WIND RIVER SYSTEMS INC
S-8, 2000-04-14
COMPUTER PROGRAMMING SERVICES
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<PAGE>

As filed with the Securities and Exchange Commission on April 14, 2000
                                                  Registration No. 333-
===============================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               ------------------

                                    FORM S-8
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

                               ------------------

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

                               ------------------
        DELAWARE                                       94-2873391
(State of Incorporation)                   (I.R.S. Employer Identification No.)

                               ------------------

                               500 WIND RIVER WAY
                            ALAMEDA, CALIFORNIA 94501
                                 (510) 748-4100
                    (Address of principal executive offices)

                               ------------------

 EMBEDDED SUPPORT TOOLS CORPORATION AMENDED AND RESTATED 1999 STOCK OPTION PLAN
           WIND RIVER SYSTEMS, INC. 1998 NON-OFFICER STOCK OPTION PLAN
                            (Full title of the plans)

                               ------------------

                                RICHARD W. KRABER
                             CHIEF FINANCIAL OFFICER
                            WIND RIVER SYSTEMS, INC.
                               500 WIND RIVER WAY
                            ALAMEDA, CALIFORNIA 94501
                                 (510) 748-4100
            (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)

                               ------------------

                                   Copies to:
                               ANDREA VACHSS, ESQ.
                               COOLEY GODWARD LLP
                               5 PALO ALTO SQUARE
                               3000 EL CAMINO REAL
                           PALO ALTO, CALIFORNIA 94306
                                 (650) 843-5000

                               ------------------

<PAGE>


                                          CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>

=================================================================================================================================

                                                      PROPOSED MAXIMUM          PROPOSED MAXIMUM
 TITLE OF SECURITIES TO        AMOUNT TO BE          OFFERING PRICE PER     AGGREGATE OFFERING PRICE    AMOUNT OF REGISTRATION
      BE REGISTERED             REGISTERED               SHARE (1)                     (1)                       FEE
- -------------------------- ---------------------- ------------------------- -------------------------- -------------------------
<S>                            <C>                   <C>                         <C>                         <C>
Stock Options and Common
Stock (par value $.001)          3,122,855             $8.50 - $34.0625            $77,669,268                 $20,504
=================================================================================================================================

</TABLE>

(1)      Estimated solely for the purpose of calculating the amount of the
         registration fee pursuant to Rule 457(c) and (h)(1) under the
         Securities Act of 1933, as amended (the "Act"). The offering price
         per share and aggregate offering price are based upon (a) the
         weighted average exercise price for shares subject to outstanding
         options granted under the Embedded Support Tools Corporation Amended
         and Restated 1999 Stock Option Plan (the "Embedded Plan") (pursuant
         to Rule 457(h) under the Act) or (b) the average of the high and low
         prices of Registrant's Common Stock as reported on the Nasdaq
         National Market on April 12, 2000, for shares reserved for future
         grant pursuant to the Wind River Systems, Inc. ("Registrant" or
         "Company") 1998 Non-Officer Stock Option Plan (the "Wind River
         Non-Officer Plan") (pursuant to Rule 457(c) under the Act). The
         following chart illustrates the calculation of the registration fee:

<TABLE>
<CAPTION>

    ======================================================================================================================
                                                                             OFFERING PRICE PER     AGGREGATE OFFERING
                     TITLE OF SHARES                     NUMBER OF SHARES           SHARE                  PRICE
    --------------------------------------------------- -------------------- -------------------- ------------------------
<S>                                                             <C>               <C>                       <C>
    Shares issuable pursuant to outstanding stock
    options under the Embedded Plan                               1,122,855          $8.50(1)(a)               $9,544,268
    --------------------------------------------------- -------------------- -------------------- ------------------------
    Shares reserved for future grant under the Wind
    River Non-Officer Plan                                        2,000,000         $34.0625(1)(b)            $68,125,000
    --------------------------------------------------- -------------------- -------------------- ------------------------
    Proposed Maximum Aggregate Offering Price                                                                 $77,669,268
    --------------------------------------------------- -------------------- -------------------- ------------------------
    Registration Fee                                                                                              $20,504
    ======================================================================================================================

</TABLE>

<PAGE>


                 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

         The following documents filed by Wind River Systems, Inc. (the
"Company") with the Securities and Exchange Commission are incorporated by
reference into this Registration Statement:

         (a)  The Company's Annual Report on Form 10-K for the fiscal year
ended January 31, 1999;

         (b)  The Company's quarterly reports on Form 10-Q for the quarters
ended April 30, July 31 and October 31, 1999;

         (c) The Company's Current Reports in Form 8-K filed with the
Commission on May 3, July 16, September 13, November 4 and December 2, 1999,
and February 28 and March 6, 2000;

         (d)  The Company's Amended Current Report in Form 8-K/A filed with
the Commission on April 3, 2000; and

         (e)  The description of the Company's Common Stock set forth in its
Registration Statement on Form 8-A filed with the Commission on March 12,
1993 as amended through the date hereof.

         All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference herein and to be a
part of this registration statement from the date of the filing of such
reports and documents.


                    INDEMNIFICATION OF DIRECTORS AND OFFICERS

         Under Section 145 of the Delaware General Corporation Law the
Company has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act"). The Company's
By-laws also provide that the Company will indemnify its directors and
executive officers, and may indemnify its other officers, employees and other
agents, to the fullest extent not prohibited by Delaware law.

         The Company's Restated Certificate of Incorporation (the "Restated
Certificate") provides that the liability of its directors for monetary
damages shall be eliminated to the fullest extent permissible under Delaware
law. Pursuant to Delaware law, this includes elimination of liability for
monetary damages for breach of the directors' fiduciary duty of care to the
Company and its stockholders. These provisions do not eliminate the
directors' duty of care and, in appropriate circumstances, equitable remedies
such as injunctive or other forms of non-monetary relief will remain
available under Delaware law. In addition, each director will continue to be
subject to liability for breach of the director's duty of loyalty to the
Company, for acts omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any transaction from which the
director derived an improper personal benefit, and for payment of dividends
or approval of stock repurchases or redemptions that are unlawful under
Delaware law. The provision also does not affect a director's
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws.

         The Company has been authorized by the Board to enter into
agreements with its directors and officers that require the Company to
indemnify such persons to the fullest extent authorized or permitted by the
provisions of the Restated Certificate and Delaware law against expenses,
judgments, fines, settlements and other amounts actually and reasonably
incurred (including expenses of a derivative action) in connection with any
proceeding, whether actual or threatened, to which any such person may be
made a party by reason of the fact that such person is or was a director,
officer, employee or other agent of the Company or any of its affiliated
enterprises. Delaware law permits such indemnification provided such person
acted in good faith and in a manner such person reasonably believed to be in
or not opposed to the best interest of the Company and, with respect to any
criminal proceeding, had no



<PAGE>


reasonable cause to believe his or her conduct was unlawful. The
indemnification agreements also set forth certain procedures that will apply
in the event of a claim for indemnification thereunder.

         At present, there is no pending litigation or proceeding involving a
director or officer of the Company as to which indemnification is being
sought nor is the Company aware of any threatened litigation that may result
in claims for indemnification by any officer or director.



<PAGE>




                                    EXHIBITS
<TABLE>
<CAPTION>

EXHIBIT
NUMBER
<S>                 <C>
 5.1                  Opinion of Cooley Godward LLP

23.1                  Consent of PricewaterhouseCoopers LLP

23.2                  Consent of Cooley Godward LLP is contained in Exhibit 5.1
                      to this Registration Statement

24.1                  Power of Attorney is contained on the signature page

99.1                  Embedded Support Tools Corporation Amended and Restated
                      1999 Stock Option Plan

99.2                  Wind River Systems, Inc. 1998 Non-Officer Stock Option
                      Plan

</TABLE>

                                  UNDERTAKINGS

1.       The undersigned registrant hereby undertakes:

         (a)  To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

                (i)      To include any prospectus required by section 10(a)(3)
of the Securities Act;

                (ii)     To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) (Section 230.424(b) of this chapter) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.

                (iii)    To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;

                PROVIDED, HOWEVER, that paragraphs (a)(i) and (a)(ii) do not
         apply if the information required to be included in a post-effective
         amendment by those paragraphs is contained in periodic reports filed
         by the issuer pursuant to section 13 or section 15(d) of the
         Exchange Act that are incorporated by reference herein.

         (b)  That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

         (c)  To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

<PAGE>

2.       The undersigned registrant hereby undertakes that, for purposes of
         determining any liability under the Securities Act, each filing of
         the registrant's annual report pursuant to Section 13(a) or Section
         15(d) of the Exchange Act (and, where applicable, each filing of an
         employee benefit plan's annual report pursuant to section 15(d) of
         the Exchange Act) that is incorporated by reference in the
         Registration Statement shall be deemed to be a new registration
         statement relating to the securities offered herein, and the
         offering of such securities at that time shall be deemed to be the
         initial bona fide offering thereof.

3.       Insofar as indemnification for liabilities arising under the
         Securities Act may be permitted to directors, officers and
         controlling persons of the registrant pursuant to the foregoing
         provisions, or otherwise, the registrant has been advised that in
         the opinion of the Securities and Exchange Commission such
         indemnification is against public policy as expressed in the
         Securities Act and is, therefore, unenforceable. In the event that a
         claim for indemnification against such liabilities (other than the
         payment by the registrant of expenses incurred or paid by a
         director, officer or controlling person of the registrant in the
         successful defense of any action, suit or proceeding) is asserted by
         such director, officer or controlling person in connection with the
         securities being registered, the registrant will, unless in the
         opinion of its counsel the matter has been settled by controlling
         precedent, submit to a court of appropriate jurisdiction the
         question whether such indemnification by it is against public policy
         as expressed in the Securities Act and will be governed by the final
         adjudication of such issue.



<PAGE>



                                   SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-8 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Alameda, State of
California, on April 14, 2000.

                               WIND RIVER SYSTEMS, INC.

                               By: /s/ Richard W. Kraber
                                  ---------------------------------------
                                     Richard W. Kraber
                                     Chief Financial Officer and Vice President



                                   POWER OF ATTORNEY

         KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Thomas St. Dennis and Richard W.
Kraber, and each or any one of them, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or
their or his substitutes or substitute, may lawfully do or cause to be done
by virtue hereof.

         Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>

SIGNATURE                                                 TITLE                                       DATE
<S>                                                    <C>                                         <C>

      /s/ Thomas St. Dennis                               Chief Executive Officer and                 April 14, 2000
- ----------------------------------------                  Director (Principal Executive
         (Thomas St. Dennis)                              Officer)

      /s/ Richard W. Kraber
- ----------------------------------------                  Vice President and Chief Financial          April 14, 2000
         (Richard W. Kraber)                              Officer (Principal Financial Officer)

       /s/ Narendra K. Gupta
- ----------------------------------------                  Director                                    April 14, 2000
          (Narendra K. Gupta)

      /s/ Ronald A. Abelmann
- ----------------------------------------                  Director                                    April 14, 2000
         (Ronald A. Abelmann)

         /s/ John C. Bolger
- ----------------------------------------                  Director                                    April 14, 2000
            (John C. Bolger)

</TABLE>

<PAGE>


<TABLE>

<S>                                                    <C>                                         <C>

      /s/ William B. Elmore
- ----------------------------------------                  Director                                    April 14, 2000
         (William B. Elmore)

       /s/ David B. Pratt
- ----------------------------------------                  Director                                    April 14, 2000
          (David B. Pratt)

</TABLE>

<PAGE>



                                    EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                               DESCRIPTION
<S>                 <C>
 5.1                  Opinion of Cooley Godward LLP

23.1                  Consent of PricewaterhouseCoopers LLP

23.2                  Consent of Cooley Godward LLP is contained in Exhibit 5.1
                      to this Registration Statement

24.1                  Power of Attorney is contained on the signature page

99.1                  Embedded Support Tools Corporation Amended and Restated
                      1999 Stock Option Plan

99.2                  Wind River Systems, Inc. 1998 Non-Officer Stock Option
                      Plan

</TABLE>


<PAGE>

                                                                     EXHIBIT 5.1

                           [COOLEY GODWARD LETTERHEAD]

April 14, 2000

Wind River Systems, Inc.
500 Wind River Way
Alameda, CA  94501

Ladies and Gentlemen:

You have requested our opinion with respect to certain matters in connection
with the filing by Wind River Systems, Inc. (the "Company") of a Registration
Statement on Form S-8 (the "Registration Statement") with the Securities and
Exchange Commission covering the offering of up to (i) 1,122,855 shares of the
Company's common stock, $.001 par value ("Common Stock"), pursuant to the
Embedded Tools Corporation Amended and Restated 1999 Stock Option Plan (the
"1999 Embedded Plan") and (ii) 2,000,000 shares of the Company's Common Stock
pursuant to the Company's 1998 Non-Officer Stock Option Plan (together with the
1999 Embedded Plan referred to as the "Plans").

In connection with this opinion, we have examined the Registration Statement,
your Certificate of Incorporation and Bylaws, as amended, and such other
documents, records, certificates, memoranda and other instruments as we deem
necessary as a basis for this opinion. We have assumed the genuineness and
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as copies thereof, and the due
execution and delivery of all documents where due execution and delivery are a
prerequisite to the effectiveness thereof.

On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the shares of Common Stock, when sold and issued in accordance with the
Plans, the Registration Statement and the related prospectus will be validly
issued, fully paid, and nonassessable.

We consent to the filing of this opinion as an exhibit to the Registration
Statement.

Very truly yours,

COOLEY GODWARD LLP


By:      /s/ Andrea Vachss
  ---------------------------
         Andrea Vachss, Esq.




                                       1.

<PAGE>
                                                                   Exhibit 23.1


                     CONSENT OF PRICEWATERHOUSECOOPERS LLP




                      CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated February 24, 1999 relating to the
consolidated financial statements and financial statement schedules of Wind
River Systems, Inc., which appears in Wind River System's Annual Report on
Form 10-K for the year ended January 31, 1999.

/s/ PricewaterhouseCoopers LLP

San Jose, California
April 14, 2000



<PAGE>
                                                                   Exhibit 99.1

                       EMBEDDED SUPPORT TOOLS CORPORATION

                             AMENDED AND RESTATED

                            1999 STOCK OPTION PLAN

1. PURPOSE. The purpose of this Amended and Restated 1999 Stock Option Plan (the
"Plan") is to encourage employees of Embedded Support Tools Corporation (the
"Company") and of any present or future parent or subsidiary of the Company
(collectively, "Related Corporations"), and other individuals who render
services to the Company or a Related Corporation, by providing opportunities to
purchase stock in the Company pursuant to options granted hereunder which
qualify as "incentive stock options" ("ISOs") under Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code") and options which do not
qualify as ISOs ("Non-Qualified Options"). Both ISOs and Non-Qualified Options
are referred to hereafter individually as an "Option" and collectively as
"Options." As used herein, the terms "parent" and "subsidiary" mean "parent
corporation" and "subsidiary corporation," respectively, as those terms are
defined in Section 424 of the Code.

2. ADMINISTRATION OF THE PLAN.

     A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered by the
Board of Directors of the Company (the "Board") or by a committee appointed by
the Board (the "Committee"). Hereinafter, all references in this Plan to the
"Committee" shall mean the Board if no Committee has been appointed. Subject to
ratification of the grant or authorization of each Option by the Board (if so
required by applicable state law), and subject to the terms of the Plan, the
Committee shall have the authority to (i) determine to whom (from among the
class of employees eligible under paragraph 3 to receive ISOs) ISOs shall be
granted, and to whom (from among the class of individuals and entities eligible
under paragraph 3 to receive Non-Qualified Options) Non-Qualified Options may be
granted; (ii) determine the time or times at which Options shall be granted;
(iii) determine the exercise price of shares subject to each Option, which price
shall not be less than the minimum price specified in paragraph 6; (iv)
determine whether each Option granted shall be an ISO or a Non-Qualified Option;
(v) determine (subject to paragraph 7) the time or times when each Option shall
become exercisable and the duration of the exercise period; (vi) extend the
period during which outstanding Options may be exercised; (vii) determine
whether restrictions such as repurchase options are to be imposed on shares
subject to Options and the nature of such restrictions, if any; and (viii)
interpret the Plan and prescribe and rescind rules and regulations relating to
it. If the Committee determines to issue a Non-Qualified Option, it shall take
whatever actions it deems necessary, under Section 422 of the Code and the
regulations promulgated thereunder, to ensure that such Option is not treated as
an ISO. The interpretation and construction by the Committee of any provisions
of the Plan or of any Option granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time adopt such rules
and regulations for carrying out the Plan as it may deem advisable. No member of
the Board or the Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any Option granted under it.

     B. COMMITTEE ACTIONS. The Committee may select one of its members as its
chairman, and shall hold meetings at such time and places as it may determine. A
majority of the Committee shall constitute a quorum and acts by a majority of
the members of the Committee at a meeting at which a quorum is present, or acts
reduced to or approved in writing by a majority of the members of the Committee
(if consistent with applicable state law), shall constitute the valid acts of
the Committee. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.

     C. GRANT OF OPTIONS TO BOARD MEMBERS. Options may be granted to members of
the Board. All grants of Options to members of the Board shall in all respects


<PAGE>

be made in accordance with the provisions of this Plan applicable to other
eligible persons. Members of the Board who either (i) are eligible to receive
grants of Options pursuant to the Plan or (ii) have been granted Options may
vote on any matters affecting the administration of the Plan or the grant of
any Options pursuant to the Plan, except that no such member shall act upon
the granting to himself or herself of Options, but any such member may be
counted in determining the existence of a quorum at any meeting of the Board
during which action is taken with respect to the granting to such member of
Options.

     D. PERFORMANCE-BASED COMPENSATION. The Board, in its discretion, may take
such action as may be necessary to ensure that Options granted under the Plan
qualify as "qualified performance-based compensation" within the meaning of
Section 162(m) of the Code and applicable regulations promulgated thereunder
("Performance-Based Compensation"). Such action may include, in the Board's
discretion, some or all of the following (i) if the Board determines that
Options granted under the Plan generally shall constitute Performance-Based
Compensation, the Plan shall be administered, to the extent required for such
Options to constitute Performance-Based Compensation, by a Committee consisting
solely of two or more "outside directors" (as defined in applicable regulations
promulgated under Section 162(m) of the Code), (ii) if any Non-Qualified Options
with an exercise price less than the fair market value per share of Common Stock
are granted under the Plan and the Board determines that such Options should
constitute Performance-Based Compensation, such Options shall be made
exercisable only upon the attainment of a pre-established, objective performance
goal established by the Committee, and such grant shall be submitted for, and
shall be contingent upon shareholder approval and (iii) Options granted under
the Plan may be subject to such other terms and conditions as are necessary for
compensation recognized in connection with the exercise or disposition of such
Option or the disposition of Common Stock acquired pursuant to such Option, to
constitute Performance-Based Compensation.

3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees of the
Company or any Related Corporation. Non-Qualified Options may be granted to any
employee, officer or director (whether or not also an employee) or consultant of
the Company or any Related Corporation. The Committee may take into
consideration a optionee's individual circumstances in determining whether to
grant an ISO or a Non-Qualified Option. The granting of any Option to any
individual or entity shall neither entitle that individual or entity to, nor
disqualify such individual or entity from, participation in any other grant of
Options.

4. STOCK. The stock subject to Options shall be authorized but unissued shares
of Common Stock of the Company, par value $0.10 per share (the "Common Stock"),
or shares of Common Stock reacquired by the Company in any manner. The aggregate
number of shares which may be issued pursuant to the Plan is 4,000,000, subject
to adjustment as provided in paragraph 13. If any Option granted under the Plan
shall expire or terminate for any reason without having been exercised in full
or shall cease for any reason to be exercisable in whole or in part or shall be
repurchased by the Company, the shares subject to such Option shall again be
available for grants of Options under the Plan. No employee of the Company or
any Related Corporation may be granted Options to acquire, in the aggregate,
more than 500,000 shares of Common Stock under the Plan during any fiscal year
of the Company. If any Option granted under the Plan shall expire or terminate
for any reason without having been exercised in full or shall cease for any
reason to be exercisable in whole or in part or shall be repurchased by the
Company, the shares subject to such Option shall be included in the
determination of the aggregate number of shares of Common Stock deemed to have
been granted to such employee under the Plan.

5. GRANTING OF OPTIONS. Options may be granted under the Plan at any time after
June 1, 1999 and prior to June 15, 2009. The date of grant of an Option under
the Plan will be the date specified by the Committee at the time it grants the
Option; provided, however, that such date shall not be prior to the date on
which the Committee acts to approve the grant.

6. MINIMUM OPTION PRICE; ISO LIMITATIONS.


<PAGE>

     A. PRICE FOR NON-QUALIFIED OPTIONS. Subject to Paragraph 2D (relating to
compliance with Section 162(m) of the Code), the exercise price per share
specified in the agreement relating to each Non-Qualified Option granted under
the Plan shall in no event be less than the minimum legal consideration required
therefor under the laws of any jurisdiction in which the Company or its
successors in interest may be organized.

     B. PRICE FOR ISOs. The exercise price per share specified in the agreement
relating to each ISO granted under the Plan shall not be less than the fair
market value per share of Common Stock on the date of such grant. In the case of
an ISO to be granted to an employee owning stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any Related Corporation, the price per share specified in the
agreement relating to such ISO shall not be less than one hundred ten percent
(110%) of the fair market value per share of Common Stock on the date of grant.
For purposes of determining stock ownership under this paragraph, the rules of
Section 424(d) of the Code shall apply.

     C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible employee may be
granted Options treated as ISOs only to the extent that, in the aggregate under
this Plan and all incentive stock option plans of the Company and any Related
Corporation, ISOs do not become exercisable for the first time by such employee
during any calendar year with respect to stock having a fair market value
(determined at the time the ISOs were granted) in excess of $100,000. The
Company intends to designate any Options granted in excess of such limitation as
Non-Qualified Options.

     D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is granted
under the Plan, the Company's Common Stock is publicly traded, "fair market
value" shall be determined as of the date of grant or, if the prices or quotes
discussed in this sentence are unavailable for such date, the last business day
for which such prices or quotes are available prior to the date of grant and
shall mean (i) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is traded, if the Common Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date) of the Common
Stock on the Nasdaq National Market, if the Common Stock is not then traded on a
national securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the Nasdaq
National Market. If the Common Stock is not publicly traded at the time an
Option is granted under the Plan, "fair market value" shall be deemed to be the
fair value of the Common Stock as determined by the Committee after taking into
consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.

7. OPTION DURATION. Subject to earlier termination as provided in paragraphs
9 and 10 or in the agreement relating to such Option, each Option shall
expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee
owning stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Related
Corporation, as determined under paragraph 6(B). Subject to earlier
termination as provided in paragraphs 9 and 10, the term of each ISO shall be
the term set forth in the original instrument granting such ISO, except with
respect to any part of such ISO that is converted into a Non-Qualified Option
pursuant to paragraph 16.

8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through 12,
each Option granted under the Plan shall be exercisable as follows:

     A. VESTING. The Option shall either be fully exercisable on the date of
grant or shall become exercisable thereafter in such installments as the
Committee may specify.

     B. FULL VESTING OF INSTALLMENTS. Once an installment becomes exercisable it


<PAGE>

shall remain exercisable until expiration or termination of the Option, unless
otherwise specified by the Committee.

     C. PARTIAL EXERCISE. Each Option or installment may be exercised at any
time or from time to time, in whole or in part, for up to the total number of
shares with respect to which it is then exercisable.

     D. ACCELERATION OF VESTING. The Committee shall have the right to
accelerate the date on which any installment of any Option becomes exercisable;
provided that the Committee shall not, without the consent of an optionee,
accelerate the permitted exercise date of any installment of any Option granted
to any employee as an ISO (and not previously converted into a Non-Qualified
Option pursuant to paragraph 16) if such acceleration would violate the annual
vesting limitation contained in Section 422(d) of the Code, as described in
paragraph 6(C).

9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the agreement
relating to such ISO, if an ISO optionee ceases to be employed by the Company
and all Related Corporations other than by reason of death or disability as
defined in paragraph 10, no further installments of his or her ISOs shall
become exercisable, and his or her ISOs shall terminate after the passage of
three months from the date of termination of his or her employment, but in no
event later than on their specified expiration dates, except to the extent
that such ISOs (or unexercised installments thereof) have been converted into
Non-Qualified Options pursuant to paragraph 16. For purposes of this
paragraph 9, employment shall be considered as continuing uninterrupted
during any bona fide leave of absence (such as those attributable to illness,
military obligations or governmental service) provided that the period of
such leave does not exceed 90 days or, if longer, any period during which
such optionee's right to reemployment is guaranteed by statute or by
contract. A bona fide leave of absence with the written approval of the
Committee shall not be considered an interruption of employment under this
paragraph 9, provided that such written approval contractually obligates the
Company or any Related Corporation to continue the employment of the optionee
after the approved period of absence. ISOs granted under the Plan shall not
be affected by any change of employment within or among the Company and
Related Corporations, so long as the optionee continues to be an employee of
the Company or any Related Corporation. Nothing in the Plan shall be deemed
to give any optionee the right to be retained in employment or other service
by the Company or any Related Corporation for any period of time.

10. DEATH; DISABILITY.

     A. DEATH. If an ISO optionee ceases to be employed by the Company and all
Related Corporations by reason of his or her death, any ISO owned by such
optionee may be exercised, to the extent otherwise exercisable on the date of
death, by the estate, personal representative or beneficiary who has acquired
the ISO by will or by the laws of descent and distribution, until the earlier of
(i) the specified expiration date of the ISO or (ii) 180 days from the date of
the optionee's death.

     B. DISABILITY. If an ISO optionee ceases to be employed by the Company and
all Related Corporations by reason of his or her disability, such optionee shall
have the right to exercise any ISO held by him or her on the date of termination
of employment, to the extent of the number of shares with respect to which he or
she could have exercised it on that date, until the earlier of (i) the specified
expiration date of the ISO or (ii) 180 days from the date of the termination of
the optionee's employment. For the purposes of the Plan, the term "disability"
shall mean "permanent and total disability" as defined in Section 22(e)(3) of
the Code or any successor statute.

11. ASSIGNABILITY. No ISO shall be assignable or transferable by the optionee
except by will, or by the laws of descent and distribution, and during the
lifetime of the optionee shall be exercisable only by such optionee. Options
other than ISOs shall be transferable to the extent set forth in the agreement
relating to such Option.


<PAGE>

12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by instruments
(which need not be identical) in such forms as the Committee may from time to
time approve. Such instruments shall conform to the terms and conditions set
forth in paragraphs 6 through 11 hereof and may contain such other provisions as
the Committee deems advisable which are not inconsistent with the Plan,
including restrictions applicable to shares of Common Stock issuable upon
exercise of Options. The Committee may specify that any Non-Qualified Option
shall be subject to the restrictions set forth herein with respect to ISOs, or
to such other termination and cancellation provisions as the Committee may
determine. The Committee may from time to time confer authority and
responsibility on one or more of its own members and/or one or more officers of
the Company to execute and deliver such instruments. The proper officers of the
Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.

13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:

     A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock shall be
subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.

     B. CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated with or
acquired by another entity in a merger or other reorganization in which the
holders of the outstanding voting stock of the Company immediately preceding the
consummation of such event, shall, immediately following such event, hold, as a
group, less than a majority of the voting securities of the surviving or
successor entity, or in the event of a sale of all or substantially all of the
Company's assets or otherwise (each, an "Acquisition"), the Committee or the
board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding Options, either (i)
make appropriate provision for the continuation of such Options by substituting
on an equitable basis for the shares then subject to such Options either (a) the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition, (b) shares of stock of the surviving or
successor corporation or (c) such other securities as the Successor Board deems
appropriate, the fair market value of which shall not materially exceed the fair
market value of the shares of Common Stock subject to such Options immediately
preceding the Acquisition; or (ii) upon written notice to the optionees, provide
that all Options must be exercised, to the extent then exercisable or to be
exercisable as a result of the Acquisition, within a specified number of days of
the date of such notice, at the end of which period the Options shall terminate;
or (iii) terminate all Options in exchange for a cash payment equal to the
excess of the fair market value of the shares subject to such Options (to the
extent then exercisable or to be exercisable as a result of the Acquisition)
over the exercise price thereof.

     C. RECAPITALIZATION OR REORGANIZATION. In the event of a recapitalization
or reorganization of the Company (other than a transaction described in
subparagraph B above) pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares of Common Stock,
an optionee upon exercising an Option shall be entitled to receive for the
purchase price paid upon such exercise the securities he or she would have
received if he or she had exercised such Option prior to such recapitalization
or reorganization.

     D. MODIFICATION OF ISOs. Notwithstanding the foregoing, any adjustments
made pursuant to subparagraphs A, B or C with respect to ISOs shall be made only
after the Committee, after consulting with counsel for the Company, determines
whether such adjustments would constitute a "modification" of such ISOs (as that



<PAGE>

term is defined in Section 424 of the Code) or would cause any adverse tax
consequences for the holders of such ISOs. If the Committee determines that such
adjustments made with respect to ISOs would constitute a modification of such
ISOs or would cause adverse tax consequences to the holders, it may refrain from
making such adjustments.

     E. DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or
liquidation of the Company, each Option will terminate immediately prior to the
consummation of such proposed action or at such other time and subject to such
other conditions as shall be determined by the Committee.

     F. ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.

     G. FRACTIONAL SHARES. No fractional shares shall be issued under the Plan
and the optionee shall receive from the Company cash in lieu of such fractional
shares.

     H. ADJUSTMENTS. Upon the happening of any of the events described in
subparagraphs A, B or C above, the class and aggregate number of shares set
forth in paragraph 4 hereof that are subject to Options which previously have
been or subsequently may be granted under the Plan shall also be appropriately
adjusted to reflect the events described in such subparagraphs. The Committee or
the Successor Board shall determine the specific adjustments to be made under
this paragraph 13 and, subject to paragraph 2, its determination shall be
conclusive.

14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify
the number of shares as to which such Option is being exercised, accompanied
by full payment of the purchase price therefor either (a) in United States
dollars in cash or by check, (b) at the discretion of the Committee, through
delivery of shares of Common Stock having a fair market value equal as of the
date of the exercise to the cash exercise price of the Option, (c) at the
discretion of the Committee, by delivery of the optionee's personal recourse
note bearing interest payable not less than annually at no less than 100% of
the lowest applicable Federal rate, as defined in Section 1274(d) of the
Code, (d) at the discretion of the Committee and consistent with applicable
law, through the delivery of an assignment to the Company of a sufficient
amount of the proceeds from the sale of the Common Stock acquired upon
exercise of the Option and an authorization to the broker or selling agent to
pay that amount to the Company, which sale shall be at the participant's
direction at the time of exercise, or (e) at the discretion of the Committee,
by any combination of (a), (b), (c) and (d) above. If the Committee exercises
its discretion to permit payment of the exercise price of an ISO by means of
the methods set forth in clauses (b), (c), (d) or(e) of the preceding
sentence, such discretion shall be exercised in writing at the time of the
grant of the ISO in question. The holder of a Option shall not have the
rights of a shareholder with respect to the shares covered by his Option
until the date of issuance of a stock certificate to such holder for such
shares. Except as expressly provided above in paragraph 13 with respect to
changes in capitalization and stock dividends, no adjustment shall be made
for dividends or similar rights for which the record date is before the date
such stock certificate is issued.

15. TERM AND AMENDMENT OF PLAN. The 1999 Stock Option Plan was adopted by the
Board on June 15, 1999 and approved by the stockholders of the Company on June
15, 1999. This Plan was adopted by the Board on December 17, 1999. The Plan
shall expire at the end of the day on June 15, 2009 (except as to Options
outstanding on that date). Subject to the provisions of paragraph 5 above,
Options may be granted under the Plan prior to the date of stockholder approval
of the Plan. The Board may terminate or amend the Plan in any respect at any
time, except that, without the approval of the stockholders obtained within 12


<PAGE>

months before or after the Board adopts a resolution authorizing any of the
following actions: (a) the total number of shares that may be issued under the
Plan may not be increased(except by adjustment pursuant to paragraph 13); (b)
the provisions of paragraph 3 regarding eligibility for grants of ISOs may not
be modified; (c) the provisions of paragraph 6(B) regarding the exercise price
at which shares may be offered pursuant to ISOs may not be modified (except by
adjustment pursuant to paragraph 13); and (d) the expiration date of the Plan
may not be extended. Except as otherwise provided in this paragraph 15, in no
event may action of the Board or stockholders alter or impair the rights of an
optionee, without such optionee's consent, under any Option previously granted
to such optionee.

16. MODIFICATIONS OF ISOs; CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS.
Subject to Paragraph 13D, without the prior written consent of the holder of an
ISO, the Committee shall not alter the terms of such ISO (including the means of
exercising such ISO) if such alteration would constitute a modification (within
the meaning of Section 424(h)(3) of the Code). The Committee, at the written
request or with the written consent of any optionee, may in its discretion take
such actions as may be necessary to convert such optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the optionee is an employee of
the Company or a Related Corporation at the time of such conversion. Such
actions may include, but shall not be limited to, extending the exercise period
or reducing the exercise price of the appropriate installments of such ISOs. At
the time of such conversion, the Committee (with the consent of the optionee)may
impose such conditions on the exercise of the resulting Non-Qualified Options as
the Committee in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to
give any optionee the right to have such optionee's ISOs converted into
NonQualified Options, and no such conversion shall occur until and unless the
Committee takes appropriate action. Upon the taking of such action, the Company
shall issue separate certificates to the optionee with respect to Options that
are Non-Qualified Options and Options that are ISOs.

17. COMPANY'S RIGHT OF FIRST REFUSAL REGARDING OPTION SHARES. An optionee who
desires to dispose of any shares acquired upon exercise of an Option shall first
offer the shares to the Company. The optionee shall provide notice signed by the
optionee to the Company indicating the optionee's desire to dispose of the
shares. The notice shall also specify the number of shares that the optionee
intends to dispose of. The Company shall have the irrevocable and exclusive
first option, but not the obligation, to purchase all or a portion of the
shares, provided the Company provides notice of its election to purchase the
shares within 60 days after the Company receives the optionee's notice. The
purchase price to be paid by the Company for the shares being offered by the
optionee shall be the Fair Market Value of the shares on the date of the
optionee's notice, and payment shall be made in full in cash at closing. If an
Initial Public Offering occurs, the provisions of this paragraph 17 shall cease
to be effective.

18. COMPANY'S RIGHT TO REPURCHASE OPTION SHARES. The Company shall have the
right to repurchase any shares purchased by an optionee following such
optionee's termination of service or affiliation with the Company for any
reason. The price for repurchasing the shares shall be the Fair Market Value of
the shares on the date the Company exercises its repurchase right. If the
Company fails to exercise such repurchase right within 60 days following the
date of such optionee's termination of service or affiliation, the Company shall
be deemed to have waived such right. If an Initial Public Offering occurs, the
provisions of this paragraph 18 shall cease to be effective.

19. RESTRICTIONS ON EXERCISE RELATING TO S-ELECTION. The Company has made a
valid election to be treated as a Subchapter S corporation under the Code. If
such S-election is valid at the time an optionee elects to exercise his or her
Option, the Committee shall be authorized to take reasonable steps to preserve
the Company's S-election. The optionee agrees to indemnify and hold the Company
and its other stockholders harmless from and against any and all damages, costs,
liabilities and expenses arising out of or in connection with any breach of such


<PAGE>

representations and warranties or violation of the Company's S-election caused
by such optionee's exercise of his or her Option. Each optionee recognizes and
agrees that the Company makes no representation or warranty whatsoever as to the
current status of the Company's subchapter S-election under the Code, and the
Company or any of its stockholders who own voting stock of the Company may
terminate or otherwise cause the Company to fail to qualify as a subchapter S
corporation, and each optionee assumes all investment, tax and all other
economic risks and liabilities associated with the Company's failure to qualify
as an S-corporation, including without limitation, any and all income tax and
other liability related thereto. The optionee further acknowledges that if he or
she exercises his or her Option and if the Company at the time has a valid
Selection in effect, the optionee may have certain tax liabilities arising by
virtue of his or her owning stock in a S-corporation. The optionee understands
and acknowledges that the Company shall be under no obligation to make
distributions or other payments to the optionee in order to pay such tax
obligations.

20. APPLICATION Of FUNDS. The proceeds received by the Company from the sale of
shares pursuant to Options granted under the Plan shall be used for general
corporate purposes.

21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO granted
under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.

22. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a Non-Qualified
Option, the transfer of a Non-Qualified Stock Option pursuant to an arm's-length
transaction, the making of a Disqualifying Disposition (as defined in paragraph
21), the vesting or transfer of restricted stock or securities acquired on the
exercise of a Option hereunder, or the making of a distribution or other payment
with respect to such stock or securities, the Company may withhold taxes in
respect of amounts that constitute compensation includible in gross income. The
Committee in its discretion may condition (i) the exercise of an Option, (ii)
the transfer of a Non-Qualified Stock Option, or (iii) the vesting or
transferability of restricted stock or securities acquired by exercising an
Option, on the optionee's making satisfactory arrangement for such withholding.
Such arrangement may include payment by the optionee in cash or by check of the
amount of the withholding taxes or, at the discretion of the Committee, by the
optionee's delivery of previously held shares of Common Stock or the withholding
from the shares of Common Stock otherwise deliverable upon exercise of a Option
shares having an aggregate fair market value equal to the amount of such
withholding taxes.

23. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver shares
of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares. Government regulations may impose reporting or other
obligations on the Company with respect to the Plan. For example, the Company
may be required to send tax information statements to employees and former
employees that exercise ISOs under the Plan, and the Company may be required to
file tax information returns reporting the income received by optionees in
connection with the Plan.

24. LIABILITY OF THE COMPANY. The Company shall not be liable to any person for
any tax consequences incurred by an optionee or other person with respect to an
Option.

25. GOVERNING LAW. The validity and construction of the Plan and the instruments
evidencing Options shall be governed by the laws of the Commonwealth of
Massachusetts, or the laws of any jurisdiction in which the Company or its
successors in interest may be organized.

<PAGE>
                                                                   Exhibit 99.2


                            WIND RIVER SYSTEMS, INC.
                       1998 NON-OFFICER STOCK OPTION PLAN
                     AS ADOPTED EFFECTIVE ON APRIL 23, 1998
                        STOCKHOLDER APPROVAL NOT REQUIRED
                    ADJUSTED FOR STOCK SPLIT FEBRUARY 4, 1999
                              AMENDED JUNE 24, 1999
                             AMENDED MARCH 30, 2000

1.       PURPOSES.

         (a) The purpose of the Plan is to provide a means by which selected
Employees and Consultants who are not Officers or members of the Board of
Directors may be given an opportunity to benefit from increases in value of the
common stock of the Company through the granting of Nonstatutory Stock Options.
Only Nonstatutory Stock Options may be granted hereunder.

         (b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Consultants who are not Officers or members of
the Board of Directors, to secure and retain the services of such new Employees
and Consultants and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.

2. DEFINITIONS. AS USED HEREIN, THE FOLLOWING DEFINITIONS SHALL APPLY:

         (a) "AFFILIATE" shall mean any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code, or such other parent
corporation or subsidiary corporation designated by the Board.

         (b) "BOARD" shall mean the Committee, if one has been appointed, or the
Board of Directors, if no Committee is appointed.

         (c) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company.

         (d) "CODE" shall mean the Internal Revenue Code of 1986, as amended.

         (e) "COMMITTEE" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed.

         (f) "COMMON STOCK" shall mean the Common Stock of the Company.

         (g) "COMPANY" shall mean Wind River Systems, Inc., a Delaware
corporation.

         (h) "CONSULTANT" shall mean any consultants, independent contractors or
advisers to the Company or an Affiliate (provided that such persons render bona
fide services not in connection with the offering and sale of securities in
capital raising transactions) excluding officers and directors of the Company
and stockholders beneficially owning 10% or more of the Company's Common Stock.



<PAGE>

         (i) "CONTINUOUS SERVICE" shall mean the absence of any interruption or
termination of service to the Company, an Affiliate, or any successors thereto,
whether as an Employee or Consultant. The Board or the Chief Executive Officer
of the Company may determine, in that party's sole discretion, whether
Continuous Service as an Employee or Consultant shall be considered interrupted
in the case of: (i) any leave of absence approved by the Board or the Chief
Executive Officer of the Company, including sick leave, military leave, or any
other personal leave; or (ii) transfers between the Company, Affiliates or their
successors.

         (j) "EMPLOYEE" shall mean any person employed by the Company or by any
Affiliate, excluding officers and directors of the Company and stockholders
beneficially owning 10% or more of the Company's Common Stock.

         (k) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.

         (l) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock of the Company determined as follows:

                  (i) If the Common Stock is listed on any established stock
exchange, or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in Common Stock) on the trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;

                  (ii) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.

         (m) "NONSTATUTORY STOCK OPTION" shall mean an Option not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.

         (n) "OFFICER" shall mean a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder and any other Employees of the Company whom
the Board or the Committee classifies as "Officer" in its sole discretion.

         (o) "OPTION" shall mean a Nonstatutory Stock Option granted pursuant to
the Plan.

         (p) "OPTION AGREEMENT" shall mean a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms and conditions
of the Plan.

         (q) "OPTIONED STOCK" shall mean the Common Stock subject to an Option.

         (r) "OPTIONEE" shall mean an Employee or Consultant who receives an
Option.

         (s) "PLAN" shall mean this 1998 Non-Officer Stock Option Plan.


                                       2
<PAGE>

         (t) "SHARE" shall mean a share of Common Stock, as adjusted in
accordance with Section 11 of the Plan.

3.       STOCK SUBJECT TO THE PLAN.

         Subject to the provisions of Section 11 of the Plan, the maximum
aggregate number of Shares which may be optioned and sold under the Plan is five
million four hundred fifty thousand (5,450,000) shares of Common Stock. The
Shares may be authorized, but unissued, or reacquired Common Stock. If an Option
should expire or become unexercisable for any reason without having been
exercised in full, the unpurchased Shares which were subject thereto shall,
unless the Plan shall have been terminated, become available for future grant
under the Plan.

4.       ADMINISTRATION OF THE PLAN.

         (a) PROCEDURE. The Plan shall be administered by the Board of
Directors. The Board of Directors may appoint a Committee consisting of not less
than two members of the Board of Directors to administer the Plan on behalf of
the Board of Directors, subject to such terms and conditions as the Board of
Directors may prescribe. Once appointed, the Committee shall continue to serve
until otherwise directed by the Board of Directors. From time to time the Board
of Directors may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause), and appoint new members
in substitution therefor, fill vacancies however caused and remove all members
of the Committee, and thereafter directly administer the Plan. Notwithstanding
anything in this Section 4 to the contrary, at any time the Board of Directors
or the Committee may delegate to a committee of one or more members of the Board
of Directors the authority to grant Options to all Employees and Consultants or
any portion or class thereof.

         (b) POWERS OF THE BOARD. Subject to the provisions of the Plan, the
Board shall have such authority with regard to the Plan and the options as
determined by the Board of Directors, including the authority, in its
discretion: (i) to grant options under the Plan, provided, however, that only
nonstatutory options may be granted under the Plan; (ii) to determine, upon
review of relevant information and in accordance with Section 8(c) of the Plan,
the Fair Market Value of the Common Stock; (iii) to determine the exercise price
per share of Options to be granted, which exercise price shall be determined in
accordance with Section 8(a) of the Plan; (iv) to determine the Employees or
Consultants to whom, and the time or times at which, Options shall be granted
and the number of Shares to be represented by each Option, provided that no
Options may be granted to persons who are neither Employees nor Consultants; (v)
to interpret the Plan; (vi) to prescribe, amend and rescind rules and
regulations relating to the Plan; (vii) to determine the terms and provisions of
each Option granted (which need not be identical) in accordance with the Plan,
and, with the consent of the holder thereof with respect to any adverse change,
modify or amend each Option; (viii) to accelerate or defer (the latter with the
consent of the Optionee) the exercise date and vesting of any Option; (ix) to
authorize any person to execute on behalf of the Company any instrument required
to effectuate the grant of an Option previously granted by the Board; and (x) to
make all other determinations deemed necessary or advisable for the
administration of the Plan.


                                       3
<PAGE>

         (c) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.

5.       ELIGIBILITY.

         Options may be granted only to Employees or Consultants as defined in
Section 2 hereof. An Employee or Consultant who has been granted an Option may,
if he or she is otherwise eligible, be granted an additional Option or Options.
Notwithstanding the foregoing, no Employee who is an Officer of the Company or
who is a member of the Board of Directors shall be entitled to receive the grant
of an Option under the Plan.

         The Plan shall not confer upon any Optionee any right with respect to
continuation of employment or consulting with the Company, nor shall it
interfere in any way with the Optionee's right or the Company's right to
terminate the Optionee's employment at any time or the Optionee's consulting for
the Company pursuant to the terms of the Consultant's agreement with the
Company.

6.       TERM OF THE PLAN.

         The Plan shall become effective upon its adoption by the Board of
Directors. It shall continue in effect until terminated under Section 13 of the
Plan.

7.       TERM OF OPTION.

         The term of each Option shall be ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.

8.       EXERCISE PRICE, CONSIDERATION AND VESTING.

         (a) EXERCISE PRICE. The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be no less than 85% of the Fair
Market Value per Share on the date of grant. Notwithstanding the foregoing, an
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.

         (b) CONSIDERATION. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Board and may consist entirely of (i) cash or check; (ii)
other shares of the Common Stock of the Company having a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which the Option shall be exercised, including by delivering to the Company an
attestation of ownership of owned and unencumbered shares of the Common Stock of
the Company in a form approved by the Company; (iii) payment pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
which, prior to the issuance of Common Stock, results in either the receipt of
cash (or check) by the Company or the receipt of irrevocable instructions to pay
the aggregate exercise price to the Company from the sales proceeds; (iv) any
combination of such methods of payment; or (v) such other consideration and


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<PAGE>

method of payment for the issuance of Shares to the extent permitted under
applicable law. In making its determination as to the type of consideration to
accept, the Board shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.

         (c) VESTING. The total number of Shares subject to an Option may, but
need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that, from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the Shares allotted to that period, and may be
exercised with respect to some or all of the Shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
Section 8(c) are subject to any Option provisions governing the minimum number
of Shares as to which an Option may be exercised.

9.       EXERCISE OF OPTION.

         (a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.

                  An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(c) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan. An Option
may not be exercised for a fraction of a Share.

                  Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

                  The Option may, but need not, include a provision whereby the
Optionee may elect at any time while an Employee or Consultant (or while an
officer or director of the Company) to exercise the Option as to any part or all
of the shares subject to the Option, subject to a repurchase right in favor of
the Company on such terms as the Board shall establish.

         (b) TERMINATION OF SERVICE AS AN EMPLOYEE OR CONSULTANT. If an
Optionee's Continuous Service as an Employee or Consultant ceases for any
reason other than death or disability, the Optionee may, but only within
three (3) months (or such other period of time as is


                                       5
<PAGE>

determined by the Board) after the date the Optionee's Continuous Service
as an Employee or Consultant ceases, exercise the Option to the extent that
the Optionee was entitled to exercise it at the date of such termination. To
the extent that the Optionee was not entitled to exercise the Option at the
date of such termination, or if the Optionee does not exercise such Option
(which the Optionee was entitled to exercise) within the time specified
herein, the Option shall terminate.

         (c) DEATH OF OPTIONEE. In the event of the death during the term of
the Option of an Optionee who is at the time of his or her death an Employee
or Consultant and who shall have been in Continuous Service as an Employee or
Consultant since the date of grant of the Option, or in the event of the
death of an Optionee within three (3) months following the termination of the
Optionee's Continuous Service as an Employee or Consultant for any other
reason, the Option may be exercised at any time within eighteen (18) months
(or such other period of time as is determined by the Board) following the
date of death by the Optionee's estate or by a person who acquired the right
to exercise the Option by bequest or inheritance, to the extent that the
Optionee was entitled to exercise it at the date of such termination. To the
extent that the Optionee was not entitled to exercise the Option at the date
of such termination, or if the Option is not exercised (to the extent the
Optionee was entitled to exercise) within the time specified herein, the
Option shall terminate.

         (d) DISABILITY OF OPTIONEE. In the event of the disability during the
term of the Option of an Optionee who is at the time of his or her disability an
Employee or Consultant and who shall have been in Continuous Service as an
Employee or Consultant since the date of grant of the Option, the Optionee may,
but only within twelve (12) months (or such other period of time as is
determined by the Board) after the date the Optionee ceases to be an Employee or
Consultant on account of such disability, exercise the Option to the extent that
the Optionee was entitled to exercise it at the date of such termination. To the
extent that the Optionee was not entitled to exercise the Option at the date of
such termination, or if the Optionee does not exercise such Option (which the
Optionee was entitled to exercise) within the time specified herein, the Option
shall terminate.

         (e) WITHHOLDING. To the extent provided by the terms of the Option
Agreement, the Optionee may satisfy any federal, state or local tax
withholding obligation relating to the exercise of such Option by any of the
following means (in addition to the Company's right to withhold from any
compensation paid to Optionee by the Company) or by a combination of such
means: (i) tendering a cash payment; (ii) authorizing the Company to withhold
Shares from the Shares otherwise issuable to the Optionee as a result of the
exercise of the Option; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock of the Company.

10.      TRANSFERABILITY OF OPTIONS.

         Except as otherwise expressly provided in the terms of the Option
Agreement, the Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. Notwithstanding the foregoing, the Optionee may,
by delivering written notice to the Company, in a form satisfactory to the
Company,


                                       6
<PAGE>

designate a third party who, in the event of the death of the Optionee, shall
thereafter be entitled to exercise the Option.

11.      ADJUSTMENTS UPON CHANGES IN STOCK.

         (a) If any change is made in the stock subject to the Plan, or subject
to any Option, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan and the outstanding Options will be appropriately adjusted in
the class(es) and number of securities and price per share of stock subject to
such outstanding Options. Such adjustments shall be made by the Board, the
determination of which shall be final, binding and conclusive. (The conversion
of convertible securities, cashless exercise of options and net exercise of
warrants shall not be treated as transactions "without receipt of consideration"
by the Company.)

         (b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; or (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's common stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise, then, subject to paragraph
(c) of this Section 11, at the sole discretion of the Board and to the extent
permitted by applicable law: (i) any surviving corporation shall assume any
Options outstanding under the Plan or shall substitute similar Options for those
outstanding under the Plan, (ii) such Stock Awards shall continue in full force
and effect, or (iii) the time during which such Stock Awards become vested or
may be exercised shall be accelerated and any outstanding unexercised rights
under any Stock Awards terminated if not exercised prior to such event. In the
event any surviving corporation or acquiring corporation refuses to assume such
Options or to substitute similar Options for those outstanding under the Plan,
then with respect to Options held by Optionees whose Continuous Service has not
terminated, the vesting shall be accelerated in full, and the Options shall
terminate if not exercised at or prior to such event. With respect to any other
Options outstanding under the Plan, such Options shall terminate if not
exercised prior to such event.

         (c) In the event of either (i) the acquisition by any person, entity or
group within the meaning of Section 13(d) or 14(d) of the Exchange Act or any
comparable successor provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or an Affiliate of the Company) of
the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, which acquisition has not been approved by
resolution of the Company's Board of Directors, or (ii) a change in a majority
of the membership of the Company's Board of Directors within a twenty-four (24)
month period where the selection of such majority either (A) was not approved by
a majority of the members of the Board of Directors at the beginning of such
twenty-four (24) month period or (B) occurred as the result of an actual or
threatened "Election Contest" (as described in Rule 14a-11 promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of


                                       7
<PAGE>

any person other than the Board (a "Proxy Contest"), including by reason of
any agreement intended to avoid or settle any Election Contest or Proxy
Contest, then to the extent not prohibited by applicable law, the time during
which options outstanding under the Plan may be exercised shall be
accelerated prior to such event, but only to the extent that such options
would have become exercisable within thirty (30) months of the date of such
event, and the options terminated if not exercised after such acceleration
and at or prior to such event.

12.      TIME OF GRANTING OPTIONS.

         The date of grant of an Option shall, for all purposes, be the date on
which the Board makes the determination granting such Option. Notice of the
determination shall be given to each Employee or Consultant to whom an Option is
so granted within a reasonable time after the date of such grant.

13.      AMENDMENT AND TERMINATION OF THE PLAN.

         (a) AMENDMENT AND TERMINATION. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable.

         (b) EFFECT OF AMENDMENT OR TERMINATION. Options granted before
amendment of the Plan shall not be impaired any amendment unless mutually agreed
otherwise between the Optionee and the Company, which agreement must be in
writing and signed by the Optionee and the Company.

14.      SECURITIES LAW COMPLIANCE.

         Notwithstanding any provisions relating to vesting contained herein or
in an Option, no Option granted hereunder may be exercised unless the shares
issuable upon exercise of such option are then registered under the Securities
Act of 1933, as amended.

15.      RESERVATION OF SHARES.

         The Company, during the term of this Plan, will at all times reserve
and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

         Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.

16.      OPTION AGREEMENT.

         Options shall be evidenced by written Option Agreements in such form or
forms as the Board or the Committee shall approve.


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