Quest Software (News - Alert) released details earlier in the week that it received an offer to participate in the buyout deal with Insight Venture Partners. Quest Software said it had received a proposal from a “strategic bidder” to buy the company at a near 11 percent premium, allowing Insight Ventures to either match or boost the $25.50 bid.

However, Quest announced today that it would be renegotiating its agreement with affiliates of Insight Venture to provide for the addition of Vector Capital as a member of the buyout group and for an increase in the merger consideration to be received by stockholders not affiliated with the buyout group from $23 per share in cash to $25.75 per share in cash – an increase of $0.25 cents per share.

Quest has also announced other changes in the amended agreement including an increase in the termination fees payable to the company pending certain circumstances. For example, if the company was to receive a better offer. The company would have to pay increased termination fees from $6.3 million to $25 million and increase the maximum reimbursement from $7 million to $12 million.

In an official press release from Quest, the company said all the independent directors except one voted to approve this new amended agreement. The company also confirmed that any previous agreement is no longer valid saying, “In connection with the Board’s approval of the amended agreement with Insight and Vector for a purchase price of $25.75 per share, and upon the recommendation of the Special Committee, the Board also determined that the previously announced proposal for $25.50 per share submitted by a strategic bidder no longer constituted a Superior Proposal.”

Quest said the transaction provided for in the amended agreement will be financed through a combination of $187 million equity commitment from Insight, $187 million equity from Vector, a rollover of at least 84 percent of Vinny Smith’s existing shares, and $1.2 billion of debt financing commitments from various banking institutions.

Shares slid 1.4 percent to $26.15 yesterday in after-hours trading; still suggesting shareholders were hoping the stock would increase. The stock has continued to climb as much as 43 percent since the beginning of the year. 

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