3Rd Amended and Restated1993 STOCK OPTION PLANOFSUNRISE MEDICAL INC.

 

SUNRISE MEDICAL INC., a corporationorganized under the laws of the State of Delaware, adopted the 1993 Stock OptionPlan of Sunrise Medical Inc. by the action of its Board of Directors as ofAugust 24, 1993 and the approval of its Stockholders as of November 15, 1993;which Plan was first amended and restated by the Board of Directors as ofNovember 13, 1997; and was amended and restated for a second time by action ofthe Board of Directors as of April 28, 1998; and is hereby amended and restatedfor a third time by action of the Board of Directors as of February 28, 2000.The purposes of this Plan are as follows:

(1)  To further the growth,development and financial success of the Company by providing additionalincentives to certain of its executive and other key Associates who have been orwill be given responsibility for the management or administration of theCompany's business affairs, by assisting them to become owners of the Company'sCommon Stock and thus to benefit directly from its growth, development andfinancial success.

(2)  To enable the Companyto obtain and retain the services of the type of professional, technical andmanagerial Associates considered essential to the long-range success of theCompany by providing and offering them an opportunity to become owners of theCompany's Common Stock under options, including options that are intended toqualify as "incentive stock options" under Section 422 of the Code.

(3)  To provide forappropriate compensation for Non-Associate Directors for service as members ofthe Board, by providing such Non-Associate Directors a financial stake andinterest in the Company's performance.

 

ARTICLE IDEFINITIONS

 

Whenever the following terms are used in this Plan, theyshall have the meaning specified below unless the context clearly indicates tothe contrary. The masculine pronoun shall include the feminine and neuter andthe singular shall include the plural, where the context so indicates.

Section 1.1 - Administrator

"Administrator" shall mean the entitythat conducts the administration of the Plan (including the grant of Options) asprovided herein. With reference to the administration of the Plan with respectto an Option granted or to be granted to Non-Associate Directors, the term"Administrator" shall refer to the Board. With reference to theadministration of the Plan with respect to an Option granted or to be granted toAssociates, the term "Administrator" shall refer to the Committee,unless and to the extent (a) the Board has assumed the authority foradministration of all or any part of the Plan as permitted in Section 6.2 or (b)the Committee has delegated the authority for administration of all or part ofthe Plan as permitted by Section 6.5.

Section 1.2 - Associate

"Associate" shall mean any Employee (asdefined in accordance with the regulations and revenue rulings then applicableunder Section 3401(c) of the Code) of the Company, or of any corporation whichis then a Parent Corporation or a Subsidiary, whether such Employee is soemployed at the time this Plan is adopted or becomes so employed subsequent tothe adoption of this Plan.

**Section 1.3 - Board**
"Board" shall mean the Board of Directors ofthe Company, as constituted from time to time.
**Section 1.4 - Code**
"Code" shall mean the Internal Revenue Codeof 1986, as amended.

**Section 1.5 - Committee**
"Committee" shall mean the CompensationCommittee of the Board, or another committee or subcommittee of the Board,appointed as provided in Section 6.1.**Section 1.6 - Company**
"Company" shall mean Sunrise Medical Inc. Inaddition, "Company" shall mean any corporation assuming, orissuing new stock options in substitution for, Options outstanding under thePlan. 

**Section 1.7 - Director**
"Director" shall mean a member of the Board.
**Section 1.8 - Exchange Act**
"Exchange*Act*" shall mean the SecuritiesExchange Act of 1934, as amended from time to time.

**Section 1.9 - Executive Officers**
"Executive Officers" shall mean in any oneof the Company's fiscal years (a) the Chief Executive Officer of the Company (orthe individual acting in such capacity) and (b) the four most highly compensatedOfficers of the Company (other than the Chief Executive Officer) whose totalcompensation is required to be reported to the Company's stockholders under theExchange Act.

**Section 1.10 - Incentive Stock Option**
"Incentive Stock Option" shall mean anOption which qualifies under Section 422 of the Code and which is designated asan Incentive Stock Option by the Administrator.

**Section 1.11 - Non-Associate Director**
"Non-*Associate Director*" shall mean aDirector who is not an Associate.

**Section 1.12 - Non-Qualified Option**
"No*n-Qualified Option*" shall mean an Optionwhich is not an Incentive Stock Option and which is designated as aNon-Qualified Option by the Administrator.

**Section 1.13 - Officer**
"Off*icer*" shall mean an officer of theCompany, as defined in Rule 16a-1(f) under the Exchange Act, as such Rulemay be amended in the future.

**Section 1.14 - Option**
"O*ption*" shall mean an option to purchaseCommon Stock of the Company, granted under the Plan. "*Options*"includes both Incentive Stock Options and Non-Qualified Options.

**Section 1.15 - Optionee**
"Optionee" shall mean an Associate or aNon-Associate Director to whom an Option is granted under the Plan.

**Section 1.16 - Parent Corporation**
"Par*ent Corporation*" shall mean anycorporation in an unbroken chain of corporations ending with the Company if eachof the corporations other than the Company then owns stock possessing 50% ormore of the total combined voting power of all classes of stock in one of theother corporations in such chain.

**Section 1.17 - Plan**
"P*lan*" shall mean this Third Amended andRestated 1993 Stock Option Plan of Sunrise Medical Inc., as amended and/orrestated from time to time.

**Section 1.18 - Rule 16b-3**
"Rule*16b-3*" shall mean that certain Rule16b-3 under the Exchange Act, as such Rule may be amended from time to time.

**Section 1.19 - Secretary**
"Sec*retary*" shall mean the Secretary of theCompany.\

**Section 1.20 - Securities Act**
"Securities Act" shall mean the SecuritiesAct of 1933, as amended from time to time.

**Section 1.21 - Subsidiary**
"Subs*idiary*" shall mean any corporation inan unbroken chain of corporations beginning with the Company if each of thecorporations other than the last corporation in the unbroken chain then ownsstock possessing 50% or more of the total combined voting power of all classesof stock in one of the other corporations in such chain.

**Section 1.22 - Termination of Directorship**
"Termination of Directorship" shall mean thetime when a Director ceases to be a member of the Board for any reason,including, but not by way of limitation, a termination by resignation,expiration of term, removal (with or without cause), retirement or death. TheBoard, in its sole and absolute discretion, shall determine the effect of allmatters and questions relating to Termination of Directorship.

**Section 1.23 - Termination of Employment**
"Termination of Employment" shall mean thetime when the employee-employer relationship between the Associate and theCompany, a Parent Corporation or a Subsidiary is terminated for any reason, withor without cause, including, but not by way of limitation, a termination byresignation, discharge, death, disability, or retirement, but excluding (i)terminations where there is a simultaneous reemployment by the Company, a ParentCorporation or a Subsidiary, (ii) at the discretion of the Administrator,terminations which result in a temporary severance of the employee-employerrelationship, and (iii) at the discretion of the Administrator, terminationswhich are followed by the simultaneous establishment of a consultingrelationship by the Company or a Subsidiary with the former Associate. TheAdministrator, in its absolute discretion, shall determine the effect of allother matters and questions relating to Termination of Employment, including,but not by way of limitation, the question of whether a Termination ofEmployment resulted from a discharge for good cause, and all questions ofwhether particular leaves of absence constitute Terminations of Employment; *provided*,*however*, that, with respect to Incentive Stock Options, a leave ofabsence shall constitute a Termination of Employment if, and to the extent that,such leave of absence interrupts employment for the purposes of Section422(a)(2) of the Code and the then applicable regulations and revenue rulingsunder said Section. Notwithstanding any other provision of this Plan, theCompany or any Subsidiary has an absolute and unrestricted right to terminate anAssociate's employment at any time for any reason whatsoever, with or withoutcause, except to the extent expressly provided otherwise in writing.

 
**ARTICLE IISHARES SUBJECT TO PLAN

Section 2.1 - Shares Subject to Plan**
(a) The shares of stock subject to Options shall be shares ofthe Company's $1.00 par value Common Stock. The aggregate number of such shareswhich may be issued upon exercise of Options shall not exceed 300,000; provided,however, that on the last business day of each fiscal year of the Companybeginning with July 1, 1994 such maximum number shall be increased by a numberequal to 1.5% of the number of shares of Common Stock issued and outstanding asof the close of business on such day; *provided, further,* that theaggregate number of shares which may be issued upon exercise of Options grantedto the Executive Officers as a group in any fiscal year of the Company under thePlan shall not exceed 60% of the shares which may be issued upon exercise of allOptions granted in such fiscal year under the Plan.

(b) In no event shall the aggregate number of shares whichmay be issued upon exercise of Options under the Plan exceed 4,000,000. Allshares remaining available for grant as of the termination or expiration of thisPlan shall be and become available for option grant under the Company's Year2000 Non-Qualified Stock Option Plan, as the same may be amended and/or restatedfrom time to time.
**Section 2.2 - Unexercised Options; Retained or SurrenderedShares**
If any Option expires or is canceled without having beenfully exercised, the number of shares subject to such Option but as to whichsuch Option was not exercised prior to its expiration or cancellation may againbe optioned hereunder, subject to the overall limitation of section 2.1(b) butnot subject to the limitations of Section 2.1(a). Shares of stock which arereceived or retained by the Company upon the exercise of options pursuant toSection 5.3(b) or Sections 5.3(c) and 5.4(d) may also again be optionedhereunder, subject to the overall limitation of section 2.1(b) but not subjectto the limitations of Section 2.1(a).

**Section 2.3 - Changes in Company's Shares**
In the event that the outstanding shares of Common Stock ofthe Company are hereafter changed into or exchanged for a different number orkind of shares or other securities of the Company, or of another corporation, byreason of reorganization, merger, consolidation, recapitalization,reclassification, stock split-up, stock dividend or combination of shares,appropriate adjustments shall be made by the Administrator in the number andkind of shares for the purchase of which Options may be granted, includingadjustments of the limitations in Section 2.1 on the maximum number and kind ofshares which may be issued on exercise of Options.

 
**ARTICLE IIIGRANTING OF OPTIONS

 

Section 3.1 - Eligibility**
Any executive or other key Associate of the Company or of anycorporation which is then a Parent Corporation or a Subsidiary, including theExecutive Officers, shall be eligible to be granted Options. Non-AssociateDirectors may be granted Non-Qualified Options as provided in Section 3.4.

**Section 3.2 - Qualification of Incentive Stock Options**
No Incentive Stock Option shall be granted unless suchOption, when granted, qualifies as an "incentive stock option"under Section 422 of the Code. Incentive Stock Options shall not be granted toNon-Associate Directors, but may, in the discretion of the Administrator, begranted to Directors who are also Associates.

 
**Section 3.3 - Granting of Options to Associates**
 

(a)  In the case of Options to be granted toAssociates, the Administrator shall from time to time, in its absolutediscretion:

(1)  Determine which Associates are executive or  other key Associates and select from among the executive or other key  Associates (including the Executive Officers and those executive or other key  Associates to whom Options have been previously granted under the Plan) such  of them as in its opinion should be granted Options; and

(2)  Determine the number of shares to be subject  to such Options, and determine whether such Options are to be Incentive Stock  Options or Non-Qualified Options; and

(3)  Determine the terms and conditions of suchOptions, consistent with the Plan; and

(4)  Instruct the Secretary to issue such Options  and may impose such conditions on the grant of such Options as it deems  appropriate.
**Section 3.4 - Granting of Non-Qualified Options toNon-Associate Directors**
(a)  In the case of Options to be granted toNon-Associate Directors, the Administrator shall from time to time, in itsabsolute discretion:

(1)  Determine which Non-Associates Directors  should be granted Options; and

(2)  Determine the number of shares to be subject  to such Options; and

(3)  Determine the terms and conditions of such  Options, consistent with the Plan; provided, however, that only Non-Qualified  Options may be granted to Non-Associate Directors; and

(4)  Instruct the Secretary to issue such Options  and may impose such conditions on the grant of such Options as it deems  appropriate.
**ARTICLE IVTERMS OF OPTIONS

 

Section 4.1 - Option Agreement**
Each Option shall be evidenced by a written Stock OptionAgreement, which shall be executed by the Optionee and an authorized Officer ofthe Company and which shall contain such terms and conditions as theAdministrator shall determine, consistent with the Plan. Stock Option Agreementsevidencing Incentive Stock Options shall contain such terms and conditions asmay be necessary to qualify such Options as "*incentive stock options*"under Section 422 of the Code.
**Section 4.2 - Option Price**
(a)  The price of the shares subject to each Optionshall be set by the Administrator; provided, however, that, in thecase of an Incentive Stock Option granted to an individual then owning (withinthe meaning of Section 424(d) of the Code) more than 10% of the total combinedvoting power of all classes of stock of the Company, any Subsidiary or anyParent Corporation, the price per share shall not be less than 110% of the fairmarket value of such shares on the date such Option is granted.

(b)  For purposes of the Plan, the fair marketvalue of a share of the Company's Common Stock as of a given date shall be: (i)the closing price of a share of the Company's Common Stock on the principalexchange on which shares of the Company's Common Stock are then trading, if any,on the trading day previous to such date, or, if shares were not traded on thetrading day previous to such date, then on the next preceding trading day duringwhich a sale occurred; or (ii) if such Common Stock is not traded on an exchangebut is quoted on NASDAQ or a successor quotation system, (1) the last salesprice (if the Company's Common Stock is then listed as a National Market Issueunder the NASD National Market System) or (2) the mean between the closingrepresentative bid and asked prices (in all other cases) for the Company'sCommon Stock on the trading day previous to such date as reported by NASDAQ orsuch successor quotation system; or (iii) if such Common Stock is not publiclytraded on an exchange and not quoted on NASDAQ or a successor quotation system,the mean between the closing bid and asked prices for the Company's CommonStock, on the trading day previous to such date, as determined in good faith bythe Administrator; or (iv) if the Company's Common Stock is not publicly traded,the fair market value established by the Administrator acting in good faith.

**Section 4.3 - Commencement of Exercisability**
(a)  Options shall become exercisable at such timesand in such installments (which may be cumulative) as the Administrator shallprovide in the terms of each individual Option; *provided*, *however*,that by a resolution adopted after an Option is granted the Administrator may,on such terms and conditions as it may determine to be appropriate, acceleratethe time at which such Option or any portion thereof may be exercised.

(b)  Except as provided in the applicable StockOption Agreement executed hereunder, no portion of an Option which isunexercisable at Termination of Employment or Termination of Directorship, asapplicable, shall thereafter become exercisable.

(c)  To the extent that the aggregate fair marketvalue of stock with respect to which "incentive stock options"(within the meaning of Section 422 of the Code, but without regard to Section422(d) of the Code) are exercisable for the first time by an Optionee during anycalendar year (under the Plan and all other incentive stock option plans of theCompany, any Subsidiary and any Parent Corporation) exceeds $100,000, suchoptions shall be taxed as Non-Qualified Options. The rule set forth in thepreceding sentence shall be applied by taking options into account in the orderin which they were granted. For purposes of this Section 4.3(c), the fair marketvalue of stock shall be determined as of the time that the option with respectto such stock is granted.

**Section 4.4 - Expiration of Options**
(a)  No Option may be exercised to any extent byanyone after the first to occur of the following events:

(1)  The expiration of ten years from the date  the Option was granted; or

(2)  With respect to an Incentive Stock Option  granted to an Optionee owning (within the meaning of Section 424(d) of the  Code) at the time the Incentive Stock Option was granted, more than 10% of the  total combined voting power of all classes of stock of the Company, any  Subsidiary or any Parent Corporation, the expiration of five years from the  date the Incentive Stock Option was granted.

(b)  Subject to the provisions of Section 4.4(a),the Administrator shall provide, in the terms of each individual Option, whensuch Option expires and becomes unexercisable. Without limiting the generalityof the foregoing, the Administrator may provide in the terms of individualOptions that said Options expire immediately upon a Termination of Employment orTermination of Directorship, as applicable, for any reason.

(c)  Except as limited by requirements of Section422 of the Code and regulations and rulings thereunder applicable to IncentiveStock Options, the Administrator may extend the term of any outstanding Optionin connection with any Termination of Employment or Termination of Directorshipof the Optionee, or amend any other term or condition of such Option relating tosuch a termination.

**Section 4.5 - Consideration**
In consideration of the granting of an Option, the Optioneeshall agree, in the written Stock Option Agreement, to remain in the employ (or,in the case of a Non-Associate Director, as a Director) of the Company, a ParentCorporation or a Subsidiary for a period of at least one year after the Optionis granted. Nothing in this Plan or in any Stock Option Agreement hereundershall confer upon any Optionee any right to continue in the employ or as aDirector of the Company, any Parent Corporation or any Subsidiary or shallinterfere with or restrict in any way the rights of the Company and its ParentCorporation and Subsidiaries, which are hereby expressly reserved, to discharge(or, in the case of a Non-Associate Director, to remove) any Optionee at anytime for any reason whatsoever, with or without cause.

**Section 4.6 - Adjustments in Outstanding Options**
In the event that the outstanding shares of the stock subjectto Options are changed into or exchanged for a different number or kind ofshares of the Company or other securities of the Company or of anothercorporation by reason of merger, consolidation, recapitalization,reclassification, stock split-up, stock dividend or combination of shares, theAdministrator shall make an appropriate and equitable adjustment in the numberand kind of shares as to which all outstanding Options, or portions thereof thenunexercised, shall be exercisable, to the end that after such event theOptionee's proportionate interest shall be maintained as before the occurrenceof such event. Such adjustment in an outstanding Option shall be made withoutchange in the total price applicable to the Option or the unexercised portion ofthe Option (except for any change in the aggregate price resulting fromrounding-off of share quantities or prices) and with any necessary correspondingadjustment in Option price per share; provided, however, that, inthe case of Incentive Stock Options, each such adjustment shall be made in suchmanner as not to constitute a "*modification*" within the meaningof Section 424(h)(3) of the Code. Any such adjustment made by the Administratorshall be final and binding upon all Optionees, the Company and all otherinterested persons.

**Section 4.7 - Merger, Consolidation, Acquisition, Liquidationor Dissolution**
Notwithstanding the provisions of Section 4.6, in itsabsolute discretion, and on such terms and conditions as it deems appropriate,in the event of the merger or consolidation of the Company with or into anothercorporation, the acquisition by another corporation, person or group of personsof all or substantially all of the Company's assets or 40% or more of theCompany's then outstanding voting stock, or the liquidation or dissolution ofthe Company or any other transaction deemed by the Board to involve a change incontrol of the Company (a "Corporate Transaction"), the Administratormay, but is not obligated to, provide by the terms of any Option or by that aresolution adopted prior to the occurrence of such Corporate Transaction that (i)upon such Corporate Transaction, such Option shall be exercisable as to allshares covered thereby, notwithstanding anything to the contrary in Section 4.3and/or any installment provisions of such Option, or (ii) such Option cannot beexercised and is terminated after the Corporate Transaction, and if theAdministrator so provides, it must on such terms and conditions as it deemsappropriate, also provide that for some period of time prior to such CorporateTransaction that such Option shall be exercisable as to all shares coveredthereby, notwithstanding anything to the contrary in Section 4.3 and/or anyinstallment provisions of such Option.
**ARTICLE VEXERCISE OF OPTIONS

Section 5.1 - Person Eligible to Exercise**
During the lifetime of the Optionee, only the Optionee, orany permitted transferee pursuant to Section 7.1 hereof, may exercise an Option(or any portion thereof) granted to the Optionee. After the death of theOptionee, any exercisable portion of an Option may, prior to the time when suchportion becomes unexercisable under the Plan or the applicable Stock OptionAgreement, be exercised by his personal representative or by any personempowered to do so under the deceased Optionee's will or under the thenapplicable laws of descent and distribution.

**Section 5.2 - Partial Exercise**
At any time and from time to time prior to the time when anyexercisable Option or exercisable portion thereof becomes unexercisable underthe Plan or the applicable Stock Option Agreement, such Option or portionthereof may be exercised in whole or in part; *provided*, *however*,that the Company shall not be required to issue fractional shares and theAdministrator may, by the terms of the Option, require any partial exercise tobe with respect to a specified minimum number of shares.

**Section 5.3 - Manner of Exercise**
An exercisable Option, or any exercisable portion thereof,may be exercised solely by delivery to the Secretary or his office of all of thefollowing prior to the time when such Option or such portion becomesunexercisable under the Plan or the applicable Stock Option Agreement:

(a)  Notice in writing signed by the Optionee or  other person then entitled to exercise such Option or portion, stating that  such Option or portion is exercised, such notice complying with all applicable  rules established by the Administrator; and

(b)  (1) Full payment (in cash or by check) for  the shares with respect to which such Option or portion is thereby exercised;  or

(2)  With the consent of the Administrator, (A)    shares of the Company's Common Stock owned for at least six months by the    Optionee, duly endorsed for transfer to the Company or (B) shares of the    Company's Common Stock issuable to the Optionee upon exercise of the Option,    in either case, with a fair market value (as determined under Section    4.2(b)), on the date of option exercise equal to the aggregate Option price    of the shares with respect to which such Option or portion is thereby    exercised; or

(3)  With the consent of the Administrator,    allow payment, in whole or in part, through the delivery of a notice that    the Optionee has placed a market sell order with a broker with respect to    the shares of Common Stock then issuable upon exercise of the Option, and    that the broker has been directed to pay a sufficient portion of the net    proceeds of the sale to the Company in satisfaction of the Option exercise    price, provided that payment of such proceeds is then made to the Company    upon settlement of such sale;

(4)  With the consent of the Administrator, any    combination of the consideration provided in the foregoing subsections (1),    (2) and (3); and

(c)  The payment to the Company (or other  employer corporation) of all amounts which it is required to withhold under  federal, state or local law in connection with the exercise of the Option,  which in the discretion of the Administrator, may be in the form of  consideration used by the Optionee to pay for such shares pursuant to Section  5.3(b); and

(d)  Such representations and documents as the  Administrator, in its absolute discretion, deems necessary or advisable to  effect compliance with all applicable provisions of the Securities Act and any  other federal or state securities laws or regulations. The Administrator may,  in its absolute discretion, also take whatever additional actions it deems  appropriate to effect such compliance including, without limitation, placing  legends on share certificates and issuing stop-transfer orders to transfer  agents and registrars; and

(e)  In the event that the Option or portion  thereof shall be exercised pursuant to Section 5.1 by any person or persons  other than the Optionee, appropriate proof of the right of such person or  persons to exercise the Option or portion thereof.
**Section 5.4 - Conditions to Issuance of Stock Certificates**
The shares of the Company's Common Stock issuable anddeliverable upon the exercise of an Option, or any portion thereof, may beeither previously authorized but unissued shares or issued shares which havethen been reacquired by the Company. The Company shall not be required to issueor deliver any certificate or certificates for shares of stock purchased uponthe exercise of any Option or portion thereof prior to fulfillment of all of thefollowing conditions:

(a)  The admission of such shares to listing on  all stock exchanges on which such series or class of stock is then listed; and

(b)  The completion of any registration or other  qualification of such shares under any state or federal law or under the  rulings or regulations of the Securities and Exchange Commission or any other  governmental regulatory body, which the Administrator shall, in its absolute  discretion, deem necessary or advisable; and

(c)  The obtaining of any approval or other  clearance from any state or federal governmental agency which the  Administrator shall, in its absolute discretion, determine to be necessary or  advisable; and

(d)  The payment to the Company (or other  employer corporation) of all amounts which it is required to withhold under  federal, state or local law in connection with the exercise of the Option,  which in the discretion of the Administrator, may be in the form of  consideration used by the Optionee to pay for such shares pursuant to Section  5.3(b); and

(e)  The lapse of such reasonable period of time  following the exercise of the Option as the Administrator may establish from  time to time for reasons of administrative convenience.
**Section 5.5 - Rights as Stockholders**
The holders of Options shall not be, nor have any of therights or privileges of, stockholders of the Company in respect of any sharespurchasable upon the exercise of any part of an Option unless and untilcertificates representing such shares have been issued by the Company to suchholders.

**Section 5.6 - Transfer Restrictions**
The Administrator, in its absolute discretion, may imposesuch other restrictions on the transferability of the shares purchasable uponthe exercise of an Option as it deems appropriate. Any such other restrictionshall be set forth in the respective Stock Option Agreement and may be referredto on the certificates evidencing such shares. The Administrator may require anAssociate to give the Company prompt notice of any disposition of shares ofstock, acquired by exercise of an Incentive Stock Option, within two years fromthe date of granting such Option or one year after the transfer of such sharesto such Associate. The Administrator may direct that the certificates evidencingshares acquired by exercise of an Incentive Stock Option refer to suchrequirement to give prompt notice of disposition.
**ARTICLE VIADMINISTRATION

 

Section 6.1 - Committee**
The Compensation Committee of the Board (or another committeeor a subcommittee of the Board assuming the functions of the Administrator underthis Plan) shall serve as the Committee and shall consist of two or moreDirectors appointed by and holding office at the pleasure of the Board,provided, however, that grants to Associates who are considered reportingpersons under Section 16 of the Exchange Act are to be administered by acommittee or subcommittee consisting of two or more Directors each of whomsatisfies the applicable requirements of Rule 16b-3 and Section 162(m) of theCode. Appointment of Committee members shall be effective upon acceptance ofappointment. Committee members may resign at any time by delivering writtennotice to the Board. Vacancies in the Committee may be filled by the Board.

**Section 6.2 - Duties and Powers of Administrator**
It shall be the duty of the Administrator to conduct thegeneral administration of the Plan in accordance with its provisions. TheAdministrator shall have the power to interpret the Plan and the Options and toadopt such rules for the administration, interpretation and application of thePlan as are consistent therewith and to interpret, amend or revoke any suchrules. Any such interpretations and rules in regard to (a) Incentive StockOptions shall be consistent with the basic purpose of the Plan to grant "*incentivestock options*" within the meaning of Section 422 of the Code. In itsabsolute discretion, the Board may at any time and from time to time exerciseany and all rights and duties of the Committee under this Plan, except withrespect to matters which under Rule 16b-3 or Section 162(m) of the Code, or anyregulations or rules issued thereunder, are required to be determined in thesole discretion of the Committee.

**Section 6.3 - Majority Rule**
The Administrator shall act by a majority of its members inoffice. The Administrator may act either by vote at a meeting or by a memorandumor other written instrument signed by a majority of the Administrator.

**Section 6.4 - Compensation; Professional Assistance; GoodFaith Actions**
Members of the Administrator shall receive such compensationfor their services as members as may be determined by the Board. All expensesand liabilities incurred by members of the Administrator in connection with theadministration of the Plan shall be borne by the Company. The Administrator mayemploy attorneys, consultants, accountants, appraisers, brokers or otherpersons. The Administrator, the Company and its Officers and Directors shall beentitled to rely upon the advice, opinions or valuations of any such persons.All actions taken and all interpretations and determinations made by theAdministrator in good faith shall be final and binding upon all Optionees, theCompany and all other interested persons. No member of the Administrator shallbe personally liable for any action, determination or interpretation made ingood faith with respect to the Plan or the Options, and all members of theAdministrator shall be fully protected by the Company in respect to any suchaction, determination or interpretation.

**Section 6.5 - Delegation of Authority to Grant Awards**
The Committee may, but need not, delegate from time to timesome or all of its authority to grant (and administer the terms of) Optionsunder the Plan to a committee consisting solely of one or more members of theCommittee or consisting solely of one or more Officers of the Company; provided,however, that the Committee may not so delegate its authority to grant Options(or administer the Plan with respect to Options granted) to any individual (i)who is subject on the date of the grant to the reporting rules under Section16(a) of the Exchange Act, (ii) who is an Executive Officer or (iii) who is anOfficer. Any delegation hereunder shall be subject to the restrictions andlimits that the Committee specifies at the time of such delegation of authorityand may be rescinded at any time by the Committee. At all times, any committeeappointed under this Section 6.5 shall serve in such capacity at the pleasure ofthe Committee.

**ARTICLE VIIOTHER PROVISIONS
 

Section 7.1 - Transferability of Options**
(a)  No Option or interest or right therein or partthereof shall be liable for the debts, contracts or engagements of the Optioneeor his successors in interest or shall be subject to disposition by transfer,alienation, anticipation, pledge, encumbrance, assignment or any other meanswhether such disposition be voluntary or involuntary or by operation of law, byjudgment, levy, attachment, garnishment or any other legal or equitableproceedings (including bankruptcy), and any attempted disposition thereof shallbe null and void and of no effect; *provided*, *however*, that nothingin this Section 7.1 shall prevent transfers by will or by the applicable laws ofdescent and distribution, or permitted transfers pursuant to the Section 7.1(b)hereof.

(b)  Notwithstanding the foregoingprovisions of this Section 7.1, the Administrator, in its sole discretion, maydetermine to grant an Option, which, by its terms or by resolution of theAdministrator after its grant, may be transferred by the Optionee, in writingand with prior written notice to the Administrator, by (i) gift or contribution,to a "family member" of the Optionee (as defined under theinstructions to use of Form S-8), or (ii) pursuant to a domestic relationsorder, provided, that an Option that has been so transferred shall continue tobe subject to all of the terms and conditions as applicable to the originalOptionee, and the transferee shall execute any and all such documents requestedby the Administrator in connection with the transfer, including withoutlimitation to evidence the transfer and to satisfy any requirements for anexemption for the transfer under applicable federal and state securities laws.

**Section 7.2 - Amendment, Suspension or Termination of thePlan**
The Plan may be wholly or partially amended or otherwisemodified, suspended or terminated at any time or from time to time by the Board.However, without approval of the Company's stockholders given within 12 monthsbefore or after the action by the Board, no action of the Board may, except asprovided in Section 2.3, increase any limit imposed in Section 2.1 on themaximum number of shares which may be issued on exercise of Options or amend ormodify the Plan in a manner requiring stockholder approval under Section 422 ofthe Code. Neither the amendment, suspension nor termination of the Plan shall,without the consent of the holder of the Option, impair any rights orobligations under any Option theretofore granted. No Option may be grantedduring any period of suspension nor after termination of the Plan, and in noevent may any Option be granted under this Plan after the first to occur of thefollowing events:

(a)  The expiration of ten years from the date  the Plan is adopted by the Board; or

(b)  The expiration of ten years from the date  the Plan is approved by the Company's stockholders under Section 7.3.
**Section 7.3 - Approval of Plan by Stockholders**
This Stock Option Plan was originally approved by theStockholders of the Company as of November 15, 1993.
**Section 7.4 - Effect of Plan Upon Other Option**and Compensation Plans**
The adoption of this Plan shall not affect any othercompensation or incentive plans in effect for the Company, any ParentCorporation or any Subsidiary. Nothing in this Plan shall be construed to limitthe right of the Company, any Parent Corporation or any Subsidiary (a) toestablish any other forms of incentives or compensation for Associates of theCompany, any Parent Corporation or any Subsidiary or (b) to grant or assumeoptions otherwise than under this Plan in connection with any proper corporatepurpose, including, but not by way of limitation, the grant or assumption ofoptions in connection with the acquisition by purchase, lease, merger,consolidation or otherwise, of the business, stock or assets of any corporation,firm or association.

**Section 7.5 - Titles**
Titles are provided herein for convenience only and are notto serve as a basis for interpretation or construction of the Plan.

**Section 7.6 - Conformity to Securities Laws**
The Plan is intended to conform to the extent necessary withall provisions of the Securities Act and the Exchange Act and any and allregulations and rules promulgated by the Securities and Exchange Commissionthereunder, including without limitation Rule 16b-3. Notwithstanding anythingherein to the contrary, the Plan shall be administered, and Options shall begranted and may be exercised, only in such a manner as to conform to such laws,rules and regulations. To the extent permitted by applicable law, the Plan andOptions granted hereunder shall be deemed amended to the extent necessary toconform to such laws, rules and regulations.

 

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I hereby certify that the Plan was previously approved by thestockholders of Sunrise Medical Inc. on November 15, 1993, and the first amendedand restated Plan was duly adopted by the Board of Directors of Sunrise MedicalInc. on November 13, 1997; and the Second Amended and Restated Plan was dulyadopted by the Board of Directors of Sunrise Medical Inc. on April 28, 1998; andthis Third Amended and Restated Plan was duly adopted by the Board of Directorsof Sunrise Medical Inc. on February 28, 2000.

 

Executed as of _______________, 2000.

 

 

__________________________________________

Steven A. Jaye, Secretary

 

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