**Exhibit 10.4**

**QUEST SOFTWARE, INC.**

**2008 STOCKINCENTIVE PLAN**

 

**(a)****Successorand Continuation of Prior Plan.** The Plan is intended as the successor to and continuation of the Company’s 1999 Stock Incentive Plan and 2001 Stock Incentive Plan (the “***Prior Plans***”). Following the Effective Date, noadditional stock awards shall be granted under the Prior Plans. Any shares remaining available for issuance pursuant to the exercise of options or settlement of stock awards under the Prior Plans shall become available for issuance pursuant to StockAwards granted hereunder. Any shares subject to outstanding stock awards granted under the Prior Plans that expire or terminate for any reason prior to exercise or settlement shall become available for issuance pursuant to Stock Awards grantedhereunder. On the Effective Date, all outstanding stock awards granted under the Prior Plans shall be deemed to be stock awards granted pursuant to the Plan, but shall remain subject to the terms of the Prior Plans with respect to which they wereoriginally granted. All Stock Awards granted subsequent to the Effective Date shall be subject to the terms of this Plan. 

**(b)****Eligible Stock Award Recipients.** The persons eligible to receive Stock Awards are Employees, Directors and Consultants. The persons eligible to receive Options under the Non-Discretionary Grant Program are Eligible Directors. 

**(c)****Available Stock Awards.** The Plan provides for the grant of the following Stock Awards: (i) Incentive Stock Options,(ii) Nonstatutory Stock Options, (iii) Restricted Stock Awards, (iv) Restricted Stock Unit Awards, (v) Stock Appreciation Rights, and (vi) Other Stock Awards. 

**(d)****Purpose.** The Company, by means of the Plan, seeks to secure and retain the services of the group of persons eligible to receive StockAwards as set forth in Section 1(b), to provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate, and to provide a means by which such eligible recipients may be given an opportunity tobenefit from increases in value of the Common Stock through the granting of Stock Awards. 

 

**(a)****Administration by Board.** The Board shall administer the Plan unless and until the Board delegates administration of the Plan to a Committee or Committees, as provided in Section 2(d). However, the Board may not delegateadministration of the Non-Discretionary Grant Program. 

 

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**(b)****Powers of Board.** Except with respect to the Non-Discretionary Grant Program, the Boardshall have the power, subject to, and within the limitations of, the express provisions of the Plan: 

**(i)** Todetermine from time to time (A) which of the persons eligible under the Plan shall be granted Stock Awards; (B) when and how each Stock Award shall be granted; (C) what type or combination of types of Stock Award shall be granted;(D) the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive cash or Common Stock pursuant to a Stock Award; (E) the number of shares of Common Stockwith respect to which a Stock Award shall be granted to each such person; and (F) the Fair Market Value applicable to a Stock Award. 

**(ii)** To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correctany defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan or Stock Award fully effective. 

**(iii)** To settle all controversies regarding the Plan and Stock Awards granted under it. 

**(iv)** To accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any partthereof will vest in accordance with the Plan, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest. 

**(v)** To suspend or terminate the Plan at any time. Suspension or termination of the Plan shall not impair rights and obligationsunder any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant. 

**(vi)** To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, relating to Incentive Stock Options and certain nonqualified deferred compensation under Section 409A of the Codeand/or to bring the Plan or Stock Awards granted under the Plan into compliance therewith, subject to the limitations, if any, of applicable law. However, except as provided in Section 10(a) relating to Capitalization Adjustments, to the extentrequired by applicable law or listing requirements shareholder approval shall be required for any amendment of the Plan that either (i) materially increases the number of shares of Common Stock available for issuance under the Plan,(ii) materially expands the class of individuals eligible to receive Stock Awards under the Plan, (iii) materially increases the benefits accruing to Participants under the Plan or materially reduces the price at which shares of CommonStock may be issued or purchased under the Plan, (iv) materially extends the term of the Plan, or (v) expands the types of Stock Awards available for issuance under the Plan. Except as provided above, rights under any Stock Award grantedbefore amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the affected Participant, and (ii) such Participant consents in writing.****

**(vii)** To submit any amendment to the Plan for shareholder approval, including, but not limited to, amendments to the Plan intendedto satisfy the requirements of (i) Section 162(m) of the Code and the regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation, (ii) Section 422 ofthe Code regarding Incentive Stock Options, or (iii) Rule 16b-3. 

 

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**(viii)** To approve forms of Stock Award Agreements for use under the Plan and toamend the terms of any one or more Stock Awards, including, but not limited to, amendments to provide terms more favorable than previously provided in the Stock Award Agreement, subject to any specified limits in the Plan that are not subject toBoard discretion; *provided however,* that, the rights under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the affected Participant, and (ii) such Participant consents inwriting. Notwithstanding the foregoing, subject to the limitations of applicable law, if any, the Board may amend the terms of any one or more Stock Awards without the affected Participant’s consent if necessary to maintain the qualified statusof the Stock Award as an Incentive Stock Option or to bring the Stock Award into compliance with Section 409A of the Code and the related guidance thereunder. 

**(ix)** Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the bestinterests of the Company and that are not in conflict with the provisions of the Plan or Stock Awards. 

**(x)** To adoptsuch procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States. 

**(c)****Administration of Non-Discretionary Grant Program.** The Board shall have the power, subject to and within the limitation of the expressprovisions of the Non-Discretionary Grant Program: 

**(i)** To determine the provisions of each Option to the extent notspecified in the Non-Discretionary Grant Program. 

**(ii)** To construe and interpret the Non-Discretionary Grant Programand the Options granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Non-Discretionary Grant Program orin any Option Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Non-Discretionary Grant Program or Option fully effective. 

**(iii)** Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the bestinterests of the Company and that are not in conflict with the provisions of the Non-Discretionary Grant Program. 

**(d) Delegation toCommittee.**

**(i)****General.** The Board may delegate some or all of the administration of the Plan (except theNon-Discretionary Grant Program) to a Committee or Committees. If administration of the Plan is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board thathave been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in the Plan to the Board shall thereafter be to theCommittee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may retain the authority to concurrently administer the Plan with theCommittee and may, at any time, revest in the Board some or all of the powers previously delegated. 

 

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**(ii)****Section 162(m) and Rule 16b-3 Compliance.** The Committee mayconsist solely of two or more Outside Directors in accordance with Section 162(m) of the Code, or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3. 

**(e)****Cancellation and Re-Grant of Stock Awards**. Neither the Board nor any Committee shall have the authority to: (i) reprice anyoutstanding Stock Awards under the Plan, or (ii) cancel and re-grant any outstanding Stock Awards under the Plan, unless the shareholders of the Company have approved such an action within twelve (12) months prior to such an event. Inaddition, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up,spin-off, combination, or exchange of shares), the terms of outstanding Options or Stock Appreciation Rights may not be amended to reduce the exercise price of such outstanding Options or Stock Appreciation Rights and neither the Board nor anyCommittee may cancel outstanding Options or Stock Appreciation Rights with exercise prices greater than the then current fair market value of the Common Stock in exchange for cash, other awards or Options or Stock Appreciation Rights with anexercise price that is less than the exercise price of the original Options or Stock Appreciation Rights without stockholder approval.

**(f)****Effect of Board’s Decision.** All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.

 
**3.****SHARES SUBJECTTOTHE PLAN.**
**(a)****Share Reserve**. Subject to the provisions of Section 10(a) relating to Capitalization Adjustments, the aggregate number of shares ofCommon Stock that may be issued pursuant to Stock Awards under the Plan shall not exceed thirty-five million (35,000,000) shares. Such share reserve consists of (i) the number of shares remaining available for issuance under the PriorPlans, including shares subject to outstanding stock awards under the Prior Plans as of the Effective Date, plus (ii) an additional 10,750,748 shares. After the Effective Date, such share reserve shall be reduced from time to time by(i) the number of shares issued pursuant to the exercise of outstanding options granted under the Prior Plans, and (ii) the number of fully-vested shares issued pursuant to share right awards and the settlement of restricted stock unitsoutstanding under the Prior Plans. Subject to Section 3(b), the number of shares available for issuance under the Plan shall be reduced by: (i) one (1) share for each share of Common Stock issued pursuant to (A) an Option grantedunder Sections 5 or 7, or (B) a Stock Appreciation Right granted under Section 6(c), and (ii) one and ninety-four hundredths (1.94) shares for each share of Common Stock issued pursuant to a Restricted Stock Award, RestrictedStock Unit Award, or Other Stock Award granted under Section 6. Shares may be issued in connection with a merger or acquisition as permitted by FINRA Rule 4350(i)(1)(A)(iii) or, if applicable, NYSE Listed Company Manual Section 303A.08, orAMEX Company Guide Section 711 and such issuance shall not reduce the number of shares available for issuance under the Plan. 

 

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**(b)****Reversion of Shares to the Share Reserve**. If (i) a Stock Award (including thestock awards transferred from the Prior Plans on the Effective Date) shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, (ii) shares of Common Stock issued to a Participant pursuant toa Stock Award (including the stock awards transferred from the Prior Plans on the Effective Date) are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required for the vesting of such shares,or (iii) a Stock Award (including the stock awards transferred from the Prior Plans on the Effective Date) is settled in cash, then the shares of Common Stock not issued under such Stock Award, or forfeited to or repurchased by the Company,shall revert to and again become available for issuance under the Plan. If any shares subject to a Stock Award are not delivered to a Participant because such shares are withheld for the payment of taxes or the Stock Award is exercised through areduction of shares subject to the Stock Award (*i.e.*, “net exercised”) or an appreciation distribution in respect of a Stock Appreciation right is paid in shares of Common Stock, the number of shares subject to the Stock Award thatare not delivered to the Participant shall not remain available for subsequent issuance under the Plan. If the exercise price of any Stock Award is satisfied by tendering shares of Common Stock held by the Participant (either by actual delivery orattestation), then the number of shares so tendered shall not remain available for issuance under the Plan. To the extent there is issued a share of Common Stock pursuant to a Stock Award that counted as one and ninety-four hundredths(1.94) shares against the number of shares available for issuance under the Plan pursuant to Section 3(a) and such share of Common Stock again becomes available for issuance under the Plan pursuant to this Section 3(b), then thenumber of shares of Common Stock available for issuance under the Plan shall increase by one and ninety-four hundredths (1.94) shares. 

**(c)****Incentive Stock Option Limit.**Notwithstanding anything to the contrary in this Section 3(c), subject to the provisions of Section 10(a) relating to Capitalization Adjustments the aggregate maximum number ofshares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be the same as the maximum number of shares of Common Stock that may be issued pursuant to Stock Awards under Section 3(a). 

**(d)****Source of Shares.** The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, includingshares repurchased by the Company on the open market. 

 
**4.****ELIGIBILITY.**
**(a)****Eligibility for Specific Stock Awards**. Incentive Stock Options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and424(f) of the Code). Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. Non-discretionary Options granted under the Non-Discretionary Grant Program in Section 7 may be granted only toEligible Directors 

**(b)****Ten Percent Shareholders.** A Ten Percent Shareholder shall not be granted an Incentive Stock Optionunless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the date of grant and the Option is not exercisable after the expiration of five (5) years from the date ofgrant. 

 

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**(c)****Section 162(m) Limitation**. Subject to the provisions of Section 10(a)relating to Capitalization Adjustments, at such time as the Company may be subject to the applicable provisions of Section 162(m) of the Code, no Employee shall be eligible to be granted during any calendar year Options, Stock AppreciationRights, and Other Stock Awards whose value is determined by reference to an increase over an exercise or strike price of at least one hundred percent (100%) of the Fair Market Value of the Common Stock on the date the Stock Award is grantedcovering more than one million (1,000,000) shares of Common Stock. 

**(d)****Consultants.**A Consultant shall be eligible forthe grant of a Stock Award only if, at the time of grant, a Form S-8 Registration Statement under the Securities Act (“***Form S-8***”) is available to register either the offer or the sale of the Company’s securities to suchConsultant. 

 
**5.****OPTION PROVISIONS.**
Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and,if certificates are issued, a separate certificate or certificates shall be issued for shares of Common Stock purchased on exercise of each type of Option. If an Option is not specifically designated as an Incentive Stock Option, then the Optionshall be a Nonstatutory Stock Option. The provisions of separate Options need not be identical; *provided, however*, that each Option Agreement shall conform to (through incorporation of provisions hereof by reference in the Option Agreement orotherwise) the substance of each of the following provisions: 

**(a)****Term.** Subject to the provisions of Section 4(b)regarding Ten Percent Shareholders, no Option shall be exercisable after the expiration of ten (10) years from the date of its grant or such shorter period specified in the Option Agreement. 

**(b)****Exercise Price.** Subject to the provisions of Section 4(b) regarding Ten Percent Shareholders, the exercise price of each Optionshall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Option may be granted with an exercise price lower thanone hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option if such Option is granted pursuant to an assumption or substitution for another option in a manner consistent with the provisions of Sections 409A and424(a) of the Code. 

**(c)****Consideration.** The purchase price of Common Stock acquired pursuant to the exercise of an Optionshall be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below. The Board shall have the authority to grant Options that do not permit allof the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to utilize a particular method of payment. The permitted methods of payment are as follows:

**(i)** by cash, check, bank draft or money order payable to the Company; 

 

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**(ii)** pursuant to a program developed under Regulation T as promulgated by theFederal Reserve Board that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company fromthe sales proceeds; 

**(iii)** by delivery to the Company (either by actual delivery or attestation) of shares of CommonStock; 

**(iv)** by a “net exercise” arrangement pursuant to which the Company will reduce the number of sharesof Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; *provided, however,* the Company shall accept a cash or other payment from the Participantto the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; *provided, further,* that shares of Common Stock will no longer be subject to an Option and willnot be exercisable thereafter to the extent that (A) shares issuable upon exercise are reduced to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise,and (C) shares are withheld to satisfy tax withholding obligations; or 

**(v)** in any other form of legalconsideration that may be acceptable to the Board in its sole discretion and permissible under applicable law. 

**(d)****Transferability of Options.** The Board may, in its sole discretion, impose such limitations on the transferability of Options as the Board shall determine. In the absence of such a determination by the Board to the contrary, the followingrestrictions on the transferability of Options shall apply: 

**(i)****Restrictions on Transfer.** An Option shall notbe transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder; *provided, however*, that the Board may, in its sole discretion, permittransfer of the Option in a manner that is not prohibited by applicable tax and securities laws upon the Optionholder’s request. 

**(ii)****Domestic Relations Orders.** Notwithstanding the foregoing, an Option may be transferred pursuant to a domestic relations order, *provided, however,* that if an Option is an Incentive StockOption, such Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer. 

**(iii)****Beneficiary Designation.** Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company and any broker designated by the Company to effectOption exercises, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option. In the absence of such a designation, the executor or administrator of the Optionholder’s estateshall be entitled to exercise the Option. 

**(e)****Vesting of Options Generally.** The total number of shares of Common Stocksubject to an Option may vest and therefore become exercisable in periodic installments that may or may not be equal. The Option may be subject to such other terms and conditions on the time 

 

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or times when it may or may not be exercised (which may be based on the satisfaction of performance goals or other criteria) as the Board may deemappropriate. The vesting provisions of individual Options may vary. However, Options granted to the Chief Executive Officer of the Company or Chairman of the Board of Directors (the “***Chairman***”) shall be subject to a minimumvesting 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 date of grant, and not more than ten percent (10%) after everysix-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 Section 5(e). Notwithstanding the foregoing, at such timeas the Chairman is Independent, the minimum vesting period required by this Section 5(e) shall not apply to Options granted to such Chairman. The provisions of this Section 5(e) are subject to any Option provisions governing the minimumnumber of shares of Common Stock as to which an Option may be exercised. 

**(f)****Termination of Continuous Service.** In the eventthat an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as ofthe date of termination of Continuous Service) but only within such period of time ending on the earlier of (i) the date thirty (30) days following the termination of the Optionholder’s Continuous Service (or such longer or shorterperiod specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the timespecified herein or in the Option Agreement (as applicable), the Option shall terminate. 

**(g)****Extension of Termination Date.**In the event that exercise of an Option following the termination of the Optionholder’s Continuous Service (other than upon the Optionholder’s death or Disability) would be prohibited at any time solely because the issuance of shares ofCommon Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a period of thirty (30) days after the termination of the Optionholder’sContinuous Service during which the exercise of the Option would not be in violation of such registration requirements, or (ii) the expiration of the term of the Option as set forth in the Option Agreement. 

**(h)****Disability of Optionholder.** In the event that an Optionholder’s Continuous Service terminates as a result of theOptionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service), but only within such period of timeending on the earlier of (i) the date twelve (12) months following such termination of Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as setforth in the Option Agreement. If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate. 

 

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**(i)****Death of Optionholder.** In the event that (i) an Optionholder’s ContinuousService terminates as a result of the Optionholder’s death, or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous Service for a reason otherthan death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest orinheritance or by a person designated to exercise the option upon the Optionholder’s death, but only within the period ending on the earlier of (i) the date twelve (12) months following the date of death (or such longer or shorterperiod specified in the Option Agreement), or (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, after the Optionholder’s death, the Option is not exercised within the time specified herein or in theOption Agreement (as applicable), the Option shall terminate. 

**(j)****Non-Exempt Employees**. No Option granted to an Employee whois a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any shares of Common Stock until at least six (6) months following the date of grant of the Option. The foregoingprovision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option will be exempt from his or her regular rate of pay. 

 
**6.****PROVISIONSOF STOCK AWARDSOTHERTHAN OPTIONS.**
**(a)****Restricted Stock Awards.** Each Restricted Stock Award Agreement shall be in such form and shall contain suchterms and conditions as the Board shall deem appropriate. To the extent consistent with the Company’s Bylaws, at the Board’s election, shares of Common Stock may be (x) held in book entry form subject to the Company’sinstructions until any restrictions relating to the Restricted Stock Award lapse; or (y) evidenced by a certificate, which certificate shall be held in such form and manner as determined by the Board. The terms and conditions of RestrictedStock Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not be identical, *provided, however*, that each Restricted Stock Award Agreement shall conform to (throughincorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions: 

**(i)****Consideration.** A Restricted Stock Award may be awarded in consideration for (A) cash, check, bank draft or money order payable to the Company; (B) past services actually rendered to theCompany or an Affiliate; or (C) any other form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law. 

**(ii)****Vesting**. Shares of Common Stock awarded under a Restricted Stock Award Agreement may be subject to forfeiture to theCompany in accordance with a vesting schedule to be determined by the Board. 

**(iii)****Termination ofParticipant’s Continuous Service.** In the event a Participant’s Continuous Service terminates, the Company may receive via a forfeiture condition or a repurchase right, any or all of the shares of Common Stock held by the Participantwhich have not vested as of the date of termination of Continuous Service under the terms of the Restricted Stock Award Agreement. 

 

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**(iv)****Transferability**. Rights to acquire shares of Common Stock under theRestricted Stock Award Agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board shall determine in its sole discretion, so long as Common Stockawarded under the Restricted Stock Award Agreement remains subject to the terms of the Restricted Stock Award Agreement. 

**(b)****Restricted Stock Unit Awards.** Each Restricted Stock Unit Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of Restricted Stock Unit Award Agreementsmay change from time to time, and the terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical, *provided, however,*that each Restricted Stock Unit Award Agreement shall conform to (through incorporation ofthe provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions: 

**(i)****Consideration.** At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the RestrictedStock Unit Award. The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board in its solediscretion and permissible under applicable law. 

**(ii)****Vesting.**At the time of the grant of a Restricted StockUnit Award, the Board may impose such restrictions or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate. 

**(iii)****Payment**. A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cashequivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement. 

**(iv)****Additional Restrictions.**At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate,may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award. 

**(v)****Dividend Equivalents.**Dividend equivalents may be credited in respect of shares of Common Stock covered by a RestrictedStock Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement. At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the RestrictedStock Unit Award in such manner as determined by the Board. Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all the terms and conditions of the underlying RestrictedStock Unit Award Agreement to which they relate. 

**(vi)****Termination of Participant’s Continuous Service.**Except as otherwise provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service. 

 

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**(vii)****Compliance with Section 409A of the Code.** Notwithstandinganything to the contrary set forth herein, any Restricted Stock Unit Award granted under the Plan that is not exempt from the requirements of Section 409A of the Code shall contain such provisions so that such Restricted Stock Unit Award willcomply with the requirements of Section 409A of the Code. Such restrictions, if any, shall be determined by the Board and contained in the Restricted Stock Unit Award Agreement evidencing such Restricted Stock Unit Award. 

**(c) Stock Appreciation Rights**. Each Stock Appreciation Right Agreement shall be in such form and shall contain such terms and conditions as theBoard shall deem appropriate. Stock Appreciation Rights may be granted as stand-alone Stock Awards or in tandem with other Stock Awards. The terms and conditions of Stock Appreciation Right Agreements may change from time to time, and the terms andconditions of separate Stock Appreciation Right Agreements need not be identical; *provided, however*, that each Stock Appreciation Right Agreement shall conform to (through incorporation of the provisions hereof by reference in the agreementor otherwise) the substance of each of the following provisions: 

**(i) Term.** No Stock Appreciation Right shall beexercisable after the expiration of ten (10) years from the date of its grant or such shorter period specified in the Stock Appreciation Right Agreement. 

**(ii) Strike Price.**Each Stock Appreciation Right will be denominated in shares of Common Stock equivalents. The strike price ofeach Stock Appreciation Right shall not be less than one hundred percent (100%) of the Fair Market Value of the Common Stock equivalents subject to the Stock Appreciation Right on the date of grant. 

**(iii) Calculation of Appreciation.** The appreciation distribution payable on the exercise of a Stock Appreciation Right will be notgreater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation Right) of a number of shares of Common Stock equal to the number of shares of Common Stock equivalents inwhich the Participant is vested under such Stock Appreciation Right, and with respect to which the Participant is exercising the Stock Appreciation Right on such date, over (B) the strike price. 

**(iv) Vesting.**At the time of the grant of a Stock Appreciation Right, the Board may impose such restrictions or conditions to thevesting of such Stock Appreciation Right as it, in its sole discretion, deems appropriate. 

**(v) Exercise.** To exerciseany outstanding Stock Appreciation Right, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right. 

**(vi) Payment**. The appreciation distribution in respect of a Stock Appreciation Right may be paid in Common Stock, in cash, in anycombination of the two or in any other form of consideration, as determined by the Board and set forth in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right. 

 

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**(vii)****Termination of Continuous Service.** In the event that aParticipant’s Continuous Service terminates, the Participant may exercise his or her Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of the date of termination of ContinuousService) but only within such period of time ending on the earlier of (A) the date thirty (30) days following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the StockAppreciation Right Agreement), or (B) the expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement. If, after termination of Continuous Service, the Participant does not exercise his or herStock Appreciation Right within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate. 

**(viii) Compliance with Section 409A of the Code**. Notwithstanding anything to the contrary set forth herein, any StockAppreciation Rights granted under the Plan that are not exempt from the requirements of Section 409A of the Code shall contain such provisions so that such Stock Appreciation Right will comply with the requirements of Section 409A of theCode. Such restrictions, if any, shall be determined by the Board and contained in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right. 

**(d)****Other Stock Awards**. Other forms of Stock Awards valued in whole or in part by reference to, or otherwise based on, Common Stock may be granted either alone or in addition to Stock Awards provided forunder Section 5 and the preceding provisions of this Section 6. Subject to the provisions of the Plan, the Board shall have sole and complete authority to determine the persons to whom and the time or times at which such Other Stock Awardswill be granted, the number of shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock Awards and all other terms and conditions of such Other Stock Awards. 

 
**7.****NON-DISCRETIONARY GRANTSTO ELIGIBLE DIRECTORS.**
**(a)****General**. The Non-Discretionary Grant Program in this Section 7 allows Eligible Directors to receive Nonstatutory Stock Optionsautomatically at designated intervals over their period of Continuous Service on the Board. The Non-Discretionary Grant Program is intended as the successor to and continuation of the Automatic Option Grant Program under the Company’s 1999Stock Incentive Plan. 

**(b)****Eligibility**. The Options shall automatically be granted to all Eligible Directors who meet thespecified criteria. 

**(c)****Non-Discretionary Option Grants**. 

**(i)****Initial Grants**. Without any further action of the Board, each person who becomes elected or appointed to serve on theBoard for the first time and who has not been previously in the employ of the Company or an Affiliate automatically shall, upon the date of his or her initial election or appointment, be granted a Nonstatutory Stock Option to purchase forty thousand(40,000) shares of Common Stock (the “***Initial Grant***”) on the terms and conditions set forth in Section 7(d). 

 

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**(ii)****Transitional Annual Grants**. Without any further action of the Board,on July 1, 2008, each Eligible Director who has served as a non-employee Board member since the first business day in July 2007 and whose Continuous Service has not then terminated shall automatically be granted a Nonstatutory Stock Option topurchase thirty thousand (30,000) shares of Common Stock (the “***Transitional Annual Grant***”) on the terms and conditions set forth in Section 7(d). 

**(iii)****Annual Grants**. Without any further action of the Board, on the first business day in January of each year, beginningon January 2, 2009, each Eligible Director who has served as a non-employee Board member since the first business day in January of the previous year and whose Continuous Service has not then terminated shall automatically be granted aNonstatutory Stock Option to purchase twenty thousand (20,000) shares of Common Stock (the “***Annual Grant***”) on the terms and conditions set forth in Section 7(d). 

**(d) Non-Discretionary Option Grant Provisions.**

**(i)****Term**. No Option granted hereunder shall be exercisable after the expiration of ten (10) years from the date it was granted. 

**(ii)****Exercise Price**. The exercise price of each Option granted hereunder shall be one hundred percent (100%) of theFair Market Value of the Common Stock subject to the Option on the date the Option is granted. 

**(iii)****Consideration**. The purchase price of Common Stock acquired pursuant to the exercise of an Option may be paid by any combination of the methods of payment set forth below: 

**(1)** by cash, check, bank draft or money order payable to the Company; 

**(2)** to the extent exercised for vested shares, pursuant to a program developed under Regulation T as promulgated by the FederalReserve Board that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from thesales proceeds; or 

**(3)** by delivery to the Company (either by actual delivery or attestation) of shares of CommonStock. 

**(iv)****Vesting**. Options granted under the Non-Discretionary Grant Program shall vest as follows:

**(1)****Initial Grants**. Each Initial Grant shall vest in a series of four (4) successive equal annualinstallments during the Eligible Director’s Continuous Service over the four (4)-year period measured from the date of grant. 

 

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**(2)****Transitional Annual Grants**. Each Transitional Annual Grant shall befully vested on the date of grant. 

**(3)****Annual Grants**. Each Annual Grant shall be fully vested on the date ofgrant. 

**(v)****Early Exercise**. Each Option granted under the Non-Discretionary Grant Program shall be immediatelyexercisable as to any or all of the shares of Common Stock subject to such Options prior to the full vesting of the Option. Any unvested shares of Common Stock so acquired shall be subject to a repurchase option in favor of the Company or to anyother restriction the Board determines to be appropriate. The Company shall not be required to exercise its repurchase option until at least six (6) months (or such longer or shorter period of time necessary to avoid classification of theOption as a liability for financial accounting purposes) have elapsed following exercise of the Option. 

**(vi)****Termination of Continuous Service**. In the event that an Eligible Director’s Continuous Service terminates (other than upon the Eligible Director’s death or Disability), the Eligible Director may exercise his or her Option (to theextent that the Eligible Director was entitled to exercise such Option as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (i) the date twelve (12) months following thetermination of the Eligible Director’s Continuous Service, or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Eligible Director does not exercise his orher Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate. 

**(vii) Extension of Termination Date**. If the exercise of the Option following the termination of the Eligible Director’s Continuous Service (other than upon the Eligible Director’s death or Disability) would be prohibited atany time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a period of twelve (12) monthsafter the termination of the Eligible Director’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements, or (ii) the expiration of the term of the Option as set forth in theOption Agreement. 

**(viii)****Disability of Eligible Director**. In the event that an Eligible Director’sContinuous Service terminates as a result of the Eligible Director’s Disability, the Option shall become fully vested and exercisable and the Eligible Director may exercise his or her Option, but only within such period of time ending on theearlier of (i) the date twelve (12) months following such termination of Continuous Service, or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Eligible Director does notexercise his or her Option within the time specified herein or in the Option Agreement, the Option shall terminate. 

**(ix)Death of Eligible Director**. In the event that an Eligible Director’s Continuous Service terminates as a result of the Eligible Director’s death, then the Option shall become fully vested and exercisable and may be exercised by theEligible Director’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person 

 

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designated to exercise the Option upon the Eligible Director’s death, but only within the period ending on the earlier of (i) the date twelve(12) months following the date of death, or (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, after the Eligible Director’s death, the Option is not exercised within the time specified herein,the Option shall terminate. 

**(x)****Change in Control**. In the event of a Change in Control, each Option grantedunder the Non-Discretionary Grant Program shall become fully vested and exercisable immediately prior to the effectiveness of such Change in Control. 

**(xi)****Remaining Terms**. The remaining terms and conditions of each Option shall be as set forth in an Option Agreement in the form adopted from time to time by the Board; provided, however, that the termsof such Option Agreement shall be consistent with the terms of the Plan. 

 
**8.****COVENANTSOFTHE COMPANY.**
**(a)****Availability of Shares.** During the terms of the Stock Awards, the Company shall keep available at all times the number of shares ofCommon Stock required to satisfy such Stock Awards. 

**(b)****Securities Law Compliance.** The Company shall seek to obtain fromeach regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; *provided, however,* that thisundertaking shall not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from anysuch regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell CommonStock upon exercise of such Stock Awards unless and until such authority is obtained. A Participant shall not be eligible for the grant of a Stock Award or the subsequent issuance of Common Stock pursuant to the Stock Award if such grant or issuancewould be in violation or any applicable securities law. 

**(c)****No Obligation to Notify.**The Company shall have no duty orobligation to any holder of a Stock Award to advise such holder as to the time or manner of exercising such Stock Award. Furthermore, the Company shall have no duty or obligation to warn or otherwise advise such holder of a pending termination orexpiration of a Stock Award or a possible period in which the Stock Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of a Stock Award to the holder of such Stock Award. 

 
**9.****MISCELLANEOUS.**
**(a)****Use ofProceeds.**Proceeds from the sale of shares of Common Stock pursuant to Stock Awards shall constitute general funds of the Company. 

 

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**(b)****Corporate Action Constituting Grant of Stock Awards.** Corporate action constituting agrant by the Company of a Stock Award to any Participant shall be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the StockAward is communicated to, or actually received or accepted by, the Participant. 

**(c)****Shareholder Rights.** No Participant shallbe deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award unless and until (i) such Participant has satisfied all requirements for exercise of the Stock Awardpursuant to its terms, and (ii) the issuance of the Common Stock pursuant to such exercise has been entered into the books and records of the Company. 

**(d)****No Employment or Other Service Rights.** Nothing in the Plan, any Stock Award Agreement or other instrument executed thereunder or in connection with any Stock Award granted pursuant to the Plan shallconfer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment ofan Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to theBylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be. 

**(e)****Incentive Stock Option $100,000 Limitation.** To the extent that the aggregate Fair Market Value (determined at the time of grant) ofCommon Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000), theOptions or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s). 

**(f)****Investment Assurances.** The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any StockAward, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who isknowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give writtenassurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock.The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (x) the issuance of the shares upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a thencurrently effective registration statement under the Securities Act, or (y) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the thenapplicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws,including, but not limited to, legends restricting the transfer of the Common Stock. 

 

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**(g)****Withholding Obligations.** Unless prohibited by the terms of a Stock Award Agreement, theCompany may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to a Stock Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to theParticipant by the Company) or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant inconnection with the Stock Award; *provided, however*, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classificationof the Stock Award as a liability for financial accounting purposes); (iii) withholding cash from a Stock Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by such othermethod as may be set forth in the Stock Award Agreement. 

**(h)****Electronic Delivery**. Any reference herein to a“written” agreement or document shall include any agreement or document delivered electronically or posted on the Company’s intranet. 

**(i)****Deferrals.** To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting orsettlement of all or a portion of any Stock Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code.Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee. The Board is authorized to make deferrals of Stock Awards and determine when, and in what annual percentages,Participants may receive payments, including lump sum payments, following the Participant’s termination of employment or retirement, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance withapplicable law. 

**(j)****Compliance with Section 409A.**To the extent that the Board determines that any Stock Award grantedhereunder is subject to Section 409A of the Code, the Stock Award Agreement evidencing such Stock Award shall incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code. To theextent applicable, the Plan and Stock Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation anysuch regulations or other guidance that may be issued or amended after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Board determines that any Stock Award may besubject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Board may adopt such amendments to the Plan and the applicable StockAward Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Board determines are necessary or appropriate to (1) exempt the Stock Award fromSection 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Stock Award, or (2) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.

 

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**10.****ADJUSTMENTSUPON CHANGESIN COMMON STOCK; OTHER CORPORATEEVENTS.**
**(a)****Capitalization Adjustments**. In the event of a Capitalization Adjustment, theBoard shall appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a); (ii) the class(es) and maximum number of securities that may be issued pursuant tothe exercise of Incentive Stock Options pursuant to Section 3(c); (iii) the class(es) and maximum number of securities that may be awarded to any person pursuant to Section 4(c); (iv) the class(es) and number of securitiessubject to each Option granted under the Non-Discretionary Grant Program under Section 7; and (v) the class(es) and number of securities and price per share of stock subject to outstanding Stock Awards. The Board shall make suchadjustments, and its determination shall be final, binding and conclusive. 

**(b)****Dissolution or Liquidation**. Except asotherwise provided in a Stock Award Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiturecondition or the Company’s right of repurchase) shall terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights may be repurchased by theCompany notwithstanding the fact that the holder of such Stock Award is providing Continuous Service, *provided, however,* that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or nolonger subject to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion. 

**(c)****Corporate Transaction.**The following provisions shall apply to Stock Awards in the event of a Corporate Transaction unless otherwiseprovided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate and the holder of the Stock Award or unless otherwise expressly provided by the Board at the time of grant of a Stock Award.Except as otherwise stated in the Stock Award Agreement, in the event of a Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board shall take one or more of the following actions with respect to Stock Awards,contingent upon the closing or completion of the Corporate Transaction: 

**(i)** arrange for the surviving corporation oracquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Stock Award or to substitute a similar stock award for the Stock Award (including, but not limited to, an award to acquire the sameconsideration paid to the shareholders of the Company pursuant to the Corporate Transaction); 

**(ii)** arrange for theassignment of any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to the Stock Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parentcompany); 

 

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**(iii)** accelerate the vesting of the Stock Award (and, if applicable, the time atwhich the Stock Award may be exercised) to a date prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five (5) days prior to the effectivedate of the Corporate Transaction), with such Stock Award terminating if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction; 

**(iv)** arrange for the lapse of any reacquisition or repurchase rights held by the Company with respect to the Stock Award;

**(v)** cancel or arrange for the cancellation of the Stock Award, to the extent not vested or not exercised prior tothe effective time of the Corporate Transaction, in exchange for such cash consideration as the Board, in its sole discretion, may consider appropriate; and 

**(vi)** make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of theproperty the holder of the Stock Award would have received upon the exercise of the Stock Award, over (B) any exercise price payable by such holder in connection with such exercise. 

The Board need not take the same action with respect to all Stock Awards, portions thereof, or with respect to all Participants. 

**(d)****Change in Control.** A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a Change inControl as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant. A Stock Award may vest as to all or any portion of the sharessubject to the Stock Award (i) immediately upon the occurrence of a Change in Control, whether or not such Stock Award is assumed, continued, or substituted by a surviving or acquiring entity in the Change in Control, or (ii) in the eventa Participant’s Continuous Service is terminated, actually or constructively, within a designated period following the occurrence of a Change in Control. In the absence of such provisions, no such acceleration shall occur. 

 
**11.****TERMINATIONOR SUSPENSIONOFTHE PLAN.**
**(a)****Plan Term.** The Board may suspend or terminate the Plan at any time. Unless terminated sooner, the Plan shall terminate on the day beforethe tenth (10th) anniversary of the earlier of (i) the date the Plan is adopted by the Board, or (ii) the date the Plan is approved by the shareholders of the Company. No Stock Awards may be granted under the Plan while the Plan issuspended or after it is terminated. 

**(b)****No Impairment of Rights.** Suspension or termination of the Plan shall not impairrights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant. 

 

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**12.****EFFECTIVE DATEOF PLAN.**
Should the Plan be approved by the Company’s shareholders at the 2008 Annual Meeting, the Plan shall become effective on July 1, 2008.

 
**13.****CHOICEOF LAW.**
The law of the State of California shall govern all questions concerning the construction, validity and interpretation of the Plan, without regard to that state’s conflict of laws rules. 

 
**14.****DEFINITIONS.**
As used in the Plan,the following definitions shall apply to the capitalized terms indicated below: 

**(a)** “***Affiliate***” means, atthe time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Securities Act. The Board shall have the authority to determine the time or times at which “parent” or“subsidiary” status is determined within the foregoing definition. 

**(b)** “***Annual Grant***” means anOption granted to an Eligible Director who meets the specified criteria pursuant to Section 7(c)(iii). 

**(c)**“***Board***” means the Board of Directors of the Company. 

**(d)** “***CapitalizationAdjustment***” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Effective Date without the receipt of consideration by the Company(through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure orother similar transaction). Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a Capitalization Adjustment. 

**(e)** “***Cause***” means with respect to a Participant, the occurrence of any of the following events: (i) suchParticipant’s commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii) such Participant’s attempted commission of, or participation in, a fraudor act of dishonesty against the Company; (iii) such Participant’s intentional, material violation of any contract or agreement between the Participant and the Company or of any statutory duty owed to the Company; (iv) suchParticipant’s unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v) such Participant’s gross misconduct. The determination that a termination of the Participant’s ContinuousService is either for Cause or without Cause shall be made by the Company in its sole discretion. Any determination by the Company that the Continuous Service of a Participant was terminated with or without Cause for the purposes of outstandingStock Awards held by such Participant shall have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose. 

 

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**(f)** “***Change in Control***” means the occurrence, in a single transaction orin a series of related transactions, of any one or more of the following events: 

**(i)** any Exchange Act Person becomesthe Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or othertransaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person from the Companyin a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (B) solely because the level of Ownership held by any Exchange Act Person (the“***Subject Person***”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of sharesoutstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of anyadditional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Changein Control shall be deemed to occur; 

**(ii)** there is consummated a merger, consolidation or similar transactioninvolving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the shareholders of the Company immediately prior thereto do not Own, directly or indirectly, either(A) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent(50%) of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding votingsecurities of the Company immediately prior to such transaction; 

**(iii)** the shareholders of the Company approve orthe Board approves a plan of complete dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company shall otherwise occur, except for a liquidation into a parent corporation; 

**(iv)** there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidatedassets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of thecombined voting power of the voting securities of which are Owned by shareholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease,license or other disposition; or 

 

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**(v)** individuals who, on the date the Plan is adopted by the Board, are members ofthe Board (the “***Incumbent Board***”) cease for any reason to constitute at least a majority of the members of the Board; *provided, however,* that if the appointment or election (or nomination for election) of any new Boardmember was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of the Plan, be considered as a member of the Incumbent Board. 

For avoidance of doubt, the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purposeof changing the domicile of the Company. 

Notwithstanding the foregoing or any other provision of the Plan, the definition of Change inControl (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Stock Awards subject to such agreement; *provided, however,*that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply. 

**(g)** “***Code***” means the Internal Revenue Code of 1986, as amended. 

**(h)**“***Committee***” means a committee of two (2) or more members of the Company’s Compensation Committee to whom authority has been delegated by the Board in accordance with Section 2(d). 

**(i)** “***Common Stock***” means the common stock of the Company. 

**(j)** “***Company***” means Quest Software, Inc., a California corporation. 

**(k)** “***Consultant***” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to renderconsulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services. However, service solely as a Director, or payment of a fee forsuch service, shall not cause a Director to be considered a “Consultant” for purposes of the Plan.******

**(l)**“***Continuous Service***” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which theParticipant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of theParticipant’s service with the Company or an Affiliate, shall not terminate a Participant’s Continuous Service; *provided, however*, if the Entity for which a Participant is rendering services ceases to qualify as an“Affiliate,” as determined by the Board in its sole discretion, such Participant’s Continuous Service shall be considered to have terminated on the date such Entity ceases to qualify as an Affiliate. To the extent permitted by law,the Board or the chief executive officer or the president of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of: (i) any leave of absence approved by theBoard, the chief executive officer, or the president, including sick leave, military leave or any other personal leave; or (ii) transfers between the Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absenceshall be treated as Continuous Service for purposes of vesting in a Stock Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to theParticipant, or as otherwise required by law. 

 

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**(m)** “***Corporate Transaction***” means the occurrence, in a single transactionor in a series of related transactions, of any one or more of the following events: 

**(i)** a sale or other dispositionof all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries; 

**(ii)** a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the Company; 

**(iii)** the consummation of a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or 

**(iv)** the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporationbut the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form ofsecurities, cash or otherwise. 

**(n)** “***Director***” means a member of the Board. 

**(o)** “***Disability***” means, with respect to a Participant, the inability of such Participant to engage in any substantialgainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, as provided inSection 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and shall be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances. 

**(p)** “***Effective Date***” means the effective date of the Plan as set forth in Section 12. 

**(q)** “***Eligible Director***” means a Director who is not an Employee and is eligible to participate in the Non-DiscretionaryGrant Program. 

**(r)** “***Employee***” means any person employed by the Company or an Affiliate. However, servicesolely as a Director, or payment of a fee for such services, shall not cause a Director to be considered an “Employee” for purposes of the Plan. 

**(s)** “***Entity***” means a corporation, partnership, limited liability company or other entity. 

**(t)** “***Exchange Act***” means the Securities Exchange Act of 1934, as amended. 

**(u)** “***Exchange Act Person***” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall notinclude (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding 

 

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securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuantto a registered public offering of such securities, (iv) an Entity Owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their Ownership of stock of the Company; (v) any natural person,Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) ofthe combined voting power of the Company’s then outstanding securities; or (vi) Vincent C. Smith, or any Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) controlled by Vincent C. Smith.

**(v)** “***Fair Market Value***” means, as of any date, the value of the Common Stock determined as follows:

**(i)** If the Common Stock is listed on any established stock exchange or traded on any established market, the FairMarket Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the CommonStock) on the date of determination, as reported in a source the Board deems reliable. 

**(ii)** If the Common Stock islisted or traded on the Nasdaq Capital Market, the Fair Market Value of a share of Common Stock shall be the mean between the bid and asked prices for the Common Stock on the date of determination, as reported in a source the Board deems reliable.Unless otherwise provided by the Board, if there is no closing sales price (or closing bid if no sales were reported) for the Common Stock on the date of determination, then the Fair Market Value shall be the mean between the bid and asked pricesfor the Common Stock on the last preceding date for which such quotation exists. 

**(iii)** In the absence of suchmarkets for the Common Stock, the Fair Market Value shall be determined by the Board in good faith and in a manner that complies with Sections 409A and 422 of the Code. 

**(w)** “***Incentive Stock Option***” means an Option which qualifies as an “incentive stock option” within the meaning of Section 422 of the Code and the regulations promulgatedthereunder. 

**(x)** “***Independent***” shall mean such meaning as defined in Section 303A.02 of the New YorkStock Exchange Listed Company Manual. 

**(y)** “***Initial Grant***” means an Option granted to an Eligible Directorwho meets the criteria pursuant to Section 7(c)(i). 

**(z)** “***Non-Discretionary Grant Program***” means thenon-discretionary grant program in effect under Section 7. 

**(aa)** “***Non-Employee Director***” means aDirector who either (i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacityother than as a Director (except for an amount as to which disclosure would not 

 

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be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“***Regulation S-K***”)), does not possessan interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of RegulationS-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3. 

**(bb)**“***Nonstatutory Stock Option***” means an Option that does not qualify as an Incentive Stock Option. 

**(cc)**“***Officer***” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. 

**(dd)** “***Option***” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock grantedpursuant to the Plan. 

**(ee)** “***Option Agreement***” means a written agreement between the Company and anOptionholder evidencing the terms and conditions of an Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan. 

**(ff)** “***Optionholder***” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option. 

**(gg)** “***Other Stock Award***” means an award based in whole or in part by reference to the Common Stock which is grantedpursuant to the terms and conditions of Section 6(d). 

**(hh)** “***Other Stock Award Agreement***” means awritten agreement between the Company and a holder of an Other Stock Award evidencing the terms and conditions of an Other Stock Award grant. Each Other Stock Award Agreement shall be subject to the terms and conditions of the Plan. 

**(ii)** “***Outside Director***” means a Director who either (i) is not a current employee of the Company or an“affiliated corporation” (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated corporation” who receives compensation for priorservices (other than benefits under a tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or an “affiliated corporation,” and does not receive remuneration from the Company or an “affiliatedcorporation,” either directly or indirectly, in any capacity other than as a Director, or (ii) is otherwise considered an “outside director” for purposes of Section 162(m) of the Code. 

**(jj)** “***Own***,” “***Owned***,” “***Owner***,” “***Ownership***”****Aperson or Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract,arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities. 

**(kk)** “***Participant***” means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such otherperson who holds an outstanding Stock Award. 

 

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**(ll)** “***Plan***” means this Quest Software, Inc. 2008 Stock Incentive Plan.

**(mm)** “***Prior Plans***” means the Company’s 1999 Stock Incentive Plan and the Company’s 2001 StockIncentive Plan, as in effect immediately prior to the Effective Date. 

**(nn)** “***Restricted Stock Award***” meansan award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(a). 

**(oo)**“***Restricted Stock Award Agreement***” means a written agreement between the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award grant. Each Restricted Stock AwardAgreement shall be subject to the terms and conditions of the Plan. 

**(pp)** “***Restricted Stock Unit Award***”means a right to receive shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(b). 

**(qq)**“***Restricted Stock Unit Award Agreement***” means a written agreement between the Company and a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock Unit Award grant. Each RestrictedStock Unit Award Agreement shall be subject to the terms and conditions of the Plan. 

**(rr)** “***Rule 16b-3***”means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time. 

**(ss)**“***Securities Act***” means the Securities Act of 1933, as amended. 

**(tt)** “***Stock AppreciationRight***” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 6(c). 

**(uu)** “***Stock Appreciation Right Agreement***” means a written agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a StockAppreciation Right grant. Each Stock Appreciation Right Agreement shall be subject to the terms and conditions of the Plan. 

**(vv)**“***Stock Award***” means any right to receive Common Stock granted under the Plan, including an Option, a Restricted Stock Award, a Restricted Stock Unit Award, a Stock Appreciation Right, or any Other Stock Award. 

**(ww)** “***Stock Award Agreement***” means a written agreement between the Company and a Participant evidencing the terms andconditions of a Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan. 

**(xx)**“***Subsidiary***” means, with respect to the Company, (i) any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directorsof such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned bythe Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fiftypercent (50%) . 

 

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**(yy)** “***Ten Percent Shareholder***” means a person who Owns (or is deemed toOwn pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Affiliate. 

**(zz)** “***Transitional Annual Grant***” means an Option granted to an Eligible Director who meets the specified criteria pursuantto Section 7(c)(ii). 

 

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