UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

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Exchange Act of 1934 (Amendment No.  )

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

                                                            Phone:                610.293.0600
                                                            Toll-Free:          877.506.7371
                                                            Fax:                    610.293.0601

Internet: www.safeguard.com

SAFEGUARD SCIENTIFICS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

Dear Shareholder:

You are invited to attend the Safeguard Scientifics, Inc. 2007 Annual Meeting of Shareholders.

DATE:		May 24, 2007
TIME:		10:00 a.m. Eastern time
PLACE:		The Desmond Hotel and Conference Center
		1 Liberty Boulevard
		Malvern, PA 19355
		610.296.9800 or 800.575.1776
RECORD DATE:		Only shareholders who owned stock at the close of business on April 2, 2007, can vote at this meeting and any adjournments that may take place.
ITEMS OF BUSINESS:		1.     To elect 10 directors;

	2.		To consider a proposal to ratify the appointment of KPMG LLP as Safeguard’s independent registered public accounting firm for the fiscal year ending December 31, 2007; and
	3.		To consider such other business as may properly come before the meeting.

We also will report on Safeguard’s 2006 business results and other matters of interest to our shareholders. You will have an opportunity at the meeting to ask questions, make comments and meet our management team.

Your vote is very important. We encourage you to read the proxy statement and submit your proxy or voting instructions as soon as possible to ensure your representation at the annual meeting, regardless of whether you attend in person. You may vote by completing, signing, dating and returning your proxy card or voting instruction form in the pre-addressed envelope provided, or, in most cases, by using the telephone or the Internet. For specific instructions on how to vote your shares, please refer to the section entitled “Questions and Answers about the Meeting and the Proposals” beginning on page 1 of the proxy statement and the instructions on the proxy card or voting instruction form.

This notice of annual meeting, proxy statement, accompanying proxy card, and 2006 annual report are being mailed to shareholders beginning April 20, 2007, in connection with the solicitation of proxies by the Board of Directors.

By Order of the Board of Directors,

Deirdre Blackburn
Secretary

April 18, 2007

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 Thursday, May 24, 2007 at 10:00 a.m. at The Desmond Hotel and Conference Center, 1 Liberty Boulevard, Malvern, PA 19355.
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, bank or other nominee, you will need to provide proof of beneficial ownership on the record date, such as a legal proxy from your broker, trust, bank or other nominee, your most recent brokerage account statement prior to April 2, 2007, a copy of the voting instruction form provided by your broker, trustee or nominee, or other similar evidence of ownership. If you do not have photo identification and proof that you own Safeguard shares, you will not be admitted to the meeting.
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 April 2, 2007, the record date for determining the shareholders entitled to vote at the annual meeting. This proxy statement contains detailed information relating to the proposals on which we would like you, as a shareholder, to vote. The proxy card or voting instruction form is used for voting on the proposals.
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 the outstanding shares, which may be represented at the meeting either in person or by proxy. Proxies received but marked as abstentions or containing broker non-votes on a particular matter will be included in the calculation of the number of shares entitled to vote for the purpose of determining the presence of a quorum.
Q:		What am I voting on?
A:		You are being asked to vote on:

	1.		the election of 10 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 2007 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:		Safeguard’s Board recommends a vote “FOR” 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, 2007. Our Board also requests discretionary authority to cumulate votes in the election of directors and to vote on any other matters that may properly arise at the meeting.
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 120,771,313 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 10 directors are standing for election at the annual meeting, if you hold 100 shares of Safeguard stock, you may cast 1,000 votes (10 times 100) in the election of directors. You may distribute those votes among as few or as many of the 10 nominees as you wish. In other words, in the example provided, you may cast all 1,000 votes “FOR” one nominee or allocate your 1,000 votes among two or more nominees, as long as the total equals 1,000 votes.
		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 10. If the number of votes does not add up correctly, your votes will not be counted until a properly completed proxy card has been received.
		The cumulative voting feature for the election of directors also is available by voting in person at the annual meeting; however, it is not available by telephone or the Internet. If you are the beneficial owner of shares held in street name and wish to vote cumulatively, you will need to contact your broker, bank or other nominee holder of your shares.

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, Mellon Investor Services LLC, you are considered the shareholder of record with respect to those shares, and these proxy materials are being sent to you directly by Safeguard. As a shareholder of record, you have the right to grant your voting proxy directly to Safeguard or to vote in person at the meeting. If you are a shareholder of record, Safeguard has enclosed a proxy card for your use in voting your shares.

		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 the beneficial owner, you have the right to direct your broker or other nominee how to vote your shares, but unless you receive a proxy from your broker, you cannot vote your shares directly or by proxy – you must instruct your broker or other nominee as to how to vote your shares. You also are invited to attend the annual meeting. To vote your shares at the meeting, you will need a legal proxy from your broker or other nominee authorizing you to vote at the meeting.
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. 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, either Steven J. Feder or Deirdre Blackburn, as the proxy designated by our Board to act on behalf of shareholders, will vote your shares and cumulate your votes as recommended by our Board and, in his or her discretion, will vote on any other matters which may properly arise at the meeting.
		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;
	2.		by telephone; or
	3.		by completing, signing and returning the voting instruction form in the accompanying prepaid envelope.

		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 so. 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:		In the election of directors, the 10 nominees who receive the highest number of “FOR” votes at the annual meeting will be elected as directors. A properly executed proxy that withholds authority to vote with respect to the election of one or more directors will not be voted with respect to the director or directors indicated and will not be taken into account in determining the outcome of the election; however, it will be counted for purposes of determining whether there is a quorum.
		The proposal to ratify the appointment of our independent registered public accounting firm requires the affirmative “FOR” vote of a majority of the shares present in person or represented by proxy and entitled to vote on the proposal.
		Broker non-votes (which are explained in the next question) and abstentions are not counted in the tally of votes “FOR” or “AGAINST” a proposal and, therefore, have no effect on the proposal, assuming a quorum is present.
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 do not provide your broker with voting instructions, your broker or other nominee may either use its discretion to vote your shares on “routine” matters (such as the election of directors or the ratification of our independent registered public accounting firm) or leave your shares unvoted. However, for matters deemed “non-routine” by the New York Stock Exchange, your broker or other nominee would not be able to vote without your instructions, in which case your shares would be considered “broker non-votes” on that particular matter.
Q:		Who will count the votes?
A:		A representative of Mellon Investor Services LLC, our registrar and transfer agent, 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 Mellon Investor Services LLC
P. O. Box 3315
South Hackensack, NJ 07606

Toll Free:                                                                   800.851.9677
TDD Hearing Impaired:                                            800.231.5469
International:                                                             201.680.6578
International TDD Hearing Impaired:                       201.680.6610

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.melloninvestor.com.

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 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 877.506.7371.

ELECTION OF DIRECTORS
Item 1 on Proxy Card

Directors are elected annually and serve until the next annual meeting of shareholders. There are 10 nominees for election this year. All of the nominees are currently serving as directors. Each nominee has consented to serve until the next annual meeting if elected. You will find a biography for each nominee below. If any director is unable to stand for re-election after distribution of this proxy statement, the Board may reduce its size or designate a substitute. If the Board designates a substitute, proxies voting on the original director candidate will be cast for the substituted candidate. The Board recommends a vote “FOR” each nominee. The 10 nominees who receive the highest number of affirmative votes will be elected as directors.

Peter J. Boni, age 61, joined Safeguard as President and Chief Executive Officer and a member of the Board in August 2005. Mr. Boni also is non-executive Chairman of the Board of Intralinks, Inc. and a director of Clarient, Inc. Positions held include Operating Partner for Advent International, Inc., a global private equity firm with $10 billion under management (April 2004 to August 2005); Chairman and Chief Executive Officer of Surebridge, Inc., an applications outsourcer serving the mid-market (March 2002 to April 2004); Managing Principal of Vested Interest LLC, a management consulting firm (January 2001 to March 2002); and President and Chief Executive Officer of Prime Response, Inc., an enterprise applications software provider (February 1999 to January 2001).

Michael J. Cody, age 57, has served on our Board since 2006. Positions held include Partner, Meadowood Capital, LLC, a private equity firm specializing in technology companies (April 2007 to present); Vice President of Corporate Development, responsible for mergers, acquisitions and divestitures at EMC Corporation, a provider of products, services and solutions for information storage and management (1998 until his retirement in March 2007); Director of Corporate Development at United Technologies Corporation, a diversified technology company (1993 to 1998); Managing Director of the investment banking group at Price Waterhouse (1990 to 1993); and Vice President of Investment Banking at Kidder Peabody & Co. (1980 to 1989).

Julie A. Dobson, age 50, has served on our Board since 2003. Ms. Dobson also is a director of PNM Resources, Inc. and non-executive Chairperson of the Board of LCC International, Inc. Positions held include Chief Operating Officer (1998 until February 2002) of TeleCorp PCS, Inc., a wireless/mobile phone company that was acquired by AT&T Wireless, Inc. in late 2001; President of Bell Atlantic 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.

Robert E. Keith, Jr., age 65, has served on our Board since 1996 and was appointed Chairman of the Board in October 2001, prior to which he served as Vice Chairman since February 1999. Mr. Keith also is a director of Internet Capital Group, Inc. and Millstream II Acquisition Corporation. Positions held include Managing Director of TL Ventures, a group of venture capital funds, and its predecessor funds (1988 to present); senior adviser to, and co-founder of, EnerTech Capital Partners (1996 to present); member of the Office of the Chief Executive of Safeguard (April 2001 to October 2001); and President (1991 to December 2002) and Chief Executive Officer (February 1996 to December 2002), of Technology Leaders Management, Inc., a private equity capital management company.

Andrew E. Lietz, age 68, has served on our Board since 2003. Mr. Lietz also is a director of Amphenol Corporation and DDi Corp. and a member of the Board of Trustees of the University System of New Hampshire. Positions held include Managing Director and Founder of Rye Capital Management, LLC, a private equity investment firm (2001 to present); Executive Chairman (late 2000 until mid 2002) of Clare Corporation, a designer and manufacturer of integrated circuits, solid-state relays and electronic switches, which was acquired by Ixys Corporation in June 2002; President and Chief Executive Officer (1995 to 2000) of, and several other executive positions during his 16-year career with, Hadco Corporation, a global manufacturer of electronic interconnect products and services; and a variety of positions at IBM Corporation.

George MacKenzie, age 58, has served on our Board since 2003. Mr. MacKenzie also is a director of C&D Technologies, Inc. Positions held include non-executive Chairman of the Board (May 2006 to present) and interim Chief Executive Officer (January 2006 to April 2006) of American Water, a provider of water services in North America; interim Chief Executive Officer of C&D Technologies, Inc., a technology company that produces and markets systems for the conversion and storage of electrical power (March 2005 to July 2005); Executive Vice President and Chief Financial Officer of P.H. Glatfelter Company, a manufacturer of specialty papers and engineered products (September 2001 to June 2002); Vice Chairman and Chief Financial Officer (1995 until his retirement in 2001) of, and several other executive positions during his 22-year career with, Hercules, Incorporated, a global chemical specialties manufacturer.

George D. McClelland, age 60, has served on our Board since 2006. Positions held include Chairman, CEO and Founder of eSecLending, a provider of securities lending services to the pension industry (2000 to 2001); a director of Riverstone Networks, Inc. and Storage Networks, Inc.; Senior Vice President, responsible for managing many of the portfolio companies of United Asset Management Corporation, a public holding company (1994-2001); multiple corporate management roles at FMR Corp., a diversified financial services company (1987-1991); and Corporate Treasurer of Data General Corporation, a technology company (1972-1987).

Jack L. Messman, age 67, has served on our Board since 1994. Mr. Messman also is a director of RadioShack Corporation and Timminco Limited. Positions held include Chairman of the Board and Chief Executive Officer of Novell, Inc., a provider of infrastructure software products focused around Linux and identity management (2001 to 2006); Chief Executive Officer and President of Cambridge Technology Partners (Massachusetts), Inc., an e-business systems integration company (August 1999 until its acquisition by Novell, Inc. in July 2001); Chairman and Chief Executive Officer of Union Pacific Resources Group Inc., an independent oil and gas exploration and production company (April 1991 to August 1999); and Chairman and Chief Executive Officer of USPCI, Inc., Union Pacific’s environmental services company (May 1988 to April 1991).

Dr. John W. Poduska, Sr., age 69, has served on our Board since 1987. Dr. Poduska also is a director of Novell, Inc. and Anadarko Petroleum Corporation. Positions held include Chairman of Advanced Visual Systems, Inc., a provider of visualization software and solutions (January 1992 to December 2001); President and Chief Executive Officer of Stardent Computer, Inc, a computer manufacturer (December 1989 to December 1991); and Founder, Chairman and Chief Executive Officer of Stellar Computer, Inc., a computer manufacturer and the predecessor of Stardent Computer, Inc. (December 1985 to December 1989).

John J. Roberts, age 62, has served on our Board since 2003. Mr. Roberts also is a director of Armstrong World Industries, Inc. and Vonage Holdings Corp. and a trustee of Pennsylvania Real Estate Investment Trust. Mr. Roberts is a C.P.A. Positions held include Global Managing Partner and a Member of the Leadership Team of PricewaterhouseCoopers LLP at the time of his retirement in June 2002, completing a 35-year career with the professional services firm during which he served in a variety of client service and operating positions.

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. Shareholders also may obtain a print copy of these documents, at no cost, by writing to our Secretary at 435 Devon Park Drive, Building 800, Wayne, PA 19087-1945. The Code of Business Conduct and Ethics is applicable to all employees of Safeguard, including each of our executive and financial officers, and the members of our Board. Safeguard intends to post information regarding amendments to or waivers from our Code of Business Conduct and Ethics (to the extent applicable to 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 or someone in the director’s immediate family is a current partner of a firm that is our internal or external auditor, the director is a current employee of the firm, someone in the director’s family is a current employee of the firm who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice, 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 $100,000 in direct compensation from us (other than director and committee fees and pension or other forms of deferred compensation for prior service that are not contingent in any way on continued service);
•		the director is a current employee or holder of more than 10% of the equity of another company, or someone in the 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 exceeds the greater of $1 million or 2% of that charitable organization’s consolidated gross revenues.

The Board has determined that Michael Cody, Julie Dobson, Andrew Lietz, George MacKenzie, George McClelland, Jack Messman, John Poduska and John Roberts have no direct or indirect material relationships with us other than their directorship and, therefore, are independent within the meaning of the NYSE listing standards and satisfy the categorical standards contained in our Corporate Governance Guidelines. In reviewing Mr. Cody’s independence, the Board determined that EMC Corporation’s purchases of IT consulting and software solutions from Alliance Consulting Group Associates, Inc., a majority-owned subsidiary of Safeguard, did not exceed the threshold in our categorical standards for determining independence and did not adversely impact Mr. Cody’s independence, as the relationship was not material to either Safeguard or EMC.

Board Structure and Committee Composition. At the date of this proxy statement, Safeguard’s Board has 10 members and four standing committees. The Board held eight meetings in 2006, one of which was a joint meeting with the Compensation Committee. Each incumbent director attended at least 75% of the total number of meetings of the Board and committees of which he or she was a member. Directors are invited, but not required, to attend annual meetings of Safeguard shareholders. Six directors attended the 2006 annual meeting of shareholders. Under our Corporate Governance Guidelines and NYSE listing standards, non-employee directors meet in executive

session at each regularly scheduled Board meeting, outside of the presence of any management directors and any other members of Safeguard’s management who may otherwise be present, and during at least one session per year, only independent directors are present. The Chair of the Nominating & Corporate Governance Committee presides at these sessions. The table below describes the membership of each of the standing committees during 2006 and the number of meetings held by each of these committees during 2006.

								Nominating &
		Acquisition		Audit		Compensation		Corporate Governance
Number of Meetings held in 2006		4		9		6		5
Membership:
Peter J. Boni		ü
Michael J. Cody		ü
Julie A: Dobson				ü		Chair
Robert E. Keith, Jr.		Chair
Andrew E. Lietz						ü		Chair
George MacKenzie				Chair
George D. McClelland				ü
Jack L. Messman		ü						ü
John W. Poduska, Sr.		ü						ü
Robert Ripp		†						†
John J. Roberts				ü		ü

Acquisition Committee. The Board has delegated to the Acquisition Committee the authority to approve, between regularly scheduled Board meetings, the following transactions:

•		follow-on transactions in existing partner companies involving amounts between $5 million and $20 million;
•		new transactions involving amounts between $10 million and $20 million; and
•		divestitures of existing partner companies involving amounts between $10 million and $20 million.

Audit Committee. The Audit 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 for 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 Safeguard’s website at www.safeguard.com/Governance.

The Board has determined that each member of the Audit Committee meets the independence requirements established by SEC regulations, the NYSE listing standards and our Corporate Governance Guidelines. The Board has determined that Messrs. MacKenzie and Roberts are “audit committee financial experts” within the meaning of

the SEC regulations, and the Board has determined that each member of the Audit Committee has accounting and related financial management expertise within the meaning of the NYSE listing standards. Mr. Roberts serves as a member of the audit committee of the board of directors of four publicly-traded companies, including our Audit Committee. The Board has determined that such simultaneous service does not impair Mr. Roberts’ ability to effectively serve on our Audit Committee.

Compensation Committee. The Compensation 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 executive officers and other employees;
•		establish compensation (including base salary, incentive compensation and equity-based programs) for our Chief Executive Officer and other executive officers;
•		administer the long- and short-term compensation and performance-based incentive plans (which are cash and equity based);
•		approve employment agreements and perquisites provided to our executive officers;
•		review 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 proxy statement.

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

A discussion of some of the Compensation 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 five times each year, with additional meetings being scheduled as needed. The annual committee calendar is established prior to the beginning of each year, and agendas for each meeting are established in consultation with the Compensation Committee Chair. The Compensation Committee meets in executive session during or prior to the end of each regularly scheduled meeting.
•		Role of Independent Consultant. The Compensation Committee has retained the services of an independent compensation consultant, Hewitt Associates, to assist the Compensation Committee in its deliberations regarding executive officer and director compensation. Specifically, Hewitt Associates provided information relating to competitiveness of pay levels, compensation design, market trends and technical considerations and assisted the Compensation Committee with the reporting of executive compensation under the SEC’s proxy disclosure rules. These services, which are provided in support of decision-making by the Compensation Committee, are the only services that the compensation consultant performs for Safeguard. Hewitt Associates reports to and acts at the direction of, and attends selected meetings as requested by, the Chair of the Compensation Committee. The Compensation Committee, which has the sole authority to hire and terminate the consultant, evaluates the performance of the consultant annually.
•		Role of Executive Team. The Compensation Committee discusses its compensation views with the Chief Executive Officer. Management provides the Compensation Committee with comprehensive tally sheets on an annual basis to facilitate the Committee’s review of the total compensation of our executive officers. The tally sheets include the annual cash compensation (salary, target cash incentive award and perquisites), the value of benefits provided to our executive officers, the potential severance payments should an executive officer’s employment terminate under various scenarios, and the outstanding equity awards held by each executive officer. The Chief Executive Officer also makes recommendations to the Compensation Committee for salary adjustments and equity and non-equity plan participation and awards to the named executive officers and other

employees. However, other than for compensation that has been established contractually or under quantitative formulas established by the Compensation Committee each year under our management incentive plan, the Compensation Committee exercises its own discretion in determining compensation for the named executive officers. Additional information can be found in “Compensation Discussion and Analysis—Role of Executive Team 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;
•		consider qualified Board candidates 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;
•		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 Safeguard’s website at www.safeguard.com/Governance. The Board has determined that each member of the committee meets the independence requirements established in the NYSE listing standards and our Corporate Governance Guidelines. During 2006, Mr. Boni recommended Messrs. McClelland and Cody to the Nominating & Corporate Governance Committee as potential candidates for Safeguard’s Board. Following completion of their consideration of these Board candidates, the Nominating & Corporate Governance Committee recommended to our Board, and our Board appointed, Messrs. McClelland and Cody as directors in July 2006 and October 2006, respectively. The Nominating & Corporate Governance Committee recommended the nomination of, and our Board nominated, Messrs. McClelland and Cody for election as directors by our shareholders at the 2007 annual meeting.

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

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

Communications with 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 in care of our Secretary 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 Chair 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 Chair of the Audit Committee and, if requested by the Chair, may be sent to the other members of the Audit Committee. Any person who desires to contact the Audit Committee may do so by addressing correspondence to Chair, Audit Committee, in care of our Secretary at the address noted above.

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

Our Secretary maintains a log of all communications which are available for review upon request of any member of the Board. Typically, we do not forward to our non-management directors communications from our shareholders or other communications which are of a personal nature or not related to the duties and responsibilities of the Board, including, without limitation, business plan or other business opportunity submissions, inquiries related to products or services provided by 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 a director nominee:

•		a strong record of personal integrity and ethical conduct;
•		a leader in the companies or institutions with which he or she is affiliated;
•		competencies, skills and experiences that are complementary to the background and experience represented on Safeguard’s Board and that meet the needs of Safeguard’s strategy and business;
•		the willingness and ability to devote sufficient time to fulfill his or her responsibilities to Safeguard and our shareholders;
•		the ability to represent the long-term interests of our shareholders; and
•		the ability to provide relevant advice and counsel to management and best perpetuate the success of 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, which must be received not later than December 22, 2007, should be directed to:

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

Board Compensation. During 2006, each of our non-employee directors was compensated for his or her service as a director as shown in the table below:

Compensation Item		Amount
Annual Board Retainers:
Chairman of the Board		$	50,000
Other Directors			35,000
Additional Annual Chair Retainers:
Audit Committee			10,000
Compensation Committee			7,500
Nominating & Corporate Governance Committee			5,000
Meeting Attendance Fees:
Board			2,000
Committee			1,500

We also reimburse our directors for expenses they incur to attend our Board and Committee meetings.

Each director who is not an employee of Safeguard receives an initial option grant to purchase 50,000 shares of Safeguard common stock upon initial election to the Board. Each non-employee director also receives an annual service option grant to purchase 25,000 shares. Directors’ options have an eight-year term. Initial option grants vest as to 25% of the underlying shares on each of the first four anniversaries of the grant date. Annual service option grants fully vest on the first anniversary of the grant date. The exercise price is equal to the fair market value of a share of our common stock on the grant date. Upon appointment to the Board, on July 26, 2006, Mr. McClelland received an initial option grant to purchase 50,000 shares at an exercise price of $1.9801 per share, and on October 25, 2006, Mr. Cody received an initial option grant to purchase 50,000 shares at an exercise price of $2.265 per share. On December 18, 2006, each non-employee director (including Messrs. Cody and McClelland) received an annual service option grant to purchase 25,000 shares at an exercise price of $2.30 per share.

Safeguard maintains a Group Deferred Stock Unit Program for Directors (“Directors’ DSU Program”) which allows each director, at his or her election, to receive deferred stock units in lieu of retainer and meeting fees paid to directors (“Directors’ Fees”). The deferral election applies to Directors’ Fees to be received for the calendar year following the year in which the election is made and remains in effect for each subsequent year unless the director elects otherwise by the end of the calendar year prior to the year in which the services are rendered. The number of deferred stock units awarded is determined by dividing the Directors’ Fees by the fair market value of 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. 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 – 2006. The following table provides information on compensation earned during 2006 by each non-employee director who served on our Board at any time during 2006:

		Fees Earned or				Stock				Option
		Paid in Cash				Awards				Awards				Total
Name		($)(1)				($)(2)(3)(5)				($)(3)(4)(5)				($)(6)
Michael J. Cody (7)			10,756				—				4,266				15,022
Julie A. Dobson			79,000				—				43,318				122,318
Robert E. Keith, Jr.			68,500				23,882				64,389				156,771
Andrew E. Lietz			72,500				—				80,207				152,707
George MacKenzie			74,500				—				43,318				117,818
George D. McClelland (7)			29,622				—				7,812				37,434
Jack L. Messman			57,500				216				64,389				122,105
John W. Poduska, Sr.			64,500				—				64,389				128,889
Robert Ripp (7)			15,442				—				54,430				69,872
John J. Roberts			70,000				2,932				43,318				116,250

		Deferred Stock
Name		Units				Stock Options
Michael J. Cody			—				75,000
Julie A. Dobson			—				97,500
Robert E. Keith, Jr.			122,546				213,500
Andrew E. Lietz			—				130,000
George MacKenzie			—				127,000
George D. McClelland			—				75,000
Jack L. Messman			20,654				138,500
John W. Poduska, Sr.			—				138,500
Robert Ripp			—				105,000
John J. Roberts			26,779				130,000

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

•		shares beneficially owned by the director;
•		vested shares of restricted stock;
•		vested deferred stock units that have been credited to the director; and
•		shares underlying vested, in-the-money options.

At March 31, 2007, each non-employee director, other than directors newly appointed to our Board in 2006, had achieved this ownership goal.

RATIFICATION OF APPOINTMENT OF KPMG LLP
Item 2 on Proxy Card

The Audit Committee, composed entirely of independent, non-employee members of the Board, approved the reappointment of KPMG LLP (“KPMG”) as Safeguard’s independent registered public accounting firm for the fiscal year ending December 31, 2007, and the Board has recommended that our shareholders ratify the appointment. If the shareholders do not ratify the appointment, the Audit Committee may reconsider its recommendation and may retain KPMG or another accounting firm without resubmitting the matter to shareholders. Even if the shareholders ratify the appointment of KPMG, the Audit Committee may select another firm if it determines such selection to be in the best interest of Safeguard and its shareholders.

Services provided to Safeguard and its subsidiaries by KPMG in fiscal 2006 and fiscal 2005 are described below under “Independent Registered Public Accounting 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.

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, 2007. Ratification requires the affirmative vote of a majority of those shares present in person or represented by proxy and entitled to vote on the proposal.

Independent Registered Public Accounting Firm—Audit Fees

The following table presents fees for professional services rendered by KPMG for the audit of Safeguard’s consolidated financial statements for fiscal 2006 and fiscal 2005 and fees billed for audit-related services, tax services and all other services rendered by KPMG for fiscal 2006 and fiscal 2005. This table includes fees billed to Safeguard’s consolidated subsidiaries for services rendered by KPMG.

		2006				2005
Audit Fees (1)		$	1,999,974			$	2,055,374
Audit-Related Fees (2)			99,786				32,200
Tax Fees (3)			379,119				255,825
All Other Fees			—				—
Total		$	2,478,879			$	2,343,399

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

AUDIT COMMITTEE REPORT

The Audit Committee assists the Board of Directors in fulfilling its responsibilities for 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 accounting principles generally accepted in the United States. Safeguard’s independent registered public accounting firm is responsible for auditing those financial statements and issuing opinions as to the conformity of Safeguard’s audited financial statements with accounting principles generally accepted in the United States, the effectiveness of Safeguard’s internal control over financial reporting and management’s assessment of the internal control over financial reporting.

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

	1.		The Audit Committee reviewed Safeguard’s audited consolidated financial statements for fiscal year 2006 and met and held discussions with management and KPMG regarding the audited financial statements.
	2.		The Audit Committee discussed with KPMG the matters required to be discussed by Statement on Auditing Standards No. 61 (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
	3.		The Audit Committee received the written disclosures and the letter from KPMG required by Independence Standards Board Standard No. 1 (Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees) and discussed with KPMG its independence.
	4.		Based on the review and discussion referred to in paragraphs 1 through 3 above, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in Safeguard’s Annual Report on Form 10-K for fiscal year 2006.

Members of the Audit Committee:

George MacKenzie, Chair           Julie A. Dobson           George D. McClelland           John J. Roberts

STOCK OWNERSHIP OF DIRECTORS AND OFFICERS

The following table shows the number of shares of Safeguard common stock beneficially owned (unless otherwise indicated) as of March 31, 2007, by our directors, our executive officers named in the Summary Compensation Table in this proxy statement, and our directors and executive officers as a group. On March 31, 2007, there were no known beneficial owners of greater than 5% of our common stock outstanding. For purposes of reporting total beneficial ownership, shares that may be acquired within 60 days of March 31, 2007 through the exercise of Safeguard stock options are included. On March 31, 2007, there were 120,771,313 shares of common stock outstanding and 3,698,804 shares underlying stock options held by current executive officers and directors that were exercisable on or before May 30, 2007.

										Shares
		Outstanding								Beneficially
		Shares				Options				Owned Assuming				Percent of				Other Stock-Based
		Beneficially				Exercisable				Exercise of				Outstanding				Holdings (2)
Name		Owned				Within 60 Days				Options				Shares (1)				Vested				Unvested
Peter J. Boni			190,000				1,129,556				1,319,556				1.1	%			—				—
Michael J. Cody			—				—				—				*				—				—
Julie A. Dobson			40,500				72,500				113,000				*				—				—
Robert E. Keith, Jr.			153,366				188,500				341,866				*				125,392				5,824
Andrew E. Lietz			45,000				105,000				150,000				*				—				—
George MacKenzie			3,000				102,000				105,000				*				—				—
George D. McClelland			10,000				—				10,000				*				—				—
Jack L. Messman			38,000				113.500				151,500				*				20,654				—
John W. Poduska, Sr.			12,500				113,500				126,000				*				—				—
John J. Roberts			—				105,000				105,000				*				26,779				—
James A. Datin			60,072				596,725				656,797				*				—				—
John A. Loftus			61,827				746,247				808,074				*				—				—
Steven J. Feder			16,959				366,276				383,235				*				—				—
Stephen T. Zarrilli			—				60,000				60,000				*				—				—
Christopher J. Davis			177,426				789,514				966,940				*				255,000				—
Executive officers and directors as a group (14 persons) (3)			631,224				3,698,804				4,330,028				3.5	%			172,825				5,824

As of March 31, 2007, the executive officers and directors of Safeguard owned less than 1% of the shares of common stock outstanding of Clarient, Inc., a publicly-traded partner company of Safeguard. The executive officers and directors of Safeguard did not own shares of any other Safeguard subsidiary.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and greater than 10% holders of our common stock to file with the SEC reports of ownership of our securities and changes in ownership of our securities. Based solely on our review of the copies of reports we have received and upon written representations from the reporting persons that no Form 5 reports were required to be filed by those persons, Safeguard believes there were no late filings by our directors and executive officers during 2006. There were no known holders of greater than 10% of our common stock during 2006.

COMPENSATION DISCUSSION AND ANALYSIS

Overview

The Compensation Committee (for purposes of this analysis, the “Committee”) is responsible for establishing our compensation philosophy and determining the compensation provided to the individuals who serve as our Chief Executive Officer, Chief Financial Officer and the other individuals included in the Summary Compensation Table (referred to as the “named executive officers”) and our other executive officers. The Committee reviews our compensation philosophy each year to assure that its principles and objectives are aligned to our overall business strategy and aligned with the interests of shareholders in increasing the value of our common stock over the long-term.

Compensation Philosophy and Objectives

Our overall goals in compensating our executive officers are to:

•		attract, retain and motivate outstanding executives who can thrive in a competitive environment of continuous change and whose experience and skills can be leveraged across our partner companies to facilitate their growth and success;
•		promote and reward the achievement of short-term and long-term objectives that our Board and management believe will lead to long-term growth in shareholder value; and
•		encourage meaningful equity ownership and the alignment of executive and shareholder interests as an incentive to increase shareholder value.

We design our executive compensation program to provide an appropriate mix of fixed and variable, at-risk pay; balance short-term performance with long-term shareholder value; and encourage executive recruitment and retention. There is no pre-established target for the allocation between either cash and non-cash or short-term and long-term compensation. Rather, the Committee reviews information provided by management as well as its independent compensation consultant, Hewitt Associates, to determine the appropriate level and mix of incentive compensation. During 2006, we used the following principal elements of compensation to meet our overall goals:

Base Pay		à		fixed compensation based on competitive market practice that rewards an executive’s core competencies relative to his skills, experience and contributions to us and our partner companies;
Annual Cash Incentives		à		variable, at-risk, performance-based incentive compensation that rewards an executive’s contributions towards the achievement of short-term corporate and individual performance objectives;
Long-Term Incentives		à		equity awards that encourage executive ownership of our stock and promote continued employment with us during the long-term vesting period, thereby aligning executives’ interests with those of our shareholders to increase shareholder value through improvement in our stock price over the long-term;
Health and Welfare Benefits		à		benefits that are part of our broad-based employee benefit programs, including medical, dental, life insurance, and disability plans, our 401(k) plan and our nonqualified deferred compensation plan;
Perquisites		à		limited additional benefits that are available to our executive officers; and
Severance and Change-in-Control Arrangements		à		severance benefits that are payable in the event of a termination of employment without cause or for good reason, either involuntarily or in connection with a change-in-control, provide retention incentives for our executive officers as well as continuity of executive management in the event of an actual or threatened change in control.

Role of Executive Team in Compensation Decisions

The Committee makes all compensation decisions with respect to the named executive officers.

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

The Chief Executive Officer assesses each other named executive officer’s performance and makes a recommendation to the Committee concerning achievement of individual objectives. The Chief Executive Officer also makes recommendations to the Committee concerning salary adjustments and equity and non-equity grants to the named executive officers and other employees. In determining the compensation of other executive officers, the Committee considers the Chief Executive Officer’s assessment and recommendations. However, the Committee exercises its own discretion in determining whether to accept or modify the Chief Executive Officer’s recommendations. These individuals are not present when the Committee and the Chief Executive Officer review their performance, nor when the Committee makes its final determinations concerning their compensation.

Setting Executive Compensation

In setting compensation of our executive officers, the Committee believes that a significant portion of each officer’s total compensation should be variable or “at-risk.” These variable components are not guaranteed to provide compensation – they require achievement of strategic and operating corporate objectives, as well as individual performance objectives, to earn annual cash incentives and stock price appreciation for executive officers to realize value from stock options and other equity incentive awards granted as long-term incentives.

Management provides the Committee with comprehensive tally sheets on an annual basis to facilitate the Committee’s review of the total compensation of our executive officers. The tally sheets include the annual cash compensation (salary and cash incentive target opportunity), the value of benefits and other perquisites provided to our executive officers, and the potential severance payments should an executive officer’s employment terminate under various scenarios, as well as the outstanding equity awards held by each executive officer. The Committee has found these tally sheets to be useful in its evaluation of the total compensation program for our executive officers.

The Committee from time to time has reviewed a comparison of each element of total compensation against a group of specific companies and industries against which we believe we compete for talent and for shareholder investment, including the private equity industry, as well as by reference to industry-specific compensation surveys. However, we recognize that our business strategy, industry focus and diverse array of partner companies make comparisons to other companies difficult. Also, based on the inherent challenge in matching companies, job positions and skill sets, we have viewed some of these comparisons as more appropriate for some positions than others. In recognition of the historical nature of the benchmarking data and the challenge in matching not only companies but also job positions and skill sets, we have looked to this data for general guidance rather than rigid adherence to specific percentages.

We historically have targeted base pay levels generally at or near the 50^th percentile of base salaries for executives having comparable duties and responsibilities to our executive officers. Total compensation, including both annual cash incentives and long-term incentives, was targeted historically to fall at or near the 75^th percentile of total compensation for executives having substantially comparable duties and responsibilities to our executive officers, assuming achievement of Safeguard’s business objectives. During the review of our compensation philosophy for 2006, the Committee determined that we should continue to review compensation in comparison to the historically targeted 50^th and 75^th percentiles for base pay and total compensation, respectively, but that the overall objectives of our compensation philosophy would be better achieved through flexibility in determining pay levels to address

differences in duties and responsibilities, individual experience, skill levels and achievements, rather than rigid adherence to specific target percentiles.

In the prior year, the Committee approved employment agreements with Messrs. Boni and Datin that established the terms of their respective compensation based on employment negotiations. The Committee also approved increases in Mr. Loftus’ base salary and variable cash incentive target under our management incentive plan in connection with his promotion in September 2005. See “Executive Compensation—Summary Compensation Table – 2006” for additional information regarding employment agreements. Due to the limited number of changes in executive compensation contemplated for 2006 (with most of the named executive officers, including our Chief Executive Officer, having assumed their positions during 2005), the Committee did not ask Hewitt Associates to prepare a compensation report comparing our executive compensation to other companies or surveys during the latter part of 2005. Instead, the Committee reviewed management-gathered industry survey data on compensation trends, including published compensation information from Internet Capital Group, Inc., a holding company that acquires and builds Internet software companies, as well as several private equity and industry-specific compensation surveys, and discussed with our Chief Executive Officer his recommendations for compensation changes for 2006. During the second half of 2006, Hewitt Associates prepared a report to provide the Committee with comparative data for reference in its review and establishment of 2007 compensation levels and the Committee’s consideration of 2006 equity awards, which the Committee generally awards in December.

2006 Compensation Program

Base Pay. Base pay is established initially on the basis of several factors, including experience, individual achievements, the level of responsibility assumed, and the level of skills and experience that can be leveraged across our partner companies to facilitate their growth and success. Each of our named executive officers has an employment agreement with us which sets his initial base salary. Base salaries typically are reviewed annually by the Committee, as well as in connection with a promotion or other changes in job responsibilities. In reviewing the appropriate level of base pay for our executive officers for 2006, the Committee considered the compensation comparisons, as described above, and the recommendations of the Chief Executive Officer. Based on its review, in December 2005, the Committee left unchanged, or modified only slightly, base salary levels for our named executive officers for 2006 as shown below:

Name		2005 Base Salary				2006 Base Salary
Peter J. Boni		$	600,000			$	600,000
James A. Datin		$	375,000			$	375,000
John A. Loftus		$	250,000			$	275,000
Steven J. Feder		$	300,000			$	325,000
Christopher J. Davis		$	375,000			$	375,000

In December 2006, Christopher Davis, our former Executive Vice President and Chief Administrative & Financial Officer, resigned, and we entered into a consulting agreement with Stephen Zarrilli pursuant to which he commenced service as Acting Senior Vice President, Acting Chief Administrative Officer and Acting Chief Financial Officer. Mr. Zarrilli is a managing partner of Penn Valley Group, a middle-market management advisory and private equity firm which he co-founded in October 2004. Mr. Zarrilli will serve as our Acting Senior Vice President, Acting Chief Administrative Officer and Acting Chief Financial Officer until a permanent replacement has been identified and for up to a 30-day transition period following his successor’s commencement of employment. Mr. Zarrilli receives a retainer of $2,500 per day, subject to a maximum monthly retainer of $50,000 and a maximum retainer of $50,000 during the 30-day transition period following his successor’s commencement of employment. During 2006, we paid Mr. Zarrilli $15,000 for his services.

Cash Incentives. In February 2006, the Committee adopted the 2006 Management Incentive Plan (the “2006 MIP”) to provide variable cash incentives to our executive officers and other employees based on 2006 performance. The 2006 MIP program, which emphasized teamwork among members of management to achieve key business objectives, was based:

•		80% on the achievement of corporate objectives; and
•		20% on the achievement of individual objectives.

We believe that short-term compensation (such as base salary and annual cash incentive awards) should not be based on the short-term performance of our stock, whether favorable or unfavorable, but rather on our executives’ management of the company towards achieving our goal of long-term growth in shareholder value. The price of our stock should, in the long term, reflect our performance, and the performance of our stock will directly affect the value of stock options and other equity incentive awards provided to our executive officers as part of our compensation program.

Therefore, to align the 2006 MIP with our 2006 business strategy, the Committee established the following corporate objectives and weightings (representing 80% (or 80 points) of the total 2006 MIP target award):

Weighting		Corporate Objectives
35%		Achievement of specified levels of deployment of capital in acquisitions of new partner companies and/or funding to support acquisitions or other similar strategic opportunities for existing partner companies, with achievement being measured based on a formula for the amount of capital deployed and the number of transactions completed;
20%		Achievement of capital generation through asset sales, with achievement being measured based on a formula for the amount of capital generated and the number of transactions completed;
20%		Achievement of specified levels of revenues or profitability for partner companies reported as consolidated in our financial statements and certain other minority holdings, with each measure selected to reflect the respective partner company’s stage of growth, and achievement being measured by the Committee based on its subjective evaluation of achievement of partner company performance; and
25%		Overall performance of Safeguard and our corporate staff, based on the Committee’s subjective evaluation.

The Committee established targets for these objectives by taking into consideration the anticipated level of difficulty in achieving our 2006 business plan and the Committee’s judgment of acceptable performance. The award criteria were designed to provide management with a meaningful opportunity to meet the criteria for a target award, but not guarantee achievement. The formula was intended to provide increased economic incentives for exceeding the target award and some economic recognition, albeit reduced, for near achievement of the target.

At the beginning of 2006, each executive officer also prepared written individual objectives that were reviewed and approved by the Chief Executive Officer. The Chief Executive Officer’s individual objectives were reviewed and approved by the Committee. The individual objectives varied depending upon each participant’s roles and responsibilities.

Based on the factors set forth above, the Committee set the following variable cash target awards for 2006 for our named executive officers (in accordance with the terms of their respective agreements):

		Target Variable
Name		Cash Incentive
Peter J. Boni		$	600,000
James A. Datin		$	375,000
John A. Loftus		$	275,000
Steven J. Feder		$	175,000
Christopher J. Davis		$	325,000

Mr. Zarrilli was not an eligible participant in our 2006 MIP.

There was no mandatory minimum award payable under the 2006 MIP. The actual cash incentive award paid to a participant was determined based upon the level of achievement of the quantitative and qualitative corporate and individual performance objectives and was measured in the aggregate on a sliding scale basis (e.g., achievement of objectives totaling 50 points would result in payment of 50% of the target award, achievement of objectives totaling 100 points would result in payment of 100% of the target award and achievement of objectives totaling 150 points would result in payment of 150% of the target award). Payments under the 2006 MIP were limited to 150% of each individual’s target award.

In February 2007, the Committee reviewed our performance against the quantitative and qualitative corporate objectives set forth above and confirmed the following payout levels:

		Target				Payout
		Incentive				Level
Corporate Objectives		(in points)				(in points)				Factors Affecting Determination
Capital Deployment			28				26			Deployment of approximately $57 million of capital in a total of seven transactions — $46.5 million relating to acquisitions of new partner companies (Advantedge Healthcare Solutions, Authentium, NuPathe, Portico Systems and Rubicor Medical); the balance related to supporting acquisitions by existing partner companies.
Capital Generation			16				24			Generation of approximately $125 million of capital through asset sales, primarily reflecting the proceeds of the sale of our holdings in Mantas, Inc.
Partner Company Performance			16				14			Achievement by most of our partner companies of specified levels of revenue or profitability.
Overall Corporate Performance			20				20			Development and execution of strategic positioning, reigniting deal sourcing efforts, augmenting the organization internally and externally, facilitating growth of partner companies and management of core corporate functions, such as financial reporting and other compliance responsibilities. In addition to the transactions and financial performance described above, the Committee specifically noted the following significant 2006 achievements in its review:

	•		achievement of key business milestones by our partner companies;
	•		key executive and staff recruiting successes;
	•		increased Safeguard analyst coverage and institutional share ownership;
	•		increased investor conferences and meetings;
	•		successful roll-out of new corporate branding;
	•		creation of Advisory Boards for Technology and Life Sciences and recruitment of high-quality industry experts; and
	•		repurchase of a portion of our convertible debentures.

| | |
Total Points			80				84

At the end of the year, each executive officer also completed a self-assessment of his achievement of individual objectives (representing 20% (or 20 points) of the total 2006 MIP target award). The Chief Executive Officer’s self-assessment was a component of the annual performance review conducted by the Nominating & Corporate Governance Committee. Based on the Committee’s review with the Nominating & Corporate Governance Committee of its assessment of the performance of the Chief Executive Officer, including his achievement of individual objectives, and the Committee’s discussion with the Chief Executive Officer on his review of each other named executive officer’s achievement of each officer’s specific individual objectives, the Committee approved the following achievement levels for individual objectives:

		Payout Level
Name		(in points)
Peter J. Boni			30
James A. Datin			18
John A. Loftus			28
Steven J. Feder			22

Based on the Committee’s review of the 2006 MIP and the actual achievements of Safeguard and our individual executive officers, in February 2007 the Committee approved the following 2006 MIP payments to the named executive officers (which amounts are presented in the Summary Compensation Table under “Non-Equity Incentive Plan Compensation”):

		Payout Level				Approved Variable
Name		(in points)				Cash Incentive
Peter J. Boni			114			$	684,000
James A. Datin			102			$	382,500
John A. Loftus			112			$	308,000
Steven J. Feder			106			$	185,500

Under the terms of his agreements with us (see “Severance and Change-in-Control Arrangements” below), Mr. Davis’ will receive $338,000 (representing an amount equal to his 2006 MIP payment) as part of his severance package.

In addition to the 2006 MIP, the Committee has the authority to award individual discretionary bonus awards to executive officers. These awards typically relate to specific achievements during the year and may be made in cash or equity awards. Recipients of discretionary bonuses, and the amount of awards, are designated by the Committee, which may receive recommendations from the Chief Executive Officer. In recognition of specific achievements during 2006, the Committee approved a $275,000 special cash bonus and a restricted stock award (see “Long-Term Incentives”) to Mr. Loftus for his exceptional performance in connection with our sale of Mantas in October 2006 and a $25,000 special cash bonus to Mr. Feder for his exceptional performance on certain projects during 2006. These special performance bonuses are presented in the Summary Compensation Table under “Bonus.”

Long-Term Incentives. Our executive compensation programs include a significant equity component in the form of stock options, restricted stock awards and such other equity awards as the Committee may determine to be appropriate from time to time.

As noted above, we compete for executive talent with private equity firms, and we review comparative information regarding private equity industry compensation practices. In the private equity industry, executives (referred to as “managing partners”) have compensation programs that include a share of the private equity fund’s profits (referred to as “carry”). We do not provide our executives with a compensation program tied directly to gains from our partner company holdings. Instead, we utilize our equity compensation plans as an alternative to approximate the economic benefit that would be provided by a carry. The equity awards made in 2005 to our executive officers were based on our assessment of the carry which would typically be provided to our executives in positions of comparable responsibility at private equity firms. For example, managing partners of a private equity firm would typically expect a carry ranging from about 1% to 5% of the amount of invested capital under management by the firm. We use stock options equal to about 1% to 5% of our outstanding shares of common stock to provide a different, but somewhat comparable, long-term economic benefit to our executive officers. The grants are intended by the Committee to be competitive with those to comparable executives in the comparison data reviewed by the Committee (as adjusted for the executive officer’s experience).

Since stock options are granted with an exercise price equal to the average of the high and low trading prices of our common stock on the date of grant, the options will have value only if the market price increases after that date and, in the case of options that vest upon achievement of a specified improvement in market capitalization, only if the specified improvement is achieved. We refer to grants of options that vest upon achievement of specified levels of improvement in market capitalization as “market-based vesting” options.

Most of the options granted during 2005 to our Chief Executive Officer, named executive officers and other employees were made using the market-based vesting model, in addition to traditional time-based vesting options. The market-based vesting model conditions vesting on our common stock’s achievement of specified improvement in market capitalization for a specified number of consecutive trading days. The Committee believes the use of market-based vesting helps to align the long-term interests of Safeguard management and our shareholders since our executive officers will not benefit unless the Safeguard stock price achieves and sustains a targeted improvement for 20 consecutive trading days. The market-based vesting options granted in 2005 vest incrementally based upon improvement in our market capitalization over the base market capitalization of $172,943,623. The base market capitalization was determined by multiplying the average per share closing price for the 20 consecutive trading days immediately preceding August 3, 2005 (the date of issuance of our press release announcing the appointment of Mr. Boni as Safeguard’s President and Chief Executive Officer) by the total of our outstanding shares of common stock plus all shares underlying outstanding stock options as of August 16, 2005 (the date Mr. Boni’s employment commenced). The market-based vesting options granted to the other executive officers during 2005 used the same market-based vesting model as Mr. Boni’s equity award. The following table shows the market capitalization levels at which portions of the shares underlying the options will vest:

Percentage of Shares Underlying		Achievement of Improvement in		Per Share
Options That Vest		Market Capitalization		Price Equivalent
First 10%		$100 million incremental over base		$2.0359
Next 20%		additional $150 million incremental		$3.1548
Next 30%		additional $200 million incremental		$4.6466
Final 40%		additional $250 million incremental		$6.5114

In addition to vesting upon the achievement of a specified level of market capitalization improvement, the shares underlying the options may vest on a pro rata basis every six months if the market capitalization is between the levels set forth in the table. For example, if 10% of the shares underlying the options have vested and, six months later, an additional $75 million improvement was achieved over 20 consecutive trading days during the six-month period, an additional 10% of the shares underlying the options will vest.

During 2006, the Committee reviewed the equity awards made to the named executive officers (other than Mr. Zarrilli who joined in December 2006). The Committee determined that additional grants were not necessary to achieve our compensation objectives, other than the restricted stock award for 42,827 shares of our common stock which was awarded to Mr. Loftus in recognition of his exceptional performance in connection with our sale of Mantas in October 2006 as described above. We also granted options to Mr. Zarrilli to acquire up to 150,000 shares of our common stock under the terms of his consulting agreement with us.

We expect to continue to use stock options and other equity awards as part of our compensation program, including market-based vesting grants. We expect to make appropriate adjustments in the base market capitalization, per share price equivalents and vesting schedules used for additional market-based vesting option grants as our outstanding shares increase and based on our stock price level.

Stock Option Granting Process. The Committee is responsible for equity grants under our equity compensation plans. The Committee approves and grants all equity awards to our executive officers, employees and advisory board members, with the exception of those grants for which the Committee has delegated authority to the Chief Executive Officer which are described below. Equity grants to directors are generally approved by the Board; however, in those cases where the Board has approved the size and form of recurring annual service grants, the Committee may set the date of those grants.

Generally, equity awards are made at the Committee’s December meeting, although specific grants may be made at other regularly scheduled meetings or at special meetings convened to approve compensation arrangements for newly hired executive officers or for executive officers who have been promoted or are otherwise subject to changes in responsibilities.

The Committee has delegated to our Chief Executive Officer the authority to make equity grants between regularly scheduled Committee meetings (primarily to new hires and advisory board members), provided that the aggregate number of shares granted may not exceed 300,000 shares, the maximum number of shares allocated to any one employee may not exceed 125,000 shares and the aggregate number of shares allocated to any one advisory board member may not exceed 5,000 shares. The Chief Executive Officer reports to the Compensation Committee at each of its regularly scheduled meetings any grants that he has approved, following which the aggregate number of shares available is reset to 300,000 shares. The Chief Executive Officer is not authorized to make equity grants to executive officers or directors.

All grants approved by the Committee and Chief Executive Officer are made on the date the award is approved except that grants to newly hired employees or newly retained consultants or advisors may be effective on the later of the date the award is approved or the date of commencement of employment or provision of services. The exercise price for all stock options granted under our equity compensation plans is the average of the high and low trading prices of our common stock as reported on the New York Stock Exchange consolidated tape on the date of grant, which we believe reflects common practice.

Nonqualified Deferred Compensation. Our named executive officers may defer compensation under our qualified 401(k) plan (subject to the limits imposed by the Internal Revenue Code) but are not eligible to receive matching company contributions under that plan. Our named executive officers are eligible to participate in our nonqualified deferred compensation plan, which is an unfunded plan that does not allow deferral of compensation but does allow participants to obtain credits, in the form of Safeguard contributions that are allocated to accounts for the benefit of an executive officer. We offer this nonqualified deferred compensation plan to selected employees in light of their inability to obtain a company matching contribution under our qualified 401(k) plan. Additional information regarding this plan can be found below under “Executive Compensation—Nonqualified Deferred Compensation – 2006.”

Perquisites (fringes). Our executives are entitled to few benefits that are not otherwise available to all of our employees. We do not provide a defined benefit pension arrangement, post-retirement health coverage or similar benefits for our executive officers. The additional perquisites we provided to our executive officers in fiscal 2006 consisted of the following:

•		$10,000 annual car allowance;
•		$8,000 non-accountable annual expense allowance;
•		universal life insurance coverage ranging from $750,000 to $1,000,000;
•		up to $5,000 reimbursement annually for medical, vision or dental expenses not covered under our other benefit plans; and
•		relocation expenses for certain newly hired executive officers.

These perquisites are provided to enable us to attract top talent and represent a relatively modest portion of each named executive officer’s compensation. These perquisites are taken into consideration by the Committee in determining total compensation payable to the named executive officers and are reviewed annually by the Committee.

Severance and Change-in-Control Arrangements

Messrs. Boni, Datin, Loftus and Feder each have agreements with Safeguard which provide certain benefits upon termination of employment without cause or for good reason (as defined in the agreements) either involuntarily or in connection with a change in control.

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

Unlike “single trigger” change-in-control arrangements that pay out immediately upon a change in control, most of the benefits to which our named executive officers are entitled under their agreements require a “double trigger,” namely a change in control coupled with a loss of employment or a substantial change in job duties. We believe a “double trigger” provides retention incentives as well as continuity of management in the event of an actual or threatened change in control. However, the acceleration of the vesting of the stock options that were granted to Mr. Boni when he joined Safeguard in 2005 require only a “single trigger” to be effective – that is, only a change in control. Since equity represents a significant portion of Mr. Boni’s total compensation, we believe that this “single trigger” can be an important retention device during change in control discussions.

On December 14, 2006, we announced that Christopher J. Davis, our former Executive Vice President and Chief Administrative & Financial Officer, resigned effective December 15, 2006, to pursue other interests. We and Mr. Davis agreed that Mr. Davis’ resignation would be treated as having been for good reason, as defined in his

agreement with us, and Mr. Davis will receive the severance benefits described in that agreement consisting of the following:

•		a payment equal to his 2006 MIP payout for the year of termination of $338,000, plus two times his base salary of $375,000 plus two times his annual target bonus of $325,000, for an aggregate payment of $1,738,000;
•		coverage under our medical, health and life insurance plans for 24 months;
•		$15,000 for outplacement services; and
•		full vesting of all time-vested stock options (which will remain exercisable for 36 months) and deferred stock units that had not otherwise vested, and a 12-month period within which to exercise vested market-based stock options.

Deductibility of Executive Compensation

The Committee considers the potential impact of Section 162(m) of the Internal Revenue Code in structuring executive compensation. Section 162(m) disallows a tax deduction for any publicly-held corporation for certain executive compensation exceeding $1,000,000 per person in any taxable year unless it is “performance based” within the meaning of Section 162(m). We believe the stock options awarded under our equity compensation plans are in compliance with the provisions of Section 162(m). The portion of cash compensation paid to Mr. Boni for 2006 in excess of $1,000,000 was not “performance-based” compensation within the meaning of Section 162(m) and, therefore, was not deductible by Safeguard. We believe that providing an appropriate level of cash compensation and maintaining flexibility in determining compensation may be more important than preserving this tax deduction. Therefore, the Committee does not currently plan to take any action to qualify any of our cash incentive compensation plans under Section 162(m).

Stock Ownership Guidelines

Our Board established stock ownership guidelines, effective December 31, 2005, that are designed to closely align the long-term interests of our executive officers with the long-term interests of our shareholders. The guidelines provide that each executive officer should attain an equity position in our common stock equal to two times annual base salary. These guidelines should be achieved within five years and will be assessed annually. Shares counted toward these guidelines include:

•		shares beneficially owned by the executive officer;
•		vested shares of restricted stock;
•		vested deferred stock units that have been credited to the executive officer; and
•		shares underlying vested, in-the-money options.

Our named executive officers have either met the guidelines or, based on information they have provided to us, are diligently working toward meeting the guidelines within the prescribed time frame.

Prohibition on Speculation in Safeguard Stock

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

COMPENSATION COMMITTEE REPORT

We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussion with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

Members of the Compensation Committee:

Julie A. Dobson, Chair           Andrew E. Lietz           John J. Roberts

EXECUTIVE COMPENSATION

Summary Compensation Table – 2006

The table below is a summary of total compensation paid to or earned by our named executive officers for the fiscal year ended December 31, 2006.

																										Change in
																						Non-Equity				Pension Value
																						Incentive				and
																						Plan				Nonqualified				All Other
														Stock				Option				Compensa-				Deferred				Compen-
Name and						Salary				Bonus				Awards				Awards				tion				Compensation				sation				Total
Principal Position		Year				($)				($)(1)				($)(2)				($)(2)				($)(3)				Earnings ($)(4)				($)(5)				($)
Peter J. Boni President and Chief Executive Officer			2006				600,000				—				—				1,185,249				684,000				—				248,935				2,718,814
Stephen Zarrilli (6) Acting Senior Vice President, Acting Chief Administrative Officer and Acting Chief Financial Officer			2006				15,000				—				—				25,577				—				—				—				40,577
James A. Datin Executive Vice President and Managing Director, Life Sciences			2006				375,000				—				—				713,813				382,500				—				44,989				1,516,302
John A. Loftus Executive Vice President and Managing Director, Technology			2006				275,000				275,000				1,461				745,102				308,000				7,684				43,279				1,655,526
Steven J. Feder Senior Vice President and General Counsel			2006				325,000				25,000				—				300,142				185,500				—				45,783				881,425
Christopher J. Davis (7) Former Executive Vice President and Chief Administrative & Financial Officer			2006				375,000				—				194,997				534,967				—				7,684				1,797,863				2,910,511

		2006				2005				2004				2003				2002
Service-Based Awards:
Dividend yield			0	%			0	%			0	%			0	%			0	%
Expected volatility			69	%			84	%			86	%			95	%			93	%
Average expected
option life		5 years				5 years				5 years				5 years				5 years
Risk-free interest rate			4.7	%			4.4	%			3.6	%			3.0	%			3.6	%
Market-Based Awards:
Dividend yield			0	%			0	%			N/A				N/A				N/A
Expected volatility			62	%			67	%			N/A				N/A				N/A
Average expected
option life		5 - 7 years				5 - 7 years					N/A				N/A				N/A
Risk-free interest rate			4.8	%			4.3	%			N/A				N/A				N/A

		Perquisites				Nonqualified								Group Life
		and Personal				Deferred				Life Insurance				Insurance				Severance
Name		Benefits				Compensation Plan				Premiums				Imputed Income				Benefits
Peter J. Boni		$	198,362			$	16,500			$	30,509			$	3,564				—
James A. Datin			21,169				16,500				6,930				390				—
John A. Loftus			20,342				16,500				6,032				405				—
Steven J. Feder			23,000				16,500				5,953				330				—
Christopher J. Davis			19,726				16,500				7,740				897			$	1,753,000

Each of our named executive officers has an employment agreement with us that sets his initial base salary and initial annual cash incentive target award. The initial base salary and initial annual cash incentive target award for each named executive officer were as follows: Mr. Boni ($600,000 salary; $600,000 target award); Mr. Datin ($375,000 salary; $375,000 target award); Mr. Loftus ($250,000 salary; $150,000 target award); and Mr. Feder ($300,000 salary; $150,000 target award). Base salaries and annual cash incentive target awards, which are reviewed by the Compensation Committee each year, currently exceed these contractual amounts. The primary focus of these agreements is to provide our executive officers with severance benefits in the event of a termination of employment involuntarily, for good reason or upon a change in control, as described below under “Potential Payments upon Termination or Change in Control.” The components of compensation reported in the Summary Compensation Table, including an explanation of the amount of salary and cash incentive compensation in proportion to total compensation, are described in detail under “Compensation Discussion and Analysis.”

Grants of Plan-Based Awards – 2006

The following table shows non-equity incentive plan awards, stock awards and option awards granted during 2006 to our named executive officers.

																		All Other				All Other
																		Stock				Option
																		Awards:				Awards:				Exercise								Grant Date
																		Number of				Number of				or Base								Fair Value
						Estimated Possible Payouts Under												Shares of				Securities				Price of				Market				of Stock
						Non-Equity Incentive Plan Awards (1)												Stock or				Underlying				Option				Price on				and Option
		Grant				Threshold				Target				Maximum				Units				Options				Awards				Grant Date				Awards
Name		Date				($)				($)				($)				(#)(2)				(#)(3)				($/Sh)				($/Sh)(4)				($)(5)
Peter J. Boni			02/21/06				—				600,000				900,000				—				—				—				—				—
Stephen Zarrilli			12/15/06				—				—				—				—				150,000				2.335				2.34				247,275
James A. Datin			02/21/06				—				375,000				562,500				—				—				—				—				—
John A. Loftus			02/21/06				—				275,000				412,500				—				—				—				—				—
			12/15/06				—				—				—				42,827				—				—				2.34				100,000
Steven J. Feder			02/21/06				—				175,000				262,500				—				—				—				—				—
Christopher J. Davis			02/21/06				—				325,000				487,500				—				—				—				—				—

	•		as to 30,000 underlying shares on March 27, 2007;
	•		as to 15,000 underlying shares on April 1, 2007 and as to an additional 15,000 underlying shares on the first day of each calendar month thereafter; and
	•		upon the satisfactory completion of his services relating to the transition of his duties and responsibilities to his successor, or upon his appointment as our Chief Financial Officer (and the removal of the term “Acting” from his titles), as to all remaining underlying shares that have not vested previously.

 

Outstanding Equity Awards at Fiscal Year-End – 2006

The following table shows the equity awards we have made to our named executive officers that were outstanding at December 31, 2006.

		Option Awards																				Stock Awards
										Equity
										Incentive Plan
										Awards:
		Number of				Number of				Number of												Number of
		Securities				Securities				Securities												Shares or				Market Value
		Underlying				Underlying				Underlying												Units of				of Shares or
		Unexercised				Unexercised				Unexercised				Option								Stock That				Units of Stock
		Options				Options				Unearned				Exercise				Option				Have Not				That Have
		(#)(1)				(#)(1)(2)				Options				Price				Expiration				Vested				Not Vested
Name		Exercisable				Unexercisable				(#)(2)(3)				($)				Date				(#)(2)(4)				($)(5)
Peter J. Boni			333,333				666,667				—				1.2750				08/16/13				—				—
			597,674	(3)			—				2,402,326				1.2750				08/16/13				—				—
Stephen Zarrilli			—				150,000	(6)			—				2.3350				12/15/14				—				—
James A. Datin			156,250				343,750				—				1.5600				09/07/13				—				—
			298,836	(3)			—				1,201,164				1.5600				09/07/13				—				—
John A. Loftus			115,000				—				—				2.1700				05/13/10				42,827				103,641
			25,000				—				—				1.6850				12/18/10				—				—
			75,000				25,000				—				3.5600				12/19/11				—				—
			112,500				112,500				—				2.1250				12/15/12				—				—
			298,836	(3)			—				1,201,164				1.5550				09/13/13				—				—
Steven J. Feder			156,250				143,750				—				1.7800				11/17/12				—				—
			58,333				141,667				—				1.3800				10/25/13				—				—
			99,610	(3)			—				400,390				1.3800				10/25/13				—				—
Christopher J. Davis (7)			60,000				—				—				5.2813				12/21/08				—				—
			75,000				—				—				4.7850				06/19/09				—				—
			25,000				—				—				3.5050				08/28/09				—				—
			130,000				—				—				1.2500				12/31/09				—				—
			250,000				—				—				2.1250				12/31/09				—				—
			39,844	(3)			—				—				1.3800				12/31/07				—				—
			84,670	(3)			—				—				1.9100				12/31/07				—				—
			125,000				—				—				1.9100				12/31/09				—				—

Expiration Date		Initial Vest Date				Subsequent Monthly Vest Dates
05/13/10			05/13/03			06/13/03 through 05/13/06
08/06/10			08/06/03			09/06/03 through 08/06/06
12/18/10			12/18/03			01/18/04 through 12/18/06
12/19/11			12/19/04			01/19/05 through 12/19/07
11/17/12			11/17/05			12/17/05 through 11/17/08
12/15/12			12/15/05			01/15/06 through 12/15/08
08/16/13			08/16/06			09/16/06 through 08/16/09
09/07/13			09/07/06			10/07/06 through 09/07/09
09/13/13			09/13/06			10/13/06 through 09/13/09
10/25/13			10/25/06			11/25/06 through 10/25/09
12/16/13			12/16/06			01/06/07 through 12/15/09

(2)

Vesting of certain equity awards may be accelerated upon death, permanent disability, retirement on or after 65th birthday, termination of employment for good reason or without cause, or termination of employment in connection with a change in control, and, in the case of Mr. Boni’s equity awards, upon the occurrence of a change in control. Further information regarding the equity awards that are subject to acceleration of vesting in each circumstance can be found below under “Potential Payments upon Termination or Change in Control.”

(3)

These options are market-based vesting options and vest only upon the achievement of improvement in Safeguard’s market capitalization above the base market capitalization of $172,943,623. The base market capitalization was determined by multiplying the average per share closing price for the 20 consecutive trading days immediately preceding August 3, 2005 (the date of issuance of our press release announcing the appointment of Mr. Boni as Safeguard’s President and Chief Executive Officer) by the total of our outstanding shares of common stock plus all shares underlying outstanding stock options as of August 16, 2005 (the date Mr. Boni’s employment commenced). Achievement of market capitalization improvement is measured based on the average daily closing price of Safeguard common stock as reported on the New York Stock Exchange composite tape for 20 consecutive trading days. The following table shows the market capitalization levels and per share price equivalents at which portions of the shares underlying the options vest:

Percentage of Shares Underlying Options that Vest		Market Capitalization				Per Share Price Equivalent
10%		$	272,943,623			$	2.0359
Additional 20%			422,943,623				3.1548
Additional 30%			622,943,623				4.6466
Remaining 40%			872,943,623				6.5114

		In addition to vesting upon the achievement of a specified level of market capitalization improvement, the options may vest on a pro rata basis every six months following the grant date if the market capitalization is between the levels of vesting in the above table. For example, if options have vested as to 10% of the underlying shares and, at the next six-month anniversary of a grant, an additional $75 million improvement was achieved over 20 consecutive trading days during the six-month period, an additional 10% of the shares underlying the option will vest. Options subject to market-based vesting that were vested at December 31, 2006 are included in the exercisable options column in the above table.
(4)		Mr. Loftus’ stock award vests in three equal annual installments commencing on December 15, 2007.
(5)		Under SEC rules, the value is calculated based on the year-end closing stock price of $2.42 per share, as reported on the New York Stock Exchange consolidated tape, multiplied by the number of shares that have not vested.
(6)		Mr. Zarrilli’s option vests as follows:

	•		as to 30,000 underlying shares on March 27, 2007;
	•		as to 15,000 underlying shares on April 1, 2007 and as to an additional 15,000 underlying shares on the first day of each calendar month thereafter; and
	•		upon the satisfactory completion of his services relating to the transition of his duties and responsibilities to his successor, or upon his appointment as our Chief Financial Officer (and the removal of the term “Acting” from his titles), as to all remaining underlying shares that have not vested previously.

		Mr. Zarrilli will forfeit stock options that have not vested upon the termination of the agreement. Vested stock options will remain exercisable until the earlier of December 15, 2014 and the third anniversary of his termination of services as our Acting Chief Financial Officer or Chief Financial Officer.
(7)		Under the terms of Mr. Davis’ agreements with Safeguard, upon his separation from our employment on December 31, 2006:

	•		he forfeited options to purchase 500,486 shares that were subject to market-based vesting;
	•		we accelerated the vesting of options to purchase 218,750 shares that were subject to time-based vesting; and
	•		we accelerated the vesting of 16,874 deferred stock units.

Mr. Davis holds several limited partnership interests that were awarded to him under the terms of our long-term incentive plan prior to 2002 which are not included in the table above. We established these partnerships to hold all or a portion of our interests in partner companies acquired by us during a particular year. Limited partners are eligible to receive a distribution of shares (or cash equivalent) of a particular partner company based upon their partnership interest upon the occurrence of certain liquidity events, but only if we receive a return equal to at least two times the cost of our holding in that partner company. Mr. Davis has not received any distributions related to his partnership interests, and we presently cannot estimate whether he will receive any distributions in the future. As part of his agreements with us, Mr. Davis will continue to hold those limited partnership interests following his separation from employment with us.

Option Exercises and Stock Vested – 2006

The following table shows restricted stock awards and deferred stock units that vested during 2006. There were no stock options exercised by the named executive officers during 2006.

		Option Awards								Stock Awards
		Number of								Number of
		Shares								Shares
		Acquired				Value Realized				Acquired				Value Realized
		on Exercise				on Exercise				on Vesting				on Vesting
Name		(#)				($)				(#)(1)				($)(2)
Peter J. Boni			—				—				—				—
Stephen Zarrilli			—				—				—				—
James A. Datin			—				—				—				—
John A. Loftus			—				—				—				—
Steven J. Feder			—				—				—				—
Christopher J. Davis			—				—				62,495				139,200

Nonqualified Deferred Compensation – 2006

In 2003, Safeguard adopted the Executive Deferred Compensation Plan, which is a nonqualified, unfunded plan that provides for a designated group of employees to obtain credits, in the form of Safeguard contributions that are allocated to accounts for the benefit of each participant. Participants may not defer compensation under the plan.

Contributions by Safeguard are discretionary and may vary from year to year. For 2006, we credited each participant’s account with an amount equal to 4% of up to $220,000 of the participant’s 2006 salary and bonus (which amount was fully vested) and 3.5% of up to $220,000 of the participant’s 2006 base salary (which amount vests 20% for each year of service in which the participant has attained 1,000 hours of service).

Lump sum distributions of the vested balance in a named executive officer’s account are made following termination of employment as follows:

•

amounts that were earned and vested at December 31, 2004, are distributed within 30 business days following termination; and

•

the remaining amount is distributed six months following termination.

A committee appointed by Safeguard’s Board selects the funds or indices that are used for purposes of calculating the earnings that are credited to each participant’s account based on a notional investment in the selected funds or indices. Since the plan’s inception, we have calculated earnings based on the performance of the notional investment in the Principal Investors Fund, Inc. Large-Cap S&P 500 Index Fund (PLFPX), which is one of the investment choices available to participants in Safeguard’s 401(k) plan. The committee, in its discretion, may replace this fund and add new funds.

The following table shows contributions and earnings for 2006 and account balances at December 31, 2006. There were no withdrawals or distributions during 2006.

		Registrant
		Contributions in Last				Aggregate Earnings				Aggregate Withdrawals/				Aggregate Balance
		Fiscal Year				in Last Fiscal Year				Distributions				at Last Fiscal Year End
Name		($)(1)				($)(1)				($)				($)(2)(3)
Peter J. Boni			16,500				—				—				16,500
Stephen Zarrilli			—				—				—				—
James A. Datin			16,500				—				—				16,500
John A. Loftus			16,500				7,684				—				66,856
Steven J. Feder			16,500				—				—				16,500
Christopher J. Davis			16,500				7,684				—				66,856