EXHIBIT 99.2
QUEST SOFTWARE, INC.
STOCK OPTION AGREEMENT
2001 STOCK INCENTIVE PLAN
THIS STOCK OPTION AGREEMENT (the "Agreement") is entered into by and
between QUEST SOFTWARE, INC., a California corporation (the "Corporation") and
the Optionee identified in the Notice of Grant of Stock Option to which this
Agreement is attached (the "Grant Notice") as of the Grant Date specified in the
Grant Notice.
RECITALS
A. The Corporation has adopted the Quest Software, Inc. 2001 Stock
Incentive Plan (the "Plan") in order to promote the interests of the Corporation
by providing eligible persons with an opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
as an incentive to remain in the Service of the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is intended to carry out the purposes
of the Plan in connection with the Corporation's grant of an option to Optionee
pursuant to the terms and provisions of the Plan.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the Plan.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as of the
Grant Date, an option to purchase up to the number of shares of Common Stock
("Option Shares") specified in the Grant Notice. The Option Shares shall be
purchasable from time to time during the option term specified in Paragraph 2 at
the Exercise Price specified in the Grant Notice (the "Exercise Price").
2. OPTION TERM. This option shall have a term of ten (10) years measured
from the Grant Date and shall accordingly expire at the close of business on the
Expiration Date, unless sooner terminated in accordance with Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. This option may, in connection with the
Optionee's estate plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of the Optionee's immediate family or to a trust
established for the exclusive benefit of one or more such family members;
provided, that the number of Option Shares with respect to which any such
assignment is made shall be limited to the aggregate number of Option Shares for
which this option, at the time of assignment, shall have become exercisable in
accordance with Paragraph 4 below. The assigned portion shall be exercisable
only by the person or persons who acquire a proprietary interest in the option
pursuant to such assignment. The terms applicable to the assigned portion shall
be the same as those in effect for this option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Corporation may deem appropriate. Should the Optionee die while holding this
option, then this option shall be transferred in accordance with Optionee's will
or the laws of descent and distribution.
4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2 shall
terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(a) If Optionee ceases to remain in Service for any reason (other
than death or Permanent Disability or in circumstances involving Detrimental
Activities described in Section 6(b) below) while this option is outstanding,
then Optionee shall have a 30-day period (commencing with the date of such
cessation of Service) during which to exercise this option, but in no event
shall this option be exercisable at any time after the Expiration Date.
(b) If Optionee dies while this option is outstanding, then the
personal representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or in accordance with the
laws of descent and distribution shall have the right to exercise this option.
Such right shall lapse, and this option shall cease to be outstanding, upon the
earlier of (A) the expiration of the twelve (12)- month period measured from the
date of Optionee's death or (B) the Expiration Date.
(c) If Optionee ceases to remain in Service by reason of Permanent
Disability while this option is outstanding, then Optionee shall have a period
of twelve (12) months (commencing with the date of such cessation of Service)
during which to exercise this option, but in no event shall this option be
exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service exercisability, this
option may not be exercised in the aggregate for more than the number of Option
Shares for which the option is exercisable at the time of Optionee's cessation
of Service. Upon the expiration of such limited exercise period or (if earlier)
upon the Expiration Date, this option shall terminate and cease to be
outstanding for any otherwise exercisable Option Shares for which the option has
not been exercised. To the extent this option is not exercisable for one or more
Option Shares at the time of Optionee's cessation of Service, this option shall
immediately terminate and cease to be outstanding with respect to those shares.
6. DETRIMENTAL ACTIVITIES.
(a) If, at any time within (i) 12 months after Optionee ceases to
remain in Service, or (ii) within 12 months after Optionee exercises any portion
of this option, whichever is the latest, Optionee engages in any Detrimental
Activity (as defined below) then (A) this option shall terminate effective
immediately, unless terminated sooner by operation of another term or condition
of this option or the Plan, and shall cease to be outstanding, and (B) the
Corporation may rescind any exercise of this option, in which case Optionee
shall pay to the Corporation the amount of any Option Gain (as defined below)
realized or payment received as a result of the rescinded exercise.
(b) For purposes of this Agreement: "Detrimental Activity" includes:
(1) engaging or participating, directly or indirectly, in any business that is
in competition with or adverse to the business of the Corporation in any manner
whatsoever; (2) soliciting or otherwise inducing the Corporation's employees to
leave the Corporation's business or employ; or (3) any other act of Misconduct
(as such term is defined in the Plan); and "Option Gain" means an amount equal
to the gain represented by the Fair Market Value of the Common Stock on the
Exercise Date over the Exercise Price, multiplied by the number of Option Shares
purchased in such exercise, without regard to any subsequent decrease or
increase in the Fair Market Value of the Option Shares.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to the total number and/or
class of securities subject to this option and the Exercise Price in order to
reflect such change and thereby preclude any dilution or enlargement of benefits
hereunder.
8. SHAREHOLDER RIGHTS. The holder of this option shall not have any
shareholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
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9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or any other person or persons exercising the option) must take the following
actions:
(i) Execute and deliver to the Corporation a Notice of Exercise
(in the form attached to this Agreement) for the Option Shares for which the
option is exercised, which Notice may require the Optionee to certify in a
manner acceptable to the Corporation that Optionee is in compliance with the
terms and conditions of the Plan and this Agreement; and
(ii) Pay the aggregate Exercise Price for the purchased shares
in one or more of the following forms:
(A) Cash, by wire transfer or check made payable to the
Corporation;
(B) a promissory note payable to the Corporation, but only
to the extent authorized by the Plan Administrator in accordance with the Plan;
(C) shares of Common Stock held by Optionee (or any other
person or persons exercising the option) for the requisite period necessary to
avoid a charge to the Corporation's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date; or
(D) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to which
Optionee shall concurrently provide irrevocable instructions (I) to a
Corporation-approved brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (II) to the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm in
order to complete the sale transaction.
Except to the extent the sale and remittance procedure is utilized in
connection with the option exercise, payment of the Exercise Price must
accompany the Notice of Exercise delivered to the Corporation in connection with
the option exercise.
(iii) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the satisfaction of
all Federal, state and local income and employment tax withholding requirements
applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as
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to which such approval shall not have been obtained. The Corporation, however,
shall use its best efforts to obtain all such approvals.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise specifically
provided in this Agreement, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.
12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
13. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
14. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
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