THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

SafeNet, Inc. (SFNT)

7/3/2006 Proxy Information

Effective May 1, 2003, the Company hired Shelley A. Harrison, a member of its Board of Directors, as a part-time employee to provide services relating to the CompanyŐs Embedded Security Division, corporate development and business combination strategy. In consideration for such services, Mr. Harrison was compensated at a rate of $189,000 per year and was granted options for 50,000 shares of Common Stock at an exercise price equal to the price of the Common Stock on May 1, 2003, which options were fully vested on such date. Mr. Harrison subsequently served as joint holder of the Office of President and Chief Operating Officer from December 2003 to June 2004. As further compensation for Mr. HarrisonŐs employment in those roles, Mr. Harrison was granted options for 50,000 shares of Common Stock at an exercise price equal to the price of the Common Stock on May 19, 2004, and for 25,000 shares of Common Stock at an exercise price equal to the price of the Common Stock on September 29, 2005, which options were fully vested on such dates, respectively. Effective January 1, 2006, the Company and Mr. Harrison entered into a new employment agreement, which describes Mr. HarrisonŐs role and compensation as Chief Corporate Development Officer. In this role, Mr. Harrison manages the CompanyŐs mergers and acquisitions activities. Mr. Harrison is compensated at a rate of $250,000 per year, plus incentive compensation of up to 0.3% of prior twelve-month revenues of acquired companies, which may vary according to attainment of integration objectives. This incentive compensation is capped at $500,000 per year.

Legal Proceedings

On May 18, 2006, the Company announced that it has received a subpoena from the office of the United States Attorney for the Southern District of New York relating to the CompanyŐs granting of stock options. The Company also announced that it has received an informal inquiry from the Securities and Exchange Commission requesting information relating to stock option grants to directors and officers of the Company, as well as information relating to certain accounting policies and practices. The Company is actively engaged in responding to these requests and is cooperating with both offices. On and after May 31, 2006, individuals claiming to be shareholders of the Company filed multiple derivative complaints in the Circuit Court for Harford County, Maryland, against current and former officers and directors of the Company, as well as the Company as a nominal defendant. The complaints allege state law claims for breach of fiduciary duty and unjust enrichment arising from alleged backdating of stock option grants. On and after June 6, 2006, individuals claiming to be shareholders of the Company filed multiple derivative complaints in the United States District Court for the District of Maryland, purportedly on behalf of the Company, against the current directors and certain current and former officers of the Company, as well as the Company as a nominal defendant. The complaints allege, among other things, claims for breach of fiduciary duties and unjust enrichment and claims under Section 304 of the Sarbanes-Oxley Act of 2002 arising from alleged backdating of stock option grants and alleged dissemination of misleading and inaccurate information through public statements, including filings with the Securities and Exchange Commission. The Board of Directors has directed a special committee of the board to investigate these allegations. This special committee has retained independent counsel and has the authority to retain such other advisers as it deems appropriate to assist in the investigation. In addition, the Company has also received a letter from a law firm, allegedly on behalf of an unidentified shareholder, demanding that the Board of Directors recover short swing profits alleged to be made by officers and directors in alleged violations of Section 16(b) of the Securities Exchange Act of 1934, as amended. The special committee also will investigate these allegations.