Quest Software (News - Alert), Inc. had initially entered into a merger association with partners of Insight Venture Partners. The agreement has now been modified by Quest to include Vector Capital as an additional member of the buyout group. As per the modified agreement, stockholders who are not associated with the buyout group will now stand to receive $25.75 per share in cash, up from the existing $23 per share.

The Insight Merger Agreement was announced on March 8, 2012. The closing price of Quest stock on March 7, 2012, along with a 33-percent premium, will now be offered as the purchase price for the stockholders. As per the latest agreement, the termination fee, which might have to be paid by Quest under special circumstances, will be increased to $25 million, from the existing $6.3 million by Quest as a result of the augmented purchase price. Quest has also raised the highest amount of expense reimbursement, which needs to be paid by Quest under special circumstances, from the current $7 million to $12 million.

The modified agreement has been unanimously approved by the special committee of independent directors apart from Vinny Smith, who refrained from voting. Autonomous financial advisors and outside legal counsel were referred by the special committee before approving the amended agreement.

Insight has committed equity worth $187 million to finance the merger as per the modified agreement terms. Vector has pledged equity worth $187 million for the same. The other funds will be recovered by using a rollover of a minimum of 84 percent of Vinny Smith's current shares and nearly $1.2 billion of debt financing pledges from J.P. Morgan Chase Bank N.A., RBC Capital Markets and Barclays Capital.

The financial advisor to the special committee will be Morgan Stanley & Co. for this transaction. The legal counsel for the Special Committee is being carried out by Potter Anderson & Corroon LLP. While Insight’s legal counsel for this transaction is Willkie Farr & Gallagher LLP, Vector’s legal counsel is Davis Polk & Wardwell LLP. The legal counsel for Quest in this transaction is Latham & Watkins LLP.

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