EXHIBIT 99.1
EMPLOYMENT TRANSITION AND
RETIREMENT
AGREEMENT
THIS EMPLOYMENT TRANSITION AND
RETIREMENT AGREEMENT (the “Agreement”) , made and
entered into on this 13 th day of April,
2005 (the “Effective Date”), by and between Safeguard
Scientifics, Inc. a Pennsylvania corporation (the
“Company”), and Anthony L. Craig (the
“Executive”), reads as follows:
ARTICLE I
RECITALS
WHEREAS, Executive currently
serves on the Company’s Board of Directors and as its
President and Chief Executive Officer (“CEO”), a
position of substantial authority and responsibility in which he
has access to the Company’s trade secrets, proprietary
information, and intellectual property; and
WHEREAS, the Executive
recently notified the Board of his intention to retire from
employment with the Company; and
WHEREAS, the parties desire
Executive to continue as President and CEO of the Company during
the period commencing on the date of this Agreement and ending on
the Transition Date (defined below), during which Executive will
continue his duties and employment and assist the Company in the
identification and recruitment of a successor; and
WHEREAS, on the Transition
Date, the Executive shall resign his office and position as CEO of
the Company; and
WHEREAS, following the
Transition Date, the parties desire for the Executive to continue
as a part-time employee of the Company for a period ending on his
Retirement Date (defined below) on mutually agreeable terms;
and
WHEREAS, on the Retirement
Date, Executive will resign from his all of his offices and
positions with the Company and its subsidiaries; and
WHEREAS, in appreciation for
Executive’s service to the Company, his leadership of the
Company and in exchange for all of Executive’s undertakings
in this Agreement, the Company and Executive wish to enter into
this Agreement to (i) provide for services to be rendered by
Executive prior to the Transition Date, (ii) provide for
part-time employment to be rendered by Executive during the
Transition Period, (iii) provide mutual releases by the
Company of Executive and by Executive of the Company as to any
claims including, without limitation, claims that might be asserted
by Executive under the Age Discrimination in Employment Act, as
further described herein, and (iv) assuming that Executive
performs the services required by this Agreement and executes and
does not rescind the releases contemplated hereunder, provide
Executive with the benefits and entitlements described
herein.
NOW THEREFORE, in
consideration of these premises and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE II
DEFINITIONS
Section 2.1.
“Board” means the Board of Directors of the
Company.
Section 2.2.
“Cause” means (a) Executive’s failure to
adhere to any written Company policy if Executive has been given a
reasonable opportunity to comply with such policy or cure
Executive’s failure to comply (which reasonable opportunity
must be granted during the ten-day period preceding termination of
this Agreement); (b) Executive’s appropriation (or
attempted appropriation) of a material business opportunity of the
Company, including attempting to secure or securing any personal
profit in connection with any transaction entered into on behalf of
the Company; (c) Executive’s misappropriation (or
attempted misappropriation) of any Company fund or property; or
(d) Executive’s conviction of, or his entering a guilty
plea or plea of no contest with respect to, a felony, the
equivalent thereof, or any other crime with respect to which
imprisonment is a possible punishment.
Section 2.3.
“Change in Control” shall be deemed to have occurred if
(i) any “person” or “group” (as such
terms are used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), other than any the Company employee stock ownership
plan or an equivalent retirement plan, becomes the beneficial owner
(as such term is used in Section 13(d) of the Exchange Act),
directly or indirectly, of securities of the Company representing
50% or more of the combined voting power of the Company’s
then outstanding voting securities, (ii) the Board ceases to
consist of a majority of Continuing Directors (as defined below),
(iii) the consummation of a sale of all or substantially all
of the Company’s assets or a liquidation (as measured by the
fair value of the assets being sold compared to the fair value of
all of the Company’s assets), or (iv) a merger or other
combination occurs such that a majority of the equity securities of
the resultant entity after the transaction are not owned by those
who owned a majority of the equity securities of the Company prior
to the transaction. A “Continuing Director” shall mean
a member of the Board of Directors who either (i) was a member
of the board of Directors as of January 1, 2005 or
(ii) is nominated or appointed to serve as a Director by a
majority of the then Continuing Directors.
Section 2.4.
“Change in Control Termination” means termination of
Executive’s employment with the Company during the Executive
Period by the Company without Cause or by Executive for Good Reason
within twenty four (24) months following a Change in Control.
Section 2.5.
“Code” means the Internal Revenue Code of 1986, as
amended.
Section 2.6.
“Deferred Stock Units” means those deferred stock
awards made to Executive by the Company and identified on
Appendix A.
Section 2.7.
“Disability” means a disability pursuant to which
Executive is entitled to receive payments under the Company’s
long-term disability plan, or if no such plan is then in effect, a
permanent and total disability, as described in
Section 22(e)(3) of the Code.
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Section 2.8.
“Employment Agreement” means the letter agreement dated
October 12, 2001, as amended by letter agreements dated
January 15, 2002 and January 1, 2003.
Section 2.9.
“Employment Period” means the period beginning on the
Effective Date and ending on the day that Executive’s
employment with the Company terminates for any reason.
Section 2.10.
“Executive Period” means the period beginning on the
Effective Date and ending on the earlier of (i) the Transition
Date or (ii) the day that Executive’s employment with
the Company terminates for any reason.
Section 2.11.
“Good Reason” means except otherwise set forth or
contemplated by this Agreement, (i) Executive’s
assignment (without his consent) to a position, title,
responsibilities, or duties of a materially lesser status or degree
of responsibility than Executive’s current position,
responsibilities, or duties; provided, however, that a mere change
in Executive’s area of responsibilities shall not constitute
a material change if Executive is reasonably suited by his
education and training for such responsibilities and Executive
remains an executive officer of the Company; (ii) a reduction
of Executive’s base salary or target bonus opportunity
(acknowledging that the payment of any bonus is subject to the
discretion of the Compensation Committee of the Board);
(iii) the relocation of the Company’s principal
executive offices to a location which is more than 30 miles away
from the location of the Company’s principal executive
offices on the date of this Agreement; or (iv) during the
Executive Period, Executive’s assignment (without his
consent) to be based anywhere other than the Company’s
principal executive offices. Notwithstanding the foregoing, good
reason shall not exist if the Company cures such action or failure
to act that constitutes good reason within a reasonable period of
time (which reasonable period of time shall not be longer than
10 days) following the date Executive provides the Company
with notice of his intended resignation for good reason.
Notwithstanding any other provision of this Agreement to the
contrary, neither the execution of this Agreement nor any of the
transactions provided for or contemplated by this Agreement shall
constitute “Good Reason” under this or any other
written agreement by and between the Company and the
Executive.
Section 2.12.
“Restricted Period” means the period commencing on the
Retirement Date and ending on the first anniversary thereof.
Section 2.13.
“Retirement Date” means the earlier of (i) the
last day of the Transition Period or (ii) the day that
Executive’s employment with the Company terminates for any
reason.
Section 2.14.
“Severance Termination” means termination of
Executive’s employment during the Executive Period for any
reason other than by the Company for Cause or resignation by the
Executive without Good Reason. Notwithstanding any other provision
of this Agreement to the contrary, the termination of
Executives’ employment at the end of the Transition Period
shall not constitute a Severance Termination.
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Section 2.15.
“Stock Options” means those options to purchase shares
of the Company’s common stock granted to Executive by the
Company and identified on Appendix A attached hereto.
Section 2.16.
“Transition Date” means the date immediately prior to
the date that the Company’s next CEO is scheduled to commence
his or her duties, as identified in a written notice from the
Board.
Section 2.17.
“Transition Period” means the period commencing on the
business day immediately following the Transition Date and ending
6 months thereafter; provided, however, that the
Transition Period may be extended on a month to month basis if
mutually agreed to by the Executive and the Board.
ARTICLE III
EMPLOYMENT PERIOD
Section 3.1.
Employment Term . The Company and Executive agree that
Executive shall continue in employment and perform such duties for
the Company as set forth in this Article 3 until the
Retirement Date, unless earlier terminated by the Company or the
Executive pursuant to Section 3.3(e) or
Section 3.4(d).
Section 3.2.
Duties .
(a) Executive Period . During the Executive
Period, Executive will continue to serve as President and CEO of
the Company (his “Position”) and will report directly
to the Board and its Chairman and will have all duties customarily
associated with the position of a CEO, as are set forth in the
Company’s bylaws for such position and as are delegated to
the CEO from time to time by the Board. During that period,
Executive shall perform his duties faithfully and assist the Board
in the identification and recruitment of, and transition to, his
successor. On the Transition Date, Executive shall resign from his
Position and from membership on the board of directors of any
subsidiary of the Company on which he then currently serves.
(b) Transition Period .
(i) Employment . Following the resignation
required by Section 3.2(a) and during the Transition Period,
Executive will remain an employee of the Company and shall make
himself available to perform services on a part-time basis for not
less than an average of two (2) full business days per week at
the Company’s headquarters (or such other locations as
reasonably requested by the Board or its delegate). During the
Transition Period, Executive shall assist the management of the
Company in the transition of responsibility to the Company’s
then current CEO and will make himself available to the management
of the Company with respect to strategic planning, corporate
development and other matters, as determined by the Company’s
CEO or by the Board.
(ii) Membership on the Board . Executive will
continue to serve on the Company’s Board during the
Transition Period. Upon the expiration of the
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Transition Period, Executive will not stand for reelection to the
Board; provided, however, that Executive may stand for
reelection to the Board if requested by the then CEO of the Company
and approved by the Board and Executive chooses to serve as a
member of the Board. In light of the compensation paid to Executive
for his continuing employment under this Agreement, he will not be
entitled to any additional compensation for his service as a member
of the Board during the Transition Period. Following the expiration
of the Transition Period, if he is reelected to the Board, he will
be entitled to the same compensation as is then paid to other
members of the Board who are also non-employee directors.
Section 3.3.
Compensation during the Executive Period . In consideration
of agreeing to continue to remain employed by the Company until the
Transition Date and subject to Section 3.3(e) and
Article 4, the Company shall pay or cause to be paid or
provided to Executive during the Executive Period the following
amounts and benefits:
(a) Base Salary . During the Executive Period,
Executive will receive a base salary of $600,000 per annum (the
“Base Salary”).
(b) Bonus . With respect to the 12-month period
ending December 31, 2005, Executive will participate in the
Company’s 2005 Management Incentive Plan (the
“MIP”), subject to the bonus schedule set forth in
Appendix B, attached hereto. If the Transition Date is after
January 1, 2006, Executive shall be eligible to participate in
the Company’s bonus program for executive officers as may be
established by the Board from time to time.
(c) Fringe Benefits . During the Executive
Period, Executive will be paid a car allowance at the rate of
$10,000 per annum, will be reimbursed for country club dues at the
rate of $8,000 per annum, will participate in the Company’s
executive medical plan (pursuant to which up to $5,000 per annum of
reasonable and necessary medical, healthcare, vision or dental
expenses not allowed under normal health plans are reimbursed), and
will receive life insurance providing up to $1,000,000 in death
benefits payable on the Executive’s death (assuming that
Executive meets normal insurability requirements) paid by the
Company. In addition, Executive will be entitled to participate in
all other benefit programs offered generally by the Company to its
other executives.
(d) Repayment of Club Membership Expenses .
Executive will repay the Company $75,000 in exchange for the
Company’s beneficial interest in the Applebrook Country Club
membership, not later than ten (10) days following the earlier
of the Transition Date or the Retirement Date, unless otherwise
agreed to by the Executive and the Board.
(e) Severance; Severance Payments . Consistent
with the terms and conditions of the Employment Agreement, at any
time during the Executive Period, (1) the Company may
terminate the employment of the Executive with or without Cause
upon written notice to the Executive and (2) the Executive may
terminate his employment with or without Good Reason on thirty
(30) days written notice to the Company. Subject to the terms
and conditions set forth below, in the event that there is a Change
in Control Termination or a Severance Termination during the
Executive Period, the Company shall provide Executive with the
following benefits, which together with any benefits provided under
the applicable terms of any other plan or program sponsored by the
Company, and applicable to Executive, shall be the
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only severance benefits or other payments in respect of
Executive’s employment with the Company to which Executive
shall be entitled (including those payments contemplated by
Section 3.4). The benefits Executive receives under this
Section 3.3(e) will be in respect of all Base Salary, bonus or
other incentive compensation, accrued vacation and other rights
that Executive may have against the Company or its
affiliates.
(i) Executive will receive a payment in satisfaction
of the requirements set forth in Section 3.3(b) equal to a
pro-rata amount of the amount payable for 2005 under
Section 3.4 (assuming that Executive’s Transition Date
occurs on December 31, 2005).
(ii) Executive will receive a lump sum payment equal
to the product of (i) 3 multiplied by (ii) the sum of
Executive’s Base Salary (of not less than $600,000) plus the
greater of Executive’s bonus at his target bonus (of not less
than $720,000) or the average of his actual bonus as received for
the last three completed fiscal years during which Executive was
President and Chief Executive Officer of the Company (taking into
account the value of any equity grants received by Executive during
such period in lieu of cash bonuses).
(iii) Except as provided below, Executive will vest in
his interests under and Executive will receive benefits in
accordance with the terms and conditions set forth in the
Company’s various long term incentive plans.
(iv) Executive will receive up to twenty four
(24) months continued coverage under the Company’s
medical and health plans and life insurance plans, which coverage
shall run concurrent with the coverage provided under section 4980B
of the Code; or as an alternative, at the discretion of the Board,
the Board may elect to pay Executive in lieu of such coverage an
amount equal to Executive’s cost of continuing such coverage.
Executive should consult with the Company’s Manager of Human
Resources concerning the process for assuming ownership of and
continued premium payments for any whole life policy at the end of
such twenty four (24) month period.
(v) Executive will be reimbursed promptly for all his
reasonable and necessary business expenses incurred on behalf of
the Company prior to Executive’s termination date in
accordance with the Company’s customary policies.
(vi) Upon a Change of Control Termination, Executive
will become fully vested in all of Executive’s outstanding
Stock Options and Executive may exercise those Stock Options during
the thirty six (36) month period following his termination of
employment (unless any of the options would by their terms expire
sooner, in which case Executive may exercise such options at any
time before their expiration) and Executive will become fully
vested in all of his outstanding restricted stock awards and
Deferred Stock Units, if any.
(vii) If Executive’s employment with the Company
is terminated during the Executive Period for any reason, other
than Cause or his resignation without Good Reason, Executive will
become fully vested in his outstanding Stock Options and Executive
may exercise those Stock Options during the 36 month period
following his termination of
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employment (unless any of the options would by their terms expire
sooner, in which case Executive may exercise such options at any
time before their expiration). In addition, upon such a
termination, Executive’s restricted stock grants made before
October 1, 2002 will become fully vested and the Board, in its
discretion may accelerate the vesting of any restricted stock
grants and Deferred Stock Units, if any, made or credited after
October 1, 2002.
(viii) Executive will not be required to mitigate the
amount of any payment provided for in this Section 3.3 by
seeking other employment or otherwise.
Section 3.4.
Compensation During the Transition Period . In consideration
of resigning from his Position (as required by Section 3.2(a))
and agreeing to remain a part-time employee during the Transition
Period, subject to Section 3.4(d) and Article 4, the Company
shall pay or cause to be paid or provided to Executive during the
Transition Period the following amounts and benefits:
(a) Salary . The Company will pay to Executive
a monthly salary of $75,000 or, for any partial month, a pro-rata
amount (the “Transition Period Salary”) for each month
during the Transition Period with respect to which Executive makes
himself available to provide services, which amounts will be paid
in accordance with Safeguard’s then standard payroll
practices;
(b) Certain Fringe Benefits . For each month
during the Transition Period with respect to which Executive makes
himself available to provide services, Executive (and, to the
extent covered immediately prior to the date of termination, his
spouse and dependents) will continue to be covered under the
Company’s group health program (which for purposes hereof,
includes medical, executive medical, dental, vision and life
insurance benefits). Such continuation coverage will be provided at
the same cost to Executive during the Transition Period as in
effect immediately prior to the Transition Period. Executive shall
not be entitled to any other fringe benefits during the Transition
Period, including without limitation, the reimbursement of any
country club dues or car allowance; and
(c) No Bonus Payments . During the Transition
Period, Executive shall not be eligible for nor shall he receive
any payment with respect to any (i) annual, short-term or long-term
cash incentive compensation plan or (ii) any severance plan,
policy or program maintained by the Company.
(d) Severance Payments .
(i) Reasons for Termination . At any time
during the Transition Period, (1) the Company may terminate
the employment of the Executive with or without Cause upon written
notice to the Executive and (2) the Executive may terminate
his employment with Good Reason on thirty (30) days written
notice to the Company.
(ii) Severance Upon a Termination Without Cause or
for Good Reason . Subject to Section 3.7, if
Executive’s employment during the Transition Period is
terminated by the Company without Cause or by Executive for Good
Reason, the Company will continue to pay to Executive (1) the
Transition Period Salary through the end of the then current
Transition Period and (2) the benefits required by
Section 3.5.
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(iii) Severance Upon a Termination For Cause or
Without Good Reason . If Executive’s employment during
the Transition Period is terminated by the Company for Cause or by
Executive for any reason other than Good Reason, then
notwithstanding any other provision of this Agreement, he will not
be entitled to any further payments and all his entitlements under
this Section 3.4 and Section 3.5 will cease.
(iv) Termination of the Transition Period .
Executive shall not be entitled to any severance or other benefits
from the Company and the Company shall have no further obligations
to the Executive as a result of the Transition Period ending
because of either party notifying the other party that the
Transition Period will not be extended beyond the initial six month
period or any then current one-month extension.
Section 3.5.
Compensation Following the Transition Period . Following the
end of the Transition Period and subject to Article 4:
(a) During the period Executive is eligible for COBRA,
the Company will pay the COBRA premium for health insurance
coverage for Executive and his spouse. Thereafter, Executive will
receive an annual cash payment from the Company of up to a maximum
of $20,000 per annum as reimbursement for the actual cost incurred
by Executive (from an independent third party provided as reflected
in appropriate documentation) health insurance coverage for
Executive and his spouse, payable until the earlier of:
(1) the date that Executive attains age 65 or (2) the
date that Executive dies; and
(b) Notwithstanding the terms of the Company’s
equity incentive plans and any Stock Option award or deferred stock
unit agreement between Executive and the Company, solely for
purposes of the vesting to purchase shares of the Company’s
common stock under any Stock Option award and Deferred Stock Units
held by Executive as of the Retirement Date, Executive will be
treated as continuing in the employment of the Company until the
later of (a) January 1, 2006, (b) the date six
months after the last day of the Transition Period, or (c) the
date six months after the last day of Executive’s service as
a member of the Board (the “Revised Vesting Period”);
provided however, that any Stock Option held by Executive on the
Retirement Date will terminate on the earlier of (a) the
second anniversary of the last day of the Revised Vesting Period,
or (b) the date such Stock Option expires pursuant to the
terms of the Company’s equity incentive plan and the
applicable Stock Option award agreement. In all other respects, the
terms of the Stock Options and the Deferred Stock Units shall
remain unchanged by this Agreement.
Section 3.6.
Effect
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