By Sean Wolfe

Vector Capital on Tuesday said it had struck a $634 million agreement to acquire SafeNet, the troubled security software firm that has sacked senior management and faces Nasdaq delisting as a result of an ongoing investigation into its stock options backdating practices.

Vector’s $29 per share offer was agreed to by senior management and the company’s board, but shareholders have yet to approve the transaction. Lazard Asset Management, which holds 6 percent of the company, said the company was worth $34 per share. Lazard also cautioned that new suitors could emerge if Vector didn’t increase its bid.

Belcamp, Maryland-based SafeNet has developed a portfolio of hardware and software security products to protect communications, intellectual property, and information networks. The firm appeared poised for rapid growth in 2005, snapping up smaller security firms Eracom Technologies, MediaSentry, and DMDsecure.com.

But the company’s fortunes turned in early 2006 when the U.S. Securities Exchange Commission began investigating whether SafeNet improperly backdated stock options it granted to executives. Improper accounting issues then forced the company to acknowledge it would restate its earnings for 2004 and 2005.

That eventually prompted the October resignations of SafeNet CEO Anthony Caputo and president Carole Argo. SafeNet board chair Walter Straub stepped in as interim CEO, and the CFO was replaced by promoting the firm’s controller. Ultimately, fixing its financials cost the company around $14 million, the company said.

All that tumult spelled opportunity to San Francisco-based Vector Capital, which typically purchases troubled tech companies it considers undervalued, and in some cases, takes them private. Vector in 2006 sold LANDesk Group to Avocent for $416 million, a 10-fold return on investment for Vector.

Mr. Straub said in a statement that the company had evaluated its strategic options, and that being acquired by Vector was the most compelling opportunity. "In Vector, we have identified a partner that is committed to assisting the Company to fully realize its opportunities while we continue to address our issues and build momentum in our business," he said.

David Fishman, a principal at Vector said he was limited in what he could say about the deal which is pending, but said he believed that the pressures and expense of being public can limit growth, and that taking the firm private was the best solution.

SafeNet shareholders were expected to vote on the Vector offer by the end of the month.