Document:

1994 Stock Incentive Plan

 EXHIBIT 10.3 
 MEDICAL ACTION INDUSTRIES INC. 
 1994 STOCK INCENTIVE PLAN, AS AMENDED

 SECTION 1 DEFINITIONS 
 1.1
Definitions. Whenever used herein, the masculine pronoun shall be deemed to include the feminine and the singular to include the plural, unless the context clearly indicates otherwise, and the following capitalized words and phrases are used
herein within the meaning thereafter ascribed: 
 (a) “Board of Directors” means the board of directors of the Company.

 (b) “Change in Control” means the first to occur of the following events: 
 (i) any person (as defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof), excluding the
Company, any Subsidiary and any employee benefit plan sponsored or maintained by the Company or any Subsidiary (including any trustee of such plan acting as trustee), but including ‘group’ as defined in Section 13(d)(3) of the
Exchange Act (a “Person”), becomes the beneficial owner of shares of the Company having at least twenty (20%) percent of the total number of votes that may be cast for the election of directors of the Company (the “Voting
Shares”); provided that no Change of Control will occur as a result of an acquisition of stock by the Company which increases, proportionately, the stock representing the voting power of the Company, and provided further that if such person or
group acquires stock representing more than twenty percent (20%) of the voting power of the Company by reason of share purchases by the Company, and after such share purchases by the Company acquires any additional shares representing the
voting power of the Company, then a Change in Control shall occur; 
 (ii) the shareholders of the Company shall approve any
merger or other business combination of the Company, sale of the Company’s assets or combination of the foregoing transactions (a “Transaction”) other than a Transaction involving only the Company and one or more of its Subsidiaries,
or a Transaction immediately following which the shareholders of the Company immediately prior to the Transaction continue to have a majority of the voting power in the resulting entity excluding for this purpose any shareholder owning directly or
indirectly more than ten percent (10%) of the shares of the other company involved in the merger; or 
 (iii) within any
24-month period beginning on or after June 30, 1994, who were directors of the Company immediately before the beginning of such period (the “Incumbent Directors”) shall cease (for any reason other than death) to constitute at least a
majority of the Board of Directors or the board of directors of any successor to the Company, provided that any director who was not a director as of July 1, 1994 shall be deemed to be an Incumbent Director if such director was elected to the
Board of Directors by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually or by prior operation of this clause (iii); and provided 

 
further that any director elected to the Board of Directors to avoid or settle a threatened or actual proxy contest shall in no event be deemed to be an
Incumbent Director. 
 (c) “Code” means the Internal Revenue Code of 1986, as amended. 
 (d) “Committee” means the committee appointed by the Board of Directors to administer the Plan. The Committee shall consist of at least
two members of the Board of Directors, each of whom shall be a “disinterested person”, as defined in Rule 16b-3 as promulgated under the Exchange Act. 
 (e) “Company” means Medical Action Industries Inc., a Delaware corporation. 
 (f)
“Disability” has the same meaning as provided in the long-term disability plan or policy maintained or, if applicable, most recently maintained, by the Company or, if applicable, any affiliate of the Company for the Participant. If
no long-term disability plan or policy was ever maintained on behalf of the Participant or, if the determination of Disability relates to an Incentive Stock Option, disability shall mean the condition described in Code Section 22(e)(3), as
amended from time to time. In the event of a dispute, the determination of Disability shall be made by the Committee and shall be supported by advice of a physician competent in the area to which such Disability relates. 
 (g) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time. 
 (h) “Fair Market Value” with regard to a date means the closing price at which Stock shall have been sold on the last trading date prior
to that date as reported by the National Association of Securities Dealers Automated Quotation System (or, if applicable, as reported by a national securities exchange selected by the Committee on which the shares of Stock are then actively traded)
and published in The Wall Street Journal; provided that, for purposes of granting awards other than Incentive Stock Options, Fair Market Value of the shares of Stock may be determined by the Committee by reference to the average market value
determined over a period certain or as of specified dates, to a tender offer price for the shares of Stock (if settlement of an award is triggered by such an event) or to any other reasonable measure of fair market value. 
 (i) “Option” means a non-qualified stock option or an incentive stock option. 
 (j) “Over 10% Owner” means an individual who at the time an Incentive Stock Option is granted owns Stock possessing more than 10% of the
total combined voting power of the Company or one of its Subsidiaries, determined by applying the attribution rules of Code Section 424(d). 
 (k) “Participant” means an individual who receives a Stock Incentive hereunder. 
 (l) “Plan”
means the Medical Action Industries Inc 1994 Stock Incentive Plan. 
 (m) “Stock” means the Company’s common stock,
$.001 par value. 

 (n) “Stock Incentive Agreement” means an agreement between the Company and a Participant
or other documentation evidencing an award of a Stock Incentive. 
 (o) “Stock Incentive Program” means a written program
established by the Committee, pursuant to which Stock Incentives are awarded under the Plan under uniform terms, conditions and restrictions set forth in such written program. 
 (p) “Stock Incentives” means, collectively, Incentive Stock Options, Non-Qualified Stock Options and Stock Awards. 
 (q) “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, with
respect to Incentive Stock Options, at the time of the granting of the Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain. 
 SECTION 2 THE STOCK INCENTIVE PLAN 
 2.1 Purpose of the Plan. The Plan is intended to (a) provide incentive to officers and key employees of the Company and its affiliates to stimulate their
efforts toward the continued success of the Company and to operate and manage the business in a manner that will provide for the long-term growth and profitability of the Company; (b) encourage stock ownership by officers and key employees by
providing them with a means to acquire a proprietary interest in the Company, acquire shares of Stock, or to receive compensation which is based upon appreciation in the value of Stock; and (c) provide a means of obtaining, rewarding and
retaining key personnel. 
 2.2 Stock Subject to the Plan. Subject to adjustment in accordance with Section 5.2, 2,350,000 shares of Stock
(the “Maximum Plan Shares”) are hereby reserved exclusively for issuance pursuant to Stock Incentives. At no time shall the Company have outstanding Stock Incentives subject to Section 16 of the Exchange Act and shares of Stock issued
in respect of Stock Incentives in excess of the Maximum Plan Shares; for this purpose, the outstanding Stock Incentives and shares of Stock issued in respect of Stock Incentives shall be computed in accordance with Rule 16b-3(a)(1) as promulgated
under the Exchange Act. To the extent permitted by Rule 16-b3(a)(1) as promulgated under the Exchange Act, the shares of Stock attributable to the non-vested, unpaid, unexercised, unconverted or otherwise unsettled portion of any Stock Incentive
that is forfeited or cancelled or expires or terminates for any reason without becoming vested, paid, exercised, converted or otherwise settled in full shall again be available for purposes of the Plan. 
 2.3 Administration of the Plan. The Plan shall be administered by the Committee. The Committee shall have full authority in its discretion to determine the
officers and key employees of the Company or its affiliates to whom Stock Incentives shall be granted and the terms and provisions of Stock Incentives subject to the Plan; provided, however, that any award of a Stock Incentive to any employee who is
also a member of the Board of Directors shall be approved by the majority of the “disinterested persons”, as defined in Rule 16b-3 as promulgated under the Exchange Act, then serving as members of the Board of Directors, upon the
recommendation of the Committee. Subject to the 

 
provisions of the Plan, the Committee shall have full and conclusive authority to interpret the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the respective Stock Incentive Agreements and to make all other determinations necessary or advisable for the proper administration of the Plan. The Committee’s determinations under
the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan (whether or not such persons are similarly situated). The Committee’s decisions shall be final and
binding on all Participants. 
 2.4 Eligibility and Limits. Stock Incentives may be granted only to officers and key employees of the Company, or any
affiliate of the Company; provided, however, that directors who serve on the Committee shall not be eligible to receive awards that are subject to Section 16 of the Exchange Act while they are members of the Committee and that an incentive
stock option may only be granted to an employee of the Company or any Subsidiary. In the case of incentive stock options, the aggregate Fair Market Value (determined as at the date an incentive stock option is granted) of stock with respect to which
stock options intended to meet the requirements of Code Section 422 become exercisable for the first time by an individual during any calendar year under all plans of the Company and its Subsidiaries shall not exceed $100,000; provided further,
that if the limitation is exceeded, the incentive stock option(s) which cause the limitation to be exceeded shall be treated as non-qualified stock option(s). 
 SECTION 3 TERMS OF STOCK INCENTIVES 
  

	3.1	Terms and Conditions of All Stock Incentives. 

 (a)
The number of shares of Stock as to which a Stock Incentive shall be granted shall be determined by the Committee in its sole discretion, subject to the provisions of Section 2.2 as to the total number of shares available for grants under the
Plan. 
 (b) Each Stock Incentive shall either be evidenced by a Stock Incentive Agreement in such form and containing such terms, conditions
and restrictions as the Committee may determine to be appropriate, or be made subject to the terms of a Stock Incentive Program, containing such terms, conditions and restrictions as the Committee may determine to be appropriate. Each Stock
Incentive Agreement or Stock Incentive Program shall be subject to the terms of the Plan and any provisions contained in the Stock Incentive Agreement or Stock Incentive Program that are inconsistent with the Plan shall be null and void. 

(c) The date a Stock Incentive is granted shall be date on which the Committee has approved the terms and conditions of the Stock Incentive and has
determined the recipient of the Stock Incentive and the number of shares covered by the Stock Incentive. 
 (d) Each Stock Incentive
Agreement or Stock Incentive Program shall provide that, in the event of a Change in Control, the Stock Incentive shall be cashed out on the basis of any price not greater than the highest price paid for a share of Stock in any transaction reported
by the National Association of Securities Dealers Automated Quotation System or any national securities exchange selected by the Committee on which the shares of Stock are then actively traded during a specified period immediately preceding or
ending on the date of the Change in Control or offered for a share of Stock 

 
in any tender offer occurring during a specified period immediately preceding or ending on the date the tender offer commenced; provided that, in no case
shall any such specified period exceed one (1) year (the “Change in Control Price”). For purposes of this Subsection the cash-out of a Stock Incentive shall be determined as follows: 
 (i) Options shall be cashed out on the basis of the excess, if any, of the Change in Control Price (but not more than the Fair Market
Value of the Stock on the date of the cash-out in the case of Incentive Stock Options) over the Exercise Price with or without regard to whether the Option may otherwise be exercisable only in part; and 
 (ii) Stock Awards shall be cashed out in an amount equal to the Change in Control Price with or without regard to any conditions or
restrictions otherwise applicable to any such Stock Incentive. 
 (e) Any Stock Incentive may be granted in connection with all or any
portion of a previously or contemporaneously granted Stock Incentive. Exercise or vesting of a Stock Incentive granted in connection with another Stock Incentive may result in a pro rata surrender or cancellation of any related Stock Incentive, as
specified in the applicable Stock Incentive Agreement or Stock Incentive Program. 
 (f) Stock Incentives shall not be transferable or
assignable except by will or by the laws of descent and distribution and shall be exercisable, during the Participant’s lifetime, only by the Participant, or in the event of the Disability of the Participant, by the legal representative of the
Participant. 
 3.2 Terms and Conditions of Options. Each Option granted under the Plan shall be evidenced by a Stock Incentive Agreement. At the time
any Option is granted, the Committee shall determine whether the Option is to be an incentive stock option described in Code Section 422 or a non-qualified stock option, and the Option shall be clearly identified as to its status as an
incentive stock option or a non-qualified stock option. An incentive stock option may only be granted within ten (10) years from the earlier of the date the Plan is adopted or approved by the Company’s stockholders. 
 (a) Option Price. Subject to adjustment in accordance with Section 5.2 and the other provisions of this Section 3.2, the exercise price
(the “Exercise Price”) per share of Stock purchasable under any Option shall be as set forth in the applicable Stock Incentive Agreement, but in no event shall it be less than the Fair Market Value on the date the Option is granted. With
respect to each grant of an incentive stock option to a Participant who is an Over 10% Owner, the Exercise Price shall not be less than 110% of the Fair Market Value on the date the Option is granted. The Exercise Price of an Option may not be
amended or modified after the grant of the Option, and an Option may not be surrendered in consideration of or exchanged for a grant of a new Option having an Exercise Price below that of an Option which was surrendered or exchanged. 
 (b) Option Term. Any incentive stock option granted to a Participant who is not an Over 10% Owner shall not be exercisable after the expiration of
ten (10) years after the date the Option is granted. Any incentive stock option granted to an Over 10% Owner shall not be exercisable after the expiration of five (5) years after the date the Option is granted. The term of any
non-qualified stock option plan shall be as specified in the applicable Stock Incentive Agreement. 

 (c) Payment. Payment for all shares of Stock purchased pursuant to exercise of an Option shall be
made in any form or manner authorized by the Committee in the Stock Incentive Agreement or by amendment thereto, including, but not limited to, cash or, if the Stock Incentive Agreement provides, (i) by delivery to the Company of a number of
shares of Stock which have been owned by the holder for at least six (6) months prior to the date of exercising having an aggregate Fair Market Value of not less than the product of the Exercise Price multiplied by the number of shares the
Participant intends to purchase upon exercise of the Option on the date of delivery; (ii) in a cashless exercise through a broker; or (iii) by having a number of shares of Stock withheld, the Fair Market Value of which as of the date of
exercise is sufficient to satisfy the Exercise Price. In its discretion, the Committee also may authorize (at the time an Option is granted or thereafter) Company financing to assist the Participant as to payment of the Exercise Price on such terms
as may be offered by the Committee in its discretion. Any such financing shall require the payment by the Participant of interest on the amount financed at a rate not less than the “applicable federal rate” under the Code. Payment shall be
made at the time that the Option or any part thereof is exercised, and no shares shall be issued or delivered upon exercise of an Option until full payment has been made by the Participant. The holder of an Option as such shall have none of the
rights of a stockholder. 
 (d) Conditions to the Exercise of an Option. Each Option granted under the Plan shall be exercisable by
whom, at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee shall specify in the Stock Incentive Agreement; provided, however, that subsequent to the grant of an Option, the Committee, at any
time before complete termination of such Option, may accelerate the time or times at which such Option may be exercised in whole or in part, including, without limitation, upon a Change in Control and may permit the Participant or any other
designated person to exercise the Option, or any portion thereof, for all or part of the remaining Option term, notwithstanding any provision of the Stock Incentive Agreement to the contrary. 
 (e) Termination of Incentive Stock Option. With respect to an incentive stock option, in the event of termination of employment of a Participant,
the Option or portion thereof held by the Participant which is unexercised shall expire, terminate, and become unexercisable no later than the expiration of three (3) months after the date of termination of employment; provided, however, that
in the case of a holder whose termination of employment is due to death or Disability, one (1) year shall be substituted for such three (3) month period. For purposes of this Subsection (e), termination of employment of the Participant
shall not be deemed to have occurred if the Participant is employed by another corporation (or a parent or subsidiary corporation of such other corporation) which has assumed the incentive stock option of the Participant in a transaction to which
Code Section 424(a) is applicable. 
 (f) Special Provisions for Certain Substitute Options. Notwithstanding anything to the
contrary in this Section 3.2, any Option issued in substitution for an option previously issued by another entity, which substitution occurs in connection with a transaction to which Code Section 424(a) is applicable, may provide for an
exercise price computed in accordance with such Code Section and the regulations thereunder and may contain such other terms and conditions as the Committee may prescribe to cause such substitute Option to contain as nearly as possible the same
terms and conditions 

 
(including the applicable vesting and termination provisions) as those contained in the previously issued option being replaced thereby. 
 3.3 Terms and Conditions of Stock Awards. The number of shares of Stock subject to a Stock Award and restrictions or conditions on such shares, if any, shall be
as the Committee determines, provided, however, no Stock Award shall vest prior to one (1) year if based upon performance criteria and three (3) years pro rata if time based. The certificate for such shares shall bear evidence of any
restrictions or conditions. Subsequent to the date of the grant of the Stock Award, the Committee shall not have the power to permit, an acceleration of the expiration of an applicable restriction period with respect to any part or all of the shares
awarded to a Participant, except in the case of a Change of Control, death or disability of the Participant. The Committee may require a cash payment from the Participant in an amount no greater than the aggregate Fair Market Value of the shares of
Stock awarded determined at the date of grant in exchange for the grant of a Stock Award or may grant a Stock Award without the requirement of a cash payment. In the event that shares of Stock subject to Stock Awards are forfeited by a Participant,
such shares of Stock may again be subject to a new Stock Award under the Plan. 
 3.4 Treatment of Awards Upon Termination of Employment. Except as
otherwise provided by Plan Section 3.2(e), any award under this Plan to a Participant who has terminated employment may be cancelled, accelerated, paid or continued, as provided in the applicable Stock Incentive Agreement or Stock Incentive
Program, or, in the absence of such provision, as the Committee may determine. The portion of any award exercisable in the event of continuation or the amount of any payment due under a continued award may be adjusted by the Committee to reflect the
Participant’s period of service from the date of grant through the date of the Participant’s termination of employment or such other factors as the Committee determines are relevant to its decision to continue the award. 
 SECTION 4 RESTRICTIONS ON STOCK 
 4.1 Escrow of
Shares. Any certificates representing the shares of Stock issued under the Plan shall be issued in the Participant’s name, but, if the applicable Stock Incentive Agreement or Stock Incentive Program so provides, the shares of Stock shall be
held by a custodian designated by the Committee (the “Custodian”). Each applicable Stock Incentive Agreement or Stock Incentive Program providing for transfer of shares of Stock to the Custodian shall appoint the Custodian as the
attorney-in-fact for the Participant for the term specified in the applicable Stock Incentive Agreement or Stock Incentive Program, with full power and authority in the Participant’s name, place and stead to transfer, assign and convey to the
Company any shares of Stock held by the Custodian for such Participant, if the Participant forfeits the shares under the terms of the applicable Stock Incentive Agreement or Stock Incentive Program. During the period that the Custodian holds the
shares subject to this Section, the Participant shall be entitled to all rights, except as provided in the applicable Stock Incentive Agreement or Stock Incentive Program, applicable to shares of Stock not so held. Any dividends declared on shares
of Stock held by the Custodian shall, as the Committee may provide in the applicable Stock Incentive Agreement or Stock Incentive Program, be paid directly to the Participant or, in the alternative, be retained by the Custodian or by the Company
until the expiration of the term specified in the applicable Stock Incentive Agreement or Stock 

 
Incentive Program and shall then be delivered, together with any proceeds, with the shares of Stock to the Participant or to the Company, as applicable.

 4.2 Restrictions on Transfer. The Participant shall not have the right to make or permit to exist any disposition of the shares of Stock issued
pursuant to the Plan except as provided in the Plan or the applicable Stock Incentive Agreement or Stock Incentive Program. Any disposition of the shares of Stock issued under the Plan by the Participant not made in accordance with the Plan or the
applicable Stock Incentive Agreement or Stock Incentive Program shall be void. The Company shall not recognize, or have the duty to recognize, any disposition not made in accordance with the Plan and the applicable Stock Incentive Agreement or Stock
Incentive Program, and the shares so transferred shall continue to be bound by the Plan and the applicable Stock Incentive Agreement or Stock Incentive Program. 
 SECTION 5 GENERAL PROVISIONS 
 5.1 Withholding. The Company shall deduct from all cash
distributions under the Plan any taxes required to be withheld by federal, state or local government. Whenever the Company proposes or is required to issue or transfer shares of Stock under the Plan or upon the vesting of any Stock Award, the
Company shall have the right to require the recipient to remit to the Company an amount sufficient to satisfy any federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such shares or the
vesting of such Stock Award. A Participant may pay the withholding tax in cash, or, if the applicable Stock Incentive Agreement or Stock Incentive Program provides, a Participant may elect to have the number of shares of Stock he is to receive
reduced by, or with respect to a Stock Award, tender back to the Company, the smallest number of whole shares of Stock which, when multiplied by the Fair Market Value of the shares of Stock determined as of the Tax Date (defined below), is
sufficient to satisfy federal, state and local, if any, withholding taxes arising from exercise or payment of a Stock Incentive (a “Withholding Election”). A Participant may make a Withholding Election only if both of the following
conditions are met: 
 (a) The Withholding Election must be made on or prior to the date on which the amount of tax required to be withheld is
determined (the “Tax Date”) by executing and delivering to the Company a properly completed notice of Withholding Election as prescribed by the Committee; and 
 (b) Any Withholding Election made will be irrevocable except on six months advance written notice delivered to the Company; however, the Committee may in its sole discretion disapprove and give no effect to the
Withholding Election. 
  

	5.2	Changes in Capitalization; Merger; Liquidation. 

 (a) The number of shares of Stock reserved for the grant of Options and Stock Awards; the number of shares of Stock reserved for issuance upon the exercise or payment, as applicable, of each outstanding Option, and upon vesting or grant, as
applicable, of each Stock Award; the Exercise Price of each outstanding Option shall be proportionately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a subdivision or combination of shares or the
payment of a stock dividend in shares of Stock to holders of outstanding shares of Stock or any other 

 
increase or decrease in the number of shares of Stock outstanding effected without receipt of consideration by the Company. 
 (b) In the event of a merger, consolidation or other reorganization of the Company or tender offer for shares of Stock, the Committee may make such
adjustments with respect to awards and take such other action as it deems necessary or appropriate to reflect such merger, consolidation, reorganization or tender offer, including, without limitation, the substitution of new awards, or the
adjustment of outstanding awards, the acceleration of awards or the removal of restrictions on outstanding awards. Any adjustment pursuant to this Section 5.2 may provide, in the Committee’s discretion, for the elimination without payment
therefor of any fractional shares that might otherwise become subject to any Stock Incentive, but shall not otherwise diminish the then value of the Stock Incentive. 
 (c) The existence of the Plan and the Stock Incentives granted pursuant to the Plan shall not affect in any way the right or power of the Company to make or authorize any adjustment, reclassification, reorganization
or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preference or priorities as to the Stock or the rights thereof, the dissolution or liquidation of the
Company, any sale or transfer of all or any part of its business or assets, or any other corporate act or proceeding. 
 5.3 Cash Awards. The
Committee may, at any time and in its discretion, grant to any holder of a Stock Incentive the right to receive, at such times and in such amounts as determined by the Committee in its discretion, a cash amount which is intended to reimburse such
person for all or a portion of the federal, state and local income taxes imposed upon such person as a consequence of the receipt of the Stock Incentive or the exercise of rights thereunder. 
 5.4 Compliance with Code. All incentive stock options to be granted hereunder are intended to comply with Code Section 422, and all provisions of the Plan
and all incentive stock options granted hereunder shall be construed in such manner as to effectuate that intent. 
 5.5 Right to Terminate
Employment. Nothing in the Plan or in any Stock Incentive shall confer upon any Participant the right to continue as an employee or officer of the Company or any of its affiliates or affect the right of the Company or any of its affiliates to
terminate the Participant’s employment at any time. 
 5.6 Non-alienation of Benefits. Other than as specifically provided with regard to the
death of a Participant, no benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge; and any attempt to do so shall be void. No such benefit shall, prior to receipt
by the Participant, be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the Participant. 
 5.7 Listing
and Legal Compliance. The Committee may suspend the exercise or payment of any Stock Incentive so long as it determines that securities exchange listing or registration or qualification under any securities laws is required in connection
therewith and has not been completed on terms acceptable to the Committee. 

 5.8 Termination and Amendment of the Plan. The Board of Directors may not materially amend or increase any benefit
under the Plan without stockholder approval; provided, however, that the Board of Directors may terminate the Plan. No such termination or amendment without the consent of the holder of a Stock Incentive shall adversely affect the rights of the
Participant under such Stock Incentive. 
 5.9 Stockholder Approval. The Plan shall be submitted to the stockholders of the Company for their approval
within twelve (12) months before or after the adoption of the Plan by the Board of Directors of the Company. If such approval is not obtained, any Stock Incentive granted hereunder shall be void. 
 5.10 Choice of Law. The laws of the State of Delaware shall govern the Plan, to the extent not preempted by federal law. 
 5.11 Effective Date of Plan. The Plan shall become effective upon the date the Plan is approved by the stockholders of the Company and shall terminate on
December 31, 2015.Nonstatutory Stock Option Agreement

 Exhibit 10.4 
 WIND RIVER SYSTEMS, INC. 
STOCK OPTION GRANT NOTICE 
(OUTSIDE OF THE 2005 EQUITY INCENTIVE PLAN) 
 WIND RIVER SYSTEMS, INC. (the “Company”) hereby grants to Optionee a nonstatutory stock option to purchase the number of shares of the Company’s common stock (the “Shares”) set forth below. This option is not
intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). This option is not subject to, and is granted outside of, the Company’s 2005
Equity Incentive Plan. This option is subject to all of the terms and conditions as set forth herein and in Attachments I and II, which are incorporated herein in their entirety. 
  

			
	OPTIONEE:	  	IAN R. HALIFAX
	DATE OF GRANT:	  	March 21, 2007
	SHARES SUBJECT TO OPTION:	  	425,000
	EXERCISE PRICE PER SHARE:	  	$10.18
	EXPIRATION DATE:	  	March 21, 2014

  

 VESTING SCHEDULE 
 25% of the shares subject to this option
shall vest on February 26, 2008. 1/48th of the shares shall vest monthly thereafter. In the event that Optionee
dies during his Continuous Service to the Company, then 100% of the shares subject to this option shall vest on the date of death. 
  

 PAYMENT: Payment of the option exercise price may be made in cash, check or any other method provided in the Stock Option Agreement.

 ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionee acknowledges receipt of, and understands and agrees to, this Grant Notice and
the Stock Option Agreement. Optionee further acknowledges that as of the Date of Grant, this Grant Notice and the Stock Option Agreement set forth the entire understanding between Optionee and the Company regarding the acquisition of Shares pursuant
to the option and supersedes all prior oral and written agreements on that subject with the exception of the following agreements only: 
  

			
		
	OTHER AGREEMENTS:	  	 Offer letter dated January 30, 2007 and Wind River Systems, Inc. Executive Officers’ Change of Control Incentive and Severance
Plan
  

  

							
	WIND RIVER SYSTEMS, INC.	 		  	OPTIONEE
				
	By:	  	 /s/    Kenneth Klein
	 		  	 /s/    Ian R. Halifax

		  	KENNETH KLEIN	 		  	
	Title:	  	President and Chief Executive Officer	 		  	
				
	Date:	  	March 21, 2007	 	Date:	  	March 22, 2007

  

 ATTACHMENT I 
 WIND RIVER SYSTEMS, INC. 
STOCK OPTION AGREEMENT 
 Pursuant to the Grant Notice and this
Stock Option Agreement, Wind River Systems, Inc. (the “Company”) has granted you an option to purchase the number of shares of the Company’s common stock (“Shares”) indicated in the Grant Notice at the exercise price
indicated in the Grant Notice. 
 This option is granted in connection with and in furtherance of the Company’s compensatory benefit
plan for the Company’s employees (including officers), directors or consultants. 
 1. VESTING. Subject to the limitations
contained herein, this option will vest as provided in the Grant Notice, provided that vesting will cease upon the termination of your Continuous Service. For purposes of this Option Agreement, “Continuous Service” shall mean that your
service with the Company or an affiliate of the Company, whether as an employee, director or consultant, is not interrupted or terminated. Furthermore, your Continuous Service shall not be deemed to have terminated merely because of a change in the
capacity in which you render service to the Company or an affiliate as an employee, director or consultant or a change in the entity for which you render such service, provided that there is no interruption or termination of your Continuous Service.
For example, a change in status from an employee to a consultant would not constitute an interruption of Continuous Service. Unless the Board of Directors or its Compensation Committee provides otherwise or except as otherwise required by applicable
law, vesting of this stock option award shall cease commencing on the first day of any unpaid leave of absence and shall recommence only upon return to active service. 
 2. METHOD OF PAYMENT. Payment of the exercise price by cash or check is due in full upon exercise of all or any part of this option, provided that you may elect, to the extent permitted by applicable law, to
make payment of the exercise price under the following alternatives, (i) provided that at the time of exercise the Company’s stock is publicly traded and quoted regularly in the Wall Street Journal: payment by delivery of already-owned
Shares, held for the period required to avoid a charge to the Company’s reported earnings, and owned free and clear of any liens, claims, encumbrances or security interests, which Shares shall be valued at their fair market value on the date of
exercise, or (ii) payment pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board which, prior to the issuance of Shares, 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. 
 3. WHOLE SHARES. This
option may be exercised only for whole Shares. 
 4. TERM. The term of this option commences on the Date of Grant and expires upon the
earliest of: 
 (a) the seventh (7th) anniversary of the Date of Grant; 
 (b) three (3) months after the termination of your Continuous Service for any reason other than death or permanent and total disability; 

 

 I-1 

 (c) twelve (12) months after the termination of your Continuous Service due to your permanent and
total disability (within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended); or 
 (d) twelve
(12) months after your death, if you die while an employee, director or consultant of the Company 
 5. EXERCISE.

 (a) You may exercise the vested portion of this option during its term by delivering a notice of exercise (in a form designated by the
Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require. 
 (b) By exercising this option you agree that: 
 (i) As a condition to any exercise of this option, you are required to pay the Company any tax withholding obligation of the Company arising by reason of the exercise of this option. 
 (ii) Regardless of whether the offer and sale of Shares subject to this option have been registered under the Securities Act of 1933, as amended
(the “1933 Act”) or have been registered or qualified under the securities laws of any state, the Company may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on
stock certificates) if in the judgment of the Company and its counsel such restrictions are necessary or desirable in order to achieve compliance with the provisions of the 1933 Act, the securities laws of any state or any other law. 
 6. TRANSFERABILITY. This option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your
lifetime only by you. 
 7. TAX CONSULATION. You understand and hereby acknowledge that you may suffer adverse tax consequences as a
result of your purchase or disposition of Exercised Shares. You herebv represent that you have consulted or will consult with any tax consultants you deem advisable in connection with the purchase or disposition of the Exercised Shares and that you
are not relying on the Company for any tax advice. 
 8. CAPITALIZATION ADJUSTMENTS. If any change is made in the Shares subject to
this 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 option will be appropriately adjusted in the class(es) and number of shares and price per share of
stock subject to such option. Such adjustments shall be made by the Board of Directors of the Company or its Compensation Committee, determination of which shall be final, binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a transaction "without receipt of consideration" by the Company.) 
 9. CHANGE OF CONTROL. Your
option is subject to accelerated vesting in accordance with the provisions of the Wind River Systems, Inc. Executive Officers’ Change of Control Incentive and Severance Plan, as such Plan may apply to you, and the terms of your offer
letter dated January 30, 2007. 
  

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 10. PURCHASE FOR INVESTMENT; RIGHTS OF HOLDER ON SUBSEQUENT REGISTRATION. Unless the Shares
to be issued upon exercise of your option have been effectively registered under the 1933 Act, the Company shall be under no obligation to issue any Shares covered by the option unless the person who exercises such option, whether such exercise is
in whole or in part, shall give a written representation and undertaking to the Company which is satisfactory in form and scope to counsel for the Company and upon which, in the opinion of such counsel, the Company may reasonably rely, that he or
she is acquiring the Shares issued to him or her pursuant to such exercise of the option for his or her own account as an investment and not with a view to, or for sale in connection with, the distribution of any such Shares, and that he or she will
make no transfer of the same except in compliance with any rules and regulations in force at the time of such transfer under the 1933 Act, or any other applicable law, and that if Shares are issued without such registration a legend to this effect
may be endorsed on the securities so issued. In the event that the Company shall, nevertheless, deem it necessary or desirable to register under the 1933 Act or other applicable statutes any Shares with respect to which an option shall have been
exercised, or to qualify any such Shares for exemption from the 1933 Act or other applicable statutes, then the Company shall take such action at its own expense and may require from each participant such information in writing for use in any
registration statement, prospectus, preliminary prospectus or offering circular as is reasonably necessary for such purpose and may require reasonable indemnity to the Company and its officers and directors from such holder against all losses,
claims, damages and liabilities arising from such use of the information so furnished and caused by any untrue statement of any material fact required to be stated therein or necessary to make the statement therein not misleading in light of the
circumstances under which they were made. 
 11. RULE 16B-3. This option has been granted in compliance with Rule 16b-3 and will
be deemed to contain such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act. 
 12. OPTION NOT AN EMPLOYMENT CONTRACT. This option is not an employment contract, and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company, or of the Company to continue your employment with the Company. The Company may terminate your employment at any time, for any reason or no reason, with or without
cause. 
 13. NOTICES. Any notices provided for in this option shall be given in writing and shall be deemed effectively given
upon receipt or, in the case of notices delivered by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company. 
 14. CHOICE OF LAW. This option shall be governed by, and construed in accordance with the laws of the State of California, as such laws are
applied to contracts entered into and performed in such State. 
 15. ENTIRE AGREEMENT; GOVERNING LAW. This Agreement, along with the
offer letter between you and the Company dated January 30, 2007 and the terms of the Wind River Systems, Inc. Executive Officers’ Change of Control Incentive and Severance Plan, constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes in their entirety all prior undertakings and agreements of the Company and you with respect to the subject matter hereof, and may not be modified adversely to your interest except by means of a
writing signed by the Company and you. This Agreement is governed by the internal substantive laws, but not the choice of law rules, of the State of California. 
 16. GOVERNING AUTHORITY. This option is subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted by 

  

 I-3 

 
the Company. This authority shall be exercised by the Board, or by a committee of one or more members of the Board in the event that the Board delegates its
authority to a committee. The Board, in the exercise of this authority, may correct any defect, omission or inconsistency in this option in a manner and to the extent the Board shall deem necessary or desirable to make this option fully effective.
References to the Board also include any committee appointed by the Board to administer and interpret this option. Any interpretations, amendments, rules and regulations promulgated by the Board shall be final and binding upon the Company and its
successors in interest as well as you and your heirs, assigns, and other successors in interest. 
  

			
	Date: March 21, 2007
	
	Very truly yours,
	
	WIND RIVER SYSTEMS, INC.
		
	By:	  	 /s/ Kenneth Klein

		  	 Kenneth Klein
 Chairman of the Board, President and Chief
Executive Officer
 Duly authorized on behalf of the Board of Directors

  

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 ATTACHMENT II 
 NOTICE OF EXERCISE 
  

			
	 Wind River Systems, Inc.
 500 Wind River
Way
 Alameda, CA 94501
	  	Date of Exercise: ______________

 Ladies and Gentlemen: 
 This constitutes notice under my nonstatutory stock option agreement that I elect to purchase the number of shares for the price set forth below. 
  

			
	Stock option dated:	  	March 21, 2007
		
	Number of shares as to which option is exercised:	  	
		  	 
		
	Certificate to be issued in name of:	  	
		  	 
		
	Total exercise price:	  	$
		  	 
		
	Cash payment (or check) delivered herewith:	  	$
		  	 
		
	Value of ____________ shares of Wind River Systems, Inc. common stock delivered herewith(1):	  	$
		  	 

	 (1)
	 Shares must meet the public trading requirements set forth in the option. Shares must be valued in accordance with the terms of the option being exercised, must have been owned for the minimum period required
in the option, and must be owned free and clear of any liens, claims, encumbrances or security interests. Certificates must be endorsed or accompanied by an executed assignment separate from certificate. 

 By this exercise, I agree to provide such additional documents as you may reasonably require. I understand that my right to receive the shares otherwise
issuable to me upon the exercise of the option is contingent upon my satisfaction of these requirements. 
 I hereby make the following
statements with respect to the shares of common stock (the "Shares"), which are being acquired by me for my own account upon this exercise of the option as set forth above: 
 I acknowledge and agree that as a condition to this exercise of the option, I am required to pay the Company any tax withholding obligation of the
Company arising by reason of the exercise of the option. 
 I further acknowledge and agree that regardless of whether the offer and sale of
Shares subject to the option have been registered under the Securities Act of 1933, as amended (the "1933 Act") or have been registered or qualified under the securities laws of any state, the Company may impose restrictions 

 
upon the sale, pledge or other transfer of the Shares (including the placement of appropriate legends on stock certificates) if in the judgment of the
Company and its counsel such restrictions are necessary or desirable in order to achieve compliance with the provisions of the 1933 Act, the securities laws of any state or any other law. 
 I further acknowledge and agree that the Option Agreement is incorporated herein by reference and that this Exercise Notice, the Option Agreement and my
offer letter dated January 30, 2007, constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and me with respect to the
subject matter hereof, and may not be modified adversely to my interest except by means of a writing signed by the Company and me. This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of California.

  

	
	Very truly yours,
	
	

	IAN R. HALIFAX

  

 II-2

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