SafeNet receives acceleration notice on 2.5% convertibles, plans to pay $253 million owed

By Caroline Salls

Pittsburgh, Oct. 20 - SafeNet, Inc. received a notice of acceleration from Citibank, NA, as trustee of the company's 2.5% convertible subordinated notes due 2010 for failure to file its 10-Q quarterly report for the period ended June 30, according to an 8-K filing with the Securities and Exchange Commission.

According to the filing, the company received a notice of default on Aug. 14 and was given 60 days to cure the default.

The notice of acceleration declares all amounts due under the notes due and payable.

SafeNet said it believes that there are substantial grounds for contesting the notice of acceleration and the notice of default, but that the process would be costly and the outcome uncertain.

Therefore, the company said it will pay the noteholders all principal and interest due as soon as practically possible.

The filing said the outstanding principal amount of the notes is $250 million, and interest accrues at a rate of 2.5% per year.

As previously reported, the total payment will be about $253 million, leaving the company with net cash of about $70 million and no debt.

On June 2, the company's board of directors appointed a special committee to investigate SafeNet's stock option granting practices, and the investigation is in progress.

In addition, the company has retained an international professional services firm to assist in a review of its accounting for stock option grants.

As a result of the ongoing investigation, chairman of the board and chief executive officer Anthony A. Caputo resigned, effective Oct. 17, and Carole Argo has also resigned from her position as president, chief operating officer and chief financial officer, also effective Oct. 17.

Walter W. Straub has been appointed chairman of the board and interim CEO, and Chris Fedde has been appointed president and chief operating officer

In addition, John W. Frederick has been appointed senior vice president and chief accounting officer and interim chief financial officer.

SafeNet is a Baltimore information security company.

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