as the staffing needs of each of its committees. With respect to the nomination of continuing directors for re-election, an individual’s past contributions to the Board also are considered.

During mid to late 2009 and early 2010, the Board’s Nominating & Corporate Governance Committee undertook a thorough analysis of the types of skill sets, professional backgrounds and individual profiles that would be helpful to have represented on Safeguard’s Board. It then also undertook a skill inventory exercise regarding each of Safeguard’s current Board members. The committee then utilized all of the skill inventory information provided by our individual directors to make an assessment of the fit between Safeguard’s needs regarding its Board composition and the individual attributes of each of the nominees for re-election at the upcoming annual meeting.

All of our directors bring to our Board executive leadership experience from their service as executives and/or directors of other entities. The biography of each of the nominees below contains information regarding the person’s service as a director, business experience, director positions held currently or at any time during the last five years, and the experiences, qualifications, attributes and skills that caused the Nominating & Corporate Governance Committee and our Board to determine that the person should serve as a director during 2010, given our business and structure.

THE BOARD RECOMMENDS A VOTE “FOR” EACH NOMINEE. THE EIGHT NOMINEES WHO RECEIVE THE HIGHEST NUMBER OF AFFIRMATIVE VOTES WILL BE ELECTED AS DIRECTORS.

Peter J. Boni, age 64, joined Safeguard as President and Chief Executive Officer and a member of the Board in August 2005. Mr. Boni also is a director of Clarient, Inc. and previously served as non-executive Chairman of Intralinks, Inc. Positions held include Operating Partner for Advent International, Inc., a global private equity firm with $10 billion under management (April 2004 to August 2005); Chairman and Chief Executive Officer of Surebridge, Inc., an applications outsourcer serving the mid-market (March 2002 to April 2004); Managing Principal of Vested Interest LLC, a management consulting firm (January 2001 to March 2002); and President and Chief Executive Officer of Prime Response, Inc., an enterprise applications software provider (February 1999 to January 2001). Mr. Boni holds a BA degree from the University of Massachusetts at Amherst and has more than 25 years of experience in venture capital/private equity; capital markets transactions; debt and equity financings; strategic planning and development; merger and acquisition transactions; and domain expertise in the technology sector.

Julie A. Dobson, age 53, has served on our Board since 2003. Ms. Dobson also is a director of American Water Works Company, Inc. and PNM Resources, Inc. and previously served as non-executive Chairperson of the Board of LCC International, Inc. Positions held include Chief Operating Officer (1998 until February 2002) of TeleCorp PCS, Inc., a wireless/mobile phone company that was acquired by AT&T Wireless, Inc. in late 2001; President of Bell Atlantic Corporation’s New York/ New Jersey Metro Region mobile phone operations (1997 to 1998); and a number of executive positions during her 18-year career with Bell Atlantic Corporation, including sales, operations, and strategic planning and development in the chief executive officer’s office. Ms. Dobson holds a BS degree from The College of William and Mary and an MBA degree from the University of Pittsburgh. Ms. Dobson has 22 years of corporate and entrepreneurial experience, including experience relevant to corporate finance and accounting matters; strategic planning, corporate development and operations management; capital markets transactions; as well as debt and equity financings. Ms. Dobson also has relevant experience growing businesses organically and through merger and acquisition transactions; and experience serving on public company boards and the principal committees thereof.

Andrew E. Lietz, age 71, has served on our Board since 2003 and was appointed Chairman of the Board in August 2009. Mr. Lietz also is a director of Amphenol Corporation and DDi Corp. and previously served as a director of Omtool Corporation. Positions held include Managing Director and Founder of Rye Capital Management, LLC, a private equity investment firm (2001 to 2008); Executive Chairman (late 2000 until mid 2002) of Clare Corporation, a designer and manufacturer of integrated circuits, solid-state relays and electronic switches, which was acquired by Ixys Corporation in June 2002; President and Chief Executive Officer (1995 to 2000) of, and several other executive positions during his 16-year career with, Hadco Corporation, a global manufacturer of electronic interconnect products and services; and a variety of positions at IBM Corporation. Mr. Lietz holds a BS degree from the Wayne State University Business Administration School. He has more than 40 years of corporate management experience, including strategic planning; operations management; capital markets transactions; debt and equity financings; merger and acquisition transactions; and more than 20 years’ service in public sector activities and on public company boards.

George MacKenzie, age 61, has served on our Board since 2003. Mr. MacKenzie also is a director of American Water Works Company, Inc., C&D Technologies, Inc. and Tractor Supply Company and previously served as a director of Central Vermont Public Service Company and Traffic.com. Positions held include non-executive Chairman of the Board (May 2006 to present) and interim Chief Executive Officer (January 2006 to April 2006) of American Water, a provider of water services in North America; interim Chief Executive Officer of C&D Technologies, Inc., a technology company that produces and markets systems for the conversion and storage of electrical power (March 2005 to July 2005); Executive Vice President and Chief Financial Officer of P.H. Glatfelter Company, a manufacturer of specialty papers and engineered products (September 2001 to June 2002); Vice Chairman (2000 to 2001) and Chief Financial Officer (1995 until his retirement in 2001) of, and several other executive positions during his 22-year career with, Hercules, Incorporated, a global chemical specialties manufacturer. Mr. MacKenzie holds a BS degree from the University of Delaware and an MBA degree from the University of Chicago. Mr. MacKenzie has extensive experience in corporate finance and accounting. He has served as the chief financial officer of a publicly traded company, and he is a certified public accountant. Mr. MacKenzie also has experience in capital markets transactions; debt and equity financings; global strategic planning and operations management; merger and acquisition transactions; and risk management. In addition, he has extensive public company board experience, including service on multiple audit, compensation and nominating and corporate governance committees.

George D. McClelland, age 63, has served on our Board since 2006. Positions held include co-founder, Vice Chairman and Director of Business Development of F Squared Investments, an investment management company (2006 to present); Chairman, CEO and co-founder of eSecLending, a provider of securities lending services to the pension industry (2000 to 2001); a director of Riverstone Networks, Inc. and Storage Networks, Inc.; Senior Vice President, responsible for managing many of the portfolio companies of United Asset Management Corporation, a public holding company (1994 to 2001); multiple corporate management roles at FMR Corp., a diversified financial services company (1987 to 1991); and Corporate Treasurer of Data General Corporation, a technology company (1972 to 1987). Mr. McClelland holds a BA degree from Trinity College and an MBA degree from Harvard Business School. Mr. McClelland has extensive experience in corporate finance, treasury and accounting; capital markets transactions; debt and equity financings; venture investment; investment management; merger and acquisition transactions; and risk management. He also has entrepreneurial experience as a founding member of multiple companies; extensive domain expertise in the technology, healthcare and financial sectors; and public and private company board service experience.

Jack L. Messman, age 70, has served on our Board since 1994. Mr. Messman also is a director of AMG Advanced Metallurgical Group N.V., RadioShack Corporation and Timminco Limited. Positions held include Chairman of the Board and Chief Executive Officer of Novell, Inc., a provider of infrastructure software products focused around Linux and identity management (2001 to 2006); Chief Executive Officer and President of Cambridge Technology Partners (Massachusetts), Inc., an e-business systems integration company (August 1999 until its acquisition by Novell, Inc. in July 2001); Chairman and Chief Executive Officer of Union Pacific Resources Group Inc., an independent oil and gas exploration and production company (April 1991 to August 1999); and Chairman and Chief Executive Officer of USPCI, Inc., Union Pacific’s environmental services company (May 1988 to April 1991). Mr. Messman holds a BS degree from the University of Delaware and an MBA degree from Harvard Business School. Mr. Messman has extensive experience in treasury and financial planning matters; capital markets transactions; debt and equity financings; strategic planning and operations management; as well as merger and acquisition transactions. In addition, he possesses domain expertise in the technology sector and public and private company board service experience.

John J. Roberts, age 65, has served on our Board since 2003. Mr. Roberts also is a director of Armstrong World Industries, Inc. and Vonage Holdings Corp. and a trustee of Pennsylvania Real Estate Investment Trust and previously served as a director of Sicor, Inc. Positions held include Global Managing Partner and a Member of the Leadership Team of PricewaterhouseCoopers LLP at the time of his retirement in June 2002, completing a 35-year career with the professional services firm during which he served in a variety of client service and operating positions. Mr. Roberts holds a BSBA degree from Drexel University and is a certified public accountant. Mr. Roberts has extensive experience in corporate finance and accounting; capital markets transactions; debt and equity financings; global strategic planning, corporate development and operations management; management and technology consulting; risk management; as well as merger and acquisition transactions. He also has public company board service experience, including service on multiple audit committees.

Dr. Robert J. Rosenthal, age 53, has served on our Board since 2007. Positions held include Chief Executive Officer of Intelligent Medical Implants AG, a company that is developing an intelligent retinal implant system for degenerative retinal disorders (January 2010 to present); President, Chief Executive Officer and a director of Magellan Biosciences, Inc., a provider of clinical diagnostics and life sciences research tools (October 2005 to December 2009); President, Chief Executive Officer and a director of TekCel, Ltd., a provider of life sciences research tools (October 2003 to January 2007); President and Chief Executive Officer of Boston Life Sciences, Inc., a diagnostic and therapeutic development company (July 2002 to October 2003); President and Chief Executive Officer of Magellan Discovery Technologies, LLC, a life sciences acquisition company (January 2001 to July 2002); Senior Vice President of PerkinElmer Corporation and President of its instrument division (March 1999 to November 2000); and in various executive positions at Thermo Optek Corporation (September 1995 to February 1999). Dr. Rosenthal holds a BS degree from the University of Maryland, an MS degree from State University of New York, and a PhD degree from Emory University; completed a post-doctoral fellowship at, and was a guest scientist of the Alexander von Humboldt Foundation, followed by an additional post-doctoral fellowship at UCLA; and he holds an AEA Executive MBA degree from Stanford University. Dr. Rosenthal has 20 years of experience relating to companies involved in the development of diagnostics, therapeutics, medical devices, and life sciences tools. His specific experience includes strategic planning and positioning; corporate and product development; operations management; capital markets transactions; debt and equity financings; fund-raising; merger and acquisition transactions; and corporate finance. Dr. Rosenthal also has significant public and private company board experience.

CORPORATE GOVERNANCE AND BOARD MATTERS

Safeguard’s Corporate Governance Guidelines, Code of Business Conduct and Ethics, and the charters for the Board’s Audit Committee, Compensation Committee and Nominating & Corporate Governance Committee are available at www.safeguard.com/governance. The Code of Business Conduct and Ethics is applicable to all employees of Safeguard, including each of our executive and financial officers, and the members of our Board. Safeguard intends to post information regarding amendments to or waivers from our Code of Business Conduct and Ethics (to the extent applicable to Safeguard’s directors or executive officers) in the Corporate Governance section of our website. Our website is not part of this proxy statement. All references to our website address are intended to be inactive textual references only.

Board Independence. Safeguard’s common stock is listed on the New York Stock Exchange, which we refer to below as the “NYSE.” To assist the Board in making independence determinations, the Board has adopted categorical standards which are reflected in our Corporate Governance Guidelines. Generally, under these standards, a director does not qualify as an independent director if any of the following relationships exist:

•

Currently or within the previous three years, the director has been employed by us; someone in the director’s immediate family has been one of our executive officers; or the director or someone in the director’s immediate family has been employed as an executive officer of another company where any of our present executive officers at the same time serves or served on that company’s compensation committee;

•

The director is a current partner or employee, or someone in the director’s immediate family is a current partner of, a firm that is our internal or external auditor; someone in the director’s immediate family is a current employee of the firm and personally works on our audit; or the director or someone in the director’s immediate family is a former partner or employee of such a firm and personally worked on our audit within the last three years;

•

The director or someone in the director’s immediate family received, during any 12-month period within the last three years, more than $120,000 in direct compensation from us (other than director and committee fees and pension or other forms of deferred compensation for prior service that are not contingent in any way on continued service);

•

The director is a current employee or holder of more than 10% of the equity of another company, or someone in the director’s immediate family is a current executive officer or holder of more than 10% of the equity of another company, that has made payments to or received payments from us, in any of the last three fiscal years of the other company, that exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues; or

•

The director is a current executive officer of a charitable organization to which we have made charitable contributions in any of the charitable organization’s last three fiscal years that exceed the greater of $1 million or 2% of that charitable organization’s consolidated gross revenues.

The Board has determined that, of our current Board members, Michael Cody, Julie Dobson, Andrew Lietz, George MacKenzie, George McClelland, Jack Messman, John Roberts and Robert Rosenthal have no direct or indirect material relationships with us other than their directorship and, therefore, are independent within the meaning of the NYSE listing standards and satisfy the categorical standards contained in our Corporate Governance Guidelines. Mr. Boni, our Chief Executive Officer, is our only non-independent director.

Board Leadership Structure and Committee Composition. At the date of this proxy statement, Safeguard’s Board has nine members and four standing committees. Effective at the annual meeting, the Board will be made up of eight members. The Board held six meetings in 2009. Each incumbent director attended at least 75% of the total number of meetings of the Board and committee(s) of which he or she was a member. Directors are invited and encouraged, but not required, to attend annual meetings of Safeguard shareholders. Safeguard typically undertakes to schedule its annual meeting for a date, time and place that is coordinated with a normally scheduled Board meeting, so as to encourage attendance at the annual meeting by all directors. For reasons beyond our control, that coordination was not possible in 2009. Therefore, only two of our current directors attended our 2009 annual meeting of shareholders.

Based upon the recommendation of our Nominating & Corporate Governance Committee, the Board has determined that separating the roles of the Chief Executive Officer and Chairman of the Board is in the best interests of the shareholders at the present time. The Board views the role of the Chief Executive Officer as having responsibility for the day-to-day leadership and performance of Safeguard, while the Chairman of the Board provides guidance to the Chief Executive Officer, sets the agenda for Board meetings and presides over meetings of the Board.

Under our Corporate Governance Guidelines and NYSE listing standards, non-employee directors meet in executive session at each regularly scheduled Board meeting, outside of the presence of any management directors and any other members of Safeguard’s management. The Chairman presides at these sessions.

The table below describes the membership of each of the current committees during 2009 and the number of meetings held by each of these committees during 2009.

								Nominating &
		Acquisition		Audit		Compensation		Corporate Governance
Number of Meetings held in 2009		4		6		10		3
Membership:
Peter J. Boni		Ö
Michael J. Cody (1)		Ö						Ö
Julie A. Dobson						Chairperson
Robert E. Keith, Jr. (2)		†
Andrew E. Lietz (3)						Ö		†
George MacKenzie				Chairperson
George D. McClelland (4)				Ö		Ö		Chairperson
Jack L. Messman		Ö						Ö
John W. Poduska, Sr. (2)		†						†
John J. Roberts				Ö		Ö
Robert J. Rosenthal (4)		Chairperson		Ö

Based on the recommendation of our Nominating & Corporate Governance Committee, our Board has determined that our current committee structure is the most appropriate for Safeguard, at present.

Acquisition Committee. As described in detail in its charter, the Board has delegated to the Acquisition Committee the authority to approve, between regularly scheduled Board meetings, the following transactions:

•

Follow-on transactions in existing partner companies involving amounts between $5 million and $20 million;

•

New transactions involving amounts between $10 million and $20 million; and

•

Divestitures of existing partner companies involving amounts between $10 million and $20 million.

Audit Committee. The Audit Committee’s responsibilities, which are described in detail in its charter, include, among other duties, the responsibility to:

•

Assist the Board in fulfilling its responsibilities regarding general oversight of the integrity of Safeguard’s financial statements, Safeguard’s compliance with legal and regulatory requirements, and the performance of Safeguard’s internal audit function;

•

Interact with and evaluate the performance, qualifications and independence of Safeguard’s independent registered public accounting firm;

•

Review and approve related party transactions; and

•

Prepare the report required by SEC regulations to be included in the proxy statement.

The Audit Committee has the sole authority to retain, set compensation and retention terms for, terminate and oversee the relationship with Safeguard’s independent registered public accounting firm (which reports directly to the Audit Committee). The Audit Committee also oversees the activities of the internal auditor, reviews the effectiveness of the internal audit function and approves the appointment of the internal auditor. The Audit Committee has the authority to obtain advice, counsel and assistance from internal and external legal, accounting or other advisors as the Audit Committee deems necessary to carry out its duties and to receive appropriate funding from Safeguard for such advice and assistance. The full responsibilities of the Audit Committee are set forth in the Audit Committee Charter, which is reviewed annually by the Committee. The Audit Committee Charter is available through the Corporate Governance link on our website at www.safeguard.com/governance.

The Board has determined that each member of the Audit Committee meets the independence requirements established by SEC regulations, the NYSE listing standards and by our Corporate Governance Guidelines. The Board has determined that Messrs. MacKenzie, McClelland and Roberts and Dr. Rosenthal are “audit committee financial experts” within the meaning of the SEC regulations, and the Board has determined that each member of the Audit Committee has accounting and related financial management expertise within the meaning of the NYSE listing standards. Mr. MacKenzie and Mr. Roberts each serve as a member of the audit committee of the board of directors of four publicly traded companies, including our Audit Committee. The Board has determined that such simultaneous service does not impair Mr. MacKenzie’s or Mr. Roberts’ ability to effectively serve on our Audit Committee.

Compensation Committee. The Compensation Committee’s responsibilities, which are described in detail in its charter, include, among other duties, the responsibility to:

•

Approve the philosophy for compensation of our executives and other employees;

•

Establish compensation (including base salary, incentive compensation and equity-based programs) for our Chief Executive Officer and other executive officers;

•

Administer the long- and short-term compensation and performance-based incentive plans (which are cash and equity based);

•

Approve employment agreements and perquisites provided to our executive officers;

•

Review management’s recommendations for our broad-based employee benefit plans;

•

Evaluate and recommend to the Board the compensation for all non-employee directors for service on the Board and its committees; and

•

Review and discuss with management the Compensation Discussion and Analysis and recommend to the Board its inclusion in our Form 10-K and proxy statement.

It also is the responsibility of the Compensation Committee to assess Safeguard’s compensation policies and practices insofar as they may create risk for Safeguard. The Compensation Committee constantly takes into account how the policies and practices that it utilizes may affect Safeguard. In early 2010, the Committee specifically undertook to assess the potential effect of Safeguard’s compensation policies and practices on the Company and made the affirmative determination that the committee does not believe that any of our compensation policies and practices are reasonably likely to have a material adverse effect on Safeguard. It should be noted that Safeguard’s Audit Committee and our Board have concurred in that determination.

The Compensation Committee Charter is available through the Corporate Governance link on our website at www.safeguard.com/governance. The Board has determined that each member of the Compensation Committee meets the independence requirements established in the NYSE listing standards and by our Corporate Governance Guidelines.

A discussion of some of the Compensation Committee’s processes and procedures for the consideration and determination of executive compensation is contained in “Compensation Discussion and Analysis—Setting Executive Compensation.” Additional processes and procedures include the following:

•

Meetings. The Compensation Committee generally meets at least four times each year, with additional meetings being scheduled as needed. The annual committee calendar is established prior to the beginning of each year, and agendas for each meeting are established in consultation with the Compensation Committee Chairperson. The Compensation Committee meets in executive session during or prior to the end of each regularly scheduled meeting.

•

Role of Consultant. The Committee has retained Semler Brossy Consulting Group LLC to assist the Compensation Committee in its deliberations regarding executive and director compensation. Specifically, the Compensation Committee’s consultants provide the Committee with information relating to competitiveness of pay levels, compensation design, market trends and technical considerations concerning both executives and directors, and assist the Compensation Committee with the reporting of executive compensation under the SEC’s proxy disclosure rules. These services, which are provided in support of decision-making by the Compensation Committee, are the only formal services that the compensation consultant performs for Safeguard. From time to time since its hire, Semler Brossy also has provided miscellaneous data and research to the Compensation Committee relating to various compensation topics generally. The consultant reports to and acts at the direction of, and attends selected meetings as requested by, the Chairperson of the Compensation Committee. The Compensation Committee has the sole authority to hire and terminate consultants and evaluates the performance of its consultant(s) annually.

•

Role of Executive Team. Our Chief Executive Officer, Chief Financial Officer and General Counsel, with the assistance of other company employees as they request, provide support to the Compensation Committee by preparing materials to assist the Committee in making its compensation decisions; conferring with the Committee and its consultant on the selection of peer companies and industries used for comparison purposes; providing suggestions to the Committee in the area of executive compensation, including suggestions in the context of terms of employment agreements, performance measures and targets under our management incentive plan, and equity awards; and ultimately implementing the Committee’s compensation decisions. Management also provides the Compensation Committee with comprehensive tally sheets on an annual basis to facilitate the Committee’s review of the total compensation of our named executive officers and other executives. The tally sheets include both historical data and estimated forward looking amounts for the current calendar year. The tally sheets summarize: cash compensation (salary, actual/target cash incentive awards and perquisites); the dollar value of benefits provided; potential severance amounts payable under various scenarios; and outstanding equity awards held by each named executive officer and other executives. The Compensation Committee discusses its compensation views with the Chief Executive Officer, and the Chief Executive Officer makes recommendations to the Compensation Committee for salary adjustments and equity and non-equity plan participation and awards to the named executive officers and other executives. However, other than for compensation that has been established contractually or under quantitative formulas established by the Compensation Committee each year under our management incentive plan, the Compensation Committee exercises its own discretion in determining additional compensation, which may take the form of cash or equity, for the named executive officers and other executives. Additional information can be found in “Compensation Discussion and Analysis—Role of Named Executive Officers in Compensation Decisions.”

Nominating & Corporate Governance Committee. The Nominating & Corporate Governance Committee’s responsibilities, which are described in detail in its charter, include, among other duties, the responsibility to:

•

Establish criteria for the selection of directors;

•

Evaluate and consider qualified Board candidates, including those recommended by shareholders;

•

Recommend to the Board the nominees for director, including nominees for director in connection with Safeguard’s annual meeting of shareholders;

•

Conduct an annual evaluation of the Board and its members and oversee the evaluations of each of the Board committees;

•

Take a leadership role in shaping Safeguard’s corporate governance policies, including developing and recommending to the Board Safeguard’s Corporate Governance Guidelines and Code of Business Conduct and Ethics;

•

Review with management Safeguard’s strategic direction and Safeguard’s strategic plan and the implementation of management’s long-term strategy and to report to the Board on such activities;

•

Evaluate the performance of the Chief Executive Officer; and

•

Monitor the process of succession planning for the Chief Executive Officer and executive management.

The Nominating & Corporate Governance Committee Charter is available through the Corporate Governance link on our website at www.safeguard.com/governance. The Board has determined that each member of the committee meets the independence requirements established in the NYSE listing standards and by our Corporate Governance Guidelines.

The Nominating & Corporate Governance Committee may use any number of methods to identify potential nominees, including personal, management and industry contacts; recruiting firms; and, as described below under the heading “Process for Submission of Shareholder Recommendations for Board Nominees,” candidates recommended by shareholders.

Annual Performance Evaluations. The directors and Nominating & Corporate Governance Committee annually assess the performance of the Board based on input from all directors. The Audit Committee, Compensation Committee and Nominating & Corporate Governance Committee also annually assess their respective performance and committee processes.

Review and Approval of Transactions with Related Persons. The Board has adopted a written policy which charges the Audit Committee with the responsibility of reviewing with management at each regularly scheduled meeting and determining whether to approve any transaction (other than a transaction that is available to all employees generally on a non-discriminatory basis) between us and our directors, director nominees and executive officers or their immediate family members. Between regularly scheduled meetings of the Audit Committee, management may preliminarily approve a related party transaction, subject to ratification of the transaction by the Audit Committee. If the Audit Committee does not ratify the transaction, management will make all reasonable efforts to cancel the transaction.

Risk Management. Our Board, as a whole and at the committee level, is actively involved in the oversight of risks that affect Safeguard’s business. The Compensation Committee is responsible for overseeing the management of risks relating to our compensation plans and arrangements. The Audit Committee oversees the management of financial related risks and related party transactions. The Nominating & Corporate Governance Committee manages risks associated with the independence of our Board and potential conflicts of interest. Although the oversight of certain risks is conducted through committees of the Board, our full Board retains responsibility for risk oversight and no individual committee has been delegated responsibility for such function. Our Board receives reports at each regularly scheduled Board meeting by each committee chair regarding each committee’s considerations and actions, as well as regular reports directly from our senior management team regarding particular risks that may impact Safeguard. This allows our Board and its committees to coordinate the risk oversight role and to keep our Board timely apprised of all risks that might impact Safeguard’s business.

Communications with Safeguard’s Board and Audit Committee. Any shareholder or other interested party may communicate with our Board or any specified non-management director(s) by addressing the communication as follows:

c/o Secretary
Safeguard Scientifics, Inc.
435 Devon Park Drive, Building 800
Wayne, PA 19087-1945

All communications are initially reviewed by our Secretary. The Chairperson of the Audit Committee is advised promptly of any communication that alleges misconduct on the part of Safeguard’s management or raises legal, ethical or compliance concerns about Safeguard’s policies or practices.

Safeguard’s Audit Committee also has established procedures for confidential, anonymous submission of complaints by employees and for receipt, retention and treatment of complaints, from whatever source, received by Safeguard, regarding accounting, internal accounting controls or auditing matters. All such communications are initially sent to the Chairperson of the Audit Committee and, if requested by the Chairperson, may be sent to the other members of the Audit Committee. Any person who desires to contact the Audit Committee may do so by addressing correspondence to Chairperson, Audit Committee, care of our Secretary at the address noted above.

The Chairperson of the Audit Committee also receives updates on other communications to the Board, Audit Committee or non-employee directors that raise issues related to the affairs of Safeguard but which do not fall into the two prior categories. The Chairperson of the Audit Committee determines which of these communications he would like to see.

Our Secretary maintains a log of all communications, which is available for review upon request of any member of the Board. Typically, we do not forward to our non-management directors communications from our shareholders or other communications which are of a personal nature or not related to the duties and responsibilities of the Board, including, without limitation, business plan or other business opportunity submissions; inquiries related to products or services provided by Safeguard’s companies; spam, junk mail and mass mailings; resumes and other forms of job inquiries; surveys or polls; business solicitations or advertisements; and any material that relates to improper or irrelevant topics or is unduly hostile, threatening, illegal or similarly unsuitable.

Process for Submission of Shareholder Recommendations for Board Nominees. In considering candidates, the Nominating & Corporate Governance Committee seeks the following attributes for director nominees:

•

A strong record of personal integrity and ethical conduct;

•

A leader in the companies or institutions with which he or she is affiliated;

•

Competencies, skills and experiences that are complementary to the background and experience represented on Safeguard’s Board and that meet the needs of Safeguard’s strategy and business;

•

A willingness and ability to devote sufficient time to fulfill his or her responsibilities to Safeguard and our shareholders;

•

The ability to represent the long-term interests of our shareholders; and

•

The ability to provide relevant advice and counsel to management and best perpetuate the success of Safeguard’s business.

The Nominating & Corporate Governance Committee considers properly submitted shareholder recommendations of director candidates in substantially the same manner as it considers director candidate recommendations from other sources. Any shareholder recommendation must include the following: the nominee’s name and the information about the nominee that would be required in a proxy statement under the SEC’s rules; information about the relationship between the nominee and the nominating shareholder; proof of the number of shares of Safeguard common stock that the nominating shareholder owns and the length of time the shares of Safeguard common stock have been owned; and a letter from the nominee certifying his or her willingness to serve, if elected, as a director.

Recommendations should be directed to:

Chairperson, Nominating & Corporate Governance Committee
c/o Secretary
Safeguard Scientifics, Inc.
435 Devon Park Drive, Building 800
Wayne, PA 19087-1945

 

Board Compensation. During 2009, each of our non-employee directors was compensated for his or her service as a director as shown in the table below:

Compensation Item		Amount
Annual Board Retainers (payable relative to a full year of Board service measured from annual meeting to annual meeting):
Chairman of the Board		$	50,000
Other Directors			35,000
Additional Annual Chairperson Retainers (payable relative to a full year of Committee service measured from annual meeting to annual meeting):
Audit Committee			15,000
Compensation Committee			7,500
Nominating & Corporate Governance Committee			5,000
Meeting Attendance Fees:
Board			2,000
Committee			1,500

We also reimburse our directors for expenses they incur to attend our Board and Committee meetings and for attendance at one director’s continuing education program during each calendar year or the reasonable cost of one year’s membership in an organization which is focused on director education. At the request of Safeguard, non-employee directors of Safeguard also may, from time to time, be asked to act as Safeguard’s designated member on the Board of Directors of a Safeguard partner company. In exchange for providing such board service, Safeguard will directly compensate each such director on a per meeting basis at rates ranging from $500 to $2,000 for attendance at each in-person meeting or telephonic board meeting. Safeguard also will reimburse each such director for all out-of-pocket expenses incurred by him or her in connection with such service, subject to being reimbursed by the particular partner company as circumstances dictate.

On August 31, 2009, following our 2009 annual meeting, each director also was awarded a recurring annual service grant which consisted of a stock option grant to purchase 4,166 shares of Safeguard common stock at an exercise price of $10.9403 per share and 2,083 deferred stock units, as more fully described below. Directors’ stock options have an eight-year term. Annual service stock option and deferred stock unit grants fully vest on the first anniversary of the grant date or, for deferred stock units, once a director reaches age 65, if earlier. The exercise price of stock options is equal to the average of the high and low trading prices of our common stock, as reported on the NYSE composite tape, on the grant date. The deferred stock units represent the right to receive shares of Safeguard common stock, on a one-for-one basis, on or about the first anniversary of the date upon which the director leaves the Safeguard Board.

In late 2009, at the Compensation Committee’s request, Semler Brossy Consulting Group, LLC assisted the committee to assess our Board compensation practices relative to current market practices. After reviewing Semler Brossy’s findings and recommendations, the Compensation Committee recommended that the Board amend our compensation arrangements for non-employee directors consistent with Semler Brossy’s recommendations. In March 2010, the Board approved the following annual cash and equity compensation for directors, effective as of the date of our upcoming annual meeting of shareholders:

•

Annual Board retainer in the amount of $80,000 for the Chairman of the Board and $50,000 for each other non-employee director, payable in arrears in equal quarterly installments (per meeting fees eliminated);

•

An annual retainer for each committee chair, payable in arrears in equal quarterly installments, as follows: Acquisition Committee—$5,000; Audit Committee—$15,000; Compensation Committee—$7,500; Nominating & Corporate Governance Committee—$5,000;

•

$1,500 for attendance by each committee member at a committee meeting; and

•

Annual equity service compensation consisting of 5,000 stock options and 2,500 deferred stock units, to be awarded on or about the date of our annual meeting.

Safeguard also maintains a Group Deferred Stock Unit Program for Directors (“Directors’ DSU Program”) which allows each director, at his or her election, to receive deferred stock units in lieu of retainer and meeting fees paid to each director for service on the Safeguard Board and its committees (“Directors’ Fees”). The deferral election applies to Directors’ Fees to be received for the calendar year following the year in which the election is made and remains in effect for each subsequent year unless the director elects otherwise by the end of the calendar year prior to the year in which the services are rendered. In an effort to conserve cash during a difficult economic environment, the Board required that each director defer at least 25% of Directors’ Fees earned for 2009. For 2010, the Board eliminated that requirement; however, each director retained the option to defer all or any portion of his or her Directors’ Fees. The number of deferred stock units awarded is determined by dividing the Directors’ Fees by the fair market value of Safeguard’s stock on the date on which the director would have otherwise received the Directors’ Fees. Each director also receives a number of matching share units, based on the same fair market value calculation, equal to 25% of the Directors’ Fees deferred. A director is always fully vested in Directors’ Fees deferred; the matching share units vest fully on the first anniversary of the date the matching share units are credited to the director’s account or, if earlier, once a director reaches age 65. Each deferred stock unit entitles the director to receive one share of Safeguard common stock on or about the first anniversary of the date upon which the director leaves the Safeguard Board. A director also may elect to receive the stock in annual installments over a period of up to five years after leaving the Board.

Director Compensation — 2009. The following table provides information on compensation earned for services provided during 2009 by each non-employee director who served on our Board at any time during 2009:

		Fees Earned or				Stock				Option				All Other
		Paid in Cash				Awards				Awards				Compensation				Total
Name		($)(1)				($)(2)(3)				($)(3)(4)				($)(5)				($)(6)
Michael J. Cody		$	63,000			$	25,707			$	24,077			$	1,200			$	113,984
Julie A. Dobson			66,500				27,031				24,077				—				117,608
Robert E. Keith, Jr. (7)			45,880				15,456				—				—				61,336
Andrew E. Lietz			62,924				25,620				24,077				—				112,621
George MacKenzie			71,000				26,217				24,077				—				121,294
George D. McClelland			74,212				31,988				24,077				1,200				131,477
Jack L. Messman			55,500				36,660				24,077				—				116,237
John W. Poduska, Sr. (7)			37,016				2,307				—				—				39,323
John J. Roberts			68,000				26,075				24,077				—				118,152
Robert J. Rosenthal			65,000				25,989				24,077				—				115,066

		Grant Date Fair Value (in dollars)
Name		1/15/09				4/15/09				7/15/09				8/31/09				10/15/09
Michael J. Cody		$	—			$	1,200			$	759			$	22,789			$	959
Julie A. Dobson			1,069				1,226				877				22,789				1,070
Robert E. Keith, Jr.			3,998				4,625				3,993				—				2,840
Andrew E. Lietz			—				1,091				744				22,789				996
George MacKenzie			—				1,250				1,182				22,789				996
George D. McClelland			5,688				1,388				1,041				22,789				1,082
Jack L. Messman			3,437				4,060				2,563				22,789				3,811
John W. Poduska, Sr.			—				981				760				—				566
John J. Roberts			—				1,200				1,041				22,789				1,045
Robert J. Rosenthal			—				1,200				1,041				22,789				959

		Deferred Stock				Stock
Name		Units				Options
Michael J. Cody			6,414				24,997
Julie A. Dobson			12,342				28,746
Robert E. Keith, Jr.			54,534				26,164
Andrew E. Lietz			6,296				34,163
George MacKenzie			6,755				32,413
George D. McClelland			35,710				24,997
Jack L. Messman			29,039				30,330
John W. Poduska, Sr.			—				26,164
John J. Roberts			11,088				34,163
Robert J. Rosenthal			6,593				16,665

Under the terms of the Directors’ DSU Program, since the DSUs held by Dr. Poduska had a value of less than $50,000, he received a distribution of the 3,923 shares underlying his DSUs shortly after his retirement from our Board.

Stock Ownership Guidelines. Our stock ownership guidelines provide that within five years of December 31, 2005 (for directors who served on our Board at that date) or by the end of the fifth full calendar year after joining our Board, each non-employee director should attain an equity position in our common stock equal to two times the annual cash Board retainer. Shares counted toward these guidelines include:

•

Shares beneficially owned by the director;

•

Vested shares of restricted stock;

•

Vested deferred stock units that have been credited to the director; and

•

Shares underlying vested, in-the-money options.

At December 31, 2009, each non-employee director had achieved this ownership goal or was working toward meeting the required ownership level.

PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP

Item 2 on Proxy Card

The Audit Committee, composed entirely of independent, non-employee members of the Board, approved the reappointment of KPMG LLP (“KPMG”) as Safeguard’s independent registered public accounting firm for the fiscal year ending December 31, 2010, and the Board has recommended that our shareholders ratify the appointment. If the shareholders do not ratify the appointment, the Audit Committee may reconsider its recommendation and may retain KPMG or another accounting firm without resubmitting the matter to shareholders. Even if the shareholders ratify the appointment of KPMG, the Audit Committee may select another firm if it determines such selection to be in the best interest of Safeguard and its shareholders.

Services provided to Safeguard and its subsidiaries by KPMG in fiscal 2009 and fiscal 2008 are described below under “Independent Registered Public Accounting Firm—Audit Fees.” Representatives of KPMG are expected to attend the annual meeting. They will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.

Ratification requires the affirmative vote of a majority of the votes cast by all shareholders entitled to vote on the proposal.

THE BOARD RECOMMENDS A VOTE “FOR” THE PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG AS SAFEGUARD’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2010.

Independent Registered Public Accounting Firm—Audit Fees

The following table presents fees for professional services rendered by KPMG LLP for the audit of Safeguard’s consolidated financial statements for fiscal 2009 and fiscal 2008 and fees billed for audit-related services, tax services and all other services rendered by KPMG for fiscal 2009 and fiscal 2008. This table includes fees billed to Safeguard’s consolidated subsidiaries for services rendered by KPMG.

		2009(1)				2008
Audit Fees (2)		$	519,117			$	1,513,691
Audit-Related Fees			—				—
Tax Fees (3)			213,700				282,606
All Other Fees			—				—
Total		$	732,817			$	1,796,297

The Audit Committee pre-approves each service to be performed by KPMG at its regularly scheduled meetings. For any service that may require pre-approval between regularly scheduled meetings, the Audit Committee has delegated to the Chairperson of the Audit Committee the authority to pre-approve services not prohibited by law to be performed by Safeguard’s independent registered public accounting firm and associated fees up to a maximum for non-audit services of $100,000, and the Chairperson communicates such pre-approvals to the Audit Committee at its next regularly scheduled meeting.

AUDIT COMMITTEE REPORT

The Audit Committee assists the Board of Directors in fulfilling its responsibilities regarding general oversight of the integrity of Safeguard’s financial statements, Safeguard’s compliance with legal and regulatory requirements, the performance of Safeguard’s internal audit function, review and approval of related party transactions, and the performance, qualifications and independence of Safeguard’s independent registered public accounting firm.

Safeguard’s management has primary responsibility for the financial reporting process, including the system of internal controls, and for preparation of Safeguard’s consolidated financial statements in accordance with U.S. generally accepted accounting principles. Safeguard’s independent registered public accounting firm is responsible for auditing those consolidated financial statements and issuing opinions as to the conformity of Safeguard’s audited financial statements with U.S. generally accepted accounting principles and the effectiveness of Safeguard’s internal control over financial reporting based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Throughout the year, the Audit Committee regularly meets with management of Safeguard, Safeguard’s independent registered public accounting firm and Safeguard’s internal auditor. The Audit Committee also regularly meets with each of these groups separately in closed sessions. In this context, the Audit Committee hereby reports as follows:

1.

The Audit Committee reviewed Safeguard’s audited consolidated financial statements for fiscal year 2009 and met and held discussions with management and KPMG regarding the audited financial statements.

2.

The Audit Committee discussed with KPMG the matters required to be discussed by Statement on Auditing Standards No. 61 (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.

3.

The Audit Committee received the written disclosures and the letter from KPMG required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence and discussed with KPMG its independence.

4.

Based on the review and discussion referred to in paragraphs 1 through 3 above, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in Safeguard’s Annual Report on Form 10-K for fiscal year 2009.

Members of the Audit Committee:

George MacKenzie, Chairperson		George D. McClelland		John J. Roberts		Robert J. Rosenthal

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND OFFICERS

The following table shows the number of shares of Safeguard common stock beneficially owned (unless otherwise indicated) as of March 15, 2010, by each person known to us to be the beneficial owner of more than 5% of our outstanding shares of common stock, our current directors, persons named in the Summary Compensation Table in this proxy statement, and our current directors and current executive officers as a group. For purposes of reporting total beneficial ownership, shares that may be acquired within 60 days of March 15, 2010, through the exercise of Safeguard stock options are included. On March 15, 2010, there were 20,465,160 shares of common stock outstanding and 858,929 shares underlying stock options held by executive officers and directors as a group that were exercisable within 60 days of March 15, 2010.

										Shares
		Outstanding								Beneficially
		Shares				Options				Owned Assuming				Percent of				Other Stock-Based
		Beneficially				Exercisable				Exercise of				Outstanding				Holdings (2)
Name		Owned				Within 60 Days				Options				Shares (1)				Vested				Unvested
Dimensional Fund Advisors LP 1299 Ocean Avenue Santa Monica, CA 90401 (3)			1,128,515				—				1,128,515				5.5	%			—				—
T. Rowe Price Associates, Inc. 100 East Pratt Street Baltimore, MD 21202 (4)			1,194,131				—				1,194,131				5.8	%			—				—
Blackrock, Inc. 40 East 52nd Street New York, NY 10022 (5)			1,113,607				—				1,113,607				5.5	%			—				—
Peter J. Boni			110,954				329,998				440,952				2.1	%			—				—
Michael J. Cody			1,250				18,747				19,997				*				4,427				2,326
Julie A. Dobson			6,750				24,580				31,330				*				10,405				2,368
Andrew E. Lietz			7,500				29,997				37,497				*				6,779				—
George MacKenzie			1,750				28,247				29,997				*				4,793				2,403
George D. McClelland			1,666				18,748				20,414				*				33,804				2,403
Jack L. Messman			10,833				21,664				32,497				*				30,558				—
John J. Roberts			—				29,997				29,997				*				11,509				—
Robert J. Rosenthal			—				8,332				8,332				*				4,603				2,370
James A. Datin			76,101				165,000				241,101				1.2	%			—				—
Kevin L. Kemmerer			47,839				105,406				153,245				*				—				—
Brian J. Sisko			39,327				36,627				75,954				*				—				—
Stephen T. Zarrilli			17,855				41,586				59,441				*				—				—
Executive officers and directors as a group (13 persons)			321,825				858,929				1,180,754				5.5	%			106,878				11,870

COMPENSATION DISCUSSION AND ANALYSIS

Overview

The Compensation Committee (for purposes of this analysis, the “Committee”) is responsible for establishing our company-wide compensation philosophy; for determining the compensation provided to the individuals who serve as our Chief Executive Officer, Chief Financial Officer and the other individuals included in the Summary Compensation Table (collectively referred to as the “named executive officers”); and for approving the compensation for our other executives, based on recommendations of our named executive officers. As of the date hereof, for purposes of this analysis our executive group is comprised of a total of 11 persons, including the named executive officers as well as six other company employees who each hold the title of vice president. The Committee reviews our compensation philosophy each year to ensure that its principles and objectives are aligned to our overall business strategy and aligned with the interests of our shareholders in increasing the value of our common stock over the long term. We seek to apply a consistent philosophy across our executive rank, not just among our named executive officers.

Compensation Philosophy and Objectives

Our overall goals in compensating our executives are to:

•

Attract, retain and motivate executives who are particularly qualified, as a result of their prior professional experience, to shape Safeguard’s business model and pursue our business plan, and whose experience and skills can be leveraged across our partner companies to facilitate the partner companies’ growth and success;

•

Promote and reward the achievement of short-term and long-term corporate and individual objectives that our Board and management believe will lead to long-term growth in shareholder value; and

•

Encourage meaningful equity ownership and the alignment of executive and shareholder interests as an incentive to increase shareholder value.

The executive compensation program the Committee has created is intended to: provide an appropriate mix of fixed and variable at-risk cash compensation; balance rewards for short-term performance with our ultimate goal of producing long-term shareholder value; link variable compensation to value creation; and facilitate executive recruitment and retention. There are no pre-established targets, weighting, mix or position relative to competitors for the allocation between either cash or non-cash compensation payments; short-term or long-term compensation; and/or fixed or variable items of compensation. Rather, the Committee reviews information provided by its consultant (as well as information which may be provided by management) to determine the appropriate level, both on an absolute and a relative basis, and mix of each of these components. It is important to highlight that 100% of our executives’ long-term compensation is performance-based, linked directly to return to shareholders or to the accomplishment of specific objectives which, it is believed, will result directly in share price appreciation. Therefore, when it considers the relationships between the different components of its overall compensation philosophy, especially the relationship between fixed compensation and long-term incentive compensation, the Committee is very mindful of the fact that it builds challenging performance metrics into all of Safeguard’s long-term incentive compensation programs.

During 2009, we used the following principal elements of compensation to meet our overall goals:

Base Pay		à		Fixed cash compensation, based on competitive market practices and existing salary levels, that rewards an executive’s core competencies relative to his skills, experience, responsibilities and anticipated contributions to us and our partner companies;
Annual Incentives		à		Variable, at-risk, performance-based incentive compensation, based on competitive market practices and existing incentive compensation levels, that rewards an executive’s contributions towards the achievement of annual corporate objectives and an executive’s achievement of individual performance objectives. These incentives are paid in the form of cash and/or equity at the Compensation Committee’s discretion;
Long-Term Incentives		à		Equity awards that encourage executive ownership of our stock and which promote continued employment with us through the use of long-term vesting periods. These awards align our executives’ interests with those of our shareholders. The value of the awards to the executive is directly impacted as cash-on-cash returns on our partner company deployments are realized and as our stock price increases;
Health and Welfare Benefits		à		Benefits that are part of our broad-based employee benefit programs, including medical, dental, life insurance, and disability plans, our 401(k) plan matching contributions and our nonqualified deferred compensation plan (contributions to which have been discontinued for 2009 and beyond);
Perquisites		à		Limited additional benefits that are available to certain of our executives; and
Severance and Change-in-Control Arrangements		à		Severance benefits that are payable in the event a termination of employment occurs without cause or for good reason. These committed benefits are intended to help us retain our named executive officers and certain of our other executives, providing us with continuity of executive management in the event of an actual or threatened change in control.

Role of Named Executive Officers in Compensation Decisions

The Committee makes or has final approval authority regarding all compensation decisions with respect to our executives. Within the parameters approved by the Committee each year, our named executive officers are responsible for evaluating and setting compensation with respect to our other employees.

Our Chief Executive Officer, Chief Financial Officer and General Counsel, each a named executive officer, with the assistance of other company employees, provide support to the Committee by preparing materials to assist the Committee in making its compensation decisions; conferring with the Committee and its consultant on the selection of peer companies and industries used for comparison purposes; providing suggestions to the Committee in the area of executive compensation, including suggestions in the context of terms of employment agreements, performance measures and targets under our management incentive plan, and equity awards; suggesting or recommending alternative approaches to certain elements of our executive compensation philosophy; and, ultimately, implementing the Committee’s compensation decisions. Management also provides the Committee with comprehensive tally sheets on an annual basis to facilitate the Committee’s review of the total compensation of our named executive officers and our other executives. The tally sheets include both historical data and estimated forward looking amounts for the current calendar year. The tally sheets summarize: cash compensation (salary, actual/target annual incentive awards and perquisites); the dollar value of benefits provided; potential severance amounts payable under various scenarios; and outstanding equity awards held by each executive.

In determining the compensation of our Chief Executive Officer, the Committee considers the results of the performance assessment conducted each year by our Nominating & Corporate Governance Committee, which includes our Chief Executive Officer’s self-assessment of achievement of his individual prior year objectives and the assessment of his performance by each Board member. The Committee also discusses its compensation views with our Chief Executive Officer directly. Our Chief Executive Officer is not present when the Committee makes its determinations concerning his compensation.

Our Chief Executive Officer annually assesses each other named executive officer’s performance and makes a recommendation to the Committee concerning achievement of individual objectives. Our other named executive officers annually assess the other executives who report to them and make recommendations to our Chief Executive Officer concerning the achievement of individual objectives by such executives. Our Chief Executive Officer makes recommendations to the Committee concerning salary adjustments and equity grants to the named executive officers and, based on the recommendations of our other named executive officers, our other executives. In determining the compensation of our executives, the Committee considers our Chief Executive Officer’s assessment and recommendations. However, other than for compensation that has been established contractually or under quantitative formulas established by the Committee each year under our management incentive plan, the Committee exercises its own discretion in determining whether to accept or modify our Chief Executive Officer’s recommendations. These individuals are not present when the Committee and our Chief Executive Officer review their performance or when the Committee makes its determinations concerning their compensation.

From time to time during the year, our Chief Executive Officer may recommend to the Committee one-time cash bonuses or stock option or other equity grants to certain executives or other employees relating to instances of superior performance. The Committee acts on such recommendations on a case-by-case basis. During 2009, the Committee acted on one such recommendation which resulted in the payment of one-time cash bonuses to eight of our executives, including four of our named executive officers, one of which is our Chief Executive Officer. Such bonuses were paid in recognition of the role played by such executives in the consummation of a large private placement by Clarient, Inc., resulting in the successful recoupment of Safeguard’s loans to Clarient, Inc. and the elimination of guarantees of other debt during the Spring of 2009, and the sale of approximately $61 million of Safeguard’s holdings in Clarient, Inc. during August 2009. The Committee considered such accomplishments to be significant particularly given the prevailing macro economic climate when the transactions took place. It should also be noted that matters related to Clarient were by design not included in the Partner Company Performance component of the corporate objectives established under our 2009 MIP. Such one-time bonuses totaled $325,000, in the aggregate, to our executives as a group, $75,000 of which was paid to our Chief Executive Officer. For further detail regarding such bonuses, see the “Summary Compensation Table” below.

Role of Consultant

Semler Brossy Consulting Group, LLC assisted the Committee in its deliberations regarding executive and director compensation matters during 2009. Specifically, Semler Brossy provided information relating to competitiveness of pay levels, compensation design, specific equity grant matters, market trends and technical considerations concerning named executive officers, other executives and directors. Semler Brossy also assisted the Committee with the reporting of executive compensation matters relating to 2009 under applicable SEC disclosure rules. These services, which were provided in support of decision-making by the Committee, are the only services that Semler Brossy performed for Safeguard. Semler Brossy reported to and acted at the direction of, and attended selected meetings as requested by, the Chairperson of the Committee.

The Committee, which has the sole authority to hire and terminate its consultant, evaluates the performance of its consultant annually. The Committee has utilized the services of Semler Brossy since 2008. Semler Brossy is compensated on an hourly billing basis. Invoices are directed to and reviewed by the Compensation Committee Chairperson before payment by Safeguard.

Setting Executive Compensation

The Committee believes that a significant portion of each executive’s total compensation should be variable or “at-risk.” It is the view of the Committee that the greater the ability of an executive (based on his role and responsibilities at Safeguard) to impact Safeguard’s achievement of its short- and long-term objectives, the greater the percentage of such executive’s overall compensation which should be “at-risk.” The Committee principally utilizes variable/at-risk cash and performance-based equity compensation to accomplish its objectives in this regard. As described below under “2009 Compensation Program — Annual Incentives,” the Committee provides at-risk target bonus levels under Safeguard’s MIP (as defined below) to our executives. Payments against such targets are determined by the Committee based on both corporate achievement as well as personal achievement. Payments may be made in cash and/or equity, in the Committee’s discretion. Neither the actual awards to be made under the MIP or otherwise, nor the minimum long-term value of any equity grants made, is guaranteed.

As described above, management provides the Committee with comprehensive tally sheets on an annual basis to facilitate the Committee’s review of the total compensation of our named executive officers and other executives. The Committee has found these tally sheets to be useful in its evaluation of the total compensation program for our named executive officers and other executives. From time to time, the Committee requests supplemental information be included in such tally sheets as its discussions require.

Specifically with regard to our named executive officers, the Committee from time to time, and at least annually, has reviewed a comparison of each element of total compensation against a group of specific companies and industries against which we believe we compete for talent and for shareholder investment, including the venture capital and private equity industries, as well as by reference to industry-specific compensation surveys. The analysis provided by Semler Brossy in December 2008 for purposes of the Committee’s consideration of 2009 cash and total compensation levels measured our compensation against data from the following sources:

Proxy Peer Group Data		à		Business development companies, registered investment companies and holding companies that are representative of the unique nature of our business model for a publicly owned company. Included in this group were: Allied Capital Corporation; American Capital Strategies, Ltd.; Capital Southwest Corporation; Harris & Harris Group, Inc.; Hercules Technology Growth Capital, Inc.; Internet Capital Group, Inc.; MCG Capital Corporation; and Patriot Capital Funding
Venture Capital		à		Surveys used included the following:
Survey Data
				2008 Mercer AERD Survey
				2008/2009 Watson Wyatt Report on Top Management Compensation 2008 The Private Equity Analyst — Holt Compensation Study
				(Each of the surveys utilized is very broad-based and, therefore, is not highly influenced by the data relating to any one company included in the survey.)

The Committee annually evaluates the companies and surveys used for comparison purposes to be certain that the comparables reviewed by the Committee remain appropriate. In connection with the commencement of its process for its 2010 compensation review in mid 2009, the Committee determined that reviewing compensation from multiple perspectives was still appropriate given Safeguard’s unique business model. In reviewing the Proxy Peer Group in connection with that undertaking, the Committee did decide to revise its Proxy Peer Group for compensation review purposes by adding Kohlberg Capital Company and Main Street Capital Corporation, based upon their relevant scope and business models. The Committee is continually refining the comparables utilized as members of the Peer Group are acquired or merged, etc. The Committee does not focus on any one single peer or benchmark in setting compensation levels.

Recognizing that our business strategy, industry focus and diverse array of partner companies make comparisons to other companies difficult, and based on the inherent challenge in matching companies, job positions and skill sets, the Committee has looked to competitive information for general guidance rather than rigid adherence to specific percentages. The Committee has determined that the overall objectives of our compensation philosophy are better achieved through flexibility in determining pay levels to address differences in duties and responsibilities, individual experience, skill levels and achievements, and any retention concerns.

2009 Compensation Program

Base Pay. Base pay is established initially on the basis of several factors, including market competitiveness; past practice; individual performance and experience; the level of responsibility assumed; the level of skills and experience that can be leveraged across our partner companies to facilitate their growth and success; and individual employment negotiations with executives. Each of our named executive officers has an employment agreement with us which sets a minimum base salary. The Committee acknowledges, in particular, that as named executive officers leave Safeguard and new officers are hired, candidates for hire typically will review publicly available information regarding our existing compensation levels and will condition their interest in working for Safeguard upon receiving compensation comparable to that of the officer they are replacing and of other executives of Safeguard. This situation would impact the Committee’s ability to measurably reduce overall compensation levels for any new senior executives, if any such reductions were deemed appropriate by the Committee.

Base salaries typically are reviewed annually (at the end of one year and the beginning of the upcoming calendar year) by the Committee, as well as in connection with a promotion or other changes in job responsibilities. As noted above, Safeguard competes for executive talent with venture capital and private equity firms, among others. In considering whether to adjust base salary levels of any of our executives for 2009, the Committee took into account:

•

The proxy peer group and survey data provided by Semler Brossy;

•

The Committee’s assessment of Safeguard’s overall performance during 2008 and the individual performance of each of our named executive officers; and

•

United States economic conditions, in general.

Based on the Committee’s review of the foregoing, the Committee determined, generally, that 2009 base salary levels for our named executive officers satisfied the Committee’s stated objectives for the role of fixed cash compensation within our overall compensation philosophy and made no broad changes to such base salary levels for 2009. In connection with its review, the Committee did, based on the recommendation of our Chief Executive Officer, increase the base salary of Kevin Kemmerer, one of our named executive officers, in connection with his promotion earlier in the year.

Historically, Safeguard has included in its compensation packages for its executives certain perquisites that were paid to such executives in cash in addition to base salary. These perquisites were as follows: car allowance, executive medical coverage and non-accountable expense allowances. During late 2009, the Committee undertook its annual review of executive compensation for 2010. Based upon the recommendation of our named executive officers, and on the Committee’s review of information provided by Semler Brossy, the Committee determined that it would, effective January 1, 2010, eliminate the cash-settled perquisites previously provided by Safeguard (car allowance, non-accountable expense account and executive medical coverage) and increase the base salary levels of Safeguard’s executives in a like amount. This resulted in an increase in base salary of $23,000 for each of the named executive officers. In general, it was otherwise determined that base salary levels for our current named executive officers satisfied the Committee’s stated objectives for the role of fixed cash compensation within our overall compensation philosophy and made no broad-based changes to such base salary levels for 2010. Based upon the recommendation of our CEO, the Committee did grant an additional $18,500 base salary increase to Kevin Kemmerer and a $23,000 base salary increase to Stephen Zarrilli, both named executive officers, effective January 1, 2010. Mr. Kemmerer’s increase was made based on analysis of competitive data; and Mr. Zarrilli’s increase was granted to keep his compensation in line with other named executive officers despite the fact that he was not affected by the elimination of the perquisites described above. Certain of our other executives also received nominal increases in recognition of their professional growth and accomplishments and additional responsibilities assumed by them.

Annual Incentives.

Incentive Opportunity. In March 2009, the Committee adopted the particular corporate and personal objectives and target award levels for 2009 under Safeguard’s Management Incentive Plan (the “MIP”) to provide a variable incentive to each of our executives and other employees based on 2009 performance. The 2009 MIP program, which emphasized teamwork among members of management to achieve key business objectives under our 2009 strategic plan, was based on the following mix of corporate and individual objectives for all of our executives:

•

80% on the achievement of corporate objectives; and

•

20% on the achievement of individual objectives.

Our remaining employees also participated in our 2009 MIP, with professional staff incentives being based on the same mix of corporate and individual objectives as our executives and administrative employee incentives being based 50% on corporate objectives and 50% on individual objectives.

We believe that short-term compensation (such as base salary and annual incentive awards) should not be based on the short-term performance of our stock, whether favorable or unfavorable, but rather on our executives’ management of Safeguard towards achieving our annual goals that we believe will contribute to long-term growth in shareholder value. It has been our practice through 2009, that under our MIP, all of our executives earn their incentive payments based on the same relative weighting of corporate and individual objectives. The Committee may undertake to adjust such relative weightings as it continues to gain experience with the annual application of Safeguard’s MIP in light of Safeguard’s overall compensation goals. The price of our stock should, in the long term, reflect our performance, and the performance of our stock will directly affect the value of stock options and other equity incentive awards provided to our executives as part of our compensation program.

Performance Measures. To align the 2009 MIP with our 2009 business strategy, the Committee established the following corporate objectives and weightings (representing 80% (or up to 80 points) of the total 2009 MIP target award):

Weighting		Corporate Objectives
50% — Partner Company Performance		Achievement of explicit milestones or objectives (by Safeguard management and/or the partner company itself) or specified levels of revenues or profitability for the 15 non-legacy partner companies to which the current management team had deployed capital and in which we held an active interest as of the adoption of the 2009 MIP, with each measure selected to reflect the respective partner company’s stage of growth and with greater emphasis being placed on those companies in which we exercise a greater level of influence and control based on our ownership interest, board representation, etc. and with the Committee retaining the ability, in its discretion, to assign value to milestones achieved, etc; and
50% — Overall Corporate Performance		Overall corporate performance of Safeguard, based on the Committee’s subjective evaluation. The Committee specifically listed the following illustrative examples of the types of things they would consider in their final determination: execution of overall business strategy (including achievement of capital return where possible without forcing premature exits; deployment of new capital into growth and select early-stage partner companies; and the pacing of capital deployment relative to cash availability and market conditions); exploration of alternate sources of capital; restructuring of Clarient’s commercial debt; opportunistic repurchase or refinance of long-term debt; continued development of robust deal pipelines; development of internal fund-raising capabilities; continued improvement of transparency to shareholders; continued improvement in partner company referenceability; maintenance of appropriate risk identification and mitigation strategies; management and alignment of corporate budget with business strategy and capital availability; and enhancement of our market capitalization.

The Committee established the applicable objectives by taking into consideration the stage of development of each of our partner companies; the anticipated relative levels of focus to be applied by management against the various aspects of our business model during the 2009 fiscal year; and the anticipated level of difficulty in achieving our 2009 business plan. In constructing the specific parameters of the 2009 MIP, the Committee wished to increase (relative to prior years) the level of discretion which it reserved to itself in reaching final determinations of achievement levels reached. At least in part, this desire arose from the Committee’s realization that, as circumstances change throughout a given fiscal year, specific formulas or guidelines for measuring achievement set in the beginning of a year, if strictly applied, may well prove to result in compensation grants that do not match actual shareholder value creation. The award criteria were designed to provide management with a meaningful guideline for meeting the Committee’s criteria for a target award but not guarantee achievement or make achievement somewhat inevitable. This approach is also intended to provide the possibility of exceeding target awards and some economic recognition, albeit reduced, for near achievement of the target.

In connection with the finalization of the 2009 MIP corporate objectives, each executive also prepared written individual objectives. Our Chief Executive Officer’s individual objectives were reviewed and approved by the Committee. Each other named executive officer’s individual objectives were reviewed and approved by our Chief Executive Officer, and each other executive’s individual objectives were reviewed and approved by one of our named executive officers. The individual objectives varied depending upon each participant’s roles and responsibilities. Mr. Boni’s individual objectives for the 2009 MIP tracked Safeguard’s overall business strategy as approved by the Board of Directors and included the following: continued support for and increase in value of our partner company holdings; the realization of some valuable exits from our partner company holdings; the replenishment of our partner company holdings with new, promising partner companies; the retirement/repurchase or restructuring of our long-term debt; seeking alternative sources of capital; and preparation of Safeguard for strategic growth. Mr. Datin’s and Mr. Kemmerer’s individual objectives, as the respective heads of our Life Sciences and Technology deal teams, related to the following: the achievement of growth and milestone targets of our partner companies; the continued development of quality pipelines of deal flow resulting in the deployment of identified amounts of capital in transactions involving credentialed syndication partners where appropriate; and positioning partner companies for profitable exits. Mr. Sisko’s objectives related to the following: management of efforts related to the restructure/refinance of our long-term debt; management of specific components of efforts related to accessing alternate pools of capital; management of our litigation exposures; management of reverse stock split; and management of shareholder approval process relating to equity plan changes. Mr. Zarrilli’s personal objectives related to the following: continued improvement in our debt-to-equity ratio; structure and execution of the reverse stock split; exploration of alternate pools of capital; assistance to partner companies with regards to their financial, administrative and strategic requirements; and planning and execution of Clarient exit activities.

Consistent with their respective employment agreements and Safeguard’s overall compensation philosophy, the Committee set the following target awards for 2009 for our named executive officers:

		2008 MIP Target				2009 MIP Target				2010 MIP Target
		Variable				Variable				Variable
Name		Incentive*				Incentive				Incentive*
Peter J. Boni		$	650,000			$	650,000			$	661,500
James A. Datin		$	390,000			$	390,000			$	401,500
Kevin L. Kemmerer		$	325,000			$	357,500			$	387,500
Brian J. Sisko		$	250,000			$	250,000			$	261,500
Stephen T. Zarrilli			N/A			$	250,000			$	261,500

The Committee notes that it has been the Committee’s recent practice to maintain the ratio between the annual base salary and the annual MIP target variable incentive amount that was first established for a particular executive upon hire (or later renegotiation of terms of employment). This approach is not a formal policy nor is it a contractual requirement. In connection with the elimination of perquisites as otherwise described in this analysis, beginning in 2010, the Committee varied from the practice in that target variable incentive levels for 2010 were increased for the named executive officers by a fixed amount of $11,500 per named executive officer affected by the elimination of the perquisites and the increase in base salary. Even though Mr. Zarrilli was not affected by the perquisite elimination, his base salary and target variable incentive amount were increased to keep his compensation in line with the other named executive officers.

Payouts. There were no mandatory minimum awards payable under the 2009 MIP. The actual incentive awards paid to participants were determined based upon the level of achievement of the quantitative and qualitative corporate and individual performance objectives and were measured in the aggregate on a sliding scale basis (e.g., for executives and professional staff, achievement of objectives totaling 50 points would result in payment of 50% of the target award, achievement of objectives totaling 100 points would result in payment of 100% of the target award and achievement of objectives totaling 150 points would result in payment of 150% of the target award). Payments under the 2009 MIP were limited to 150% of each individual’s target award.

Under the terms of our 2009 MIP, the Committee had the ability to make payments to participants in cash and/or equity. There was no requirement that any particular portion of any payments may be made in any particular form. In late 2009 and early 2010, the Committee reviewed our performance against the quantitative and qualitative corporate objectives set forth above and preliminarily determined the following payout levels. The finalization of the payouts was conditioned upon the substantial completion of the audit of our 2009 financial statements and internal controls over financial reporting without any unexpected material adjustments. Such substantial completion was deemed to have occurred on March 2, 2010, when the Audit Committee met in the normal course of its audit oversight process with Safeguard’s independent registered public accountants.

		Target				Payout
		Incentive				Level
Corporate Objectives		(in points)				(in points)				Factors Affecting Determination
Partner Company Performance			40				32			In approving a payout of 80% of the potential award total in this category, the Committee noted the exceptional performance of two of our partner companies, Advanced BioHealing and Avid Radiopharmaceuticals. In noting the below plan financial results of certain of our partner companies, the Committee recognized the impact of the macro economy on these companies’ development. It was also noted that our partner companies did achieve most of the non-financial objectives and milestones established for them. The Committee also took into account the write-downs in carrying value on some of our partner company holdings during the year in determining the final performance level in this category.
Overall Corporate Performance			40				40			The Committee evaluated overall corporate performance, including execution of our business strategy; exploration of alternate sources of funding/capital structures; opportunistic repurchase of our outstanding convertible debt; deal sourcing and pipeline development; organizational staffing and development; development of “fund-raising” competencies; expansion of transparency to investor community; fostering partner company referenceability; maintaining risk identification and mitigation strategies; management of corporate budget; and enhancement of Safeguard’s market capitalization. In awarding a 100% payout in this category, the Committee noted the significant progress made in 2009 in strengthening Safeguard’s balance sheet, the two new partner company deployments made in a challenging environment, Safeguard’s stock performance relative to the peer group, and the prudent management of Safeguard’s financial resources
Total Points			80				72			(which equates to 90% achievement of corporate objectives)

At the end of the year, each executive also completed a self-assessment of his achievement of individual objectives (representing 20% (target — 20 points) of the total 2009 MIP target award). The Chief Executive Officer’s self-assessment was a component of the annual performance review conducted by the Nominating & Corporate Governance Committee. The Committee reviewed with the Nominating & Corporate Governance Committee its assessment of the performance of the Chief Executive Officer, including his achievement of individual objectives, and discussed with the Chief Executive Officer his review of each other named executive officer’s achievement of each officer’s specific individual objectives. The Committee’s determinations regarding the individual achievement levels of each of the named executive officers was as follows: Mr. Boni’s individual performance component was determined to be 100%, with the Committee recognizing his successful efforts in strategy formulation, execution, and balance sheet initiatives in 2009. Mr. Datin’s individual performance was determined to be 125% based upon the growth and milestone achievements of our Life Sciences partner companies; the valuation growth of Clarient, Inc. due to that company’s improved performance and the addition of Oak Investment Partners as an investor in the company; the deployment of capital into Quinnova; and the valuable exit of a portion of our holdings in Clarient, Inc. Mr. Kemmerer’s individual performance component was determined to be 95%, based upon the growth and milestone achievements of our Technology partner companies; the deployment of capital into MediaMath; and the accretive acquisitions accomplished by certain technology partner companies. Mr. Sisko’s individual performance was determined to be 132% based upon negotiation of the terms of the Oak/Clarient investment; management of the timing and effectiveness of our reverse stock split to coincide with the completion of our Clarient stock sale and our 2009 annual meeting; management of the sale of a portion of our holdings in Clarient; management of the successful approval of an increase in our principal equity compensation plan; development of an investment banking relationship with Stifel Nicolaus; and participation in the evaluation of alternate pools of capital. Mr. Zarrilli’s individual performance was determined to be 132% based upon improvements accomplished regarding our balance sheet; participation in the negotiations and structuring of the Oak/Clarient investment; management of the Clarient stock sale to coincide with our reverse stock split; repurchase of our long-term debt at a discount to face; cash and expense management; and participation in the evaluation of alternate forms of capital.

Based on its review of the achievement of both quantitative and qualitative 2009 MIP objectives, the Committee (i) authorized the following individual awards to Safeguard’s named executive officers and, in the aggregate, the following award to Safeguard’s 11 eligible executives as a group. The Committee determined, based on consultations with the Committee’s independent consultant and analysis of data related to incentive payment practices being followed within Safeguard’s peer group and throughout the United States financial services industry, as a whole, to pay 75% of 2009 MIP payments to our executives in cash and to pay the remainder in the form of stock grants. The Committee’s decision to pay a portion of the 2009 MIP awards in equity but in a different form and in a different ratio than it did concerning 2008 MIP payments was based upon a number of factors, including the conservation of equity in Safeguard’s long-term incentive plans, the need for management to have the cash to pay the taxes on the equity granted (without having to sell stock into the market), and industry trends. Specifically, the Committee determined to make outright equity grants as opposed to restricted stock grants in recognition of the fact that these awards are part of the annual incentive component of our compensation policies and not part of long-term incentive compensation. For purposes of determining the specific number of shares of stock to be issued to each executive, the Committee decided that it would be appropriate to use a trailing 30-day average of Safeguard’s average of the high and low trading prices of our stock as reported on the NYSE composite tape as of March 2, 2010 ($11.1308), the date upon which the audit of Safeguard’s 2009 financial statements was deemed substantially complete. The Committee has made no determination regarding the ongoing use of equity as a component of its annual incentive policies and practices.

The cash amounts paid to our named executive officers as well as the value of the shares issued on March 2, 2010, also are presented in the Summary Compensation Table under “Non-Equity Incentive Plan Compensation.” The cash payments were made, and the shares were issued to each executive, upon completion of the audit of our financial statements on March 2, 2010.

						Total Variable
		Payout				Incentive				Total Cash
Name		Level (1)				Payment				Amount (2)				Shares (3)
Peter J. Boni			92			$	598,000			$	448,500				13,431
James A. Datin			97			$	378,300			$	283,725				8,497
Kevin L. Kemmerer			91			$	325,325			$	243,994				7,307
Brian J. Sisko			98			$	245,840			$	184,380				5,522
Stephen T. Zarrilli			98			$	245,840			$	184,380				5,522
Eligible executives, as a group (11 persons)			94			$	2,340,881			$	1,755,661				52,579

The Committee has not made any determination as to the ways in which payments under our 2010 MIP will be made. The Committee is aware that, under our presently existing shareholder-approved equity compensation plans, there is limited availability of shares available for issuance to our named executive officers.

It should be noted that the Committee is in the process of instituting a clawback policy that will formally give Safeguard the ability to recover portions of the compensation paid, including incentive compensation, to our named executive officers and others under certain circumstances involving financial results restatements and ethical misconduct. The Committee is undertaking this initiative, not in response to any particular situation or circumstance, but as a natural extension of the Committee’s commitment to sound executive compensation practices and effective corporate governance.

Long-Term Incentives. The principal approach utilized by the Committee to meet the need for a long-term incentive component to Safeguard’s executive compensation program has been the granting of significant amounts of equity to our named executive officers, primarily in the form of stock options, but, more recently, also in the form of restricted stock and performance stock units. Our equity compensation plans allow for the grant of options, restricted stock awards and such other equity-based awards as the Committee may determine to be appropriate from time to time. It should be noted that, as described above under “2009 Compensation Program – Payouts,” the Committee chose to pay a portion of the 2009 MIP awards in the form of stock grants. The Committee chose to pay a portion of the 2008 MIP awards in the form of restricted stock. These decisions reflect the Committee’s desire to continually incorporate a longer term perspective throughout its compensation policies and practices and to always look to link management’s and our shareholders’ perspectives together.

As noted above, we compete for executive talent with venture capital and private equity firms, and we review comparative information regarding venture capital and private equity industry compensation practices as part of our overall analysis. In such industries, executives (referred to as “managing partners”) typically have compensation programs heavily weighted towards long-term incentive, structured as a share of the fund’s profits, payable in cash (referred to as “carry”). We currently do not provide our executives with a cash compensation program tied directly to gains from our sales of our partner company holdings. Instead, as part of our overall process of composing a complete approach to executive compensation, we review our equity compensation plans in light of the type of economic benefit and performance metrics that would be included in a “carry” approach to compensation. We compare the initial equity awards made to our named executive officers against our assessment of the carry which would typically be provided to executives in positions of comparable responsibility at private equity and/or venture capital firms at that time. Based upon information available to the Committee through its consultant, we continually reassess the competitiveness of our executives’ long-term compensation opportunity against a carry methodology as well as other relevant metrics from other types of businesses within our peer group. The ultimate potential value of the equity grants is intended to be competitive with those held by comparable executives in the comparison data reviewed by the Committee (as adjusted for the senior executive’s experience).

In order to undertake a discussion of the Committee’s work regarding long-term incentives during 2009, it is relevant to revisit issues related to long-term incentives confronted in 2008. The Committee’s deliberations with regard to long-term incentives during 2008 were made increasingly challenging by a variety of factors – the economic environment impacted the opportunity to realize the value of long-term incentives, and the retentive value of long-term incentive grants made to the named executives upon hire declined precipitously through the course of 2008. In an effort to better approximate a “carry” approach, the Committee considered a variety of alternatives for long-term incentives, including cash, restricted stock, and stock options, with all of these approaches tied to gains derived by Safeguard from sales of our partner company interests. The Committee decided to continue the use of options as the principal component of its long-term incentive program, but changed the performance criteria for new grants from the “market-based” approach (described below) which had been utilized since 2005, to the “capital-return” approach (described below). The Committee made this change in the belief that this vehicle best ties the reward to the factors critical to the creation of shareholder value.

All of our stock options are granted with an exercise price equal to the average of the high and low trading prices of our common stock on the date of grant. Therefore, the options will have value only if the market price increases after that date and, in the case of options that vest upon achievement of specified performance milestones, only if the specified performance milestones are achieved. We refer to options that vest upon achievement of specified performance milestones as “performance-based” options. At present, we have issued and outstanding two types of performance-based options: “market-based vesting” options and “capital-return” options (initiated in 2008). Both of these types of performance-based options are described in detail below.

In general, for executive personnel, the Committee has established the following model for allocating option grants (both initial and any annual grants) between options which are subject to simple time-based vesting and performance-based options:

•

25% of the total underlying shares are subject to time-based vesting; of such amount, 25% vests on the first anniversary date of the grant date and the remaining 75% vests in 36 equal monthly installments on the same date of each month thereafter; and

•

75% of the total underlying shares are subject to performance-based vesting.

The Committee believes that allocating option grants in such a fashion aligns the long-term interests of Safeguard management and our shareholders. The Committee may infrequently grant options allocated in a different manner, in special circumstances. All option grants to our named executive officers in 2009 were allocated, between time-based vesting and performance-based vesting, in the above manner.

Market-based Options. Our market-based vesting options vest as Safeguard’s per share price on the NYSE achieves certain specified levels in excess of the exercise price of such options. The Committee began utilizing these market-based vesting options during 2005 and continued to utilize them through the second quarter of 2008. Our executives will not benefit from such option grants unless our stock price achieves and sustains a targeted stock price (based on the average closing price of a share of our common stock as reported on the NYSE composite tape for 20 consecutive trading days).

The following table shows the per share stock price levels at which portions of the shares underlying the market-based vesting options granted in 2005 and 2006 to Messrs. Boni, Datin and Kemmerer will vest:

		Per Share Stock Price
Percentage of Shares Underlying Options That Vest		(as adjusted to reflect 8/2009 reverse stock split)
First 10%		$12.2154
Next 20%		$18.9288
Next 30%		$27.8796
Final 40%		$39.0684

The market-based options issued to Mr. Sisko in 2007 and to Messrs. Kemmerer and Zarrilli during 2008 will vest as follows:

		Per Share Stock Price
Percentage of Shares Underlying Options That Vest		(as adjusted to reflect 8/2009 reverse stock split)
First 20%		$18.9288
Next 30%		$27.8796
Next 40%		$39.0684
Final 10%		$43.3476

Market-based options also may vest on a pro rata basis if the per share stock price is between the designated stock price levels set forth in the above tables for 20 consecutive trading days. We measure for these pro rata vestings every six months. For example, based on the stock price levels in the first table above, if the first 10% of the options have already vested and within the next six-month window, the highest average closing price of a share of our common stock as reported on the NYSE composite tape over 20 consecutive trading days equals $15.5721, an additional 10% of the shares underlying the options will vest.

Capital-Return Model. During the third quarter of 2008, based upon discussions with the Committee’s consultant and in an attempt to 1) formally incorporate the annual granting of equity as part of the annual total compensation package; 2) better approximate the “carry” concept described above; and 3) better link compensation to two principal elements of Safeguard’s business plan for producing enhanced shareholder value, increasing the value of our partner company interests and consummating exit transactions to realize such value, the Committee formulated the following capital-return model. The principle behind the capital-return model is to vest the underlying equity as partner company exit transactions produce aggregate cash returns to Safeguard in excess of certain predetermined levels. In order to create a starting point for the use of this vesting approach, the Committee formed a group consisting of all of Safeguard’s partner companies existing as of September 30, 2008, other than Clarient (the “Initial Group”) and tied the vesting to predetermined levels of net cash proceeds returned to Safeguard based on exit transactions involving the Initial Group. The model calls for vesting to be calculated annually as of the anniversary date of the grant. Vesting will only begin to occur after a hurdle amount of proceeds are produced. All instruments will become vested upon achievement of a predetermined target amount of proceeds. After the hurdle amount is reached, the instruments will vest on a linear basis relative to additional proceeds produced beyond the hurdle amount until such time as 100% are vested when the target amount of proceeds is reached. Adjustments to the hurdle amount and the target amount will be made if and when Safeguard deploys additional capital into any of the Initial Group. The Committee determined that the instruments issued in 2008 would all be options. None of such Initial Group capital-return options have vested as of the date hereof. It was contemplated that, on an annual basis going forward, on or about the anniversary date of the formation of the Initial Group, the Committee would create an additional grouping of partner companies defined as companies into which Safeguard first deployed capital during the preceding 12 months. The vesting of any stock option or other equity issuances to be made at that time (or within the next 12 months) in the normal course of the Committee’s management of executive compensation equity matters would be tied to net proceeds produced from exit transactions involving such group of partner companies. Consistent with such expectations, in Fall 2009, the Committee issued additional capital-return options as well as performance stock units (which also vest based on the capital-return model) pegged to a group of partner companies first funded by Safeguard in the prior 12 months. This practice is expected to continue annually.

The Committee annually reviews the equity awards held by our executives and other employees and also may consider awards periodically during a year in an effort to retain and motivate employees and to ensure continuing alignment of executive and shareholder interests. Information regarding the equity grants made to our named executive officers during 2009 can be found below under “Executive Compensation — Grants of Plan-Based Awards — 2009.”

Subject to availability under our shareholder approved equity compensation plans, we expect to continue to use stock options and other equity awards as part of our executive compensation program, including performance-based options.

Stock Option/Equity Granting Process. The Committee is responsible for equity grants under our equity compensation plans. The Committee approves and grants all equity awards to our executives, employees and advisory board members, with the exception of those grants for which the Committee has delegated authority to the Chief Executive Officer which are described below. Equity grants to directors are generally approved by the Board; however, in those cases where the Board has approved the size and form of recurring annual service grants, the Committee may authorize grants without further Board approval.

Grants may be made at regularly scheduled meetings or at special meetings convened to approve compensation arrangements for newly hired executive officers or for executive officers who have been promoted or are otherwise subject to changes in responsibilities. During 2007, the Committee determined that, as a matter of best practice, recurring grants to directors and advisory board members would be made on or about the date of Safeguard’s annual meeting of shareholders. During 2008, the Committee further determined that it would also begin utilizing the end of Safeguard’s fiscal third quarter each year as an acceptable and administratively convenient time to make annual determinations regarding executive equity compensation matters. It is presently contemplated that, at that time in each calendar year going forward, and in connection with the process described above regarding Safeguard’s capital-return model, the Committee may issue additional options (or other forms of incentive equity) to some or all of Safeguard’s executives. This annual process was established in 2008 in recognition of the fact that the core of Safeguard’s senior management team was established beginning in 2005 and that, based on the term of Safeguard’s option grants, it would be appropriate to begin an annual option review and potential programmatic supplemental grant designed to deliver an annual long-term incentive value relative to each executive’s roles and responsibilities. The Committee believes that granting equity on an annual basis will 1) provide greater alignment between the performance achieved and the value realized; 2) reinforce equity value as an important component of each executive’s annual total compensation; and 3) recognize each executive’s ongoing role in achieving results rather than the point in time that he joined Safeguard.

The Committee has delegated to our Chief Executive Officer the authority to make equity grants between regularly scheduled Committee meetings (primarily to new hires and new advisory board members), provided that the aggregate number of shares granted may not exceed 50,000 shares, the maximum number of shares allocated to any one employee may not exceed 20,000 shares and the aggregate number of shares allocated to any one advisory board member may not exceed 1,000 shares. A report is made to the Committee at each of its regularly scheduled meetings regarding any grants that our Chief Executive Officer has approved since the date of the last report, following which the aggregate number of shares available is reset to 50,000 shares. The Chief Executive Officer is not authorized to make equity grants to executives or directors without prior Committee approval of the specific grant contemplated.

It recently has become our practice to make all employee grants of options, subject to limited exceptions for new hires, on fixed quarterly grant dates. Grants to newly retained consultants or advisors may be made on the later of the date the award is approved or the date of commencement of services. The exercise price for all stock options granted under our equity compensation plans is the average of the high and low trading prices of our common stock as reported on the NYSE composite tape on the date of grant, which we believe reflects a commonly utilized practice.

Nonqualified Deferred Compensation. Our executives may defer compensation under our qualified 401(k) plan (subject to the limits imposed by the Internal Revenue Code) but generally, due to the structure of our 401(k) plan, the most highly compensated of our executives (including our named executive officers) were not eligible to receive matching company contributions under that plan for calendar years through 2008. In lieu of such a matching 401(k) contribution, such executives were eligible to participate in our nonqualified deferred compensation plan, which is an unfunded plan that did not allow participants to elect to defer compensation but did allow participants to obtain credits, in the form of Safeguard contributions allocated to accounts for the benefit of participants. We offered this nonqualified deferred compensation plan to those executives excluded from matching contributions in light of their ineligibility to obtain a Company matching contribution under our qualified 401(k) plan. During 2008, the Committee approved a change to our 401(k) plan which allowed matching contributions for all of our employees for calendar years beginning with 2009. Therefore, no further contributions are expected to be made under our nonqualified deferred compensation plan for calendar years beyond 2008. Amounts accrued for prior periods will remain credited, and earnings on those prior amounts will continue to be credited, to prior participants in accordance with the terms of the plan. Additional information regarding participation in this plan by named executive officers can be found below under “Executive Compensation—Nonqualified Deferred Compensation — 2009.”

Perquisites (fringe benefits). Previously, certain of our executives were contractually entitled to a few benefits that were not otherwise available to our employees generally. We do not provide a defined benefit pension arrangement, post-retirement health coverage or similar benefits for any of our executives. During 2009, we provided universal life insurance coverage ranging from $750,000 to $1,000,000 to each of our named executive officers. In addition, the following cash-settled additional perquisites were provided to all of our named executive officers in fiscal 2009, other than to Mr. Zarrilli:

•

$10,000 annual car allowance;

•

$8,000 non-accountable annual expense allowance; and

•

Up to $5,000 reimbursement annually for medical, vision or dental expenses not covered under our other benefit plans (“Executive Medical”).

In connection with the Committee’s deliberations regarding 2010 Base Salary amounts for our named executive officers, it was determined that the car allowance, non-accountable expense allowance and Executive Medical perquisites would be eliminated effective January 1, 2010. As described above, the Committee did adjust base salaries of the affected named executive officers in connection with the elimination of such perquisites.

Severance and Change-in-Control Arrangements

Each of our named executive officers has an agreement with Safeguard which provides certain benefits in the event of termination of his employment by Safeguard without “cause” or by the officer for “good reason” (as defined in the agreements).

Upon the occurrence of a termination event, each executive will be entitled to those benefits outlined in his agreement with us, which may include a multiple of his then current base salary, payment of his pro rata bonus for the year of termination or a multiple of the greater of his target bonus for the year of termination or the average of his actual bonuses for up to the last three years, accelerated vesting of equity awards and extension of the post-termination exercise period within which some or all of the equity awards held by the executive may be exercised, coverage under our medical, health and life insurance plans for a designated period of time, and outplacement services or office space. See “Potential Payments upon Termination or Change in Control” elsewhere herein for a summary of the specific benefits that each executive will receive upon the occurrence of a termination event.

Unlike “single trigger” change-in-control arrangements that pay out immediately upon a change in control, most of the benefits to which our named executive officers are entitled under their agreements in the event of a “change in control” require a “double trigger,” namely a change in control coupled with a loss of employment or a substantial change in job duties. We believe a “double trigger” provides retention incentives as well as continuity of management in the event of an actual or threatened change in control. However, we note that the acceleration of the vesting of the stock options that have been granted to Mr. Boni require only a “single trigger” to be effective – that is, only a change in control. This arrangement was specifically negotiated by Mr. Boni as a condition to his agreement to join Safeguard. Since equity represents a significant portion of Mr. Boni’s total compensation, we believe that this “single trigger” can be an important retention device during change–in-control discussions.

Deductibility of Executive Compensation

The Committee considers the potential impact of Section 162(m) of the Internal Revenue Code in structuring executive compensation. Section 162(m) disallows a tax deduction for any publicly held corporation for certain executive compensation exceeding $1,000,000 per person in any taxable year unless it is “performance based” within the meaning of Section 162(m). We believe the stock options awarded under our equity compensation plans are in compliance with the provisions of Section 162(m). The portion of cash compensation paid to Mr. Boni for 2009 in excess of $1,000,000 was not “performance-based” compensation within the meaning of Section 162(m) and, therefore, was not deductible by Safeguard. We believe that providing an appropriate level of cash compensation and maintaining flexibility in determining compensation may be more important than preserving this tax deduction. Therefore, the Committee does not currently plan to take any action to qualify any of our cash incentive compensation plans under Section 162(m).

Stock Ownership Guidelines

Our Board established stock ownership guidelines, effective December 31, 2005, that are designed to closely align the long-term interests of our named executive officers with the long-term interests of our shareholders. The guidelines provide that each named executive officer should attain an equity position in our common stock equal to two times annual base salary. The ownership level should be achieved (i) within five years of December 31, 2005 for executive officers who were employed on that date or (ii) for individuals who were not employees on December 31, 2005, by the end of the fifth full calendar year following the year in which the executive officer was hired or became an executive officer. The Nominating & Corporate Governance Committee monitors compliance as of the end of each calendar year. Shares counted toward these guidelines include:

•

Shares beneficially owned by the executive officer;

•

Vested shares of restricted stock;

•

Vested deferred stock units that have been credited to the executive officer; and

•

Shares underlying vested, in-the-money options.

Based on information they have provided to us, two of our named executive officers, including our Chief Executive Officer, have achieved the required ownership levels and the other three named executive officers are working toward meeting the guidelines within the prescribed time frames.

Prohibition on Speculation in Safeguard Stock

Our company policy on securities trading by company personnel prohibits our named executive officers, directors and other employees from engaging in activities with regard to our stock that can be considered as speculative, including but not limited to, short selling (profiting if the market price of our securities decreases); buying or selling publicly traded options (e.g., a put option, which is an option or right to sell stock at a specific price prior to a specified date, or a call option, which is an option or right to buy stock at a specific price prior to a specified date); and hedging or any other type of derivative arrangement that has a similar economic effect. Our executive officers and directors also are prohibited from pledging, directly or indirectly, our common stock or the stock of any of our partner companies, as collateral for indebtedness.

COMPENSATION COMMITTEE REPORT

We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussion with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K and the Company’s proxy statement.

Members of the Compensation Committee:

Julie A. Dobson, Chairperson                        Andrew E. Lietz                        George D. McClelland                        John J. Roberts

EXECUTIVE COMPENSATION

Summary Compensation Table — Fiscal Years Ended December 31, 2009, 2008 and 2007

The table below is a summary of total compensation paid to or earned by our named executive officers for the fiscal years ended December 31, 2009, 2008, and 2007.

																										Change in
																						Non-Equity				Pension Value
																						Incentive				and
																						Plan				Nonqualified				All Other
														Stock				Option				Compen-				Deferred				Compen-
Name and						Salary				Bonus				Awards				Awards				sation				Compensation				sation				Total
Principal Position		Year				($)				($)(1)				($)(2)(3)				($)(2)(4)				($)(5)				Earnings ($)				($)(6)				($)
Peter J. Boni			2009				650,000				75,000				307,031				260,703				598,000				10,805				69,323				1,970,862
President and Chief			2008				650,000				—				—				667,736				428,964				—				74,323				1,821,023
Executive Officer			2007				650,000				—				—				—				455,000				267				116,049				1,221,316
James A. Datin			2009				390,000				75,000				143,691				122,009				378,300				10,805				41,564				1,161,369
Executive Vice President			2008				390,000				—				—				333,875				266,569				—				46,961				1,037,405
and Managing Director,			2007				390,000				—				—				—				273,000				267				47,441				710,708
Life Sciences
Kevin L. Kemmerer (7)			2009				357,500				—				168,253				142,866				325,325				14,224				40,022				1,048,190
Executive Vice President			2008				309,337				—				—				638,350				204,306				—				45,081				1,197,074
and Managing Director,
Technology
Brian J. Sisko			2009				340,000				50,000				71,231				60,483				245,840				4,691				42,763				815,008
Senior Vice President and			2008				340,000				50,000				—				72,292				176,771				—				48,109				687,172
General Counsel			2007				126,410				91,096				—				1,205,538				—				—				6,238				1,429,282
Stephen T. Zarrilli (8)			2009				340,000				50,000				71,231				60,483				245,840				—				21,681				789,235
Senior Vice President and			2008				198,333				113,750				—				1,099,875				—				—				14,006				1,425,964
Chief Financial Officer			2007				327,500				—				—				19,122				—				—				—				346,622

						Nonqualified Deferred				Life				Group Life
		Perquisites				Compensation Plan or 401(k)				Insurance				Insurance
Name		and Personal Benefits				Matching Contribution				Premiums				Imputed Income
Peter J. Boni		$	23,000			$	12,250			$	30,509			$	3,564
James A. Datin			21,772				12,250				6,930				612
Kevin L. Kemmerer			22,762				12,250				4,640				370
Brian J. Sisko			22,571				12,250				7,420				522
Stephen T. Zarrilli			—				12,250				8,909				522

For Messrs. Boni, Datin, Kemmerer, and Sisko, the perquisites and personal benefits included a $10,000 car allowance, an $8,000 non-accountable annual expense allowance, and reimbursement of up to $5,000 for medical, vision or dental expenses not covered under our other benefit plans. Our named executive officers also have occasional personal use of tickets to various sporting events at no incremental cost to us and are eligible to receive matching charitable contributions under our program, which is available to all employees, subject to a maximum of $1,500 in matching contributions for each individual for each calendar year.

Each of our current named executive officers has an employment agreement with us that sets his initial base salary and initial minimum annual cash incentive target award. The initial base salary and initial minimum annual cash incentive target award for each named executive officer employed as of December 31, 2009, were as follows: Mr. Boni ($600,000 salary; $600,000 target award); Mr. Datin ($375,000 salary; $375,000 target award); Mr. Kemmerer ($325,000 salary; $325,000 target award); Mr. Sisko ($340,000 salary; $250,000 target award); and Mr. Zarrilli ($340,000 salary; $195,000 target award). Base salaries and annual cash incentive target awards, which are reviewed by the Compensation Committee each year, currently exceed these contractual minimum amounts for each named executive officer. The primary focus of these agreements is to provide our executive officers with severance benefits in the event of a termination of employment involuntarily, for good reason or upon a change in control, as described below under “Potential Payments upon Termination or Change in Control.” The components of compensation reported in the Summary Compensation Table, including an explanation of the amount of salary and cash incentive compensation in proportion to total compensation, are described in detail under “Compensation Discussion and Analysis.”

Grants of Plan-Based Awards — 2009

The following table shows non-equity and equity incentive plan awards, stock awards and option awards granted during 2009 to our named executive officers.

																																		All Other				All Other
																																		Stock				Option												Grant
																																		Awards:				Awards:				Exercise				Closing				Date Fair
										Estimated Possible Payouts												Estimated Future Payouts												Number				Number of				or Base				Market				Value of
						Date of				Under Non-Equity Incentive												Under Equity Incentive Plan												of Shares				Securities				Price of				Price on				Stock and
						Comp.				Plan Awards (1)												Awards (2)												of Stock				Underlying				Option				Date of				Option
		Grant				Committee				Threshold				Target				Maximum				Threshold				Target				Maximum				or Units				Options				Awards				Grant				Awards
Name		Date				Action				($)				($)				($)				(#)				(#)				(#)				(#)				(#)(2)(3)				($/Sh)				($/Sh)(4)				($)(5)
Peter J. Boni			03/02/09				03/02/09				—				650,000				975,000				—				—				—				—				—				—				—				—
			10/30/09				10/27/09				—				—				—				—				—				—				—				15,625				9.825				9.740				80,577
			10/30/09				10/27/09				—				—				—				—				46,875	(6)			—				—				—				9.825				9.740				180,126
			10/30/09				10/27/09				—				—				—				—				31,250	(7)			—				—				—				—				—				307,031
James A. Datin			03/02/09				03/02/09				—				390,000				585,000				—				—				—				—				—				—				—				—
			10/30/09				10/27/09				—				—				—				—				—				—				—				7,313				9.825				9.740				37,712
			10/30/09				10/27/09				—				—				—				—				21,937	(6)			—				—				—				9.825				9.740				84,297
			10/30/09				10/27/09				—				—								—				14,625	(7)			—				—				—				—				—				143,691
Kevin L. Kemmerer			03/02/09				03/02/09				—				357,500				536,250				—				—				—				—				—				—				—				—
			10/30/09				10/27/09				—				—				—				—				—				—				—				8,563				9.825				9.740				44,159
			10/30/09				10/27/09				—				—				—				—				25,687	(6)			—				—				—				9.825				9.740				98,707
			10/30/09				10/27/09				—				—				—				—				17,125	(7)			—				—				—				—				—				168,253
Brian J. Sisko			03/02/09				03/02/09				—				250,000				375,000				—				—				—				—				—				—				—				—
			10/30/09				10/27/09				—				—				—				—				—				—				—				3,625				9.825				9.740				18,694
			10/30/09				10/27/09				—				—				—				—				10,875	(6)			—				—				—				9.825				9.740				41,789
			10/30/09				10/27/09				—				—				—				—				7,250	(7)			—								—				—				—				71,231
Stephen T. Zarrilli			03/02/09				03/02/09				—				250,000				375,000				—				—				—				—				—				—				—				—
			10/30/09				10/27/09				—				—				—				—				—				—				—				3,625				9.825				9.740				18,694
			10/30/09				10/27/09				—				—				—				—				10,875	(6)			—				—				—				9.825				9.740				41,789
			10/30/09				10/27/09				—				—				—				—				7,250	(7)			—				—				—				—				—				71,231

Outstanding Equity Awards at Fiscal Year-End — 2009

The following table shows the equity awards we have made to our named executive officers that were outstanding at December 31, 2009.

																																						Equity
																																		Equity				Incentive Plan
														Equity																Market				Incentive Plan				Awards:
														Incentive Plan												Number				Value of				Awards:				Market or
														Awards:												of Shares				Shares				Number of				Payout Value
						Number of				Number of				Number of												or Units				or Units				Unearned				of Unearned
						Securities				Securities				Securities												of Stock				of Stock				Shares, Units				Shares, Units
						Underlying				Underlying				Underlying												That				That				or Other				or Other
						Unexercised				Unexercised				Unexercised				Option								Have				Have				Rights That				Rights That
						Options				Options				Unearned				Exercise				Option				Not				Not				Have Not				Have Not
		Grant				(#)(1)				(#)(1)(2)				Options				Price				Expiration				Vested				Vested				Vested				Vested
Name		Date				Exercisable				Unexercisable				(#)(2)				($)				Date				(#)(2)(3)				($)(5)				(#)(2)(4)				($)(5)
Peter J. Boni			08/16/05				166,666				—				—				7.650				08/16/13				—				—				—				—
			08/16/05				143,541				—				356,459	(6)			7.650				08/16/13				—				—				—				—
			09/30/08				15,624				34,375				—				7.410				09/30/16				—				—				—				—
			09/30/08				—				—				150,000	(7)			7.410				09/30/16				—				—				—				—
			02/09/09				—				—				—				—				—				65,857				678,986				—				—
			10/30/09				—				15,625				—				9.825				10/30/17				—				—				—				—
			10/30/09				—				—				46,875	(7)			9.825				10/30/19				—				—				—				—
			10/30/09				—				—				—				—				—				—				—				31,250				322,188
James A. Datin			09/07/05				83,333				—				—				9.360				09/07/13				—				—				—				—
			09/07/05				71,771				—				178,229	(6)			9.360				09/07/13				—				—				—				—
			09/30/08				7,813				17,187				—				7.410				09/30/16				—				—				—				—
			09/30/08				—				—				75,000	(7)			7.410				09/30/16				—				—				—				—
			02/09/09				—				—				—				—				—				40,925				421,937				—				—
			10/30/09				—				7,313				—				9.825				10/30/17				—				—				—				—
			10/30/09				—				—				21,937	(7)			9.825				10/30/19				—				—				—				—
			10/30/09				—				—				—				—				—				—				—				14,625				150,784
Kevin L. Kemmerer			06/14/04				16,666				—				—				14.010				06/14/12				—				—				—				—
			12/15/04				20,833				—				—				12.750				12/15/12				—				—				—				—
			06/06/05				4,166				—				—				6.180				06/06/13				—				—				—				—
			10/25/05				8,333				—				—				8.280				10/25/13				—				—				—				—
			10/25/05				19,139				—				47,527	(6)			8.280				10/25/13				—				—				—				—
			02/21/06				14,354				—				35,646	(6)			11.850				02/21/14				—				—				—				—
			06/30/08				7,813				13,020				—				7.650				06/30/16				—				—				—				—
			06/30/08				4,121				—				58,379	(8)			7.650				06/30/16				—				—				—				—
			09/30/08				6,509				14,323				—				7.410				09/30/16				—				—				—				—
			09/30/08				—				—				62,500	(7)			7.410				09/30/16				—				—				—				—
			02/09/09				—				—				—				—				—				31,366				323,383				—				—
			10/30/09				—				8,563				—				9.825				10/30/17				—				—				—				—
			10/30/09				—				—				25,687	(7)			9.825				10/30/19				—				—				—				—
			10/30/09				—				—				—				—				—				—				—				17,125				176,559
Brian J. Sisko			08/20/07				24,305				17,361				—				12.636				08/20/15				—				—				—				—
			08/20/07				6,770				—				118,230	(8)			12.636				08/20/15				—				—				—				—
			09/30/08				1,641				3,609				—				7.410				09/30/16				—				—				—				—
			09/30/08				—				—				16,416	(7)			7.410				09/30/16				—				—				—				—
			02/09/09				—				—				—				—				—				27,139				279,803				—				—
			10/30/09				—				3,625				—				9.825				10/30/17				—				—				—				—
			10/30/09				—				—				10,875	(7)			9.825				10/30/19				—				—				—				—
			10/30/09				—				—				—				—				—				—				—				7,250				74,748
Stephen T. Zarrilli			12/15/06				25,000				—				—				14.010				06/11/10				—				—				—				—
			06/30/08				23,438				39,062				—				7.650				06/30/16				—				—				—				—
			06/30/08				12,362				—				175,138	(8)			7.650				06/30/16				—				—				—				—
			09/30/08				456				1,002				—				7.410				09/30/16				—				—				—				—
			09/30/08				—				—				4,375	(7)			7.410				09/30/16				—				—				—				—
			10/30/09				—				3,625				—				9.825				10/30/17				—				—				—				—
			10/30/09				—				—				10,875	(7)			9.825				10/30/19				—				—				—				—
			10/30/09				—				—				—				—				—				—				—				7,250				74,748