Commitments and Contingencies

March 2019,

the Company entered into a sublease of its prior corporate headquarters office space beginning in

June 2019.

The term of the sublease is through

April 2026,

the same as the Company's underlying lease. Fixed sublease payments to the Company are escalating over the term of the sublease and are reported as a component of general and administrative expenses.

April 2019,

the Company entered into a sublease for replacement office space with a related party, a company in which we hold an ownership interest, beginning in

June 2019.

The term of this sublease is

months with

three

conditional

six

month renewals based on mutual agreement with the sublessor. The aggregate payments expected under this sublease are

not

material.

A summary of the Company's operating lease cash flows at

March 31, 2020

follows:

	Operating lease payments			Expected sublease receipts
	(Unaudited - In thousands)
2020 (nine months ending December 31)	$	530		$	384
2021		595			525
2022		601			540
2023		607			556
2024		613			573
2025		619			590
Thereafter		207			199
Total future minimum lease payments		3,772		$	3,367
Less imputed interest		(1,089	)
Total operating lease liabilities	$	2,683

The Company and the companies in which it holds ownership interests are involved in various claims and legal actions arising in the ordinary course of business. In the current opinion of the Company, the ultimate disposition of these matters will

not

have a material adverse effect on the Company’s consolidated financial position or results of operations, however,

assurance can be given as to the outcome of these actions, and

one

or more adverse rulings could have a material adverse effect on the Company’s consolidated financial position and results of operations or that of its companies. The Company records costs associated with legal fees as such services are rendered.

The Company had outstanding guarantees of

$3.8

million at

March 31, 2020

which related to

one

of the Company's private equity holdings.

2018,

the Board of Directors (the “Board”) of the Company adopted a long-term incentive plan, which was amended in

February 2019,

the Amended and Restated Safeguard Scientifics Transaction Bonus Plan, (the “LTIP”). The purpose of the LTIP is to promote the interests of the Company and its shareholders by providing an additional incentive to employees to maximize the value of the Company in connection with the execution of the business strategy that the Company adopted and announced in

January 2018.

Under the LTIP, participants have received awards that

may

result in cash payments in connection with sales of the Company’s ownership interests (“Sale Transaction(s)”). The LTIP provides for a bonus pool corresponding to: (i) specified vesting thresholds or (ii) specified events. In the

first

case, the bonus pool will range from an amount equal to

of received proceeds at the

first

threshold to

1.333%

at higher thresholds and

bonus pool will be created if the transaction consideration is less than certain minimum thresholds. In the

second

case, a minimum pool will be created and paid under specified circumstances. The bonus pool will be allocated and paid to participants in the LTIP based on the product of (i) the participant’s applicable bonus pool percentage and (ii) the bonus pool calculated as of the vesting date, minus any previously paid portion of the bonus pool. Any portion of the bonus pool available as of the applicable vesting date that is reserved will be allocated in connection with each vesting date so that the entire bonus pool available as of such vesting date is allocated and payable to participants. Subject to the terms of the LTIP, payments under the LTIP will be paid in cash

not

later than

March

15th

of the calendar year following the calendar year of the applicable vesting date. All current officers and employees of the Company are eligible to participate in the LTIP. The Board, in its sole discretion, will determine the participants to whom awards are granted under the LTIP. The Company has accrued approximately

$0.8

million under the LTIP as of

March 31, 2020

The Company recorded severance expense of

$1.7

million during the

three

months ended

March 31, 2020

for the former CEO in accordance with an existing employment arrangement. This amount will be paid during the

second

quarter. Other accrued compensation amounts previously deferred will be paid within

six

months. Additional contingent amounts could be paid based on continued participation in prior awards granted pursuant to the LTIP. The Company has agreements with certain remaining employees that provide for severance payments to the employee in the event the employee is terminated without cause or an employee terminates his employment for “good reason.” The maximum aggregate exposure under employment and severance agreements for remaining employees was approximately

$2.2

million at

March 31, 2020

June 2011,

the Company's former ownership interest, Advanced BioHealing, Inc. (“ABH”) was acquired by Shire plc (“Shire”). Prior to the expiration of the escrow period in

March 2012,

Shire filed a claim against all amounts held in escrow related to the sale based principally upon a United States Department of Justice (“DOJ”) false claims act investigation relating to ABH (the “Investigation”). In connection with the Investigation, in

July 2015

the Company received a Civil Investigation Demand-Documentary Material (“CID”) from the DOJ regarding ABH and Safeguard’s relationship with ABH. Pursuant to the CID, the Company provided the requested materials and information. To the Company’s knowledge, the CID was related to multiple qui tam (“whistleblower”) actions,

one

of which was filed in

2014

by an ex-employee of ABH that named the Company and

one

of the Company’s employees along with other entities and individuals as defendants. At this time, the DOJ has declined to pursue the qui tam action as it relates to the Company and such Company employee. In addition, in connection with the above matters, the Company and other former equity holders in ABH entered into a settlement and release with Shire, which resulted in the release to Shire of all amounts held in escrow related to the sale of ABH.