©

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.