Settlement Agreement, Executed On March 21, 2005

Exhibit 10.1


SETTLEMENT AGREEMENT


This Settlement Agreement (this " Agreement" ) is entered into as of this 16 th day of March 2005 (the " Effective Date" ) by and between Computer Associates International, Inc., on the one hand, and Quest Software, Inc., Michael J. Friel (" Friel" ), Robert M. Mackowiak (" Mackowiak" ), Elizabeth W. Wahlgren (" Wahlgren" ), Frank L. Bisotti (" Bisotti" ), and Debra A. Jenson (" Jenson" ), on the other hand. Quest Software, Friel, Mackowiak, Wahlgren, Bisotti, and Jenson are referred to collectively in this Agreement as the " Defendants." Computer Associates and Defendants are referred to collectively in this Agreement as the " Parties" and individually as a " Party."


RECITALS

A. Computer Associates is in the business of developing, manufacturing, and licensing certain proprietary computer software programs. Computer Associates asserts that it is the owner of the Enterprise Database Administration software program and copyrights and trade secrets therein, all of which are defined below.


B. Quest Software is in the business of developing, manufacturing, and licensing certain proprietary computer software programs, including database administration programs that function across several database platforms.


C. Friel is, and Mackowiak, Wahlgren, Bisotti, and Jenson were, at the relevant times, employees of Quest Software.


D. On July 2, 2002, Computer Associates filed a lawsuit in the United States District Court for the Northern District of Illinois asserting claims for copyright infringement and trade secret misappropriation against Quest Software, Friel, Mackowiak, Wahlgren, and Jenson. The lawsuit is entitled Computer Associates International, Inc. v. Quest Software, Inc. et al. , Case No. 02 C 4721 (the " Lawsuit" ). In the Lawsuit, Computer Associates sought damages and an injunction.

E. On May 11, 2003, Computer Associates amended its complaint in the Lawsuit to add Bisotti as a defendant on the copyright infringement and trade secret misappropriation claims, and adding breach of contract claims against Jenson, Wahlgren, and Bisotti.


F. On October 16, 2003, Computer Associates filed a Motion for Preliminary Injunction in the Lawsuit.

G. On January 16, 2004, Defendants filed a Counterclaim against Computer Associates in the Lawsuit seeking a declaratory judgment that Computer Associates' copyrights were invalid and unenforceable. Defendants also asserted affirmative defenses of unclean hands, license, fraud on the Copyright Office and copyright misuse.

H. On June 24, 2004, the District Court granted Computer Associates' Motion for Preliminary Injunction against the Defendants.


I. On August 3, 2004, the District Court entered an order enjoining Defendants from, among other things, using or licensing the Quest Central for DB2 product (as defined below).

J. On August 26, 2004, Defendants filed an appeal with the United States Court of Appeals for the Seventh Circuit seeking to dissolve the injunction (the " Appeal" ). The Appeal is still pending.


K. The Parties desire to dismiss the Lawsuit and the Appeal and to resolve, settle, and compromise the Lawsuit and the Appeal.

L. In settlement of this matter, Computer Associates agrees to grant Quest Software a license pursuant to the terms of the License Agreement (attached as Exhibit A), which is concurrently entered into by Computer Associates and Quest Software, in exchange for a lump sum of $16 million dollars from Quest Software, a $25,000.00 payment from Jenson and royalty payments pursuant to the terms of the License Agreement.


M. In settlement of this matter, Friel, Mackowiak, Wahlgren, Bisotti and Jenson agree to a permanent prohibition against making, using, copying, distributing, marketing, selling, or offering to sell EDBA, and otherwise agree to permanently refrain from any acts that would infringe the asserted CA Copyrights or constitute a misappropriation of the asserted CA Trade Secrets, except as allowed under the License Agreement.

N. The Parties desire to enter into this Agreement without making any admissions regarding their respective contentions as to issues involved in the Lawsuit. Defendants specifically deny any and all liability for claims asserted by Computer Associates in the Lawsuit. Computer Associates specifically denies any and all liability for counterclaims asserted by Defendants in the Lawsuit.


NOW THEREFORE , in consideration of the preceding recitals, which are incorporated into and shall constitute terms and conditions of this Agreement, and the mutual promises and consideration set forth below, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:


DEFINITIONS

1. Definitions . The following terms, when used herein with initial capital letters, shall have the meanings ascribed to them below.


a. " Agreed Motion for Voluntary Dismissal" means the agreed motion to be filed in the Court of Appeals for the Seventh Circuit dismissing the Appeal with prejudice attached hereto as Exhibit C.

b. " Agreement" or " Settlement Agreement" shall have the meaning first set forth in the introductory paragraph above.


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c. " CA Claims" means any and all claims or controversies that Computer Associates has asserted in the Lawsuit or could have asserted in the Lawsuit and that are based on or related to facts, circumstances or transactions asserted or discovered in the Lawsuit.


d. " CA Copyrights" means the following asserted Computer Associates' copyright registrations for EDBA: Txu 1-028-946, TX 5-524-580, TX 5-524-581, TX 5-524-582, and TX 5-524-583 (which were attached as Exhibit 1 to Computer Associates' First Amended Complaint).


e. " CA Trade Secrets" means any trade secrets Computer Associates asserts are embedded in or contained within EDBA.

f. " Computer Associates" means Computer Associates International, Inc., a Delaware corporation with its present principal place of business at One Computer Associates Plaza, Islandia, New York 11749, and any parent, subsidiary, division, member and/or affiliated entities, past or present, of any of the foregoing, and any person or entity, past or present, acting on behalf of any of the foregoing, including, but not limited to, each of its respective present and former owners, shareholders, officers, executives, partners, directors, employees, attorneys, agents and/or representatives.


g. " Defendants' Counterclaims" means any counterclaim Defendants have asserted in the Lawsuit or could have asserted in the Lawsuit and that is based on or related to facts, circumstances or transactions asserted or discovered in the Lawsuit, including without limitation the counterclaim asserted by Defendants in the Lawsuit seeking a declaratory judgment that the CA Copyrights are invalid and unenforceable.

h. " Dismissal Orders" means the Agreed Motion for Voluntary Dismissal and the Stipulation of Dismissal, collectively.

i. " EDBA" means any version of Computer Associates' Enterprise Database Administration program and associated object code and source code that existed on or before June 30, 1999.

j. " Effective Date" shall have the meaning first set forth in the introductory paragraph above.

k. " License Agreement" shall refer to the License Agreement (attached as Exhibit A hereto) between Computer Associates and Quest Software, executed herewith.

l. " Quest Central for DB2" means the Quest Software product known as Quest Central for DB2, all alpha and beta versions thereof, versions 1.0 through 4.5 and all subsequent versions derived from such versions, and any other DB2 database management product that is derived from or contains the same source code or any portion thereof.

m. " Quest Software" means Quest Software, Inc., a California corporation with its present principal place of business at 5 Polaris Way, Aliso Viejo, California 92656, and any parent, subsidiary, division, member and/or affiliated entities, past or present, of any of the foregoing, and any person or entity, past or present, acting on behalf of any of the foregoing,


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including, but not limited to, each of its respective present and former owners, shareholders, officers, executives, partners, directors, employees, attorneys, agents and/or representatives, excluding Friel, Mackowiak, Wahlgren, Bisotti and Jenson.

n. " Quest Software' s Customers" means any customer who had a license to, or who submitted a written order for a license to Quest Software for, Quest Central for DB2 on or at any time before June 30, 2004.


o. " Stipulation of Dismissal" means the stipulation to be filed in the District Court dismissing with prejudice the CA Claims and the Defendants' Counterclaims attached hereto as Exhibit B.

SETTLEMENT AGREEMENT AND MUTUAL RELEASE

2. Dismissal.


a. Computer Associates agrees to dismiss with prejudice the CA Claims by executing and providing to Quest Software' s counsel of record this Agreement, the License Agreement and the Dismissal Orders. Defendants shall file the Dismissal Orders only pursuant to the requirements of subsection 2(d).


b. All Defendants agree to execute and provide to Computer Associates' counsel of record this Agreement.

c. Quest Software agrees to execute and provide to Computer Associates' counsel of record the License Agreement.


d. Defendants agree to dismiss with prejudice Defendants' Counterclaims and the Appeal by executing and filing the Dismissal Orders, but only after Quest Software' s counsel of record receives written notification from Computer Associates' counsel of record verifying Computer Associates' receipt of the payment of $16,000,000.00 by Quest Software pursuant to Section 4(a) and Computer Associates' receipt of the payment of $25,000.00 by Jenson pursuant to Section 4(b).

3. Releases; Waiver of Contribution and Indemnification; Limitations.

a. As of the Effective Date, Computer Associates shall, and does hereby, release and forever discharge Quest Software and Quest Software' s Customers, Friel, Mackowiak, Wahlgren, Bisotti, and Jenson, and each of their heirs, executors, legal administrators, successors, and assigns, of and from any and all of the CA Claims, except as limited in Section 3(d) herein.


b. As of the Effective Date, Quest Software, Friel, Mackowiak, Wahlgren, Bisotti and Jenson, and each of their heirs, executors, legal administrators, successors, and assigns, shall, and do hereby, release and forever discharge Computer Associates of and from any and all of the Defendants' Counterclaims, except as limited in Section 3(d) herein.


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c. As a material part of this Agreement, each Defendant agrees that this settlement has been entered into in good faith and that all Defendants are discharged and forever released from any liability for any contribution to any other Defendant relating to the CA Claims. Further, each Defendant agrees to forever waive and not to seek any type of indemnification or contribution from any other Defendant regarding the CA Claims or payments made hereunder.

d. The foregoing releases shall not release or discharge any claims or causes of action that arise after the Effective Date, including without limitation breach of contract, copyright infringement, and trade secret misappropriation, that are based upon or arise out of a breach by any Party of any of the obligations undertaken or made pursuant to this Agreement or the License Agreement.

e. QUEST SOFTWARE ACKNOWLEDGES THAT IT HAS BEEN ADVI ...