10-Q

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

/x/
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2001

or

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to               

Commission file number 0-21342

WIND RIVER SYSTEMS, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation or organization) 94-2873391
(I.R.S. Employer
Identification Number)

500 Wind River Way, Alameda, California 94501
(Address of principal executive offices, including zip code)

(510) 748-4100
(Registrant's telephone number, including area code)

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes /x/  No / /

    As of November 30, 2001, there were 78,027,389 shares of the registrant's common stock outstanding.

WIND RIVER SYSTEMS, INC.
FORM 10-Q
FOR THE QUARTER ENDED OCTOBER 31, 2001
INDEX

Part I.	Financial Information
	Item 1.	Financial Statements (Unaudited)
		a)	Condensed Consolidated Statements of Operations for the three and nine month periods ended October 31, 2001 and 2000	3
		b)	Condensed Consolidated Balance Sheets at October 31, 2001 and January 31, 2001	4
		c)	Condensed Consolidated Statements of Cash Flows for the nine month periods ended October 31, 2001 and 2000	5
		d)	Notes to Condensed Consolidated Financial Statements	6
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		18
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		40
Part II.	Other Information
	Item 1.	Legal Proceedings		42
	Item 2.	Changes in Securities and Use of Proceeds		42
	Item 3.	Defaults Upon Senior Securities		43
	Item 4.	Submission of Matters to a Vote of Security Holders		43
	Item 5.	Other Information		43
	Item 6.	Exhibits and Reports on Form 8-K		44
Signature				45

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Part I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WIND RIVER SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

(Unaudited)

					Three Months Ended October 31,						Nine Months Ended October 31,
					2001			2000			2001			2000
Revenues, net:
	Products				$	53,000		$	82,621		$	181,220		$	213,685
	Services					27,145			32,217			89,347			94,052
		Total revenues, net				80,145			114,838			270,567			307,737
Cost of revenues:
	Products					6,140			9,250			19,906			26,374
	Services					13,842			16,573			47,160			45,729
		Total cost of revenues				19,982			25,823			67,066			72,103
			Gross profit			60,163			89,015			203,501			235,634
Operating expenses:
	Selling and marketing					35,104			45,246			118,299			125,452
	Product development and engineering					21,640			22,357			68,667			59,814
	General and administrative					8,802			10,547			28,642			29,587
	Amortization of goodwill and purchased intangibles					13,554			28,449			69,361			64,780
	Restructuring costs					—			—			28,615			—
	Impairment of goodwill and purchased intangibles					—			—			225,418			—
	Acquisition related costs and other					—			100			—			31,848
			Total operating expenses			79,100			106,699			539,002			311,481
				Loss from operations		(18,937	)		(17,684	)		(335,501	)		(75,847	)
Other income:
	Interest income					3,624			4,965			13,455			15,412
	Interest expense					(1,205	)		(1,750	)		(4,705	)		(5,250	)
	Other income (expense), net					(5,126	)		1,475			(7,291	)		9,412
			Total other income (expense)			(2,707	)		4,690			1,459			19,574
Loss before provision (benefit) for income taxes and extraordinary gain						(21,644	)		(12,994	)		(334,042	)		(56,273	)
Provision (benefit) for income taxes						(1,843	)		3,000			(7,841	)		9,500
Loss before extraordinary gain						(19,801	)		(15,994	)		(326,201	)		(65,773	)
Extraordinary gain, net of income taxes						568			—			568			—
				Net loss	$	(19,233	)	$	(15,994	)	$	(325,633	)	$	(65,773	)
Extraordinary gain per share					$	0.01		$	—		$	0.01		$	—
Basic and diluted net loss per share					$	(0.25	)	$	(0.22	)	$	(4.21	)	$	(0.92	)
Shares used in per share calculation:
		Basic and diluted				77,820			74,195			77,320			71,230

The accompanying notes are an integral part of these condensed consolidated financial statements.

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WIND RIVER SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)

(Unaudited)

				October 31, 2001			January 31, 2001
ASSETS
Current assets:
	Cash and cash equivalents			$	72,125		$	92,431
	Short-term investments				21,449			41,725
	Accounts receivable, net				77,266			117,530
	Prepaid and other current assets				30,475			41,304
		Total current assets			201,315			292,990
Investments					90,017			155,412
Property and equipment, net					63,751			66,989
Intangibles, net					156,557			403,238
Other assets					15,097			23,552
Restricted cash					63,683			61,324
			Total assets	$	590,420		$	1,003,505
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	7,530		$	15,977
	Line of credit				16,728			14,858
	Accrued liabilities				19,272			27,347
	Accrued restructuring costs				14,969			—
	Accrued compensation				22,863			27,011
	Income taxes payable				6,790			8,949
	Convertible subordinated debt				64,540			—
	Deferred revenues				37,125			53,621
		Total current liabilities			189,817			147,763
	Deferred taxes payable				5,455			8,988
	Long-term debt and other				483			140,007
		Total liabilities			195,755			296,758
Commitments and contingencies (Note 12)
Stockholders' equity:
	Common stock, par value $.001; 325,000 shares authorized; 79,247 and 77,866 shares issued at October 31, 2001 and January 31, 2001, respectively; 77,970 and 76,589 shares outstanding at October 31, 2001 and January 31, 2001, respectively				80			78
	Additional paid-in capital				729,562			715,156
	Loan to stockholder				(1,866	)		(1,787	)
	Treasury stock, 1,277 shares at cost				(29,488	)		(29,488	)
	Accumulated other comprehensive loss				(1,489	)		(711	)
	Retained earnings (accumulated deficit)				(302,134	)		23,499
		Total stockholders' equity			394,665			706,747
			Total liabilities and stockholders' equity	$	590,420		$	1,003,505

The accompanying notes are an integral part of these condensed consolidated financial statements.

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WIND RIVER SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

					Nine Months Ended October 31,
					2001			2000
Cash flows from operating activities:
	Net loss				$	(325,633	)	$	(65,773	)
	Adjustments to reconcile net loss to net cash provided by (used in) operations:
		Impairment of goodwill and purchased intangibles				225,418			—
		Depreciation and amortization				83,676			76,725
		Impairment of non-publicly and publicly traded investments				11,146			—
		Non-cash compensation and restructuring charges				3,619			—
		Impairment of capitalized internal use software				1,204			—
		Realized gain on repurchase of convertible subordinated notes				(1,202	)		—
		Deferred income taxes				(4,919	)		(1,684	)
		Minority interest in consolidated subsidiary				—			(780	)
		Acquired in-process research and development				—			4,800
		Changes in assets and liabilities:
			Accounts receivable, net			40,264			(16,785	)
			Prepaid and other short-term assets			10,807			(2,256	)
			Accounts payable			(8,447	)		735
			Accrued liabilities			(11,878	)		2,441
			Accrued restructuring costs			14,969			—
			Accrued compensation			(4,148	)		9,432
			Income taxes payable			(2,159	)		10,303
			Deferred revenue			(16,496	)		3,986
			Other assets and liabilities			2,875			(7,421	)
				Net cash provided by operating activities		19,096			13,723
Cash flows from investing activities:
	Acquisition of property and equipment					(14,169	)		(16,228	)
	Capitalized software development costs					(801	)		—
	Purchases of investments					(217,247	)		(86,983	)
	Sales and maturities of investments					300,030			104,564
	Acquisitions, net of cash acquired					(43,427	)		(28,670	)
	Restricted cash					(1,982	)		(16,353	)
				Net cash provided by (used in) investing activities		22,404			(43,670	)
Cash flows from financing activities:
	Issuance of common stock, net					12,200			40,429
	Repurchase of convertible subordinated notes					(74,458	)		—
	Repayment of bank borrowings					—			(3,553	)
	Borrowings against line of credit					1,870			1,410
	Repayment (loan) to stockholder					(79	)		1,622
				Net cash provided by (used in) financing activities		(60,467	)		39,908
Effect of exchange rate changes on cash and cash equivalents						(1,339	)		(2,269	)
				Net increase (decrease) in cash and cash equivalents		(20,306	)		7,692
Cash and cash equivalents at beginning of period						92,431			77,929
Cash and cash equivalents at end of period					$	72,125		$	85,621

The accompanying notes are an integral part of these condensed consolidated financial statements.

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WIND RIVER SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1: BASIS OF PRESENTATION

    The accompanying condensed consolidated financial statements and related notes of Wind River Systems, Inc. ("Wind River") are unaudited. However, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of the financial position as of October 31, 2001 and January 31, 2001, the results of operations for the three and nine months ended October 31, 2001 and 2000, and cash flows for the nine months ended October 31, 2001 and 2000 have been included. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Wind River's Annual Report on Form 10-K filed on May 1, 2001 with the Securities and Exchange Commission ("2001 Form 10-K"). The results of operations for the three and nine months ended October 31, 2001 are not necessarily indicative of results to be expected for the entire fiscal year, which ends on January 31, 2002, or for any future period.

    In accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"), unaudited condensed consolidated financial statements may omit or condense certain information and disclosures normally required for a complete set of financial statements prepared in accordance with generally accepted accounting principles. Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles ("GAAP"), have been condensed or omitted pursuant to such rules and regulations. The January 31, 2001 consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. However, Wind River believes that the notes to the condensed consolidated financial statements contain disclosures adequate to make the information presented not misleading.

    The condensed consolidated financial statements include the financial information of Wind River and its subsidiaries. All significant inter-company accounts and transactions have been eliminated. Wind River has a fiscal year end of January 31. Its international subsidiaries (outside of North America) have fiscal year ends of December 31. The condensed consolidated financial statements for the three and nine months ended October 31, 2001 and 2000 include the international subsidiaries' results for the three and nine months ended September 30, 2001 and 2000, respectively. Acquisitions that have been accounted for as purchase transactions, including Eonic Systems, NV ("Eonic") in the first quarter of fiscal 2002, Berkeley Software Designs, Inc. ("BSDI") in the second quarter of fiscal 2002, the Telenetworks division of Next Level Communications, Inc. ("Telenetworks") in the third quarter of fiscal 2002, Embedded Support Tools Corporation ("Embedded Support Tools") in the first quarter of fiscal 2001, AudeSi Technologies, Inc. ("AudeSi") and ICESoft AS ("ICESoft") in the second quarter of fiscal 2001, and Rapid Logic, Inc. ("Rapid Logic") in the third quarter of fiscal 2001, have been included in the condensed consolidated results from the date of their acquisition. All historical information has also been restated to reflect the acquisition in the first quarter of fiscal 2001 of Integrated Systems, Inc. ("Integrated Systems"), which was accounted for as a pooling of interests.

    Certain amounts have been reclassified to conform to the current period's presentation.

NOTE 2: ACQUISITIONS

    Wind River has completed a number of acquisitions accounted for as purchase transactions. The consolidated financial statements include the operating results of each business from the date of acquisition. The purchase price for each acquisition is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of the estimated fair values on the effective date of their acquisition. For the acquisitions that occurred during fiscal 2002, Wind River is

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still refining its purchase price allocation and there may be some resulting adjustments in future periods.

    On March 31, 2000, Wind River completed its acquisition of Embedded Support Tools in a stock-for-stock merger transaction. Embedded Support Tools is a provider of integrated hardware and software for programming, testing and debugging embedded systems. In connection with the acquisition: (a) each outstanding share of Embedded Support Tools common stock was exchanged for 0.4246 of a share of Wind River common stock, resulting in the issuance of an aggregate of 5,474,788 shares of Wind River common stock for all outstanding shares of Embedded Support Tools common stock; and (b) all options to purchase shares of Embedded Support Tools common stock outstanding immediately prior to the consummation of the acquisition were converted into options to purchase 1,122,855 shares of Wind River common stock. The total purchase price of $331.6 million consisted of common stock with a fair market value of $275.7 million, options assumed with a fair market value of $51.5 million, assumed liabilities of $6.2 million and merger costs of $1.9 million. Wind River recorded an expense of $3.7 million for the in-process research and development, which was charged against earnings in the first quarter of fiscal year 2001.

    The following unaudited pro forma summary presents the consolidated results of operations as if the Embedded Support Tools acquisition had occurred at the beginning of the three and nine month periods ended October 31, 2000 and does not purport to be indicative of the results that would have been achieved had the acquisition been made as of those dates nor of the results which may occur in the future.

In thousands, except per share data	Three Months Ended October 31, 2000			Nine Months Ended October 31, 2000
Net revenue	$	114,278		$	309,724
Net loss	$	(15,540	)	$	(80,712	)
Net loss per share—basic and diluted	$	(0.22	)	$	(1.17	)

    On May 1, 2000, Wind River acquired AudeSi in a transaction involving Canadian exchangeable shares. AudeSi is a supplier of Java™ based tools and other components for building flexible, multi-application consumer devices. In connection with the acquisition: (a) each outstanding share of AudeSi common stock was exchanged for .0927 of an exchangeable share in AudeSi and each such exchangeable share is or will be by its terms, exchangeable on a share-for-share basis for a share of Wind River common stock (the exchange of all such exchangeable shares requiring the ultimate issuance of an aggregate of 957,169 shares of Wind River common stock), and (b) all options to purchase AudeSi common stock outstanding immediately prior to the consummation of the acquisition were converted into options to purchase 119,488 shares of Wind River common stock. The total purchase price of $52.4 million consisted of common stock with a fair market value of $47.2 million, options assumed with a fair market value of $4.7 million and merger costs of $500,000. In connection with the acquisition, Wind River recorded an expense of $1.0 million for in-process research and development, which was charged against earnings in the second quarter of fiscal year 2001. Pro forma results of this purchase have not been presented because the effects were not material to the condensed consolidated financial statements of Wind River.

    On July 14, 2000, Wind River acquired ICESoft, which is a developer of embedded Internet browsing technologies for intelligent devices. In connection with the acquisition, Wind River paid cash of approximately $24.5 million for ICESoft. ICESoft is located in Norway and is considered an international entity; therefore, the results of its operations were included from the date of acquisition. The purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their estimated fair values as of the effective date of the acquisition.

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Pro forma results of this purchase have not been presented because the effects were not material to the condensed consolidated financial statements of Wind River.

    On October 24, 2000, Wind River completed its acquisition of Rapid Logic in a stock-for-stock merger transaction. Rapid Logic is a provider of advanced device management technologies for networking equipment and other intelligent devices. In connection with the acquisition: (a) each outstanding share of Rapid Logic common stock was exchanged for 0.0730 of a share of Wind River common stock, resulting in the issuance of an aggregate of 1,244,940 shares of Wind River common stock for all outstanding shares of Rapid Logic common stock, and (b) all options to purchase shares of Rapid Logic common stock outstanding immediately prior to the consummation of the acquisition were converted into fully-vested options to purchase 126,298 shares of Wind River common stock. The total purchase price of approximately $57.5 million consisted of common stock with a fair market value of $51.8 million, options assumed with a fair market value of $5.0 million and merger costs of $700,000. In connection with the acquisition, Wind River recorded an expense of $3.25 million for in-process research and development, which was charged against earnings in the fourth quarter of fiscal year 2001. Pro forma results of this purchase have not been presented because the effects were not material to the condensed consolidated financial statements of Wind River.

    On April 18, 2001, Wind River purchased certain identified software products, including an operating system for digital signal processors from Eonic. The total purchase price of $15.5 million consisted of $15.0 million in cash and approximately $542,000 in acquisition related costs. Pro forma results of this purchase have not been presented because the effects were not material to the condensed consolidated financial statements of Wind River. The allocation of the purchase price is summarized below (in thousands):

Completed technology		$	2,370
Workforce			320
Customer base			940
Non-compete agreement			560
Net tangible assets			108
Goodwill			11,244
	Total	$	15,542

    On May 4, 2001, Wind River purchased from BSDI certain identified software products, including the BSDI operating system, a UNIX based code suitable for various Internet applications. The total purchase price of $23.4 million consisted of approximately $22.9 million in cash and $507,000 in acquisition related costs. Prior to the closing of the transaction, Wind River loaned $7.5 million to BSDI to repay BSDI creditors. Pro forma results of this purchase have not been presented because the effects were not material to the condensed consolidated financial statements of Wind River. The allocation of the purchase price is summarized below (in thousands):

Completed technology		$	2,600
Workforce			2,000
Trademark			420
Customer base			390
Net liabilities assumed			(90	)
Goodwill			18,073
	Total	$	23,393

    On October 10, 2001, Wind River purchased the assets of Telenetworks, a business unit of Next Level Communications, Inc. The assets acquired in the transaction include software stacks that

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implement the signaling and control mechanisms used in voice-over-IP networks, customer lists and other assets. The total net purchase price of $5.6 million consisted of approximately $5.5 million in net cash and $100,000 in acquisition related costs. This acquisition resulted in intangible assets of $5.6 million that have been temporarily allocated to goodwill pending finalization of the purchase price allocation. Wind River is currently allocating the purchase price between the identifiable intangible assets acquired on the basis of their estimated fair values as of the effective date of the acquisition. Pro forma results of this purchase have not been presented because the effects were not material to the condensed consolidated financial statements of Wind River.

    Refer to Note 3 of Notes to Consolidated Financial Statements of Wind River's 2001 Form 10-K for further details of acquisitions completed during the three and nine month periods ended October 31, 2000 and the fiscal year ended January 31, 2001.

NOTE 3: RESTRUCTURING COSTS

    In May 2001, Wind River announced cost control measures that include a reduction of its worldwide work force, organizational restructuring and additional measures focused on reducing operational expenses. Wind River made both permanent and temporary adjustments to its operations in order to optimize operating efficiency. In July 2001, Wind River announced the second phase of the restructuring program that included an additional reduction in the worldwide work force and the consolidation of excess facilities.

    As a result of the decision to restructure its business, during the quarter ended July 31, 2001, Wind River recorded restructuring costs of $28.6 million classified as operating expenses. The following paragraphs provide detailed information relating to the restructuring costs that were recorded during the second quarter of fiscal 2002.

WORLDWIDE WORK FORCE REDUCTION

    The restructuring program will result in the reduction of approximately 425 regular employees across all business functions, operating units, and geographic regions. The worldwide work force reductions started in the second quarter of fiscal 2002 and will be substantially completed by the first half of fiscal 2003. Wind River recorded a work force reduction charge of approximately $20.1 million relating primarily to severance payments and the continuation of benefits. In addition, the number of contractors and temporary workers employed by Wind River were reduced. Equipment disposed of or removed from operations as a result of the work force reduction resulted in a charge of $765,000 and consisted primarily of computer equipment.

CONSOLIDATION OF EXCESS FACILITIES

    During the quarter ended July 31, 2001, Wind River recorded a restructuring charge of $8.5 million relating to excess facilities. The excess facilities, primarily located in the United States and the United Kingdom, include the closure of certain leased corporate facilities and sales offices that related to business activities that have been restructured. The estimated excess facility costs represent the remaining lease payments and estimated costs less estimated proceeds from sub-leasing certain facilities that are being exited. The estimated proceeds from sub-leasing these facilities are based on current comparable rates for leases in the respective markets. Should facilities operating lease rental rates continue to decrease in these markets or should it take longer than expected to find a suitable tenant to sublease these facilities, the actual loss could exceed this estimate. Cash related charges of $7.8 million relate primarily to lease terminations and non-cancelable lease costs related to the excess facilities. Non-cash related charges of $646,000 relate primarily to the impairment of leasehold improvements.

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    A summary of the restructuring costs is outlined as follows (in thousands):

		Total charges		Non-cash charges		Cash payments		Restructuring liabilities at October 31, 2001
Work force reduction		$	20,132	$	765	$	12,142	$	7,225
Consolidation of excess facilities			8,483		646		93		7,744
	Total	$	28,615	$	1,411	$	12,235	$	14,969

    Wind River expects to substantially complete implementation of its work force reduction program by the first half of fiscal 2003. Amounts accrued related to the net future payments due to the excess facilities will be paid through fiscal 2011 unless Wind River successfully negotiates to exit the leases at an earlier date.

NOTE 4: IMPAIRMENT OF GOODWILL AND INTANGIBLES

    During the second quarter of fiscal year 2002, Wind River identified indicators of possible impairment of goodwill and other acquired intangible assets relating to previous acquisitions. These indicators included the deterioration in the business climate, recent changes in sales and cash flow forecasts, strategic plans for certain of the acquired businesses and significant declines in the market values of companies in the embedded software industry. Accordingly, Wind River compared the undiscounted cash flows associated with the acquired goodwill and purchased intangible assets with the respective carrying amounts and determined that an impairment of certain of these assets existed. As a result, during the quarter ended July 31, 2001, Wind River recorded an aggregate charge of $225.4 million, of which, $223.6 million related to the impairment of goodwill and $1.8 million related to the impairment of purchased intangible assets. The impaired amount was measured as the amount by which the carrying amount exceeded the present value of the estimated future cash flows for goodwill and purchased intangible assets, as follows (in thousands):

Acquired Company		Amount Impaired
Embedded Support Tools		$	167,482
AudeSi			27,893
Software Development Systems, Inc.			14,788
ICESoft			15,255
	Total	$	225,418

    The impairment charge for those assets held for use was determined based upon the estimated discounted cash flows over the remaining useful life of the goodwill using discount rates ranging from 17% to 23%. The assumptions supporting the cash flows, including the discount rates, were determined using Wind River's best estimates as of the date of the impairment review. The impairment charge for those assets held for disposal was determined based on the expected proceeds of disposition. Wind River expects to complete the disposition of the assets held for disposal by the end of fiscal 2002. As of October 31, 2001, Wind River had goodwill and purchased intangible assets of approximately $156.6 million which are being amortized over their remaining useful lives until Wind River adopts Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" (see Note 15).

NOTE 5: REVENUE RECOGNITION

    Wind River recognizes revenues in accordance with Statement of Position ("SOP") 97-2, "Software Revenue Recognition," as amended, SOP 81-1, "Accounting for Performance of Construction-Type and Certain Production-Type Contracts," and Staff Accounting Bulletin ("SAB") 101, "Revenue

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Recognition," which outline the basic criteria that must be met to recognize revenues and provides guidance for presentation of revenue and for disclosure related to revenue recognition policies in financial statements filed with the SEC.

    Product revenues consist of royalties and fees for operating systems and fees for the use of development tools. Service revenues are derived from fees from professional services, which include design and development fees, software maintenance contracts, and customer training and consulting. Maintenance contract renewals are generally sold separately from the products. Wind River's customers consist of end users, distributors, original equipment manufacturers, system integrators and value-added resellers.

    Product revenues for software are recognized at the time of shipment or upon the delivery of a product master in satisfaction of non-cancelable contractual agreements provided that collection of the resulting receivable is reasonably assured, the fee is fixed or determinable and vendor-specific objective evidence ("VSOE") exists to allocate the total fee to all delivered and undelivered elements of the arrangement. If evidence of fair value of all undelivered elements exists but evidence does not exist for one or more delivered elements, then revenue is recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. Any maintenance included in these arrangements is deferred based on VSOE and recognized ratably over the term of the arrangement. Product revenues for hardware are recognized upon shipment provided that persuasive evidence of an arrangement exists, no significant obligations remain, the fee is fixed and determinable, and collectibility is considered reasonably assured. Wind River accrues for warranty costs, sales returns, and other allowances based on its experience.

    Service revenues from engineering services contracts are recognized on the percentage-of-completion basis, or as performed. Service revenues from software maintenance, support and update fees are recognized ratably over the contract period. Services revenues from training and consulting are recognized when the services are provided.

    Deferred revenues result primarily from customer prepayments under software maintenance contracts, which are recognized ratably over the life of the agreements; certain run-time agreements, which are recognized as target license delivery criteria are met; and professional services and engineering services contracts or training arrangements, which are recognized as services are performed.

NOTE 6: CASH AND CASH EQUIVALENTS, INVESTMENTS AND RESTRICTED CASH

    Cash equivalents consist of highly liquid investments with remaining maturity at the date of purchase of three months or less. These investments consist of fixed income securities, which are readily convertible to cash and are stated at cost, which approximates fair value. Fair value is determined based upon the quoted market prices of the securities as of the balance sheet date.

    Investments with original maturities greater than three months and less than one year from the date of purchase are classified as short-term investments. Investments with maturities greater than one year are classified as long-term investments. Wind River accounts for its investments, including marketable equity securities, money market funds, municipal bonds, U.S. government and agency obligations, corporate bonds and other debt securities, in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Wind River determines the appropriate classification of its investments at the time of purchase and re-evaluates such classification as of each balance sheet date. Wind River has classified all of its investments, excluding other minority investments, as available-for-sale and carries such investments at fair value, with unrealized gains and losses reported in the accumulated other comprehensive income (loss) component of stockholders' equity until disposition. Fair value is determined based upon the quoted market prices of the securities

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as of the balance sheet date. The cost of securities sold is based on the specific identification method. Realized gains or losses and declines in value if any judged to be other than temporary on available-for-sale securities are reported in other income or expense. During the three months ended October 31, 2001, Wind River recorded an impairment loss of $4.3 million on its publicly traded investment securities due to Wind River's determination that the unrealized losses on these investments were other than temporary.

    Wind River has certain other minority investments in non-publicly traded companies. These investments are included in other long-term assets on Wind River's balance sheet and are carried at cost, subject to adjustment for impairment. These investments are inherently risky because the markets for the technologies or products they have under development are typically in the early stages and may never develop. Due to the recent economic downturn, Wind River recorded impairment losses of $3.6 million and $6.9 million during the three and nine month periods ended October 31, 2001, respectively, on its investments in non-publicly traded companies. As of October 31, 2001, the cost basis of the portion of Wind River's remaining investment relating to non-publicly traded companies was $4.0 million. Wind River will continue to monitor these investments for impairment and make appropriate reductions in carrying values when necessary.

    Restricted cash consists of the investments held as collateral under the operating lease of Wind River's headquarters and interest rate swap agreements.

NOTE 7: DERIVATIVE FINANCIAL INSTRUMENTS

    In the first quarter of fiscal 2002, Wind River adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments and for hedging activities. SFAS No. 133 requires that an entity recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. The accounting for changes in the fair value of a derivative depends upon the intended use of the derivative and the resulting designation.

    Wind River designates its derivatives based upon criteria established by SFAS No. 133. For a derivative designated as a fair value hedge, the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributed to the risk being hedged. For a derivative designated as a cash flow hedge, the effective portion of the derivative's gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified to earnings when the hedged exposure affects earnings. The ineffective portion of the gain or loss is reported in earnings immediately. For a derivative not designated as a hedging instrument, the gain or loss is recognized in the period of change. The adoption of SFAS No. 133 had no material effect on Wind River's financial position, results of operations, or cash flows.

    Wind River enters into foreign currency forward exchange contracts to manage transaction exposure related to certain foreign currency denominated inter-company balances. Wind River may, from time to time, adjust its foreign currency hedging position by taking out additional contracts or by terminating or offsetting existing forward contracts. These adjustments may result from changes in the underlying foreign currency exposures or from fundamental shifts in the economics of particular exchange rates. Gains and losses on terminated forward contracts, or on contracts that are offset, are recognized in income in the period of contract termination or offset. As of October 31, 2001, Wind River had outstanding forward contracts with notional amounts totaling $15.9 million. Each of these contracts matures in less than ninety days. Wind River does not enter into derivative financial instruments for trading or speculative purposes.

    On March 18, 1998, Wind River entered into an accreting interest rate swap agreement to reduce the impact of changes in interest rates on its floating rate operating lease for its corporate headquarters. The interest rate swap effectively changes Wind River's interest rate exposure on its operating lease, which is at the one-month London interbank offering rate ("LIBOR"), to a fixed rate of 5.9%. As of October 31, 2001, the notional amount of the accreting interest rate swap was $28.5 million.

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    On January 10, 2001, Wind River entered into a second accreting interest rate swap agreement to reduce the impact of changes in interest rates on its second floating rate operating lease for additional construction at its headquarters facility. This second interest rate swap changes Wind River's interest rate exposure on its second operating lease, which is at one-month LIBOR, to a fixed rate of 5.6%. As of October 31, 2001, the notional amount of this interest rate swap was $27.9 million. Wind River's potential credit exposure under the interest rate swaps (arising from the inability of the counterparties to meet the terms of their contracts) is limited to the amounts, if any, by which the counterparties obligations exceed the obligations of Wind River.

    As of January 31, 2001 and October 31, 2001 the fair value of these interest rate swap liabilities was approximately $4.0 million. The swap agreements mature at the same time that the respective operating lease expires.

NOTE 8: BORROWINGS

    Wind River has an unsecured line of credit through a Japanese subsidiary for borrowing up to 2.1 billion Japanese yen, United States dollar equivalent of $17.5 million. As of October 31, 2001, Wind River had outstanding United States dollar equivalent borrowings of $16.7 million. On November 30, 2001, the line of credit was paid in full. Simultaneously, Wind River extended the line of credit until February 26, 2002, at an average annual interest rate of 0.9288% on any borrowed amount.

    In July 1997, Wind River issued $140.0 million of 5% convertible subordinated notes, which mature on August 1, 2002. The notes are redeemable at the option of Wind River, in whole or in part, at any time on or after August 2, 2000, at 102% of the principal amount initially and thereafter at prices declining to 100% at maturity. During quarter ending July 31, 2001, Wind River repurchased $11.3 million in face value of the convertible subordinated notes, resulting in a gain of $183,000, net of tax. During the quarter ending October 31, 2001, Wind River repurchased $64.2 million in face value of the convertible subordinated notes, resulting in an extraordinary gain on the early extinguishment of debt of $568,000, net of taxes. As of October 31, 2001, notes in an aggregate principal amount of $64.5 million remained outstanding.

NOTE 9: COMPREHENSIVE INCOME (LOSS)

    Comprehensive income (loss) is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. The difference between net loss and comprehensive loss for Wind River results from foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities, net of taxes.

    Comprehensive loss for the three and nine months ended October 31, 2001 and 2000 is as follows (in thousands):

			Three Months Ended October 31,						Nine Months Ended October 31,
			2001			2000			2001			2000
Net loss:			$	(19,233	)	$	(15,994	)	$	(325,633	)	$	(65,773	)
Other comprehensive income (loss):
	Foreign currency translation adjustments			448			(1,218	)		(1,724	)		(2,094	)
	Unrealized and realized, net gain (loss) on available-for-sale securities, net of taxes			2,030			(901	)		946			(19,455	)
Other comprehensive income (loss)				2,478			(2,119	)		(778	)		(21,549	)
		Comprehensive loss	$	(16,755	)	$	(18,113	)	$	(326,411	)	$	(87,322	)

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NOTE 10: NET LOSS PER SHARE COMPUTATION

    In accordance with the SFAS No. 128, "Earnings Per Share," the calculation of shares used in basic and diluted net loss per share computation is presented below (in thousands):

	Three Months Ended October 31,		Nine Months Ended October 31,
	2001	2000	2001	2000
Shares used in basic net loss per share computation	77,820	74,195	77,320	71,230
Effect of dilutive potential common shares	—	—	—	—
Shares used in diluted net loss per share computation	77,820	74,195	77,320	71,230

    The effect of assumed conversion of the convertible subordinated notes is anti-dilutive shares of 2.0 million and 4.3 million for the three and nine months ended October 31, 2001 and 2000, respectively and is therefore excluded from both of the above computations. In addition, dilutive potential common shares totaling approximately 1.1 million and 1.9 million for the three and nine months ended October 31, 2001, respectively, and 5.0 million and 5.5 million for the three and nine months ended October 31, 2000, respectively, were excluded from the computation of the number of shares used in the diluted net loss per share calculation for the three and nine months ended October 31, 2001 and 2000, respectively, as their inclusion would be anti-dilutive. Since Wind River has a net loss for all periods presented, net loss per share on a diluted basis is equivalent to basic net loss per share.

NOTE 11: COMMON STOCK

    In October 1999, Wind River's Board of Directors adopted a share purchase rights plan declaring a dividend of one preferred share purchase right for each share of Wind River's common stock outstanding on November 15, 1999. Each right entitles the holder to purchase 1/100th of a share of Series A Junior Participating Preferred Stock, par value $.001 per share, at a price of $160.00 per 1/100th of a preferred share, subject to certain adjustments. The rights will not be distributed until the earlier of the date of a public announcement that a person or a group have acquired beneficial ownership of 15% or more of the outstanding common stock ("Acquiring Person"), or 10 business days following the commencement of, or announcement of an intention to commence a tender offer or exchange offer, the consummation of which would result in any person or entity becoming an Acquiring Person. The rights will expire on October 22, 2009, unless earlier redeemed or exchanged by Wind River.

NOTE 12: COMMITMENTS AND CONTINGENCIES

    In connection with the lease of Wind River's headquarters, Wind River has entered into a lease of its land in Alameda, California, with the lessor of the building at a nominal rate and for a term of 55 years. If Wind River terminates or does not negotiate an extension of the building leases, the ground lease converts to a market rental rate. The lease provides Wind River with the option at end of the lease term to either acquire the buildings at the lessor's original cost or arrange for the buildings to be acquired. Wind River has guaranteed the residual value associated with the buildings under the first operating lease and the second operating lease to the lessor of approximately 82% and 85%, respectively, of the lessor's actual funding of $32.4 million on the first operating lease and actual funding of $25.0 million on the second operating lease, respectively. Management believes that the contingent liability relating to the residual value guarantee will not have a material adverse effect on Wind River's financial condition or result of operations or cash flows. Wind River is also required to deposit fixed income securities with a custodian as a deposit to secure the performance of its obligations under the leases. As a result, the balance of $63.7 million is segregated as restricted cash as

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of October 31, 2001 of which $60.3 million relates to the operating leases and $3.4 million relates to the interest rate swap agreements. In addition, under the terms of the leases, Wind River must maintain compliance with certain financial covenants. In connection with amendments to the governing agreements entered into between Wind River and the financial institution in December 2001, Wind River was granted a waiver of one covenant as at October 31, 2001 and was in compliance with respect to the other covenants at such date. Among other things, the amendments require Wind River to maintain least $100 million in unencumbered cash, which includes cash and cash equivalents and short-term and long-term investments in marketable securities, in addition to the restricted cash already required under the agreements, through January 31, 2003.

    From time to time, Wind River is subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of patents and other intellectual property rights, including those relating to Mentat Inc. and MATRIXx® disclosed in Part II—Item 1 "Legal Proceedings." Wind River is not currently aware of any legal proceedings or claims that Wind River believes will have, individually or in the aggregate, a material adverse effect on Wind River's financial position, results of operations or cash flows.

NOTE 13: DISTRIBUTION AGREEMENT

    On February 16, 2001, Wind River sold exclusive distribution rights for the MATRIXx® product family to The MathWorks, Inc. ("MathWorks"). MATRIXx is a set of software tools used in the development of embedded control systems. Under the agreement, in exchange for cash of $12.0 million, Wind River granted MathWorks exclusive distribution rights of MATRIXx for a period of two and a half years and an option to purchase the intellectual property and assets of MATRIXx at the end of the licensing term. MathWorks will assume the support of MATRIXx and will provide a transition plan to its MATLAB® and Simulink® family of products for customers who choose to migrate. As a result, Wind River paid MathWorks a cash amount of $3.0 million related to the transfer of deferred maintenance contracts to MathWorks. MathWorks became obligated to provide support to customers of MATRIXx products beginning February 16, 2001.

NOTE 14: SEGMENT AND GEOGRAPHIC INFORMATION

    Wind River reports in one industry segment—technology for embedded operating systems. Wind River markets its products and related services to customers in the United States, Canada, Europe, Japan and Asia Pacific. Internationally, Wind River markets its products and services primarily through its subsidiaries and various distributors. Revenues are attributed to geographic areas based on the country in which the customer is domiciled. The distribution of revenues and long-lived assets, net by geographic location is as follows (in thousands):

	Revenues								Long-Lived Assets
	Three Months Ended October 31,				Nine Months Ended October 31,				October 31,		January 31,
	2001		2000		2001		2000		2001		2001
North America	$	48,581	$	82,128	$	166,907	$	208,664	$	214,587	$	467,596
Japan		8,198		11,322		26,559		30,499		8,955		7,554
Other international		23,366		21,388		77,101		68,574		10,563		10,781
Consolidated	$	80,145	$	114,838	$	270,567	$	307,737	$	234,105	$	485,931

    Other international consists of the revenues and assets of operations in Europe and Asia Pacific.

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    Revenue information on a product and services basis is as follows (in thousands):

		Three Months Ended October 31,				Nine Months Ended October 31,
		2001		2000		2001		2000
Software licenses		$	35,465	$	56,696	$	123,421	$	149,608
Run-time license revenue			17,535		25,925		57,799		64,077
Maintenance revenues			15,300		17,731		50,108		51,206
Other service revenues			11,845		14,486		39,239		42,846
	Total	$	80,145	$	114,838	$	270,567	$	307,737

NOTE 15: RECENT ACCOUNTING PRONOUNCEMENTS

    In November 2001, the Emerging Issues Task Force ("EITF") issued EITF Issue No. 01-09 ("EITF 01-09"), "Accounting for Consideration Given by a Vendor to a Customer/Reseller", which addresses the accounting for consideration given by a vendor to a customer including both a reseller of the vendor's products and an entity that purchases the vendor's products from a reseller. EITF 01-09 also codifies and reconciles related guidance issued by the EITF including EITF No. 00-25 "Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products" ("EITF 00-25"). EITF 01-09 outlines the presumption that consideration given by a vendor to a customer, a reseller or a customer of a reseller is to be treated as a deduction from revenue. Treatment of such payments as an expense would only be appropriate if two conditions are met: a) the vendor receives an identifiable benefit in return for the consideration paid that is sufficiently separable from the sale such that the vendor could have entered into an exchange transaction with a party other than the purchaser or its products in order to receive that benefit; and b) the vendor can reasonably estimate the fair value of that benefit. EITF 01-09 will be adopted by Wind River effective February 1, 2002. Wind River is currently assessing EITF 01-09, and has not determined their impact on Wind River's consolidated financial statements.

    In July 2001 the Financial Accounting Standards Board ("FASB") issued SFAS No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets." SFAS No. 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting, and broadens the criteria for recording intangible assets separately from goodwill. Recorded goodwill and intangibles will be evaluated against these new criteria and may result in certain intangibles being subsumed into goodwill, or alternatively, amounts initially recorded as goodwill may be separately identified and recognized apart from goodwill. SFAS No. 142 requires the use of a non-amortization approach to account for purchased goodwill and certain intangibles. Under a non-amortization approach, goodwill and certain intangibles will not be amortized into results of operations, but instead would be reviewed for impairment and written down and charged to results of operations only in the periods in which the recorded value of goodwill and certain intangibles is more than its fair value. Wind River will continue to amortize goodwill and purchased intangible assets acquired prior to June 30, 2001. The provisions of each statement, which apply to goodwill and intangible assets acquired prior to June 30, 2001, will be adopted by Wind River on February 1, 2002. For business combinations initiated after June 30, 2001, Wind River will follow the non-amortization method under SFAS No. 142. Wind River is currently assessing SFAS No. 142 and has not determined the impact on Wind River's consolidated financial statements.

    In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of." SFAS No. 144 applies to all long-lived assets (including discontinued operations) and consequently amends APB Opinion No. 30, "Reporting the Results of Operations, Reporting the Effects of Disposal of a Segment of a Business,

16

and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS No. 144 develops one accounting model for long-lived assets that are to be disposed of by sale. SFAS No. 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally SFAS No. 144 expands the scope of discontinued operations to include all components of an entity with operations that (1) can be distinguished from the rest of the entity and (2) will be eliminated from the ongoing operations of the entity in a disposal transaction. SFAS No. 144 is effective for the Wind River for all financial statements issued in 2002. The adoption of SFAS No. 144 is not expected to have a material impact on the Wind River's financial statements.

NOTE 16: SUBSEQUENT EVENTS

    On December 10, 2001, Wind River issued $150.0 million of its 3.75% convertible subordinated notes due 2006. The issuance generated net proceeds of approximately $144.3 million after deducting fees and expenses. The notes mature on December 15, 2006, unless earlier redeemed by Wind River at its option or converted at the holders' option. Interest is payable in cash semi-annually in arrears on June 15 and December 15 of each year, commencing June 15, 2002. At the option of the holder, notes may be converted into Wind River's common stock at any time, unless previously redeemed, at a conversion price of $24.115 per share. Wind River may redeem all or a portion of the notes for cash at a redemption price of 100.75% of the principal amount between December 15, 2004 and December 14, 2005, and 100.0% of the principal amount beginning December 15, 2005 and thereafter. Additionally, under specified circumstances Wind River may redeem the notes prior to 2004. The notes are unsecured and are subordinated to all existing and future senior indebtedness, as defined, and are pari passu with the 5% convertible subordinated notes due August 2002.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

    The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include the sentences in the last paragraph under "Revenues" regarding expectations for international sales; the sentences in the second and third paragraphs under "Cost of Revenues" regarding factors that may affect product related costs of revenues in the future and our expectations regarding cost of service revenues in absolute dollars and as a percentage of revenue; the sentences in the first, second and third paragraphs under "Operating Expenses" regarding our expectations about sales and marketing expenses, product development and engineering expenses, and general and administrative expenses, respectively; the statements in the seventh paragraph under "Operating Expenses" about our belief regarding the realization of expected economic return from acquired or in-process technology and resulting or related products and our ability to continue making substantial progress in the development and commercialization of acquired technologies; the statements in the second paragraph under "Restructuring Costs" about our expectations for our organizational restructuring and cost-control measures and the timing of their implementation; the statements in the second paragraph under "Impairment of Goodwill and Intangibles" about our expectation as to the completion of disposition of certain assets; the statements in the second paragraph under "Other Income and Expense" regarding future increases in interest expense; the statements in the sixth paragraph under "Liquidity and Capital Resources" regarding our belief about liability relating to the residual value guarantee and in the last paragraph regarding our beliefs about future liquidity and capital requirements; the statements under "Recent Accounting Pronouncements" regarding the expected impact on Wind River of the adoption of such pronouncements; and the statements under "Euro Currency" about the impact of the introduction of the Euro on our operations.

    These forward-looking statements are based on current expectations and involve known and unknown risks and uncertainties that may cause the results, levels of activity, performance or achievements of Wind River or its industry to be materially different from those expressed or implied by the forward-looking statements. The cautionary statements set forth below and in "Additional Risk Factors that May Affect Future Results of Operations" identify important factors that could cause actual results to differ materially from those in any such forward-looking statements. Additionally, see Wind River's Annual Report on Form 10-K for the fiscal year ended January 31, 2001 for further discussion of these factors. Wind River does not intend to update any of the forward-looking statements contained in this report to reflect any future events or developments unless required by law.

    The following discussion should be read in conjunction with the condensed consolidated financial statements and notes included elsewhere in this report.

OVERVIEW

    Wind River develops, markets, supports and provides consulting services for software platforms and software and hardware development tools that allow customers to create complex, robust, software applications for embedded computers. An embedded computer is a microprocessor that is incorporated into a larger device and is dedicated to responding to external events by performing specific tasks quickly, predictably and reliably. Embedded systems provide an immediate, predictable response to an unpredictable sequence of external events. Wind River's products enable customers to enhance product performance, standardize designs across projects, reduce research and development costs and shorten product development cycles.

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RESULTS OF OPERATIONS

    Operating results as a percentage of revenue for the three and nine month periods ended October 31, 2001 and 2000 are summarized in the following table:

				Three Months Ended October 31,				Nine Months Ended October 31,
				2001		2000		2001		2000
Revenues, net:
	Products			66	%	72	%	67	%	69	%
	Services			34		28		33		31
		Total revenues, net		100		100		100		100
Cost of revenues:
	Products			8		8		7		9
	Services			17		14		18		15
		Total cost of revenues		25		22		25		24
			Gross profit	75		78		75		76
Operating expenses:
	Selling and marketing			44		39		44		41
	Product development and engineering			27		20		25		19
	General and administrative			11		9		11		10
	Amortization of goodwill and purchased intangibles			17		25		26		21
	Restructuring costs			—		—		10		—
	Impairment of goodwill and purchased intangibles			—		—		83		—
	Acquisition related costs and other			—		—		—		10
			Total operating expenses	99		93		199		101
			Loss from operations	(24	)	(15	)	(124	)	(25	)
Other income:
	Interest income			5		5		5		5
	Interest expense			(2	)	(2	)	(2	)	(2	)
	Other income (expense), net			(6	)	1		(2	)	3
			Total other income (expense)	(3	)	4		1		7
Loss before provision (benefit) for income taxes and extraordinary gain				(27	)	(11	)	(123	)	(18	)
Provision (benefit) for income taxes				(2	)	3		(3	)	3
Loss before extraordinary gain				(25	)	(14	)	(120	)	(21	)
Extraordinary gain				1		—		—		—
			Net loss	(24	)%	(14	)%	(120	)%(1)	(21	)%(2)

(1)

The condensed consolidated statements of operations for the nine months ended October 31, 2001, include charges of 26%, or $69.4 million of amortization of goodwill and purchased intangibles, 10% or $28.6 million of restructuring costs and 83% or $225.4 million of impairment of goodwill and purchased intangibles. The impairment primarily relates to the goodwill associated with the acquisition of Embedded Support Tools Corporation.

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(2)

The condensed consolidated statements of operations for the nine months ended October 31, 2000, include costs of 10%, or $31.8 million, in acquisition costs associated with the integration of Integrated Systems, Inc., Embedded Support Tools Corporation, AudeSi Technologies, Inc., ICESoft AS, and Rapid Logic, Inc. and 21%, or $64.8 million, of amortization of goodwill and purchased intangibles.

ACQUISITIONS

    On February 15, 2000, Wind River completed its acquisition of Integrated Systems, Inc. ("Integrated Systems"), a developer of software tools for the embedded systems market, in a stock-for-stock merger transaction. The acquisition was accounted for as a pooling of interests and all financial data of Wind River has been restated to include the historical financial information of Integrated Systems.

    The following acquisitions were accounted for as a purchase and the results of operations included in Wind River's results from the respective dates of acquisition.

    On March 31, 2000, Wind River completed its acquisition of Embedded Support Tools Corporation ("Embedded Support Tools") in a stock-for-stock merger transaction with a total purchase price of $331.6 million. Embedded Support Tools is a provider of integrated hardware and software for programming, testing and debugging embedded systems.

    On May 1, 2000, Wind River completed its acquisition of AudeSi Technologies, Inc. ("AudeSi") in a transaction involving Canadian exchangeable shares with a total purchase price of $52.4 million. AudeSi is a supplier of Java™ based tools and other components, for building flexible, multi-application consumer devices.

    On July 14, 2000, Wind River acquired ICESoft AS ("ICESoft"), a developer of innovative embedded Internet browsing technologies for intelligent devices, for cash of approximately $24.5 million.

    On October 24, 2000, Wind River completed its acquisition of Rapid Logic, Inc. ("Rapid Logic") in a stock-for-stock merger transaction for a total purchase price of $57.5 million. Rapid Logic is the provider of advanced device management technologies for networking equipment and other intelligent devices.

    On April 18, 2001, Wind River purchased certain identified software assets, including an operating system for digital signal processors from Eonic Systems NV ("Eonic"), for a total purchase price of $15.5 million consisting of $15.0 million in cash and approximately $542,000 in acquisition related costs.

    On May 4, 2001, Wind River purchased from Berkeley Software Design, Inc. ("BSDI") certain identified software assets, including the BSDI operating system, a UNIX based code suitable for various Internet applications for a total purchase price of $23.4 million consisting of approximately $22.9 million in cash and $507,000 in acquisition related costs. Prior to the closing of the transaction, Wind River loaned $7.5 million to BSDI to repay BSDI creditors.

    On October 10, 2001, Wind River purchased the assets of Telenetworks, a unit of Next Level Communications, Inc., for a total net purchase price of $5.6 million consisting of approximately $5.5 million in net cash and $100,000 in acquisition costs. The assets acquired in the transaction include software stacks that implement the signaling and control mechanisms used in voice-over-IP networks, customer lists and other assets.

REVENUES

    Revenues consist of product revenues and service revenues. Product revenues consist of royalties and fees for operating systems, licenses, and fees for the use of development tools. Services revenues

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are derived from fees from professional services, which include design and development fees, software maintenance contracts, and customer training and consulting. Wind River accrues for warranty costs, sales returns, and other allowances based on its experience. Total revenues for the three and nine month periods ended October 31, 2001 were $80.1 million and $270.6 million, respectively, compared to $114.8 million and $307.7 million for the same periods in fiscal 2001. The decrease in total revenues of 30% and 12% for the three and nine month periods ended October 31, 2001, respectively, is due to a decline in product and services revenues resulting from the current economic downturn in the high-technology sector as discussed below. Product revenues accounted for approximately 66% and 67% of total revenues for the three and nine month periods ended October 31, 2001, respectively, and 72% and 69% for the same periods in fiscal 2001. Services revenues accounted for approximately 34% and 24% of total revenues for the three and nine month periods ended October 31, 2001, respectively, and 28% and 31% for the same periods in fiscal 2001.

    Product revenues decreased 36% and 15% to $53.0 million and $181.2 million for the three and nine month periods ended October 31, 2001, respectively, compared to $82.6 million and $213.7 million for the same periods in fiscal 2001. The decline in product revenues is primarily due to lower customer demand for hardware and software products, including run-time royalties, as a result of the current economic downturn in the high-technology sector. Some of Wind River's customers have either deferred projects to a future date or have experienced budget constraints which caused a reduction in their purchases of Wind River products. Product revenues are recognized at the time of shipment or upon the delivery of a product master in satisfaction of non-cancelable contractual agreements, provided that collection of the resulting receivable is reasonably assured, the fee is fixed or determinable and vendor-specific objective evidence exists to allocate the total fee to all delivered and undelivered elements of the arrangement.

    Services revenues decreased 16% and 5% to $27.1 million and $89.3 million for the three and nine month periods ended October 31, 2001, respectively, compared to $32.2 million and $94.1 million for the same periods in fiscal 2001. The decrease was primarily due to lower customer demand for maintenance, consulting and training services as a result of the current economic downturn in the high technology sector.

    Deferred revenue results primarily from customer prepayments under software maintenance contracts, which are recognized ratably over the life of the agreements; certain run-time agreements, which are recognized as licenses are delivered; and professional services and engineering services contracts or training arrangements, which are recognized as the services are performed.

    Revenues from international sales for the three months ended October 31, 2001 were $31.6 million compared to $32.7 million for the same period in fiscal 2001, a decrease of 3%. This decrease was due to a 28% decline in revenues from Japan resulting primarily from the transition to a new distribution model whereby Wind River began selling directly to its customers in Japan as well as from declining local economic conditions. This decrease in revenues in Japan was offset by an overall increase in revenues from Europe and Asia Pacific. Revenues from international sales in the nine months ended October 31, 2001 were $103.7 million compared to $99.1 million for the same period in fiscal 2001, an increase of 5%. This increase for the nine month period was due to increased demand for our products and services in Europe and the Asia Pacific region (excluding Japan). International revenues accounted for 39% and 38% of total revenues for the three and nine month periods ended October 31, 2001, respectively, compared to 28% and 32% for the same periods in fiscal 2001. International sales were not as adversely affected by the decrease in customer spending as compared to domestic sales, resulting in the increase of international revenue as a percentage of total revenue. Wind River expects international sales to continue to represent a significant portion of revenues, although the actual percentage may fluctuate from period to period. Wind River's international sales are denominated in the local currencies. Wind River actively monitors its foreign currency exchange exposure and to date,

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such exposures have not had a material impact on Wind River's results of operations or cash flows. See "Additional Risk Factors That May Affect Future Results of Operations" section of this report.

COSTS OF REVENUES

    The overall cost of products and services as a percentage of total revenues was 25% for each of the three and nine month periods ended October 31, 2001, compared to 22% and 24% the same periods in fiscal 2001.

    Cost of products was $6.1 million and $19.9 million for the three and nine month periods ended October 31, 2001, compared to $9.3 million and $26.4 million for the same periods of fiscal 2001. Product-related cost of sales as a percentage of product revenues was 12% and 11%, respectively, for the three and nine month periods ended October 31, 2001, compared to 11% and 12% for the same periods in fiscal 2001. Product-related costs consist primarily of salaries and benefits for production employees, product media, royalty payments to third parties for the use of their software, documentation and packaging. There were no significant changes in the three- and nine-month percentages of product costs to product revenues. Product related cost of revenues as a percentage of product revenues may be affected in the future by the amortization of capitalized research and development costs, distribution rights cost related to the introduction of new products and by royalty payments to other third parties for use of their software in Wind River products.

    Cost of services was $13.8 million and $47.2 million for the three and nine month periods ended October 31, 2001, compared to $16.6 million and $45.7 million for the same periods of fiscal 2001. Service related cost of revenues as a percentage of services revenues was 51% and 53%, respectively, for the three and nine month periods ended October 31, 2001, compared to 51% and 49% for the same periods in fiscal year 2001. Service related cost of revenues consists primarily of personnel related costs associated with providing services, including consulting services, to customers and the infrastructure to manage a services organization as well as costs to recruit, develop, and retain services professionals. The decrease in absolute dollars of service costs for the three month period ended October 31, 2001 is primarily due to reduced utilization of outside consultants as part of our restructuring program implemented during the second quarter of fiscal 2002. The increase in costs of service revenues as a percentage of service revenues for the nine month period ended October 31, 2001, is due to a faster decline in the service revenue base than the decline in fixed costs associated with customer support, personnel and certified third party contractors within our professional services organization resulting from the restructuring program initiated during the second quarter of fiscal 2002. We expect that the cost of service revenues will increase in absolute dollars in the long-term as we continue to increase our professional service organization and customer support capabilities. Additionally, we expect cost of services to fluctuate as a percentage of service revenue based on progress of various consulting and professional service projects.

OPERATING EXPENSES

    Selling and marketing expenses were $35.1 million and $118.3 million, respectively, for the three and nine month periods ended October 31, 2001, compared to $45.2 million and $125.5 million for the same periods in fiscal 2001. As a percentage of total revenues, selling and marketing expenses were 44% for both the three and nine month periods ended October 31, 2001, compared to 39% and 41% for the same periods in fiscal 2001. The decrease in absolute dollars for the three and nine months ended October 31, 2001 as compared to the three and nine months ended October 31, 2000 is attributed to lower sales commissions payments and decreased expenditures in various areas, primarily payroll costs, relating to Wind River's restructuring program initiated during the second quarter of fiscal 2002. Additionally, the percentage increase for both the three and nine month periods ended October 31, 2001, compared to the same periods in fiscal 2001 is due to an overall lower revenue base. Wind River believes selling and marketing expenses will not increase significantly in the short-term.

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However, Wind River does expect an increase in absolute dollars in the long-term, as it continues to focus on long-term growth in the areas of sales and marketing personnel and marketing and advertising programs.

    Product development and engineering expenses were $21.6 million and $68.7 million for the three and nine month periods ended October 31, 2001, compared to $22.4 million and $59.8 million for the same periods in fiscal 2001. As a percentage of total revenues, product development and engineering expenses were 27% and 25% for the three and nine month periods ended October 31, 2001, compared to 20% and 19% for the same periods in fiscal 2001. The increase in product development and engineering expenses for the nine months ended October 31, 2001 compared to the same period in fiscal 2001 is primarily due to the increase in staff and associated support for engineers to expand and enhance Wind River's product lines, including acquisition costs, and with the additional engineering staff as a result of recent acquisitions. Additionally, the percentage increase for both the three and nine month periods ended October 31, 2001, compared to the same periods in fiscal 2001 is due to an overall lower revenue base. However, due to the restructuring program discussed above, including the controlling of payroll and consulting costs, the absolute dollar costs in the three months ended October 31, 2001 decreased as compared to the same period for fiscal 2001. Wind River believes that product development and engineering expenses will not increase significantly in the short-term. However, Wind River does expect an increase in absolute dollars in the long-term, as it continues to focus on long-term growth in the areas of research and development.

    General and administrative expenses were $8.8 million and $28.6 million for the three and nine month periods ended October 31, 2001, compared to $10.5 million and $29.6 million for each of the same periods in fiscal 2001. As a percentage of total revenues, general and administrative expenses were 11% for both the three and nine month periods ended October 31, 2001 compared to 9% and 10% for the same periods in fiscal 2001. General and administrative expenses in absolute dollars declined due to the Company controlling expenditures in various areas, primarily payroll and consulting costs as a result of Wind River's restructuring program initiated during the second quarter, and organizational efficiencies gained from the integration of acquired companies, in particular, Integrated Systems. The percentage increase for the three and nine month periods ended October 31, 2001 is primarily attributed to a lower revenue base as compared to the same periods in fiscal year 2001. Wind River believes that general and administrative expenses will not increase significantly in the short-term as a result of the restructuring program discussed above. However, Wind River does expect an increase in absolute dollars in the long-term, as it continues to invest in worldwide staff and infrastructure in the areas of information systems, finance and administration, and to consolidate the financial, manufacturing, customer relations management and customer support information systems of acquired companies.

    Wind River allocates the total costs for information technology and facilities to each of the functional areas that uses the information technology and facilities services based on the headcount in each area. Information technology allocated costs include salaries, information technology, project costs, communication costs and depreciation expense for shared infrastructure costs. Facilities allocated costs include facility rent for the corporate offices as well as shared function offices, property taxes, depreciation expenses for office furniture and other department operating costs.

    Amortization of goodwill and purchased intangibles totaled $13.6 million and $69.4 million, respectively, for the three and nine month periods ended October 31, 2001, compared to $28.4 million and $64.8 million for the same periods in fiscal 2001. The decrease in amortization for the three months ended October 31, 2001 as compared to the same period in fiscal 2001 primarily relates to the reduced carrying value of goodwill and purchased intangibles as a result of the $225.4 million impairment charge recorded during the second quarter of fiscal 2002. The decrease was offset by additional amortization resulting from acquisitions occurring during fiscal 2002. The increase in the amortization of goodwill and purchased intangibles for the nine months ended October 31, 2001 as

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compared to the same period in fiscal 2001 was due to the amortization of goodwill and intangible assets relating to the acquisitions of Rapid Logic in the third quarter of fiscal 2001 and Eonic and BSDI during the first and second quarters of fiscal 2002, respectively. Acquisitions made subsequent to June 30, 2001, are accounted for under non-amortization method consistent with SFAS No. 142 (see Note 15 of Notes to Condensed Consolidated Financial Statements). Wind River will continue to monitor these acquisitions for impairment and make appropriate reductions in the carrying values when necessary.

    There were no acquisition-related and other expenses for each of the three and nine month periods ended October 31, 2001, compared to $100,000 and $31.8 million for the same periods in fiscal 2001. For the nine month period ended October 31, 2000, acquisition related costs and other expenses were comprised primarily of $27.0 million in costs associated with the acquisition Integrated Systems consisting of: (a) $11.1 million for investment banking fees, (b) $7.2 million in severance costs (c) $4.5 million for office closure and other costs for surplus sales offices in the United States, Europe and Japan, (d) $3.6 million for legal, accounting and other professional fees which relate primarily to the acquisition process for Integrated Systems and the elimination of acquired legal entities in the United States, Europe and Japan, and (e) $600,000 for general integration costs. Additionally, $3.7 million related to the write-off of in-process research and development costs of Embedded Support Tools, $1.0 million related to the write-off of in-process research and development costs of AudeSi, and $100,000 related to the write-off of in-process research and development costs of ICESoft were recorded to acquisition costs during the first, second and third quarter of fiscal 2001, respectively.

    The amounts related to in-process technology associated with Embedded Support Tools, AudeSi, and ICESoft represents purchased in-process technology for projects that have not yet reached technological feasibility and have no alternative future use. The value of the in-process research and development was determined by estimating the net cash flows resulting from the completion of the projects reduced by the percentage of completion of the projects. Net cash flows were tax effected using estimated income taxes consistent with Wind River's anticipated tax rate for the foreseeable future and then discounted back to their present value at a discount rate based on Wind River's required risk adjusted weighted average rate of return. Wind River's estimated revenues, margins and operating costs are based upon historical information about similar product development cycles combined with projections of future revenue and cost patterns, including projections used when initially evaluating the acquisition of Embedded Support Tools, AudeSi and Software Development Systems. Wind River cannot guarantee that it will realize revenue from these in-process projects in the amounts estimated or that the costs incurred will be materially consistent with estimates made.

    The nature of the efforts to develop all purchased in-process technology into commercially viable products principally relates to the completion of all planning, designing, prototyping, verification and testing activities that are necessary to establish that the resulting products can meet their design specification, including function, features and technical performance requirements. Due to the fact that the projects were in process, there is uncertainty regarding whether they can be successfully finished and result in the net cash flows that were originally estimated at the time of the acquisitions. It is reasonably possible that the development of the acquired technology could fail because of either prohibitive costs, Wind River's inability to perform the required completion efforts or other factors outside Wind River's control such as a change in the market for the resulting developed products. If the development of the technology is unsuccessful, the technology may be abandoned during the development phase. Should Wind River's development efforts fail or encounter significant delay, then Wind River's future returns may be significantly reduced. In such case, Wind River may be unable to recover its investment in this project, may be less well positioned to benefit from new product markets in these areas and Wind River's future operating results could be adversely affected.

    With the exception of the acquisitions discussed below, the assumptions used in determining the value of in-process research and development acquired in connection with Wind River's purchase

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acquisitions completed during fiscal 2001 have been consistent, in all material respects, with the actual results to date. The assumptions primarily consist of the expected completion date for the in-process projects, estimated costs to complete the projects, and revenue and expense projections once the products have entered the market. Failure to achieve the expected levels of revenue and net income from these products during their entire life cycle will negatively impact the return on investment expected at the time that the acquisitions were completed and could potentially result in impairment of any other assets related to the development activities.

    In the second quarter of fiscal 2002, Wind River determined that the carrying value of certain goodwill and purchased intangible assets were impaired due to changes in circumstances from those present at the time these assets were acquired. At the time of the acquisitions, the in-process technologies acquired from Embedded Support Tools, AudeSi and ICESoft were expected to be utilized in embedded software development tools and Internet appliance applications. During the second quarter of fiscal 2002, the current and future plans for utilization of these technologies and other existing technologies acquired had changed due to the deterioration in the current business environment such that expected future cash flows from the use of these technologies were less than the carrying value of the underlying assets. Accordingly, impairment charges of $167.5 million, $27.9 million and $15.3 million, respectively, were recognized in the second quarter of fiscal 2002 to reduce the carrying values of goodwill and purchased intangible assets to the present value of the future expected cash flows. See "Impairment of Goodwill and Purchased Intangibles" below for a further discussion of Wind River's impairment review.

RESTRUCTURING COSTS

    In May 2001, Wind River announced cost control measures that include a reduction of its worldwide work force, organizational restructuring and additional measures focused on reducing operational expenses. Wind River made both permanent and temporary adjustments to the business operations in order to optimize operating efficiency. In July 2001, Wind River announced the second phase of the restructuring program that included an additional reduction in the worldwide work force and the consolidation of excess facilities.

    As a result of the decision to restructure its business, during the quarter ended July 31, 2001, Wind River recorded restructuring costs of $28.6 million classified as operating expenses. The following paragraphs provide detailed information relating to the restructuring costs that were recorded during the second quarter of fiscal 2002.

WORLDWIDE WORK FORCE REDUCTION

    The restructuring program will result in the reduction of approximately 425 regular employees across all business functions, operating units, and geographic regions. The worldwide work force reductions started in the second quarter of fiscal 2002 and will be substantially completed in the first half of fiscal 2003. Wind River recorded a work force reduction charge of approximately $20.1 million relating primarily to severance payments and the continuation of benefits. In addition, the number of contractors and temporary workers employed by Wind River were reduced. Equipment disposed of or removed from operations as a result of the work force reduction resulted in a charge of $765,000 and consisted primarily of computer equipment.

CONSOLIDATION OF EXCESS FACILITIES

    During the quarter ended July 31, 2001, Wind River recorded a restructuring charge of $8.5 million relating to excess facilities. The excess facilities, primarily located in the United States and the United Kingdom, include the closure of certain leased corporate facilities and sales offices that related to business activities that have been restructured. The estimated excess facility costs represent the remaining lease payments and estimated costs less estimated proceeds from sub-leasing certain

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facilities. The estimated proceeds from sub-leasing these facilities are based on current comparable rates for leases in the respective markets. Should facilities operating lease rental rates continue to decrease in these markets or should it take longer than expected to find a suitable tenant to sublease these facilities, the actual loss could exceed this estimate. Cash related charges of $7.8 million relate primarily to lease terminations and non-cancelable lease costs related to the excess facilities. Non-cash related charges of $646,000 relate primarily to the impairment of leasehold improvements.

    A summary of the restructuring costs is outlined as follows (in thousands):

		Total charges		Non-cash charges		Cash payments		Restructuring liabilities at October 31, 2001
Work force reduction		$	20,132	$	765	$	12,142	$	7,225
Consolidation of excess facilities			8,483		646		93		7,744
	Total	$	28,615	$	1,411	$	12,235	$	14,969

    Wind River expects to substantially complete implementation of its work force reduction program by the first half of fiscal 2003. Amounts accrued related to the net future payments due to the excess facilities will be paid through fiscal 2011 unless Wind River successfully negotiates to exit the leases at an earlier date.

IMPAIRMENT OF GOODWILL AND INTANGIBLES

    During the second quarter of fiscal year 2002, Wind River identified indicators of possible impairment of goodwill and other acquired intangible assets relating to previous acquisitions. These indicators included the deterioration in the business climate, recent changes in sales and cash flow forecasts, revised strategic plans for certain of the acquired businesses and significant declines in the market values of companies in the embedded software industry. Accordingly, Wind River compared the undiscounted cash flows associated with the acquired goodwill and purchased intangible assets with the respective carrying amounts and determined that an impairment of certain of these assets existed. As a result, during the quarter ended July 31, 2001, Wind River recorded an aggregate charge of $225.4 million, of which, $223.6 million related to the impairment of goodwill and $1.8 million related to the impairment of purchased intangible assets. The impaired amount was measured as the amount by which the carrying amount exceeded the present value of the estimated future cash flows for goodwill and purchased intangible assets, as follows (in thousands):

Acquired Company		Amount Impaired
Embedded Support Tools		$	167,482
AudeSi			27,893
Software Development Systems, Inc.			14,788
ICESoft			15,255
	Total	$	225,418

    The impairment charge for those assets held for use was determined based upon the estimated discounted cash flows over the remaining useful life of the goodwill using discount rates ranging from 17% to 23%. The assumptions supporting the cash flows, including the discount rates, were determined using Wind River's best estimates as of the date of the impairment review. The impairment charge for those assets held for disposal was determined based on the expected proceeds of disposition. Wind River expects to complete the disposition of the assets held for disposal by the end of fiscal 2002. As of October 31, 2001, Wind River had goodwill and purchased intangible assets of approximately $156.6 million which are being amortized over their remaining useful lives until Wind River adopts

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Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" (see Note 15).

    On the strength of continued customer spending and as part of its strategic plan, Wind River acquired these businesses to complement and extend its product offerings. Since these acquisitions were made, many companies in the high technology and software industries have experienced significant decreases in capital funding and customer spending and as a result, have curtailed research and development activities. Therefore, revenues associated with these businesses have not met the original expectations at the time of acquisition.

    Many companies in the high technology and software industries, including Wind River, have experienced significant declines in the price of their common stock. The acquisition of Embedded Support Tools and AudeSi were paid for in stock valued at approximately $50 and $49 per share, respectively. Subsequently, Wind River's stock price declined significantly. As a result, the purchase prices of the Embedded Support Tools and AudeSi assets are substantially higher than their valuation under the current business environment.

OTHER INCOME AND EXPENSE

    Interest income was $3.6 million and $13.5 million for the three and nine month periods ended October 31, 2001, respectively, compared to $5.0 million and $15.4 million for the same periods in fiscal 2001. The decrease in interest income is primarily due to lower interest rates on invested balances and a lower base of invested balances. Total cash and cash equivalents, investments and restricted cash at October 31, 2001 and 2000 was approximately $247.3 million and $327.6 million, respectively.

    Interest expense was $1.2 million and $4.7 million for each of the three and nine month periods ended October 31, 2001, respectively, compared to $1.8 million and $5.3 million for the same periods in fiscal 2001. The interest expense decrease is primarily due to the repurchase of $11.3 million in face value of the convertible subordinated notes, resulting in a gain of $183,000, net of taxes, during the second quarter of fiscal 2002 and the repurchase of $64.2 million in face value of the convertible subordinated notes, resulting in an extraordinary gain on the early extinguishment of debt of $568,000, net of taxes, during the third quarter of fiscal 2002. Wind River pays interest on its outstanding 5.0% convertible subordinated notes due in August 2002 and records the amortization of certain issuance costs associated with these notes as interest expense. The interest on the notes is payable on February 1 and August 1 of each year. As of October 31, 2001, notes in the aggregate principal amount of $64.5 million were outstanding. As a result of Wind River's issuance of $150.0 million of its 3.75% convertible subordinated debt on December 10, 2001, as discussed above, management expects interest expense to increase in future periods.

    Other income and expense, net was a net other expense of $5.1 million and $7.3 million for the three and nine month periods ended October 31, 2001, respectively, compared to net other income of $1.5 million and $9.4 million for the same periods in fiscal 2001. The increase in net expense for the three and nine month periods ended October 31, 2001 is primarily due to the write-down of certain non-publicly and publicly traded equity investments of $7.9 million and $11.2 million in the three and nine month periods ended October 31, 2001, respectively, offset by a realized gain of $1.4 million related to the disposition of the remaining shares of Liberate Technologies, Inc. ("Liberate") during the third quarter of fiscal 2002. For the three and nine month periods ended October 31, 2000, Wind River realized gains of $1.5 million and $10.2 million, respectively, related to the disposition of shares of Liberate and e-Sim, Inc.

    Wind River invests in certain non-publicly traded companies, which are included in other long-term assets on Wind River's balance sheet. These investments are inherently risky because the markets for the technologies or products they have under development are typically in the early stages and may never develop. As mentioned above, during the nine months ended October 31, 2001, Wind

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River recorded impairment charges on these investments based on the determination that the decrease in the valuation of these investments was other than temporary. The remaining balance of these investments as of October 31, 2001, was $4.0 million. Wind River will continue to monitor these investments for impairment and will record an appropriate write down to other expenses when deemed necessary.

PROVISION (BENEFIT) FOR INCOME TAXES

    Net loss for the three and nine month periods ended October 31, 2001 was negatively impacted by $13.6 million and $323.4 million, respectively, in acquisition related and other special charges, including, $13.6 million and $294.8 million, respectively, of amortization and impairment of goodwill and purchased intangibles, and $28.6 million of restructuring costs for the nine month period ended October 31, 2001. The tax benefit was reduced for the three and nine month periods ended October 31, 2001 due to the exclusion of amortization of goodwill and other purchased intangibles, and the exclusion of impairment in certain goodwill and purchased intangibles, which are non-deductible for income tax purposes. The effective tax charge and benefit rate for the nine months ended October 31, 2001 and 2000 excluding amortization and impairment of goodwill and purchased intangibles and acquisition charges was 37.5%.

LIQUIDITY AND CAPITAL RESOURCES

    As of October 31, 2001 and 2000, Wind River had working capital of approximately $11.5 million and $123.3 million, respectively, and cash and investments of approximately $183.6 million and $271.1 million, respectively. Included in these amounts are investments with maturities greater than one year and publicly traded equity investments aggregating to approximately $90.0 million and $137.5 million as of October 31, 2001 and 2000, respectively. The figures exclude restricted cash of $63.7 million and $56.5 million at October 31, 2001 and 2000, respectively. Wind River invests primarily in instruments that are highly liquid and of investment grade. Cash flows for the nine months ended October 31, 2001 and 2000 include cash flows from companies acquired as purchase transactions from the date of their acquisition.

    During the nine months ended October 31, 2001, Wind River's operating activities provided net cash of $19.1 million compared to $13.7 million for the same period in fiscal 2001. Net cash provided by operating activities for the nine months ended October 31, 2001 of $19.1 million was due primarily to net cash flows used in operations of $6.7 million before net cash provided by changes in assets and liabilities of $25.8 million. Net cash flows used in operations before changes in assets and liabilities consisted primarily of the net loss of $325.6 million, which was offset by depreciation and amortization of $83.7 million and impairment of goodwill and purchased intangibles of $225.4 million. Net changes in assets and liabilities consisted primarily of a decrease in accounts receivable of $40.3 million, prepaid and other short-term assets of $10.8 million, and an increase in accrued restructuring costs and other assets and liabilities of $15.0 million and $2.9 million respectively, offset by a decrease in accrued liabilities of $11.9 million, accrued compensation of $4.1 million, accounts payable of $8.4 million and deferred revenues of $16.5 million.

    During the nine months ended October 31, 2001, Wind River's investing activities provided net cash of $22.4 million compared to the use of $43.7 million for the same period in fiscal 2001. The sales and maturities of investments provided cash of $300.0 million, which were offset by cash used to purchase investments of $217.2 million, net cash paid in the acquisitions of BSDI, Eonic and Telenetworks totaling $43.4 million and the purchase of capital equipment of $14.2 million.

    During the nine months ended October 31, 2001, financing activities used net cash of $60.5 million compared to provided net cash of $39.9 million for the same period in fiscal 2001. Net cash used by financing activities during the nine months ended October 31, 2001 was primarily for the repurchase of

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$75.5 million associated with repurchasing convertible notes from the open market. This use of cash was offset by proceeds from the sale of common stock in connection with employee stock option exercises and the employee stock purchase plan of $12.2 million.

    In July 1997, Wind River issued $140 million of 5% convertible subordinated notes, which mature on August 1, 2002. The notes are subordinated to all existing and future senior debt and are convertible into shares of Wind River's common stock at a price of $32.33 per share. The notes are redeemable at the option of Wind River, in whole or in part, at any time on or after August 2, 2000 at 102% of the principal amount initially, and thereafter at prices declining to 100% at maturity, in each case plus accrued interest. Interest is payable semi-annually on February 1 and August 1. During quarter ending July 31, 2001, Wind River repurchased $11.3 million in face value of the convertible subordinated notes, resulting in a gain of $183,000, net of tax. During the quarter ending October 31, 2001, Wind River repurchased $64.2 million in face value of the convertible subordinated notes, resulting in an extraordinary gain on the early extinguishment of debt of $568,000, net of taxes. As of October 31, 2001, notes in an aggregate principal amount of $64.5 million remained outstanding. See the "Additional Risk Factors That May Affect Future Results of Operations" section of this report.

    In fiscal year 1998 and fiscal year 2000, Wind River entered into operating leases for its headquarters facility constructed on land owned by Wind River. Construction of the latest set of buildings was completed in January 2001. The lessor has funded a total of $32.4 million of construction costs related to the first set of buildings and operating lease and has funded a total of $25.0 million of construction costs related to the second set of buildings and second operating lease. The operating lease payments will vary based upon the total construction costs of the buildings, which include capitalized interest and the London interbank offering rate ("LIBOR"). In connection with the lease of Wind River's headquarters, Wind River has entered into a ground lease of its land in Alameda, California, with the lessor of the building at a nominal rate and for a term of 55 years. If Wind River terminates or does not negotiate an extension of the building lease, the ground lease converts to a market rental rate. The ground lease provides Wind River with the option at the end of the lease terms to either acquire the buildings at the lessor's original cost or arrange for the buildings to be acquired. Wind River has guaranteed the residual value associated with the buildings under the first operating lease and second operating lease to the lessor of approximately 82% and 85%, respectively, of the lessor's actual funding of the two leases. Management believes that the contingent liability relating to the residual value guarantee will not have a material adverse effect on Wind River's financial condition, results of operations, or cash flows. Wind River is also required to deposit fixed income securities with a custodian as a deposit to secure the performance of its obligations under the lease. As a result, the balance of $63.7 million is segregated as restricted cash as of October 31, 2001 of which $60.3 million relates to the operating leases and $3.4 million relates to the interest rate swap agreements. In addition, under the terms of the leases, Wind River must maintain compliance with certain financial covenants. In connection with amendments to the governing agreements entered into between Wind River and the financial institution in December 2001. Wind River was granted a waiver of one covenant as at October 31, 2001 and was in compliance with respect to the other covenants at such date. Among other things, the amendments require Wind River to maintain at least $100 million in unencumbered cash, which includes cash and cash equivalents and short-term and long-term investments in marketable securities, in addition to the restricted cash already required under the agreements, through January 31, 2003.

    On March 18, 1998, Wind River entered into an accreting interest rate swap agreement to reduce the impact of changes in interest rates on its floating rate operating lease for its new corporate headquarters. The swap agreement effectively changes Wind River's interest rate exposure on its operating lease, which is based on the one month LIBOR, to a fixed rate of 5.9%. As of October 31, 2001, the notional amount of the interest rate swap was $28.5 million. On January 10, 2001, Wind River entered into a second interest rate swap agreement to reduce the impact of changes in interest

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rates on its second floating rate operating lease for the additional construction of its headquarters facility. This second interest rate swap changes Wind River's interest rate exposure on its second operating lease, which is based on the one month LIBOR, to a fixed rate of 5.6%. As of October 31, 2001, the notional amount of the interest rate swap was $27.9 million. The interest rate swaps mature at the same time as the respective operating lease expires. As of October 31, 2001, the fair value of these interest rate swap liabilities was approximately $4.0 million. Wind River's potential credit exposure under the interest rate swaps (arising from the inability of the counterparties to meet the terms of their contracts) is generally limited to the amounts, if any, by which the counterparties' obligations exceed the obligations of Wind River. Wind River adopted SFAS No. 133 and SFAS No. 138, "Accounting For Certain Derivative Instruments and Certain Hedging Activities—An Amendment of SFAS No. 133" on February 1, 2001. The adoption did not have a material effect on Wind River's financial position, results of operations or cash flows.

    On December 10, 2001, Wind River issued $150.0 million of its 3.75% convertible subordinated notes due 2006. The issuance generated net proceeds of approximately $144.3 million after deducting fees and expenses. The notes mature on December 15, 2006, unless earlier redeemed by Wind River at its option or converted at the holders' option. Interest is payable in cash semi-annually in arrears on June 15 and December 15 of each year, commencing June 15, 2002. At the option of the holder, notes may be converted into Wind River's common stock at any time, unless previously redeemed, at a conversion price of $24.115 per share. Wind River may redeem all or a portion of the notes for cash at prior to December 15, 2004 at a redemption price of 100.75% of the principal amount between December 15, 2004 and December 14, 2005 and 100.0% of the principal amount beginning December 15, 2005 and thereafter. Additionally, under specified circumstances Wind River may redeem the notes prior to 2004. The notes are unsecured and are subordinated to all existing and future senior indebtedness, as defined, and are pari passu with the 5% convertible subordinated notes due August 2002.

    Management believes Wind River's working capital and cash flow generated from operations are sufficient to meet its working capital requirements for planned expansion, product development and capital expenditures for at least the next twelve months and on a longer term basis; however, Wind River may sell additional equity or debt securities or obtain credit facilities to further enhance its liquidity position. The sale of additional securities could result in additional dilution to Wind River's stockholders.

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RECENT ACCOUNTING PRONOUNCEMENTS

    In November 2001, the Emerging Issues Task Force ("EITF") issued EITF Issue No. 01-09 ("EITF 01-09"), "Accounting for Consideration Given by a Vendor to a Customer/Reseller", which addresses the accounting for consideration given by a vendor to a customer including both a reseller of the vendor's products and an entity that purchases the vendor's products from a reseller. EITF 01-09 also codifies and reconciles related guidance issued by the EITF including EITF No. 00-25 "Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products" ("EITF 00-25"). EITF 01-09 outlines the presumption that consideration given by a vendor to a customer, a reseller or a customer of a reseller is to be treated as a deduction from revenue. Treatment of such payments as an expense would only be appropriate if two conditions are met: a) the vendor receives an identifiable benefit in return for the consideration paid that is sufficiently separable from the sale such that the vendor could have entered into an exchange transaction with a party other than the purchaser or its products in order to receive that benefit; and b) the vendor can reasonably estimate the fair value of that benefit. EITF 01-09 will be adopted by Wind River effective February 1, 2002. Wind River is currently assessing EITF 01-09, and has not determined their impact on Wind River's consolidated financial statements.

    In July 2001 the Financial Accounting Standards Board ("FASB") issued SFAS No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets." SFAS No. 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting, and broadens the criteria for recording intangible assets separately from goodwill. Recorded goodwill and intangibles will be evaluated against these new criteria and may result in certain intangibles being subsumed into goodwill, or alternatively, amounts initially recorded as goodwill may be separately identified and recognized apart from goodwill. SFAS No. 142 requires the use of a non-amortization approach to account for purchased goodwill and certain intangibles. Under a non-amortization approach, goodwill and certain intangibles will not be amortized into results of operations, but instead would be reviewed for impairment and written down and charged to results of operations only in the periods in which the recorded value of goodwill and certain intangibles is more than its fair value. Wind River will continue to amortize goodwill and purchased intangible assets acquired prior to June 30, 2001. The provisions of each statement, which apply to goodwill and intangible assets acquired prior to June 30, 2001, will be adopted by Wind River on February 1, 2002. For business combinations initiated after June 30, 2001, Wind River will follow the non-amortization method under SFAS No. 142. Wind River is currently assessing SFAS No. 142 and has not determined the impact on Wind River's consolidated financial statements.

    In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 144 applies to all long-lived assets (including discontinued operations) and consequently amends APB Opinion No. 30, "Reporting the Results of Operations, Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS No. 144 develops one accounting model for long-lived assets that are to be disposed of by sale. SFAS No. 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally SFAS No. 144 expands the scope of discontinued operations to include all components of an entity with operations that (1) can be distinguished from the rest of the entity and (2) will be eliminated from the ongoing operations of the entity in a disposal transaction. SFAS No. 144 is effective for Wind River for all financial statements issued in 2002. The adoption of SFAS No. 144 is not expected to have a material impact on the Wind River's financial statements.

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EURO CURRENCY

    On January 1, 1999, several member countries of the European Union established fixed conversion rates between their sovereign currencies and adopted the Euro as their new common legal currency. Since that date, the Euro has traded on currency exchanges. The legacy currencies will remain legal tender in the participating countries for a transition period between January 1999 and January 1, 2002. During the transition period, non-cash payments can be made in Euros, and parties can elect to pay for goods and services and transact business using either the Euro or a legacy currency. Between January 1, 2002 and February 28, 2002, the participating countries will introduce Euro notes and coins and withdraw all legacy currencies from circulation. The Euro conversion may affect cross-border competition by creating cross-border price transparency. Wind River is assessing its pricing and marketing strategy in order to insure that it remains competitive in a broader European market and is reviewing whether certain existing contracts will need to be modified. Wind River has assessed the ability of information technology systems to allow for transactions to take place in both the legacy currencies and the Euro and the eventual elimination of the legacy currencies and believes that its information technology systems will not be affected by the transition to the Euro. Wind River does not presently expect that introduction and use of the Euro will materially affect Wind River's foreign exchange exposures and hedging activities or will result in any material increase in costs to Wind River. Wind River's currency risk and risk management for operations in participating countries may be reduced as the legacy currencies are converted to the Euro. Wind River will continue to evaluate issues involving introduction of the Euro. Based on current information and Wind River's current assessment, Wind River does not expect that the Euro conversion will have a material adverse effect on its business, financial condition, results of operations, or cash flows.

ADDITIONAL RISK FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

    Our business faces significant risks. The risks described below may not be the only risks we face. Additional risks that we do not yet know of or that we currently think are immaterial may also impair our business operations. If any of the events or circumstances described in the following risks actually occur, our business, financial condition or results of operations could suffer, and the trading price of our common stock could decline.

The recent economic downturn has adversely impacted and may continue to adversely impact our revenues and earnings. In addition, uncertainties associated with the downturn increase the difficulty of financial planning and forecasting.

    We are currently in the midst of a general economic downturn. In recent periods, we have experienced a decline in revenues and a loss of profitability, which we believe is attributable, at least in part, to this downturn. We cannot predict how long or severe this downturn will be or whether any actions taken or proposed by the government will be effective to bolster the economy. As a result of this uncertainty, forecasting and financial and strategic planning are more difficult than usual. Our decline in revenues, as well as the adverse economic conditions, led us to implement a reduction in force and to record charges for restructuring and impairment of acquired goodwill and other assets. If the downturn continues for an extended period or becomes more severe, our business would suffer and we may experience additional declines in sales, as well as continued losses, as our customers attempt to limit their spending. In addition, the adverse impact of the downturn on the capital markets could impair our ability to raise capital as needed and impede our ability to expand our business. In addition, this economic slowdown has been exacerbated by the recent terrorist attacks in New York and Washington, D.C., which caused disruption to commercial activities in the United States and internationally. The long-term impact on the economy of the terrorist attacks is not known at this time. Any future terrorist attacks or future outbreaks of hostilities arising out of any attacks, or concerns that attacks or hostilities may occur, could adversely affect the United States economy in general, including

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the capital markets, which in turn could adversely impact the worldwide economy and prolong or intensify the current downturn.

Numerous factors may cause our total revenues and operating results to fluctuate significantly from period to period. These fluctuations increase the difficulty of financial planning and forecasting and may result in decreases in our available cash and declines in the market price of our stock.

    A number of factors, many of which are outside our control, may cause or contribute to significant fluctuations in our total revenues and operating results. These fluctuations make financial planning and forecasting more difficult. In addition, these fluctuations may result in unanticipated decreases in our available cash which could negatively impact our operations. As discussed more fully below, these fluctuations also could increase the volatility of our stock price. Factors that may cause or contribute to fluctuations in our operating results and revenues include:

•

the number and timing of orders we receive, including disproportionately higher receipt and shipment of orders in the last month of the quarter;



•

changes in the length of our products' sales cycles, which increase as our customers' purchase decisions become more strategic and are made at higher management levels;



•

the success of our customers' products from which we derive our royalty revenue;



•

the mix of our revenues as between sales of products and lower margin sales of services;



•

our ability to control our operating expenses;



•

our ability to continue to develop, introduce and ship competitive new products and product enhancements quickly;



•

possible deferrals of orders by customers in anticipation of new product introductions;



•

announcements, product introductions and price reductions by our competitors;



•

our ability to manage costs for fixed-price consulting agreements;



•

seasonal product purchases by our customers, which historically have been higher in our fourth fiscal quarter;



•

changes in business cycles that affect the markets in which we sell our products;



•

economic conditions generally and in international markets in particular; and



•

foreign currency exchange rates.

    One or more of the foregoing factors may cause our operating expenses to be disproportionately high or may cause our net revenue and operating results to fluctuate significantly. Results from prior periods are thus not necessarily indicative of the results of future periods.

Our restructuring plans may not result in sufficient cost savings to enable us to achieve profitability in a difficult economic environment.

    In response to market conditions, we have announced a restructuring plan designed to more strategically realign our resources and control our expenses. Our restructuring plan is based on certain assumptions regarding the cost structure of our business and the nature and severity of the current industry adjustment and general economic trends. These assumptions may not prove to be accurate and our restructuring plan may not result in sufficient cost savings. Our restructuring plan involves the implementation of a number of initiatives to streamline our business and focus our investments, including reducing headcount, implementing cost control measures, and writing off goodwill and purchased intangible assets. These reductions in employee positions and disposition of assets may

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adversely affect our ability to realize our current or future business objectives. In addition, the costs actually incurred in connection with restructuring actions may exceed our estimated costs of these actions. We may need to refine, expand or extend our plan, which may involve additional restructuring actions, such as further headcount reductions, assessing whether we should consider disposing of businesses or product lines and reviewing the recoverability of remaining tangible and intangible assets. Any decision to further limit investment or to dispose of or otherwise exit additional businesses may result in the recording of additional accrued liabilities for one-time or other charges such as work force reduction costs, asset write downs, and contractual settlements. Current and additional restructuring actions may result in further cash and/or non-cash charges, which could have a material adverse effect on our business and results of operations. As a result, we cannot be sure that we will return to profitability as a result of our restructuring plan.

We face intense competition in the embedded software industry, which could decrease demand for our products or cause us to reduce our prices.

    The embedded software industry is characterized by rapid change, new and complex technology and intense competition. Our ability to maintain our current market share depends on our ability to satisfy customer requirements, enhance existing products and develop and introduce new products. We expect the intensity of competition to increase in the future. Increased competitiveness may result in reductions in the prices of our products, run-time royalties and services, lower-than-expected gross margins or loss of market share, any of which would harm our business.

    Our current competitors include:

•

Internal Research and Development Departments. We believe our principal competition to be companies that develop operating systems in-house. In many cases, these companies have already made significant investments of time and effort in developing their own internal systems, making acceptance of our products as a replacement more difficult.



•

Independent Software Vendors. We also compete with independent software vendors, including Accelerated Technology, Inc.; ENEA OSE Systems AB; Mentor Graphics, Inc.; Microsoft Corporation; Motorola, Inc.; QNX Software Systems, Ltd.; Sun Microsystems, Inc.; and Symbian Ltd.



•

Open Source Software Vendors. A number of companies, including Red Hat, Inc., LinuxWorks, Lineo Inc., and MonteVista Software, Inc. have been promoting the open source Linux operating system for use in embedded applications. Because Linux is royalty-free, increased use of the Linux operating system may force us to reduce the prices of run-time royalties, and our revenues and profit margins could decline. In addition, the accessibility of the open source code promotes rapid technological changes from contributors in the open source community.

    Some of our competitors have significantly greater financial, technical, marketing, sales and other resources and significantly greater name recognition than we do. Demands for rapid change and the increasing complexity of the technology in our industry intensifies the competition we face. These factors favor larger competitors that have the resources to develop new technologies or to respond more quickly with new product offerings or product enhancements. In addition, our competitors may consolidate or establish strategic alliances to expand product offerings and resources or address new market segments. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements or to devote greater resources to the development, promotion, sale and support of their products. We may be unable to meet the pace of these developments or may incur additional costs attempting to do so, which may cause declines in our operating results. Our competitors may foresee the course of market developments more accurately than we do and could in the future develop new technologies that compete with our products or even render our products obsolete, any of which could adversely affect our competitive position.

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If we do not continue to successfully address new and rapidly changing markets and increasingly complex technologies and to continue to deliver our products on a timely basis, our revenues and operating results will decline.

    The market for embedded software is characterized by ongoing technological developments, evolving industry standards and rapid changes in customer requirements and product offerings in the embedded market. Our success depends upon our ability to adapt and respond to these changes in a timely and cost-effective manner. If we fail to continually update our existing products to keep them current with customer needs or to develop new or enhanced products to take advantage of new technologies, emerging standards, and expanding customer requirements, our existing products could become obsolete and our financial performance would suffer. We have from time to time experienced delays in the commercial release of new technologies, new products and enhancements of existing products. These delays are commonplace in the software industry due to the complexity and unpredictability of the development work required. We must effectively market and sell new product offerings to key customers, because once a customer has designed a product with a particular operating system, that customer typically is reluctant to change its supplier due to the significant related costs. If we cannot adapt or respond in a cost-effective and timely manner to new technologies and new customer requirements, sales of our products could decline.

The costs of software development can be high, and we may not realize revenues from our development efforts for a substantial period of time.

    Introducing new products that rapidly address changing market demands requires a continued high level of investment in research and development. As we undertake the extensive capital outlays to address the changes in the embedded market, we may be unable to realize revenue as soon as we may expect. These costs associated with software development are increasing, including the costs of recruiting and retaining engineering talent and acquiring or licensing new technologies. Our investment in new and existing market opportunities prior to our ability to generate revenue from these new opportunities may adversely affect our operating results.

Integrating the companies we have acquired and costs associated with acquisitions and investments may disrupt our business and harm our operating results.

    We anticipate that, as part of our business strategy, we will continue to acquire or make investments in business, products and technologies that complement ours. These investments and acquisitions can be expensive and difficult to manage and integrate. We have incurred significant costs in connection with acquisition transactions in recent years completed during our last fiscal year and to date in our current fiscal year and may incur significant costs in connection with future transactions, whether or not they actually occur. Acquisitions involve additional risks including:

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difficulties in integrating the operations, technologies, and products of the acquired companies;



•

the risk of diverting management's attention from normal daily operations of the business;



•

potential difficulties in completing projects associated with in-process research and development;



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risks of operating in markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions;



•

disruption of customer relationships;



•

increased expenses associated with acquisitions, including costs for employee redeployment, relocation or severance; conversion of information systems; combining research and development teams and processes; reorganization or closures of facilities; and relocation or disposition of excess equipment;

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•

potential charges relating to amortization or impairment of acquired goodwill or other acquired assets;



•

potential delays in realizing anticipated revenues associated with the acquisition; and



•

the potential loss of key employees of the acquired companies.

    We may not be successful in integrating the business, products, technologies and personnel we acquire. Similarly, we cannot guarantee that our investments will yield a significant return, if any. If we cannot successfully manage the integration of our acquisitions or are unable to realize the benefits of, or anticipated revenues from, our acquisitions, our business, financial condition and operating results could suffer.

If we are unable to successfully maintain our strategic alliances and collaborative relationships, we could experience delays in product development and our business would suffer.

    We have several forms of strategic relationships, primarily with key semiconductor manufacturers, through our Centers of Excellence program and value added reseller agreements. In addition, we have collaborative marketing agreements through our WindLink program and collaborative marketing and distribution agreements through our Wind River Direct program with certain developers of third-party applications and products. These strategic relationships are complex because we compete in certain business areas with companies with which we have a strategic relationship in other business areas. Our strategic partners may also have concurrent relationships with companies that provide open source and in-house solutions, which may put pressure on our product development roadmaps, timelines and prices. If we are not successful in developing and maintaining these strategic relationships, our business will be harmed. If our collaborative marketing and distribution agreements terminate or expire, the scope of our product offerings may be restricted, and the distribution of our products and revenues may be adversely impacted.

Because a significant portion of our revenue is derived from royalties, we are dependent upon the ability of our customers to develop and penetrate new markets successfully.

    Our operating systems and middleware products are embedded in end-user products developed and marketed by our customers, and we receive royalty fees for each copy of our operating system and middleware products embedded in those products. Therefore, our royalty revenues depend both upon our ability to successfully negotiate royalty agreements with our customers and, in turn, upon our customers' successful commercialization of their underlying products. In particular, we derive significant revenue from customers that develop products in highly competitive and technologically complex areas such as Internet infrastructure, servers and storage, digital consumer, aerospace and defense, industrial control and automotive. If these customers sell fewer products or otherwise face significant economic difficulties, our revenues will decline. During our current fiscal year, we have experienced a decline in run-time royalties received from customers, which we believe is primarily due to our customers' response to the existing current market conditions in the high technology sector. We cannot control these customers' product development or commercialization or predict their success. In addition, we depend on our customers to accurately report the use of their products in order for us to collect our run-time royalties. If our customers are not successful with their products or do not accurately report use of their products, our royalty revenues may decline significantly.

Our significant international business activities subject us to increased costs and economic risks.

    We develop and sell a substantial percentage of our products internationally. For the nine months ended October 31, 2001, revenues from international sales were $103.7 million, or 38% of total revenue, as compared to $99.1 million, or 32% of total revenue, for the nine months ended October 31, 2000. Additionally, we have investments in, or have made acquisitions of, technology internationally. We

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also expect to continue to make investments to further support and expand our international operations and increase our direct sales force in Europe and Asia. Risks inherent in international operations include:

•

the imposition of governmental controls and regulatory requirements;



•

the costs and risks of localizing products for foreign countries;



•

differences in business cultures and sales cycles;



•

differences in operation and sales support expenses;



•

unexpected changes in tariffs, import and export restrictions and other barriers and restrictions;



•

greater difficulty in accounts receivable collection;



•

the restrictions on repatriation of earnings;



•

exposure to adverse movements in foreign currency exchange rates;



•

the burdens of complying with a variety of foreign laws;



•

difficulties in staffing and managing foreign subsidiaries and branch operations;



•

difficulties in integrating products and operations from foreign acquisitions; and



•

credit instruments extended to support foreign operations, in particular in Japan.

foreig

    Any of these events, regionally and as a whole, could reduce our international sales and increase our costs of doing business internationally and have a material adverse effect on our gross margins and net operating results. Moreover, during fiscal 2001, we began to transition sales in Japan to a direct distribution model. Partly as a result of this transition, revenues in Japan have declined in recent quarters. We cannot be certain that our expectations for the direct sale model will be met and that the level of sales in Japan will increase in absolute dollars or as a percentage of our revenue. If we fail to increase our sales in Japan, or other international regions, our results of operations may be adversely affected.

We have substantial debt service and principal repayment obligations, which could make it difficult for us to obtain financing and deplete our cash reserves.

    As of October 31, 2001, we had approximately $64.5 million in outstanding indebtedness under our outstanding 5% convertible subordinated notes and $57.4 million in long-term obligations under the lease financings of our facilities in Alameda. As of October 31, 2001, there was $16.7 million outstanding under the revolving credit facility of our Japanese subsidiary. In addition, in December 2001, we issued $150.0 million of 3.75% convertible subordinated notes due December 2006. As a result of these financings, we will have substantial debt service, principal repayment and lease payment obligations, which could impair our liquidity and cash reserves and our ability to obtain additional financing for working capital or acquisitions, should we need to do so.

Failure of our current and planned information systems, controls and infrastructure to adequately manage and support our anticipated growth and global operations could disrupt our business.

    We have experienced, and expect to continue to experience in the long-term, both through acquisitions and internal expansion, significant growth in our headcount and in the scope, complexity and geographic reach of our operations. To support this expansion, we must standardize, integrate and improve our management controls, reporting systems and procedures and information technology infrastructure. To implement those improvements, we must purchase, develop and maintain complex

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and expensive information management systems. Our current and planned systems, procedures and controls may not be adequate to support our future operations. Failure of these systems to meet our needs and an inability to efficiently integrate and expand support worldwide could disrupt our operations. Our ability to manage this growth is complicated by the need to implement headcount reductions and cost-control measures in the short-term in response to general economic conditions and declining revenues. See "—Our restructuring plans may not result in sufficient cost savings to enable us to achieve profitability in a difficult economic environment" above.

We depend on key employees and face competition in hiring and retaining qualified employees.

    Our employees are vital to our success, and our key management, engineering, sales and other employees are difficult to replace. We generally do not have employment contracts with our key employees or maintain key person life insurance on any of our employees. The expansion of high technology companies in the San Francisco bay area and elsewhere has increased competition for highly qualified technical personnel. If we are unable to attract, assimilate, retain or motivate highly qualified technical and sales employees in the future through competitive compensation and employment policies, our ability to develop and introduce competitive new products in a timely manner may suffer.

Our common stock price is subject to volatility.

    In recent years, the stock markets in general and the shares of technology companies in particular have experienced extreme price fluctuations. These recent price fluctuations have often been unrelated or disproportionate to the operating performance of the companies affected. Our stock price has similarly experienced significant volatility. In recent fiscal quarters, we have experienced shortfalls in revenue and earnings from levels expected by securities analysts and investors, which have had an immediate and significant adverse effect on the trading price of our common stock. The factors relating to the fluctuations in our revenues and operating results discussed above will continue to affect our stock price. Comments by or changes in estimates from securities analysts as well as significant developments involving our competitors or our industry could also affect our stock price. In addition, the market price of our common stock is affected by the stock performance of other companies in our industry and other technology companies generally. Other broad market and industry factors may negatively affect our operating results or cause our stock price to decline, as may general political or economic conditions in the United States and globally, such as recessions, or interest rate or currency fluctuations.

Potential volatility of our stock price may subject us to the risk of securities litigation, which could result in substantial costs and divert management's attention.

    In the past, securities class action litigation has often been instituted against companies following periods of decline in market prices of their common stock. As discussed above, the securities of high technology companies have been particularly subject to extreme price fluctuations, and securities litigation against these companies and their directors has frequently ensued. We may become a target of similar litigation. Any securities litigation that is commenced against us could result in substantial costs and diversion of management's time and attention from our business, even if we ultimately prevail in the litigation. Moreover, an adverse determination in litigation could subject us to substantial liabilities.

Our strategic equity investments are subject to equity price risk and their value may fluctuate.

    From time to time, we make investments for the promotion of business and strategic objectives with publicly traded and non-publicly traded companies. The market price and valuation of the securities that we hold in these companies may fluctuate due to market conditions and other circumstances over which we have little or no control. Recently, the value of these investments has

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declined significantly, causing us to record significant impairment losses for most of these investments. We typically do not attempt to reduce or eliminate this equity price risk, through hedging or similar techniques, and market price and valuation fluctuations could impact our financial results. Moreover, our investments in non-publicly traded companies are inherently risky because the markets for the technologies or products these companies have under development are typically in the early stage and may never develop. We will continue to monitor these investments for impairment and will make appropriate reductions in the carrying value when necessary. To the extent that the fair value of these securities is less than our cost over an extended period of time, our net income would be reduced.

The rights we rely upon to protect the intellectual property underlying our products may not be adequate, which could enable third parties to use our technology and reduce our ability to compete.

    Our success depends significantly upon the proprietary technology contained in our products. We currently rely on a combination of patents, copyrights, trademarks, trade secret laws, and contractual provisions to establish and protect our intellectual property rights in our technology and products. We cannot be certain that the steps we take to protect our intellectual property will adequately protect our rights, that others will not independently develop or otherwise acquire equivalent or superior technology, or that we can maintain such technology as trade secrets. In addition, discovery and investigation of unauthorized use of our intellectual property is difficult. We expect software piracy, which is difficult to detect, to be a persistent problem, particularly in those foreign countries where the laws may not protect our intellectual property as fully as in the United States. Employees, consultants, and others who participate in the development of our products may breach their agreements with us regarding our intellectual property. We might not have adequate remedies for infringement or breach of our proprietary rights by third parties, employees or consultants. Further, we may initiate claims or litigation against third parties for infringement or breach of our proprietary rights or to establish the validity of our proprietary rights. Whether or not such litigation is determined in our favor, such actions could result in significant expense to us, divert the efforts of our technical and management personnel from productive tasks or cause product shipment delays.

Patent or copyright infringement or product liability claims against us may result in costly litigation, cause product shipment delays and require us to enter into royalty or licensing arrangements.

    We occasionally receive communications from third parties alleging patent, trademark or copyright infringement or other intellectual property claims, and there is always the chance that third parties may assert infringement claims against us or against our customers under circumstances that might require us to provide indemnification. For example, at various times in recent years, we have been informed that IBM Corporation has contacted a few of our customers with respect to potential infringement of IBM patents by our customers' products which may include our software. Additionally, because our products are increasingly used in applications, such as network infrastructure, transportation, medical and mission-critical business systems, in which the failure of the embedded system could cause property damage, personal injury or economic loss, we may face product liability claims.

    Although our agreements with our customers typically contain provisions intended to limit our exposure to infringement and liability claims, these provisions may not be effective in doing so in all circumstances or in all jurisdictions. Any of these types of claims, with or without merit, could result in claims for indemnification by us or costly litigation, could require us to expend significant resources to develop non-infringing technology, cause product shipment delays or require us to enter into royalty or licensing agreements, or to pay significant damages if the claims are successful. In the case of infringement of another party's intellectual property, we cannot be certain that the necessary licenses will be available or that they can be obtained on commercially reasonable terms. If we are not successful in defending these claims or were to fail to obtain royalty or licensing agreements in a timely

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manner and on reasonable terms, our business, financial condition and results of operations would be materially adversely affected.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE SENSITIVITY

    Wind River's exposure to market risk for changes in interest rates relate primarily to its investment portfolio and debt obligations.

    Wind River places its investments with high quality credit issuers and, by policy, limits the amount of credit exposure to any one issuer. As stated in its policy, Wind River's first priority is to reduce the risk of principal loss. Consequently, Wind River seeks to preserve its invested funds by limiting default risk, market risk and reinvestment risk. Wind River mitigates default risk by investing in only high quality credit securities that it believes to be low risk and by positioning its portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer or guarantor. The portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity.

    Wind River believes an immediate 10% move in interest rates affecting Wind River's floating and fixed rate financial instruments as of October 31, 2001 would have an immaterial effect on Wind River's pretax earnings. Wind River also believes the immediate 10% move in interest rates would have an immaterial effect on the fair value of Wind River's fixed income securities.

    In March 1998, Wind River entered into a 5.9% accreting interest rate swap to reduce the impact of changes in interest rates on its floating interest rate operating lease for its new headquarters. As of October 31, 2001, the notional amount of the accreting interest rate swap was $28.5 million. In January 2001, Wind River entered into a 5.6% interest rate swap to mitigate the impact of interest rate changes on its second floating interest rate operating lease for the additional construction of its headquarters facility. The notional amount of the interest rate swap was $27.9 million. The estimated fair value of these interest rate swap liabilities at October 31, 2001 was approximately $4.0 million.

FOREIGN CURRENCY RISK

    Wind River transacts business in various foreign currencies, primarily in Japanese yen and certain European currencies. Wind River has established a foreign currency transaction hedging program, utilizing foreign currency exchange contracts for its foreign currency transaction exposures in Japan and certain European countries. While these instruments are subject to fluctuations in value, these fluctuations are offset by fluctuations in the value of the underlying asset or liability being managed, resulting in minimal net exposure for us. Wind River does not use forward contracts for trading purposes. The success of the hedging program depends on the estimation of intercompany balances denominated in various foreign currencies. To the extent that these forecasts are overstated or understated during periods of currency volatility, we may experience unanticipated currency gains or losses. Wind River's ultimate realized gain or loss with respect to currency fluctuations will depend on the currency exchange rates and other factors in effect as the contracts mature. As of October 31, 2001, Wind River had outstanding forward contracts with notional amounts totaling approximately $15.9 million.

    The unrealized gains and losses on the outstanding forward contracts at October 31, 2001 were immaterial to Wind River's consolidated financial statements. Due to the short-term nature of the forward contracts, the fair value at October 31, 2001 was negligible. The realized gains and losses on these contracts as they matured were not material to the consolidated operations of Wind River in the third quarter of fiscal 2002.

40

EQUITY PRICE RISK

    Wind River owns 338,652 shares of common stock of e-Sim, Inc., an Israeli corporation. Wind River purchased the common stock prior to e-Sim's public offering. e-Sim went public in July 1998 at $7.50 per share, and on October 31, 2001, the closing price of e-Sim's stock was $0.19 per share.

    Wind River owns 90,909 shares of common stock of Tvia, Inc., a Delaware corporation. Wind River purchased the common stock prior to Tvia's public offering. Tvia went public in August 2000 at $11.00 per share, and on October 31, 2001, the closing price of Tvia's stock was $1.40 per share.

    On February 12, 2001, Wind River purchased 400,000 shares of common stock of Insignia Solutions, Ltd., a company incorporated under the laws of England and Wales, at a cost of $5.00 per share. On October 31, 2001, the closing price of Insignia was $1.66 per share.

    Wind River values the above investments using the closing price of the stock at the end of each month. As a result, Wind River reflects these investments on its balance sheet at October 31, 2001 at their aggregate market value of approximately $846,000. During the three months ended October 31, 2001, Wind River recorded a impairment on these investments of $4.3 million which represents the unrealized loss valued at October 31, 2001. The impairment was recorded as the unrealized losses on these investments were determined to be other than temporary.

    Prior to the July 1999 public offering of shares of Liberate Technologies, Inc. ("Liberate"), a Delaware corporation, Wind River purchased 208,333 shares at $4.80 per share. During the three months ended October 31, 2001, Wind River sold its remaining investment in Liberate, for a pre-tax gain of approximately $1.4 million.

    Wind River has certain other minority investments in non-publicly traded companies. These investments are included in other long-term assets on Wind River's balance sheet and are carried at cost, subject to adjustment for impairment. These investments are inherently risky because the markets for the technologies or products they have under development are typically in the early stages and may never develop. Due to the recent economic downturn, Wind River recorded impairment losses of $3.6 million and $6.9 million during the three and nine month periods ended October 31, 2001, respectively, on its investments in non-publicly traded companies. As of October 31, 2001, the cost basis of the portion of Wind River's remaining investment related to non-publicly traded companies was $4.0 million. Wind River will continue to monitor these investments for impairment and make appropriate reductions in carrying values when necessary. See the "Additional Risk Factors That May Affect Future Results of Operations" section of this report.

41

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

    In February 2001, Wind River entered into a license and distribution agreement with The MathWorks, Inc., to ensure customer support and product transition as Wind River prepared to discontinue the MATRIXx® product family. Under the agreement, in exchange for a cash payments worth $12.0 million, Wind River granted to MathWorks the exclusive distribution rights to MATRIXx for a specified time period as well as an option to purchase the MATRIXx intellectual property and assets at the end of the licensing term. The agreement requires MathWorks to provide support to customers of MATRIXx products and to provide a transition plan for customers that choose to migrate to its MATLAB® and Simulink® family of products. In July 2001, the Antitrust Division of the U.S. Department of Justice advised Wind River that it had commenced a civil antitrust investigation into whether the agreement with MathWorks was a restraint of trade in violation of the federal antitrust laws. Wind River is cooperating fully with the Justice Department. To date, in addition to issuing a civil investigative demand requesting that Wind River provide information relating to the agreement, the Justice Department has taken several depositions; however, no court action has been commenced. Wind River believes that, if the Justice Department ultimately determined to file an action in connection with this matter, it would have meritorious defenses and, although no assurance can be given, the outcome of such action would not have a material adverse effect on its business.

    On December 3, 2001, Wind River filed an action for declaratory relief in the Superior Court of California, County of Alameda, against Mentat, Inc. concerning the 1999 Distribution Agreement for Computer Software Package (the "Agreement") entered into between Wind River and Mentat. Under the Agreement, Wind River agreed to license and distribute software designed by Mentat known as WindNet Streams 1.0, which provides an interface for certain networking protocols and terminal subsystems, helpful but not commonly used in embedded applications. The dispute arose from a claim by Mentat alleging that Wind River had breached the Agreement by distributing WindNet Streams 1.0 binaries in a recent distribution of less than 100 board support packages and by including some allegedly confidential source code header files (but not the application itself) in Wind River's Tornado 2.x product. Mentat alleged damages measured at license fees of $35,000 for each WindNet Streams 1.0 binary distribution and source code license fees of $26,000 for each header file distribution. Wind River has requested that the court make a declaration that (i) the header files are not confidential source code, (ii) no misappropriation of Mentat's trade secrets has occurred, (iii) Mentat has failed to mitigate, and has not suffered, any damages, and (iv) Wind River has not breached the agreement. Wind River intends to pursue this action and defend the matter vigorously and believes it has meritorious defenses to the allegations.

    Management believes the outcome of its outstanding legal proceedings, claims and litigation, including the matters discussed herein, will not have a material adverse effect on Wind River's business, results of operations, financial condition or cash flows. However, these pending lawsuits involve complex questions of fact and law and could involve significant costs and the diversion of resources to defend. Additionally, the results of litigation are inherently uncertain, and an adverse outcome is at least reasonably possible. In the event of an adverse outcome, Wind River's business, financial condition and results of operations may be materially adversely affected. Wind River is unable to estimate the range of possible loss from outstanding litigation, and no amounts have been provided for such matters in the accompanying consolidated financial statements.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

    Not applicable.

42

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

    Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    At the Annual Meeting of Stockholders held August 1, 2001, the following matters were submitted to a vote of the security holders:

    (1)  To elect the following to serve as directors of Wind River:

Name	For	Withheld
James W. Bagley	66,012,965	1,968,936
John C. Bolger	66,014,520	1,967,381
William B. Elmore	66,014,691	1,967,210
Jerry L. Fiddler	66,014,766	1,967,135
Narendra K. Gupta	65,754,729	2,227,172
Grant M. Inman	66,014,691	1,967,210
Thomas St. Dennis	65,857,852	2,124,049

    (2)  To ratify the selection of PricewaterhouseCoopers LLP as Wind River's independent accountants for the fiscal year ending January 31, 2002:

Votes for	67,659,173
Votes against	284,955
Votes abstaining	37,741

ITEM 5. OTHER INFORMATION

    Not applicable.

43

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)

Exhibits

4.1		Indenture dated as of December 10, 2001 between the Registrant and Bankers Trust Company, as Trustee.
10.50		Separation Agreement and Release dated as of September 14, 2001 by and among Curt Shacker and the Registrant.
10.51	*	First Amendment to Participation Agreement and Certain Operative Agreements with Limited Waiver dated November 30, 2001 between Wind River Systems, Inc., Deutsche Bank AG, New York Branch and Deutsche Bank AG, New York and/or Cayman Islands Branch.
10.52	*	Eighth Amendment to Participation Agreement and Certain Operative Agreements with Limited Waiver dated December 3, 2001 between Wind River Systems, Inc., Deutsche Bank AG, New York Branch, and Deutsche Bank AG, New York and/or Cayman Islands Branch.
10.53		Purchase Agreement dated as of December 5, 2001 by and among the Registrant, Credit Suisse First Boston Corporation, UBS Warburg LLC and Thomas Weisel Partners LLC.
10.54		Registration Rights Agreement dated as of December 10, 2001 by and between the Registrant, Credit Suisse First Boston Corporation, UBS Warburg LLC and Thomas Weisel Partners LLC.

*

Incorporated by reference to the Current Report on Form 8-K filed by the Registrant with the Securities and Exchange Commission on December 3, 2001.

(b)

Reports on Form 8-K

    Wind River filed a report on Form 8-K, dated August 7, 2001, filing the press release announcing the continuation of a significant slowdown in near-term customer spending and the implementation of measures to control costs.

44

SIGNATURE

    Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	WIND RIVER SYSTEMS, INC.
Dated: December 17, 2001	By:	/s/ MICHAEL W. ZELLNER Michael W. Zellner Vice President of Finance, Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)

45

QuickLinks

WIND RIVER SYSTEMS, INC. FORM 10-Q FOR THE QUARTER ENDED OCTOBER 31, 2001 INDEX
Part I—FINANCIAL INFORMATION
WIND RIVER SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
WIND RIVER SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value)
WIND RIVER SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
WIND RIVER SYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURE

EX-4.1

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Exhibit 4.1

WIND RIVER SYSTEMS, INC.

3³/4% CONVERTIBLE SUBORDINATED NOTES DUE DECEMBER 15, 2006

INDENTURE
DATED AS OF DECEMBER 10, 2001

BANKERS TRUST COMPANY,
AS TRUSTEE

TABLE OF CONTENTS

			Page
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE			1
	SECTION 1.1.	DEFINITIONS	1
	SECTION 1.2.	OTHER DEFINITIONS	6
	SECTION 1.3.	TRUST INDENTURE ACT PROVISIONS	7
	SECTION 1.4.	RULES OF CONSTRUCTION	7
ARTICLE 2 THE SECURITIES			8
	SECTION 2.1.	FORM AND DATING	8
	SECTION 2.2.	EXECUTION AND AUTHENTICATION	9
	SECTION 2.3.	REGISTRAR, PAYING AGENT AND CONVERSION AGENT	10
	SECTION 2.4.	PAYING AGENT TO HOLD MONEY IN TRUST	10
	SECTION 2.5.	SECURITYHOLDER LISTS	11
	SECTION 2.6.	TRANSFER AND EXCHANGE	11
	SECTION 2.7.	REPLACEMENT SECURITIES	12
	SECTION 2.8.	OUTSTANDING SECURITIES	12
	SECTION 2.9.	TREASURY SECURITIES	12
	SECTION 2.10.	TEMPORARY SECURITIES	13
	SECTION 2.11.	CANCELLATION	13
	SECTION 2.12.	LEGEND; ADDITIONAL TRANSFER AND EXCHANGE REQUIREMENTS	13
	SECTION 2.13.	CUSIP NUMBERS	15
ARTICLE 3 REDEMPTION AND PURCHASES			16
	SECTION 3.1.	RIGHT TO REDEEM; NOTICE TO TRUSTEE	16
	SECTION 3.2.	SELECTION OF SECURITIES TO BE REDEEMED	16
	SECTION 3.3.	NOTICE OF REDEMPTION	17
	SECTION 3.4.	EFFECT OF NOTICE OF REDEMPTION	17
	SECTION 3.5.	DEPOSIT OF REDEMPTION PRICE	18
	SECTION 3.6.	SECURITIES REDEEMED IN PART	18
	SECTION 3.7.	CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION	18
	SECTION 3.8.	PURCHASE OF SECURITIES AT OPTION OF THE HOLDER UPON CHANGE IN CONTROL	19
	SECTION 3.9.	EFFECT OF CHANGE IN CONTROL PURCHASE NOTICE	22
	SECTION 3.10.	DEPOSIT OF CHANGE IN CONTROL PURCHASE PRICE	23
	SECTION 3.11.	SECURITIES PURCHASED IN PART	23
	SECTION 3.12.	COMPLIANCE WITH SECURITIES LAWS UPON PURCHASE OF SECURITIES	23
	SECTION 3.13.	REPAYMENT TO THE COMPANY	23
ARTICLE 4 CONVERSION			24
	SECTION 4.1.	CONVERSION PRIVILEGE	24
	SECTION 4.2.	CONVERSION PROCEDURE	24
	SECTION 4.3.	FRACTIONAL SHARES	25
	SECTION 4.4.	TAXES ON CONVERSION	25
	SECTION 4.5.	COMPANY TO PROVIDE STOCK	26
	SECTION 4.6.	ADJUSTMENT OF CONVERSION PRICE	26
	SECTION 4.7.	NO ADJUSTMENT	30
	SECTION 4.8.	ADJUSTMENT FOR TAX PURPOSES	31
	SECTION 4.9.	NOTICE OF ADJUSTMENT	31

i

	SECTION 4.10.	NOTICE OF CERTAIN TRANSACTIONS	31
	SECTION 4.11.	EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE ON CONVERSION PRIVILEGE	31
	SECTION 4.12.	TRUSTEE'S DISCLAIMER	32
	SECTION 4.13.	VOLUNTARY REDUCTION	32
ARTICLE 5 SUBORDINATION			33
	SECTION 5.1.	AGREEMENT OF SUBORDINATION	33
	SECTION 5.2.	PAYMENTS TO HOLDERS	33
	SECTION 5.3.	SUBROGATION OF SECURITIES	35
	SECTION 5.4.	AUTHORIZATION TO EFFECT SUBORDINATION	36
	SECTION 5.5.	NOTICE TO TRUSTEE	36
	SECTION 5.6.	TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS	37
	SECTION 5.7.	NO IMPAIRMENT OF SUBORDINATION	37
	SECTION 5.8.	CERTAIN CONVERSIONS DEEMED PAYMENT	37
	SECTION 5.9.	ARTICLE APPLICABLE TO PAYING AGENTS	38
	SECTION 5.10.	SENIOR INDEBTEDNESS ENTITLED TO RELY	38
ARTICLE 6 COVENANTS			38
	SECTION 6.1.	PAYMENT OF SECURITIES	38
	SECTION 6.2.	SEC REPORTS	38
	SECTION 6.3.	COMPLIANCE CERTIFICATES	39
	SECTION 6.4.	FURTHER INSTRUMENTS AND ACTS	39
	SECTION 6.5.	MAINTENANCE OF CORPORATE EXISTENCE	39
	SECTION 6.6.	RULE 144A INFORMATION REQUIREMENT	39
	SECTION 6.7.	STAY, EXTENSION AND USURY LAWS	39
	SECTION 6.8.	PAYMENT OF ADDITIONAL INTEREST	40
ARTICLE 7 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE			40
	SECTION 7.1.	COMPANY MAY CONSOLIDATE, ETC, ONLY ON CERTAIN TERMS	40
	SECTION 7.2.	SUCCESSOR SUBSTITUTED	40
ARTICLE 8 DEFAULT AND REMEDIES			41
	SECTION 8.1.	EVENTS OF DEFAULT	41
	SECTION 8.2.	ACCELERATION	42
	SECTION 8.3.	OTHER REMEDIES	42
	SECTION 8.4.	WAIVER OF DEFAULTS AND EVENTS OF DEFAULT	43
	SECTION 8.5.	CONTROL BY MAJORITY	43
	SECTION 8.6.	LIMITATIONS ON SUITS	43
	SECTION 8.7.	RIGHTS OF HOLDERS TO RECEIVE PAYMENT AND TO CONVERT	43
	SECTION 8.8.	COLLECTION SUIT BY TRUSTEE	44
	SECTION 8.9.	TRUSTEE MAY FILE PROOFS OF CLAIM	44
	SECTION 8.10.	PRIORITIES	44
	SECTION 8.11.	UNDERTAKING FOR COSTS	44
ARTICLE 9 TRUSTEE			45
	SECTION 9.1.	DUTIES OF TRUSTEE	45
	SECTION 9.2.	RIGHTS OF TRUSTEE	46
	SECTION 9.3.	INDIVIDUAL RIGHTS OF TRUSTEE	46
	SECTION 9.4.	TRUSTEE'S DISCLAIMER	47

ii

	SECTION 9.5.	NOTICE OF DEFAULT OR EVENTS OF DEFAULT	47
	SECTION 9.6.	REPORTS BY TRUSTEE TO HOLDERS	47
	SECTION 9.7.	COMPENSATION AND INDEMNITY	47
	SECTION 9.8.	REPLACEMENT OF TRUSTEE	48
	SECTION 9.9.	SUCCESSOR TRUSTEE BY MERGER, ETC.	48
	SECTION 9.10.	ELIGIBILITY; DISQUALIFICATION	49
	SECTION 9.11.	PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY	49
ARTICLE 10 SATISFACTION AND DISCHARGE OF INDENTURE			49
	SECTION 10.1.	SATISFACTION AND DISCHARGE OF INDENTURE	49
	SECTION 10.2.	APPLICATION OF TRUST MONEY	50
	SECTION 10.3.	REPAYMENT TO COMPANY	50
	SECTION 10.4.	REINSTATEMENT	50
ARTICLE 11 AMENDMENTS, MODIFICATIONS AND SUPPLEMENTS			50
	SECTION 11.1.	WITHOUT CONSENT OF HOLDERS	50
	SECTION 11.2.	WITH CONSENT OF HOLDERS	51
	SECTION 11.3.	COMPLIANCE WITH TRUST INDENTURE ACT	52
	SECTION 11.4.	REVOCATION AND EFFECT OF CONSENTS	52
	SECTION 11.5.	NOTATION ON OR EXCHANGE OF SECURITIES	52
	SECTION 11.6.	TRUSTEE TO SIGN AMENDMENTS, ETC.	52
	SECTION 11.7.	EFFECT OF SUPPLEMENTAL INDENTURES	52
ARTICLE 12 MISCELLANEOUS			52
	SECTION 12.1.	TRUST INDENTURE ACT CONTROLS	52
	SECTION 12.2.	NOTICES	53
	SECTION 12.3.	COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS	53
	SECTION 12.4.	CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT	53
	SECTION 12.5.	RECORD DATE FOR VOTE OR CONSENT OF SECURITYHOLDERS	54
	SECTION 12.6.	RULES BY TRUSTEE, PAYING AGENT, REGISTRAR AND CONVERSION AGENT	54
	SECTION 12.7.	LEGAL HOLIDAYS	54
	SECTION 12.8.	GOVERNING LAW AND SUBMISSION TO JURISDICTION	54
	SECTION 12.9.	NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS	55
	SECTION 12.10.	NO RECOURSE AGAINST OTHERS	55
	SECTION 12.11.	SUCCESSORS	55
	SECTION 12.12.	MULTIPLE COUNTERPARTS	55
	SECTION 12.13.	SEPARABILITY	55
	SECTION 12.14.	TABLE OF CONTENTS, HEADINGS, ETC.	55

iii

CROSS-REFERENCE TABLE*

TIA SECTION		INDENTURE SECTION
Section	310(a)(1)	9.10
	(a)(2)	9.10
	(a)(3)	N.A.**
	(a)(4)	N.A.
	(a)(5)	9.10
	(b)	9.8; 9.10
	(c)	N.A.
Section	311(a)	9.11
	(b)	9.11
	(c)	N.A.
Section	312(a)	2.5
	(b)	12.3
	(c)	12.3
Section	313(a)	9.6
	(b)(1)	N.A.
	(b)(2)	9.6
	(c)	9.6; 12.2
	(d)	9.6
Section	314(a)	6.2; 6.4; 12.2
	(b)	N.A.
	(c)(1)	12.4(a)
	(c)(2)	12.4(a)
	(c)(3)	N.A.
	(d)	N.A.
	(e)	12.4(b)
	(f)	N.A.
Section	315(a)	9.1(b)
	(b)	9.5; 12.2
	(c)	9.1(a)
	(d)	9.1(c)
	(e)	8.11

iv

Section	316(a)(last sentence)	2.9
	(a)(1)(A)	8.5
	(a)(1)(B)	8.4
	(a)(2)	N.A.
	(b)	8.7
	(c)	12.5
Section	317(a)(1)	8.8
	(a)(2)	8.9
	(b)	2.4

*

This Cross-Reference Table shall not, for any purpose, be deemed a part of this Indenture.

**

N.A. means Not Applicable.

v

    THIS INDENTURE dated as of December 10, 2001 is between Wind River Systems, Inc., a corporation duly organized under the laws of the State of Delaware (the "Company"), and Bankers Trust Company, a New York banking corporation, as Trustee (the "Trustee").

    In consideration of the premises and the purchase of the Securities by the Holders thereof, both parties agree as follows for the benefit of the other and for the equal and ratable benefit of the registered Holders of the Company's 3³/4% Convertible Subordinated Notes Due December 15, 2006.

ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE

    SECTION 1.1.  DEFINITIONS.

    "Additional Interest" has the meaning specified in Section 5 of the Registration Rights Agreement. All references herein to interest accrued or payable as of any date shall include any Additional Interest accrued or payable as of such date as provided in the Registration Rights Agreement.

    "Affiliate" means, with respect to any specified person, any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, "control" when used with respect to any person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

    "Agent" means any Registrar, Paying Agent or Conversion Agent.

    "Applicable Procedures" means, with respect to any transfer or exchange of beneficial ownership interests in a Global Security, the rules and procedures of the Depositary, in each case to the extent applicable to such transfer or exchange.

    "Board of Directors" means either the board of directors of the Company or any committee of the Board of Directors authorized to act for it with respect to this Indenture.

    "Business Day" means each day that is not a Legal Holiday.

    "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, but excluding any debt securities convertible into such equity.

    "Cash" or "cash" means such coin or currency of the United States as at any time of payment is legal tender for the payment of public and private debts.

    "Certificated Security" means a Security that is in substantially the form attached hereto as Exhibit A and that does not include the information or the schedule called for by footnotes 1, 4 and 6 thereof.

    "Common Stock" means the common stock of the Company, $0.001 par value, as it exists on the date of this Indenture and any shares of any class or classes of Capital Stock of the Company resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which are not subject to redemption by the Company; provided, however, that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable on conversion of Securities shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications and further provided that all references to "Common Stock" payable in connection with the purchase of Securities upon a Change in Control

1

in accordance with the terms of Section 3.8(g) shall be deemed to include common stock of any parent company of the Company.

    "Company" means the party named as such in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Company.

    "Corporate Trust Office" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered which office at the date of the execution of this Indenture is located at Four Albany Street, New York, New York 10006, Attention: Dorothy Robinson or at any other time at such other address as the Trustee may designate from time to time by notice to the Company.

    "Default" or "default" means, when used with respect to the Securities, any event which is or, after notice or passage of time or both, would be an Event of Default.

    "Designated Senior Indebtedness" means the Fuji Guarantee and any other particular Senior Indebtedness of the Company in which the instrument creating or evidencing the same or the assumption or guarantee thereof (or any related agreements or documents to which the Company is a party) expressly provides that such Senior Indebtedness shall be "Designated Senior Indebtedness" for purposes of this Indenture. If any payment made to any holder of any Designated Senior Indebtedness or its Representative with respect to such Designated Senior Indebtedness is rescinded or must otherwise be returned by such holder or Representative upon the insolvency, bankruptcy or reorganization of the Company or otherwise, the reinstated Indebtedness of the Company arising as a result of such rescission or return shall constitute Designated Senior Indebtedness effective as of the date of such rescission or return.

    "Exchange Act" means the Securities and Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as in effect from time to time.

    "Final Maturity Date" means December 15, 2006.

    "Fuji Guarantee" means the guaranty letter dated as of October 20, 2000 made by the Company in favor of The Fuji Bank, Limited, guaranteeing the obligations of Wind River Co., Ltd., a Japanese corporation and a wholly owned subsidiary of the Company, to The Fuji Bank, Limited, under a line of credit dated October 20, 2000, including any related documents, instruments and agreements executed in connection therewith, and in each case as amended (including any amendment and restatement thereof), modified, renewed, refunded, replaced, refinanced or restructured (including, without limitation, any amendment increasing the amount of available borrowing thereunder) from time to time and whether with the same or any other agent, lender or group of lenders.

    "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the date of this Indenture, including those set forth in (1) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (2) the statements and pronouncements of the Financial Accounting Standards Board, (3) such other statements by such other entity as approved by a significant segment of the accounting profession and (4) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in registration statements filed under the Securities Act and periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC.

    "Global Security" means a permanent Global Security that is in substantially the form attached hereto as Exhibit A and that includes the information and schedule called for by footnotes 1, 4 and 6

2

thereof and which is deposited with the Depositary or its custodian and registered in the name of the Depositary or its nominee.

    "Holder" or "Securityholder" means the person in whose name a Security is registered on the Primary Registrar's books.

    "Indebtedness" means, with respect to any Person, without duplication,

    (a) all indebtedness, obligations and other liabilities (contingent or otherwise) of such Person (i) for borrowed money (including obligations of such Person in respect of overdrafts, foreign exchange contracts, currency exchange agreements, interest rate protection agreements, and any loans or advances from banks, whether or not evidenced by notes or similar instruments) or (ii) evidenced by credit or loan agreements, bonds, debentures, notes or similar instruments (whether or not the recourse of the lender is to the whole of the assets of such Person or to only a portion thereof) (other than any accounts payable or other accrued current liability or obligation incurred in the ordinary course of business in connection with the obtaining of materials or services);

    (b) all reimbursement obligations and other liabilities (contingent or otherwise) of such Person with respect to letters of credit, bank guarantees or bankers' acceptances;

    (c) all obligations and liabilities (contingent or otherwise) of such Person (i) in respect of leases of such Person required, in conformity with GAAP, to be accounted for as capitalized lease obligations on the balance sheet of such Person (as determined by the Company);

    (d) all obligations and liabilities, contingent or otherwise, as lessee under leases for facility equipment (and related assets leased together with such equipment) and under any lease or related document (including a purchase agreement, conditional sale or other title retention or synthetic lease agreement) in connection with the lease of real property or improvement thereon (or any personal property included as part of any such lease) which provides that such Person is contractually obligated to purchase or cause a third party to purchase the leased property or pay an agreed upon residual value of the leased property, including the obligations under such lease or related document to purchase or cause a third party to purchase such leased property (whether or not such lease transaction is characterized as an operating lease or a capitalized lease in accordance with GAAP) or pay an agreed upon residual value of the leased property to the lessor;

    (e) all obligations and liabilities (contingent or otherwise) of such Person with respect to any interest rate or other swap, cap, floor or collar agreement, hedge agreement, forward contract, or other similar instrument or agreement or foreign currency hedge, exchange, purchase or similar instrument or agreement;

    (f)  all direct or indirect guarantees or similar agreements by such Person in respect of, and obligations or liabilities of such Person (contingent or otherwise) to purchase or otherwise acquire or otherwise assure a creditor against loss in respect of, indebtedness, obligations or liabilities of another Person of the kind described in clauses (a) through (e);

    (g) any indebtedness or other obligations described in clauses (a) through (f) secured by any mortgage, pledge, lien or other encumbrance existing on property which is owned or held by such Person, regardless of whether the indebtedness or other obligations secured thereby shall have been assumed by such Person; and

    (h) any and all deferrals, renewals, extensions, refinancings, replacements and refundings of, or amendments, modifications or supplements to, any indebtedness, obligation or liability of the kind described in clauses (a) through (g).

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    "Indenture" means this Indenture as amended or supplemented from time to time pursuant to the terms of this Indenture.

    "Initial Purchasers" means Credit Suisse First Boston Corporation, UBS Warburg LLC and Thomas Weisel Partners LLC.

    "Notes" means the 3³/4% Convertible Subordinated Notes Due December 15, 2006 or any of them (each, a "Note"), as amended or supplemented from time to time, that are issued under this Indenture.

    "Officer" means the chairman or any co-chairman of the Board of Directors, any vice chairman of the Board of Directors, the chief executive officer, the chief operating officer, the president, any Vice President, the chief financial officer, the chief legal officer, the treasurer, any assistant treasurer, the controller, the secretary or any assistant controller or assistant secretary of the Company.

    "Officers' Certificate" means a certificate signed by two Officers; provided, however, that for purposes of Sections 4.11 and 6.3, "Officers' Certificate" means a certificate signed by the principal executive officer, principal financial officer or principal accounting officer of the Company and by one other Officer.

    "Opinion of Counsel" means a written opinion from legal counsel. The counsel may be an employee of or counsel to the Company or the Trustee.

    "Person" or "person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

    "Principal" or "principal" of a debt security, including the Securities, means the principal of the security plus, when appropriate, the premium, if any, on the security.

    "Redemption Date" when used with respect to any Security to be redeemed, means the date fixed for such redemption pursuant to this Indenture, including, without limitation, any Provisional Redemption Date.

    "Redemption Price" when used with respect to any Security to be redeemed, means the price fixed for such redemption pursuant to this Indenture, as set forth in the form of Security annexed as Exhibit A hereto, including, without limitation, any Provisional Redemption Price.

    "Registration Rights Agreement" means the Registration Rights Agreement, dated as of December 10, 2001, between the Company and the Initial Purchasers.

    "Representative" means the (a) indenture trustee or other trustee, agent or representative for any Senior Indebtedness or (b) with respect to any Senior Indebtedness that does not have any such trustee, agent or other representative, (i) in the case of such Senior Indebtedness issued pursuant to an agreement providing for voting arrangements as among the holders or owners of such Senior Indebtedness, any holder or owner of such Senior Indebtedness acting with the consent of the required persons necessary to bind such holders or owners of such Senior Indebtedness and (ii) in the case of all other such Senior Indebtedness, the holder or owner of such Senior Indebtedness.

    "Responsible Officer" means when used with respect to the Trustee, any managing director, director, vice president, assistant vice president, assistant treasurer, assistant secretary, associate or any other officer within the corporate trust department of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also shall mean, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge and familiarity with the particular subject.

    "Restricted Global Security" means a Global Security that is a Restricted Security.

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    "Restricted Security" means a Security required to bear the restricted legend set forth in the form of Security set forth in Exhibit A of this Indenture (corresponding to footnote 2 thereof).

    "Rule 144" means Rule 144 under the Securities Act or any successor to such Rule.

    "Rule 144A" means Rule 144A under the Securities Act or any successor to such Rule.

    "SEC" means the Securities and Exchange Commission.

    "Securities" means the 3³/4% Convertible Subordinated Notes Due December 15, 2006 or any of them (each, a "Security"), as amended or supplemented from time to time, that are issued under this Indenture.

    "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, as in effect from time to time.

    "Securities Custodian" means the Trustee, as custodian with respect to the Securities in global form, or any successor thereto.

    "Senior Indebtedness" means the principal of, premium, if any, interest (including all interest accruing subsequent to the commencement of any bankruptcy or similar proceeding, whether or not a claim for post-petition interest is allowed as a claim in any such proceeding) and rent payable on or in connection with, and all fees, costs, expenses and other amounts accrued or due on or in connection with, Indebtedness of the Company, whether outstanding on the date of this Indenture or thereafter created, incurred, assumed, guaranteed or in effect guaranteed by the Company, including:

    (1) commitment or standby fees due and payable to lending institutions with respect to credit facilities available to such Person;

    (2) all noncontingent obligations (a) for the reimbursement of any obligor on any letter of credit, bankers' acceptance or similar credit transaction, and (b) under any interest rate or other swap, cap, floor or collar agreement or hedge agreement, forward contract or other similar instrument or agreement or foreign currency hedge, exchange, purchase or similar instrument or agreement;

    (3) all obligations under leases for real estate, facilities, equipment or related assets whether or not capitalized, entered into or leased for financing purposes;

    (4) any liabilities of others described in the preceding clauses that such Person has guaranteed or which are otherwise such Person's legal liability; and

    (5) deferrals, renewals, extensions, refinancings, replacement, restructurings, refundings of, or amendments, modifications or supplements to, the foregoing,

unless in the case of any particular Indebtedness the instrument creating or evidencing the same or the assumption or guarantee thereof expressly provides that such Indebtedness shall not be senior in right of payment to the Securities or expressly provides that such Indebtedness is "pari passu" or "junior" to the Securities. Notwithstanding the foregoing, the term Senior Indebtedness shall not include (i) our 5% Convertible Subordinated Notes due 2002, (ii) any Indebtedness of the Company to any Subsidiary of the Company (other than Indebtedness of the Company to such Subsidiary arising by reason of guarantees by the Company of Indebtedness of such Subsidiary to a Person that is not a Subsidiary of the Company) or (iii) the Securities. If any payment made to any holder of any Senior Indebtedness or its Representative with respect to such Senior Indebtedness is rescinded or must otherwise be returned by such holder or Representative upon the insolvency, bankruptcy or reorganization of the Company or otherwise, the reinstated Indebtedness of the Company arising as a result of such rescission or return shall constitute Senior Indebtedness effective as of the date of such rescission or return.

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    "Significant Subsidiary" means, in respect of any Person, a Subsidiary of such Person that would constitute a "significant subsidiary" as such term is defined under Rule 1-02 of Regulation S-X under the Securities Act and the Exchange Act.

    "Subsidiary" means, in respect of any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, general partners or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person; (ii) such Person and one or more Subsidiaries of such Person; or (iii) one or more Subsidiaries of such Person.

    "TIA" means the Trust Indenture Act of 1939, as amended, and the rules and regulations thereunder as in effect on the date of this Indenture, except as provided in Section 11.3, and except to the extent any amendment to the Trust Indenture Act expressly provides for application of the Trust Indenture Act as in effect on another date.

    "Trading Day" means, with respect to any security, each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on which securities are not generally traded on the principal exchange or market in which such security is traded.

    "Transfer Restricted Securities" has the meaning set forth in the Registration Rights Agreement and shall bear the legend set forth in the form of Security set forth in Exhibit A of this Indenture (corresponding to footnote 3 thereof) and include the certificate corresponding to footnote 7 thereof.

    "Trustee" means the party named as such in the first paragraph of this Indenture until a successor replaces it in accordance with the provisions of this Indenture, and thereafter means the successor.

    "Unrestricted Certificated Security" means a Certificated Security that is not a Restricted Security.

    "Unrestricted Global Security" means a Global Security that is not a Restricted Security.

    "Vice President" when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president."

    "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof.

    SECTION 1.2.  OTHER DEFINITIONS.

Term	Defined in Section
"Agent Members"	2.1(b)
"Authorized Agent"	2.3
"Bankruptcy Law"	8.1
"Change in Control"	3.8(a)
"Change in Control Purchase Date"	3.8(a)
"Change in Control Purchase Notice"	3.8(c)
"Change in Control Purchase Price"	3.8(a)
"Closing Price"	4.6(d)
"Company Order"	2.2
"Conversion Agent"	2.3
"Conversion Date"	4.2
"Conversion Price"	4.1
"Current Market Price"	4.6(d)
"Custodian"	8.1

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"DTC"	2.1(a)
"Depositary"	2.1(a)
"Determination Date"	4.6(c)
"Event of Default"	8.1
"Expiration Date"	4.6(c)
"Expiration Time"	4.6(c)
"Legal Holiday"	12.7
"Legend"	2.12
"Make-Whole Payment"	3.1(a)
"NNM"	4.6(d)
"Notice Date"	3.1(a)
"Paying Agent"	2.3
"Payment Blockage Notice"	5.2
"Primary Registrar"	2.3
"Provisional Redemption"	3.1(a)
"Provisional Redemption Date"	3.1(a)
"Provisional Redemption Price"	3.1(a)
"Purchase Agreement"	2.1
"Purchased Shares"	4.6(c)
"QIB"	2.1(a)
"Registrar"	2.3
"Rights Plan"	4.6(c)
"Triggering Distribution"	4.6(c)
"Trigger Event"	4.6(c)
"Unissued Shares"	3.8(a)

    SECTION 1.3  TRUST INDENTURE ACT PROVISIONS.

    Whenever this Indenture refers to a provision of the TIA, that provision is incorporated by reference in and made a part of this Indenture. The Indenture shall also include those provisions of the TIA required to be included herein by the provisions of the Trust Indenture Reform Act of 1990. The following TIA terms used in this Indenture have the following meanings:

    "indenture securities" means the Securities;

    "indenture security holder" means a Securityholder;

    "indenture to be qualified" means this Indenture;

    "indenture trustee" or "institutional trustee" means the Trustee; and

    "obligor" on the indenture securities means the Company or any other obligor on the Securities.

    All other terms used in this Indenture that are defined in the TIA, defined by TIA reference to another statute or defined by any SEC rule and not otherwise defined herein have the meanings assigned to them therein.

    SECTION 1.4  RULES OF CONSTRUCTION.

    Unless the context otherwise requires:

    (A) a term has the meaning assigned to it;

    (B) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

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    (C) words in the singular include the plural, and words in the plural include the singular;

    (D) provisions apply to successive events and transactions;

    (E) the term "merger" includes a statutory share exchange and the term "merged" has a correlative meaning;

    (F) the masculine gender includes the feminine and the neuter;

    (G) references to agreements and other instruments include subsequent amendments thereto; and

    (H) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision, unless the content otherwise requires.

ARTICLE 2
THE SECURITIES

    SECTION 2.1  FORM AND DATING.

    The Securities and the Trustee's certificate of authentication shall be substantially in the respective forms set forth in Exhibit A, which Exhibit is incorporated in and made part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage. The Company shall provide any such notations, legends or endorsements to the Trustee in writing. Each Security shall be dated the date of its authentication. The Securities are being offered and sold by the Company pursuant to a Purchase Agreement, dated December 5, 2001 (the "Purchase Agreement"), between the Company and the Initial Purchasers, in transactions exempt from, or not subject to, the registration requirements of the Securities Act.

    (a)  Restricted Global Securities.  All of the Securities are initially being offered and sold to qualified institutional buyers as defined in Rule 144A (collectively, "QIBs" or individually, each a "QIB") in reliance on Rule 144A under the Securities Act and shall be issued initially in the form of one or more Restricted Global Securities, which shall be deposited on behalf of the purchasers of the Securities represented thereby with the Trustee, at its Corporate Trust Office, as custodian for the depositary, The Depository Trust Company ("DTC") (such depositary, or any successor thereto, being hereinafter referred to as the "Depositary"), and registered in the name of its nominee, Cede & Co., duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Restricted Global Securities may from time to time be increased or decreased by adjustments made on the records of the Securities Custodian as hereinafter provided, subject in each case to compliance with the Applicable Procedures.

    (b)  Global Securities In General.  Each Global Security shall represent such of the outstanding Securities as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Securities from time to time endorsed thereon and that the aggregate amount of outstanding Securities represented thereby may from time to time be reduced or increased, as appropriate, to reflect replacements, exchanges, redemptions, purchases or conversions of such Securities. Any adjustment of the aggregate principal amount of a Global Security to reflect the amount of any increase or decrease in the amount of outstanding Securities represented thereby shall be made by the Trustee in accordance with instructions given by the Holder thereof as required by Section 2.12 hereof and shall be made on the records of the Trustee and the Depositary.

    Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary or under the Global Security, and the Depositary (including, for this purpose, its nominee) may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and Holder

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of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall (A) prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or (B) impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Security.

    (c)  Book Entry Provisions.  The Company shall execute and the Trustee shall, in accordance with this Section 2.1(c), authenticate and deliver initially one or more Global Securities that (i) shall be registered in the name of the Depositary or its nominee, (ii) shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instructions and (iii) shall bear a legend substantially to the following effect:

"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO WIND RIVER SYSTEMS, INC. (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF."

    SECTION 2.2.  EXECUTION AND AUTHENTICATION.

    An Officer shall sign the Securities for the Company by manual or facsimile signature. Typographic and other minor errors or defects in any such facsimile signature shall not affect the validity or enforceability of any Security which has been authenticated and delivered by the Trustee.

    If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless.

    A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture.

    The Trustee shall authenticate and make available for delivery Securities for original issue in the aggregate principal amount of up to $150,000,000 upon receipt of a written order or orders of the Company signed by one Officer of the Company (a "Company Order"). The Company Order shall specify the amount of Securities to be authenticated, shall provide that all such Securities will be represented by a Restricted Global Security and the date on which each original issue of Securities is to be authenticated. The aggregate principal amount of Securities outstanding at any time may not exceed $150,000,000 except as provided in Section 2.7.

    The Trustee shall act as the initial authenticating agent. Thereafter, the Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent shall have the same rights as an Agent to deal with the Company or an Affiliate of the Company.

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    The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 principal amount and any integral multiple thereof.

    SECTION 2.3.  REGISTRAR, PAYING AGENT AND CONVERSION AGENT.

    The Company shall maintain one or more offices or agencies where Securities may be presented for registration of transfer or for exchange (each, a "Registrar"), one or more offices or agencies where Securities may be presented for payment (each, a "Paying Agent"), one or more offices or agencies where Securities may be presented for conversion (each, a "Conversion Agent") and one or more offices or agencies where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will at all times maintain a Paying Agent, Conversion Agent, Registrar and an office or agency where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served in the Borough of Manhattan, The City of New York. One of the Registrars (the "Primary Registrar") shall keep a register of the Securities and of their transfer and exchange.

    The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture and provide a copy to the Trustee. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Company fails to maintain a Registrar, Paying Agent or Conversion Agent in any place required by this Indenture, or fails to give the foregoing notice, the Trustee shall act as such. Upon written notice to the Trustee, the Company or any Affiliate of the Company may act as Paying Agent (except for the purposes of Section 3.7, Section 6.10 and Article 10).

    The Company hereby initially designates the Trustee as Paying Agent, Registrar, Primary Registrar, Custodian and Conversion Agent, and each of the Corporate Trust Office of the Trustee and the office or agency of the Trustee in the Borough of Manhattan, The City of New York (which shall initially be Bankers Trust Company located at Corporate Trust and Agency Service, Four Albany Street, New York, New York 10006, Attention: Dorothy Robinson), as such office or agency of the Company for each of the aforesaid purposes.

    The Company hereby irrevocably appoints CT Corporation System, 1633 Broadway, New York, NY 10019 (together with any successor, the "Authorized Agent"), as its authorized agent for receipt of notices and demands in respect of the Securities and this Indenture.

    SECTION 2.4.  PAYING AGENT TO HOLD MONEY IN TRUST.

    Prior to 11:00 a.m., New York City time, on each due date of the principal of or interest, if any, on any Securities, the Company shall deposit with a Paying Agent a sum sufficient to pay such principal or interest, if any, so becoming due. Subject to Section 5.2, a Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest, if any, on the Securities, and shall notify the Trustee of any default by the Company (or any other obligor on the Securities) in making any such payment. If the Company or an Affiliate of the Company acts as Paying Agent, it shall, before 11:00 a.m., New York City time, on each due date of the principal of or interest on any Securities, segregate the money and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee, and the Trustee may at any time during the continuance of any default, upon written request to a Paying Agent, require such Paying Agent to pay forthwith to the Trustee all sums so held in trust by such Paying Agent. Upon doing so, the Paying Agent (other than the Company) shall have no further liability for the money.

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    SECTION 2.5.  SECURITYHOLDER LISTS.

    The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Primary Registrar, the Company shall furnish to the Trustee on or before each semiannual interest payment date, and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders.

    SECTION 2.6.  TRANSFER AND EXCHANGE.

    (a) Subject to compliance with any applicable additional requirements contained in Section 2.12, when a Security is presented to a Registrar with a request to register a transfer thereof or to exchange such Security for an equal principal amount of Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested; provided, however, that every Security presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by an assignment form and, if applicable, a transfer certificate each in the form included in Exhibit A, and in form satisfactory to the Registrar duly executed by the Holder thereof or its attorney duly authorized in writing. To permit registration of transfers and exchanges, upon surrender of any Security for registration of transfer or exchange at an office or agency maintained pursuant to Section 2.3, the Company shall execute and the Trustee shall authenticate Securities of a like aggregate principal amount at the Registrar's request. Any exchange or transfer shall be without charge, except that the Company or the Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto; and provided, that this sentence shall not apply to any exchange pursuant to Section 2.7, 2.10, 2.12(a), 3.6, 3.11, 4.2 (last paragraph) or 11.5.

    Neither the Company, any Registrar nor the Trustee shall be required to exchange or register a transfer of (i) any Securities for a period of 15 days next preceding any mailing of a notice of Securities to be redeemed, (ii) any Securities or portions thereof selected or called for redemption (except, in the case of redemption of a Security in part, the portion thereof not to be redeemed) or (iii) any Securities or portions thereof in respect of which a Change in Control Purchase Notice has been delivered and not withdrawn by the Holder thereof (except, in the case of the purchase of a Security in part, the portion thereof not to be purchased).

    All Securities issued upon any transfer or exchange of Securities shall be valid obligations of the Company, evidencing the same debt and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange.

    (b) Any Registrar appointed pursuant to Section 2.3 hereof shall provide to the Trustee such information as the Trustee may reasonably require in connection with the delivery by such Registrar of Securities upon transfer or exchange of Securities.

    (c) Each Holder of a Security agrees to indemnify the Company and the Trustee against any liability that may result from the transfer, exchange or assignment of such Holder's Security in violation of any provision of this Indenture and/or applicable United States federal or state securities law.

    The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Agent Members or other beneficial owners of interests in any Global Security) other than (i) to require delivery of such certificates and other documentation or evidence as are expressly required by this Indenture, (ii) to examine the same to determine substantial compliance as to form with the express requirements hereof and (iii) to perform such other monitoring, determination or inquiry if and when the Indenture expressly requires it to do so.

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    SECTION 2.7.  REPLACEMENT SECURITIES.

    If any mutilated Security is surrendered to the Company, a Registrar or the Trustee, or the Company, a Registrar and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company, the applicable Registrar and the Trustee such security or indemnity as will be required by them to save each of them harmless, then, in the absence of written notice to the Company, such Registrar or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute, and upon its written request the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount, bearing a number not contemporaneously outstanding.

    In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, or is about to be redeemed or purchased by the Company pursuant to Article 3, the Company in its discretion may, instead of issuing a new Security, pay, redeem or purchase such Security, as the case may be.

    Upon the issuance of any new Securities under this Section 2.7, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the reasonable fees and expenses of the Trustee or the Registrar and their counsel) in connection therewith.

    Every new Security issued pursuant to this Section 2.7 in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder.

    The provisions of this Section 2.7 are (to the extent lawful) exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

    SECTION 2.8.  OUTSTANDING SECURITIES.

    Securities outstanding at any time are all Securities authenticated by the Trustee, except for those canceled by it, those converted pursuant to Article 4, those delivered to it for cancellation or surrendered for transfer or exchange and those described in this Section 2.8 as not outstanding.

    If a Security is replaced pursuant to Section 2.7, it ceases to be outstanding unless the Company receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser.

    If a Paying Agent (other than the Company or an Affiliate of the Company) holds on a Redemption Date, a Change in Control Purchase Date or the Final Maturity Date money sufficient to pay the principal of (including premium, if any) and accrued interest on Securities (or portions thereof) payable on that date, then on and after such Redemption Date, Change in Control Purchase Date or Final Maturity Date, as the case may be, such Securities (or portions thereof, as the case may be) shall cease to be outstanding and interest on them shall cease to accrue; provided that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor reasonably satisfactory to the Trustee has been made.

    Subject to the restrictions contained in Section 2.9, a Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security.

    SECTION 2.9.  TREASURY SECURITIES.

    In determining whether the Holders of the required principal amount of Securities have concurred in any notice, direction, waiver or consent, Securities owned by the Company or any other obligor on

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the Securities or by any Affiliate of the Company or of such other obligor shall be disregarded, except that, for purposes of determining whether the Trustee shall be protected in relying on any such notice, direction, waiver or consent, only Securities with respect to which a Responsible Officer of the Trustee has received written notice from the Company, an obligor or an Affiliate of either that such Securities are so owned shall be so disregarded. Securities so owned which have been pledged in good faith shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to the Securities and that the pledgee is not the Company or any other obligor on the Securities or any Affiliate of the Company or of such other obligor.

    SECTION 2.10.  TEMPORARY SECURITIES.

    Until definitive Securities are ready for delivery, the Company may prepare and execute, and, upon receipt of a Company Order, the Trustee shall authenticate and deliver, temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company with the consent of the Trustee considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate and deliver definitive Securities in exchange for temporary Securities.

    SECTION 2.11.  CANCELLATION.

    The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar, the Paying Agent and the Conversion Agent shall forward to the Trustee or its agent any Securities surrendered to them for transfer, exchange, redemption, payment or conversion. The Trustee and no one else shall cancel, in accordance with its standard procedures, all Securities surrendered for transfer, exchange, redemption, payment, conversion or cancellation and shall deliver the canceled Securities to the Company. All Securities which are redeemed, purchased or otherwise acquired by the Company or any of its Subsidiaries prior to the Final Maturity Date shall be delivered to the Trustee for cancellation, and the Company may not hold or resell such Securities or issue any new Securities to replace any such Securities or any Securities that any Holder has converted pursuant to Article 4. Without limitation to the foregoing, any Securities acquired by any investment bankers or other purchasers pursuant to Section 3.7 shall be surrendered for conversion and thereafter cancelled, and may not be reoffered, sold or otherwise transferred.

    SECTION 2.12.  LEGEND; ADDITIONAL TRANSFER AND EXCHANGE REQUIREMENTS.

    (a) If Securities are issued upon the transfer, exchange or replacement of Securities subject to restrictions on transfer and bearing the legend set forth on the forms of Securities attached hereto as Exhibit A (corresponding to footnote 2 thereof) (the "Legend"), or if a request is made to remove the Legend on a Security, the Securities so issued shall bear the Legend, or the Legend shall not be removed, as the case may be, unless there is delivered to the Company, the Trustee and the Registrar such satisfactory evidence, which shall include an opinion of counsel if requested by the Company, the Trustee or such Registrar, as may be reasonably required by the Company, the Trustee and the Registrar, that neither the Legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A or Rule 144 under the Securities Act or that such Securities are not "restricted" within the meaning of Rule 144 under the Securities Act; provided that no such evidence need be supplied in connection with the sale of such Security pursuant to a registration statement that is effective at the time of such sale. Upon (i) provision of such satisfactory evidence if requested, or (ii) notification by the Company to the Trustee and Registrar of the sale of such Security pursuant to a registration statement that is effective at the time of such sale, the Trustee, at the written direction of the Company, shall authenticate and deliver a Security that does not bear the Legend. If the Legend is removed from the face of a Security and the Security is subsequently held by an Affiliate of the Company, the Legend shall be reinstated.

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    (b) A Global Security may not be transferred, in whole or in part, to any Person other than the Depositary or a nominee or any successor thereof, and no such transfer to any such other Person may be registered; provided that the foregoing shall not prohibit any transfer of a Security that is issued in exchange for a Global Security but is not itself a Global Security. No transfer of a Security to any Person shall be effective under this Indenture or the Securities unless and until such Security has been registered in the name of such Person. Notwithstanding any other provisions of this Indenture or the Securities, transfers of a Global Security, in whole or in part, shall be made only in accordance with this Section 2.12.

    (c) Subject to the succeeding paragraph, every Security shall be subject to the restrictions on transfer provided in the Legend other than a Restricted Global Security. Whenever any Restricted Security other than a Restricted Global Security is presented or surrendered for registration of transfer or for exchange for a Security registered in a name other than that of the Holder, such Security must be accompanied by a certificate in substantially the form set forth in the Certificate to be Delivered upon Exchange or Registration of Transfer of Transfer Restricted Securities included in Exhibit A, dated the date of such surrender and signed by the Holder of such Security, as to compliance with such restrictions on transfer. The Registrar shall not be required to accept for such registration of transfer or exchange any Security not so accompanied by a properly completed certificate.

    (d) The restrictions imposed by the Legend upon the transferability of any Security shall cease and terminate when such Security has been sold pursuant to an effective registration statement under the Securities Act or transferred in compliance with Rule 144 under the Securities Act (or any successor provision thereto) or, if earlier, upon the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision). Any Security as to which such restrictions on transfer shall have expired in accordance with their terms or shall have terminated may, upon a surrender of such Security for exchange to the Registrar in accordance with the provisions of this Section 2.12 (accompanied, in the event that such restrictions on transfer have terminated by reason of a transfer in compliance with Rule 144 or any successor provision, by, if requested, an opinion of counsel reasonably acceptable to the Company and the Trustee, addressed to the Company, the Registrar and the Trustee and in form acceptable to the Company and the Trustee, to the effect that the transfer of such Security has been made in compliance with Rule 144 or such successor provision), be exchanged for a new Security, of like tenor and aggregate principal amount, which shall not bear the restrictive Legend. The Company shall inform the Trustee of the effective date of any registration statement registering the Securities under the Securities Act. Neither the Trustee nor the Registrar shall be liable for any action taken or omitted to be taken by them in accordance with the aforementioned opinion of counsel or registration statement.

    (e) As used in the preceding two paragraphs of this Section 2.12, the term "transfer" encompasses any sale, pledge, transfer, hypothecation or other disposition of any Security.

    (f)  The provisions of clauses (i), (ii), (iii), (iv) and (v) below shall apply only to Global Securities:

    (1) Notwithstanding any other provisions of this Indenture or the Securities, a Global Security shall not be exchanged in whole or in part for a Security registered in the name of any Person other than the Depositary or one or more nominees thereof; provided that a Global Security may be exchanged for Securities registered in the names of any person designated by the Depositary in the event that (A) the Depositary has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or such Depositary has ceased to be a "clearing agency" registered under the Exchange Act, and a successor Depositary is not appointed by the Company within 90 days, or (B) an Event of Default has occurred and is continuing with respect to the Securities. Any Global Security exchanged pursuant to subclause (A) above shall be so exchanged in whole and not in part, and any Global Security exchanged pursuant to subclause (B) above may be exchanged in whole or from time to time in part as directed by the Depositary.

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Any Security issued in exchange for a Global Security or any portion thereof shall be a Global Security; provided that any such Security so issued that is registered in the name of a Person other than the Depositary or a nominee thereof shall not be a Global Security.

    (2) Securities issued in exchange for a Global Security or any portion thereof shall be issued in definitive, fully registered form, without interest coupons, shall have an aggregate principal amount equal to that of such Global Security or portion thereof to be so exchanged, shall be registered in such names and be in such authorized denominations as the Depositary shall designate and shall bear the applicable legends provided for herein. Any Global Security to be exchanged in whole shall be surrendered by the Depositary to the Trustee, as Registrar. With regard to any Global Security to be exchanged in part, either such Global Security shall be so surrendered for exchange or, if the Trustee is acting as custodian for the Depositary or its nominee with respect to such Global Security, the principal amount thereof shall be reduced, by an amount equal to the portion thereof to be so exchanged, by means of an appropriate adjustment made on the records of the Trustee. Upon any such surrender or adjustment, the Trustee shall authenticate and deliver the Security issuable on such exchange to or upon the order of the Depositary or an authorized representative thereof.

    (3) Subject to the provisions of clause (v) below, the registered Holder may grant proxies and otherwise authorize any Person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities.

    (4) In the event of the occurrence of any of the events specified in clause (i) above, the Company will promptly make available to the Trustee a reasonable supply of Certificated Securities in definitive, fully registered form, without interest coupons.

    (5) Neither Agent Members nor any other Persons on whose behalf Agent Members may act shall have any rights under this Indenture with respect to any Global Security registered in the name of the Depositary or any nominee thereof, or under any such Global Security, and the Depositary or such nominee, as the case may be, may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and holder of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or such nominee, as the case may be, or impair, as between the Depositary, its Agent Members and any other Person on whose behalf an Agent Member may act, the operation of customary practices of such Persons governing the exercise of the rights of a beneficial holder of any Security.

    SECTION 2.13.  CUSIP NUMBERS.

    The Company in issuing the Securities may use one or more "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption or purchase as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption or purchase and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption or purchase shall not be affected by any defect in or omission of such "CUSIP" numbers. The Company will promptly notify the Trustee of any change in the "CUSIP" numbers.

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ARTICLE 3
REDEMPTION AND PURCHASES

    SECTION 3.1.  RIGHT TO REDEEM; NOTICE TO TRUSTEE.

    (a) The Securities may be redeemed at the election of the Company, as a whole or in parts from time to time, at any time prior to December 15, 2004 (a "Provisional Redemption"), at a Redemption Price equal to $1,000 per $1,000 principal amount of the Securities redeemed (such amount, together with the Make-Whole Payment described below, the "Provisional Redemption Price"), on the date of redemption (the "Provisional Redemption Date") specified in the notice of Provisional Redemption if (1) the closing price of the Common Stock on the NNM (or other United States national securities exchange where the Company's Common Stock is traded) has exceeded 150% of the Conversion Price for at least 20 Trading Days within a period of any 30 consecutive Trading Days ending on the Trading Day prior to the date of mailing of the notice of Provisional Redemption (the "Notice Date"), and (2) a shelf registration statement covering resales of the Securities and the Common Stock issuable upon conversion thereof is effective and available for use and is expected to remain effective and available for use for the 30 days following the Provisional Redemption Date, unless registration is no longer required.

    Upon any such Provisional Redemption, the Company shall make an additional payment (the "Make-Whole Payment") with respect to the Securities called for redemption to holders on the Provisional Redemption Date in an amount equal to the total value of the aggregate amount of interest that would have been payable on the Securities from the last day through which interest was paid on the Securities (or December 10, 2001 if no interest has been paid) through December 15, 2004. The Company may make these Make-Whole Payments, at its option, either in cash or Common Stock or a combination thereof. Payments made in Common Stock will be valued at 97% of the average closing sales prices of the Common Stock on the NNM (or other United States national securities exchange where Stock is traded) for the five Trading Days ending on the day prior to the Provisional Redemption Date. The Company shall make the Make-Whole Payment on all Securities called for Provisional Redemption, including those Securities converted into Common Stock between the Notice Date and the Provisional Redemption Date.

    The Company will comply with all Federal and state securities laws in connection with any offer to sell or solicitations of offers to buy Common Stock pursuant to this Section 3.1(a).

    (b) The Securities may be redeemed at the election of the Company, as a whole or from time to time in part, in cash at any time on or after December 15, 2004, at the Redemption Prices specified in paragraph 5 of the form of Security attached hereto as Exhibit A, together with accrued interest up to, but not including, the Redemption Date; provided that if the Redemption Date falls after an interest payment record date and on or before an interest payment date, then the interest will be payable to the Holders in whose name the Securities are registered at the close of business on the interest payment record date.

    (c) If the Company elects to redeem Securities pursuant to this Section 3.1 and paragraph 5 of the Securities, it shall notify the Trustee at least 40 days prior to the Redemption Date as fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee) of the Redemption Date and the principal amount of Securities to be redeemed. If fewer than all of the Securities are to be redeemed, the record date relating to such redemption shall be selected by the Company and given to the Trustee, which record date shall not be less than ten days after the date of notice to the Trustee.

    SECTION 3.2.  SELECTION OF SECURITIES TO BE REDEEMED.

    If less than all of the Securities are to be redeemed, unless the procedures of the Depositary provide otherwise, the Trustee shall, at least 30 days but not more than 60 days prior to the Redemption Date, select the Securities to be redeemed. The Trustee shall make the selection from the

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Securities outstanding and not previously called for redemption on a pro rata basis. Securities in denominations of $1,000 may only be redeemed in whole. The Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the principal of Securities that have denominations larger than $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption.

    If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed to be the portion selected for redemption. Securities which have been converted during a selection of Securities to be redeemed shall be treated by the Trustee as outstanding for the purpose of such selection.

    SECTION 3.3.  NOTICE OF REDEMPTION.

    At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail or cause to be mailed a notice of redemption to each Holder of Securities to be redeemed at such Holder's address as it appears on the Primary Registrar's books.

    The notice shall identify the Securities (including CUSIP numbers) to be redeemed and shall state:

    (1) the Redemption Date;

    (2) the Redemption Price;

    (3) the then current Conversion Price;

    (4) the name and address of each Paying Agent and Conversion Agent;

    (5) that Securities called for redemption must be presented and surrendered to a Paying Agent to collect the Redemption Price;

    (6) that Holders who wish to convert Securities must surrender such Securities for conversion no later than the close of business on the second Business Day preceding the Redemption Date and must satisfy the other requirements set forth in paragraph 8 of the Securities;

    (7) that, unless the Company defaults in paying the Redemption Price, interest on Securities called for redemption shall cease accruing on and after the Redemption Date and the only remaining right of the Holder shall be to receive payment of the Redemption Price plus accrued interest, if any, upon presentation and surrender to a Paying Agent of the Securities;

    (8) the type of consideration for the Make-Whole Payment, if applicable; and

    (9) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the Redemption Date, upon presentation and surrender of such Security, a new Security or Securities in aggregate principal amount equal to the unredeemed portion thereof will be issued.

    If any of the Securities to be redeemed is in the form of a Global Security, then the Company shall modify such notice to the extent necessary to accord with the procedures of the Depositary applicable to redemptions. At the Company's written request, which request shall (i) be irrevocable once given and (ii) set forth all relevant information required by clauses (1) through (9) of the preceding paragraph, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense.

    SECTION 3.4.  EFFECT OF NOTICE OF REDEMPTION.

    Once notice of redemption is mailed, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price stated in the notice, together with accrued interest, if any, except for Securities that are converted in accordance with the provisions of Article 4. Upon

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presentation and surrender to a Paying Agent, Securities called for redemption shall be paid at the Redemption Price, plus accrued interest up to but not including the Redemption Date; provided that if the Redemption Date falls after an interest payment record date and on or before an interest payment date, interest will be payable to the Holders in whose names the Securities are registered on the relevant record date.

    SECTION 3.5.  DEPOSIT OF REDEMPTION PRICE.

    Prior to 11:00 a.m. New York City time, on the Redemption Date, the Company shall deposit with a Paying Agent (or, if the Company, after written notice to the Trustee, acts as Paying Agent, shall segregate and hold in trust) an amount of money (in immediately available funds if deposited on such Redemption Date) or Common Stock, if applicable, sufficient to pay the Redemption Price of and accrued interest on all Securities to be redeemed on that date, other than Securities or portions thereof called for redemption on that date which have been delivered by the Company to the Trustee for cancellation or have been converted. The Paying Agent shall as promptly as practicable return to the Company any money or Common Stock not required for that purpose because of the conversion of Securities pursuant to Article 4 or, if such money or Common Stock is then held by the Company in trust and is not required for such purpose, it shall be discharged from the trust.

    SECTION 3.6.  SECURITIES REDEEMED IN PART.

    Upon presentation and surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder a new Security equal in principal amount to the unredeemed portion of the Security surrendered.

    SECTION 3.7.  CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION.

    In connection with any redemption of Securities, the Company may arrange for the purchase and conversion of any Securities called for redemption by an agreement with one or more investment banks or other purchasers to purchase such Securities by paying to a Paying Agent (other than the Company or any of its Affiliates) in trust for the Holders, on or before 11:00 a.m. New York City time on the Redemption Date, an amount that, together with any amounts deposited with such Paying Agent by the Company for the redemption of such Securities, is not less than the Redemption Price, together with interest accrued to, but not including, the Redemption Date, of such Securities. Notwithstanding anything to the contrary contained in this Article 3, the obligation of the Company to pay the Redemption Price of such Securities, including all accrued interest, shall be deemed to be satisfied and discharged to the extent such amount is so paid by such purchasers; provided, however, that nothing in this Section 3.7 shall relieve the Company of its obligation to pay the Redemption Price, plus accrued interest to but excluding the relevant Redemption Date, on Securities called for redemption. If such an agreement with one or more investment banks or other purchasers is entered into, any Securities called for redemption and not surrendered for conversion by the Holders thereof prior to the relevant Redemption Date may, at the option of the Company upon written notice to the Trustee, be deemed, to the fullest extent permitted by law, acquired by such purchasers from such Holders and (notwithstanding anything to the contrary contained in Article 4) surrendered by such purchasers for conversion, all as of 11:00 a.m. New York City time on the Redemption Date, subject to payment of the above amount as aforesaid. The Paying Agent shall hold and pay to the Holders whose Securities are selected for redemption any such amount paid to it for purchase in the same manner as it would money deposited with it by the Company for the redemption of Securities. Subject to Article 11, without the Paying Agent's prior written consent, no arrangement between the Company and such purchasers for the purchase and conversion of any Securities shall increase or otherwise affect any of the powers, duties, responsibilities or obligations of the Paying Agent as set forth in this Indenture, and the Company agrees to indemnify the Paying Agent and Trustee from, and hold them harmless against, any loss, liability or expense arising out of or in connection with any such arrangement for the purchase and conversion of any Securities between the Company and such purchasers, including the costs and

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expenses incurred by the Paying Agent or Trustee in the defense of any claim or liability arising out of or in connection with the exercise or performance of any of their powers, duties, responsibilities or obligations under this Indenture.

    SECTION 3.8.  PURCHASE OF SECURITIES AT OPTION OF THE HOLDER UPON CHANGE IN CONTROL.

    (a) If at any time that Securities remain outstanding there shall occur a Change in Control, Securities shall be purchased by the Company at the option of their Holders, as of the date that is 35 Business Days after the occurrence of the Change in Control (the "Change in Control Purchase Date") at a purchase price equal to 100% of the principal amount of the Securities, together with accrued and unpaid interest to, but excluding, the Change in Control Purchase Date (the "Change in Control Purchase Price"), at the option of the Company, in cash, by delivery of Common Stock in accordance with the provisions of Section 3.8(g) or in a combination of cash and Common Stock, subject to satisfaction by or on behalf of any Holder of the requirements set forth in subsection (c) of this Section 3.8.

    A "Change in Control" shall be deemed to have occurred if any of the following occurs after the date hereof:

    (1) any "person" or "group" (as such terms are defined below) is or becomes the "beneficial owner" (as defined below), directly or indirectly, of shares of Voting Stock of the Company representing 50% or more of the total voting power of all outstanding classes of Voting Stock of the Company or has the power, directly or indirectly, to elect a majority of the members of the Board of Directors of the Company; or

    (2) the Company consolidates with, or merges with or into, another Person or, excluding a grant of security interest, the Company sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of the assets of the Company, or any Person consolidates with, or merges with or into, the Company, in any such event other than pursuant to a transaction in which the Persons that "beneficially owned" (as defined below), directly or indirectly, shares of Voting Stock of the Company immediately prior to such transaction "beneficially own" (as defined below), directly or indirectly, shares of Voting Stock of the Company representing at least a majority of the total voting power of all outstanding classes of Voting Stock of the surviving or transferee Person; or

    (3) the holders of Capital Stock of the Company approve any plan or proposal for the liquidation or dissolution of the Company (whether or not otherwise in compliance with the terms hereof).

For the purpose of the definition of "Change in Control", (i) "person" and "group" have the meanings given such terms under Section 13(d) and 14(d) of the Exchange Act or any successor provision to either of the foregoing, and the term "group" includes any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act (or any successor provision thereto), (ii) a "beneficial owner" shall be determined in accordance with Rule 13d-3 under the Exchange Act, as in effect on the date of this Indenture, except that the number of shares of Voting Stock of the Company shall be deemed to include, in addition to all outstanding shares of Voting Stock of the Company and Unissued Shares deemed to be held by the "person" or "group" (as such terms are defined above) or other Person with respect to which the Change in Control determination is being made, all Unissued Shares deemed to be held by all other Persons, and (iii) the terms "beneficially owned" and "beneficially own" shall have meanings correlative to that of "beneficial owner". The term "Unissued Shares" means shares of Voting Stock not outstanding that are subject to options, warrants, rights to purchase or conversion privileges exercisable within 60 days of the date of determination of a Change in Control.

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    Notwithstanding anything to the contrary set forth in this Section 3.8, a Change in Control will be deemed not to have occurred if either:

    (1) the Closing Price of the Common Stock for any five Trading Days during the ten Trading Days immediately preceding the Change in Control is at least equal to 105% of the Conversion Price in effect on such Trading Day; or

    (2) in the case of a merger or consolidation, all of the consideration (excluding cash payments for fractional shares and cash payments pursuant to dissenters' appraisal rights) in the merger or consolidation constituting the Change in Control consists of common stock quoted on the NNM or traded on a United States national securities exchange (or which will be so traded or quoted when issued or exchanged in connection with such Change in Control) and as a result of such transaction or transactions the Securities become convertible solely into such common stock.

    (b) Within 15 Business Days after the occurrence of a Change in Control, the Company shall mail a written notice of the Change in Control to the Trustee and to each Holder (and to beneficial owners as required by applicable law). The notice shall include the form of a Change in Control Purchase Notice to be completed by the Holder and shall state:

    (1) the date of such Change in Control and, briefly, the events causing such Change in Control;

    (2) the date by which the Change in Control Purchase Notice pursuant to this Section 3.8 must be given;

    (3) the Change in Control Purchase Date;

    (4) the Change in Control Purchase Price and whether the Change in Control Purchase Price shall be payable in cash, Common Stock or a combination thereof and, if payable in Common Stock, the method of calculating the amount of the Common Stock to be delivered as provided in Section 3.8(g);

    (5) the Holder's right to require the Company to purchase the Securities;

    (6) briefly, the conversion rights of the Securities;

    (7) the name and address of each Paying Agent and Conversion Agent;

    (8) the Conversion Price and any adjustments thereto;

    (9) that Securities as to which a Change in Control Purchase Notice has been given may be converted into Common Stock pursuant to Article 4 of this Indenture only to the extent that the Change in Control Purchase Notice has been withdrawn in accordance with the terms of this Indenture;

    (10) the procedures that the Holder must follow to exercise rights under this Section 3.8;

    (11) the procedures for withdrawing a Change in Control Purchase Notice, including a form of notice of withdrawal; and

    (12) that the Holder must satisfy the requirements set forth in the Securities in order to convert the Securities.

    If any of the Securities is in the form of a Global Security, then the Company shall modify such notice to the extent necessary to accord with the procedures of the Depositary applicable to the repurchase of Global Securities.

    (c) A Holder may exercise its rights specified in subsection (a) of this Section 3.8 upon delivery of a written notice (which shall be in substantially the form included in Exhibit A hereto and which may

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be delivered by letter, overnight courier, hand delivery, facsimile transmission or in any other written form and, in the case of Global Securities, may be delivered electronically or by other means in accordance with the Depositary's customary procedures) of the exercise of such rights (a "Change in Control Purchase Notice") to any Paying Agent at any time prior to the close of business on the second Business Day next preceding the Change in Control Purchase Date. The notice must specify the Securities, or the portion thereof, for which the purchase right is being exercised.

    The delivery of such Security to any Paying Agent (together with all necessary endorsements) at the office of such Paying Agent shall be a condition to the receipt by the Holder of the Change in Control Purchase Price therefor.

    The Company shall purchase from the Holder thereof, pursuant to this Section 3.8, a portion of a Security delivered to a Paying Agent only if the principal amount of such portion is $1,000 or an integral multiple of $1,000. Provisions of the Indenture that apply to the purchase of all of a Security pursuant to Sections 3.8 through 3.13 also apply to the purchase of such portion of such Security.

    Notwithstanding anything herein to the contrary, any Holder delivering to a Paying Agent the Change in Control Purchase Notice contemplated by this subsection (c) shall have the right to withdraw such Change in Control Purchase Notice in whole or in a portion thereof that is a principal amount of $1,000 or in an integral multiple thereof at any time prior to the close of business on the second Business Day next preceding the Change in Control Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.9.

    A Paying Agent shall promptly notify the Company of the receipt by it of any Change in Control Purchase Notice or written withdrawal thereof.

    Anything herein to the contrary notwithstanding, in the case of Global Securities, any Change in Control Purchase Notice may be delivered or withdrawn and such Securities may be surrendered or delivered for purchase in accordance with the Applicable Procedures as in effect from time to time.

    (d) Any issuance of shares of Common Stock in respect of the Change in Control Purchase Price shall be deemed to have been effected immediately prior to the close of business on the Change in Control Purchase Date and the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such purchase shall be deemed to have become on the Change in Control Purchase Date the holder or holders of record of the shares represented thereby; provided, however, that any surrender for purchase on a date when the stock transfer books of the Company shall be closed shall constitute the Person or Persons in whose name or names the certificate or certificates for such shares are to be issued as the record holder or holders thereof for all purposes at the opening of business on the next succeeding day on which such stock transfer books are open. No payment or adjustment shall be made for dividends or distributions on any Common Stock issued upon purchase of any Security declared prior to the Change in Control Purchase Date.

    (e) No fractions of shares of Common Stock shall be issued upon the purchase of Securities. If more than one Security shall be repurchased from the same Holder and the Change in Control Purchase Price shall be payable in shares of Common Stock, the number of full shares which shall be issuable upon such repurchase shall be computed on the basis of the aggregate principal amount of the Securities so repurchased. Instead of any fractional share of Common Stock otherwise issuable on the repurchase of any Security or Securities, the Company will deliver to the applicable Holder a check for the current market value of such fractional share. The current market value of a fraction of a share is determined by multiplying the Current Market Price of a full share by the fraction, and rounding the result to the nearest cent. For purposes of this Section, the Current Market Price of a share of Common Stock is the Closing Price of the Common Stock on the Trading Day immediately preceding the Change in Control Purchase Date.

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    (f)  Any issuance and delivery of certificates for shares of Common Stock on purchase of Securities shall be made without charge to the Holder of Securities being purchased for such certificates or for any tax or duty in respect of the issuance or delivery of such certificates or the securities represented thereby; provided, however, that the Company shall not be required to pay any tax or duty which may be payable in respect of any transfer involving the issuance or delivery of certificates for shares of Common Stock in a name other than that of the Holder of the Securities being repurchased, and no such issuance or delivery shall be made unless and until the Person requesting such issuance or delivery has paid to the Company the amount of any such tax or duty or has established, to the satisfaction of the Company, that such tax or duty has been paid.

    (g) The Company may elect to pay, at is option, all or a portion of the Change in Control Purchase Price by delivery of shares of Common Stock if and only if the following conditions shall have been satisfied:

    (1) the shares of Common Stock deliverable in payment of the Change in Control Purchase Price shall have a fair market value as of the Change in Control Purchase Date of not less than the Change in Control Purchase Price less any cash payments, if any. For purposes of this Section 3.8, the fair market value of shares of Common Stock shall be determined by the Company and shall be equal to 97% of the average of the Closing Prices of the Common Stock on the NNM or other United States national securities exchange for the five consecutive Trading Days ending on the day prior to the Change in Control Purchase Date;

    (2) such shares have been registered under the Securities Act or are freely transferable without such registration;

    (3) the issuance of such Common Stock does not require registration with or approval of any governmental authority under any state law or any other federal law, which registration or approval has not been made or obtained;

    (4) such shares have been approved for quotation on the NNM or listing on a United States national securities exchange; and

    (5) such shares will be issued out of the Company's or such other permitted Person's authorized but unissued stock and, upon issuance, will be duly and validly and fully paid and non-assessable and free of any preemptive rights.

    SECTION 3.9.  EFFECT OF CHANGE IN CONTROL PURCHASE NOTICE.

    Upon receipt by any Paying Agent of the Change in Control Purchase Notice specified in Section 3.8(c), the Holder of the Security in respect of which such Change in Control Purchase Notice was given shall (unless such Change in Control Purchase Notice is withdrawn as specified below) thereafter be entitled to receive the Change in Control Purchase Price with respect to such Security. Such Change in Control Purchase Price shall be paid to such Holder promptly following the later of (a) the Change in Control Purchase Date with respect to such Security (provided the conditions in Section 3.8(c) have been satisfied) and (b) the time of delivery of such Security to a Paying Agent by the Holder thereof in the manner required by Section 3.8(c). Securities in respect of which a Change in Control Purchase Notice has been given by the Holder thereof may not be converted into shares of Common Stock pursuant to Article 4 on or after the date of the delivery of such Change in Control Purchase Notice unless such Change in Control Purchase Notice has first been validly withdrawn.

    A Change in Control Purchase Notice may be withdrawn by means of a written notice (which may be delivered by mail, overnight courier, hand delivery, facsimile transmission or in any other written form and, in the case of Global Securities, may be delivered electronically or by other means in accordance with the Depositary's customary procedures) of withdrawal delivered by the Holder to a Paying Agent at any time prior to the close of business on the second Business Day immediately preceding the Change in Control Purchase Date, specifying the principal amount of the Security or portion thereof (which must be a principal amount of $1,000 or an integral multiple of $1,000 in excess thereof) with respect to which such notice of withdrawal is being submitted.

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    SECTION 3.10.  DEPOSIT OF CHANGE IN CONTROL PURCHASE PRICE.

    On or before 11:00 a.m. New York City time on the Change in Control Purchase Date, the Company shall deposit with the Trustee or with a Paying Agent (other than the Company or an Affiliate of the Company) an amount of money (in immediately available funds if deposited on such Change in Control Purchase Date), Common Stock or a combination thereof sufficient to pay the aggregate Change in Control Purchase Price of all the Securities or portions thereof that are to be purchased as of such Change in Control Purchase Date. The manner in which any deposit required by this Section 3.10 is made by the Company shall be at the option of the Company; provided that such deposit shall be made in a manner such that the Trustee or a Paying Agent shall have such Common Stock (in a form transferable by the Paying Agent), immediately available funds or a combination thereof on the Change in Control Purchase Date.

    If a Paying Agent holds, in accordance with the terms hereof, money, Common Stock or a combination thereof sufficient to pay the Change in Control Purchase Price of any Security for which a Change in Control Purchase Notice has been tendered and not withdrawn in accordance with this Indenture then, on the Change in Control Purchase Date, such Security will cease to be outstanding and the rights of the Holder in respect thereof shall terminate (other than the right to receive the Change in Control Purchase Price as aforesaid). The Company shall publicly announce the principal amount of Securities purchased as a result of such Change in Control on or as soon as practicable after the Change in Control Purchase Date.

    SECTION 3.11.  SECURITIES PURCHASED IN PART.

    Any Security that is to be purchased only in part shall be surrendered at the office of a Paying Agent, and promptly after the Change in Control Purchase Date the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities, of such authorized denomination or denominations as may be requested by such Holder, in aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Security so surrendered that is not purchased.

    SECTION 3.12.  COMPLIANCE WITH SECURITIES LAWS UPON PURCHASE OF SECURITIES.

    In connection with any offer to purchase or purchase of Securities under Section 3.8, the Company shall (a) comply with Rule 13e-4 and Rule 14e-1 (or any successor to either such Rule), if applicable, under the Exchange Act, (b) file the related Schedule TO (or any successor or similar schedule, form or report) if required under the Exchange Act, and (c) otherwise comply with all federal and state securities laws in connection with such offer to purchase or purchase of Securities and any offer to sell or solicitation of offers to buy Common Stock of the Company, all so as to permit the rights of the Holders and obligations of the Company under Sections 3.8 through 3.11 to be exercised in the time and in the manner specified therein.

    SECTION 3.13.  REPAYMENT TO THE COMPANY.

    To the extent that the aggregate amount of cash and/or Common Stock deposited by the Company pursuant to Section 3.10 exceeds the aggregate Change in Control Purchase Price together with interest, if any, thereon of the Securities or portions thereof that the Company is obligated to purchase, then promptly after the Change in Control Purchase Date the Trustee or a Paying Agent, as the case may be, shall return any such excess cash and/or excess Common Stock to the Company.

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ARTICLE 4
CONVERSION

    SECTION 4.1.  CONVERSION PRIVILEGE.

    Subject to the further provisions of this Article 4 and paragraph 8 of the Securities, a Holder of a Security may convert the principal amount of such Security (or any portion thereof equal to $1,000 or any integral multiple of $1,000 in excess thereof) into Common Stock at any time prior to the close of business on the Final Maturity Date, at the Conversion Price then in effect; provided, however, that, if such Security is called for redemption or submitted or presented for purchase pursuant to Article 3, such conversion right shall terminate at the close of business on the second Business Day immediately preceding the Redemption Date or Change in Control Purchase Date, as the case may be, for such Security or such earlier date as the Holder presents such Security for redemption or for purchase (unless the Company shall default in making the redemption payment or Change in Control Purchase Price payment when due, in which case the conversion right shall terminate at the close of business on the date such default is cured and such Security is redeemed or purchased, as the case may be). The number of shares of Common Stock issuable upon conversion of a Security shall be determined by dividing the principal amount of the Security or portion thereof surrendered for conversion by the Conversion Price in effect on the Conversion Date. The initial Conversion Price is set forth in paragraph 8 of the Securities and is subject to adjustment as provided in this Article 4 (as so adjusted from time to time, the "Conversion Price").

    Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of a Security.

    A Security in respect of which a Holder has delivered a Change in Control Purchase Notice pursuant to Section 3.8(c) exercising the right of such Holder to require the Company to purchase such Security may be converted only if such Change in Control Purchase Notice is withdrawn by a written notice of withdrawal delivered to a Paying Agent prior to the close of business on the second Business Day immediately preceding the Change in Control Purchase Date in accordance with Section 3.9.

    A Holder of Securities is not entitled to any rights of a holder of Common Stock until and only to the extent its Securities are deemed to have been converted into Common Stock pursuant to this Article 4.

    SECTION 4.2.  CONVERSION PROCEDURE.

    To convert a Security, a Holder must (a) complete and manually sign the conversion notice on the back of the Security and deliver such notice to a Conversion Agent, (b) surrender the Security to a Conversion Agent, (c) furnish appropriate endorsements and transfer documents if required by a Registrar or a Conversion Agent, (d) furnish such other documents, including such representations and agreements, as, in the opinion of counsel to the Company, may be required by law, and (e) pay any transfer or similar tax, if required. The date on which the Holder satisfies all of those requirements is the "Conversion Date." In the event of any conversion of Securities prior to the end of the period referred to in Rule 144(k) under the Securities Act which have been transferred pursuant to Regulation S under the Securities Act prior to such conversion, the Company shall issue and deliver shares of Common Stock in certificated form, including additional terms, conditions and restrictions, and take all other actions as, in the opinion of counsel to the Company, may be required by law. As soon as practicable after the Conversion Date, the Company shall deliver to the Holder through a Conversion Agent a certificate for the number of whole shares of Common Stock issuable upon the conversion and cash in lieu of any fractional shares pursuant to Section 4.3. Anything herein to the contrary notwithstanding, in the case of Global Securities, conversion notices may be delivered and such Securities may be surrendered for conversion in accordance with the Applicable Procedures as in effect from time to time.

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    The person in whose name the Common Stock certificate is registered shall be deemed to be a stockholder of record on the Conversion Date; provided, however, that no surrender of a Security on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the person or persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the person or persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; provided, further, that such conversion shall be at the Conversion Price in effect on the Conversion Date as if the stock transfer books of the Company had not been closed. Upon conversion of a Security and beginning on the Conversion Date, such person shall no longer be a Holder of such Security. No payment or adjustment will be made for accrued interest on the notes or dividends or distributions on shares of Common Stock issued upon conversion of a Security other than as specified in this Section 4.2, in Article 3 and in Section 4.6.

    Securities so surrendered for conversion (in whole or in part) during the period from the close of business on any regular record date to the opening of business on the next succeeding interest payment date (excluding Securities or portions thereof called for redemption or presented for purchase upon a Change in Control on a Redemption Date or Change in Control Purchase Date, as the case may be, during the period beginning at the close of business on a regular record date and ending at the opening of business on the first Business Day after the next succeeding interest payment date, or if such interest payment date is not a Business Day, the second such Business Day) shall also be accompanied by payment in funds acceptable to the Company and the Conversion Agent of an amount equal to the interest payable on such interest payment date on the principal amount of such Security then being converted, and such interest shall be payable to such registered Holder notwithstanding the conversion of such Security, subject to the provisions of this Indenture relating to the payment of defaulted interest by the Company. Except as otherwise provided in this Section 4.2, in Article 3 and in Section 4.6 no payment or adjustment will be made for accrued interest on a converted Security. If the Company defaults in the payment of interest payable on such interest payment date, the Company shall promptly repay such funds to such Holder.

    Nothing in this Section shall affect the right of a Holder in whose name any Security is registered at the close of business on a record date to receive the interest payable on such Security on the related interest payment date in accordance with the terms of this Indenture and the Securities. If a Holder converts more than one Security at the same time, the number of shares of Common Stock issuable upon the conversion shall be based on the aggregate principal amount of Securities converted.

    Upon surrender of a Security that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Security equal in principal amount to the unconverted portion of the Security surrendered.

    SECTION 4.3.  FRACTIONAL SHARES.

    The Company will not issue fractional shares of Common Stock upon conversion of Securities. In lieu thereof, the Company will pay an amount in cash for the current market value of the fractional shares. The current market value of a fractional share shall be determined, (calculated to the nearest 1/1000^thof a share) by multiplying the Closing Price (determined as set forth in Section 4.6(d)) of the Common Stock on the Trading Day immediately prior to the Conversion Date by such fractional share and rounding the product to the nearest whole cent.

    SECTION 4.4.  TAXES ON CONVERSION.

    If a Holder converts a Security, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon such conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name

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other than the Holder's name. The Conversion Agent may refuse to deliver the certificate representing the Common Stock being issued in a name other than the Holder's name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude any tax withholding required by law or regulation.

    SECTION 4.5.  COMPANY TO PROVIDE STOCK.

    The Company shall, prior to issuance of any Securities hereunder, and from time to time as may be necessary, reserve, out of its authorized but unissued Common Stock, a sufficient number of shares of Common Stock to permit the conversion of all outstanding Securities into shares of Common Stock.

    All shares of Common Stock delivered upon conversion of the Securities shall be newly issued shares, shall be duly authorized, validly issued, fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim.

    The Company will endeavor promptly to comply with all federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Securities, if any, and will list or cause to have quoted such shares of Common Stock on the NNM, each national securities exchange or other over-the-counter market or such other market on which the Common Stock is then listed or quoted; provided, however, that if rules of such automated quotation system or exchange permit the Company to defer the listing of such Common Stock until the first conversion of the Notes into Common Stock in accordance with the provisions of this Indenture, the Company covenants to list such Common Stock issuable upon conversion of the Notes in accordance with the requirements of such automated quotation system or exchange at such time. Any Common Stock issued upon conversion of a Security hereunder which at the time of conversion was a Restricted Security will also be a Restricted Security.

    SECTION 4.6.  ADJUSTMENT OF CONVERSION PRICE.

    The Conversion Price shall be adjusted from time to time by the Company as follows:

    (a) In case the Company shall (i) pay a dividend on its Common Stock in shares of Common Stock, (ii) make a distribution on its Common Stock in shares of Common Stock, (iii) subdivide its outstanding Common Stock into a greater number of shares, or (iv) combine its outstanding Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior thereto shall be adjusted so that the Holder of any Security thereafter surrendered for conversion shall be entitled to receive that number of shares of Common Stock which it would have owned after such event had such Security been converted immediately prior to such event. An adjustment made pursuant to this subsection (a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of subdivision or combination.

    (b) In case the Company shall issue rights or warrants to all or substantially all holders of its Common Stock entitling them (for a period commencing no earlier than the record date described below and expiring not more than 60 days after such record date) to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price per share (or having a conversion price per share) less than the Current Market Price per share of Common Stock (as determined in accordance with subsection (d) of this Section 4.6) on the record date for the determination of stockholders entitled to receive such rights or warrants, the Conversion Price in effect immediately prior thereto shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to such record date by a fraction of which the numerator shall be the number of shares of Common Stock outstanding on such record date plus the number of shares which the aggregate offering price of the total number of shares of Common Stock so offered (or the aggregate conversion price of the convertible securities so offered, which shall

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be determined by multiplying the number of shares of Common Stock issuable upon conversion of such convertible securities by the conversion price per share of Common Stock pursuant to the terms of such convertible securities) would purchase at the Current Market Price per share (as defined in subsection (d) of this Section 4.6) of Common Stock on such record date, and of which the denominator shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock offered (or into which the convertible securities so offered are convertible). Such adjustment shall be made successively whenever any such rights or warrants are issued, and shall become effective immediately after such record date. If at the end of the period during which such rights or warrants are exercisable not all rights or warrants shall have been exercised, the adjusted Conversion Price shall be immediately readjusted to what it would have been based upon the number of additional shares of Common Stock actually issued (or the number of shares of Common Stock issuable upon conversion of convertible securities actually issued).

    (c) In case the Company shall distribute to all or substantially all holders of its Common Stock any shares of Capital Stock of the Company (other than Common Stock), evidences of indebtedness or other non-cash assets (including securities of any person other than the Company but excluding (1) dividends or distributions paid exclusively in cash or (2) dividends or distributions referred to in subsection (a) of this Section 4.6), or shall distribute to all or substantially all holders of its Common Stock rights or warrants to subscribe for or purchase any of its securities (excluding those rights and warrants referred to in subsection (b) of this Section 4.6), then in each such case the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the then current Conversion Price by a fraction of which (A) the numerator shall be the Current Market Price per share (as defined in subsection (d) of this Section 4.6) of the Common Stock on the record date mentioned below less the fair market value on such record date (as determined by the Board of Directors, whose determination shall be conclusive evidence of such fair market value and which shall be evidenced by an Officers' Certificate delivered to the Trustee) of the portion of the Capital Stock, evidences of indebtedness or other non-cash assets so distributed or of such rights or warrants applicable to one share of Common Stock (determined on the basis of the number of shares of Common Stock outstanding on the record date), and (B) the denominator shall be the Current Market Price per share (as defined in subsection (d) of this Section 4.6) of the Common Stock on such record date. Such adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution.

    In the event the then fair market value (as so determined) of the portion of the Capital Stock, evidences of indebtedness or other non-cash assets so distributed or of such rights or warrants applicable to one share of Common Stock is equal to or greater than the Current Market Price per share of the Common Stock on such record date, in lieu of the foregoing adjustment, adequate provision shall be made so that each holder of a Security shall have the right to receive upon conversion the amount of Capital Stock, evidences of indebtedness or other non-cash assets so distributed or of such rights or warrants such holder would have received had such holder converted each Security on such record date. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not been declared. If the Board of Directors determines the fair market value of any distribution for purposes of this Section 4.6(c) by reference to the actual or when issued trading market for any securities, it must in doing so consider the prices in such market over the same period used in computing the Current Market Price of the Common Stock.

    In the event that the Company has a preferred shares rights plan in effect ("Rights Plan"), upon conversion of the Securities into Common Stock, the holders of Securities will receive, in addition to the Common Stock, the rights described therein (whether or not the rights have separated from the Common Stock at the time of conversion), subject to the limitations set forth in the Rights Plan. Any

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distribution of rights or warrants pursuant to a Rights Plan complying with the requirements set forth in the immediately preceding sentence of this paragraph shall not constitute a distribution of rights or warrants pursuant to this Section 4.6(c).

    Rights or warrants distributed by the Company to all holders of Common Stock entitling the holders thereof to subscribe for or purchase shares of the Company's Capital Stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events ("Trigger Event"): (i) are deemed to be transferred with such shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in respect of future issuances of Common Stock, shall be deemed not to have been distributed for purposes of this Section 4.6 (and no adjustment to the Conversion Price under this Section 4.6 will be required) until the occurrence of the earliest Trigger Event, whereupon such rights and warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the Conversion Price shall be made under this Section 4.6(c). If any such right or warrant, including any such existing rights or warrants distributed prior to the date of this Indenture, are subject to events, upon the occurrence of which such rights or warrants become exercisable to purchase different securities, evidences of indebtedness or other assets, then the date of the occurrence of any and each such event shall be deemed to be the date of distribution and record date with respect to new rights or warrants with such rights (and a termination or expiration of the existing rights or warrants without exercise by any of the holders thereof). In addition, in the event of any distribution (or deemed distribution) of rights or warrants, or any Trigger Event or other event (of the type described in the preceding sentence) with respect thereto that was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Price under this Section 4.6 was made, (i) in the case of any such rights or warrants which shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Price shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or repurchase price received by a holder or holders of Common Stock with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Stock as of the date of such redemption or repurchase, and (ii) in the case of such rights or warrants which shall have expired or been terminated without exercise by any holders thereof, the Conversion Price shall be readjusted as if such rights and warrants had not been issued.

    (1) In case the Company shall, by dividend or otherwise, at any time distribute (a "Triggering Distribution") to all or substantially all holders of its Common Stock cash in an aggregate amount that, together with the aggregate amount of (A) any cash and the fair market value (as determined by the Board of Directors, whose determination shall be conclusive evidence thereof and which shall be evidenced by an Officers' Certificate delivered to the Trustee) of any other consideration payable in respect of any tender offer by the Company or a Subsidiary of the Company for Common Stock consummated within the 12 months preceding the date of payment of the Triggering Distribution and in respect of which no Conversion Price adjustment pursuant to this Section 4.6 has been made and (B) all other cash distributions to all or substantially all holders of its Common Stock made within the 12 months preceding the date of payment of the Triggering Distribution and in respect of which no Conversion Price adjustment pursuant to this Section 4.6 has been made, exceeds an amount equal to 10.0% of the product of the Current Market Price per share of Common Stock (as determined in accordance with subsection (d) of this Section 4.6) at the close of business, New York City time, on the Business Day (the "Determination Date") immediately preceding the day on which such Triggering Distribution is declared by the Company multiplied by the number of shares of Common Stock outstanding on the Determination Date (excluding shares held in the treasury of the Company), the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying such Conversion Price in effect immediately prior to the Determination Date by a fraction of which the numerator shall be the Current Market Price per share of the Common Stock (as determined in accordance with

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subsection (d) of this Section 4.6) on the Determination Date less the sum of the aggregate amount of cash and the aggregate fair market value (determined as aforesaid in this Section 4.6(c)(1)) of any such other consideration so distributed, paid or payable within such 12 months (including, without limitation, the Triggering Distribution) applicable to one share of Common Stock (determined on the basis of the number of shares of Common Stock outstanding on the Determination Date) and the denominator shall be such Current Market Price per share of the Common Stock (as determined in accordance with subsection (d) of this Section 4.6) on the Determination Date, such reduction to become effective immediately prior to the opening of business on the day following the date on which the Triggering Distribution is paid.

    (2) In case any tender offer made by the Company or any of its Subsidiaries for Common Stock shall expire and such tender offer (as amended through the expiration thereof) shall involve the payment of aggregate consideration in an amount (determined as the sum of the aggregate amount of cash consideration and the aggregate fair market value (as determined by the Board of Directors, whose determination shall be conclusive evidence thereof and which shall be evidenced by an Officers' Certificate delivered to the Trustee thereof) of any other consideration) that, together with the aggregate amount of (A) any cash and the fair market value (as determined by the Board of Directors, whose determination shall be conclusive evidence thereof and which shall be evidenced by an Officers' Certificate delivered to the Trustee) of any other consideration payable in respect of any other tender offers by the Company or any Subsidiary of the Company for Common Stock consummated within the 12 months preceding the date of the Expiration Date (as defined below) and in respect of which no Conversion Price adjustment pursuant to this Section 4.6 has been made and (B) all cash distributions to all or substantially all holders of its Common Stock made within the 12 months preceding the Expiration Date and in respect of which no Conversion Price adjustment pursuant to this Section 4.6 has been made, exceeds an amount equal to 10.0% of the product of the Current Market Price per share of Common Stock (as determined in accordance with subsection (d) of this Section 4.6) as of the last date (the "Expiration Date") tenders could have been made pursuant to such tender offer (as it may be amended) (the last time at which such tenders could have been made on the Expiration Date is hereinafter sometimes called the "Expiration Time") multiplied by the number of shares of Common Stock outstanding (including tendered shares but excluding any shares held in the treasury of the Company) at the Expiration Time, then, immediately prior to the opening of business on the day after the Expiration Date, the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the Expiration Date by a fraction of which the numerator shall be the product of the number of shares of Common Stock outstanding (including tendered shares but excluding any shares held in the treasury of the Company) at the Expiration Time multiplied by the Current Market Price per share of the Common Stock (as determined in accordance with subsection (d) of this Section 4.6) on the Trading Day next succeeding the Expiration Date and the denominator shall be the sum of (x) the aggregate consideration (determined as aforesaid) payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender offer) of all shares validly tendered and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares and excluding any shares held in the treasury of the Company) at the Expiration Time and the Current Market Price per share of Common Stock (as determined in accordance with subsection (d) of this Section 4.6) on the Trading Day next succeeding the Expiration Date, such reduction to become effective immediately prior to the opening of business on the day following the Expiration Date. In the event that the Company is obligated to purchase shares pursuant to any such tender offer, but the Company is permanently prevented by applicable law from effecting any or all such purchases or any or all such purchases are rescinded, the Conversion Price shall again be adjusted

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to be the Conversion Price which would have been in effect based upon the number of shares actually purchased. If the application of this Section 4.6(c)(2) to any tender offer would result in an increase in the Conversion Price, no adjustment shall be made for such tender offer under this Section 4.6(c)(2).

    (3) For purposes of this Section 4.6(c), the term "tender offer" shall mean and include both tender offers and exchange offers, all references to "purchases" of shares in tender offers (and all similar references) shall mean and include both the purchase of shares in tender offers and the acquisition of shares pursuant to exchange offers, and all references to "tendered shares" (and all similar references) shall mean and include shares tendered in both tender offers and exchange offers.

    (d) For the purpose of any computation under subsections (b) and (c) of this Section 4.6, the current market price (the "Current Market Price") per share of Common Stock on any date shall be deemed to be the average of the daily closing prices for the 30 consecutive Trading Days commencing 45 Trading Days before (i) the Determination Date or the Expiration Date, as the case may be, with respect to distributions or tender offers under subsection (c) of this Section 4.6 or (ii) the record date with respect to distributions, issuances or other events requiring such computation under subsection (b) or (c) of this Section 4.6. The closing price (the "Closing Price") of Common Stock for any day shall be the last reported sales price or, in case no such reported sale takes place on such date, the average of the reported closing bid and asked prices in either case on the Nasdaq National Market (the "NNM") or, if the Common Stock is not listed or admitted to trading on the NNM, on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or admitted to trading on the NNM or any national securities exchange, the last reported sales price of the Common Stock as quoted on NASDAQ or, in case no reported sales takes place, the average of the closing bid and asked prices as quoted on NASDAQ or any comparable system or, if the Common Stock is not quoted on NASDAQ or any comparable system, the closing sales price or, in case no reported sale takes place, the average of the closing bid and asked prices, as furnished by any two members of the National Association of Securities Dealers, Inc. selected from time to time by the Company for that purpose. If no such prices are available, the Current Market Price per share shall be the fair value of a share of Common Stock as determined by the Board of Directors (which shall be evidenced by an Officers' Certificate delivered to the Trustee).

    (e) In any case in which this Section 4.6 shall require that an adjustment be made following a record date or a Determination Date or Expiration Date, as the case may be, established for purposes of this Section 4.6, the Company may elect to defer (but only until five Business Days following the filing by the Company with the Trustee of the certificate described in Section 4.9) issuing to the Holder of any Security converted after such record date or Determination Date or Expiration Date the shares of Common Stock and other Capital Stock of the Company issuable upon such conversion over and above the shares of Common Stock and other Capital Stock of the Company issuable upon such conversion only on the basis of the Conversion Price prior to adjustment; and, in lieu of the shares the issuance of which is so deferred, the Company shall issue or cause its transfer agents to issue due bills or other appropriate evidence prepared by the Company of the right to receive such shares. If any distribution in respect of which an adjustment to the Conversion Price is required to be made as of the record date or Determination Date or Expiration Date therefor is not thereafter made or paid by the Company for any reason, the Conversion Price shall be readjusted to the Conversion Price which would then be in effect if such record date had not been fixed or such effective date or Determination Date or Expiration Date had not occurred.

    SECTION 4.7.  NO ADJUSTMENT.

    No adjustment in the Conversion Price shall be required unless the adjustment would require an increase or decrease of at least 1% in the Conversion Price as last adjusted; provided, however, that any

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adjustments which by reason of this Section 4.7 are not required to be made shall be carried forward and taken into account in determining whether any subsequent adjustment meets the 1% threshold. All calculations under this Article 4 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be.

    No adjustment need be made for issuances of Common Stock pursuant to a Company plan for reinvestment of dividends or interest or for a change in the par value or a change to no par value of the Common Stock.

    To the extent that the Securities become convertible into the right to receive cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash.

    SECTION 4.8.  ADJUSTMENT FOR TAX PURPOSES.

    The Company shall be entitled to make such reductions in the Conversion Price, in addition to those required by Article 4, as it in its discretion shall determine to be advisable in order that any stock dividends, subdivisions of shares, distributions of rights to purchase stock or securities or distributions of securities convertible into or exchangeable for stock hereafter or any event treated as such for federal income tax purposes made by the Company to its stockholders shall not be taxable.

    SECTION 4.9.  NOTICE OF ADJUSTMENT.

    Whenever the Conversion Price or conversion privilege is adjusted, the Company shall promptly mail to Securityholders a notice of the adjustment and file with the Trustee an Officers' Certificate briefly stating the facts requiring the adjustment and the manner of computing it. Unless and until the Trustee shall receive an Officers' Certificate setting forth an adjustment of the Conversion Price, the Trustee may assume without inquiry that the Conversion Price has not been adjusted and that the last Conversion Price of which it has knowledge remains in effect.

    SECTION 4.10.  NOTICE OF CERTAIN TRANSACTIONS.

    In the event that:

    (1) the Company takes any action which would require an adjustment in the Conversion Price;

    (2) the Company consolidates or merges with, or transfers all or substantially all of its property and assets to, another corporation and shareholders of the Company must approve the transaction; or

    (3) there is a dissolution or liquidation of the Company,

the Company shall mail to Holders and file with the Trustee a notice stating the proposed record or effective date, as the case may be. The Company shall mail the notice at least ten days before such date. Failure to mail such notice or any defect therein shall not affect the validity of any transaction referred to in clause (1), (2) or (3) of this Section 4.10.

    SECTION 4.11.  EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE ON CONVERSION PRIVILEGE.

    If any of the following shall occur, namely: (a) any reclassification or change of shares of Common Stock issuable upon conversion of the Securities (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination, or any other change for which an adjustment is provided in Section 4.6); (b) any consolidation or merger or combination to which the Company is a party other than a merger in which the Company is the continuing corporation and which does not result in any reclassification of, or change (other than in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of Common Stock; or (c) any sale or conveyance as

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an entirety or substantially as an entirety of the property and assets of the Company, directly or indirectly, to any person, then the Company, or such successor, purchasing or transferee corporation, as the case may be, shall, as a condition precedent to such reclassification, change, combination, consolidation, merger, sale or conveyance, execute and deliver to the Trustee a supplemental indenture providing that the Holder of each Security then outstanding shall have the right to convert such Security into the kind and amount of shares of stock and other securities and property (including cash) receivable upon such reclassification, change, combination, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock deliverable upon conversion of such Security immediately prior to such reclassification, change, combination, consolidation, merger, sale or conveyance. Such supplemental indenture shall provide for adjustments of the Conversion Price which shall be as nearly equivalent as may be practicable to the adjustments of the Conversion Price provided for in this Article 4. If, in the case of any such consolidation, merger, combination, sale or conveyance, the stock or other securities and property (including cash) receivable thereupon by a holder of Common Stock include shares of stock or other securities and property of a person other than the successor, purchasing or transferee corporation, as the case may be, in such consolidation, merger, combination, sale or conveyance, then such supplemental indenture shall also be executed by such other person and shall contain such additional provisions to protect the interests of the Holders of the Securities as the Board of Directors shall reasonably consider necessary by reason of the foregoing. The provisions of this Section 4.11 shall similarly apply to successive reclassifications, changes, combinations, consolidations, mergers, sales or conveyances.

    In the event the Company shall execute a supplemental indenture pursuant to this Section 4.11, the Company shall promptly file with the Trustee (x) an Officers' Certificate briefly stating the reasons therefor, the kind or amount of shares of stock or other securities or property (including cash) receivable by Holders of the Securities upon the conversion of their Securities after any such reclassification, change, combination, consolidation, merger, sale or conveyance, any adjustment to be made with respect thereto and that all conditions precedent have been complied with and (y) an Opinion of Counsel that all conditions precedent have been complied with, and shall promptly mail notice thereof to all Holders.

    SECTION 4.12.  TRUSTEE'S DISCLAIMER.

    The Trustee shall have no duty to determine when an adjustment under this Article 4 should be made, how it should be made or what such adjustment should be, but may accept as conclusive evidence of that fact or the correctness of any such adjustment, and shall be protected in relying upon, an Officers' Certificate including the Officers' Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 4.9. The Trustee makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities, and the Trustee shall not be responsible for the Company's failure to comply with any provisions of this Article 4.

    The Trustee shall not be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture executed pursuant to Section 4.11, but may accept as conclusive evidence of the correctness thereof, and shall be fully protected in relying upon, the Officers' Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 4.11.

    SECTION 4.13.  VOLUNTARY REDUCTION.

    The Company from time to time may reduce the Conversion Price by any amount for any period of time if the period is at least 20 days and if the reduction is irrevocable during the period if our Board of Directors determines that such reduction would be in the best interest of the Company or to avoid or diminish income tax to holders of shares of our Common Stock in connection with a dividend or distribution of stock or similar event, and the Company provides 15 days prior notice of any

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reduction in the Conversion Price; provided, however, that in no event may the Company reduce the Conversion Price to be less than the par value of a share of Common Stock.

ARTICLE 5
SUBORDINATION

    SECTION 5.1.  AGREEMENT OF SUBORDINATION.

    The Company covenants and agrees, and each Holder of Securities issued hereunder by its acceptance thereof likewise covenants and agrees, that all Securities shall be issued subject to the provisions of this Article 5; and each Person holding any Security, whether upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees to be bound by such provisions.

    The payment of the principal of, premium, if any, and interest (including Additional Interest, if any) on all Securities (including, but not limited to, the Redemption Price with respect to the Securities called for redemption or the Change in Control Purchase Price with respect to the Securities subject to purchase in accordance with Article 3 as provided in this Indenture) issued hereunder shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full in cash or payment satisfactory to the holders of Senior Indebtedness of all Senior Indebtedness, whether outstanding at the date of this Indenture or thereafter incurred.

    No provision of this Article 5 shall prevent the occurrence of any default or Event of Default hereunder.

    SECTION 5.2.  PAYMENTS TO HOLDERS.

    No payment shall be made with respect to the principal of, or premium, if any, or interest (including Additional Interest, if any) on the Securities (including, but not limited to, the Redemption Price with respect to the Securities to be called for redemption or the Change in Control Purchase Price with respect to the Securities subject to purchase in accordance with Article 3 as provided in this Indenture), except payments and distributions made by the Trustee as permitted by the first or second paragraph of Section 5.5, if:

    (i)  a default in the payment of principal, premium, interest, rent or other obligations due on any Senior Indebtedness occurs and is continuing (or, in the case of Senior Indebtedness for which there is a period of grace, in the event of such a default that continues beyond the period of grace, if any, specified in the instrument or lease evidencing such Senior Indebtedness), unless and until such default shall have been cured or waived or shall have ceased to exist; or

    (ii) a default, other than a payment default, on a Designated Senior Indebtedness occurs and is continuing that then permits holders of such Designated Senior Indebtedness to accelerate its maturity and the Trustee receives a notice of the default (a "Payment Blockage Notice") from a Representative or holder of Designated Senior Indebtedness or the Company.

    Subject to the provisions of Section 5.5, if the Trustee receives any Payment Blockage Notice pursuant to clause (ii) above, no subsequent Payment Blockage Notice shall be effective for purposes of this Section unless and until at least 365 days shall have elapsed since the initial effectiveness of the immediately prior Payment Blockage Notice. No default under clause (ii) above that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee (unless such default was waived, cured or otherwise ceased to exist for a period of not less than 90 consecutive days and thereafter subsequently reoccurred) shall be, or be made, the basis for a subsequent Payment Blockage Notice.

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    The Company may and shall resume payments on and distributions in respect of the Securities upon the earlier of:

    (a) in the case of a default referred to in clause (i) above, the date upon which the default is cured or waived or ceases to exist, or

    (b) in the case of a default referred to in clause (ii) above, the earlier of the date on which such default is cured or waived or ceases to exist or 179 days pass after the date on which the applicable Payment Blockage Notice is received, if the maturity of such Designated Senior Indebtedness has not been accelerated, unless this Article 5 otherwise prohibits the payment or distribution at the time of such payment or distribution.

    Upon any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company (whether voluntary or involuntary) or in bankruptcy, insolvency, receivership or similar proceedings, all amounts due or to become due upon all Senior Indebtedness shall first be paid in full in cash, or other payments satisfactory to the holders of Senior Indebtedness before any payment is made on account of the principal of, premium, if any, or interest (including Additional Interest, if any) on the Securities (except payments made pursuant to Article 10 from monies deposited with the Trustee pursuant thereto prior to commencement of proceedings for such dissolution, winding-up, liquidation or reorganization); and upon any such dissolution or winding-up or liquidation or reorganization of the Company or bankruptcy, insolvency, receivership or other proceeding, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee would be entitled, except for the provision of this Article 5, shall (except as aforesaid) be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders of the Securities or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, or as otherwise required by law or a court order) or their Representative or Representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all Senior Indebtedness in full in cash, or other payment satisfactory to the holders of Senior Indebtedness, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness, before any payment or distribution is made to the Holders of the Securities or to the Trustee.

    For purposes of this Article 5, the words, "cash, property or securities" shall be deemed not to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article 5 with respect to the Securities to the payment of all Senior Indebtedness which may at the time be outstanding; provided that (i) the Senior Indebtedness is assumed by the new corporation, if any, resulting from any reorganization or readjustment, and (ii) the rights of the holders of Senior Indebtedness (other than leases which are not assumed by the Company or the new corporation, as the case may be) are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance, transfer or lease of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article 7 shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 5.2 if such other corporation shall, as a part of such consolidation, merger, conveyance, transfer or lease, comply with the conditions stated in Article 7.

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    In the event of the acceleration of the Securities because of an Event of Default, no payment or distribution shall be made to the Trustee or any Holder of Securities in respect of the principal of, premium, if any, or interest (including Additional Interest, if any) on the Securities by the Company (including, but not limited to, the Redemption Price with respect to the Securities called for redemption or the Change in Control Purchase Price with respect to the Securities subject to purchase in accordance with Article 3 as provided in this Indenture), except payments and distributions made by the Trustee as permitted by Section 5.5, until all Senior Indebtedness has been paid in full in cash or other payment satisfactory to the holders of Senior Indebtedness or such acceleration is rescinded in accordance with the terms of this Indenture. If payment of the Securities is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Indebtedness of such acceleration.

    In the event that, notwithstanding the foregoing provisions, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (including, without limitation, by way of setoff or otherwise), prohibited by the foregoing, shall be received by the Trustee or the Holders of the Securities before all Senior Indebtedness is paid in full, in cash or other payment satisfactory to the holders of Senior Indebtedness, or provision is made for such payment thereof in accordance with its terms in cash or other payment satisfactory to the holders of Senior Indebtedness, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of Senior Indebtedness or their Representative or Representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full, in cash or other payment satisfactory to the holders of Senior Indebtedness, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness.

    Nothing in this Section 5.2 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 9.7. This Section 5.2 shall be subject to the further provisions of Section 5.5.

    SECTION 5.3.  SUBROGATION OF SECURITIES.

    Subject to the payment in full, in cash or other payment satisfactory to the holders of Senior Indebtedness, of all Senior Indebtedness, the rights of the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Article 5 (equally and ratably with the holders of all indebtedness of the Company which by its express terms is subordinated to other indebtedness of the Company to substantially the same extent as the Securities are subordinated and is entitled to like rights of subrogation) to the rights of the holders of Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Indebtedness until the principal, premium, if any, and interest (including Additional Interest, if any) on the Securities shall be paid in full in cash or other payment satisfactory to the holders of Senior Indebtedness; and, for the purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article 5, and no payment over pursuant to the provisions of this Article 5, to or for the benefit of the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment by the Company to or on account of the Senior Indebtedness; and no payments or distributions of cash, property or securities to or for the benefit of the Holders of the Securities pursuant to the subrogation provisions of this Article 5, which would otherwise have been paid to the holders of Senior Indebtedness shall be deemed to be a payment by the Company to or for the account of the Securities. It is understood that the provisions of

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this Article 5 are and are intended solely for the purposes of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of the Senior Indebtedness, on the other hand.

    Nothing contained in this Article 5 or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors other than the holders of Senior Indebtedness, and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Securities and creditors of the Company other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article 5 of the holders of Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy.

    Upon any payment or distribution of assets of the Company referred to in this Article 5, the Trustee, subject to the provisions of Section 9.1, and the Holders of the Securities shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, delivered to the Trustee or to the Holders of the Securities, for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon and all other facts pertinent thereto or to this Article 5.

    SECTION 5.4.  AUTHORIZATION TO EFFECT SUBORDINATION.

    Each Holder of a Security by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 5 and appoints the Trustee to act as the Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 5.3 hereof at least 30 days before the expiration of the time to file such claim, the holders of any Senior Indebtedness or their Representatives are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Securities.

    SECTION 5.5.  NOTICE TO TRUSTEE.

    The Company shall give prompt written notice in the form of an Officers' Certificate to a Responsible Officer of the Trustee and to any Paying Agent of any fact known to the Company which would prohibit the making of any payment of monies to or by the Trustee or any Paying Agent in respect of the Securities pursuant to the provisions of this Article 5. Notwithstanding the provisions of this Article 5 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment of monies to or by the Trustee in respect of the Securities pursuant to the provisions of this Article 5, unless and until a Responsible Officer of the Trustee shall have received written notice thereof at the Corporate Trust Office from the Company (in the form of an Officers' Certificate) or a Representative or one or more holders of Senior Indebtedness or from any trustee thereof; and before the receipt of any such written notice, the Trustee, subject to the provisions of Section 9.1, shall be entitled in all respects to assume that no such facts exist; provided that if on a date not less than one Business Day prior to the date upon which by the terms hereof any such monies may become payable for any purpose (including, without limitation, the payment of the principal of, or premium, if any, or interest on any Security) the Trustee shall not have received, with respect to such monies, the notice provided for in this Section 5.5, then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and

36

authority to receive such monies and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it on or after such prior date. Notwithstanding anything in this Article 5 to the contrary, nothing shall prevent any payment by the Trustee to the Holders of monies deposited with it pursuant to Article 10, and any such payment shall not be subject to the provisions of Article 5.

    The Trustee, subject to the provisions of Section 9.1, shall be entitled to rely on the delivery to it of a written notice by a Representative or a person representing himself to be a holder of Senior Indebtedness (or a trustee on behalf of such holder) to establish that such notice has been given by a Representative or a holder of Senior Indebtedness or a trustee on behalf of any such holder or holders. In the event that the Trustee reasonably determines that further evidence is required with respect to the right of any person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article 5, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article 5, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.

    SECTION 5.6.  TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS.

    The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article 5 in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in Section 9.11 or elsewhere in this Indenture shall deprive the Trustee of any of its rights as such holder.

    With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article 5, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and, subject to the provisions of Section 9.1, the Trustee shall not be liable to any holder of Senior Indebtedness if it shall pay over or deliver to Holders of Securities, the Company or any other person money or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article 5 or otherwise.

    SECTION 5.7.  NO IMPAIRMENT OF SUBORDINATION.

    No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with.

    SECTION 5.8.  CERTAIN CONVERSIONS DEEMED PAYMENT.

    For the purposes of this Article 5 only, (1) the issuance and delivery of junior securities upon conversion of Securities in accordance with Article 4 shall not be deemed to constitute a payment or distribution on account of the principal of (or premium, if any) or interest on Securities or on account of the purchase or other acquisition of Securities, and (2) the payment, issuance or delivery of cash (except in satisfaction of fractional shares pursuant to Section 4.3), property or securities (other than junior securities) upon conversion of a Security shall be deemed to constitute payment on account of the principal of such Security. For the purposes of this Section 5.8, the term "junior securities" means (a) shares of any stock of any class of the Company, or (b) securities of the Company which are subordinated in right of payment to all Senior Indebtedness which may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than,

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the Securities are so subordinated as provided in this Article. Nothing contained in this Article 5 or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders, the right, which is absolute and unconditional, of the Holder of any Security to convert such Security in accordance with Article 4.

    SECTION 5.9.  ARTICLE APPLICABLE TO PAYING AGENTS.

    If at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; provided, however, that the first paragraph of Section 5.5 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent.

    SECTION 5.10.  SENIOR INDEBTEDNESS ENTITLED TO RELY.

    The holders of Senior Indebtedness (including, without limitation, Designated Senior Indebtedness) shall have the right to rely upon this Article 5, and no amendment or modification of the provisions contained herein shall diminish the rights of such holders unless such holders shall have agreed in writing thereto.

ARTICLE 6
COVENANTS

    SECTION 6.1.  PAYMENT OF SECURITIES.

    The Company shall promptly make all payments in respect of the Securities on the dates and in the manner provided in the Securities and this Indenture. An installment of principal or interest or Additional Interest, if any, shall be considered paid on the date it is due if the Paying Agent (other than the Company) holds by 11:00 a.m., New York City time, on that date money, deposited by the Company or an Affiliate thereof, sufficient to pay the installment. The Company shall (in immediately available funds), to the fullest extent permitted by law, pay interest on overdue principal (including premium, if any) and overdue installments of interest at the rate borne by the Securities per annum.

    Payment of the principal of (and premium, if any) and any interest on the Securities shall be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York (which shall initially be the Trustee) or at the Corporate Trust Office of the Trustee in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest on Certificated Securities may be made by check mailed to the address of the Person entitled thereto as such address appears in the Register; provided further that a Holder of a Certificated Security with an aggregate principal amount in excess of $2,000,000 will be paid by wire transfer in immediately available funds at the election of such Holder if such Holder has provided wire transfer instructions to the Company and the Paying Agent at least 10 Business Days prior to the payment date.

    SECTION 6.2.  SEC REPORTS.

    The Company shall file all reports and other information and documents which it is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act and, within 30 days after it files them with the SEC, the Company shall file copies of all such reports, information and other documents with the Trustee.

    Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates).

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    SECTION 6.3.  COMPLIANCE CERTIFICATES.

    The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year of the Company (beginning with the fiscal year ending January 31, 2002), an Officers' Certificate as to the signer's knowledge of the Company's compliance with all conditions and covenants on its part contained in this Indenture and stating whether or not the signer knows of any default or Event of Default. If such signer knows of such a default or Event of Default, the Officers' Certificate shall describe the default or Event of Default and the efforts to remedy the same. For the purposes of this Section 6.3, compliance shall be determined without regard to any grace period or requirement of notice provided pursuant to the terms of this Indenture.

    SECTION 6.4.  FURTHER INSTRUMENTS AND ACTS.

    Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture.

    SECTION 6.5.  MAINTENANCE OF CORPORATE EXISTENCE.

    Subject to Article 7, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence.

    SECTION 6.6.  RULE 144A INFORMATION REQUIREMENT.

    Within the period prior to the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision), the Company covenants and agrees that it shall, during any period in which it is not subject to Section 13 or 15(d) under the Exchange Act, upon the request of any Holder or beneficial holder of the Securities make available to such Holder or beneficial holder of Securities or any Common Stock issued upon conversion thereof which continue to be Restricted Securities in connection with any sale thereof and any prospective purchaser of Securities or such Common Stock designated by such Holder or beneficial holder, the information required pursuant to Rule 144A(d)(4) under the Securities Act or such Common Stock and it will take such further action as any Holder or beneficial holder of such Securities or such Common Stock may reasonably request, all to the extent required from time to time to enable such Holder or beneficial holder to sell its Securities or Common Stock without registration under the Securities Act within the limitation of the exemption provided by Rule 144A, as such Rule may be amended from time to time. Upon the request of any Holder or any beneficial holder of the Securities or such Common Stock, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.

    SECTION 6.7.  STAY, EXTENSION AND USURY LAWS.

    The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of, premium, if any, or interest (including Additional Interest, if any) on the Securities as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

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    SECTION 6.8.  PAYMENT OF ADDITIONAL INTEREST.

    If Additional Interest is payable by the Company pursuant to the Registration Rights Agreement, the Company shall deliver to the Trustee a certificate to that effect stating (i) the amount of such Additional Interest that is payable and (ii) the date on which such Additional Interest is payable. Unless and until a Responsible Officer of the Trustee receives such a certificate, the Trustee may assume without inquiry that no such Additional Interest is payable. If the Company has paid Additional Interest directly to the Persons entitled to it, the Company shall deliver to the Trustee a certificate setting forth the particulars of such payment.

ARTICLE 7
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

    SECTION 7.1.  COMPANY MAY CONSOLIDATE, ETC, ONLY ON CERTAIN TERMS.

    The Company shall not consolidate with or merge into any other Person (in a transaction in which the Company is not the surviving corporation) or, excluding a grant of a security interest, convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless:

    (1) in case the Company shall consolidate with or merge into another Person (in a transaction in which the Company is not the surviving corporation) or, excluding any grant of a security interest, convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the due and punctual payment of the principal of and any premium and interest on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed and the conversion rights shall be provided for in accordance with Article 4, by supplemental indenture reasonably satisfactory in form to the Trustee, executed and delivered to the Trustee, by the Person (if other than the Company) formed by such consolidation or into which the Company shall have been merged or by the Person which shall have acquired the Company's assets;

    (2) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; and

    (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with.

    SECTION 7.2.  SUCCESSOR SUBSTITUTED.

    Upon any consolidation of the Company with, or merger of the Company into, any other Person or, excluding any grant of a security interest, any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 7.1, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities.

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ARTICLE 8
DEFAULT AND REMEDIES

    SECTION 8.1.  EVENTS OF DEFAULT.

    An "Event of Default" shall occur if:

    (1) the Company defaults in the payment of any interest or Additional Interest, if any, payable to all holders of Registrable Securities (as defined in the Registration Rights Agreement) on any Security when the same becomes due and payable and the default continues for a period of 30 days, whether or not such payment shall be prohibited by the provisions of Article 5 hereof;

    (2) the Company defaults in the payment of any principal of (including, without limitation, any premium, if any, on) any Security when the same becomes due and payable (whether at maturity, upon redemption, on a Change of Control Purchase Date or otherwise), whether or not such payment shall be prohibited by the provisions of Article 5 hereof;

    (3) the Company fails to comply with any of its other agreements contained in the Securities or this Indenture and the default continues and is not cured or waived for the period and after the notice specified below;

    (4) any indebtedness under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company or any Significant Subsidiary (all or substantially all of the outstanding voting securities of which are owned, directly or indirectly, by the Company) or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or any Significant Subsidiary (all or substantially all of the outstanding voting securities of which are owned, directly or indirectly, by the Company) with a principal amount then outstanding in excess of U.S. $35,000,000, whether such indebtedness now exists or shall hereafter be created, is not paid in full at final maturity thereof (either at its stated maturity or upon acceleration thereof), and such indebtedness is not discharged, or such acceleration is not cured, waived, rescinded or annulled, within a period of 60 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the outstanding Securities a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or cause such default to be cured or waived or such acceleration to be rescinded or annulled, and stating that such notice is a "Notice of Default" hereunder;

    (5) the Company or any Significant Subsidiary (all or substantially all of the outstanding voting securities of which are owned, directly or indirectly, by the Company), pursuant to or within the meaning of any Bankruptcy Law:

    (A) commences a voluntary case or proceeding;

    (B) consents to the entry of an order for relief against it in an involuntary case or proceeding;

    (C) consents to the appointment of a Custodian of it or for all or substantially all of its property; or

    (D) makes a general assignment for the benefit of its creditors; or

    (6) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

    (A) is for relief against the Company or such Significant Subsidiary in an involuntary case or proceeding;

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    (B) appoints a Custodian of the Company or such Significant Subsidiary or for all or substantially all of the property of the Company or such Significant Subsidiary; or

    (C) orders the liquidation of the Company or such Significant Subsidiary;

and in each case the order or decree remains unstayed and in effect for 60 consecutive days.

    The term "Bankruptcy Law" means Title 11 of the United States Code (or any successor thereto) or any similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law.

    A default under clause (3) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding notify the Company and the Trustee, in writing of the default, and the Company does not cure the default within 60 days after receipt of such notice. The notice given pursuant to this Section 8.1 must specify the default, demand that it be remedied and state that the notice is a "Notice of Default." When any default under this Section 8.1 is cured, it ceases.

    The Trustee shall not be charged with knowledge of any Event of Default unless written notice thereof shall have been given to a Responsible Officer at the Corporate Trust Office of the Trustee by the Company, a Paying Agent, any Holder or any agent of any Holder.

    SECTION 8.2.  ACCELERATION.

    If an Event of Default (other than an Event of Default specified in clauses (5) or (6) of Section 8.1) occurs and is continuing, the Trustee may, by notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding may, by notice to the Company and the Trustee, declare all unpaid principal to the date of acceleration on the Securities then outstanding (if not then due and payable) to be due and payable upon any such declaration, and the same shall become and be immediately due and payable. If an Event of Default specified in clauses (5) or (6) of Section 8.1 occurs, all unpaid principal of the Securities then outstanding shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. Any payments by the Company on the Securities following any such acceleration will be subject to the subordination provisions of Article 5 to the extent provided therein. The Holders of a majority in aggregate principal amount of the Securities then outstanding by notice to the Trustee and the Company in writing may rescind an acceleration and its consequences and waive such defaults if (a) all existing Events of Default, other than the nonpayment of the principal of the Securities which has become due solely by such declaration of acceleration, have been cured or waived; (b) to the extent the payment of such interest is lawful, interest (calculated at the rate per annum borne by the Securities) on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid or deposited by the Trustee; (c) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction; and (d) all payments due to the Trustee and any predecessor Trustee under Section 9.7 have been made. No such rescission shall affect any subsequent default or impair any right consequent thereto.

    SECTION 8.3.  OTHER REMEDIES.

    If an Event of Default occurs and is continuing, the Trustee may, but shall not be obligated to, pursue any available remedy by proceeding at law or in equity to collect the payment of the principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture.

    The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or

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remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law.

    SECTION 8.4.  WAIVER OF DEFAULTS AND EVENTS OF DEFAULT.

    Subject to Sections 8.7 and 11.2, the Holders of a majority in aggregate principal amount of the Securities then outstanding by notice to the Trustee may waive an existing default or Event of Default and its consequence, except a default or Event of Default in the payment of the principal of, premium, if any, or interest on any Security, a failure by the Company to convert any Securities into Common Stock or any default or Event of Default in respect of any provision of this Indenture or the Securities which, under Section 11.2, cannot be modified or amended without the consent of the Holder of each Security affected. When a default or Event of Default is waived, it is cured and ceases.

    SECTION 8.5.  CONTROL BY MAJORITY.

    The Holders of a majority in aggregate principal amount of the Securities then outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of another Holder not taking part in such direction or the Trustee, or that may involve the Trustee in personal liability if the Trustee shall have reasonable grounds for believing that adequate indemnity against such liability is not reasonably assured to it; provided, however, that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction.

    SECTION 8.6.  LIMITATIONS ON SUITS.

    A Holder may not pursue any remedy with respect to this Indenture or the Securities (except actions for payment of overdue principal or interest or for the conversion of the Securities pursuant to Article 4) unless:

    (1) the Holder gives to the Trustee written notice of a continuing Event of Default;

    (2) the Holders of at least 25% in aggregate principal amount of the then outstanding Securities make a written request to the Trustee to pursue the remedy;

    (3) such Holder or Holders offer to the Trustee reasonable indemnity to the Trustee against any loss, liability or expense;

    (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and

    (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in aggregate principal amount of the Securities then outstanding.

    A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over such other Securityholder.

    SECTION 8.7.  RIGHTS OF HOLDERS TO RECEIVE PAYMENT AND TO CONVERT.

    Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of the principal of and interest on the Security, on or after the respective due dates expressed in the Security and this Indenture, to convert such Security in accordance with Article 4 and to bring suit for the enforcement of any such payment on or after such respective dates or the right to convert, is absolute and unconditional and shall not be impaired or affected without the consent of the Holder.

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    SECTION 8.8.  COLLECTION SUIT BY TRUSTEE.

    If an Event of Default in the payment of principal or interest specified in clause (1) or (2) of Section 8.1 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or another obligor on the Securities for the whole amount of principal and accrued interest remaining unpaid, together with, to the extent that payment of such interest is lawful, interest on overdue principal and on overdue installments of interest, in each case at the rate per annum borne by the Securities and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

    SECTION 8.9.  TRUSTEE MAY FILE PROOFS OF CLAIM.

    The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents, advisors and counsel) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor on the Securities), its creditors or its property and shall be entitled and empowered to collect and receive any money or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents, advisors and counsel, and any other amounts due the Trustee under Section 9.7, and to the extent that such payment of the reasonable compensation, expenses, disbursements and advances in any such proceedings shall be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other property which the Holders may be entitled to receive in such proceedings, whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to, or, on behalf of any Holder, to authorize, accept or adopt any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

    SECTION 8.10.  PRIORITIES.

    If the Trustee collects any money pursuant to this Article 8, it shall pay out the money in the following order:

    First, to the Trustee for amounts due under Section 9.7;

    Second, to the holders of Senior Indebtedness to the extent required by Article 5;

    Third, to Holders for amounts due and unpaid on the Securities for principal and interest (including Additional Interest, if any), ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest (including Additional Interest, if any), respectively; and

    Fourth, the balance, if any, to the Company.

    The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 8.10.

    SECTION 8.11.  UNDERTAKING FOR COSTS.

    In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the

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filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 8.11 does not apply to a suit made by the Trustee, a suit by a Holder pursuant to Section 8.7, or a suit by Holders of more than 10% in aggregate principal amount of the Securities then outstanding.

ARTICLE 9
TRUSTEE

    SECTION 9.1.  DUTIES OF TRUSTEE.

    (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

    (b) Except during the continuance of an Event of Default:

    (1) the Trustee need perform only those duties as are specifically set forth in this Indenture and no others; and

    (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. The Trustee, however, shall examine any certificates and opinions which by any provision hereof are specifically required to be delivered to the Trustee to determine whether or not they conform to the requirements of this Indenture.

    (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

    (1) this paragraph does not limit the effect of subsection (b) of this Section 9.1;

    (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

    (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 8.5.

    (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if the Trustee has reasonable grounds for believing that repayment of such funds or adequate indemnity against the risk or liability is not reasonably assured.

    (e) Every provision of this Indenture that in any way relates to the Trustee is subject to subsections (a), (b), (c) and (d) of this Section 9.1.

    (f)  The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

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    SECTION 9.2.  RIGHTS OF TRUSTEE.

    Subject to Section 9.1:

    (a) The Trustee may rely conclusively on any document reasonably believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document.

    (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Section 12.4(b). The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion.

    (c) The Trustee may act through its agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

    (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers under the Indenture.

    (e) The Trustee may consult with counsel of its selection and reasonably acceptable to the Company, and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection in respect of any such action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.

    (f)  The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.

    (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.

    (h) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office, and such notice references the Securities and this Indenture.

    (i)  The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder.

    SECTION 9.3.  INDIVIDUAL RIGHTS OF TRUSTEE.

    The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or an Affiliate of the Company with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 9.10 and 9.11. Subject to the limitations imposed by the Trust Indenture Act, nothing in this Indenture shall prohibit the Trustee from becoming and acting as Trustee under other indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding in the same manner as if it were not Trustee hereunder.

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    SECTION 9.4.  TRUSTEE'S DISCLAIMER.

    The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement in the Securities other than its certificate of authentication.

    SECTION 9.5.  NOTICE OF DEFAULT OR EVENTS OF DEFAULT.

    If a default or an Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the default or Event of Default within 90 days after it occurs. However, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding notice is in the interests of Securityholders, except in the case of a default or an Event of Default in payment of the principal of or interest on any Security.

    SECTION 9.6.  REPORTS BY TRUSTEE TO HOLDERS.

    If such report is required by TIA Section 313, within 60 days after each March 15, beginning with the March 15 following the date of this Indenture, the Trustee shall mail to each Securityholder a brief report dated as of such March 15 that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b)(2) and (c).

    A copy of each report at the time of its mailing to Securityholders shall be mailed to the Company and filed with the SEC and each stock exchange, if any, on which the Securities are listed. The Company shall notify the Trustee whenever the Securities become listed on any stock exchange or listed or admitted to trading on any quotation system and any changes in the stock exchanges or quotation systems on which the Securities are listed or admitted to trading and of any delisting thereof.

    SECTION 9.7.  COMPENSATION AND INDEMNITY.

    (a) The Company shall pay to the Trustee from time to time such compensation (as agreed to from time to time by the Company and the Trustee in writing) for its services (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust). The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it in accordance with the Indenture. Such expenses may include the reasonable compensation, disbursements and expenses of the Trustee's agents, advisors and counsel.

    (b) The Company shall indemnify the Trustee or any predecessor Trustee (which for purposes of this Section 9.7 shall include its officers, directors, employees and agents) for, and hold it harmless against, any and all loss, liability or expense including taxes (other than taxes based upon, measured by or determined by the income of the Trustee) and reasonable legal fees and expenses, incurred by it in connection with the acceptance or administration of its duties under this Indenture or any action or failure to act as authorized or within the discretion or rights or powers conferred upon the Trustee hereunder including the reasonable costs and expenses of the Trustee and its counsel in defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. The Company need not pay for any settlement without its written consent, which shall not be unreasonably withheld.

    The Company need not reimburse the Trustee for any expense or indemnify it against any loss or liability incurred by it resulting from its gross negligence, willful misconduct, recklessness or bad faith.

    To secure the Company's payment obligations in this Section 9.7, the Trustee shall have a senior claim to which the Securities are hereby made subordinate on all money or property held or collected by the Trustee, except such money or property held in trust pursuant to Article 10 to pay the principal

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of and interest on the Securities. The obligations of the Company under this Section 9.7 shall survive the satisfaction and discharge of this Indenture or the resignation or removal of the Trustee.

    When the Trustee incurs expenses or renders services after an Event of Default specified in clauses (5) or (6) of Section 8.1 occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. The provisions of this Section shall survive the termination of this Indenture.

    SECTION 9.8.  REPLACEMENT OF TRUSTEE.

    The Trustee may resign by so notifying the Company. The Holders of a majority in aggregate principal amount of the Securities then outstanding may remove the Trustee by so notifying the Trustee and may, with the Company's written consent, appoint a successor Trustee. The Company may remove the Trustee if:

    (1) the Trustee fails to comply with Section 9.10;

    (2) the Trustee is adjudged a bankrupt or an insolvent;

    (3) a receiver or other public officer takes charge of the Trustee or its property; or

    (4) the Trustee becomes incapable of acting.

    If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. The resignation or removal of a Trustee shall not be effective until a successor Trustee shall have delivered the written acceptance of its appointment as described below.

    If a successor Trustee does not take office within 45 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of 10% in principal amount of the Securities then outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee at the expense of the Company.

    If the Trustee fails to comply with Section 9.10, the Company may remove the Trustee and any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

    A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee and be released from its obligations (exclusive of any liabilities that the retiring Trustee may have incurred while acting as Trustee) hereunder, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Holder.

    A retiring Trustee shall not be liable for the acts or omissions of any successor Trustee after its succession.

    Notwithstanding replacement of the Trustee pursuant to this Section 9.8, the Company's obligations under Section 9.7 shall continue for the benefit of the retiring Trustee.

    SECTION 9.9.  SUCCESSOR TRUSTEE BY MERGER, ETC.

    If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust assets (including the administration of this Indenture) to, another corporation, the resulting, surviving or transferee corporation, without any further act, shall be the successor Trustee, provided such transferee corporation shall qualify and be eligible under Section 9.10. Such successor Trustee shall promptly mail notice of its succession to the Company and each Holder.

48

    SECTION 9.10.  ELIGIBILITY; DISQUALIFICATION.

    The Trustee shall always satisfy the requirements of paragraphs (1), (2) and (5) of TIA Section 310(a). The Trustee (or its parent holding company) shall have a combined capital and surplus of at least $50,000,000. If at any time the Trustee shall cease to satisfy any such requirements, it shall resign immediately in the manner and with the effect specified in this Article 9. The Trustee shall be subject to the provisions of TIA Section 310(b). Nothing herein shall prevent the Trustee from filing with the SEC the application referred to in the penultimate paragraph of TIA Section 310(b).

    SECTION 9.11.  PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.

    The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein.

ARTICLE 10
SATISFACTION AND DISCHARGE OF INDENTURE

    SECTION 10.1.  SATISFACTION AND DISCHARGE OF INDENTURE.

    This Indenture shall cease to be of further effect (except as to any surviving rights of conversion, registration of transfer or exchange of Securities herein expressly provided for and except as further provided below), and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when

    (1) either

    (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.7 and (ii) Securities for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company as provided in Section 10.3) have been delivered to the Trustee for cancellation; or

    (B) all such Securities not theretofore delivered to the Trustee for cancellation

    (i)  have become due and payable, or

    (ii) will become due and payable at the Final Maturity Date within one year, or

    (iii) are to be called for redemption within one year under arrangements reasonably satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company,

and the Company, in the case of clause (i), (ii) or (iii) above, has irrevocably deposited or caused to be irrevocably deposited with the Trustee or a Paying Agent (other than the Company or any of its Affiliates) as trust funds in trust for the purpose cash in an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and interest (including Additional Interest, if any) to the date of such deposit (in the case of Securities which have become due and payable) or to the Final Maturity Date or Redemption Date, as the case may be;

    (2) `the Company has paid or caused to be paid all other sums payable hereunder by the Company; and

    (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.

49

    Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 9.7 shall survive and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the provisions of Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.12, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13 and 12.5, Article 4, Article 9, the last paragraph of Section 6.2 and this Article 10, shall survive until the Securities have been paid in full.

    SECTION 10.2.  APPLICATION OF TRUST MONEY.

    Subject to the provisions of Section 10.3, the Trustee or a Paying Agent shall hold in trust, for the benefit of the Holders, all money deposited with it pursuant to Section 10.1 and shall apply the deposited money in accordance with this Indenture and the Securities to the payment of the principal of and interest on the Securities. Money so held in trust shall not be subject to the subordination provisions of Article 5.

    SECTION 10.3.  REPAYMENT TO COMPANY.

    The Trustee and each Paying Agent shall promptly pay to the Company upon request any excess money (i) deposited with them pursuant to Section 10.1 and (ii) held by them at any time.

    The Trustee and each Paying Agent shall pay to the Company any money held by them for the payment of principal or interest that remains unclaimed for a period ending on the earlier of ten Business Days prior to the date such money would escheat to the state or two years after a right to such money has matured; provided, however, that the Trustee or such Paying Agent, before being required to make any such payment, may at the expense of the Company cause to be mailed to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein, which shall be at least 30 days from the date of such mailing or, if an address of any Holder is unknown, publish once in a newspaper customarily published on a Business Day of global circulation in each place of payment notice, any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Holders entitled to money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person.

    SECTION 10.4.  REINSTATEMENT.

    If the Trustee or any Paying Agent is unable to apply any money in accordance with Section 10.2 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 10.1 until such time as the Trustee or such Paying Agent is permitted to apply all such money in accordance with Section 10.2; provided, however, that if the Company has made any payment of the principal of or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive any such payment from the money held by the Trustee or such Paying Agent in trust from which the Company has been discharged or released pursuant to Section 10.1.

ARTICLE 11
AMENDMENTS, MODIFICATIONS AND SUPPLEMENTS

    SECTION 11.1.  WITHOUT CONSENT OF HOLDERS.

    The Company and the Trustee may amend, modify or supplement this Indenture or the Securities without notice to or consent of any Securityholder:

    (a) to comply with Sections 4.11 and 7.1;

    (b) to provide for uncertificated Securities in addition to or in place of Certificated Securities;

50

    (c) to cure any ambiguity, defect or inconsistency;

    (d) to make any other change that does not adversely affect the rights of any Securityholder;

    (e) to comply with the provisions of the TIA;

    (f)  to add to the covenants of the Company for the equal and ratable benefit of the Securityholders or to surrender any right, power or option conferred upon the Company; or

    (g) to appoint a successor Trustee.

    SECTION 11.2.  WITH CONSENT OF HOLDERS.

    The Company and the Trustee may amend or supplement this Indenture or the Securities with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding. However, notwithstanding the foregoing but subject to Section 11.4, without the written consent of each Securityholder affected, an amendment, modification or supplement may not:

    (a) change the stated maturity of the principal of, or interest on, any Security;

    (b) reduce the principal amount of, or any premium or interest on, any Security;

    (c) reduce the amount of principal payable upon acceleration of the maturity of any Security;

    (d) change the place or currency of payment of principal of, or any premium or interest on, any Security;

    (e) impair the right to institute suit for the enforcement of any payment on, or with respect to, any Security;

    (f)  modify the provisions with respect to the purchase right of Holders pursuant to Article 3 upon a Change in Control in a manner adverse to Holders;

    (g) modify the subordination provisions of Article 5 in a manner materially adverse to the Holders of Securities;

    (h) adversely affect the right of Holders to convert Securities other than as provided in or under Article 4 of this Indenture;

    (i)  reduce the percentage of the aggregate principal amount of the outstanding Securities whose Holders must consent to a modification or amendment;

    (j)  reduce the percentage of the aggregate principal amount of the outstanding Securities necessary for the waiver of compliance with certain provisions of this Indenture or the waiver of certain defaults under this Indenture; and

    (k) modify any of the provisions of this Section or Section 8.4, except to increase any such percentage or to provide that certain provisions of this Indenture cannot be modified or waived without the consent of the Holder of each outstanding Security affected thereby.

    It shall not be necessary for the consent of the Holders under this Section 11.2 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof.

    After an amendment, supplement or waiver under this Section 11.2 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver. An amendment or supplement under this Section 11.2 or under Section 11.1 may not make any change

51

that adversely affects the rights under Article 5 of any holder of an issue of Senior Indebtedness unless the holders of that issue, pursuant to its terms, consent to the change.

    SECTION 11.3.  COMPLIANCE WITH TRUST INDENTURE ACT.

    Every amendment to or supplement of this Indenture or the Securities shall comply with the TIA as in effect at the date of such amendment or supplement.

    SECTION 11.4.  REVOCATION AND EFFECT OF CONSENTS.

    Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to its Security or portion of a Security if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective.

    After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder, unless it makes a change described in any of clauses (a) through (k) of Section 11.2. In that case the amendment, supplement or waiver shall bind each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security.

    SECTION 11.5.  NOTATION ON OR EXCHANGE OF SECURITIES.

    If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms.

    SECTION 11.6.  TRUSTEE TO SIGN AMENDMENTS, ETC.  The Trustee shall sign any amendment or supplemental indenture authorized pursuant to this Article 11 if the amendment or supplemental indenture does not adversely affect the rights, duties, liabilities or immunities of the Trustee or any Agent (when the Trustee also serves as Agent hereunder). If it does, the Trustee may, in its sole discretion, but need not sign it. In signing or refusing to sign such amendment or supplemental indenture, the Trustee shall be entitled to receive and, subject to Section 9.1, shall be fully protected in relying upon, an Opinion of Counsel stating that such amendment or supplemental indenture is authorized or permitted by this Indenture. The Company may not sign an amendment or supplement indenture until the Board of Directors approves it.

    SECTION 11.7.  EFFECT OF SUPPLEMENTAL INDENTURES.

    Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

ARTICLE 12
MISCELLANEOUS

    SECTION 12.1.  TRUST INDENTURE ACT CONTROLS.

    If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by any of Sections 310 to 317, inclusive, of the TIA through operation of Section 318(c) thereof, such imposed duties shall control.

52

    SECTION 12.2.  NOTICES.

    Any demand, authorization notice, request, consent or communication shall be given in writing and delivered in person or mailed by first-class mail, postage prepaid, addressed as follows or transmitted by facsimile transmission (confirmed by delivery in person or mail by first-class mail, postage prepaid, or by guaranteed overnight courier) to the following facsimile numbers:

If to the Company, to:

Wind River Systems, Inc.
500 Wind River Way
Alameda, California 94501
Attention: Vice President and General Counsel
Facsimile No.: (510) 749-2944

and to:

CT Corporation System
1633 Broadway
New York, NY 10019

If to the Trustee, to:

Bankers Trust Company
Corporate Trust and Agency Services
Four Albany Street
New York, New York 10006
Attention: Dorothy Robinson
Facsimile No.: (201) 593-6443

    Such notices or communications shall be effective when received.

    The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

    Any notice or communication mailed to a Securityholder shall be mailed by first-class mail or delivered by an overnight delivery service to it at its address shown on the register kept by the Primary Registrar.

    Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication to a Securityholder is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

    SECTION 12.3.  COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.

    Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and any other person shall have the protection of TIA Section 312(c).

    SECTION 12.4.  CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.

    (a) Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee at the request of the Trustee:

    (1) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent (including any covenants, compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with; and

53

    (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent (including any covenants, compliance with which constitutes a condition precedent) have been complied with.

    (b) Each Officers' Certificate and Opinion of Counsel with respect to compliance with a condition or covenant provided for in this Indenture shall include:

    (1) a statement that the person making such certificate or opinion has read such covenant or condition;

    (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

    (3) a statement that, in the opinion of such person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and

    (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with;

provided, however, that with respect to matters of fact an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials.

    SECTION 12.5.  RECORD DATE FOR VOTE OR CONSENT OF SECURITYHOLDERS.

    The Company (or, in the event deposits have been made pursuant to Section 10.1, the Trustee) may set a record date for purposes of determining the identity of Holders entitled to vote, waive or consent to any action by such vote, waiver or consent authorized or permitted under this Indenture, which record date shall not be more than thirty (30) days prior to the date of the commencement of solicitation of such action. Notwithstanding the provisions of Section 11.4, if a record date is fixed, those persons who were Holders of Securities at the close of business on such record date (or their duly designated proxies), and only those persons, shall be entitled to take such action by vote or consent or to revoke any vote or consent previously given, whether or not such persons continue to be Holders after such record date.

    SECTION 12.6.  RULES BY TRUSTEE, PAYING AGENT, REGISTRAR AND CONVERSION AGENT.

    The Trustee may make reasonable rules (not inconsistent with the terms of this Indenture) for action by or at a meeting of Holders. Any Registrar, Paying Agent or Conversion Agent may make reasonable rules for its functions.

    SECTION 12.7.  LEGAL HOLIDAYS.

    A "Legal Holiday" is a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York, Alameda, California and the state in which the Corporate Trust Office is located are not required to be open. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected.

    SECTION 12.8.  GOVERNING LAW AND SUBMISSION TO JURISDICTION.

    This Indenture and the Securities shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to principles of conflicts of laws.

    To the extent permissible by law, the Company hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in the City of New York in any suit or

54

proceeding arising out of or relating to this Indenture and the Securities or the transactions contemplated hereby.

    SECTION 12.9.  NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.

    This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or a Subsidiary of the Company. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

    SECTION 12.10.  NO RECOURSE AGAINST OTHERS.

    All liability described in paragraph 18 of the Securities of any director, officer, employee or shareholder, as such, of the Company is waived and released.

    SECTION 12.11.  SUCCESSORS.

    All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor.

    SECTION 12.12.  MULTIPLE COUNTERPARTS.

    The parties may sign multiple counterparts of this Indenture. Each signed counterpart shall be deemed an original, but all of them together represent the same agreement.

    SECTION 12.13.  SEPARABILITY.

    In case any provisions in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

    SECTION 12.14.  TABLE OF CONTENTS, HEADINGS, ETC.  The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

[SIGNATURE PAGE FOLLOWS]

55

    IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the date and year first above written.

WIND RIVER SYSTEMS, INC.
By:	Name: Title:
BANKERS TRUST COMPANY, AS TRUSTEE
By:	Name: Title:

56

EXHIBIT A
[FORM OF FACE OF NOTE]

    [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO WIND RIVER SYSTEMS INC. (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND, UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]¹

¹

This paragraph should be included only if the Security is a Global Security.

    [THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY AND COMMON STOCK ISSUABLE UPON CONVERSION THEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

    THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.]²

²

This paragraph to be included only if the Security is a Restricted Security.

A–1

    [THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A REGISTRATION RIGHTS AGREEMENT (AS SUCH TERM IS DEFINED IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF) AND, BY ITS ACCEPTANCE HEREOF, AGREES TO BE BOUND BY AND TO COMPLY WITH THE PROVISIONS OF SUCH REGISTRATION RIGHTS AGREEMENT.]³

³

This paragraph to be included only if the Security is a Transfer Restricted Security.

A–2

WIND RIVER SYSTEMS, INC.

CUSIP: R-      

3³/4% CONVERTIBLE SUBORDINATED NOTES DUE DECEMBER 15, 2006

    Wind River Systems, Inc., a Delaware corporation (the "Company", which term shall include any successor corporation under the Indenture referred to on the reverse hereof), promises to pay to                        , or registered assigns, the principal sum of            Dollars ($            ) on December 15, 2006 [or such greater or lesser amount as is indicated on the Schedule of Exchanges of Notes on the other side of this Note].⁴

⁴

This phrase should be included only if the Security is a Global Security.

Interest Payment Dates: June 15 and December 15

Record Dates: June 1 and December 1

    This Note is convertible as specified on the other side of this Note. Additional provisions of this Note are set forth on the other side of this Note.

SIGNATURE PAGE FOLLOWS

A–3

    IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

WIND RIVER SYSTEMS, INC.
By:	/s/ MICHAEL ZELLNER Name: Michael Zellner Title: Vice President, Finance and Chief Financial Officer

Dated:

Trustee's Certificate of Authentication: This is one of the
Securities referred to in the within-mentioned Indenture.

BANKERS TRUST COMPANY,
as Trustee

/s/ WANDA CAMACHO Authorized Signatory

By: Wanda Camacho

A–4

[FORM OF REVERSE SIDE OF NOTE]

WIND RIVER SYSTEMS, INC.
3³/4% CONVERTIBLE SUBORDINATED NOTES DUE DECEMBER 15, 2006

1.  INTEREST

    Wind River Systems, Inc., a Delaware corporation (the "Company", which term shall include any successor corporation under the Indenture hereinafter referred to), promises to pay interest on the principal amount of this Note at the rate of 3³/4% per annum. The Company shall pay interest semiannually on June 15 and December 15 of each year, commencing June 15, 2002. Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from December 15, 2001; provided, however, that if there is not an existing default in the payment of interest and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding interest payment date, interest shall accrue from such interest payment date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Any reference herein to interest accrued or payable as of any date shall include any Additional Interest accrued or payable on such date as provided in the Registration Rights Agreement.

2.  METHOD OF PAYMENT

    The Company shall pay interest on this Note (except defaulted interest) to the person who is the Holder of this Note at the close of business on June 1 or December 1, as the case may be, next preceding the related interest payment date. The Holder must surrender this Note to a Paying Agent to collect payment of principal. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company may, however, pay principal and interest in respect of any Certificated Security by check or wire payable in such money; provided, however, that a Holder of a Certificated Security with an aggregate principal amount in excess of $2,000,000 will be paid by wire transfer in immediately available funds at the election of such Holder if such Holder has provided wire transfer instructions to the Company. The Company may mail an interest check to the Holder's registered address. Notwithstanding the foregoing, so long as this Note is registered in the name of a Depositary or its nominee, all payments hereon shall be made by wire transfer of immediately available funds to the account of the Depositary or its nominee.

3.  PAYING AGENT, REGISTRAR AND CONVERSION AGENT

    Initially, Bankers Trust Company (the "Trustee", which term shall include any successor trustee under the Indenture hereinafter referred to) will act as Paying Agent, Registrar and Conversion Agent. The Company may change any Paying Agent, Registrar or Conversion Agent without notice to the Holder. The Company or any of its Subsidiaries may, subject to certain limitations set forth in the Indenture, act as Paying Agent or Registrar.

4.  INDENTURE, LIMITATIONS

    This Note is one of a duly authorized issue of Securities of the Company designated as its 3³/4% Convertible Subordinated Notes Due December 15, 2006 (the "Notes"), issued under an Indenture dated as of December 10, 2001 (together with any supplemental indentures thereto, the "Indenture"), between the Company and the Trustee. The terms of this Note include those stated in the Indenture and those required by or made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended, as in effect on the date of the Indenture. This Note is subject to all such terms, and the Holder of this Note is referred to the Indenture and said Act for a statement of them.

A–5

    The Notes are subordinated unsecured obligations of the Company limited to $150,000,000 aggregate principal amount. The Indenture does not limit other debt of the Company, secured or unsecured, including Senior Indebtedness.

5.  OPTIONAL AND PROVISIONAL REDEMPTION

    The Notes are subject to redemption, at any time on or after December 15, 2004, as a whole or from time to time in part, at the election of the Company. The Redemption Prices (expressed as percentages of the principal amount) are as follows for Notes redeemed during the periods set forth below:

Period	Redemption Price
December 15, 2004 through December 14, 2005	100.75%
December 15, 2005 and thereafter	100.00%

in each case together with accrued interest up to but not including the Redemption Date; provided that if the Redemption Date falls after an interest payment record date and on or before an interest payment date, then the interest will be payable to the Holders in whose names the Notes are registered at the close of business on the relevant interest payment record dates.

    The Securities may be redeemed at the election of the Company, as a whole or in parts from time to time, at any time prior to December 15, 2004 (a "Provisional Redemption"), at a Redemption Price equal to $1,000 per $1,000 principal amount of the Notes redeemed (such amount, together with the Make-Whole Payment described below, the "Provisional Redemption Price"), on the date of redemption (the "Provisional Redemption Date") if (i) the closing price of the Common Stock on the NNM (or other United States national securities exchange where the Company's Common Stock is traded) has exceeded 150% of the Conversion Price for at least 20 Trading Days within a period of any 30 consecutive Trading Days ending on the Trading Day prior to the date of mailing of the provisional notice of redemption (the "Notice Date"), and (ii) a shelf registration statement covering resales of the Notes and the Common Stock issuable upon conversion thereof is effective and is expected to remain effective and available for use for the 30 days following the Provisional Redemption Date, unless registration is no longer required.

    Upon any such Provisional Redemption, the Company shall make an additional payment, (the "Make-Whole Payment") to holders of the Notes called for redemption, including those Notes converted into Common Stock between the Notice Date and the Provisional Redemption Date, in an amount equal to the total value of the aggregate amount of interest that would have been payable on the Securities from the last day through which interest was paid on the Notes (or December 10, 2001 if no interest has been paid) through December 15, 2004. The Company may make these Make-Whole Payments, at its option, either in cash or in Common Stock or a combination thereof. Payments made in Common Stock will be valued at 97% of the average closing prices of Common Stock on the NNM (or other United States national securities exchange where the Company's Common Stock is traded) for the five Trading Days ending on the day prior to the Provisional Redemption Date.

    No sinking fund is provided for the Notes.

6.  NOTICE OF REDEMPTION

    Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part, but only in whole multiples of $1,000. On and after the Redemption Date, subject to the deposit with the Paying Agent of funds sufficient to pay the Redemption Price plus accrued interest, if any, accrued to, but excluding, the Redemption Date, interest shall cease to accrue on Notes or portions of them called for redemption.

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7.  PURCHASE OF NOTES AT OPTION OF HOLDER UPON A CHANGE IN CONTROL

    At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase all or any part specified by the Holder (so long as the principal amount of such part is $1,000 or an integral multiple of $1,000 in excess thereof) of the Notes held by such Holder on the date that is 35 Business Days after the occurrence of a Change in Control, at a purchase price equal to 100% of the principal amount thereof together with accrued interest up to, but excluding, the Change in Control Purchase Date. Subject to the conditions of Section 3.8 of the Indenture, the Company may, at its option, pay the Change in Control Purchase Price in cash, in Common Stock or Common Stock of the parent company to the Company or in a combination of cash and such Common Stock, such Common Stock being valued at 97% of the average of the closing prices on the NNM (or other United States national securities exchange on which such Common Stock is traded) for the five Trading Days immediately before and including the Trading Day prior to the Repurchase Date. The Holder shall have the right to withdraw any Change in Control Purchase Notice (in whole or in a portion thereof that is $1,000 or an integral multiple of $1,000 in excess thereof) at any time prior to the close of business on the second Business Day next preceding the Change in Control Purchase Date by delivering a written notice of withdrawal to the Paying Agent in accordance with the terms of the Indenture.

8.  CONVERSION

    A Holder of a Note may convert the principal amount of such Note (or any portion thereof equal to $1,000 or any integral multiple of $1,000 in excess thereof) into shares of Common Stock at any time prior to the close of business on December 15, 2006; provided, however, that if the Note is called for redemption or subject to purchase upon a Change in Control, the conversion right will terminate at the close of business on the second Business Day immediately preceding the Redemption Date or the Change in Control Purchase Date, as the case may be, for such Note or such earlier date as the Holder presents such Note for redemption or purchase (unless the Company shall default in making the redemption payment or Change in Control Purchase Price, as the case may be, when due, in which case the conversion right shall terminate at the close of business on the date such default is cured and such Note is redeemed or purchased).

    The initial Conversion Price is $24.115 per share, subject to adjustment under certain circumstances as provided in the Indenture. The number of shares of Common Stock issuable upon conversion of a Note is determined by dividing the principal amount of the Note or portion thereof converted by the Conversion Price in effect on the Conversion Date. No fractional shares will be issued upon conversion; in lieu thereof, an amount will be paid in cash based upon the Closing Price (as defined in the Indenture) of the Common Stock on the Trading Day immediately prior to the Conversion Date.

    To convert a Note, a Holder must (a) complete and manually sign the conversion notice set forth below and deliver such notice to a Conversion Agent, (b) surrender the Note to a Conversion Agent, (c) furnish appropriate endorsements and transfer documents if required by a Registrar or a Conversion Agent, (d) furnish such other documents, including such representations and agreements, as, in the opinion of counsel to the Company, may be required by law, and (e) pay any transfer or similar tax, if required. Notes so surrendered for conversion (in whole or in part) during the period from the close of business on any regular record date to the opening of business on the next succeeding interest payment date (excluding Notes or portions thereof called for redemption or subject to purchase upon a Change in Control on a Redemption Date or Change in Control Purchase Date, as the case may be, during the period beginning at the close of business on a regular record date and ending at the opening of business on the first Business Day after the next succeeding interest payment date, or if such interest payment date is not a Business Day, the second such Business Day) shall also be accompanied by payment in funds acceptable to the Company of an amount equal to the interest

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payable on such interest payment date on the principal amount of such Note then being converted, and such interest shall be payable to such registered Holder notwithstanding the conversion of such Note, subject to the provisions of this Indenture relating to the payment of defaulted interest by the Company. If the Company defaults in the payment of interest payable on such interest payment date, the Company shall promptly repay such funds to such Holder. A Holder may convert a portion of a Note equal to $1,000 or any integral multiple thereof.

    A Note in respect of which a Holder had delivered a Change in Control Purchase Notice exercising the option of such Holder to require the Company to purchase such Note may be converted only if the Change in Control Purchase Notice is withdrawn in accordance with the terms of the Indenture.

9.  CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION

    Any Notes called for redemption, unless surrendered for conversion before the close of business on the second Business Day immediately preceding the Redemption Date, may be deemed to be purchased from the Holders of such Notes at an amount not less than the Redemption Price, together with accrued interest, if any, to, but not including, the Redemption Date, by one or more investment bankers or other purchasers who may agree with the Company to purchase such Notes from the Holders, to convert them into Common Stock of the Company and to make payment for such Notes to the Paying Agent in trust for such Holders.

10. SUBORDINATION

    The indebtedness evidenced by the Notes is, to the extent and in the manner provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company. Any Holder by accepting this Note agrees to and shall be bound by such subordination provisions and authorizes the Trustee to give them effect. In addition to all other rights of Senior Indebtedness described in the Indenture, the Senior Indebtedness shall continue to be Senior Indebtedness and entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any terms of any instrument relating to the Senior Indebtedness or any extension or renewal of the Senior Indebtedness.

11. DENOMINATIONS, TRANSFER, EXCHANGE

    The Notes are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. A Holder may register the transfer of or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes or other governmental charges that may be imposed in relation thereto by law or permitted by the Indenture.

12. PERSONS DEEMED OWNERS

    The Holder of a Note may be treated as the owner of it for all purposes.

13. UNCLAIMED MONEY

    If money for the payment of principal or interest remains unclaimed for a period ending on the earlier of the date that is ten Business Days prior to the date such money would escheat to the state or two years, the Trustee or Paying Agent will pay the money back to the Company at its written request, subject to applicable unclaimed property law. After that, Holders entitled to money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person.

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14. AMENDMENT, SUPPLEMENT AND WAIVER

    Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding, and an existing default or Event of Default and its consequence or compliance with any provision of the Indenture or the Notes may be waived in a particular instance with the consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding. Without the consent of or notice to any Holder, the Company and the Trustee may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency or make any other change that does not adversely affect the rights of any Holder.

15. SUCCESSOR ENTITY

    When a successor corporation assumes all the obligations of its predecessor under the Notes and the Indenture in accordance with the terms and conditions of the Indenture, the predecessor corporation (except in certain circumstances specified in the Indenture) shall be released from those obligations.

16. DEFAULTS AND REMEDIES

    Under the Indenture, an Event of Default includes: (i) default for 30 days in payment of any interest or Additional Interest on any Notes, whether or not prohibited by the subordination provisions of the Indenture; (ii) default in payment of any principal (including, without limitation, any premium, if any) on the Notes when due, upon acceleration, redemption or otherwise, whether or not prohibited by the subordination provisions of the Indenture; (iii) failure by the Company for 60 days after written notice to it to comply with any of its other agreements contained in the Indenture or the Notes; (iv) default in the payment of certain indebtedness of the Company or a Significant Subsidiary and (v) certain events of bankruptcy, insolvency or reorganization of the Company or any Significant Subsidiary. If an Event of Default (other than as a result of certain events of bankruptcy, insolvency or reorganization of the Company) occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding may declare all unpaid principal to the date of acceleration on the Notes then outstanding to be due and payable immediately, all as and to the extent provided in the Indenture. If an Event of Default occurs as a result of certain events of bankruptcy, insolvency or reorganization of the Company, unpaid principal of the Notes then outstanding shall become due and payable immediately without any declaration or other act on the part of the Trustee or any Holder, all as and to the extent provided in the Indenture. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Notes then outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in their interests. The Company is required to file periodic reports with the Trustee as to the absence of default.

17. TRUSTEE DEALINGS WITH THE COMPANY

    The Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from and perform services for the Company or an Affiliate of the Company, and may otherwise deal with the Company or an Affiliate of the Company, as if it were not the Trustee.

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18. NO RECOURSE AGAINST OTHERS

    A director, officer, employee or shareholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture nor for any claim based on, in respect of or by reason of such obligations or their creation. The Holder of this Note by accepting this Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Note.

19. AUTHENTICATION

    This Note shall not be valid until the Trustee or an authenticating agent manually signs the certificate of authentication on the other side of this Note.

20. ABBREVIATIONS AND DEFINITIONS

    Customary abbreviations may be used in the name of the Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and UGMA (= Uniform Gifts to Minors Act).

    All terms defined in the Indenture and used in this Note but not specifically defined herein are defined in the Indenture and are used herein as so defined.

21. INDENTURE TO CONTROL; GOVERNING LAW

    In the case of any conflict between the provisions of this Note and the Indenture, the provisions of the Indenture shall control. This Note shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to principles of conflicts of law.

    To the extent permissible by law, the Company hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in the City of New York in any suit or proceeding arising out of or relating to the Indenture and this Note or the transactions contemplated thereby.

    The Company will furnish to any Holder, upon written request and without charge, a copy of the Indenture. Requests may be made to: Wind River Systems, Inc., 500 Wind River Way, Alameda, CA 94501, (510) 748-4100, Attention: Investor Relations.

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ASSIGNMENT FORM

    To assign this Note, fill in the form below:

    I or we assign and transfer this Note to

(Insert assignee's soc. sec. or tax I.D. no.)

(Print or type assignee's name, address and zip code)

and irrevocably appoint

agent to transfer this Note on the books of the Company. The agent may substitute another to act for him or her.

	Your Signature:
Date:	(Sign exactly as your name appears on the other side of this Note)
*Signature guaranteed by:
By:

*

The signature must be guaranteed by an institution which is a member of one of the following recognized signature guaranty programs: (i) the Securities Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other guaranty program acceptable to the Trustee.

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CONVERSION NOTICE

    To convert this Note into Common Stock of the Company, check the box:

    To convert only part of this Note, state the principal amount to be converted (must be $1,000 or a integral multiple of $1,000): $            .

    If you want the stock certificate made out in another person's name, fill in the form below:

(Insert assignee's soc. sec. or tax I.D. no.)

(Print or type assignee's name, address and zip code)

	Your Signature:
Date:	(Sign exactly as your name appears on the other side of this Note)
*Signature guaranteed by:
By:

*

The signature must be guaranteed by an institution which is a member of one of the following recognized signature guaranty programs: (i) the Securities Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other guaranty program acceptable to the Trustee.

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OPTION TO ELECT REPURCHASE
UPON A CHANGE OF CONTROL

    To: Wind River Systems, Inc.

    The undersigned registered owner of this Security hereby irrevocably acknowledges receipt of a notice from Wind River Systems, Inc. (the "Company") as to the occurrence of a Change in Control with respect to the Company and requests and instructs the Company to redeem the entire principal amount of this Security, or the portion thereof (which is $1,000 or an integral multiple thereof) below designated, in accordance with the terms of the Indenture referred to in this Security at the Change in Control Purchase Price, together with accrued interest to, but excluding, such date, to the registered Holder hereof.

    [If the price paid to purchase this Security will be paid in Common Stock, the undersigned requests the stock certificate to be made out in another person's name, as indicated below:

(Insert assignee's soc. sec. or tax I.D. no.)

(Print or type assignee's name, address and zip code)]⁵

Dated:
	Signature(s)
	Signature(s) must be guaranteed by a qualified guarantor institution with membership in an approved signature guarantee program pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934.
	Signature Guaranty
Principal amount to be redeemed (in an integral multiple of $1,000, if less than all):

    NOTICE: The signature to the foregoing Election must correspond to the Name as written upon the face of this Security in every particular, without alteration or any change whatsoever.

⁵

Include this section only if you would like to have the Common Stock issuable upon repurchase of the Securities issued in another person's name.

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SCHEDULE OF EXCHANGES OF NOTES⁶

    The following exchanges, redemptions, repurchases or conversions of a part of this global Note have been made:

Principal Amount
of this Global Note
Following Such
Decrease Date
of Exchange
(or Increase) Authorized
Signatory of
Securities
Custodian Amount of Decrease in
Principal Amount
of this Global Note Amount of
Increase in
Principal Amount
of this Global Note

⁶

This schedule should be included only if the Security is a Global Security.

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CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER OF TRANSFER RESTRICTED SECURITIES⁷

Re: 3³/4% Convertible Subordinated Notes Due December 15, 2006 (the "Notes") of Wind River Systems, Inc.

    This certificate relates to $      principal amount of Notes owned in (check applicable box)

            / /    book-entry or            / /    definitive form by              (the "Transferor").

    The Transferor has requested a Registrar or the Trustee to exchange or register the transfer of such Notes.

    In connection with such request and in respect of each such Note, the Transferor does hereby certify that the Transferor is familiar with transfer restrictions relating to the Notes as provided in Section 2.12 of the Indenture dated as of December 10, 2001 between Wind River Systems, Inc. and Bankers Trust Company, as trustee (the "Indenture"), and the transfer of such Note is being made pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act") (check applicable box) or the transfer or exchange, as the case may be, of such Note does not require registration under the Securities Act because (check applicable box):

/ /	Such Note is being transferred pursuant to an effective registration statement under the Securities Act.
/ /	Such Note is being acquired for the Transferor's own account, without transfer.
/ /	Such Note is being transferred to the Company or a Subsidiary (as defined in the Indenture) of the Company.
/ /	Such Note is being transferred to a person the Transferor reasonably believes is a "qualified institutional buyer" (as defined in Rule 144A or any successor provision thereto ("Rule 144A") under the Securities Act) that is purchasing for its own account or for the account of a "qualified institutional buyer", in each case to whom notice has been given that the transfer is being made in reliance on such Rule 144A, and in each case in reliance on Rule 144A.
/ /	Such Note is being transferred pursuant to and in compliance with an exemption from the registration requirements under the Securities Act in accordance with Rule 144 (or any successor thereto) ("Rule 144") under the Securities Act.

    Such Note is being transferred pursuant to and in compliance with an exemption from the registration requirements of the Securities Act (other than an exemption referred to above) and as a result of which such Note will, upon such transfer, cease to be a "restricted security" within the meaning of Rule 144 under the Securities Act.

    The Transferor acknowledges and agrees that, if the transferee will hold any such Notes in the form of beneficial interests in a global Note which is a "restricted security" within the meaning of Rule 144 under the Securities Act, then such transfer can only be made pursuant to Rule 144A under the Securities Act and such transferee must be a "qualified institutional buyer" (as defined in Rule 144A).

Date:
	(Insert Name of Transferor)

⁷

This certificate should only be included if this Security is a Transfer Restricted Security.

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QuickLinks

Exhibit 4.1

TABLE OF CONTENTS
CROSS-REFERENCE TABLE
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE
ARTICLE 2 THE SECURITIES
ARTICLE 3 REDEMPTION AND PURCHASES
ARTICLE 4 CONVERSION
ARTICLE 5 SUBORDINATION
ARTICLE 6 COVENANTS
ARTICLE 7 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
ARTICLE 8 DEFAULT AND REMEDIES
ARTICLE 9 TRUSTEE
ARTICLE 10 SATISFACTION AND DISCHARGE OF INDENTURE
ARTICLE 11 AMENDMENTS, MODIFICATIONS AND SUPPLEMENTS
ARTICLE 12 MISCELLANEOUS
EXHIBIT A [FORM OF FACE OF NOTE]
ASSIGNMENT FORM
CONVERSION NOTICE
OPTION TO ELECT REPURCHASE UPON A CHANGE OF CONTROL
SCHEDULE OF EXCHANGES OF NOTES⁶
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF TRANSFER RESTRICTED SECURITIES⁷

EX-10.50

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Exhibit 10.50

[Wind River Letterhead]

September 14, 2001
Mr. Curtis Schacker
171 Alpine Terrace
Oakland, CA 94618

Re: Separation Agreement

Dear Curtis:

    As you have been informed, Wind River Systems (the "Company") has eliminated your job position as part of its recent restructuring. This Agreement sets forth the substance of the separation agreement (the "Agreement") that the Company is offering you to aid in your employment transition.

    1.  SEPARATION.  You acknowledge that your last day of employment with the Company will be October 4, 2001 (the "Separation Date").

    2.  ACCRUED SALARY AND PAID TIME OFF.  On the Separation Date, the Company will pay you your final check, including all salary and accrued and unused vacation through the Separation Date, subject to standard payroll deductions and withholdings. You are entitled to these payments regardless of whether you sign this Agreement.

    3.  OUTPLACEMENT SERVICES.  The Company has engaged the services of Right Management Consultants to assist you with your search for new employment. As part of this Agreement, the Company will allow you time to consult with Right Management Consultants and to conduct job search activities consistent with your job responsibilities during the last two months of your employment.

    4.  SEVERANCE BENEFITS.  As part of this Agreement, you are eligible for severance benefits pursuant to the terms of the Wind River Systems, Inc. Vice Presidents' Severance Benefit Plan ("Severance Plan"), a copy of which is attached as Exhibit A. Under the Severance Plan, the Company will make severance payments to you in amounts equal to your base salary in effect on the Separation Date for 52 weeks following the Separation Date (the "Severance Period"). These payments will be subject to standard payroll withholdings and deductions and shall be made on the Company's ordinary payroll dates, beginning with the first payroll date following the Effective Date of the Release of Claims attached hereto as Exhibit B, provided, however that this Release of Claims should not be signed by you until on or after the Separation Date.

    5.  HEALTH INSURANCE.  After the Separation Date, to the extent provided by federal COBRA law and the Company's current group health insurance policies, you will be eligible to continue your group health insurance benefits. Later, you may be able to convert to an individual policy through the provider of the Company's health insurance, if you wish. You will be provided with a separate notice of your COBRA rights. As part of this Agreement, and under the terms of the Severance Plan, if you timely elect continued coverage under COBRA, the Company will pay your COBRA premium for thirteen (13) months of coverage. After that time, you will be responsible for the full cost of your COBRA premium for the remainder of the applicable COBRA period.

    6.  STOCK OPTIONS.  Your stock options will continue to vest until the Separation Date. You will then have until the close of market on January 3, 2002 to exercise any option shares that were vested as of the Separation Date. All other terms, conditions, and limitations applicable to your options will remain in full force and effect pursuant to the applicable stock option agreements between you and the Company, the applicable stock option plan documents, and any other documents applicable to the options.

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    7.  REPAYMENT OF LOAN.  On May 26, you and the Company entered into a Secured Promissory Note ("Loan Agreement') under which the Company loaned you and you agreed to repay a principal amount of one million, eight hundred and fifty thousand dollars ($1,850,000), plus interest. Under the terms of the Loan Agreement, the full amount of the loan becomes due and payable on the Separation Date. Subject to securing the agreement of all required parties to the Loan Agreement, as part of this Agreement, the Company will allow you to repay the outstanding balance of principal and interest due on the loan, including interest accrued through the payoff date, on or before June 30, 2002.

    8.  EXPENSE REIMBURSEMENTS.  You agree that, within ten (10) days following the Separation Date, you will submit your final documented expense reimbursement statement reflecting all business expenses you incurred through the Separation Date, if any, for which you seek reimbursement. The Company will reimburse you in accordance with its regular business practices.

    9.  RETURN OF COMPANY PROPERTY.  You agree that on or before the Separation Date you will return to the Company all Company documents (and all copies thereof) and other Company property in your possession or control, including, but not limited to, Company files, correspondence, memoranda, notes, notebooks, drawings, books and records, plans, forecasts, reports, proposals, studies, agreements, financial information, personnel information, sales and marketing information, research and development information, systems information, specifications, computer-recorded information, tangible property and equipment (including, but not limited to the Company-issued laptop computer and cellular telephone), credit cards, entry cards, identification badges and keys; and any materials of any kind that contain or embody any proprietary or confidential information of the Company (and all reproductions thereof in whole or in part).

    10.  NO ADMISSIONS.  You understand and agree that the promises and payments in consideration of this Agreement shall not be construed to be an admission of any liability or obligation by the Company to you or to any other person, and that the Company makes no such admission.

    11.  PROPRIETARY INFORMATION OBLIGATIONS.  Both during and after your employment, you acknowledge your continuing obligations under your Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit C.

    12.  CONFIDENTIALITY.  The provisions of this Agreement shall be held in strictest confidence by you and the Company and shall not be publicized or disclosed in any manner whatsoever, except that: (a) you may disclose this Agreement on confidence to your immediate family; (b) the parties may disclose this Agreement in confidence to their respective attorneys, accountants, auditors, tax preparers, and financial advisors; (c) the Company may disclose this Agreement as necessary to fulfill standard or legally required corporate reporting or disclosure requirements; and (d) the parties may disclose this Agreement insofar as such disclosure may be necessary to enforce its terms or as otherwise required by law. In particular, and without limitation, you agree not to discuss this Agreement with any present or former Company employees, consultants or independent contractors.

    13.  NONCOMPETITION.  During your continued employment by the Company until the Separation Date, and during the Severance Period, except on behalf of the Company, you agree that you will not, directly or indirectly, whether as an officer, director, stockholder, employee, partner, proprietor, associate, representative, consultant, or in any capacity whatsoever, be employed by, perform services for, or have any business connection with the following companies or their successors: Microsoft, Green Hills Software, ENEA, LINEO, Linux Works, Red Hat, Symbian, Rationale, Palm, QNX, Monta Vista Software. However, anything above to the contrary notwithstanding, you may own, as a passive investor, publicly- traded securities of any Competitor, so long as your direct holdings in any one such corporation shall not in the aggregate constitute more than two percent (2%) of the voting stock of such corporation.

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    14.  NONSOLICITATION.  During your continued employment by the Company until the Separation Date, and during the Severance Period, except on behalf of the Company, you agree that you will not, directly or indirectly, solicit, entice, induce, or encourage any of the Company's employees or independent contractors to become employees or independent contractors to or for any other person or entity.

    15.  BREACH OF NONCOMPETITION OR NONSOLICITATION PROVISIONS.  You agree that if you breach your Noncompetition or Nonsolicitation obligations under this Agreement, the Company's obligation to make any severance payments hereunder or to continue paying your premiums for COBRA coverage will cease immediately. Nothing in this paragraph 15 waives the Company's right to pursue other action against you for any breach of your obligations under this Agreement.

    16.  NONDISPARAGEMENT.  Both you and the Company (by its officers and directors) agree not to disparage the other in any manner likely to be harmful to the business or personal reputation of the other party or its officers, directors, employees, agents, and affiliates provided that both you and the Company will respond accurately and fully to any question, inquiry, or request for information when required by legal process.

    17.  RELEASE.  In exchange for and as a condition to receiving the severance payments, COBRA premiums, outplacement services, extension of the loan repayment period and other consideration under this Agreement and the Severance Plan to which you would not otherwise be entitled, you agree to sign, deliver to the Company, and make effective the Release of Claims, attached hereto as Exhibit B. The Release of Claims should be signed by you on or after the Separation Date.

    18.  MISCELLANEOUS.  This Agreement and its exhibits constitute the complete, final, and exclusive embodiment of your entire agreement with the Company, and supersedes all prior and contemporaneous agreements, promises and representations, with regard to its subject matters. It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein. It may not be modified except in a writing signed by you and a duly authorized officer of the Company. This Agreement shall be deemed to have been entered into and shall be construed and enforced in accordance with the laws of the State of California as applied to contracts made and to be performed entirely within California. This Agreement shall bind the heirs, personal representatives, successors, and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors, and assigns.

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    If this letter accurately sets forth our understanding, please sign below and return the entire Agreement to me. On behalf of the Company, I wish you the best of luck in your future endeavors.

Sincerely,

Wind River Systems, Inc.

By: /s/ John P. Brennan John P. Brennan
Vice President, Human Resources

Exhibit A:	Wind River Systems, Inc. Vice Presidents' Severance Benefit Plan
Exhibit B:	Release of Claims
Exhibit C:	Proprietary Information and Invention Agreement
Exhibit D:	ADEA Disclosure

I UNDERSTAND AND AGREE TO THE TERMS SET FORTH ABOVE.

/s/ Curtis Schacker	10/8/01
Curtis Schacker	Date

EXHIBIT A

Wind River Systems, Inc.
Vice Presidents' Severance Benefit Plan*

*

Omitted. Document previously filed on June 13, 2001 by the Registrant as Exhibit 10.40 to Form 10-Q for the period ended April 30, 2001.

EXHIBIT B

RELEASE OF CLAIMS

(To be signed on or after October 4, 2001)

    In exchange for and as a condition to receiving the severance payments, COBRA premiums, outplacement services, extension of the loan repayment period and other consideration under the Wind River Systems, Inc. Vice Presidents' Severance Benefit Plan and the separation agreement between Wind River Systems, Inc. (the "Company") and me dated September 14, 2001 (the "Separation Agreement"), I hereby release, acquit and forever discharge the Company, its officers, directors, agents, employees, attorneys, shareholders, successors, assigns and affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys' fees, damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or in any way related to agreements, events, acts or conduct at any time prior to and including the date I sign this Release, including but not limited to: all such claims and demands directly or indirectly arising out of or in any way connected with my employment with the Company or the termination of that employment; claims or demands related to salary, bonuses, commissions, stock, stock options, or any other equity or ownership interests in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay, or any other form of compensation; claims pursuant to any federal, state or local law, statute, or cause of action including, but not limited to, the federal Civil Rights Act of 1964, as amended; the federal Americans with Disabilities Act of 1990; the federal Age Discrimination in Employment Act of 1967, as amended ("ADEA"); the California Fair Employment and Housing Act, as amended; tort law; contract law; wrongful discharge; discrimination; harassment; fraud; defamation; emotional distress; and breach of the implied covenant of good faith and fair dealing.

    I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA and that the consideration given for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (a) my waiver and release do not apply to any rights or claims that may arise after the date I sign this Release; (b) that I have the right to consult with an attorney prior to executing this Release; (c) I have had forty-five (45) days to consider this Release; (d) I have seven (7) days following the date I sign this Release to revoke it; (e) I have received a disclosure from the Company including a list of the ob titles and ages of all employees selected for this group termination and ages of those individuals in the same job classification or organizational unit who were not selected for termination; and (f) this Agreement will not be effective until the date upon which the revocation period has expired, which will be the eighth (8h) day after this Agreement is executed by me, or on the date it is received by the Company, whichever is later ("Effective Date").

    I UNDERSTAND THAT THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS. In giving this release, which includes claims which may be unknown to me at present, I acknowledge that I have read and understand Section 1542 of the California Civil Code, which states: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." I hereby expressly waive and relinquish all rights

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and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any unknown or unsuspected claims I may have against the Company.

By:	/s/ Curtis Schacker
	Curtis Schacker
Date:	10/8/01

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EXHIBIT C

INVENTION ASSIGNMENT AND
PROPRIETARY INFORMATION AGREEMENT

    In consideration of my employment or continued employment by Wind River Systems, Inc. (the "Company") and the compensation now and hereafter paid to me, I hereby represent and agree as follows:

1.

I understand that the Company is engaged in a continuous program of research, development, production and marketing in connection with its business and that, as an essential part of my employment with the Company, I am expected to make new contributions to and create inventions of value for the Company.

2.

I will promptly disclose in confidence to the Company all inventions, improvements, original works or authorship, formulas, processes, computer programs, databases and trade secrets ("Inventions"), whether or not patentable, copyrightable or protectable as trade secrets, that are made or conceived or first reduced to practice or created by me, either alone or jointly with others, during the period of my employment, whether or not in the course of my employment, which are related in any way to the business of the Company, similar to or competitive with the products or research and development activities of the Company, or sold to the Company's customers or potential customers.

3.

I agree that all Inventions that (a) are developed using equipment, supplies, facilities or trade secrets of the Company, (b) result from work performed by me for the Company or (c) relate to the business or the actual or anticipated research or development of the Company, will be the sole and exclusive property of and are hereby assigned to the Company. I understand that the provisions of this paragraph do not apply to any Invention that qualifies fully under Section 2870 of the California Labor Code, which is set forth in the Appendix to this Agreement.

4.

I acknowledge that all original works of authorship which are made by me (solely or jointly with others) within the scope of my employment and which are protectable by copyright are "works made for hire," as that term is defined in the United States Copyright Act (17 U.S.C. Section 101).

5.

I agree to assist the Company in every proper way to obtain for the Company and enforce patents, copyrights and other legal protections for the Company's Inventions in any and all countries. I will execute any documents that the Company may reasonably request for use in obtaining or enforcing such patents, copyrights and other legal protections. My obligations under this paragraph will continue beyond the termination of my employment with the Company, provided that the Company will compensate me at a reasonable rate after such termination for time actually spent by me at the Company's request on such assistance. In the event the Company is unable for any reason, after reasonable effort, to secure my signature on any document needed in connection with the actions specified in this paragraph, I hereby irrevocably appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, which appointment is coupled with an interest, to ad for and in my behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph with the same legal force and effect as if executed by me. I hereby waive and quitclaim to the Company any and all claims, of any nature whatsoever, which I now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company.

6.

I understand that my employment by the Company creates a relationship of confidence and trust with respect to any information of a confidential or secret nature that may be disclosed to me by the Company that relates to the business of the Company or to the business of any parent, subsidiary, affiliate, customer or supplier of the Company or other third party ("Proprietary

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Information"). Such Proprietary Information includes but is not limited to Inventions, ideas, data, know-how, developments, designs, techniques, marketing plans, product plans, business strategies, financial information, forecasts, personnel information and customer lists.

7.

At all times, both during my employment and after its termination, I will keep all such Proprietary Information in confidence and trust, and I will not use or disclose any of such Proprietary Information without the written consent of the Company, except as may be necessary to perform my duties as an employee of the Company. Upon termination of my employment with the Company, I will promptly deliver to the Company all documents and materials of any nature pertaining to my work with the Company and I will not take with me any documents or materials or copies thereof containing any Proprietary Information.

8.

I agree that during the period of my employment by the Company I will not, without the Company's express written consent, engage m any employment or business activity other than for the Company. I agree further that for the period of my employment with the Company and for one (1) year after the date of termination of my employment with the Company, I will not (i) induce any employee of the Company to leave the employ of the Company or (ii) solicit the business of any client or customer of the Company (other than on behalf of the Company).

9.

I represent that my performance of all terms of this Agreement and my duties as an employee of the Company will not breach any invention assignment or proprietary information agreement with any former employer or other party. I represent that I will not bring with me to the Company or use in the performance of my duties for the Company any documents or materials of a former employer that ate not generally available to the public.

10.

To preclude any possible uncertainty, I have set forth on Exhibit A attached hereto a complete list of all Inventions that I have, alone or jointly with others, conceived, developed or reduced to practice or caused to be conceived, developed or reduced to practice prior to the commencement of my employment with the Company, that I consider to be my property or the property of third parties and that I wish to have excluded from the scope of this Agreement. If disclosure of any such Invention on Exhibit A would cause me to violate any prior confidentiality agreement, I understand that I am not to list such Inventions in Exhibit A but am to inform the Company that all such Inventions have not been listed for that reason.

11.

This Agreement will be governed by and construed according to the laws of the State of California. If any provision of this Agreement is deemed unenforceable by law, then such provision will be deemed stricken from this Agreement, unless it can be modified by a court so as to render it enforceable consistent with the intent of the Agreement, and the remaining provisions will continue in full force and effect. I understand that in the event of a breach or threatened breach of this Agreement by me the Company may suffer irreparable harm and will therefore be entitled to injunctive relief to enforce this Agreement.

12.

This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes all prior representations. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged.

13.

The provisions of this Agreement shall survive the termination of my employment and the assignment of this Agreement by the Company to any successor in interest or other assignee.

14.

I understand that this Agreement does not constitute a contract of employment or obligate the Company to employ me for any stated period of time. This Agreement shall be effected as of the first day of my employment by the Company.

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    I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY FILLED OUT EXHIBIT A TO THIS AGREEMENT.

EMPLOYEE		COMPANY
By:	/s/ Curtis Schacker	By:	/s/ Heather Schilling
Title:	V.P. Marketing	Title:	H.R. Rep
Date:	3/29/98	Date:	4/2/98

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EXHIBIT A

Prior Inventions

    The following is a complete list of all inventions or improvements relevant to the subject matter of my employment by Wind River Systems, Inc. (the "Company") that have been made or conceived or first reduced to practice by me alone or jointly with others prior to my engagement by the Company:

X	No inventions or improvements.
	See below:
	Due to confidentiality agreements with prior employer, I cannot disclose certain inventions that would otherwise be included on the above-described list.
	Additional sheets attached.

/s/ Curtis Schacker Employee Signature

Curtis Schacker Employee—Print Name

4/3/98 Date

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APPENDIX

California Labor Code Section 2870

(a)

Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1)

Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or

(2)

Result from any work performed by the employee for the employer.

(b)

To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

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Exhibit 10.50

EX-10.53

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EXHIBIT 10.53

$125,000,000

Wind River Systems, Inc.

3.75% Convertible Subordinated Notes due December 15, 2006

PURCHASE AGREEMENT

    December 5, 2001

CREDIT SUISSE FIRST BOSTON CORPORATION,
UBS WARBURG LLC
THOMAS WEISEL PARTNERS LLC
c/o CREDIT SUISSE FIRST BOSTON CORPORATION,
Eleven Madison Avenue,
New York, N.Y. 10010-3629

Dear Sirs:

    1.  Introductory.  Wind River Systems, Inc., a Delaware corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the several initial purchasers named in Schedule A hereto (the "Purchasers") U.S.$125,000,000 principal amount of its 3.75% Convertible Subordinated Notes due December 15, 2006 (the "Firm Securities") and, at the election of the Purchasers an aggregate up to an additional U.S.$25,000,000 principal amount ("Optional Securities") of its 3.75% Convertible Subordinated Notes due December 15, 2006 (the Firm Securities and the Optional Securities that the Purchasers may elect to purchase pursuant to Section 3 hereof are herein collectively called the "Offered Securities"), each to be issued under an indenture dated as of December 10, 2001 (the "Indenture"), between Bankers Trust Company, as Trustee on a private-placement basis pursuant to an exemption under Section 4(2) of the United States Securities Act of 1933 (the "Securities Act"). The holders of the Offered Securities will be entitled to the benefits of a Registration Rights Agreement of even date with the Indenture among the Company and the Purchasers (the "Registration Rights Agreement"), pursuant to which the Company agrees to file a registration statement with the Securities Exchange Commission (the "Commission") relating to the resale of the Offered Securities and the Underlying Shares, as hereinafter defined, under the Securities Act.

    The Company hereby agrees with the several Purchasers as follows:

    2.  Representations and Warranties of the Company.  The Company represents and warrants to, and agrees with, the several Purchasers that:

    (a) An offering circular relating to the Offered Securities has been prepared by the Company. Such offering circular (the "Offering Circular"), as amended or supplemented as of the date of this Agreement, together with the documents incorporated by reference therein and listed in Schedule B hereto, are hereinafter collectively referred to as the "Offering Document." On the date of this Agreement, the Offering Document, which includes the Exchange Act Reports (as defined herein) incorporated by reference therein, does not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Offering Document based upon written information furnished to the Company by any Purchaser through

1

Credit Suisse First Boston Corporation ("CSFBC") specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 7(b) hereof. The Company's Annual Report on Form 10-K most recently filed with the Commission and all subsequent reports (collectively, the "Exchange Act Reports") that have been filed by the Company with the Commission pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"), when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission thereunder.

    (b) The Company has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and conduct its business as described in the Offering Document; and the Company is duly qualified to do business as a foreign corporation in good standing in all other states of the United States in which its ownership or lease of property or the conduct of its business requires such qualification except where the failure to be so qualified would not, individually or in the aggregate, have a material adverse effect on the financial condition, business, properties or results of operations of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect").

    (c) Each subsidiary of the Company identified on Schedule C hereto (each a "Significant Subsidiary" and collectively, the "Significant Subsidiaries") has been duly incorporated and is an existing corporation in good standing under the laws of the jurisdiction of its incorporation, with corporate power and authority to own its properties and conduct its business as described in the Offering Document; each Significant Subsidiary of the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect; Wind River Systems Co., Ltd. has been duly incorporated and is an existing corporation under the laws of the jurisdiction of its incorporation, provided that the failure to be so incorporated would not have a Material Adverse Effect; all of the issued and outstanding capital stock of each Significant Subsidiary of the Company has been duly authorized and validly issued and is fully paid and nonassessable; and the capital stock of each Significant Subsidiary owned by the Company, directly or through subsidiaries, is owned free from liens, encumbrances and defects.

    (d) The Indenture has been duly authorized by the Company; the Offered Securities have been duly authorized; and when the Offered Securities are delivered and paid for pursuant to this Agreement on each Closing Date (as defined below), the Indenture will have been duly executed and delivered by the Company, such Offered Securities will have been duly executed, authenticated, issued and delivered and will conform in all material respects to the description thereof contained in the Offering Document and the Indenture and such Offered Securities will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles.

    (e) When the Offered Securities are delivered and paid for pursuant to this Agreement on each Closing Date, such Offered Securities will be convertible into the shares of Common Stock, par value $0.001 per share ("Underlying Shares") of the Company in accordance with the terms of the Indenture; the Underlying Shares initially issuable upon conversion of such Offered Securities have been duly authorized and reserved for issuance upon such conversion and, when issued upon such conversion in accordance with their terms, will be validly issued, fully paid and nonassessable; the outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable and conform in all material respects to the description thereof contained in the Offering Document; and the stockholders of the Company have no preemptive rights with respect to the Offered Securities or the Underlying Shares.

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    (f)  Except as disclosed in the Offering Document, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or any Purchaser for a brokerage commission, finder's fee or other like payment with respect to the transactions contemplated by this Agreement.

    (g) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required for the issuance or sale of the Offered Securities by the Company or the consummation by the Company of the transactions contemplated by this Agreement, the Indenture and the Registration Rights Agreement, except such as may be required under state securities laws, such as are required in connection with the filing and effectiveness of the Shelf Registration Statement as contemplated by the Registration Rights Agreement and such as may be required under state securities laws in connection with the distribution of the Offered Securities by the Purchasers (assuming that subsequent purchasers of Offered Securities or Underlying Shares offer or sell such Offered Securities or Underlying Shares as set forth in the Offering Document under the caption "Transfer Restrictions").

    (h) The execution, delivery and performance of the Indenture, this Agreement and the Registration Rights Agreement, and the issuance and sale of the Offered Securities and compliance by the Company with the terms and provisions thereof will not result in a breach or violation of any of the terms and provisions of, or constitute a default under (a) the charter of by laws of the Company or any Significant Subsidiary or (b) any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any subsidiary of the Company or any of their properties, or (c) any agreement or instrument to which the Company or any such subsidiary is a party or by which the Company or any such subsidiary is bound or to which any of the properties of the Company or any such subsidiary is subject, except for breaches or violations under clauses (b) or (c) which would not have a Material Adverse Effect, and the Company has full corporate power and authority to authorize, issue and sell the Offered Securities as contemplated by this Agreement.

    (i)  This Agreement and the Registration Rights Agreement have been duly authorized, executed and delivered by the Company.

    (j)  Except as disclosed in the Offering Document, the Company and its subsidiaries have good and marketable title to all real properties and all other properties and assets owned by them, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or to be made thereof by them; and except as disclosed in the Offering Document, the Company and its subsidiaries hold any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or to be made thereof by them.

    (k) The Company and its subsidiaries possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect.

    (l)  No labor dispute with the employees of the Company or any subsidiary exists or, to the knowledge of the Company, is imminent that could have a Material Adverse Effect.

    (m) The Company and its subsidiaries own, possess or can acquire on reasonable terms, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, "intellectual property rights") necessary to conduct the business now operated by them, or presently employed by them, and have

3

not received any notice of infringement of or conflict with asserted rights of others with respect to any intellectual property rights that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect.

    (n) Except as disclosed in the Offering Document, neither the Company nor any of its subsidiaries is in violation of any statute, any rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "environmental laws"), owns or operates any real property contaminated with any substance that is subject to any environmental laws, is liable for any off-site disposal or contamination pursuant to any environmental laws, or is subject to any claim relating to any environmental laws, which violation, contamination, liability or claim would individually or in the aggregate have a Material Adverse Effect; and the Company is not aware of any pending investigation which would lead to such a claim.

    (o) Except as disclosed in the Offering Document, there are no pending actions, suits or proceedings against or affecting the Company, any of its subsidiaries or any of their respective properties that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect, or would materially and adversely affect the ability of the Company to perform its obligations under the Indenture, this Agreement or the Registration Rights Agreement; and to the Company's knowledge, no such actions, suits or proceedings are threatened or contemplated.

    (p) The financial statements included in the Offering Document present fairly the financial position of the Company and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and, except as otherwise disclosed in the Offering Document, such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis.

    (q) Except as disclosed in the Offering Document, since the date of the latest audited financial statements included in the Offering Document there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole, and, except as disclosed in or contemplated by the Offering Document, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock.

    (r) The Company is not an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the United States Investment Company Act of 1940 (the "Investment Company Act"); and the Company is not and, after giving effect to the offering and sale of the Offered Securities and the application of the proceeds thereof as described in the Offering Document, will not be an "investment company" as defined in the Investment Company Act.

    (s) No securities of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as the Offered Securities are listed on any national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system.

    (t)  The offer and sale of the Offered Securities by the Company to the several Purchasers in the manner contemplated by this Agreement will be exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereof and Regulation D thereunder; and in connection with such offer and sale of the Offered Securities by the Company to the Purchasers, it

4

is not necessary to qualify an indenture in respect of the Offered Securities under the United States Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").

    (u) Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf (i) has, within the six-month period prior to the date hereof, offered or sold the Offered Securities or any security of the same class or series as the Offered Securities or (ii) has offered or will offer or sell the Offered Securities in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act. The Company has not entered and will not enter into any contractual arrangement with respect to the distribution of the Offered Securities except for this Agreement and the Registration Rights Agreement.

    3.  Purchase, Sale and Delivery of Offered Securities.  On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to sell to the Purchasers, and the Purchasers agree, severally and not jointly, to purchase from the Company, at a purchase price of 97% of the principal amount thereof plus accrued interest from December 10, 2001 to the First Closing Date (as hereinafter defined) the principal amount of Firm Securities.

    The Company will deliver against payment of the purchase price the Firm Securities in the form of one or more permanent global Securities in definitive form (the "Global Securities") deposited with the Trustee as custodian for The Depository Trust Company ("DTC") and registered in the name of Cede & Co., as nominee for DTC. Interests in any Global Securities will be held only in book-entry form through DTC, except in the limited circumstances described in the Offering Document. Payment for the Offered Securities shall be made by the Purchasers in Federal (same day) funds by wire transfer to the Company's account at Bank One or such other bank acceptable to CSFBC at 11:00 A.M. (New York time), on December 10, 2001, or at such other time not later than seven full business days thereafter as CSFBC and the Company determine, such time being herein referred to as the "First Closing Date," against delivery to the Trustee as custodian for DTC of the Global Securities representing all of the Offered Securities. The Global Securities will be made available for checking at the office of Cooley Godward LLP, San Francisco, California, at least 24 hours prior to the Closing Date.

    In addition, upon written notice from CSFBC given to the Company from time to time not more than 30 days subsequent to the date of this Agreement, the Purchasers may purchase all or less than all of the Optional Securities at the purchase price per principal amount of Firm Securities (including any accrued interest thereon to the related Optional Closing Date) to be paid for the Firm Securities. The Company agrees to sell to the Purchasers the principal amount of Optional Securities specified in such notice and the Purchasers agree, severally and not jointly, to purchase such Optional Securities. Such Optional Securities shall be purchased from the Company for the account of each Purchaser in the same proportion as the principal amount of Firm Securities set forth opposite such Purchaser's name in Schedule A hereto bears to the total principal amount of Firm Securities (subject to adjustment by CSFBC to eliminate fractions). No Optional Securities shall be sold or delivered unless the Firm Securities previously have been, or simultaneously are, sold and delivered. The right to purchase the Optional Securities or any portion thereof may be exercised from time to time and to the extent not previously exercised may be surrendered and terminated at any time upon notice by CSFBC to the Company.

    Each time for the delivery of and payment for the Optional Securities, being herein referred to as the "Optional Closing Date," which may be the First Closing Date (the First Closing Date and each Optional Closing Date, if any, being sometimes referred to as a "Closing Date"), shall be determined by CSFBC but shall not be earlier than two or later than seven full business days after written notice of election to purchase Optional Securities is given. The Company will deliver against payment of the purchase price the Optional Securities being purchased on each Optional Closing Date in the form of

5

one or more permanent global Securities in definitive form (each, an "Optional Global Security") deposited with the Trustee as custodian for DTC and registered in the name of Cede & Co., as nominee for DTC. Payment for such Optional Securities shall be made by the Purchasers in Federal (same day) funds by wire transfer to the Company's account at Bank One or such other bank acceptable to CSFBC at 11:00 A.M. (New York time) on the Optional Closing Date, against delivery to the Trustee as custodian for DTC of the Optional Global Securities representing all of the Optional Securities being purchased on such Optional Closing Date.

    4.  Representations by Purchasers; Resale by Purchasers.

    (a) Each Purchaser severally represents and warrants to the Company that it is an "accredited investor" within the meaning of Rule 501 under the Securities Act.

    (b) Each Purchaser acknowledges that the Offered Securities have not been registered under the Securities Act and may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Each Purchaser severally represents and agrees that it has not offered or sold, and will not offer or sell, any Offered Securities constituting part of its allotment, except in accordance with Rule 144A.

    (c) Each Purchaser severally agrees that it and each of its affiliates has not entered and will not enter into any contractual arrangement with respect to the distribution of the Offered Securities except for any such arrangements with the other Purchasers or affiliates of the other Purchasers or with the prior written consent of the Company.

    (d) Each Purchaser severally agrees that it and each of its affiliates will not offer or sell the Offered Securities (i) by means of any form of general solicitation or general advertising, within the meaning of Rule 502(c) under the Securities Act, including, but not limited to (A) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or (B) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising, or (ii) in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act. Each Purchaser severally agrees, with respect to resales made in reliance on Rule 144A of any of the Offered Securities, to deliver either with the confirmation of such resale or otherwise prior to settlement of such resale a notice to the effect that the resale of such Offered Securities has been made in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A.

    5.  Certain Agreements of the Company.  The Company agrees with the several Purchasers that:

    (a) The Company will advise CSFBC promptly of any proposal to amend or supplement the Offering Document and will not effect such amendment or supplementation without CSFBC's consent, which shall not be unreasonably withheld or delayed. If, at any time prior to the completion of the resale of the Offered Securities by the Purchasers any event occurs as a result of which the Offering Document as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any such time to amend or supplement the Offering Document to comply with any applicable law, the Company promptly will notify CSFBC of such event and promptly will prepare, at its own expense, an amendment or supplement which will correct such statement or omission or effect such compliance. Neither CSFBC's consent to, nor the Purchasers' delivery to offerees or investors of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6.

    (b) The Company will furnish to CSFBC copies of the Offering Document and all amendments and supplements to such documents, in each case as soon as available and in such quantities as CSFBC reasonably requests, and the Company will furnish to CSFBC on the date

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hereof one copy of the Offering Document signed by a duly authorized officer of the Company. At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, the Company will promptly furnish or cause to be furnished to CSFBC and, upon request of holders and prospective purchasers of the Offered Securities, to such holders and purchasers, copies of the information required to be delivered to holders and prospective purchasers of the Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto) in order to permit compliance with Rule 144A in connection with resales by such holders of the Offered Securities. The Company will pay the expenses of printing and distributing to CSFBC all such documents.

    (c) The Company will arrange for the qualification of the Offered Securities for sale and the determination of their eligibility for investment under the laws of such states in the United States as CSFBC reasonably designates in consultation with the Company and will continue such qualifications in effect so long as required for the resale of the Offered Securities by the Purchasers, provided that the Company will not be required to qualify as a foreign corporation, to file a general consent to service of process in any such state or take any action that would subject it to taxation in any jurisdiction where it has not been subject.

    (d) During the period of five years hereafter, the Company will furnish to CSFBC, as soon as practicable after the end of each fiscal year, a copy of its annual report to stockholders for such year.

    (e) During the period of two years after the later of the First Closing Date and the last Optional Closing Date, the Company will, upon request, furnish to CSFBC and any holder of Offered Securities a copy of the restrictions on transfer applicable to the Offered Securities.

    (f)  During the period of two years after the later of the First Closing Date and the last Optional Closing Date, the Company will not, and will not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Offered Securities that have been reacquired by any of them.

    (g) During the period of two years after the later of the First Closing Date and the last Optional Closing Date, the Company will not be or become, an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act.

    (h) The Company will pay all expenses incidental to the performance of its obligations under this Agreement, and the Registration Rights Agreement including (i) the fees and expenses of the Trustee and its professional advisers; (ii) all expenses in connection with the execution, issue, authentication, packaging and initial delivery of the Offered Securities and the preparation and printing of this Agreement, the Registration Rights Agreement, the Offered Securities, the Indenture and the Offering Document and amendments and supplements thereto, (iii) the cost of qualifying the Offered Securities for trading in The Portal^SM Market ("PORTAL") of The Nasdaq Stock Market, Inc. and any expenses incidental thereto, (iv) the cost of any advertising approved by the Company in connection with the issue of the Offered Securities, (v) any expenses (including fees and disbursements of counsel) incurred in connection with qualification of the Offered Securities for sale under the laws of such states of the United States as CSFBC reasonably designates and the preparation of blue sky memoranda relating thereto and (vi) for expenses incurred in distributing the Offering Document (including any amendments and supplements thereto) to the Purchasers. It is understood, however, that except as provided in this Section and Section 7, the Purchasers will pay all of their own costs and expenses, including without limitation, the fees and disbursements of their counsel and transfer taxes on resales of any of the Offered Securities by it.

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    (i)  In connection with the offering, until CSFBC shall have notified the Company of the completion of the resale of the Offered Securities, neither the Company nor any of its affiliates has or will, either alone or with one or more other persons, bid for or purchase for any account in which it or any of its affiliates has a beneficial interest any Offered Securities or attempt to induce any person to purchase any Offered Securities; and neither it nor any of its affiliates will make bids or purchases for the purpose of creating actual, or apparent, active trading in, or of raising the price of, the Offered Securities.

    (j)  For a period of 90 days after the date of the initial offering of the Offered Securities by the Purchasers, the Company will not offer, sell, contract to sell, pledge, or otherwise dispose of, directly or indirectly, or file with the Commission a registration statement under the Securities Act relating to, any United States dollar-denominated debt securities issued or guaranteed by the Company and having a maturity of more than one year from the date of issue, or any shares of the common stock, par value $0.001 per share, of the Company (the "Common Stock"), or securities convertible into or exchangeable or exercisable for shares of Common Stock or warrants or other rights to purchase shares of Common Stock, or publicly disclose the intention to make any such offer, sale, pledge, disposition or filing, without the prior written consent of CSFBC, except for (i) the amendment or supplementation of existing registration statements and the filing of a shelf registration statement covering the Offered Securities and the Underlying Shares or the filing of a registration statement on Form S-8 under the Securities Act, (ii) the issuance by the Company of the Underlying Shares, or the issuance by the Company of Common Stock upon the exercise of stock options or upon the exercise or conversion of options, warrants or convertible securities of the Company, in each case, outstanding on the date hereof, (iii) the issuance by the Company of Common Stock, or the grant by the Company of options to acquire Common Stock, to employees, consultants and directors of the Company under stock option and stock purchase plans in effect and existing on the date hereof, and (iv) the issuance by the Company of Common Stock and options in connection with acquisitions of businesses or companies. The Company will not at any time offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, pledge, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act to cease to be applicable to the offer and sale of the Offered Securities.

    6.  Conditions of the Obligations of the Purchasers.  The obligations of the several Purchasers to purchase and pay for the Firm Securities on the First Closing Date and for the Optional Securities on each Optional Closing Date will be subject to the accuracy of the representations and warranties on the part of the Company herein, to the accuracy of the statements of officers of the Company made pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions precedent:

    (a) The Purchasers shall have received a letter, which shall also be addressed to the Board of Directors of the Company, dated the date of this Agreement, of PricewaterhouseCoopers LLP confirming that they are independent public accountants within the meaning of the Securities Act and the applicable published rules and regulations thereunder ("Rules and Regulations") and to the effect that:

    (i)  In their opinion, the financial statements examined by them and included in the Offering Document and in the Exchange Act Reports comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the Exchange Act and the related published Rules and Regulations;

    (ii) they have performed the procedures specified by the American Institute of Certified Public Accountants for a review of interim financial information as described in Statement of

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Auditing Standards No. 71, Interim Financial Information, on the unaudited financial statements included in the Offering Document and in the Exchange Act Reports;

    (iii) on the basis of the review referred to in clause (ii) above, a reading of the latest available interim financial statements of the Company for the quarterly periods ended April 30 and July 31, inquiries of officials of the Company who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that:

    (A) the unaudited financial statements included in the Offering Document or in the Exchange Act Reports do not comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the Exchange Act as it applies to Form 10-Q and the related published Rules and Regulations or any material modifications should be made to such unaudited financial statements for them to be in conformity with generally accepted accounting principles;

    (B) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more than three business days prior to the date of this Agreement, there was any change in the capital stock or any increase in short-term indebtedness or long-term debt of the Company and its consolidated subsidiaries or, at the date of the latest available balance sheet read by such accountants, there was any decrease in consolidated net current assets or net assets, as compared with amounts shown on the latest balance sheet included in the Offering Document; or

    (C) for the period from the closing date of the latest income statement included in the Offering Document to the closing date of the latest available income statement read by such accountants there were any decreases, as compared with the corresponding period of the previous year and with the period of corresponding length ended the date of the latest income statement included in the Offering Document in consolidated net sales, net operating income or in the total or per share amounts of consolidated net income;

except in all cases set forth in clauses (B) and (C) above for changes, increases or decreases which the Offering Document disclose have occurred or may occur or which are described in such letter; and

    (iv) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Offering Document and the Exchange Act Reports (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its subsidiaries subject to the internal controls of the Company's accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter.

    (b) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) any change, or any development or event involving a prospective change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as one enterprise which, in the judgment of a majority in interest of the Purchasers, including CSFBC, is material and adverse and makes it impractical or inadvisable to proceed with completion of the offering or the sale of and payment for the Offered Securities; (ii) any downgrading in the rating of any debt securities of the Company by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Securities Act), or any public announcement that any such organization has under surveillance or

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review its rating of any debt securities of the Company (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating) or any announcement that the Company has been placed on negative outlook; (iii) any change in U.S. or international financial, political or economic conditions or currency exchange rates or exchange controls as would, in the judgment of a majority in interest of the Purchasers, including CSFBC, be likely to prejudice materially the success of the proposed issue, sale or distribution of the Offered Securities, whether in the primary market or in respect of dealings in the secondary market; (iv) any material suspension or material limitation of trading in securities generally on the New York Stock Exchange or The Nasdaq National Market or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (v) any banking moratorium declared by U.S. Federal or New York authorities; (vi) any major disruption of settlements of securities or clearance services in the United States, or (vii) any attack on, outbreak or escalation of hostilities or act of terrorism involving the United States, any declaration of war by Congress or any other national or international calamity or emergency if, in the judgment of a majority in interest of the Purchasers, including CSFBC, the effect of any such attack, outbreak, escalation, act, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the offering or sale of and payment for the Offered Securities.

    (c) The Purchasers shall have received an opinion, subject to appropriate qualifications, dated such Closing Date, of Cooley Godward LLP, counsel for the Company, that:

    (i)  The Company has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and conduct its business as described in the Offering Document; and the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification; each of Rapid Logic, Inc., Integrated Systems, Inc., Wind River Systems International, Inc., and Wind River Sales Co., Inc. (the "Subsidiaries") has been duly incorporated and is an existing corporation in good standing under the laws of its respective jurisdiction of incorporation.

    (ii) The Indenture has been duly authorized, executed and delivered by the Company; the Offered Securities delivered on such Closing Date have been duly authorized, executed, authenticated, issued and delivered and conform in all material respects to the description thereof contained in the Offering Circular, as amended or supplemented, under the caption "Description of Notes"; and the Indenture and the Offered Securities delivered on such Closing Date constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles;

    (iii) The Offered Securities delivered on such Closing Date are convertible into Common Stock of the Company in accordance with their terms and the terms of the Indenture; the shares of such Common Stock initially issuable upon conversion of the Offered Securities delivered on such Closing Date have been duly authorized and reserved for issuance upon such conversion and, when issued upon such conversion in accordance with the terms of the Notes and the terms of the Indenture, will be validly issued, fully paid and nonassessable; the shares of Common Stock initially issuable upon conversion of the Notes delivered on the Closing Date will conform in all material respects to the description thereof contained in the Offering Circular, as amended or supplemented, under the caption "Description of Capital Stock—Common Stock"; the outstanding shares of Common Stock have been duly authorized and are validly issued (except for shares of Common Stock issued upon the exercise of stock

10

options granted since July 16, 1996, as to which such counsel need not express any opinion) and such shares are non-assessable and, to our knowledge, fully-paid; and the stockholders of the Company have no preemptive rights with respect to the Securities or the Common Stock;

    (iv) No consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required for the issuance or sale of the Offered Securities by the Company or the consummation by the Company of the transactions contemplated by this Agreement, the Indenture and the Registration Rights Agreement, except such as may be required under state securities laws, such as are required in connection with the filing and effectiveness of the Shelf Registration Statement as contemplated by the Registration Rights Agreement, such as may be required in connection with the redemption or repurchase upon a change in control of the Offered Securities as contemplated by the Indenture, and such as may be required under state securities laws in connection with the distribution of the Offered Securities by the Purchasers (assuming that subsequent purchasers of Offered Securities or Underlying Shares offer or sell such Offered Securities or Underlying Shares as set forth in the Offering Document under the caption "Transfer Restrictions");

    (v) To such counsel's knowledge, except as disclosed in the Offering Document, there are no pending or overtly threatened actions, suits or proceedings against or affecting the Company, any of its subsidiaries or any of their respective properties that would individually or in the aggregate have a Material Adverse Effect, or would materially and adversely affect the ability of the Company to perform its obligations under the Indenture, this Agreement or the Registration Rights Agreement;

    (vi) The execution, delivery and performance by the Company of the Indenture, this Agreement and the Registration Rights Agreement and the issuance and sale of the Offered Securities and compliance with the terms and provisions thereof will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, (a) the charter or bylaws of the Company or the Subsidiaries, (b) any statute, any rule, regulation or order of any governmental agency or body or any court having jurisdiction over the Company or any of its properties, or (c) any agreement or instrument to which the Company is a party or by which the Company is bound or to which any of its properties is subject and which agreement or instrument has been identified to such counsel by the Company as material and filed by the Company as an exhibit to any of the Exchange Act Reports or attached as an exhibit to such counsel's opinion, and the Company has full power and authority to authorize, issue and sell the Offered Securities as contemplated by this Agreement;

    (vii) The statements set forth in the Offering Circular as amended or supplemented, under the captions "Description of the Notes," "Description of the Capital Stock," "Certain United States Federal Income Tax Consequences" and "Transfer Restrictions," insofar as such descriptions purport to describe the provisions of laws and documents referred to therein, fairly present in all material respects such laws and documents to the same extent as would be required if the Offering Circular were a prospectus in a Registration Statement of the Company on Form S-3 under the Securities Act; it being understood that such counsel need express no opinion as to the financial statements and notes thereto or other financial or statistical data derived from the financial statements contained in the Offering Circular;

    (viii) This Agreement and the Registration Rights Agreement have been duly authorized, executed and delivered by the Company;

    (ix) Assuming (i) that the persons to whom the Purchasers sell the Offered Securities are "qualified institutional buyers" within the meaning of Rule 144A under the Securities Act, (ii) the accuracy of the representations and warranties of the Purchasers contained in Section 4 of this Agreement and of the Company in Section 2 of this Agreement and (iii) the

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due performance by the Company of the covenants and agreements set forth in Section 5 of this Agreement and by the Purchasers of the covenants and agreement set forth in Section 4 of this Agreement, it being understood that no opinion need be expressed as to any subsequent resale of any Offered Securities, (A) the offer, sale and delivery of the Offered Securities by the Company to the Purchasers pursuant to this Agreement and in the manner contemplated by this Agreement and the Offering Circular and (B) the initial resale of the Offered Securities by the Purchasers in the manner contemplated by the Offering Circular do not require registration under the Securities Act or qualification of an indenture in respect thereof under the Trust Indenture Act; and

    (x) Each Exchange Act Report (except for financial statements and notes thereto and schedules and financial and statistical data derived from the financial statements as to which counsel need not express any opinion) complied as to form when filed with the Commission in all material respects with the Exchange Act and the rules and regulations of the Commission thereunder.

    In addition, such counsel shall state that, during the course of preparing the Offering Circular, such counsel participated in conferences with officers and other representatives of the Company, the Company's independent public accountants, and the Purchasers and their counsel, at which the contents of the Offering Circular were discussed. Such counsel did not participate in the preparation of all of the Exchange Act Reports but during the course of the preparation of the Offering Circular, such counsel reviewed the Exchange Act Reports and participated in conferences with officers and other representatives of the Company, the Company's independent public accountants, and the Purchasers and their counsel, at which the contents of the Exchange Act Reports were discussed. Certain of the information contained in the Exchange Act Reports incorporated by reference in the Offering Circular is as of the dates set forth therein or as to periods with respect to which such Exchange Act Reports were filed. While such counsel has not independently verified and is not passing upon the accuracy, completeness, or fairness of the statements made in the Offering Document, no facts have come to such counsel's attention which lead such counsel to believe that the Offering Document (other than the financial statements and schedules and related notes, and financial or statistical data derived from the financial statements as to which such counsel need make no statement), as of its date or as of the date hereof, contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

    (d) The Purchasers shall have received from Shearman & Sterling, counsel for the Purchasers, such opinion or opinions, dated such Closing Date, with respect to the incorporation of the Company, the validity of the Offered Securities, the Offering Circular, the exemption from registration for the offer and sale of the Offered Securities by the Company to the Purchasers and the resales by the Purchasers as contemplated hereby and other related matters as CSFBC may require, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters.

    (e) The Purchasers shall have received a certificate, dated such Closing Date, of the President or any Vice President and a principal financial or accounting officer of the Company in which such officers shall state, to the best of their knowledge after such consultation with other executive officers of the Company as they deem necessary to provide a reasonable basis for such statements, that the representations and warranties of the Company in this Agreement are true and correct, that the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to such Closing Date, and that, subsequent to the date of the most recent financial statements in the Offering Document, there has been no

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material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole except as set forth in or contemplated by the Offering Document or as described in such certificate.

    (f)  The Purchasers shall have received a letter, dated such Closing Date, from PricewaterhouseCoopers LLP which meets the requirements of subsection (a) of this Section, except that the specified date referred to in such subsection will be a date not more than three days prior to such Closing Date for the purposes of this subsection.

    (g) The Purchasers shall have received, on or prior to the date of this Agreement, lockup letters from each of the executive officers and directors of the Company named in the Offering Document.

The Company will furnish the Purchasers with such conformed copies of such opinions, certificates, letters and documents as the Purchasers reasonably request. CSFBC may in its sole discretion waive on behalf of the Purchasers compliance with any conditions to the obligations of the Purchasers hereunder, whether in respect of an Optional Closing Date or otherwise.

7. Indemnification and Contribution. (a) The Company will indemnify and hold harmless each Purchaser, its partners, directors and officers and each person, if any, who controls such Purchaser within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such Purchaser may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Offering Document, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, including any losses, claims, damages or liabilities arising out of or based upon the Company's failure to perform its obligations under Section 5(a) of this Agreement, and will reimburse each Purchaser for any legal or other expenses reasonably incurred by such Purchaser in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by any Purchaser through CSFBC specifically for use therein, it being understood and agreed that the only such information consists of the information described as such in subsection (b) below, and the Company shall not be liable for any settlement of any action effected without its written consent, which consent shall not be unreasonably withheld or delayed; provided, further, that with respect to any untrue statement or alleged untrue statement in, or omission or alleged omission from the Offering Document the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Purchaser that sold the Securities concerned to the person asserting any such losses, claims, damages or liabilities, to the extent that such sale was an initial resale by such Purchaser and any such loss, claim, damage or liability of such Purchaser results from the fact that there was not sent or given to such person, at or prior to the written confirmation of such sale of such Securities to such person, a copy of the Offering Document (exclusive of any material included therein but not attached thereto) if the Company had previously furnished copies thereof to such Purchaser.

    (b) Each Purchaser will severally and not jointly indemnify and hold harmless the Company, its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities to which the

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Company may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Offering Document, or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Purchaser through CSFBC specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, it being understood and agreed that the only such information furnished by any Purchaser consists of (i) the following information in the Offering Document furnished on behalf of each Purchaser: under the caption "Plan of Distribution", the second sentence of the second paragraph, the third sentence of the eighth paragraph and the ninth paragraph; provided, however, that the Purchasers shall not be liable for any losses, claims, damages or liabilities arising out of or based upon the Company's failure to perform its obligations under Section 5(a) of this Agreement and the Purchasers shall not be liable for any settlement of any action effected without their written consent, which consent shall not be unreasonably withheld or delayed.

    (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under subsection (a) or (b) above, unless and to the extent the indemnifying party did not otherwise learn of such claim and such omission results in the forfeiture by the indemnifying party of substantial rights or defenses or the indemnifying party is otherwise materially prejudiced by such omission. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party; provided, that if any such indemnified party reasonably determines that representation of such indemnifying party and the indemnified party by the same counsel would present a conflict of interest, then such counsel shall not, except with the consent of the indemnified party, be counsel to the indemnifying party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, which consent shall not be unreasonably withheld or delayed, effect any settlement or compromise, or consent to the entry of any judgment with respect to any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement, compromise or judgment includes (i) an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and (ii) does not include a statement as to or an admission of fault or failure to act by or on behalf of any indemnified party. In no event will any indemnifying party be liable for fees and disbursements of more than one counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general obligations or circumstances, unless the such

14

indemnified party reasonably determines that representation of such indemnifying party and the indemnified party by the same counsel would present a conflict of interest. No indemnified party shall, without the prior written consent of the indemnifying party, which consent shall not be unreasonably withheld or delayed, effect any settlement or compromise, or consent to the entry of any judgment with respect to any pending or threatened action in respect of which any indemnifying party is or could have been a party and indemnity could have been sought hereunder by such indemnifying party.

    (d) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Purchasers on the other from the offering of the Offered Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total discounts and commissions received by the Purchasers (before deducting expenses) from the Company under this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), no Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Offered Securities purchased by it were resold exceeds the amount of any damages which such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The Purchasers' obligations in this subsection (d) to contribute are several in proportion to their respective purchase obligations and not joint.

    (e) The obligations of the Company under this Section shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Purchaser within the meaning of the Securities Act or the Exchange Act; and the obligations of the Purchasers under this Section shall be in addition to any liability which the respective Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act.

    8.  Default of Purchasers.  If any Purchaser or Purchasers default in their obligations to purchase Securities hereunder on either the First Closing Date or any Optional Closing Date and the aggregate principal amount of the Offered Securities that such defaulting Purchaser or Purchasers agreed but failed to purchase does not exceed 10% of the total principal amount of the Offered Securities that the Purchasers are obligated to purchase on such Closing Date, CSFBC may make arrangements satisfactory to the Company for the purchase of such Offered Securities by other persons, including any of the Purchasers, but if no such arrangements are made by such Closing Date, the non-defaulting

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Purchasers shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Securities that such defaulting Purchasers agreed but failed to purchase on such Closing Date. If any Purchaser or Purchasers so default and the aggregate principal amount of the Offered Securities with respect to which such default or defaults occur exceeds 10% of the total principal amount of the Offered Securities that the Purchasers are obligated to purchase on such Closing Date and arrangements satisfactory to CSFBC and the Company for the purchase of such Offered Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Purchaser or the Company, except as provided in Section 9 (provided that if such default occurs with respect to Optional Securities after the First Closing Date, this Agreement shall not terminate as to the Firm Securities or any Optional Securities purchased prior to such termination). As used in this Agreement, the term "Purchaser" includes any person substituted for a Purchaser under this Section. Nothing herein will relieve a defaulting Purchaser from liability for its default.

    9.  Survival of Certain Representations and Obligations.  The respective indemnities, agreements, representations, warranties and other statements of the Company or its officers and of the several Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Purchaser, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If this Agreement is terminated pursuant to Section 8 or if for any reason the purchase of the Offered Securities by the Purchasers is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 5 and the respective obligations of the Company and the Purchasers pursuant to Section 7 shall remain in effect and if any Offered Securities have been purchased hereunder, the representations and warranties in Section 2 and all obligations under Section 5 shall remain in effect. If the purchase of the Offered Securities by the Purchasers is not consummated for any reason other than solely because of the termination of this Agreement pursuant to Section 8 or the occurrence of any event specified in clause (iii), (iv), (v), (vi) or (vii) of Section 6(b), the Company will reimburse the Purchasers for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Offered Securities.

    10.  Notices.  All communications hereunder will be in writing and, if sent to the Purchasers will be mailed, delivered or faxed and confirmed to the Purchasers, c/o Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention: Transactions Advisory Group (fax: (212) 325-4296), or, if sent to the Company, will be mailed, delivered or faxed and confirmed to it at 500 Wind River Way, Alameda, California, 94501, Attention: Vice President, Legal Affairs and General Counsel (fax: (510) 749-2944), provided, however, that any notice to a Purchaser pursuant to Section 7 will be mailed, delivered or faxed and confirmed to such Purchaser.

    11.  Successors.  This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and will inure to the benefit of the controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder, except that holders of Offered Securities shall be entitled to enforce the agreement for their benefit contained in the second sentence of Section 5(b) hereof against the Company as if such holders were parties hereto.

    12.  Representation of Purchasers.  You will act for the several Purchasers in connection with this purchase, and any action under this Agreement taken by you.

    13.  Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement.

    14.  Applicable Law.This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of laws.

    The Company hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in the City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

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    If the foregoing is in accordance with the Purchasers' understanding of our agreement, kindly sign and return to the Company one of the counterparts hereof, whereupon it will become a binding agreement between the Company and the several Purchasers in accordance with its terms.

Very truly yours,
WIND RIVER SYSTEMS, INC.
By:	/s/ MICHAEL ZELLNER Title: Vice President, Finance and Chief Financial Officer

The foregoing Purchase Agreement is hereby confirmed and accepted as of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION UBS WARBURG LLC THOMAS WEISEL PARTNERS LLC
BY CREDIT SUISSE FIRST BOSTON CORPORATION
By:	/s/ RICHARD HART Title:

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SCHEDULE A

Purchaser		Principal Amount of Firm Securities
CREDIT SUISSE FIRST BOSTON CORPORATION		$	93,750,000
UBS WARBURG LLC		$	25,000,000
THOMAS WEISEL PARTNERS LLC		$	6,250,000
	TOTAL	$	125,000,000

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SCHEDULE B

DOCUMENTS INCORPORATED BY REFERENCE
IN THE OFFERING CIRCULAR

Wind River SEC Filings (File No. 0-21342)	Period
Annual Reports on Form 10-K	Fiscal year ended January 31, 2001
Quarterly Reports on Form 10-Q	Quarterly periods ended April 30, 2001 and July 31, 2001
Current Report on Form 8-K	Filed on May 7, 2001
Current Report on Form 8-K	Filed on August 7, 2001
Current Report on Form 8-K	Filed on December 3, 2001

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SCHEDULE C

SIGNIFICANT SUBSIDIARIES

    Wind River Systems International, Inc., a Delaware corporation

    Wind River Sales Co., Inc., a California corporation

    Integrated Systems, Inc., a California corporation

    Embedded Support Tools Corp., a Massachusetts corporation

    Rapid Logic, Inc., a Delaware corporation

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EXHIBIT 10.53

PURCHASE AGREEMENT
SCHEDULE A
SCHEDULE B DOCUMENTS INCORPORATED BY REFERENCE IN THE OFFERING CIRCULAR
SCHEDULE C SIGNIFICANT SUBSIDIARIES

EX-10.54

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EXHIBIT 10.54

$125,000,000

WIND RIVER SYSTEMS, INC.
3.75% CONVERTIBLE SUBORDINATED NOTES DUE DECEMBER 15, 2006

REGISTRATION RIGHTS AGREEMENT

December 10, 2001

CREDIT SUISSE FIRST BOSTON CORPORATION
UBS WARBURG LLC
THOMAS WEISEL PARTNERS LLC
c/o CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue
New York, NY 10010-3629

Dear Sirs:

    Wind River Systems, Inc., a Delaware corporation ("the Company"), proposes to issue and sell to you (the "Initial Purchasers"), upon the terms set forth in a purchase agreement of even date herewith (the "Purchase Agreement"), $125,000,000 aggregate principal amount (plus up to an additional $25,000,000 aggregate principal amount) of its 3.75% Convertible Subordinated Notes due December 15, 2006 (the "Initial Securities"). The Initial Securities will be convertible into shares of common stock, par value $0.001 per share, of the Company (the "Common Stock") at the conversion price set forth in the Offering Circular dated December 5, 2001. The Initial Securities will be issued pursuant to an Indenture, dated as of December 10, 2001 (the "Indenture"), among the Company and Bankers Trust Company, as trustee (the "Trustee"). As an inducement to the Initial Purchasers to enter into the Purchase Agreement, the Company agrees with the Initial Purchasers, for the benefit of (i) the Initial Purchasers and (ii) the holders of the Initial Securities and the Common Stock issuable upon conversion of the Initial Securities (collectively, the "Securities") from time to time until the expiration of the Shelf Registration Period (as defined in Section 1, below) (each of the forgoing a "Holder" and collectively the "Holders"), as follows:

    1.  Shelf Registration.  (a) The Company shall, at its cost, prepare and, as promptly as practicable (but in no event more than 90 days after the first date of original issuance of the Initial Securities) file with the Securities and Exchange Commission (the "Commission") and thereafter use commercially reasonable efforts to cause to be declared effective as soon as practicable a registration statement on Form S-3, or such other appropriate form as the Company may be permitted to use (the "Shelf Registration Statement"), relating to the offer and sale of the Transfer Restricted Securities (as defined in Section 5 hereof) by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act of 1933, as amended (the "Securities Act") (hereinafter, the "Shelf Registration"); provided, however, that no Holder (other than an Initial Purchasers) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder and has returned a properly completed and signed Selling Securityholder Notice and Questionnaire in the form of Annex A (a "Questionnaire") to the Prospectus (as defined below) dated December 5, 2001 relating to the Initial Securities.

    (b) The Company shall use commercially reasonable efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus included therein (the "Prospectus")

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to be lawfully delivered by the Holders of the relevant Securities, for a period of two years (or for such longer period if extended pursuant to Section 2(h) below) from the date of its effectiveness or such shorter period that will terminate when all the Securities covered by the Shelf Registration Statement (i) have been sold pursuant thereto or (ii) are no longer restricted securities (as defined in Rule 144(k) under the Securities Act, or any successor rule thereof), assuming for this purpose that the Holders thereof are not affiliates of the Company (in any such case, such period being called the "Shelf Registration Period"). The Company shall be deemed not to have used commercially reasonable efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless such action is (i) required by applicable law, or (ii) taken by the Company in good faith and contemplated by Sections 2(b)(v) or 5(b) below, and the Company thereafter complies with the requirements of Section 2(h) below.

    (c) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the Prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

    2.  Registration Procedures.  In connection with the Shelf Registration contemplated by Section 1 hereof, the following provisions shall apply:

    (a) The Company shall (i) furnish to the Initial Purchasers, prior to the filing thereof with the Commission, a copy of the Shelf Registration Statement and each amendment thereof and each supplement, if any, to the Prospectus included therein and, in the event that an Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Shelf Registration Statement, shall use commercially reasonable efforts to reflect in each such document, when so filed with the Commission, such comments as such Initial Purchaser reasonably may propose; and (ii) include the names of the Holders who propose to sell Securities pursuant to the Shelf Registration Statement as selling securityholders; provided that Holders shall have furnished to the Company on a timely basis such information regarding the Holder as the Company may require pursuant to Section 2(l) hereof. Notwithstanding the foregoing, if a properly completed Questionnaire is received by the Company before 10 days prior to the effective date of the Shelf Registration Statement or amendment thereto, such Holder shall be entitled to have its Securities included in the Shelf Registration Statement or such amendment at the effective date thereof. If the Company receives such properly completed Questionnaire thereafter, the Securities covered by such Questionnaire will be included in the Shelf Registration Statement, and the Company shall file any amendments to the Shelf Registration Statement or supplements related to the Prospectus to permit such Holder to deliver the Prospectus to purchasers of the Securities, as promptly as reasonably practicable after receipt of such properly completed Questionnaire; provided that (a) the Company may take reasonable steps to aggregate the addition of Securities of more than one Holder for purposes of filing amendments to the Shelf Registration Statement or supplements to the Prospectus so as to reduce the need for multiple amendments or supplements, and (b) the Company shall not be required to file more than one amendment or supplement during any thirty-day period.

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    (b) The Company shall give written notice to the Initial Purchasers and the Holders of the Securities (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made):

    (i)  when the Shelf Registration Statement or any amendment thereto has been filed with the Commission and when the Shelf Registration Statement or any post-effective amendment thereto has become effective;

    (ii) of any request by the Commission for amendments or supplements to the Shelf Registration Statement or the Prospectus or for additional information;

    (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of any proceedings for that purpose;

    (iv) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

    (v) of the happening of any event that requires the Company to make changes in the Shelf Registration Statement or the Prospectus in order that the Shelf Registration Statement or the Prospectus does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading.

    (c) The Company shall use reasonable efforts to obtain the withdrawal, at the earliest possible time, of any order suspending the effectiveness of the Shelf Registration Statement.

    (d) The Company shall furnish to each Holder of Securities included within the coverage of the Shelf Registration, without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference).

    (e) The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the Prospectus included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by the Prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement.

    (f)  Prior to any public offering of the Securities pursuant to the Shelf Registration Statement, the Company shall register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or "blue sky" laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject.

    (g) The Company shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Securities pursuant to the Shelf Registration Statement.

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    (h) Upon the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 2(b) above or Section 5(b) below during the period for which the Company is required to maintain an effective Shelf Registration Statement, the Company shall promptly prepare and file a post-effective amendment to the Shelf Registration Statement or an amendment or supplement to the Prospectus and any other required document (except, upon the occurrence of an event contemplated by Section 5(b) below, to the extent that the Company determines in good faith that the disclosure of such event at such time would not be in the best interest of the Company) so that, as thereafter delivered to Holders or purchasers of the Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Initial Purchasers and the Holders in accordance with paragraphs (ii) through (v) of Section 2(b) above to suspend the use of the Prospectus until the requisite changes to the Prospectus have been made, then the Initial Purchasers and the Holders shall suspend use of such Prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 1(b) above shall be extended by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchasers and the Holders shall have received such amended or supplemented prospectus pursuant to this Section 2(h).

    (i)  Not later than the effective date of the Shelf Registration Statement, the Company will provide CUSIP numbers for the Initial Securities and the Common Stock registered under the Shelf Registration Statement, and provide the Trustee with printed certificates for the Initial Securities, in a form eligible for deposit with The Depository Trust Company.

    (j)  The Company will use commercially reasonable efforts to comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Shelf Registration Statement, which statement shall cover such 12-month period.

    (k) The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, (the "Trust Indenture Act") in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture.

    (l)  The Company may require each Holder of Securities to be sold pursuant to the Shelf Registration Statement to furnish to the Company such information, including a properly completed and signed Questionnaire, regarding the Holder and the distribution of the Securities as the Company may from time to time reasonably require for inclusion in the Shelf Registration Statement, and the Company may exclude from such registration the Securities of any Holder that fails to furnish such information within a reasonable time after receiving such request.

    (m) The Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other appropriate actions, if any, as any Holder shall reasonably request in order to facilitate the disposition of the Securities pursuant to the Shelf Registration.

    (n) The Company shall (i) make reasonably available for inspection by the Holders, any underwriter participating in any disposition pursuant to the Shelf Registration Statement and any attorney, accountant or other agent retained by the Holders or any such underwriter, all relevant financial and other records, pertinent corporate documents and properties of the Company (other than

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records and documents that the Company agreed contractually not to disclose) and (ii) cause the Company's officers, directors, employees, accountants and auditors to supply all relevant information (other than records and documents that the Company agreed contractually not to disclose) reasonably requested by the Holders or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as shall be reasonably necessary to enable such persons to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchasers by you and on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 3 hereof; provided, further, that any such persons requesting such information or conducting such inspection shall first agree in writing with the Company that any information that is reasonably and in good faith designated by the Company as confidential at the time of delivery or inspection (as the case may be) of such information shall be kept confidential by such persons, unless (1) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities; (2) disclosure of such information is required by law; (3) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by any such person; or (4) such information becomes available to any such person from a source other than the Company and such source is not bound by a confidentiality agreement.

    (o) The Company, if requested by any Holder of Securities in connection with an underwritten offering covered by the Shelf Registration Statement, shall cause (i) its counsel, which may be in-house counsel, to deliver an opinion and updates thereof relating to the Securities in customary form addressed to such Holders and the managing underwriters, if any, thereof, and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement (it being agreed that the matters to be covered by such opinion shall include, without limitation but subject to reasonable qualifications, the due incorporation and good standing of the Company and its material subsidiaries; the qualification of the Company and its material subsidiaries to transact business as foreign corporations; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 2(m) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the Securities; the absence of material legal or governmental proceedings involving the Company and its subsidiaries; the absence of governmental approvals (other than those required by the Commission) required to be obtained in connection with the Shelf Registration Statement, the offering and sale of the Securities, or any agreement of the type referred to in Section 2(m) hereof; and the compliance as to form of the Shelf Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act, respectively; and, as of the date of the opinion and as of the effective date of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, a statement as to the absence from the Shelf Registration Statement, together with the prospectus included therein, as then amended or supplemented, and any documents incorporated by reference therein, of an untrue statement of a material fact or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) its officers to execute and deliver all customary documents and certificates and updates thereof requested by any underwriters of the Securities and (iii) its independent public accountants to provide to the selling Holders of the applicable Securities and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72; provided however, that in connection with an underwritten offering covered by the Shelf Registration Statement the Company may require any underwriter to agree to provisions substantially in the form of Section 4 hereof.

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    (p) The Company will use commercially reasonable efforts to (a) if the Initial Securities have been rated prior to the initial sale of such Initial Securities, confirm such ratings will apply to the Securities covered by a Registration Statement, or (b) if the Initial Securities were not previously rated, cause the Securities covered by a Registration Statement to be rated with the appropriate rating agencies, if so requested by holders of a majority in aggregate principal amount of Securities covered by the Shelf Registration Statement, or by the managing underwriters, if any.

    (q) In the event that any broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "Rules") of the National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company will assist such broker-dealer in complying with the requirements of such Rules, including, without limitation, by (i) if such Rules, including Rule 2720, shall so require, engaging a "qualified independent underwriter" (as defined in Rule 2720) to participate in the preparation of the Shelf Registration Statement relating to such Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities, (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 5 hereof and (iii) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules.

    (r) The Company shall use commercially reasonable efforts to take all other steps necessary to effect the registration of the Securities covered by a Registration Statement contemplated hereby.

    3.  Registration Expenses.  (a) Except as otherwise provide in Section 7 hereof, all expenses incident to the Company's performance of and compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement is ever filed or becomes effective, including without limitation;

    (i)  all registration and filing fees and expenses;

    (ii) all fees and expenses of compliance with federal securities and state "blue sky" or securities laws;

    (iii) all expenses of printing (including printing certificates for the Securities to be issued and printing of Prospectuses), messenger and delivery services and telephone;

    (iv) all fees and disbursements of counsel for the Company;

    (v) all application and filing fees in connection with listing the Securities on a national securities exchange or automated quotation system pursuant to the requirements hereof; and

    (vi) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance).

    The Company will bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any person, including special experts, retained by the Company.

    (b) Except as otherwise provided in Section 7 hereof, in connection with the Shelf Registration Statement required by this Agreement, the Company will reimburse the Initial Purchasers and the Holders of Securities covered by the Shelf Registration Statement, for the reasonable fees and

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disbursements of not more than one counsel, designated by the Holders of a majority in principal amount of the Securities covered by the Shelf Registration Statement (provided that Holders of Common Stock issued upon the conversion of the Initial Securities shall be deemed to be Holders of the aggregate principal amount of Initial Securities from which such Common Stock was converted) to act as counsel for the Holders in connection therewith.

    4.  Indemnification.  (a) The Company agrees to indemnify and hold harmless each Holder and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (each Holder, and such controlling persons are referred to collectively as the "Indemnified Parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement or Prospectus including any document incorporated by reference therein, or in any amendment or supplement thereto relating to the Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state in a Prospectus including any document incorporated by reference therein, or in any amendment or supplement thereto relating to the Shelf Registration, a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, provided however, that the Company shall not be liable for any settlement of any action effected without its written consent (which shall not be unreasonably withheld or delayed), and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in the Shelf Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to the Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to the Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a prospectus relating to such Securities was required to be delivered by such Holder under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the final prospectus if the Company had previously furnished copies thereof to such Holder; provided further, however, that this indemnity agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party. The Company shall also indemnify underwriters that participate in an offering of the Securities under the Shelf Registration Statement, their officers and directors and each person who controls such underwriters within the meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Holders of the Securities if requested by such Holders.

    (b) Each Holder, severally and not jointly, will indemnify and hold harmless the Company, its officers and directors and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of

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a material fact contained in the Shelf Registration Statement or Prospectus or in any amendment or supplement thereto relating to the Shelf Registration, or arise out of or are based upon the omission or alleged omission to state in a Prospectus or in any amendment or supplement thereto relating to the Shelf Registration a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; provided however, that the Holders shall not be liable for any settlement of any action effected without their written consent (which shall not be unreasonably withheld or delayed); and, subject to the limitations set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any of its controlling persons.

    (c) Promptly after receipt by an indemnified party under this Section 4 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 4, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above, unless and to the extent the indemnifying party did not otherwise learn of such claim and such omission results in the forfeiture by the indemnifying party of substantial rights or defenses or the indemnifying party is otherwise materially prejudiced by such omission. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, provided that if any such indemnified party reasonably determines that representation of such indemnifying party and the indemnified party by the same counsel would present a conflict of interest, then such counsel shall not, except with the consent of the indemnified party, be counsel to the indemnifying party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 4 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld or delayed), effect any settlement or compromise of, or consent to the entry of any judgment with respect to any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement, compromise or judgment (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action, and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. In no event will any indemnifying party be liable of fees and disbursements of more than one counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general obligations or circumstances, unless such indemnified party reasonably determines that representation of such indemnifying party and the indemnified party by the same counsel would present a conflict of interest. No indemnified party shall, without the prior written consent of the indemnifying party, which consent shall not be unreasonably withheld or delayed, effect any settlement or compromise, or consent to the entry of any judgment with respect to any pending or threatened action in respect of which any indemnifying party is or could have been a party and indemnity could have been sought hereunder by such indemnifying party.

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    (d) If the indemnification provided for in this Section 4 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 4(d), the Holders shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to the Shelf Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company.

    (e) The agreements contained in this Section 4 shall survive the sale of the Securities pursuant to the Shelf Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party.

    5.  Additional Interest Under Certain Circumstances.  (a) Additional interest (the "Additional Interest") with respect to the Securities shall be assessed as follows if any of the following events occur (each such event in clauses (i) through (iii) below being herein called a "Registration Default"):

    (i)  the Shelf Registration Statement has not been filed with the Commission by the 90^th day after the first date of original issuance of the Initial Securities;

    (ii) the Shelf Registration Statement has not been declared effective by the Commission by the 180^th day after the first date of original issue of the Initial Securities;

    (iii) the Company fails supplement or amend the Shelf Registration Statement in a timely manner (subject to the procedures set forth in Section 2(a) hereof) to include the names of Holders who propose to sell Securities and who have furnished to the Company a Questionnaire as set forth in Section 1 hereof; provided however that if such Questionnaire is delivered by such Holder during a Suspension Period (as defined below), the Company shall so inform such Holder and shall take the actions set forth in Section 2 hereof upon the expiration of the Suspension Period; and

    (iv) the Shelf Registration Statement is declared effective by the Commission but (A) the Shelf Registration Statement thereafter ceases to be effective or (B) the Shelf Registration Statement or the Prospectus ceases to be usable in connection with resales of Transfer Restricted Securities (as defined below) during the periods specified herein because either (1) any event

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occurs as a result of which the Prospectus forming part of such Shelf Registration Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or (2) it shall be necessary to amend such Shelf Registration Statement or supplement the related prospectus, to comply with the Securities Act or the Exchange Act or the respective rules thereunder.

    Each of the foregoing will constitute a Registration Default whatever the reason for any such event and whether it is voluntary or involuntary or is beyond the control of the Company or pursuant to operation of law or as a result of any action or inaction by the Commission.

    Additional Interest shall accrue on the Securities over and above the interest set forth in the title of the Initial Securities from and including the date on which any such Registration Default shall occur to but excluding the earlier of (i) the date on which all such Registration Defaults have been cured and (ii) the day following the last day of the Shelf Registration Period, at a rate of 0.50% per annum (the "Additional Interest Rate").

    (b) Notwithstanding anything to the contrary herein, the Company may suspend use of the Prospectus and prohibit offers and sales of Transfer Restricted Securities at any time, if:

(A)

(1) it is in possession of material non-public information, (2) the Company determines in good faith that disclosure of such material non-public information at such time would not be in the best interests of the Company and (3) the Company determines that such prohibition is necessary to avoid a requirement to disclose such material non-public information; or



(B)

the Company determines in good faith that because of valid business reasons (not including the avoidance of the Company's obligation hereunder), including the acquisition or divestiture of assets, pending corporate developments and similar events, offers and sales of the Transfer Restricted Securities are not in the best interests of the Company (each such period during which any prohibition on offers and sales of Transfer Restricted Securities is in effect, a "Suspension Period").

    A Suspension Period shall commence on and include the date on which the Company provides written notice (which notice need not specify the nature of the event giving rise to such notice) to the Holders of Transfer Restricted Securities that offers and sales of Transfer Restricted Securities cannot be made in accordance with this Section 5(b) and shall end on the date on which each such Holder either receives copies of a prospectus supplement, or is advised in writing by the Company that offers and sales of Transfer Restricted Securities and the use of the Prospectus may be resumed; provided, however, that all Suspension Periods pursuant to clause (A) of this Section 7(b) in the aggregate shall not exceed 120 days during any period of twelve consecutive calendar months (nor more than 90 consecutive days for any one Suspension Period).

    (c) A Registration Default referred to in Section 5(a)(iii) hereof shall be deemed not to have occurred and be continuing in relation to the Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred as a result of (x) the filing of a post-effective amendment to the Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus or (y) other material events, with respect to the Company that would need to be described in such Shelf Registration Statement or the related prospectus; provided that in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement the Shelf Registration Statement and related prospectus to describe such events as required by paragraph 2(h) hereof; provided further, however, that in any case if such Registration Default occurs for a continuous period in excess of 30 days, Additional Interest shall be payable in accordance with the above paragraph from the day such Registration Default occurs until

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such Registration Default is cured. A Registration Default may not occur during any Suspension Period, and any Registration Default in existence at the commencement of any Suspension Period shall be tolled and the Additional Interest Rate shall not be increased because of such Registration Default during such Suspension Period.

    Notwithstanding anything to the contrary, during the occurrence of any Registration Default, offers and sales of Transfer Restricted Securities pursuant to the Shelf Registration Statement shall be prohibited.

    (d) Any amounts of Additional Interest due pursuant to Section 5(a) will be payable in cash on the regular interest payment dates with respect to the Securities; provided however, that in the case of a Registration Default set forth in subsection 5(a)(iii), such Additional Interest shall be paid only to Holders that have delivered a Questionnaire that caused the Company to incur the obligations set forth therein the non-performance of which is the basis of such Registration Default. The amount of Additional Interest will be determined (i) in the case of Initial Securities, by multiplying the Additional Interest Rate by the principal amount of the Initial Securities, or (ii) in the case of Common Stock issued upon conversion of the Initial Securities, by multiplying the Additional Interest Rate by the product of (A) the number of Common Shares issued upon conversion and (B) the price at which the Initial Securities were converted into Common Stock, in each case as further multiplied by a fraction, the numerator of which is the number of days such Additional Interest Rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360.

    (e) "Transfer Restricted Securities" means each Security until (i) the date on which such Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.

    6.  Rules 144 and 144A.  The Company shall use commercially reasonable efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Company covenants that it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Transfer Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Company will provide a copy of this Agreement to prospective purchasers of Securities identified to the Company by the Initial Purchasers upon request. Upon the request of any Holder, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 6 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act.

    7.  Underwritten Registrations.  If any of the Transfer Restricted Securities covered by the Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering ("Managing Underwriters") will be selected by the holders of a majority in aggregate principal amount of such Transfer Restricted Securities to be included in such offering (provided that holders of Common Stock issued upon conversion of the Initial Securities shall not be deemed holders of Common Stock, but shall be deemed to be holders of the aggregate principal amount of Initial Securities from which such Common Stock was converted); provided, however, that (a) such investment banker or bankers must be reasonably satisfactory to the Company and (b) the Company shall not be required to arrange for or participate in more than one underwritten offering during the Shelf Registration Period.

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    No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and (iii) at least 20% of the outstanding Transfer Restricted Securities are included in such underwritten offering. The holders participating in any underwritten offering shall be responsible for any expenses customarily borne by selling securityholders, including underwriting discounts and commissions and fees and expenses of counsel to the selling securityholders to the extent not required to be paid by the Company pursuant to Section 3 hereof.

    8.  Miscellaneous.

    (a) Remedies. The Company acknowledges and agrees that any failure by the Company to comply with its obligations under Section 1 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Sections 1 hereof. The Company further agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

    (b) No Inconsistent Agreements. The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof.

    (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Company and the Initial Purchasers.

    (d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery:

    (1) if to a Holder of the Securities, at the most current address given by such Holder to the Company.

    (2) if to the Initial Purchasers;

	Credit Suisse First Boston Corporation Eleven Madison Avenue New York, NY 10010-3629 Fax No.: (212) 325-8278 Attention: Transactions Advisory Group
with a copy to:
	Shearman & Sterling 555 California Street, 20th Floor San Francisco, CA 94104-1522 Fax No.: (415) 616-1199 Attention: John D. Wilson

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(3)	if to the Company, at its address as follows:
	Wind River Systems, Inc. 500 Wind River Way Alameda, CA 94501 Fax No.: (510) 749-2944 Attention: Vice President and General Counsel
with a copy to:
	Cooley Godward LLP One Maritime Plaza, 20th Floor San Francisco, CA 94111-3580 Fax No.: (415) 951-3699 Attention: Kenneth L. Guernsey

    All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient's facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery.

    (e) Third-Party Beneficiaries. The Holders shall be third-party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder.

    (f)  Successors and Assigns. This Agreement shall be binding upon the Company, the Initial Purchasers and the Holders and each of their successors and assigns.

    (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

    (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

    (i)  Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

    The Company hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in the City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

    (j)  Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

    (k) Securities Held by the Company. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.

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    If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the several Initial Purchasers and the Company in accordance with its terms.

Very truly yours,
WIND RIVER SYSTEMS, INC.
By:	/s/ MICHAEL ZELLNER Name: Michael Zellner Title: Vice President, Finance and Chief Financial Officer

The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION UBS WARBURG LLC THOMAS WEISEL PARTNERS LLC
BY CREDIT SUISSE FIRST BOSTON CORPORATION
By:	/s/ RICHARD HART Title: Director

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EXHIBIT 10.54

REGISTRATION RIGHTS AGREEMENT