**Exhibit 10.1**

**QUEST SOFTWARE, INC.**

**1999 STOCK INCENTIVE PLAN**

**(as amended on November 1, 2007)**

**ARTICLE ONE**

**GENERAL PROVISIONS**

**I. PURPOSE OF THE PLAN**

This 1999 Stock Incentive Plan is intended to promote the interests of QuestSoftware, Inc., a California corporation, by providing eligible persons with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the service ofthe Corporation. 

Capitalized terms shall have the meanings assigned to such terms in the attached Appendix. 

**II. STRUCTURE OF THE PLAN**

**A.**The Plan shallbe divided into four separate equity programs: 

**(i)**the Discretionary Option Grant Program under which eligible persons may, at thediscretion of the Plan Administrator, be granted options to purchase shares of Common Stock, 

**(ii)**the Stock Issuance Program underwhich eligible persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock directly, either through the immediate purchase of such shares or as a bonus for services rendered the Corporation (or any Parent orSubsidiary), 

**(iii)**the Automatic Option Grant Program under which eligible non-employee Board members shall automatically receiveoptions at periodic intervals to purchase shares of Common Stock; and 

**(iv)**the Director Fee Option Grant Program under whichnon-employee Board members may elect to have all or any portion of their annual retainer fee otherwise payable in cash applied to a special option grant. 

**B.**The provisions of Articles One and Six shall apply to all equity programs under the Plan and shall govern the interests of all persons under the Plan. 

**III. ADMINISTRATION OF THE PLAN**

**A.**Thefollowing provisions shall govern the administration of the Plan: 

**(i)**The Board shall have the authority to administer theDiscretionary Option Grant and Stock Issuance Programs with respect to Section 16 Insiders but may delegate such authority in whole or in part to the Primary Committee. 

 

**(ii)**Administration of the Discretionary Option Grant and Stock Issuance Programs with respect toall other persons eligible to participate in those programs may, at the Board’s discretion, be vested in the Primary Committee or a Secondary Committee, or the Board may retain the power to administer those programs with respect to all suchpersons. 

**(iii)**Administration of the Automatic Option Grant Program shall be self-executing in accordance with the terms of thatprogram. 

**B.**Each Plan Administrator shall, within the scope of its administrative jurisdiction under the Plan, have full power andauthority subject to the provisions of the Plan: 

**(i)**to establish such rules as it may deem appropriate for proper administrationof the Plan, to make all factual determinations, to construe and interpret the provisions of the Plan and the awards thereunder and to resolve any and all ambiguities thereunder; 

**(ii)**to determine, with respect to awards made under the Discretionary Option Grant and Stock Issuance Programs, which eligible persons are toreceive such awards, the time or times when such awards are to be made, the number of shares to be covered by each such award, the vesting schedule (if any) applicable to the award, the status of a granted option as either an Incentive Option or aNon-Statutory Option and the maximum term for which the option is to remain outstanding; 

**(iii)**to amend, modify or cancel anyoutstanding award with the consent of the holder or accelerate the vesting of such award; and 

**(iv)**to take such otherdiscretionary actions as permitted pursuant to the terms of the applicable program. 

Decisions of each Plan Administrator within the scope of itsadministrative functions under the Plan shall be final and binding on all parties. 

**C.**Members of the Primary Committee or anySecondary Committee shall serve for such period of time as the Board may determine and may be removed by the Board at any time. The Board may also at any time terminate the functions of any Secondary Committee and reassume all powers and authoritypreviously delegated to such committee. 

**D.**Service on the Primary Committee or the Secondary Committee shall constitute service asa Board member, and members of each such committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on such committee. No member of the Primary Committee or the Secondary Committee shall beliable for any act or omission made in good faith with respect to the Plan or any options or stock issuances under the Plan. 

 

**IV. ELIGIBILITY**

**A.**The persons eligible to participate in the Discretionary Option Grant and Stock Issuance Programs are as follows: 

**(i)**Employees, 

**(ii)**non-employee members of the Board or the board of directors of anyParent or Subsidiary, and 

**(iii)**consultants and other independent advisors who provide services to the Corporation (or any Parentor Subsidiary). 

**B.**Only non-employee Board members shall be eligible to participate in the Automatic Option Grant and Director FeeOption Grant Programs. 

**V. STOCK SUBJECT TO THE PLAN**

**A.**The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Corporation on the open market. The maximum number of shares ofCommon Stock reserved for issuance over the term of the Plan shall not exceed 28,500,000 shares. 

**B.**No one person participating inthe Plan may receive options, separately exercisable stock appreciation rights and direct stock issuances for more than One Million (1,000,000) shares of Common Stock in the aggregate per calendar year, beginning with the 1999 calendar year.

**C.**Shares of Common Stock subject to outstanding options (including options incorporated into this Plan from the Predecessor Plan)shall be available for subsequent issuance under the Plan to the extent those options expire, terminate or are cancelled for any reason prior to exercise in full. Unvested shares issued under the Plan and subsequently repurchased by the Corporation,at the original exercise or issue price paid per share, pursuant to the Corporation’s repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly beavailable for reissuance through one or more subsequent options or direct stock issuances under the Plan. However, should the exercise price of an option under the Plan be paid with shares of Common Stock or should shares of Common Stock otherwiseissuable under the Plan be withheld by the Corporation in satisfaction of the withholding taxes incurred in connection with the exercise of an option or the vesting of a stock issuance under the Plan, then the number of shares of Common Stockavailable for issuance under the Plan shall be reduced by the gross number of shares for which the option is exercised or which vest under the stock issuance, and not by the net number of shares of Common Stock issued to the holder of such option orstock issuance. Shares of Common Stock underlying one or more stock appreciation rights exercised under the Plan shall not be available for subsequent issuance. 

**D.**If any change is made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting 

the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to (i) themaximum number and/or class of securities issuable under the Plan, (ii) the number and/or class of securities by which the share reserve is to increase each calendar year pursuant to the automatic share increase provisions of the Plan,(iii) the number and/or class of securities for which any one person may be granted options, separately exercisable stock appreciation rights and direct stock issuances under the Plan per calendar year, (iv) the number and/or class ofsecurities for which grants are subsequently to be made under the Automatic Option Grant Program to new and continuing non-employee Board members, (v) the number and/or class of securities and the exercise price per share in effect under eachoutstanding option under the Plan and (vi) the number and/or class of securities and price per share in effect under each outstanding option incorporated into this Plan from the Predecessor Plan. Such adjustments to the outstanding options areto be effected in a manner which shall preclude the enlargement or dilution of rights and benefits under such options. The adjustments determined by the Plan Administrator shall be final, binding and conclusive. 

**ARTICLE TWO**

**DISCRETIONARY OPTIONGRANT PROGRAM**

**I. OPTION TERMS**

Each option shall be evidenced by one or more documents in the form approved by the Plan Administrator; *provided*, *however*, that each such document shall comply with the terms specified below. Each document evidencing anIncentive Option shall, in addition, be subject to the provisions of the Plan applicable to such options. 

**A.*****ExercisePrice.***

**1.**The exercise price per share shall be fixed by the Plan Administrator at the time of the option grant, providedthat the exercise price per share shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date. 

**2.**The exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section II of Article Six and the documents evidencing the option, be payable in cash orcheck made payable to the Corporation. Should the Common Stock be registered under Section 12 of the 1934 Act at the time the option is exercised, then the exercise price may also be paid as follows: 

**(i)**shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation’s earnings for financial reportingpurposes and valued at Fair Market Value on the Exercise Date, or 

**(ii)**to the extent the option is exercised for vested shares,through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable instructions to (a) a Corporation-approved brokerage firm to effect the immediate sale of the purchased shares and remit tothe Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes 

required to be withheld by the Corporation by reason of such exercise and (b) the Corporation to deliver the certificates for the purchased sharesdirectly to such brokerage firm in order to complete the sale. 

Except to the extent such sale and remittance procedure is utilized,payment of the exercise price for the purchased shares must be made on the Exercise Date. 

**B.*****Exercise and Term ofOptions.*****Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined by the Plan Administrator and set forth in the documents evidencing the option. However, nooption shall have a term in excess of ten (10) years measured from the option grant date. 

**C.*****Cessation ofService.***

**1.**The following provisions shall govern the exercise of any options outstanding at the time of the Optionee’scessation of Service or death: 

**(i)**Any option outstanding at the time of the Optionee’s cessation of Service for any reasonshall remain exercisable for such period of time thereafter as shall be determined by the Plan Administrator and set forth in the documents evidencing the option, but no such option shall be exercisable after the expiration of the option term.

**(ii)**Any option exercisable in whole or in part by the Optionee at the time of death may be subsequently exercised by his or herBeneficiary. 

**(iii)**During the applicable post-Service exercise period, the option may not be exercised in the aggregate for morethan the number of vested shares for which the option is exercisable on the date of the Optionee’s cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the optionshall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee’s cessation of Service, terminate and cease to be outstanding to the extentthe option is not otherwise at that time exercisable for vested shares. 

**(iv)**Should the Optionee’s Service be terminated forMisconduct or should the Optionee engage in Misconduct while his or her options are outstanding, then all such options shall terminate immediately and cease to be outstanding. 

**2.**The Plan Administrator shall have complete discretion, exercisable either at the time an option is granted or at any time while the optionremains outstanding: 

**(i)**to extend the period of time for which the option is to remain exercisable following the Optionee’scessation of Service to such period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term, and/or 

**(ii)**to permit the option to be exercised, during the applicable post-Service exercise period, for one or more additional installments in which the Optionee would have vested had the Optionee continued inService. 

 

**D.*****Stockholder Rights.***The holder of an option shall have no stockholder rights withrespect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become a holder of record of the purchased shares. 

**E.*****Repurchase Rights.***The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares ofCommon Stock. Should the Optionee cease Service while holding such unvested shares, the Corporation shall have the right to repurchase, at the exercise price paid per share, any or all of those unvested shares. The terms upon which such repurchaseright shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right.

**F.*****Vesting Period of Certain Grants.*** Options granted under the Plan to the Chief Executive Officer of the Company orChairman of the Board of Directors shall be subject to a minimum vesting period and shall vest as follows: not more than twenty percent (20%) of any shares of Common Stock subject to an option shall vest after the first year following the dateof grant and not more than ten percent (10%) after every six-month period thereafter, provided, however, the Compensation Committee shall have the authority, in its sole discretion, to reduce the minimum vesting period provided in this ArticleTwo, Section I(F). Notwithstanding the foregoing, at such time as the Chairman is Independent, the minimum vesting period required by this Article Two, Section I(F) shall not apply to options granted to such Chairman. 

**G.*****Limited Transferability of Options.*****During the lifetime of the Optionee, Incentive Options shall be exercisable only bythe Optionee and shall not be assignable or transferable other than to a Beneficiary following the Optionee’s death. 

**II. INCENTIVE OPTIONS**

The terms specified below shall be applicable to all Incentive Options. Except as modified by the provisions of this Section II, all theprovisions of Articles One, Two and Six shall be applicable to Incentive Options. Options which are specifically designated as Non-Statutory Options when issued under the Plan shall *not* be subject to the terms of this Section II. 

**A.*****Eligibility*****.**Incentive Options may only be granted to Employees. 

**B.*****Exercise Price.*****The exercise price per share shall not be less than one hundred percent (100%) of the Fair MarketValue per share of Common Stock on the option grant date. 

**C.*****Dollar Limitation.*****The aggregate Fair MarketValue of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or more options granted to any Employee under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for thefirst time become exercisable as Incentive Options during any one calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more such options which become exercisable for thefirst time in the same calendar year, the foregoing limitation on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted. 

 

**D.*****10% Stockholder.*****If any Employee to whom an Incentive Option is granted isa 10% Stockholder, then the exercise price per share shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the option grant date, and the option term shall not exceed five (5) yearsmeasured from the option grant date. 

**III. CHANGE IN CONTROL/HOSTILE TAKE-OVER**

**A.**Each option outstanding at the time of a Change in Control but not otherwise fully-vested shall automatically accelerate so that each suchoption shall, immediately prior to the effective date of the Change in Control, become exercisable for all of the shares of Common Stock at the time subject to that option and may be exercised for any or all of those shares as fully-vested shares ofCommon Stock. However, an outstanding option shall not so accelerate if and to the extent: (i) such option is, in connection with the Change in Control, assumed or otherwise continued in full force and effect by the successor corporation (orparent thereof) pursuant to the terms of the Change in Control, (ii) such option is replaced with a cash incentive program of the successor corporation which preserves the spread existing at the time of the Change in Control on the shares ofCommon Stock for which the option is not otherwise at that time exercisable and provides for subsequent payout in accordance with the same vesting schedule applicable to those option shares or (iii) the acceleration of such option is subject toother limitations imposed by the Plan Administrator at the time of the option grant. Each option outstanding at the time of the Change in Control shall terminate as provided in Section III.C. of this Article Two. 

**B.**All outstanding repurchase rights shall also terminate automatically, and the shares of Common Stock subject to those terminated rights shallimmediately vest in full, in the event of any Change in Control, except to the extent: (i) those repurchase rights are assigned to the successor corporation (or parent thereof) or otherwise continue in full force and effect pursuant to theterms of the Change in Control or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued. 

**C.**Immediately following the consummation of the Change in Control, all outstanding options shall terminate and cease to be outstanding, except tothe extent assumed by the successor corporation (or parent thereof) or otherwise expressly continued in full force and effect pursuant to the terms of the Change in Control. 

**D.**Each option which is assumed in connection with a Change in Control shall be appropriately adjusted, immediately after such Change in Control,to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Change in Control had the option been exercised immediately prior to such Change in Control. Appropriate adjustments to reflectsuch Change in Control shall also be made to (i) the exercise price payable per share under each outstanding option, *provided* the aggregate exercise price payable for such securities shall remain the same, (ii) the maximum numberand/or class of securities available for issuance over the remaining term of the Plan and (iii) the maximum number and/or class of securities for which any one person may be granted options, separately exercisable stock appreciation rights anddirect stock issuances under the Plan per calendar year. 

**E.**The Plan Administrator may at any time provide that one or more optionswill 

automatically accelerate in connection with a Change in Control, whether or not those options are assumed or otherwise continued in full force and effectpursuant to the terms of the Change in Control. Any such option shall accordingly become exercisable, immediately prior to the effective date of such Change in Control, for all of the shares of Common Stock at the time subject to that option and maybe exercised for any or all of those shares as fully-vested shares of Common Stock. In addition, the Plan Administrator may at any time provide that one or more of the Corporation’s repurchase rights shall not be assignable in connection withsuch Change in Control and shall terminate upon the consummation of such Change in Control. 

**F.**The Plan Administrator may at anytime provide that one or more options will automatically accelerate upon an Involuntary Termination of the Optionee’s Service within a designated period (not to exceed eighteen (18) months) following the effective date of any Change inControl in which those options do not otherwise accelerate. Any options so accelerated shall remain exercisable for fully-vested shares until the *earlier* of (i) the expiration of the option term or (ii) the expiration of the one(1) year period measured from the effective date of the Involuntary Termination. In addition, the Plan Administrator may at any time provide that one or more of the Corporation’s repurchase rights shall immediately terminate upon suchInvoluntary Termination. 

**G.**The Plan Administrator may at any time provide that one or more options will automatically acceleratein connection with a Hostile Take-Over. Any such option shall become exercisable, immediately prior to the effective date of such Hostile Take-Over, for all of the shares of Common Stock at the time subject to that option and may be exercised forany or all of those shares as fully-vested shares of Common Stock. In addition, the Plan Administrator may at any time provide that one or more of the Corporation’s repurchase rights shall terminate automatically upon the consummation of suchHostile Take-Over. Alternatively, the Plan Administrator may condition such automatic acceleration and termination upon an Involuntary Termination of the Optionee’s Service within a designated period (not to exceed eighteen (18) months)following the effective date of such Hostile Take-Over. Each option so accelerated shall remain exercisable for fully-vested shares until the expiration or sooner termination of the option term. 

**H.**The portion of any Incentive Option accelerated in connection with a Change in Control or Hostile Take Over shall remain exercisable as anIncentive Option only to the extent the applicable One Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Non-StatutoryOption under the Federal tax laws. 

**IV. STOCK APPRECIATION RIGHTS**

The Plan Administrator may, subject to such conditions as it may determine, grant to selected Optionees stock appreciation rights which will allow the holders of those rights to elect between the exercise of theunderlying option for shares of Common Stock and the surrender of that option in exchange for a distribution from the Corporation in an amount equal to the excess of (a) the Option Surrender Value of the number of shares for which the option issurrendered over (b) the aggregate exercise price payable for such shares. The distribution may be made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash, or partly in shares and partly in cash, as thePlan Administrator shall in its sole discretion deem appropriate. 

 

**ARTICLE THREE**

**STOCK ISSUANCE PROGRAM**

**V. STOCK ISSUANCE TERMS**

Shares of Common Stock may be issued under the Stock Issuance Program through direct and immediate issuances without any intervening options. Shares ofCommon Stock may also be issued under the Stock Issuance Program pursuant to share right awards which entitle the recipients to receive those shares upon the attainment of designated performance goals or Service requirements. Each such award shallbe evidenced by one or more documents which comply with the terms specified below. 

**A.*****Purchase Price.***

**1.**The purchase price per share of Common Stock subject to direct issuance shall be fixed by the Plan Administrator. 

**2.**Subject to the provisions of Section II of Article Six, shares of Common Stock may be issued under the Stock Issuance Program for any of thefollowing items of consideration which the Plan Administrator may deem appropriate in each individual instance: 

**(i)**cash or checkmade payable to the Corporation, or 

**(ii)**past services rendered to the Corporation (or any Parent or Subsidiary). 

**B.*****Vesting/Issuance Provisions.***

**1.**The Plan Administrator may issue shares of Common Stock which are fully and immediately vested upon issuance or which are to vest in one or more installments over the Participant’s period of Service or upon attainment ofspecified performance objectives. Alternatively, the Plan Administrator may issue share right awards which shall entitle the recipient to receive a specified number of vested shares of Common Stock upon the attainment of one or more performancegoals or Service requirements established by the Plan Administrator. 

**2.**Any new, substituted or additional securities or otherproperty (including money paid other than as a regular cash dividend) which the Participant may have the right to receive with respect to his or her unvested shares of Common Stock by reason of any stock dividend, stock split, recapitalization,combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration shall be issued subject to (i) the same vesting requirements applicable to theParticipant’s unvested shares of Common Stock and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate. 

**3.**The Participant shall have full stockholder rights with respect to the issued 

shares of Common Stock, whether or not the Participant’s interest in those shares is vested. Accordingly, the Participant shall have the right to votesuch shares and to receive any regular cash dividends paid on such shares. 

**4.**Should the Participant cease to remain in Servicewhile holding one or more unvested shares of Common Stock, or should the performance objectives not be attained with respect to one or more such unvested shares of Common Stock, then those shares shall be immediately surrendered to the Corporationfor cancellation, and the Participant shall have no further stockholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or cash equivalent (includingthe Participant’s purchase-money indebtedness), the Corporation shall repay to the Participant the cash consideration paid for the surrendered shares and shall cancel the unpaid principal balance of any outstanding purchase-money note of theParticipant attributable to the surrendered shares. 

**5.**The Plan Administrator may waive the surrender and cancellation of one ormore unvested shares of Common Stock (or other assets attributable thereto) which would otherwise occur upon the cessation of the Participant’s Service or the non-attainment of the performance objectives applicable to those shares. Such waivershall result in the immediate vesting of the Participant’s interest in the shares of Common Stock as to which the waiver applies. Such waiver may be effected at any time, whether before or after the Participant’s cessation of Service orthe attainment or non-attainment of the applicable performance objectives. 

**6.**Outstanding share right awards shall automaticallyterminate, and no shares of Common Stock shall actually be issued in satisfaction of those awards, if the performance goals or Service requirements established for such awards are not attained. The Plan Administrator, however, shall have theauthority to issue shares of Common Stock in satisfaction of one or more outstanding share right awards as to which the designated performance goals or Service requirements are not attained. 

**VI. CHANGE IN CONTROL/HOSTILE TAKE-OVER**

**A.**All of the Corporation’s outstanding repurchase rights shall terminate automatically, and all the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Change in Control, except to theextent (i) those repurchase rights are assigned to the successor corporation (or parent thereof) or otherwise continue in full force and effect pursuant to the terms of the Change in Control or (ii) such accelerated vesting is precluded byother limitations imposed by the Plan Administrator at the time the repurchase right is issued. 

**B.**The Plan Administrator may atany time provide for the automatic termination of one or more of those outstanding repurchase rights and the immediate vesting of the shares of Common Stock subject to those terminated rights upon (i) a Change in Control or Hostile Take-Over or(ii) an Involuntary Termination of the Participant’s Service within a designated period (not to exceed eighteen (18) months) following the effective date of any Change in Control or Hostile Take-Over in which those repurchase rightsare assigned to the successor corporation (or parent thereof) or otherwise continue in full force and effect. 

 

**VII. SHARE ESCROW/LEGENDS**

Unvested shares may, in the Plan Administrator’s discretion, be held in escrow by the Corporation until the Participant’s interest in such shares vests or may be issued directly to the Participant withrestrictive legends on the certificates evidencing those unvested shares. 

**ARTICLE FOUR**

**AUTOMATIC OPTION GRANT PROGRAM**

**VIII. OPTIONTERMS**

**A.*****Grant Dates.*****Options shall be made on the dates specified below: 

**1.**Each individual who is first elected or appointed as a non-employee Board member at any time after the Underwriting Date shall automatically begranted, on the date of such initial election or appointment, a Non-Statutory Option to purchase Fifty Thousand (50,000) shares of Common Stock, provided that individual has not previously been in the employ of the Corporation (or any Parent orSubsidiary). 

**2.**On the date of each Annual Stockholders Meeting beginning with the 2001 Annual Stockholder Meeting, each individualwho has served as a non-employee Board member since the date of the Annual Stockholders Meeting in the immediately preceding year shall automatically be granted a Non-Statutory Option to purchase Fifteen Thousand (15,000) shares of CommonStock. 

**B.*****Exercise Price.***

**1.**The exercise price per share shall be equal to one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date. 

**2.**The exercise price shall be payable in one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except tothe extent the sale and remittance procedure specified thereunder is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. 

**C.*****Option Term.***Each option shall have a term of ten (10) years measured from the option grant date. 

**D.*****Exercise and Vesting of Options.*****Each option shall be immediately exercisable for any or all of the option shares. However, any shares purchased under the initial 50,000 share optionshall be subject to repurchase by the Corporation, at the exercise price paid per share, upon the Optionee’s cessation of Board service prior to vesting in those shares. Each initial 50,000-share option shall vest, and the Corporation’srepurchase right shall lapse, in a series of four (4) successive equal annual installments over the Optionee’s period of continued service as a Board member, with the first such installment to vest upon the Optionee’s completion ofone (1) year of Board service measured from the option grant date. Each annual 15,000-share option shall be fully vested at the time of grant. 

 

**E.*****Cessation of Board Service.*****The following provisions shall govern theexercise of any options outstanding at the time of the Optionee’s cessation of Board service: 

**(i)**Any option outstanding atthe time of the Optionee’s cessation of Board service for any reason shall remain exercisable for a twelve (12)-month period following the date of such cessation of Board service, but in no event shall such option be exercisable after theexpiration of the option term. 

**(ii)**Any option exercisable in whole or in part by the Optionee at the time of death may besubsequently exercised by his or her Beneficiary. 

**(iii)**Following the Optionee’s cessation of Board service, the option maynot be exercised in the aggregate for more than the number of shares for which the option was exercisable on the date of such cessation of Board service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration ofthe option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee’s cessation of Board service, terminate andcease to be outstanding for any and all shares for which the option is not otherwise at that time exercisable. 

**(iv)**However,should the Optionee cease to serve as a Board member by reason of death or Permanent Disability, then all shares at the time subject to the option shall immediately vest so that such option may, during the twelve (12)-month exercise period followingsuch cessation of Board service, be exercised for all or any portion of those shares as fully-vested shares of Common Stock. 

**IX. CHANGE INCONTROL/HOSTILE TAKE-OVER**

**A.**In the event of any Change in Control or Hostile Take-Over, the shares of Common Stock at the timesubject to each outstanding option but not otherwise vested shall automatically vest in full so that each such option may, immediately prior to the effective date of such Change in Control or Hostile Take-Over, became fully exercisable for all ofthe shares of Common Stock at the time subject to such option and maybe exercised for all or any of those shares as fully-vested shares of Common Stock. Each such option accelerated in connection with a Change in Control shall terminate upon theChange in Control, except to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change in Control. Each such option accelerated in connection with aHostile Take-Over shall remain exercisable until the expiration or sooner termination of the option term. 

**B.**All outstandingrepurchase rights shall automatically terminate and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Change in Control or Hostile Take-Over. 

**C.**Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each ofhis or her outstanding options. 

The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Option Surrender Valueof the shares of Common Stock at the time subject to each surrendered option (whether or not the option is otherwise at the time exercisable for those shares) over (ii) the aggregate exercise price payable for such shares. Such cashdistribution shall be paid within five (5) days following the surrender of the option to the Corporation. 

**D.**Each option whichis assumed in connection with a Change in Control shall be appropriately adjusted to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Change in Control had the option been exercisedimmediately prior to such Change in Control. Appropriate adjustments shall also be made to the exercise price payable per share under each outstanding option, *provided* the aggregate exercise price payable for such securities shall remain thesame. 

**X. REMAINING TERMS**

Theremaining terms of each option granted under the Automatic Option Grant Program shall be the same as the terms in effect for options made under the Discretionary Option Grant Program. 

**ARTICLE FIVE**

**DIRECTOR FEE OPTION GRANT PROGRAM**

**XI. OPTION GRANTS**

The Board implemented the DirectorFee Option Grant Program as of January 1, 2004. Each non-employee Board member may elect to apply all or any portion of the annual retainer fee otherwise payable in cash for his or her service on the Board or any Board committee to theacquisition of a special option grant under this Director Fee Option Grant Program. Such election must be filed with the Corporation’s Secretary prior to the first day of the 12-month period (July 1 to June 30 of the following year) forwhich the election is to be in effect. Each non-employee Board member who files such a timely election shall automatically be granted an option under this Director Fee Option Grant Program on the first trading day in July in the 12-month period forwhich that fee would otherwise be payable. For purposes of this Program, an “annual retainer fee” means the amount to which a non-employee director will be entitled to receive for serving as a director or a member of a standing committeeof the Board in a relevant 12-month period, including service on any Board committee, but shall not include reimbursement of expenses, fees determined on a per-meeting attended basis, or fees with respect to any other services provided or to beprovided to the Corporation. 

**XII. OPTION TERMS**

Each option shall be a Non-Statutory Option governed by the terms and conditions specified below. 

**A.*****ExercisePrice.***

**1.**The exercise price per share shall be the Fair Market Value per share of Common Stock on the option grant date.

**2.**The exercise price shall become immediately due upon exercise of the option and shall bepayable in one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except to the extent the sale and remittance procedure specified thereunder is utilized, payment of the exercise price for the purchased sharesmust be made on the Exercise Date. 

**B.*****Number of Option Shares*****.** The number of shares of Common Stock subject tothe option shall be an amount necessary to make such option equal in value, using a modified Black-Scholes option valuation model, to that the portion of the annual retainer fee that the non-employee director elected to receive in the form of anoption. The value of the option will be calculated by assuming that the value of an option to purchase one share of Common Stock equals the product of (i) a fraction determined by dividing one (1) by the Multiplier (as defined below) and(ii) the fair Market Value of a share of Common Stock on the option grant date. 

The number of shares represented by an option grantedpursuant to the Director Fee Option Grant Program shall be determined by (a) dividing the amount of the annual retainer that the non-employee director elects to receive in the form of options by the Fair Market Value of a share of Common Stockon the date of grant, and (b) multiplying the quotient so obtained by a multiplier determined using a modified Black-Scholes option valuation method (the “Multiplier”). The Board or the Plan Administrator shall determine theMultiplier prior to the beginning of a relevant 12-month period by considering the following factors: (i) the Fair Market Value of the Common Stock on the date the Multiplier is determined; (ii) the average length of time the stock optionsof the Corporation are held by optionees prior to exercise; (iii) the risk-free rate of return based on the term determined in (ii) above and U.S. government securities rates; (iv) the annual dividend yield for the Common stock, ifany; and (v) the volatility of the Common Stock over the previous two-year period. The number of shares to be subject to the option shall be equal to the largest number of whole shares determined as follows: 

 
 Amount of Retainer     
 
  X Multiplier =     Number of Shares   
Fair Market Value on

GrantDate
    
**C.*****Exercise and Term of Options.*****The option shall become exercisablein a series of twelve (12) successive equal monthly installments upon the Optionee’s completion of each month of Board service during the calendar year in which the option is granted. Each option shall have a maximum term of ten(10) years measured from the option grant date. 

**D.*****Cessation of Board Service.***Should the Optionee cease Boardservice for any reason (other than death or Permanent Disability) while holding one or more options, then each such option shall remain exercisable, for any or all of the shares for which the option is exercisable at the time of such cessation ofBoard service, until the *earlier* of (i) the expiration of 

the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of such cessation of Board service. However,each option held by the Optionee at the time of such cessation of Board service shall immediately terminate and cease to remain outstanding with respect to any and all shares of Common Stock for which the option is not otherwise at that timeexercisable. 

**E.*****Death or Permanent Disability.*****Should the Optionee’s service as a Board member cease byreason of death or Permanent Disability, then each option held by such Optionee shall immediately become exercisable for all the shares of Common Stock at the time subject to that option, and the option may be exercised for any or all of thoseshares as fully-vested shares until the *earlier* of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of such cessation of Board service. 

Should the Optionee die after cessation of Board service but while holding one or more options, then each such option may be exercised, for any or all ofthe shares for which the option is exercisable at the time of the Optionee’s cessation of Board service (less any shares subsequently purchased by Optionee prior to death), by the Optionee’s Beneficiary. Such right of exercise shall lapse,and the option shall terminate, upon the *earlier* of (i) the expiration of the ten (10)-year option term or (ii) the three (3)-year period measured from the date of the Optionee’s cessation of Board service. 

**XIII. CHANGE IN CONTROL/HOSTILE TAKE-OVER**

**A.**In the event of any Change in Control or Hostile Take-Over while the Optionee remains in Board service, each outstanding option held by such Optionee shall automatically accelerate so that each such option shall, immediately prior to theeffective date of the Change in Control or Hostile Take-Over, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vestedshares of Common Stock. Each such option accelerated in connection with a Change in Control shall terminate upon the Change in Control, except to the extent assumed by the successor corporation (or parent thereof) or otherwise expressly continued infull force and effect pursuant to the terms of the Change in Control. Each such option accelerated in connection with a Hostile Take-Over shall remain exercisable until the expiration or sooner termination of the option term. 

**B.**Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each ofhis or her outstanding options. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Option Surrender Value of the shares of Common Stock at the time subject to eachsurrendered option (whether or not the Optionee is otherwise at the time vested in those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following thesurrender of the option to the Corporation. 

**XIV. REMAINING TERMS**

The remaining terms of each option granted under this Director Fee Option Grant Program shall be the same as the terms in effect for options made under the Discretionary Option Grant Program. 

**ARTICLE SIX**

**MISCELLANEOUS**

**XV. NO IMPAIRMENT OF AUTHORITY**

Outstanding awards shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any partof its business or assets. 

**XVI. FINANCING**

The Plan Administrator may permit any Optionee or Participant to pay the option exercise price under the Discretionary Option Grant Program or the purchase price of shares issued under the Stock Issuance Program by delivering afull-recourse, interest bearing promissory note payable in one or more installments. The terms of any such promissory note (including the interest rate and the terms of repayment) shall be established by the Plan Administrator in its solediscretion. In no event may the maximum credit available to the Optionee or Participant exceed the sum of (i) the aggregate option exercise price or purchase price payable for the purchased shares plus (ii) any Federal, state and localincome and employment tax liability incurred by the Optionee or the Participant in connection with the option exercise or share purchase. 

**XVII. TAXWITHHOLDING**

**A.**The Corporation’s obligation to deliver shares of Common Stock upon the exercise of options or the issuanceor vesting of such shares under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements. 

**B.**The Plan Administrator may, in its discretion, provide any or all holders of Non-Statutory Options or unvested shares of Common Stock under thePlan with the right to use shares of Common Stock in satisfaction of all or part of the Withholding Taxes incurred by such holders in connection with the exercise of their options or the vesting of their shares. Such right may be provided to anysuch holder in either or both of the following formats: 

*Stock Withholding:* The election to have the Corporationwithhold, from the shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option or the vesting of such shares, a portion of those shares with an aggregate Fair Market Value equal to the percentage of the Withholding Taxes(not to exceed one hundred percent (100%)) designated by the holder. 

*Stock Delivery:* The election to deliver tothe Corporation, at the time the Non-Statutory Option is exercised or the shares vest, one or more shares of Common Stock previously acquired by such holder (other than in connection with 

the option exercise or share vesting triggering the Withholding Taxes) with an aggregate Fair Market Value equal to the percentage of the Taxes (not toexceed one hundred percent (100%)) designated by the holder. 

**XVIII. FINANCIAL REPORTS**

The Corporation shall deliver a balance sheet and an income statement at least annually to each individual holding an outstanding option under the Plan,unless such individual is a key Employee whose duties in connection with the Corporation (or any Parent or Subsidiary) assure such individual access to equivalent information. 

**XIX. EFFECTIVE DATE AND TERM OF THE PLAN**

**A.**The Plan shall become effective immediately uponthe Plan Effective Date. However, the Director Fee Option Grant Program shall not be implemented until such time as the Primary Committee or the Board may deem appropriate. Options may be granted under the Discretionary Option Grant Program at anytime on or after the Plan Effective Date. However, no options granted under the Plan may be exercised, and no shares shall be issued under the Plan, until the Plan is approved by the Corporation’s stockholders. If such stockholder approval isnot obtained within twelve (12) months after the Plan Effective Date, then all options previously granted under this Plan shall terminate and cease to be outstanding, and no further options shall be granted and no shares shall be issued underthe Plan. 

**B.**The Plan shall serve as the successor to the Predecessor Plan, and no further options or direct stock issuances shallbe made under the Predecessor Plan after the Section 12 Registration Date. All options outstanding under the Predecessor Plan on the Section 12 Registration Date shall be incorporated into the Plan at that time and shall be treated asoutstanding options under the Plan. However, each outstanding option so incorporated shall continue to be governed solely by the terms of the documents evidencing such option, and no provision of the Plan shall be deemed to affect or otherwisemodify the rights or obligations of the holders of such incorporated options with respect to their acquisition of shares of Common Stock. 

**C.**One or more provisions of the Plan, including (without limitation) the option/vesting acceleration provisions of Article Two relating to Changes in Control, may, in the Plan Administrator’s discretion, be extended to one ormore options incorporated from the Predecessor Plan which do not otherwise contain such provisions. 

**D.**The Plan shall terminateupon the *earliest* of (i) June 8, 2009, (ii) the date on which all shares available for issuance under the Plan shall have been issued as fully-vested shares or (iii) the termination of all outstanding options in connectionwith a Change in Control. Upon such plan termination, all outstanding options and unvested stock issuances shall thereafter continue to have force and effect in accordance with the provisions of the documents evidencing such grants or issuances.

**XX. AMENDMENT OF THE PLAN**

**A.**The Board shall have complete and exclusive power and authority to amend or 

modify the Plan in any or all respects. However, no such amendment or modification shall adversely affect the rights and obligations with respect to stockoptions or unvested stock issuances at the time outstanding under the Plan unless the Optionee or the Participant consents to such amendment or modification. In addition, certain amendments may require stockholder approval pursuant to applicablelaws or regulations. 

**B.**Options to purchase shares of Common Stock may be granted under the Discretionary Option Grant Program andshares of Common Stock may be issued under the Stock Issuance Program that are in each instance in excess of the number of shares then available for issuance under the Plan, provided any excess shares actually issued under those programs shall beheld in escrow until there is obtained stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock available for issuance under the Plan. If such stockholder approval is not obtained within twelve(12) months after the date the first such excess issuances are made, then (i) any unexercised options granted on the basis of such excess shares shall terminate and cease to be outstanding and (ii) the Corporation shall promptlyrefund to the Optionees and the Participants the exercise or purchase price paid for any excess shares issued under the Plan and held in escrow, together with interest (at the applicable Short Term Federal Rate) for the period the shares were heldin escrow, and such shares shall thereupon be automatically cancelled and cease to be outstanding. 

**XXI. USE OF PROCEEDS**

Any cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes.

**XXII. REGULATORY APPROVALS**

**A.**The implementation of the Plan, the granting of any stock option under the Plan and the issuance of any shares of Common Stock (i) upon the exercise of any granted option or (ii) under the Stock Issuance Program shall be subject to theCorporation’s procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the stock options granted under it and the shares of Common Stock issued pursuant to it. 

**B.**No shares of Common Stock or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance withall applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all applicable listing requirements of anystock exchange (or the Nasdaq National Market, if applicable) on which Common Stock is then listed for trading. 

**XXIII. NO EMPLOYMENT/SERVICE RIGHTS**

Nothing in the Plan shall confer upon the Optionee or the Participant any right to continue in Service for any period of specificduration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such person) or of the Optionee or the Participant, which rights are hereby expressly reserved by each, toterminate such person’s Service at any time for any reason, with or without cause. 

**APPENDIX**

The following definitions shall be in effect under the Plan: 

**A.*****Automatic Option Grant Program***shall mean the automatic option grant program in effect under the Plan. 

**B.*****Beneficiary*** shall mean, in theevent the Plan Administrator implements a beneficiary designation procedure, the person designated by an Optionee or Participant, pursuant to such procedure, to succeed to such person’s rights under any outstanding awards held by him or her atthe time of death. In the absence of such designation or procedure, the Beneficiary shall be the personal representative of the estate of the Optionee or Participant or the person or persons to whom the award is transferred by will or the laws ofdescent and distribution. 

**C.*****Board*** shall mean the Corporation’s Board of Directors. 

**D.*****Change in Control*** shall mean a change in ownership or control of the Corporation effected through any of the followingtransactions: 

**(i)**a merger, consolidation or reorganization approved by the Corporation’s stockholders, *unless*securities representing more than fifty percent (50%) of the total combined voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially thesame proportion, by the persons who beneficially owned the Corporation’s outstanding voting securities immediately prior to such transaction, 

**(ii)**any stockholder-approved transfer or other disposition of all or substantially all of the Corporation’s assets, or 

**(iii)**the acquisition, directly or indirectly by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, theCorporation), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities pursuant to atender or exchange offer made directly to the Corporation’s stockholders which the Board recommends such stockholders accept. 

**E.*****Code***shall mean the Internal Revenue Code of 1986, as amended. 

**F.*****Common Stock*** shall mean theCorporation’s common stock. 

**G.*****Compensation Committee*** shall mean the Compensation Committee of the Corporation.

**H.*****Corporation*** shall mean Quest Software, Inc., a California corporation, and any corporate successor to all orsubstantially all of the assets or voting stock of Quest Software, Inc. which shall by appropriate action adopt the Plan. 

**I.*****Director Fee Option Grant Program***shall mean the director fee option grantprogram in effect under the Plan. 

**J.*****Discretionary Option Grant Program***shall mean the discretionary option grantprogram in effect under the Plan. 

**K.*****Employee*** shall mean an individual who is in the employ of the Corporation (orany Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. 

**L.*****Exercise Date*** shall mean the date on which the Corporation shall have received written notice of the option exercise. 

**M.*****Fair Market Value*** per share of Common Stock on any relevant date shall be determined in accordance with the following provisions:

**(i)**If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closingselling price per share of Common Stock on the date in question, as such price is reported on the Nasdaq National Market or any successor system. If there is no closing selling price for the Common Stock on the date in question, then the Fair MarketValue shall be the closing selling price on the last preceding date for which such quotation exists. 

**(ii)**If the Common Stock isat the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for theCommon Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling priceon the last preceding date for which such quotation exists. 

**(iii)**For purposes of any option grants made on the Underwriting Date,the Fair Market Value shall be deemed to be equal to the price per share at which the Common Stock is to be sold in the initial public offering pursuant to the Underwriting Agreement. 

**(iv)**For purposes of any options made prior to the Underwriting Date, the Fair Market Value shall be determined by the Plan Administrator, aftertaking into account such factors as it deems appropriate. 

**N.*****Hostile Take-Over*** shall mean: 

**(i)**the acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a person that directly orindirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combinedvoting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s stockholders which the Board does not recommend such stockholders to accept, or 

**(ii)**a change in the composition of the Board over a period of thirty-six (36) consecutivemonths or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of suchperiod or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election ornomination. 

**O.*****Incentive Option*** shall mean an option which satisfies the requirements of Code Section 422.

**P.*****Independent*** shall have such meaning as defined in Section 303A.02 of the New York Stock Exchange ListedCompanies Manual. 

**Q.*****Involuntary Termination*** shall mean the termination of the Service of any individual which occursby reason of: 

**(i)**such individual’s involuntary dismissal or discharge by the Corporation for reasons other than Misconduct,or 

**(ii)**such individual’s voluntary resignation following (A) a change in his or her position with the Corporation orParent or Subsidiary employing the individual which materially reduces his or her duties and responsibilities or the level of management to which he or she reports, (B) a reduction in his or her level of compensation (including base salary,fringe benefits and target bonus under any performance based bonus or incentive programs) by more than fifteen percent (15%) or (C) a relocation of such individual’s place of employment by more than fifty (50) miles, provided andonly if such change, reduction or relocation is effected by the Corporation without the individual’s consent. 

**R.*****Misconduct***shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation(or any Parent or Subsidiary), or any intentional wrongdoing by such person, whether by omission or commission, which adversely affects the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. This shall notlimit the grounds for the dismissal or discharge of any person in the Service of the Corporation (or any Parent or Subsidiary). 

**S.*****1934 Act***shall mean the Securities Exchange Act of 1934, as amended. 

**T.*****Non-Statutory Option***shallmean an option not intended to satisfy the requirements of Code Section 422. 

**U.*****Option Surrender Value*** shallmean the Fair Market Value per share of Common Stock on the date the option is surrendered to the Corporation or, in the event of a Hostile Take-Over, effected through a tender offer, the highest reported price per share of Common Stock paid by thetender offeror in effecting such Hostile Take-Over, if greater. However, if the surrendered option is an Incentive Option, the Option Surrender Value shall not exceed the Fair Market Value per share. 

**V.*****Optionee***shall mean any person to whom an option is granted under theDiscretionary Option Grant, Automatic Option Grant or Director Fee Option Grant Program. 

**W.*****Parent***shall mean anycorporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fiftypercent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 

**X.*****Participant*** shall mean any person who is issued shares of Common Stock under the Stock Issuance Program. 

**Y.*****Permanent Disability or Permanently Disabled***shall mean the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mentalimpairment expected to result in death or to be of continuous duration of twelve (12) months or more. However, solely for purposes of the Automatic Option Grant and Director Fee Option Grant Programs, Permanent Disability or PermanentlyDisabled shall mean the inability of the non-employee Board member to perform his or her usual duties as a Board member by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous durationof twelve (12) months or more. 

**Z.*****Plan***shall mean the Corporation’s 1999 Stock Incentive Plan, as set forthin this document. 

**AA.*****Plan Administrator*** shall mean the particular entity, whether the Primary Committee, the Boardor the Secondary Committee, which is authorized to administer the Discretionary Option Grant and Stock Issuance Programs with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functionsunder those programs with respect to the persons under its jurisdiction. However, the Primary Committee shall have the plenary authority to make all factual determinations and to construe and interpret any and all ambiguities under the Plan to theextent such authority is not otherwise expressly delegated to any other Plan Administrator. 

**BB.*****Plan Effective Date***shall mean June 9, 1999, the date on which the Plan was adopted by the Board. 

**CC.*****Predecessor****Plan* shallmean the Corporation’s pre-existing 1998 Stock Option/Stock Issuance Plan in effect immediately prior to the Plan Effective Date hereunder. 

**DD.*****Primary Committee*** shall mean the committee of two (2) or more members of the Compensation Committee appointed by the Board to administer the Discretionary Option Grant and Stock Issuance Programs with respectto eligible persons. 

**EE.*****Secondary Committee***shall mean a subcommittee of two (2) or more members of theCompensation Committee appointed by the Board to administer the Discretionary Option Grant and Stock Issuance Programs with respect to eligible persons other than Section 16 Insiders. 

**FF.*****Section 12 Registration Date***shall mean the date on which the Common Stockis first registered under Section 12(g) of the 1934 Act. 

**GG.*****Section 16 Insider*** shall mean an officer ordirector of the Corporation subject to the short-swing profit liabilities of Section 16 of the 1934 Act. 

**HH.*****Service***shall mean the performance of services for the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor, except to the extentotherwise specifically provided in the documents evidencing the option grant or stock issuance. 

**II.*****Stock Exchange***shall mean either the American Stock Exchange or the New York Stock Exchange. 

**JJ.*****Stock Issuance Program***shall meanthe stock issuance program in effect under the Plan. 

**KK.*****Subsidiary*** shall mean any corporation (other than theCorporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) ormore of the total combined voting power of all classes of stock in one of the other corporations in such chain. 

**LL.*****10%Stockholder*** shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary).

**MM.*****Underwriting Agreement***shall mean the agreement between the Corporation and the underwriter or underwritersmanaging the initial public offering of the Common Stock. 

**NN.*****Underwriting Date*** shall mean the date on which theUnderwriting Agreement is executed and priced in connection with an initial public offering of the Common Stock. 

**OO.*****Withholding Taxes***shall mean the Federal, state and local income and employment withholding tax liabilities to which the holder of Non-Statutory Options or unvested shares of Common Stock may become subject in connection with theexercise of those options or the vesting of those shares.