SafeNet Inc., the Harford County technology company under federal investigation for its stock option grants, has reached settlement agreements with two of its former top executives, according to documents filed late yesterday with the Securities and Exchange Commission.
The executives, Anthony A. Caputo, former chairman and chief executive, and Carole D. Argo, who was president, chief operating officer and acting chief financial officer, resigned in October amid an investigation into the company's stock options.
The agreement with Caputo, which was reached last week, requires that the former CEO put $1.5 million into an escrow account to be collected by the company once certain deadlines have passed. The Argo agreement, also reached last week, requires that she put $100,000 into an escrow account to be collected by the company once certain deadlines have passed, according to SEC documents.
The agreements also call for canceling or increasing the strike, or exercise, price of certain options granted to the former executives between 2000 and 2003.
SafeNet is one of dozens of publicly traded companies that have come under federal investigation for possible illegal backdating of option grants.
The company announced in September that it would have to revise financial statements from 2000 through March 31, 2006, because the accounting of some options grants used "incorrect measurement dates under applicable accounting rules in effect at the time."
The company's internal investigation led to Caputo's and Argo's resignations. SafeNet's previous chief financial officer, Ken Mueller, had resigned about six months earlier. SafeNet said in a recent SEC filing that it repriced options belonging to Caputo, Argo and Mueller.
The options were all repriced higher because they were "determined by the company to have been issued at a discount," that filing said. The changes "were made to mitigate the tax effects of the issuance of discounted options," it said.
Shareholder lawsuits alleging option manipulation have been filed against the company, some naming Caputo as a co-defendant and at least one naming Argo as a co-defendant.
The settlement agreements disclosed yesterday with Caputo and Argo become effective pending approval by the "courts presiding over the derivative actions brought by certain shareholders" against Caputo and Argo, or "the date on which such approval is no longer required."
The SEC documents do not specify which shareholder actions the settlements hinge on.
SafeNet had been the target of a lawsuit by one of its large investors, Tokyo-based Globis Capital Partners, which sought to block SafeNet's acquisition by a private equity company.
The suit, filed in Delaware Chancery Court, sought a higher price and claimed that some SafeNet directors agreed to a low-ball sale to avoid potential liability for backdated stock options. Lawyers for Globis announced an "agreement in principle" yesterday in a letter to Judge Leo Strine Jr. in Wilmington.
With its internal investigation continuing and the threat of being delisted by Nasdaq hanging over it, SafeNet announced plans last month to be acquired by Vector Capital Corp. for $28.75 a share, or about $634 million.
If SafeNet is acquired by Vector Capital, the Belcamp encryption technology company would become private and the backdating and other issues it has struggled with in recent months would be out of the public eye.
Vector Capital said yesterday that the Federal Trade Commission's mandatory waiting period for companies undergoing an acquisition has passed, clearing the way for the deal to proceed if enough shares are tendered.
The deadline for shareholders to tender their shares is midnight Friday, unless it is extended, the company said. The acquisition requires that 78 percent of SafeNet's shares be tendered.
Bloomberg News contributed to this article.