SC TO-I/A

As filed with the Securities and Exchange Commission on June 9, 2008

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE TO-I

(Rule 13e-4)

(Amendment No. 1)

Tender Offer Statement Under Section 14(d)(1) or 13(e)(1)

of the Securities Exchange Act of 1934

QUEST SOFTWARE, INC.

(Name of Subject Company (Issuer) and Filing Person (Offeror))

Options to Purchase Shares of Common Stock, No Par Value

(Title of Class of Securities)

74834T103

(CUSIP Number of Class of Securities of Underlying Common Stock)

J. Michael Vaughn

Vice President and General Counsel

Quest Software, Inc.

5 Polaris Way

Aliso Viejo, California 92656

(949) 754-8000

(Name, address and telephone number of person authorized to receive

notices and communications on behalf of filing person)

Copies to:

Nancy H. Wojtas, Esq.

Cooley Godward Kronish LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, CA 94306-2155

(650) 843-5000

CALCULATION OF FILING FEE

Transaction Valuation*	Amount of Filing Fee**
$3,025,180	$118.89

* Calculated solely for purposes of determining the filing fee. This amount assumes that options to purchase an aggregate of 766,026 shares of common stock of Quest Software, Inc. having an aggregate value of $3,025,180 as of May 30, 2008 will be amended or replaced pursuant to this offer, which may not occur. The aggregate value of such options was calculated based on the Black-Scholes option pricing model as of May 30, 2008.

** The amount of the filing fee, calculated in accordance with Rule 0-11 under the Securities Exchange Act of 1934, as amended, is based on a rate equal to $39.30 per $1,000,000 of transaction valuation. The transaction valuation set forth above was calculated for the sole purpose of determining the filing fee, and should not be used or relied upon for any other purpose.

x Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

Amount Previously Paid: $118.89	Filing Party: Quest Software, Inc.
Form or Registration No.: Schedule TO-I	Date Filed: June 2, 2008

¨ Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the statement relates:

¨ Third-party tender offer subject to Rule 14d-1.

x Issuer tender offer subject to Rule 13e-4.

¨ Going-private transaction subject to Rule 13e-3.

¨ Amendment to Schedule 13D under Rule 13d-2.

Check the following box if the filing is a final amendment reporting the results of the tender offer: ¨

SCHEDULE TO

(Amendment No. 1)

CUSIP No. 74834T103

Explanatory Note

This Amendment No. 1 to Schedule TO amends and supplements the tender offer statement on Schedule TO filed by Quest Software, Inc. (the “Company”) with the Securities and Exchange Commission on June 2, 2008, in connection with the Company’s offer to amend and, if applicable, replace, certain outstanding options to purchase common stock granted under the Company’s 1999 Stock Incentive Plan or 2001 Stock Incentive Plan, upon the terms and conditions set forth in the Offer to Amend or Replace Eligible Options and the accompanying Election Form and other exhibits thereto (collectively, the “Offer Documents”). The information in the Offer Documents, including all exhibits thereto, is hereby expressly incorporated into this Amendment No. 1 by reference to all of the applicable items in Schedule TO, except that such information is hereby amended and supplemented to the extent specifically provided herein. This Amendment No. 1 is filed solely to amend the information provided in the Schedule TO under “Item 12 Exhibits.” and file Exhibits 99.(a)(1)(S), 99.(a)(1)(T), and 99.(a)(1)(U).

ITEM 12. EXHIBITS.

Exhibit Number	Description
99.(a)(1)(A)†	Offer to Amend or Replace Eligible Options.
99.(a)(1)(B)*	Memorandum, dated December 31, 2007, from Quest Software Stock Administration to Quest Software employees.
99.(a)(1)(C)†	Form of Commencement Notice.
99.(a)(1)(D)†	Form of Election Form.
99.(a)(1)(E)†	Form of Election Confirmation Statement.
99.(a)(1)(F)†	Form of Final Election Confirmation Statement: Accepted Offer.
99.(a)(1)(G)†	Form of Final Election Confirmation Statement: Rejected Offer.
99.(a)(1)(H)†	Form of Election Reminder Notice.
99.(a)(1)(I)†	Form of Amended Grant Notice
99.(a)(1)(J)†	Form of Amended Grant Notice—Cancelled.
99.(a)(1)(K)†	Form of Option Agreement.
99.(a)(1)(L)†	Form of New Grant Notice.
99.(a)(1)(M)	Quest Software, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, filed with the SEC on February 25, 2008, and incorporated herein by reference.
99.(a)(1)(N)	Quest Software, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2008, filed with the SEC on May 12, 2008, and incorporated herein by reference.

99.(a)(1)(O)†	Form of email containing personalized Election Form.
99.(a)(1)(P)**	Form of email distributed to certain Quest U.S. employees on January 4, 2008.
99.(a)(1)(Q)**	Form of email distributed to certain Quest Non-U.S. employees on January 4, 2008.
99.(a)(1)(R)**	Form of email distributed to Quest managers on January 4, 2008.
99.(a)(1)(S)	Form of email notice—Informational Sessions on Terms of Tender Offer.
99.(a)(1)(T)	Informational Slide Presentation, presented to U.S. employees of Quest Software.
99.(a)(1)(U)	Informational Slide Presentation, presented to Canadian employees of Quest Software.
99.(b)	Not applicable.
99.(d)(1)(A)	Quest Software, Inc. 1999 Stock Incentive Plan, as amended, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2008, filed with the SEC on May 12, 2008, and incorporated herein by reference.
99.(d)(1)(B)	Quest Software, Inc. 2001 Stock Incentive Plan, as amended, filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2008, filed with the SEC on May 12, 2008, and incorporated herein by reference.
99.(d)(1)(C)	Reference is made to Exhibit 99.(a)(1)(I).
99.(d)(1)(D)	Reference is made to Exhibit 99.(a)(1)(J).
99.(d)(1)(E)	Reference is made to Exhibit 99.(a)(1)(K).
99.(d)(1)(F)	Reference is made to Exhibit 99.(a)(1)(L).
99.(g)	Not applicable.
99.(h)	Not applicable.

* Previously filed with the Preliminary Communications on Schedule TO filed with the Securities and Exchange Commission on December 31, 2007, and incorporated herein by reference.

** Previously filed with the Preliminary Communications on Schedule TO filed with the Securities and Exchange Commission on January 4, 2008, and incorporated herein by reference.

† Previously filed with the Schedule TO, filed with the Securities and Exchange Commission on June 2, 2008, and incorporated by reference herein.

SCHEDULE TO

(Amendment No. 1)

SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated: June 9, 2008.

QUEST SOFTWARE, INC.
By:	/s/ Scott J. Davidson
	Scott J. Davidson, Senior Vice President and Chief Financial Officer

SCHEDULE TO

INDEX OF EXHIBITS

Exhibit Number	Description
99.(a)(1)(A)†	Offer to Amend or Replace Eligible Options.
99.(a)(1)(B)*	Memorandum, dated December 31, 2007, from Quest Software Stock Administration to Quest Software employees.
99.(a)(1)(C)†	Form of Commencement Notice.
99.(a)(1)(D)†	Form of Election Form.
99.(a)(1)(E)†	Form of Election Confirmation Statement.
99.(a)(1)(F)†	Form of Final Election Confirmation Statement: Accepted Offer.
99.(a)(1)(G)†	Form of Final Election Confirmation Statement: Rejected Offer.
99.(a)(1)(H)†	Form of Election Reminder Notice.
99.(a)(1)(I)†	Form of Amended Grant Notice
99.(a)(1)(J)†	Form of Amended Grant Notice—Cancelled.
99.(a)(1)(K)†	Form of Option Agreement.
99.(a)(1)(L)†	Form of New Grant Notice.
99.(a)(1)(M)	Quest Software, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, filed with the SEC on February 25, 2008, and incorporated herein by reference.
99.(a)(1)(N)	Quest Software, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2008, filed with the SEC on May 12, 2008, and incorporated herein by reference.
99.(a)(1)(O)†	Form of email containing personalized Election Form.
99.(a)(1)(P)**	Form of email distributed to certain Quest U.S. employees on January 4, 2008.
99.(a)(1)(Q)**	Form of email distributed to certain Quest Non-U.S. employees on January 4, 2008.
99.(a)(1)(R)**	Form of email distributed to Quest managers on January 4, 2008.
99.(a)(1)(S)	Form of email notice—Informational Sessions on Terms of Tender Offer.
99.(a)(1)(T)	Informational Slide Presentation, presented to U.S. employees of Quest Software.
99.(a)(1)(U)	Informational Slide Presentation, presented to Canadian employees of Quest Software.
99.(b)	Not applicable.

99.(d)(1)(A)	Quest Software, Inc. 1999 Stock Incentive Plan, as amended, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2008, filed with the SEC on May 12, 2008, and incorporated herein by reference.
99.(d)(1)(B)	Quest Software, Inc. 2001 Stock Incentive Plan, as amended, filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2008, filed with the SEC on May 12, 2008, and incorporated herein by reference.
99.(d)(1)(C)	Reference is made to Exhibit 99.(a)(1)(I).
99.(d)(1)(D)	Reference is made to Exhibit 99.(a)(1)(J).
99.(d)(1)(E)	Reference is made to Exhibit 99.(a)(1)(K).
99.(d)(1)(F)	Reference is made to Exhibit 99.(a)(1)(L).
99.(g)	Not applicable.
99.(h)	Not applicable.

* Previously filed with the Preliminary Communications on Schedule TO filed with the Securities and Exchange Commission on December 31, 2007, and incorporated herein by reference.

** Previously filed with the Preliminary Communications on Schedule TO filed with the Securities and Exchange Commission on January 4, 2008, and incorporated herein by reference.

† Previously filed with the Schedule TO, filed with the Securities and Exchange Commission on June 2, 2008, and incorporated by reference herein.

EX-99.(A)(1)(S)

Exhibit 99.(a)(1)(S)

To:	[Eligible Optionee Name]
From:	Amada.ZapataGill@quest.com
Subject:	Informational Sessions on Terms of Tender Offer

On Monday, June 2, 2008, you received emails announcing our Offer to Amend or Replace Eligible Options and providing a personalized election form. These messages relate to our tender offer to address certain potentially adverse tax consequences associated with discounted stock options held by eligible Quest employees.

We will be holding informational sessions on Tuesday, June 10, 2008 to help explain the material terms of the tender offer.

Date and Time

U.S. Employees - The informational session for U.S. employees will be held on Tuesday, June 10, 2008 at 9:30 a.m. Pacific Daylight Time.

Canadian Employees - The informational session for Canadian employees will be held on Tuesday, June 10, 2008 at 11:30 a.m. Pacific Daylight Time.

Location and Access

U.S. Employees - The informational session will be held at Quest Software’s corporate headquarters, 5 Polaris Way, Aliso Viejo, California 92656 in the A1-A031 meeting room in the Merit Property Management building (adjacent to Building 5). Please plan to attend the informational session. If you are unable to attend in person, the informational session will also be conducted via live webcast using Microsoft Office Live Meeting:

{hyperlink}

You may access the audio portion of the presentation by dialing in to the following toll-free telephone number during the session:

Toll-Free: +1 (888) 373-5705

Toll: +1 (719) 457-3840

Participant Code: [********]

Canadian Employees – The informational session will be conducted live via webcast using Microsoft Office Live Meeting:

{hyperlink}

The audio portion of the presentation can be accessed by dialing in to the following toll-free telephone number during the session:

Toll-Free: +1 (888) 373-5705

Toll: +1 (719) 457-3840

Participant Code: [********]

If you have any problems accessing the webcast or audio portion of these meetings, please contact Microsoft Office Live Meeting support at {link}.

Tender Offer Materials Posted on IQ

For your convenience, electronic copies of the Offer to Amend or Replace Eligible Options, the Election Form and each of the other forms of documents relating to the Offer have been posted on the Tender Offer Documents {link} page on IQ.

*****

If you believe you have not received the necessary documentation in connection with the tender offer, or if you have any questions about such documentation, please email your questions to TenderOffer@quest.com.

Participation in the tender offer is voluntary, but may enable you to eliminate or minimize the potentially adverse personal tax consequences you may otherwise incur with respect to certain stock option grants. We strongly recommend that you consult with your personal tax advisor to determine the tax consequences of electing or declining to participate in the tender offer.

IMPORTANT: Whether or not you intend to participate in the tender offer, you must submit an executed Election Form indicating your intention to accept or reject the tender offer by Friday, June 27, 2008 at 11:59 p.m., Pacific Time (or a later time if the offer is extended).

Important Information

THIS MESSAGE IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT AN OFFER TO PURCHASE OR THE SOLICITATION OF AN OFFER TO SELL ANY SECURITIES. THE OFFER TO AMEND IS MADE ONLY PURSUANT TO THE “OFFER TO AMEND OR REPLACE” AND RELATED MATERIALS THAT QUEST SOFTWARE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) AS PART OF A TENDER OFFER STATEMENT ON JUNE 2, 2008, THE DATE OF COMMENCEMENT OF THE TENDER OFFER. OPTION HOLDERS WHO ARE ELIGIBLE TO PARTICIPATE IN THE TENDER OFFER SHOULD READ THE TENDER OFFER STATEMENT AND THE RELATED MATERIALS CAREFULLY BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TENDER OFFER. OPTION HOLDERS MAY OBTAIN THE TENDER OFFER STATEMENT AND THE RELATED MATERIALS FREE OF CHARGE FROM THE SEC’S WEBSITE AT WWW.SEC.GOV OR FROM QUEST SOFTWARE.

EX-99.(A)(1)(T)

©

2008 Quest Software, Inc. ALL RIGHTS RESERVED.

Quest Software, Inc.

Offer to Amend or Replace Eligible Options

Presented by:

Wendy Davis

Exhibit 99.(a)(1)(T)

2

Disclaimer

•

This presentation is only intended to provide you

–

an overview, and

–

an opportunity to ask questions.

•

The actual “Offer”

is contained in the Schedule TO

filed with the Securities and Exchange Commission

on June 2, 2008.

3

What is the Offer?

•

Problem:

–

Some employees hold options with exercise prices that may

be lower than the FMV of our stock on the grant date

(determined for tax and accounting purposes).

–

These

options

are

likely

subject

to

potential

adverse

tax

consequences

under

Section

409A

(“Section

409A”)

of

the

U.S.

Internal

Revenue

Code

(the

“Code”).

60%

-

80%

aggregate

tax

rate

–

even

if

you

never

exercise!

4

What is the Offer?

•

Solution:

–

Amend and, if applicable, replace these options to avoid or

minimize adverse taxation.

–

If options are amended to a price in excess of the current

exercise price, a cash bonus will be paid to offset the

increased exercise price.

5

What is Section 409A?

•

Section 409A is a new tax law intended to address

“abuses”

in deferred compensation –

that is,

compensation which is “earned”

in one year, but paid

and taxed in a later year.

–

Stock options are not “deferred compensation”

subject

to Section 409A IF

they are granted with a strike price

= FMV on the grant date

–

“Discounted”

stock options are “deferred

compensation”

subject to adverse tax consequences

under Section 409A

6

How Did I Receive “Discounted Options”?

•

Quest determined that, with respect to certain option

grants, the measurement date for accounting purposes

differed from the date of grant.

•

FMV on the revised measurement date >

FMV on original

grant date = discounted options

•

Discounted options are taxed as NSOs

and are also

subject to additional 20% -

40% tax

7

U.S. Option Taxation Generally –

NSOs

Example

•

Option is granted with an exercise price of $13 with a 5-

year vesting schedule:

–

No tax at grant

or at vesting

–

Value at exercise

= $20:

•

Employee recognizes $7 of taxable ordinary income at exercise

–

that is, the “gain”

= ($20-$13) = $7

–

Employee

recognizes

capital

gain

or

capital

loss

at

sale

on

any

additional

gain

or

loss

=

(sale

price-$20)

8

U.S. Option Taxation -

Section 409A

•

“Discounted”

options are:

–

In the year that discounted options vest (even if you never

exercise): 

•

Ordinary income and withholding taxes,

•

20% additional federal income tax under 409A,

•

20% additional state income tax under state 409A (e.g., California), and

•

Additional 409A “interest”

taxes (federal and state).

–

Subject to same taxes in the years between vesting and

exercise (even if you never exercise)

–

Subject to same taxes in year of exercise

–

Tax is calculated based on “spread”

at applicable dates

•

In short:  aggregate taxes of approximately 60 -

80% or

more on the “value”

of the option –

even if you never

exercise!

9

U.S. 409A Taxation

Example

•

Option granted on October 1, 2001 for 1,000 shares, with a 5-year

vesting schedule.

•

Exercise price = $10.74

•

Revised measurement date = January 14, 2002

•

FMV on revised measurement date = $24.40.

•

Vesting:  200 shares vest in each of 2002, 2003, 2004, 2005 and 2006

•

CONCLUSION:

400

shares

may

be

subject

to

§409A

because:

–

Option granted at less than FMV on the grant date

–

The 400 shares vested in 2005 and 2006.

10

Example (continued)

•

Assume that, as of 12/31/2008, Quest stock price = $17.00

•

W-2 Income: $2,504.00 = 400 shares x $6.26;  $6.26 = ($17.00-$10.74)

•

Total Taxes:  $2,199.61

Fed Ordinary Income

$   876.40

35.0%

CA Ordinary Income

$   232.87

9.3%

Aggregate Ordinary Income

$ 1,109.27

44.3%

409A Tax (Fed + CA)

$ 1,001.60

40.0%

Interest (Fed + CA)

$      88.74

8.0% of reg

tax*

Tax Rate w/§409A

$ 2,199.61

87.8%**

•

Tax due each year until exercise or expiration based on any increases in the

value (no offset for decreases in value).

*

Assumes an aggregate interest rate on the ordinary income under §409A and applicable CA law

of 8%.  Rate is subject to change based on changes in applicable

federal interest rate.

**

Assumes no deduction for state 409A taxes and certain timing on tax payments that may not be

applicable to your situation.  Consult your own tax advisor to determine your potential tax

liability.

11

Quest’s Offer to Amend or Replace –

U.S.

•

Amend unexercised Eligible U.S. Options to increase the exercise

price to

the lower of (i) FMV on the revised measurement date or (ii) closing price on

the Expiration Date of the Offer.

–

This “lower”

price is the Adjusted U.S. Exercise Price.

–

No additional changes--number of shares, vesting schedule, and

expiration date remain the same. 

•

If Adjusted U.S. Exercise Price would

be the same or lower than the current

“discounted”

price, the Eligible U.S. Option will be:

–

repriced up to the FMV on the revised measurement date,

–

cancelled, and

–

replaced with a new option under the 1999 Plan identical to the existing

option (i.e., keep your current exercise price) but with a new grant date.

–

No additional changes--number of shares, vesting schedule and 

expiration date remain the same.

12

Quest’s Cash Bonus –

U.S.

•

Pay U.S. Cash Bonus if exercise price of amended option

is more than original exercise price.

•

Formula:  the product of

–

the amount by which the Adjusted U.S. Exercise Price

exceeds the exercise price per share currently in

effect for that Eligible U.S. Option and

–

the number of shares of our common stock

purchasable under that Amended U.S. Option

•

Paid lump sum January 2009, whether or not you remain

employed with Quest in January 2009 and whether or not

you ever exercise the options. 

•

No bonus paid on new “replacement”

options

13

Eligibility –

U.S.

•

“Eligible U.S. Optionee”:

–

A current employee (both at start and end of the Offer);

–

Holds an Eligible U.S. Option; and

–

Is or may be subject to US taxation on the Eligible U.S.

Option.

•

“Eligible U.S. Options”:

–

Granted under the 1999 Stock Incentive Plan or the 2001

Stock Incentive Plan;

–

FMV on revised measurement date > current exercise price;

–

Held by an Eligible U.S. Optionee; and

–

Option had not vested in full before January 1, 2005

14

U.S. Example #1 –

Amendment + Cash Bonus

Assume:

•

Your unexercised option covers 1,000 shares with a “grant date”

of 10/1/01

and an exercise price per share of $10.74.

•

Revised measurement date was 1/14/02 with FMV of $24.40 per share.

•

The option vests in annual installments over 5 years, so 400 shares were

unvested on 1/1/05.

•

FMV on the Expiration Date is $17.00 per share.

Analysis:

•

400 shares that had not vested by 1/1/05 = Eligible U.S. Option

•

If you tender your Eligible U.S. Option, then the Eligible U.S. Option will be

amended to increase the exercise price to $17.00 per share for those 400

shares. 

•

You will receive a U.S. Cash Bonus = $2,504:

–

400 shares x $6.26 (that is, $17.00 -

$10.74)

–

Your U.S. Cash Bonus will be paid on Quest’s first regularly scheduled

payroll date in January, 2009, subject to applicable withholdings.

15

U.S. Example #2 –

Amendment + Cash Bonus

Assume:

•

Your unexercised option covers 1,000 shares with a “grant date”

of

4/29/02 and an exercise price per share of $11.91.

•

Revised measurement date was 6/3/02 with FMV of $12.96 per share.

•

The option vests in annual installments over 5 years, so 500 shares

were unvested on 1/1/05.

•

FMV on the Expiration Date is $17.00 per share.

Analysis:

•

500 shares that had not vested by 1/1/05 = Eligible U.S. Option

•

If you tender your Eligible U.S. Option, then the Eligible U.S. Option will

be amended to increase the exercise price to $12.96 per share for

those 500 shares. 

•

You will receive a U.S. Cash Bonus = $525:

–

500 shares x $1.05 (that is, $12.96 -

$11.91)

–

Your U.S. Cash Bonus will be paid on Quest’s first regularly

scheduled payroll date in January, 2009, subject to applicable

withholdings

16

U.S. Example #3 –

Amendment & Replacement

Assume:

•

Your unexercised option covers 1,000 shares with a “grant date”

of 1/2/01

and an exercise price per share of $23.69.

•

Revised measurement date was 5/9/01 with FMV of $31.00 per share.

•

The option vests in annual installments over 5 years, so 400 shares were

unvested on 1/1/05.

•

FMV on the Expiration Date is $17.00 per share.

Analysis:

•

400 shares that had not vested by 1/1/05 = Eligible U.S. Option

•

If you tender your Eligible U.S. Option, then the Eligible U.S. Option will be

amended to increase the exercise price to $31.00 per share for those 400

shares. 

•

The amended option will then be cancelled, and you will be granted a new

option under the 1999 Plan to purchase 400 shares with an exercise price of

$23.69 per share, with no loss of vesting or change in expiration date. 

•

No cash bonus

will be paid to you.

17

What happens if I reject the Offer?

•

U.S. Tax Impact:

–

Income

taxation

prior

to

exercise

•

Ordinary income and withholding taxes

•

20% 409A tax

•

Potential federal tax in the nature of interest

•

State “409A”

income taxes (if applicable, such as CA)

•

Tax due on the increase in “value”

each year until exercise or

expiration of the discounted options.

•

Quest must report the “value”

to the IRS and you may have to amend

prior tax returns.

•

This

Offer

to

Amend

is

a

one-time

offer

to

help

minimize

or

avoid

adverse

tax

consequences.

18

How Do I Participate?

•

Tender Offer Begins: June 2, 2008.

•

Tender Offer Expires: June 27, 2008 = Expiration Date.

–

All elections MUST be received by 11:59 PM (Pacific

Daylight Time) on the Expiration Date.

–

Late submissions will not be accepted.

•

Submit your election via email, fax, hand delivery,

certified mail, FedEx or interoffice mail.

•

Election Confirmation Statement will be emailed to you

within 3 business days.

•

Participation is voluntary -

failure to submit an election

will

be

deemed

an

election

not

to

participate.

19

Where can I get more information?

•

You have received 2 emails that include:

–

Your personalized Election Form

–

Commencement Notice and copies of the Offer to

Amend or Replace and related documents –

all are

part of Schedule TO filed with SEC

•

You may request a written copy of any or all of these

materials at no charge by contacting Quest Stock

Administration at tenderoffer@quest.com.

•

Offer to Amend or Replace and all related documents

and forms are also available on IQ

20

Terms of the Offer

•

Must tender all

Eligible Options in the Offer if you wish to

participate.

•

Participation in the Offer is at your own risk:

–

There is no guarantee that Eligible U.S. Options will not be

subject to potential adverse tax consequences.

•

Acceptance of the Offer and amendment and/or

replacement of your Eligible Options does not occur until

after the Offer expires.

•

Acceptance of the Offer gives you no additional right to

continue to remain employed by or in service of Quest.

21

What About Exercised Options?

•

Only unexercised stock options are eligible for the Offer.

•

Discounted options that were exercised prior to January 1, 2006 are

exempt from Section 409A.

•

Discounted options exercised on or after January 1, 2006 may be

subject to Section 409A taxes:

–

Discounted options that vested before January 1, 2005 are

generally “grandfathered”

and may be exercised without triggering

adverse taxation under Section 409A.

–

Discounted

options

that

are

exercised

in

connection

with

a

termination

of

service

may

be

exempt

–

talk

to

your

tax

advisor.

–

All other exercised discounted options are generally subject to

adverse taxation under Section 409A.

•

Quest has reported or will report such exercise to the IRS and has

sent or will send you a revised W-2 reflecting such exercise.

22

How Do I Accept the Offer?

•

Complete the Election Form indicating acceptance of the

Offer by “checking the box”.

–

Return the Election Form to Quest Stock Plan

Administration.

•

Via facsimile -

Attention:  Tender Offer at (949) 754-1933

•

Via email: TenderOffer@Quest.com

•

Via hand delivery, certified mail, FedEx or interoffice mail to

Amada Zapata-Gill, Quest’s Stock Plan Administrator –

Aliso

Viejo Office.

•

Quest must receive

the Election Form by June 27, 2008,

at 11:59 p.m. Pacific Daylight Time.

23

How Do I Reject the Offer?

•

Complete the Election Form indicating rejection of the

Offer by “checking the box”.

–

Return the Election Form to Quest Stock Administration.

•

Via facsimile, ATTN:  Tender Offer at (949) 754-1933

•

Via email: TenderOffer@Quest.com

•

Via hand delivery, certified mail, FedEx or interoffice mail to

Amada

Zapata-Gill,

Quest’s

Stock

Plan

Administrator

–

Aliso

Viejo

Office.

or

•

Fail to return the Election Form by the deadline.

24

What If I Change My Mind?

•

Elections may be withdrawn or changed at any time,

so long as a new Election Form is received

by

Quest prior to the Expiration Date.

25

What do I need to do?

•

Carefully review the Offer to Amend or Replace, exhibits,

and business and financial information provided to you.

•

Consult with your own tax advisors.

•

Consider which alternative is best for you:

–

Accept the Offer, or

–

Reject the Offer.

•

Quest does not know what choice is best for you and will

not make specific recommendations.

•

If considering exercising your Eligible Options during

2008, consider delaying exercising your Eligible Options

until you have decided what to do about the Offer.  Your

Eligible Options will no longer qualify as “Eligible Options”

once they have been exercised.

26

Risks of U.S. Tax Rule Uncertainty

•

Quest believes that the Offer “cures”

the potential

problem of discounted options under Section 409A,

but it cannot provide an absolute guarantee.

•

Section 409A is relatively new, and guidance from the

Treasury and IRS has been limited and sporadic to

date.

•

No assurance that subsequent guidance may not

cause unfavorable tax consequences to you under

Section 409A, despite your participation in the Offer.

•

State tax law uncertainty.

27

Important Information

THIS PRESENTATION IS FOR INFORMATIONAL PURPOSES ONLY

AND IS NOT AN OFFER TO PURCHASE OR THE SOLICITATION OF

AN OFFER TO SELL ANY SECURITIES.  THE SOLICITATION AND

THE OFFER TO AMEND ARE MADE ONLY PURSUANT TO AN

OFFER TO AMEND AND RELATED MATERIALS THAT QUEST

SOFTWARE FILED WITH THE SECURITIES AND EXCHANGE

COMMISSION (“SEC”) ON JUNE 2, 2008 AS PART OF AN

OFFERING MEMORANDUM.  OPTIONEES WHO ARE ELIGIBLE TO

PARTICIPATE IN THE TENDER OFFER SHOULD READ THE

OFFERING MEMORANDUM AND THE RELATED MATERIALS

CAREFULLY BECAUSE THEY CONTAIN IMPORTANT

INFORMATION ABOUT THE TENDER OFFER.  OPTIONEES MAY

OBTAIN THE OFFERING MEMORANDUM AND THE RELATED

MATERIALS FREE OF CHARGE FROM THE SEC’S WEBSITE AT

WWW.SEC.GOV.

28

Reminders

•

Cooley Godward Kronish LLP is not a financial or investment

advisor.

•

Circular

230

Disclaimer.

THE

FOLLOWING

DISCLAIMER

IS

PROVIDED

IN

ACCORDANCE

WITH

THE

INTERNAL

REVENUE

SERVICE’S

CIRCULAR

230

(21

C.F.R.

PART

10).

THIS

PRESENTATION

IS

NOT

INTENDED

OR

WRITTEN

TO

BE

USED,

AND

IT

CANNOT

BE

USED

BY

YOU

FOR

THE

PURPOSE

OF

AVOIDING

ANY

PENALTIES

THAT

MAY

BE

IMPOSED

ON

YOU.

THIS

PRESENTATION

WAS

WRITTEN

TO

SUPPORT

THE

PROMOTION

OR

MARKETING

OF

PARTICIPATION

IN

THE

COMPANY’S

EQUITY

INCENTIVE

PROGRAMS.

YOU

SHOULD

SEEK

ADVICE

BASED

ON

YOUR

PARTICULAR

CIRCUMSTANCES

FROM

AN

INDEPENDENT

TAX

ADVISOR.

EX-99.(A)(1)(U)

©

2008 Quest Software, Inc. ALL RIGHTS RESERVED.

Quest Software, Inc.

Offer to Amend or Replace Eligible Options

-

Canadian employees -

Presented by:

Ylang

Ha

Exhibit 99.(a)(1)(U)

2

Disclaimer

•

This presentation is only intended to provide you

–

an overview, and

–

an opportunity to ask questions.

•

The actual “Offer”

is contained in the Schedule TO

filed with the Securities and Exchange Commission

on June 2, 2008.

3

What is the Offer?

•

Problem:

–

Some employees hold options with exercise prices that may

be lower than the FMV of our stock on the grant date

(determined for tax and accounting purposes)

–

These options are likely not eligible for the preferential tax

treatment under the Income Tax Act

(Canada) (the

“Canadian

Tax

Act”),

specifically,

the

federal

50%

tax

deduction on the taxable benefit realized at

the time of

exercise.

4

What is the Offer?

•

Solution:

–

Amend and, if applicable, replace these options to

potentially allow Eligible Canadian Optionees to benefit

from the 50% federal tax deduction

–

If the exercise price of the Amended Canadian Option (if it

is not cancelled for a New Canadian Option) or the New

Canadian Option exceeds the current exercise price, a

cash bonus will be paid equal to 150% of the increase in

the exercise price:

•

to offset the increased exercise price; and

•

to compensate Canadian eligible optionees for the fact that

the cash bonus will be fully taxable as employment income

5

How Did I Receive “Discounted Options”?

•

Quest determined that, with respect to certain option

grants, the measurement date for accounting purposes

differed from the date of grant.

•

FMV on the revised measurement date >

FMV on original

grant date = discounted options

•

Discounted options are likely not eligible for the

preferential tax treatment (the 50% federal tax deduction).

6

General Canadian Taxation of Options

•

Grant

and

vesting:

no

tax

•

Exercise:

inclusion

in

employment

income

and

possible

50%

federal

tax

deduction*

–

Assume

an

option

is

granted

with

an

exercise

price

of

$13

and

is

exercised

when

the

fair

market

value

per

share

is

$20

•

Include

$7

($20-$13)

of

employment

benefit

(the

“Taxable

Benefit”)

•

May

deduct

$3.50

(50%

of

Taxable

Benefit

of

$7)

(“50%

Deduction”)

if,

among

other

conditions,

the

exercise

price

of

the

option

paid

by

the

employee

($13)

was

not

less

than

the

FMV

of

such

shares

at

grant.

•

Sale:

Employee

recognizes

capital

gain

on

any

gain

or

loss

=

(sale

price-$20).

The

applicable

tax

rate

on capital gain

is

50%

*

Unless

the

optionholder

is

eligible

for

an

election

to

defer

the

taxation,

which

is

beyond

the

scope

of

presentation

7

Example: Taxation of “Discounted”

Options

•

Grant

and

vesting:

no

tax

•

Exercise:

inclusion

in

employment

income

with

NO

offsetting

50%

deduction

–

Assume

an

option

is

granted

with

an

exercise

price

of

$13

and

is

exercised

when

the

fair

market

value

per

share

is

$20

•

Include

$7

($20-$13)

of

Taxable

Benefit

•

No

50%

deduction

•

Sale:

Employee

recognizes

capital

gain

on

any

gain

or

loss

=

(sale

price-$20).

The

applicable

tax

rate

on capital gain is

50%.

•

In

short:

the

50%

offsetting

deduction

on

the

Taxable

Benefit

is

not

available

on

discounted

options.

8

Quest’s

Offer

to

Amend

or

Replace

-

Canada

•

Amend unexercised Eligible Canadian Options to increase the exercise price

to the FMV on the revised measurement date.

–

This amended exercise price is the Adjusted Canadian Exercise Price

–

This amended option is the Amended Canadian Option.

–

No additional changes--number of shares, vesting schedule, and

expiration date remain the same. 

•

If the Adjusted Canadian Exercise Price would

be higher than the closing

price of a Quest share on the Expiration Date, the Amended Canadian

Option will be:

–

cancelled

–

replaced with a New Canadian Option under the 1999 Plan identical to

the existing option except that it will have:

•

a new exercise price equal to the greater of (i) the current exercise price and

(ii) the closing price of the Quest shares on the Expiration Date

•

a new grant date

–

No additional changes--number of shares, vesting schedule, and

expiration date remain the same.

9

Quest’s Cash Bonus –

Canada

•

Pay Canadian Cash Bonus if the exercise price of the Amended

Canadian Option (if it is not cancelled for a New Canadian Option) or

New Canadian Option is more than the original exercise price

•

Formula:

150

%

of

the

product

of

–

the amount by which the lower of (x) the Adjusted Canadian

Exercise Price and (y) the closing price per Quest share on the

Expiration Date exceeds the exercise price per share currently in

effect for that Eligible Canadian Option

–

the number of Quest shares purchasable under the Amended

Canadian Option

•

Paid lump sum not later than the second regularly scheduled payroll

date after the Expiration Date, whether or not you remain employed

with Quest on that date, and whether or not you ever exercise the

options

10

Eligibility –

Canada

•

“Eligible Canadian Optionee”:

–

A current employee (both at start and end of the Offer);

–

Holds an Eligible Canadian Option; and

–

Is or may be subject to Canadian taxation on the Eligible

Canadian Option.

•

“Eligible Canadian Options”:

–

Granted under the 1999 Stock Incentive Plan or the 2001

Stock Incentive Plan;

–

FMV on revised measurement date > current exercise price;

and

–

Held by an Eligible Canadian Optionee;

11

Canadian Example #1

Amendment + Cash Bonus

Assume:

•

Your unexercised option covers 1,000 shares with a “grant date”

of

4/29/02 and an exercise price of $11.91 per share.

•

Revised measurement date was 6/3/02 with FMV of $12.96 per share.

•

FMV of Quest shares on the Expiration Date is $17.00 per share.

Analysis:

•

If you tender your Eligible Canadian Option, then the Eligible Canadian

Option will be amended to increase the exercise price to $12.96 per

share for all 1,000 shares. 

•

You will receive a Canadian Cash Bonus = $1,575:

–

150% x 1,000 shares x $1.05 (that is, $12.96 -

$11.91)

–

Your Canadian Cash Bonus will be paid not later than our second

regularly scheduled payroll date following the Expiration Date,

subject to applicable withholdings.

12

Canadian Example #2

Amendment + Replacement + Cash Bonus

Assume:

•

Your unexercised option covers 1,000 shares with a “grant date”

of 10/1/01

and an exercise price of $10.74 per share.

•

Revised measurement date was 1/14/02 with FMV of $24.40 per share.

•

FMV on the Expiration Date is $17.00 per share.

Analysis:

•

If you tender your Eligible Canadian Option, then the Eligible Canadian

Option will be amended to increase the exercise price to $24.40 per share

for all 1,000 shares.

•

The amended option will then be cancelled, and you will be granted a new

option under the 1999 Plan to purchase 1,000 shares with an exercise price

of $17.00 per share, with no loss of vesting or change in expiration date. 

•

You will receive a Canadian Cash Bonus = $9,390

–

150% x  1,000 shares x $6.26 (that is, $17.00 -

$10.74)

–

Your Canadian Cash Bonus will be paid not later than our second

regularly scheduled payroll date following the Expiration Date, subject

to applicable withholdings.

13

Canadian Example #3

Amendment + Replacement

Assume:

•

Your

unexercised

option

covers

1,000

shares

with

a

“grant

date”

of

1/2/01 and an exercise price of $23.69 per share.

•

Revised measurement date was 5/9/01 with FMV of $31.00 per

share.

•

FMV on the Expiration Date is $17.00 per share.

Analysis:

•

If you tender your Eligible Canadian Option, then the Eligible

Canadian Options will be amended to increase the exercise price to

$31.00 per share for all 1,000 shares.

•

The amended option will then be cancelled, and you will be granted

a new option under the 1999 Plan to purchase 1,000 shares with an

exercise price of $23.69 per share, with no loss of vesting or change

in expiration date. 

•

No cash bonus

will be paid to you.

14

What happens if I reject the Offer?

•

Canadian Tax Impact:

–

Unlikely to benefit from 50% Deduction

•

Quest must make applicable withholdings and report to the

Canadian tax authorities in respect of the Taxable Benefit,

without recognizing the 50% Deduction

•

This

Offer

to

Amend

is

a

one-time

offer

to

help

eligible

optionees potentially benefit from the preferential tax

treatment under the Canadian Tax Act.

15

How Do I Participate?

•

Tender Offer Begins: June 2, 2008.

•

Tender Offer Expires: June 27, 2008 = Expiration Date.

–

All elections MUST be received by 11:59 PM (Pacific

Daylight Time) on the Expiration Date.

–

Late submissions will not be accepted.

•

Submit your election via email, fax, hand delivery,

certified mail, FedEx or interoffice mail.

•

Election Confirmation Statement will be emailed to you

within 3 business days.

•

Participation

is

voluntary

-

failure

to

submit

an

election

will

be

deemed

an

election

not

to

participate.

16

Where can I get more information?

•

You have received 2 emails that include:

–

Your personalized Election Form

–

Commencement Notice and copies of the Offer to

Amend or Replace and related documents –

all are

part of Schedule TO filed with SEC

•

You may request a written copy of any or all of these

materials at no charge by contacting Quest Stock

Administration at tenderoffer@quest.com.

•

Offer to Amend or Replace and all related documents

and forms are also available on IQ

17

Terms of the Offer

•

Must tender all

Eligible Options in the Offer if you wish to

participate.

•

Participation in the Offer is at your own risk:

–

There is no guarantee that Eligible Canadian Options will benefit

from the 50% Deduction upon the acceptance of the Offer.

–

There are certain tax risks due to the uncertainty of the tax

consequences that may arise upon your acceptance of the Offer.

•

Acceptance of the Offer and amendment and/or

replacement of your Eligible Options does not occur until

after the Offer expires.

•

Acceptance of the Offer gives you no additional right to

continue to remain employed by or in service of Quest.

18

How Do I Accept the Offer?

•

Complete the Election Form indicating acceptance of the

Offer by “checking the box”.

–

Return the Election Form to Quest Stock Plan

Administration.

•

Via facsimile -

Attention:  Tender Offer at (949) 754-1933

•

Via email: TenderOffer@Quest.com

•

Via hand delivery, certified mail, FedEx or interoffice mail to

Amada

Zapata-Gill,

Quest’s

Stock

Plan

Administrator

–

Aliso

Viejo Office.

•

Quest

must

receive

the

Election

Form

by

June

27,

2008,

at 11:59 p.m. Pacific Daylight Time.

19

How Do I Reject the Offer?

•

Complete the Election Form indicating rejection of the

Offer by “checking the box”.

–

Return the Election Form to Quest Stock Administration.

•

Via facsimile, ATTN:  Tender Offer at (949) 754-1933

•

Via email: TenderOffer@Quest.com

•

Via hand delivery, certified mail, FedEx or interoffice mail to

Amada

Zapata-Gill,

Quest’s

Stock

Plan

Administrator

–

Aliso

Viejo Office.

or

•

Fail to return the Election Form by the deadline.

20

What If I Change My Mind?

•

Elections may be withdrawn or changed at any time,

so long as a new Election Form is received

by

Quest prior to the Expiration Date.

21

What do I need to do?

•

Carefully review the Offer to Amend or Replace, exhibits,

business and financial information provided to you.

•

Consult with your own tax advisors.

•

Consider which alternative is best for you:

–

Accept

the

Offer,

or

–

Reject the Offer.

•

Quest does not know what choice is best for you and will

not make specific recommendations.

•

If considering exercising your Eligible Options during

2008, consider delaying exercising your Eligible Options

until you have decided what to do about the Offer.  Your

Eligible Options will no longer qualify as “Eligible Options”

once they have been exercised.

22

Risks of Canadian Tax Rule Uncertainty

•

There is no guarantee that Eligible Canadian Options

will benefit from the 50% Deduction upon the

acceptance of the Offer

–

Uncertainties under Canadian tax rules whether the “measurement

date”

is

the

“grant

date”

for

tax

purposes,

–

The 50% Deduction is subject to many other conditions which we

cannot predict will be met

•

The tax consequences to upward repricing is unclear;

there is a risk that CRA would take the position that

certain adverse tax consequences may arise upon the

acceptance of the Offer. 

23

Important Information

THIS PRESENTATION IS FOR INFORMATIONAL PURPOSES ONLY

AND IS NOT AN OFFER TO PURCHASE OR THE SOLICITATION OF

AN OFFER TO SELL ANY SECURITIES.  THE SOLICITATION AND

THE OFFER TO AMEND ARE MADE ONLY PURSUANT TO AN

OFFER TO AMEND AND RELATED MATERIALS THAT QUEST

SOFTWARE FILED WITH THE SECURITIES AND EXCHANGE

COMMISSION (“SEC”) ON JUNE 2, 2008 AS PART OF AN

OFFERING MEMORANDUM.  OPTIONEES WHO ARE ELIGIBLE TO

PARTICIPATE IN THE TENDER OFFER SHOULD READ THE

OFFERING MEMORANDUM AND THE RELATED MATERIALS

CAREFULLY BECAUSE THEY CONTAIN IMPORTANT

INFORMATION ABOUT THE TENDER OFFER.  OPTIONEES MAY

OBTAIN THE OFFERING MEMORANDUM AND THE RELATED

MATERIALS FREE OF CHARGE FROM THE SEC’S WEBSITE AT

WWW.SEC.GOV.

24

Reminders

•

Cooley Godward Kronish LLP and McCarthy Tetrault LLP are not

financial or investment advisors.

•

Circular

230

Disclaimer.

THE

FOLLOWING

DISCLAIMER

IS

PROVIDED IN ACCORDANCE WITH THE INTERNAL REVENUE

SERVICE’S CIRCULAR 230 (21 C.F.R. PART 10). THIS

PRESENTATION IS NOT INTENDED OR WRITTEN TO BE USED,

AND IT CANNOT BE USED BY YOU FOR THE PURPOSE OF

AVOIDING ANY PENALTIES THAT MAY BE IMPOSED ON YOU. 

THIS PRESENTATION WAS WRITTEN TO SUPPORT THE

PROMOTION OR MARKETING OF PARTICIPATION IN THE

COMPANY’S EQUITY INCENTIVE PROGRAMS.  YOU SHOULD

SEEK ADVICE BASED ON YOUR PARTICULAR

CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.