Document:

Filed by Bowne Pure Compliance

EXHIBIT 10.1

Safeguard Scientifics, Inc.

435 Devon Park Drive, 800 Building

Wayne, PA 19087

(610) 293-0600

May 28, 2008

Mr. Stephen T. Zarrilli

314 Jefferson Drive

Malvern, PA 19355

Dear Steve:

Safeguard Scientifics, Inc. (“Safeguard” or the “Company”) is pleased to offer you a position as
Senior Vice-President and Chief Financial Officer at Safeguard, located at Safeguard’s principal
executive offices on terms and conditions described below (the “Agreement”). I understand that you
will assume this position on or about June 1, 2008 (the actual date your employment commences is
herein referred to as the “Commencement Date”).

Salary and Cash Incentives. The annual salary associated with this position is $340,000.
As a matter of maintaining competitive employment terms, salaries are reviewed annually against
internal and external peer groups, and individual performance, and, if appropriate, adjusted
upwards.

You will also be eligible to participate in the Safeguard annual management incentive program (MIP)
so long as such a program is maintained by the Company, at a target payout of $195,000, payable as
per the terms of the MIP. Any reduction in your target annual bonus opportunity will constitute a
material breach of this Agreement by Safeguard. The overall MIP goals are determined at the
beginning of each year, and approved for payment annually, after the year-end audited results, by
the Compensation Committee of the Board. Actual payment of amounts pursuant to your MIP award will
be made to you on or after January 1, but prior to March 15, of the calendar year next following
the calendar year in which the payment is earned, subject to completion of the Company’s audit for
the applicable fiscal year. Your individual actual payout amount will be determined by your
performance against your individual objectives, and by the overall performance of Safeguard against
established corporate objectives. You will participate in the MIP commencing with 2009. In lieu
of any MIP participation for 2008, the Company will pay to you an amount equal to your annual
target MIP payout of $195,000, pro rated from the Commencement Date. This payment ($113,750,
assuming a June 1, 2008 Commencement Date) will be payable on the next regular payroll date
following the Commencement Date.

 

 

 

Option Grant. Subject to Compensation Committee approval, you will be granted options to
purchase 1,500,000 shares of Common Stock of Safeguard pursuant to an award qualified as an
employment inducement award for purposes of the New York Stock Exchange listing requirements. Your
initial option grant will be divided into two categories: 25% (or 375,000
options) will vest on a “time” basis (the “time-based” options) and the remaining 75% (or 1,125,000
options) will vest based on a performance basis (the “market-based” options). The options will be
granted on the quarterly grant date (established by our Compensation Committee) next following your
commencement date (the “Grant Date”). With respect to the 375,000 time-based options, 25% will
vest on the first anniversary of the Grant Date and the remaining 75% will vest in equal monthly
installments during the three-year period commencing on the first anniversary of the Grant Date.
The 1,125,000 market-based options will vest based on achievement by Safeguard of sustained
improvement in its market capitalization (as will be more fully described in the option agreement).
The option will have an exercise price equal to the mean of the high and low sales prices of
Safeguard common stock on the Grant Date and will expire on the eighth anniversary of the Grant
Date (subject to earlier termination in accordance with the option certificate). In general,
except as otherwise provided in this Agreement or in the option agreement, your unvested stock
options will be forfeited if you do not continue in active service to the Company through the
applicable vesting date.

You will be eligible for additional grants from time to time as the Compensation Committee approves
additional grants.

Fringe Benefits. Except as described below, you will also be eligible to participate in
Safeguard’s health, dental, vision, disability, 401(k) and deferred compensation programs generally
available to Safeguard executive employees from time to time. Your base salary reflects that you
will not be a participant in any car allowance or non-accountable annual expense allowance or
executive medical program which certain other of the Company’s executives receives. Subject to
evidence of insurability, you will be entitled to Company-paid universal life insurance providing
coverage of $750,000 in addition to the Company’s normal group life insurance plans offered to
employees generally. You will also be entitled to vacation at the annual rate of four weeks of
vacation per year, and other benefits as outlined on the enclosed description of Safeguard
benefits.

Severance. Subject to the terms and conditions set forth below, in the event that (A) your
employment with Safeguard is terminated by Safeguard without “cause,” as defined below, or by you
for “good reason,” as defined below, within eighteen (18) months following a “change of control,”
as defined below, of Safeguard (“Change of Control Termination”) or (B) your employment with
Safeguard terminates for any reason other than (i) your death or disability, (ii) Safeguard’s
termination of your employment for cause or (iii) your resignation without good reason (such a
termination, a “Severance Termination”), Safeguard will provide you with the following benefits,
which together with any benefits provided under the applicable terms of any other plan or program
sponsored by the Safeguard (other than any plan, program or arrangement intended to pay severance
benefits following termination of employment), and applicable to you, will be the only severance
benefits or other payments in respect of your employment with Safeguard to which you will be
entitled.

 

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	 	•	 	Beginning with fiscal year 2009, you will receive a payment in respect
of your current year’s bonus equal to the product of (i) your annual
target bonus (of at least $195,000), multiplied by (ii) Safeguard’s
percentage achievement of its annual Management Incentive Plan
objectives as determined by the Compensation Committee as of the end
of the calendar quarter closest to your date of termination,
multiplied by (iii) a fraction, the numerator of which is the number
of days in Safeguard’s fiscal year elapsed at the time of the
termination and the denominator of which is 365. Payment under this
provision will be made within sixty (60) days after the end of the
quarter for which the determination in (ii) is being made.
	 
	 	•	 	If (A) there is a Change of Control Termination or (B) a Severance
Termination, you will receive a lump sum payment equal to the product
of (i) 1.5 multiplied by (ii) your annual salary then in effect (which
annual salary will not be less than $340,000).
	 
	 	•	 	You shall receive payment of any earned, but not yet paid, salary,
bonus and accrued vacation as of the next regularly scheduled payroll
date.
	 
	 	•	 	Except as provided below, you will only vest in your interests under,
and you will receive benefits in accordance with, the terms and
conditions set forth in Safeguard’s various long-term incentive plans.
	 
	 	•	 	You will receive up to twelve (12) months continued coverage under the
Safeguard medical and health plans applicable to you (not including
dental coverage), which coverage will run concurrent with the coverage
provided under section 4980B of the Internal Revenue Code of 1986, as
amended (the “Code”). During this period, you will pay for a portion
of the cost of such coverage as if you were an active Safeguard
employee, and Safeguard will pay any remaining costs.
	 
	 	•	 	You will receive a lump sum payment equal to the cost that would be
incurred by Safeguard, as reasonably determined by Safeguard, to waive
the applicable premium otherwise payable for COBRA continuation
coverage for you (and, to the extent covered immediately prior to the
date of your termination, your spouse and dependents) solely with
respect to dental insurance for a period of twelve (12) months
following the date of your termination.
	 
	 	•	 	You will receive a lump sum cash payment equal to the cost of life
insurance coverage for a period of twelve (12) months, based on
Safeguard’s monthly cost of such coverage on your termination date.
You should consult with Safeguard’s payroll staff concerning any life
insurance policies.
	 
	 	•	 	On or before the end of the second calendar year beginning after your
Severance Termination, Safeguard will reimburse you for up to $20,000
for documented outplacement services or office space which you secure
within such time period.
	 
	 	•	 	You will be reimbursed promptly for all your reasonable and necessary
business expenses incurred on behalf of Safeguard prior to your
termination date in accordance with Safeguard’s customary policies.

 

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	 	•	 	If you experience a Change of Control Termination as described above,
(A) you will become fully vested in all of your outstanding stock
options and you may exercise (i) those stock options that were subject
to time-based vesting during the thirty-six (36) month period
following your termination of employment (unless, disregarding your
termination of employment, any of the options would by their terms
expire sooner, in which case you may exercise such options at any time
before their expiration), and (ii) those stock options that were
subject to market-based vesting during the twenty-four (24) month
period following your termination of employment (unless, disregarding
your termination of employment, any of the options would by their
terms expire sooner, in which case you may exercise such options at
any time before their expiration), and (B) you will become fully
vested in all of your outstanding restricted stock awards and deferred
stock units, if any.
	 
	 	•	 	If you experience a Severance Termination as described above, (A) you
will become fully vested in your outstanding time-based stock options
that were subject to time-based vesting and you may exercise those
stock options during the thirty-six (36)-month period following your
termination of employment (unless, disregarding your termination of
employment, any of the options would by their terms expire sooner, in
which case you may exercise such options at any time before their
expiration), (B) you may exercise your vested outstanding market-based
options during the twelve (12) month period following your termination
of employment (unless, disregarding your termination of employment,
any of the options would by their terms expire sooner, in which case
you may exercise such options at any time before their expiration),
and (C) the Board, in its discretion, may accelerate the vesting of
any restricted stock grants and deferred stock units, if any.

All compensation and benefits described in this Section entitled “Severance” (other than earned
salary and bonus and accrued vacation) will be offered in return for and contingent on your
execution, non-revocation and performance of the General Release and Agreement substantially in the
form attached to this letter agreement as Exhibit A and the Non-Competition Agreement in
the form attached to this letter agreement as Exhibit B.

Upon your termination of employment with Safeguard in connection with a change of control, as
discussed above, if it is determined that any payment or distribution by Safeguard of benefits
provided under this Agreement or any other benefits due upon a change of control (the “Change of
Control Benefits”) would constitute an “excess parachute payment” within the meaning of section
280G of the Code that would be subject to an excise tax under section 4999 of the Code (the “Excise
Tax”), the following provisions will apply, unless provided otherwise in the applicable plan,
program or agreement that provides change of control payments that are not paid pursuant to this
Agreement. If the aggregate present value to you of receiving the Change of Control Benefits and
paying the Excise Tax is not greater than the aggregate present value to you of the Change of
Control Benefits reduced to the safe harbor amount (as defined below), then Safeguard will reduce
the Change of Control Benefits such that the aggregate present value to you of receiving the Change
of Control Benefits is equal to the safe harbor amount. Otherwise you will receive the full amount
of the Change of Control Benefits and you will be responsible for payment of the Excise Tax. For
purposes of this paragraph “present value” will be determined in accordance with Section 280G(d)(4)
of the Code and the term “safe harbor amount” will mean an amount expressed in the present value
that maximizes the aggregate present value of the Change of Control Benefits without causing any of
the Change of Control Benefits to be subject to the deduction limitations set forth in Section 280G
of the Code.

 

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All determinations made pursuant to the foregoing paragraph will be made by a professional advisor
selected by Safeguard (the “Professional Advisor”), which firm will provide its determinations and
any supporting calculations both to Safeguard and to you within ten days of the termination date.
Any such determination by the Professional Advisor will be binding upon you and Safeguard. You
will then, in your sole discretion, determine which and how much of the Change of Control Benefits
will be eliminated or reduced consistent with the requirements of the foregoing paragraph. All of
the fees and expenses of the Professional Advisor in performing the determinations referred to
above will be borne solely by Safeguard.

Except as otherwise specifically provided in this section entitled “Severance,” and subject to the
requirements of the section hereof entitled “Section 409A Compliance” below, Safeguard will pay you
the lump sum payments described above within forty five (45) business days of your date of
termination, subject to your execution and non-revocation (through the end of any applicable
revocation period) within such period of forty-five (45) business days of the release (which will
be substantially in the form attached as Exhibit A to this letter, but with such changes,
if any, as recommended by Safeguard’s counsel) and non-competition agreement and such agreements
have become effective and following any determination required by the preceding paragraph.
Safeguard will prepare the final release within five business days of your termination of
employment. You will have 21 days in which to consider the release although you may execute it
sooner. Please note that the release has a rescission period of seven days after which it becomes
effective if not revoked. All other payments will be made to you on the next regularly scheduled
payroll date after the date on which they become due.

In this letter, the term “cause” means (a) your failure to adhere to any written Safeguard policy
if you have been given a reasonable opportunity to comply with such policy or cure your failure to
comply (which reasonable opportunity must be granted during the ten-day period preceding
termination of this Agreement); (b) your appropriation (or attempted appropriation) of a material
business opportunity of Safeguard, including attempting to secure or securing any personal profit
in connection with any transaction entered into on behalf of Safeguard; (c) your misappropriation
(or attempted misappropriation) of any Safeguard fund or property; or (d) your conviction of, or
your entering a guilty plea or plea of no contest with respect to, a felony, the equivalent
thereof, or any other crime with respect to which imprisonment is a possible punishment.

In this letter, the term “good reason” means (i) your assignment (without your consent) to
responsibilities or duties of a materially lesser status or degree than your current
responsibilities or duties; provided, however, that a mere change in your area of responsibilities
will not constitute a material change if you are reasonably suited by your education and training
for such responsibilities and you remain Senior Vice-President and Chief Financial Officer of
Safeguard; (ii) a material reduction of your base salary; (iii) the relocation of Safeguard’s
principal executive offices to a location which is more than 35 miles away from the location of
Safeguard’s principal executive offices on the date of this Agreement; or (iv) Safeguard’s material
breach of this agreement. Notwithstanding the foregoing, no event or condition described in
clauses (i) through (iv) will constitute good reason unless (a) you give Safeguard written notice
of your intention to terminate your employment for good reason and the grounds for such
termination, (b) the notice described in (a) is provided within 60 days after the event
giving rise to the good reason termination occurs , and (c) such grounds for termination (if
susceptible to correction) are not corrected by Safeguard within 30 days after its receipt of such
notice. If Safeguard does not correct the ground(s) for termination during the 30 day period
following your notice of termination, your termination of employment for good reason may become
effective within 90 days after the end of the cure period, in order for your termination to be
treated as a “good reason” termination under this Agreement. If your termination occurs after the
end of such 90-day period, such termination shall be treated as a voluntary termination other than
for “good reason” and you will not be entitled to severance benefits under this Agreement.

 

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A “change of control” will be deemed to have occurred if (i) any “person” or “group” (as such terms
are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)), other than any Safeguard employee stock ownership plan or an equivalent
retirement plan, becomes the beneficial owner (as such term is used in Section 13(d) of the
Exchange Act), directly or indirectly, of securities of Safeguard representing 50% or more of the
combined voting power of Safeguard’s then outstanding voting securities, (ii) the Board ceases to
consist of a majority of Continuing Directors (as defined below), (iii) the consummation of a sale
of all or substantially all of Safeguard’s assets or a liquidation (as measured by the fair value
of the assets being sold compared to the fair value of all of Safeguard’s assets), or (iv) a merger
or other combination occurs such that a majority of the equity securities of the resultant entity
after the transaction are not owned by those who owned a majority of the equity securities of
Safeguard prior to the transaction. A “Continuing Director” will mean a member of the Board who
either (i) is a member of the Board at the date of this Agreement or (ii) is nominated or appointed
to serve as a Director by a majority of the then Continuing Directors.

Terms of Employment, Agreements, Miscellaneous. You will be an employee-at-will and
subject to the arrangements described in Safeguard’s employee handbook as modified from time to
time. In addition, this offer is subject to your agreement to comply with various covenants
designed to protect Safeguard’s confidential information and employee, customer and other
relationships, as set forth in the Non-Competition Agreement, in the form attached to this letter
agreement as Exhibit B. We will need to receive a signed copy of that agreement prior to
your Commencement Date.

You will not serve as an employee, officer or director of any company that is not affiliated with
Safeguard without the consent of our Board of Directors, provided, however, that you will be
permitted to serve on the boards of those companies and not-for-profit entities identified on
Exhibit C attached to this letter for which you currently serve as a director, provided
that your service on such boards does not materially affect your ability to perform your services
hereunder.

The provisions set forth in this Agreement will inure to the benefit of your personal
representative, executors and heirs. In the event you die while any amount payable under the
Agreement remains unpaid, all such amounts will be paid in accordance with the terms and conditions
of this letter.

In addition to adhering to policies and procedures generally applicable to Safeguard’s executive
officers, you agree, within the prescribed time frame, to work toward meeting with the stock
ownership guidelines established by our Board of Directors effective December 31, 2005.

 

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No term or condition set forth in this letter may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing and signed by you and the Board of
Safeguard or a duly authorized officer of Safeguard.

You will not be required to mitigate the amount of any payment provided for in this letter by
seeking other employment or otherwise.

You acknowledge that the arrangements described in this Agreement will be the only obligations of
Safeguard or its affiliates in connection with any determination by Safeguard to terminate your
employment with Safeguard. This Agreement does not terminate, alter or affect your rights under
any plan or program of Safeguard in which you may participate or under which you are due a benefit,
except as explicitly set forth herein. Your participation in such plans or programs will be
governed by the terms of such plans and programs.

The provisions set forth in this Agreement will be construed and enforced in accordance with the
law of the Commonwealth of Pennsylvania without regard to the conflicts of laws rules of any state.

Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, will
be settled by arbitration in Philadelphia, Pennsylvania, in accordance with the National Rules for
the Resolution of Employment Disputes of the American Arbitration Association, using one
arbitrator, and judgment upon the award rendered by the arbitrator may be entered in any court of
competent jurisdiction.

The obligations of Safeguard set forth herein are absolute and unconditional and, subject to any
statutory or regulatory requirements, will not be subject to any right of set-off, counterclaim,
recoupment, defense or other right which Safeguard may have against you, subject to, in the event
of your termination of employment, your execution and performance of the General Release and
Agreement substantially in the form attached to this letter agreement as Exhibit A and your
performance of the Non-Competition Agreement in the form attached to this letter agreement as
Exhibit B.

Safeguard may withhold applicable taxes and other legally required deductions from all payments to
be made hereunder.

Safeguard’s obligations to make payments under this letter are unfunded and unsecured and will be
paid out of the general assets of Safeguard.

Compliance with Section 409A of the Code.

 

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Compliance. This Agreement is intended to provide compensation that is exempt from the
restrictions set forth in section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”). However, to the extent that the amounts payable under this Agreement are determined to be
deferred compensation within the meaning of section 409A, this Agreement will be interpreted to
avoid any penalty sanctions under section 409A of the Code. If any payment or benefit cannot be
provided or made at the time specified herein without incurring sanctions under section 409A, then
such benefit or payment will be provided in full at the earliest time thereafter when such
sanctions will not be imposed. For purposes of section 409A of the Code, all payments to be made
upon a termination of employment under this Agreement may only be made upon a “separation from
service” within the meaning of such term under section 409A of the Code, each payment made under
this Agreement will be treated as a separate payment and the right to a series of installment
payments under this Agreement is to be treated as a right to a series of separate payments. In no
event will you, directly or indirectly, designate the calendar year of any payments to be made to
you under this Agreement. All reimbursements and in-kind benefits provided under this Agreement
will be made or provided in accordance with the requirements of section 409A, including, where
applicable, the requirement that (i) any reimbursement is for expenses incurred during the
Executive’s lifetime (or during a shorter period of time specified in this Agreement) or, solely
with respect to payments due after the Executive’s death, for expenses incurred during Executive’s
lifetime and the five-year period following his death, (ii) the amount of expenses eligible for
reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses
eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (iii)
the reimbursement of an eligible expense will be made on or before the last day of the calendar
year following the year in which the expense is incurred, and (iv) the right to reimbursement or
in-kind benefits is not subject to liquidation or exchange for another benefit.

Payment Delay. Notwithstanding any provision in this Agreement to the contrary, if at the
time of your separation from service with Safeguard, Safeguard has securities which are
publicly-traded on an established securities market and you are a “specified employee” (as defined
in section 409A of the Code) and it is necessary to postpone the commencement of any severance
payments otherwise payable pursuant to this Agreement as a result of such termination of employment
to prevent any accelerated or additional tax under section 409A of the Code, then Safeguard will
postpone the commencement of the payment of any such payments or benefits hereunder (without any
reduction in such payments or benefits ultimately paid or provided to you) that are not otherwise
paid within the short-term deferral exception under section 409A of the Code and are in excess of
the lesser of two times (i) your annualized compensation for the immediately preceding calendar
year or (ii) the limit on compensation then set forth in section 401(a)(17) of the Code, until the
first payroll date that occurs after the date that is six months following the your “separation
from service” with Safeguard (as defined under section 409A of the Code). If any payments are
postponed due to such requirements, such postponed amounts will be paid in a lump sum to you on the
first payroll date that occurs after the date that is six months following your “separation from
service” with Safeguard. If you die during the postponement period prior to the payment of the
postponed amount, the amounts withheld on account of section 409A of the Code will be paid to the
personal representative of your estate within 60 days after the date of your death.

 

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This Agreement constitutes the entire agreement and understanding with respect to your severance
arrangements, and supersedes any and all prior agreements and understandings whether oral or
written, relating thereto.

If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to us
the enclosed copy of this letter which will then constitute our legally binding agreement.

Sincerely,

Safeguard Scientifics, Inc.

			
	By:	 	/s/ Peter J. Boni 
Peter J. Boni

President and Chief Executive Officer

I agree to be bound by the terms and conditions of this letter agreement.

/s/ Stephen T. Zarrilli 
Stephen T. Zarrilli

 

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EXHIBIT A

GENERAL RELEASE AND AGREEMENT

This GENERAL RELEASE AND AGREEMENT (hereinafter the “Agreement”) is made and entered into as
of this
 _____ 

day of
 _____ 

, 20
 _____ 

, by and between Safeguard Scientifics, Inc. (“Safeguard”) and
Stephen Zarrilli (“Employee”).

1. Background. The parties hereto acknowledge that this Agreement is being entered
into pursuant to the terms of the employment letter agreement, dated May 28, 2008 between Safeguard
and Employee (the “Employment Agreement”). As used in this Agreement, any reference to Safeguard
shall include its predecessors and successors and, in their capacities as such, all of its present,
past, and future directors, officers, employees, attorneys, insurers, agents and assigns; and any
reference to Employee shall include, in their capacities as such, his attorneys, heirs,
administrators, representatives, agents and assigns.

2. General Release.

(a) Employee, for and in consideration of the special benefits offered to him by Safeguard
specified in the Employment Agreement and intending to be legally bound, does hereby REMISE,
RELEASE AND FOREVER DISCHARGE Safeguard, of and from any and all waivable causes of actions, suits,
debts, claims and demands whatsoever in law or in equity, which Employee ever had, now has, or
hereafter may have or which Employee’s heirs, executors or administrators may have, by reason of
any matter, cause or thing whatsoever, from the beginning of Employee’s employment with Safeguard
to the date of this Agreement, and particularly, but without limitation, any claims arising from or
relating in any way to Employee’s employment or the termination of Employee’s employment
relationship with Safeguard, including, but not limited to, any claims arising under any federal,
state, or local laws, including Title VII of the Civil Rights Act of 1964, as amended, 42
U.S.C. § 2000e et seq., (“Title VII”), the Age Discrimination in Employment Act, 29 U.S.C.
§ 621 et seq. (the “ADEA”), the Americans with Disabilities Act, 42 U.S.C. § 12101 et
seq. (“ADA”), Employee Retirement Income Security Act of 1974, as amended 29 U.S.C. § 301,
et seq., as amended (“ERISA”), the Pennsylvania Wage Payment and Collection Law, Pa. Stat.
Ann. tit. 43 §§ 260.1-260.11a (“WPCL”), the Pennsylvania Human Relations Act, 43 P.S. § 951 et
seq. (the “PHRA”), and any and all other federal, state or local laws, regulations, ordinances
or public policies and any common law claims now or hereafter recognized, including claims for
wrongful discharge, slander and defamation, as well as all claims for counsel fees and
costs; provided, however, that the Employee does not release or discharge Safeguard from
any of its continuing obligations to him expressly set forth in this Agreement and the
Employment Agreement.

(b) By signing this Agreement, Employee represents that Employee has not commenced any
proceeding against Safeguard in any forum (administrative or judicial) concerning Employee’s
employment or the termination thereof. If Employee’s employment with Safeguard has been terminated
on or before the date of this Agreement, Employee further acknowledges that Employee was given
sufficient notice under the Worker Adjustment and Retraining Notification Act (the “WARN Act”) and
that the termination of Employee’s
employment does not give rise to any claim or right to notice, or pay or benefits in lieu of
notice under the WARN Act. In the event any WARN Act issue does exist or arises in the future,
Employee agrees and acknowledges that the payments and benefits set forth in this Agreement shall
be applied to any compensation or benefits in lieu of notice required by the WARN Act, provided
that any such offset shall not impair or affect the validity of any provision of this Agreement or
the Employment Agreement.

 

A-1

 

(c) Employee agrees that in the event of a breach of any of the terms of this Agreement,
Safeguard shall be entitled to recover attorneys’ fees and costs in an action to prosecute such
breach, in addition to compensatory damages, and may cease to make any payments then due under this
Agreement or the Employment Agreement.

(d) Employee acknowledges that Safeguard’s obligations under the Employment Agreement and this
Agreement are the only obligations of Safeguard or its parent organizations or affiliates in
connection with the matters described herein and therein.

(e) Employee agrees and acknowledges that this Agreement is not and shall not be construed to
be an admission by Safeguard of any violation of any federal, state or local statue, ordinance or
regulation or of any duty owed by Safeguard to Employee.

3. Confidentiality; Non-Disparagement.

(a) Except to the extent required by law, including SEC disclosure requirements, Safeguard and
Employee agree that the terms of this Agreement will be kept confidential by both parties, except
that Employee may advise his family and confidential advisors, and Safeguard may advise those
people needing to know to implement the above terms.

(b) Employee acknowledges and agrees that he is bound by the confidentiality provisions of the
Employment Agreement and that such terms remain in full force and effect.

(c) Employee represents that Employee has not taken, used or knowingly permitted to be used
any notes, memorandum, reports, list, records, drawings, sketches, specifications, software
programs, data, documentation or other materials of any nature relating to any matter within the
scope of the business of Safeguard or its affiliated or parent companies or concerning any of its
dealings or affairs otherwise than for the benefit of Safeguard. Employee shall not, after the
termination of Employee’s employment, use or knowingly permit to be used any such notes, memoranda,
reports, lists, records, drawings, sketches, specifications, software programs, data, documentation
or other materials, it being agreed that all of the foregoing shall be and remain the sole and
exclusive property of Safeguard and that immediately upon the termination of Employee’s employment,
Employee shall deliver all of the foregoing, and all copies thereof, to Safeguard, at its main
office.

(d) In accordance with normal ethical and professional standards, Safeguard and Employee agree
that they shall not in any way engage in any conduct or make any statement that would defame or
disparage the other, or make to, or solicit for, the media or others, any comments, statements
(whether written or oral), and the like that may be considered to be derogatory or detrimental to
the good name or business reputation of either party. It is
understood and agreed that Safeguard’s obligation under this paragraph extends only to the
conduct of Safeguard’s executive officers. The only exception to the foregoing shall be in those
circumstances in which Employee or Safeguard is obligated to provide information in response to an
investigation by a duly authorized governmental entity or in connection with legal proceedings.

 

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4. Indemnity and Assistance.

(a) This Agreement shall not release Safeguard, or any of its insurance carriers from any
obligation it or they might otherwise have to defend and/or indemnify Employee and hold harmless
any other director or officer and Safeguard hereby affirms its obligation to provide
indemnification to Employee as a director, officer or former director or officer of Safeguard, as
the case may be, as set forth in Safeguard’s bylaws and charter documents.

(b) Employee agrees that Employee will personally provide reasonable assistance and
cooperation to Safeguard in activities related to the prosecution or defense of any pending or
future lawsuits or claims involving Safeguard.

5. General.

(a) Employee acknowledges and agrees that he has 21 days to consider this Agreement, and that
Employee has been advised by Safeguard, in writing, to consult with his attorney before signing
this Agreement, and that Employee had discussed this matter with his attorney before signing it.
Employee further acknowledges that Safeguard has advised him that he may revoke this Agreement for
a period of seven calendar days after it has been executed, with the understanding that Safeguard
has no obligations under this Agreement until the seven day period has passed. If the seventh day
is a weekend or national holiday, Employee will have until the next business day to revoke. Any
revocation must be in writing and received by Safeguard at its facility located at 435 Devon Park
Drive, 800 Building, Wayne, PA 19087, Attention: President, with a copy to the General Counsel,
Safeguard Scientifics, Inc., 800 Building, 435 Devon Park Drive, Wayne, PA 19087.

(b) Employee has carefully read and fully understands all of the provisions of this Agreement
which set forth the entire agreement between him and Safeguard with respect to the subject matter
hereto, and he acknowledges that he has not relied upon any representation or statement, written or
oral, not set forth in this document.

(c) This Agreement is made in the Commonwealth of Pennsylvania and shall be interpreted under
the laws thereof. Its language shall be construed as a whole, to give effect to its fair meaning
and to preserve its enforceability.

(d) Employee agrees that any breach of this Agreement by Employee will cause irreparable
damage to Safeguard and that in the event of such breach Safeguard shall have, in addition to any
and all remedies of law, the right to an injunction, specific performance or other equitable relief
to prevent the violation of Employee’s obligations hereunder.

 

A-3

 

(e) No term or condition set forth in this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed by Employee and an
officer of Safeguard specifically and duly authorized by the Board of Directors of Safeguard.

(f) Any waiver by Safeguard of a breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach of such provision or any other provision
hereof.

(g) Each covenant, paragraph and division of this Agreement is intended to be severable and
distinct, and if any paragraph, subparagraph, provision or term of this Agreement is deemed to be
unlawful or unenforceable, such a determination will not impair the legitimacy or enforceability of
any other aspect of the Agreement.

(h) This Agreement is intended to be for the benefit of, and shall be enforceable by,
Safeguard. Except as provided in the prior sentence, this Agreement is not intended to confer any
rights, benefits, remedies, obligations or liabilities hereunder upon any person or entity other
than the parties hereto and their respective heirs, representatives, successors and permitted
assigns.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date written above.

	 	 	 	 	 
	 	 	 
	Date:                     , 20      	
 	 
	 	Stephen Zarrilli 	 
	 	 	 
	 
	 	Safeguard Scientifics, Inc.

 	 
	Date                     , 20      	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

A-4

 

EXHIBIT B

NON-COMPETITION AGREEMENT

This NON-COMPETITION AGREEMENT (hereinafter the “Agreement”) is made and entered into as of
this 28th day of May, 2008, by and between SAFEGUARD SCIENTIFICS, INC. (the “Company”) and Stephen
Zarrilli (“Employee”).

1. Background. The parties hereto acknowledge that this Agreement is being entered
into pursuant to the terms of the Letter Agreement, dated May 28, 2008 between the Company and
Employee (the “Letter Agreement”). As used in this Agreement, any reference to “Majority
Subsidiary” shall mean any person or entity that has a majority of its outstanding voting
securities owned directly or indirectly by the Company; and “Partner Company” shall mean any person
or entity in or with respect to which the Company has made, or is actively considering making, an
equity or debt investment or acquisition.

2. Confidentiality and Non-Disclosure.

(a) I will not reveal to any person or entity any of the trade secrets or confidential
information of the Company or of any Partner Company (including, but not limited to, the identity
of any Partner Company, and trade secrets or confidential information respecting inventions,
products, designs, methods, know-how, techniques, systems, processes, software programs, works of
authorship, customer lists, employee lists, customer lists, projects, plans and proposals) and I
shall keep secret all matters entrusted to me and shall not use or attempt to use any such
information in any manner which may injure or cause loss or may be calculated to injure or cause
loss, whether directly or indirectly, to the Company. The above restrictions shall not apply to:
(i) information that at the time of disclosure is in the public domain through no fault of mine;
(ii) information received from a third party outside of the Company that was disclosed without a
breach of any confidentiality obligation; (iii) information approved for release by written
authorization of the Company; or (iv) information that may be required by law or an order of any
court, agency or proceeding to be disclosed; provided, I shall provide the Company notice of any
such required disclosure once I have knowledge of it and will help the Company to the extent
reasonable to obtain an appropriate protective order.

(b) Upon termination of my employment, I shall not take, use or permit to be used any notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software programs, data,
documentation or other materials of any nature relating to any matter within the scope of the
business of the Company or any Partner Company concerning any of its dealings or affairs, it being
agreed that all of the foregoing shall be and remain the sole and exclusive property of the Company
or the Partner Company, as appropriate, and that immediately upon the termination of my employment
I shall deliver all of the foregoing, and all copies thereof, to the Company, at its main office.

 

B-1

 

3. Ownership of Inventions and Ideas. I acknowledge that the Company shall be the
sole owner of all patents, patent applications, patent rights, formulas, copyrights, inventions,
developments, discoveries, other improvements, data, documentation, drawings, charts, and other
written, audio and/or visual materials relating to equipment, methods, products, processes, or
programs in connection with or useful to the business of the Company or a Partner Company
(collectively, the “Developments”) which I, by myself or in conjunction with any other person,
conceived, made, acquired, acquired knowledge of, developed or created during the term of my
employment with the Company, free and clear of any claims by me (or any successor or assignee of
mine) of any kind or character whatsoever other than my rights under the Letter Agreement. I
acknowledge that all copyrightable Developments shall be considered works made for hire under the
Federal Copyright Act. I hereby assign and transfer my right, title and interest in and to all
such Developments, and agree that I shall, at the request of the Company, execute or cooperate with
the Company in any patent applications, execute such assignments, certificates or other
instruments, and do any and all other acts, as the Company from time to time reasonably deems
necessary or desirable to evidence, establish, maintain, perfect, protect, enforce or defend the
Company’s right, title and interest in or to any such Developments.

4. Non-Compete. Until the first anniversary of the date hereof (the “Restricted
Period”), I agree that I will not:

(a) directly or indirectly solicit, entice or induce any customer of the Company or a Majority
Subsidiary to become a customer of any other person, firm or corporation with respect to products
and/or services then sold by the Company or to cease doing business with the Company, and I shall
not approach any such person, firm or corporation for such purpose or authorize or knowingly
approve the taking of such actions by any other person;

(b) directly or indirectly solicit, recruit or hire any person who was an employee of the
Company or a Majority Subsidiary on the date of my termination of employment to work for a third
party other than the Company or such Majority Subsidiary or engage in any activity that would cause
any employee to violate any agreement with the Company or such Majority Subsidiary; provided that I
shall not be prohibited from soliciting any person who, at the time of solicitation, is no longer
employed by the Company or a Majority Subsidiary and who was not induced to leave employment in
violation of this sub-paragraph (b); or

(c) whether alone or as a partner, officer, director, consultant, agent, employee or
stockholder of any company or other commercial enterprise, directly or indirectly engage in any
business or other activity which is competitive in the same service areas with the products or
services being manufactured, marketed, distributed, or provided by the Company or a Majority
Subsidiary at the time of termination of my employment (“Competitive Activities”). The foregoing
prohibition shall not prevent (i) my ownership of securities of a public company not in excess of
five percent (5%) of any class of such securities, (ii) my employment or engagement by a company or
business organization which during the previous 12 months did not generate, or during the next 12
months does not seek to generate, more than 5% of its consolidated revenues from Competitive
Activities, provided that my responsibilities for such company or business organization do not
require me to engage in Competitive Activities or to violate sub-paragraphs (a) or (b) of this
Section, or (iii) my employment with or ownership in a traditional venture capital firm, so long
as, in the course of such employment or ownership, (x) I do not, directly or indirectly, solicit
for investment or acquisition on behalf of such firm any Majority Subsidiary or Partner Company at
the time of termination of my employment or provide any services to such firm with respect to any
such Majority Subsidiary or Partner Company, and (y) I do not violate any of the requirements of
confidentiality and non-disclosure set forth in paragraph 2 hereof or the provisions of
subparagraphs 4(a) or (b) above.

 

B-2

 

5. Reasonable Restrictions. I agree that any breach of this Agreement by me will
cause irreparable damage to the Company and that in the event of such breach the Company shall
have, in addition to any and all remedies of law, the right to an injunction, specific performance
or other equitable relief to prevent the violation of my obligations hereunder. I hereby
acknowledge that the type and periods of restriction imposed in the provisions of this Agreement
are fair and reasonable and are reasonably required for the protection of the Company and the
goodwill associated with the business of the Company. I represent that my experience and
capabilities are such that the restrictions contained herein will not prevent me from obtaining
employment or otherwise earning a living at the same general economic benefit as reasonably
required by me. I further agree that each provision herein shall be treated as a separate and
independent clause, and the unenforceability of any one clause shall in no way impair the
enforceability of any of the other clauses herein. Moreover, if one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad as to scope,
activity or subject so as to be unenforceable at law, such provision or provisions shall be
construed by the appropriate judicial body by limiting and reducing it or them, so as to be
enforceable to the maximum extent compatible with the applicable law as it shall then appear.

6. General. Any waiver by the Company of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach of such provision or any
other provision hereof. No term or condition set forth in this letter may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing and signed by me
and an officer of the Company authorized to sign such writing by the Board of Directors of
Safeguard. My obligations under this Agreement shall survive the termination of my employment
regardless of the manner of such termination and shall be binding upon my heirs, executors,
administrators and legal representatives. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania. Any controversy or claim arising out
of or relating to this agreement, or the breach thereof (other than a request for equitable relief)
will be settled by arbitration in Philadelphia, Pennsylvania, in accordance with the National Rules
for the Resolution of Employment Disputes of the American Arbitration Association, using one
arbitrator, and judgment upon the award rendered by the arbitrator may be entered in any court of
competent jurisdiction.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date written above.

	 	 	 	 	 
	 	 	 
	Date: May 28, 2008 	/s/ Stephen T. Zarrilli
 	 
	 	Stephen T. Zarrilli 	 
	 	 	 
	 
	 	SAFEGUARD SCIENTIFICS, INC.

 	 
	Date: May 28, 2008 	/s/ Peter J. Boni
 	 
	 	Peter J. Boni 	 
	 	Title:  	President & Chief Executive Officer 	 
	 

 

B-3

 

EXHIBIT C

Existing Board Positions

Cadient, Inc.

Internet Fitness, LLC

NutriSystem, Inc.

FMP Media, Inc.

Existing Not-for-Profit Board Positions

Arts and Business Council of Greater Philadelphia

Economics Pennsylvania

 

C-1Filed by Bowne Pure Compliance

EXHIBIT 10.2

Summary of Compensation Terms — Stephen Zarrilli

	 	 	 
	Annual Base Salary

	 	$340,000 
	 
	 	 
	Annual Cash Incentive

	 	In lieu of fiscal year 2008 incentive payment, signing bonus
payment to be made in the amount of $113,750 (which is an amount
equal to 100% of pro rata portion of annual incentive target,
based upon hire date). To be paid on first regular payroll date
following hire date.
	 
	 	 
	Long Term Equity Incentives

	 	• Option to purchase 375,000 shares of common stock at an
exercise price equal to the average of the high and low prices of
a share of Safeguard common stock on June 30, 2008 (Registrant’s
quarterly grant date for new hires); option will vest 25% on the
first anniversary and in 36 equal monthly installments thereafter
and will have an eight-year term.
	 
	 	 
	 

	 	• Option to purchase 1,125,000 shares of common stock at an
exercise price equal to the average of the high and low prices of
a share of Safeguard common stock on June 30, 2008 (Registrant’s
quarterly grant date for new hires); option will vest
incrementally based upon sustained improvement in Safeguard’s
stock price as set forth in the following table, with pro rata
vesting between the defined stock price levels being tested as of
each June 30 and December 31 during the term of the option:

	 	 	 
	Percentage Vesting	 	Sustained Stock Price
	  First 20%
	 	$3.1548 
	  Next 30%
	 	$4.6466 
	  Next 40%
	 	$6.5114 
	  Final 10%
	 	$7.2246 

	 	 	 
	 

	 	These option grants are intended to meet the employment inducement
award exemption provided under Section 303A.08 of the New York
Stock Exchange Listed Company Manual.
	 
	 	 
	Severance

	 	If employment with Safeguard is terminated by Safeguard without
cause or by executive for good reason within eighteen (18) months
following a change of control of Safeguard or executive is
terminated for any reason other than for cause, resignation
without good reason or as a result of death or disability:

	 	•	 	Beginning with 2009 fiscal year, pro rata portion of
current year’s management incentive plan payout based on actual
achievement as of the end of the most recent completed calendar
quarter;
	 
	 	•	 	Lump sum payment equal to 1.5 times his annual salary;
	 
	 	•	 	Up to twelve (12) months continued coverage under
Safeguard’s medical and health plans and life insurance plans;
	 
	 	•	 	In a separation other than following a change of control,
time-based vesting options will fully vest and remain exercisable
for 36 months and vested market-based options will remain
exercisable for 12 months;
	 
	 	•	 	In a change of control separation, time-based vesting
options will fully vest and remain exercisable for 36 months; all
market-based options that have not otherwise vested will vest and
remain exercisable for 24 months.

	 	 	 
	 

	 	The severance benefits described above are conditioned upon Mr.
Zarrilli’s delivery of a customary release to Safeguard.
	 
	 	 
	Benefits

	 	Participation in Safeguard’s standard executive-level benefit
programs, including health, dental, and vision plans; life and
disability insurance; 401K/deferred compensation plan, but not
including any car allowance, annual expense allowance, or
executive medical plan.

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