Document:

INSITUFORM EAST, INCORPORATED

               SUPPLEMENTAL EXECUTIVE RETIREMENT INCOME AGREEMENT

         THIS AGREEMENT is made by and between Insituform East, Incorporated,  a
Delaware corporation ("INSITUFORM") and John F. Mulhall ("Executive").

                                    RECITALS

         A.  This  Agreement's  purpose  is  to  provide  certain   supplemental
retirement  and  death  benefits  to  the  Executive  and  his   Beneficiary  in
consideration of his services to INSITUFORM and its subsidiaries.

         B.  This  Agreement  has  been  approved  on  INSITUFORM's   behalf  by
resolution of INSITUFORM's Board of Directors.

         C. The benefits  provided  under this Agreement are to be determined by
aggregating the Executive's  employment by INSITUFORM and any one or more of its
parent,  affiliates or  subsidiaries as though the employment by these companies
were employment by INSITUFORM,  and by aggregating the Executive's salaries paid
by INSITUFORM and any one or more of its parent,  affiliates or  subsidiaries as
though those salaries were all paid by INSITUFORM.

         NOW, THEREFORE, INSITUFORM and the Executive agree as follows:

         1.  Retirement  Income:  Beginning  on the first day of the month  next
following the month in which occurs the Executive's  Normal  Retirement Date or,
if later, his Termination Date,  INSITUFORM shall pay to the Executive a monthly
benefit (the  "Supplemental  Benefit") for the Executive's  life equal to 25% of
the Executive's Final Monthly Salary,  multiplied by the ratio (not to exceed 1)
of

                  (i)  his completed  years (and any fractional  year) of
employment by INSITUFORM  after 1997;

                  (ii) the total  number of years (and any  fractional  year) of
         employment by INSITUFORM  after 1997 that he would have completed if he
         had continued in employment to his Normal Retirement Date.

         If  the  Executive's  Termination  Date  occurs  prior  to  his  Normal
Retirement  Date, the Executive shall begin receiving his  Supplemental  Benefit
payments  as of the  first day of the month  next  following  the month in which
occurs his 62nd birthday or, if later, his Termination  Date,  without actuarial
reduction for early payment. In no event shall the Supplemental Benefit payments
begin prior to the later of the  Executive's  62nd  birthday or his  Termination
Date.

         2. Death Benefit:

                  A.       After Retirement.

                  If  the  Executive   dies  after  the   commencement   of  his
Supplemental   Benefit   payments   but  before  he  has  received  180  monthly
Supplemental Benefit payments, INSITUFORM shall pay to his Beneficiary a monthly
Death  Benefit  beginning  on the  first  day of the month  next  following  the
Executive's  death and continuing  until the combined number of monthly payments
under this Agreement  received by the Executive and his Beneficiary  equals 180.
Each monthly Death Benefit payment under this paragraph 2A is to be equal to the
monthly  Supplemental  Benefit  payment that the  Executive was receiving at his
death.

                  B.       Before Retirement.

                  If  the  Executive  dies  before  the   commencement   of  his
Supplemental Benefit payments hereunder, INSITUFORM shall pay to his Beneficiary
a  one-time,  lump sum Death  Benefit  in the amount of Seven  Hundred  Thousand
Dollars  ($700,000.00)  in  lieu  of all  other  benefits  provided  under  this
Agreement. This lump sum death benefit is to be paid from the proceeds of a life
insurance  policy on the Executive's  life, which policy is to be acquired by or
on behalf of INSITUFORM and subject to a  split-dollar  agreement to provide the
death benefit under this paragraph.  The lump sum death benefit shall be paid to
the  Executive's  beneficiary  within 90 days after the Date of the  Executive's
death.

         3. Funding:  INSITUFORM's obligations under this Agreement are intended
to be unfunded  for tax  purposes  and for  purposes of Title I of the  Employee
Retirement Income Security Act of 1974, as amended,  and shall not be secured in
any  manner.  No asset of  INSITUFORM  shall be  placed in trust or in escrow or
otherwise  physically or legally  segregated for the benefit of the Executive or
his  Beneficiary,  other than under a funding vehicle  intended not to cause the
plan to be funded  for such  purposes.  The  eventual  payment  of the  payments
described  in this  Agreement to the  Executive,  his  Beneficiary  or any other
person  shall not be secured to him or them by the  issuance  of any  negotiable
instrument or other evidence of indebtedness of INSITUFORM or its  subsidiaries.
Neither the Executive, his Beneficiary,  nor any other person shall be deemed to
have  any  property  interest,  legal or  equitable,  in any  specific  asset of
INSITUFORM or its subsidiaries,  and, to the extent that any person acquires any
right to receive  payments under this Agreement,  that right shall be no greater
than,  nor shall it have any  preference  or  priority  over,  the rights of any
unsecured general creditor.

         4.  Assignment:  No payments,  benefits or rights under this  Agreement
shall be subject  in any manner to  anticipation,  sale,  transfer,  assignment,
mortgage,  pledge,  encumbrance,  charge or  alienation  by the  Executive,  his
Beneficiary  or any other person who could or might  possibly  receive  payments
under this  Agreement.  In the event of any  attempted  assignment,  alienation,
encumbrance or transfer,  INSITUFORM shall have no further  liability under this
Agreement.

         5.  Amendment  and  Termination:  This  Agreement  may  be  amended  or
terminated at any time and in any respect by the written agreement of INSITUFORM
and  the  Executive.   Notwithstanding  the  foregoing,  INSITUFORM's  Board  of
Directors  may  amend  or  terminate  this  Agreement  at any time  without  the
Executive's  consent by  advance  written  notice  delivered  to the  Executive,
provided  that  the  Board  may not  unilaterally:  (i)  reduce  or  modify  the
Executive's  accrued  benefit  determined  as of the date written  notice of the
amendment or termination is received by the Executive or (ii) amend or terminate
this  Agreement  in any  respect  after a Change in Control  has  occurred.  The
Executive's  accrued  benefit as of any date is the  Supplemental  Benefit  (and
Death Benefit) that he and his Beneficiary would receive,  under this Agreement,
if that date were his Termination  Date (but the  Supplemental  Benefit or Death
Benefits  payments are to be deferred  until the earlier of the first day of the
month next following the  Executive's  death, or the first day of the month next
following the month in which occurs his 62nd  birthday or, if later,  his actual
Termination Date, without actuarial increase).

         6. Vesting and Forfeiture  for Cause:  The  Executive's  benefits under
this Agreement  (including  any benefits  payable to his  Beneficiary)  shall be
fully vested unless his employment by INSITUFORM is terminated by INSITUFORM for
Cause.  If the  Executive  is  terminated  for Cause,  all  benefits  under this
Agreement  shall be  forfeited.  Termination  of the  Executive's  employment by
INSITUFORM for "Cause" means termination upon:

                  (i)  the  willful  and  continued   failure  by  Executive  to
         substantially  perform his duties with INSITUFORM  (other than any such
         failure  resulting  from  his  incapacity  due to  physical  or  mental
         illness)  after  a  written  demand  for  substantial   performance  is
         delivered to Executive by INSITUFORM's Board of Directors, which demand
         specifically identifies the manner in which the Board believes that the
         Executive has not substantially performed his duties,

                  (ii)  the  willful  engaging  by the  Executive  in  conduct
         that is  demonstrably  and  materially injurious to INSITUFORM or its
         subsidiaries, monetarily or otherwise, or

                  (iii) the Executive's conviction of, or plea of guilty or nolo
         contendere  to, a felony in a court of  competent  jurisdiction  in the
         U.S.

         No act or  failure  to act on the  Executive's  part  shall  be  deemed
"willful" unless done, or omitted to be done, by the Executive not in good faith
and without  reasonable  belief that his action or omission was in  INSITUFORM's
and/or its  subsidiaries'  best interest.  The Executive  shall not be deemed to
have been  terminated for Cause unless and until there shall have been delivered
to him a copy of a resolution duly adopted by the  affirmative  vote of not less
than  three-quarters of the entire membership of INSITUFORM's Board at a meeting
called and held for that purpose (after  reasonable  notice to the Executive and
an opportunity  for the Executive and his counsel to be heard before the Board),
finding  that in the good faith  opinion of the Board the  Executive  engaged in
conduct  described  under  clauses (i), (ii) or (iii) above and  specifying  the
particulars thereof.

         7. Other Retirement Benefits:  This Agreement supersedes any other plan
or agreement adopted prior to this Agreement that provides  retirement  benefits
to the Executive,  except (i) any retirement or other deferred compensation plan
intended to qualify  under  Section 401 or 403 of the  Internal  Revenue Code of
1986,  (ii) any plan or agreement that expressly  provides that its benefits are
not to be  superseded  by this  Agreement  and  (iii) any  nonqualified  plan or
agreement to which the  Executive has made  contributions  directly or by salary
reduction.

         8.  Construction:  This Agreement shall be, construed  according to the
laws of Maryland,  except where  superseded by Federal law. Use of the masculine
gender  includes the feminine  gender,  use of the  singular  case  includes the
plural,  and vice versa.  The invalidity of any portion of this Agreement  shall
not  invalidate  the remainder of the  Agreement,  which shall  continue in full
force and effect.  The  Supplemental  Benefits and the Death  Benefits are to be
payable in the same  manner as salary  payments  are made by  INSITUFORM  to its
executives.  All payments are subject to applicable  withholding and other taxes
required by law.  INSITUFORM's  Board of Directors  shall adopt  procedures  for
consideration of, and action with respect to, any claims made hereunder.

         9.  Successors:  This Agreement shall be binding upon the Executive and
INSITUFORM and their successors, assigns, heirs, executors and beneficiaries.

         10. Definitions:  When used in this Agreement, the following terms have
the meanings indicated below, unless a different meaning is clearly indicated by
the context:

                  "Beneficiary"  means the person or  persons  (who may be named
         contingently or successively)  designated by the Executive from time to
         time to  receive  the  Death  Benefits  as may be  payable  under  this
         Agreement upon or after the  Executive's  death.  Any such  beneficiary
         designation may be changed from time to time by the Executive by filing
         a new  designation.  Each  designation by the Executive will revoke all
         prior designations by the Executive, shall be in the form prescribed by
         INSITUFORM  and will be  effective  only  when  filed in  writing  with
         INSITUFORM during the Executive's  lifetime.  In the absence of a valid
         Beneficiary designation or, if at the time any Death Benefit payment is
         due to a Beneficiary,  there is no living Beneficiary  validly named by
         the  Participant,   INSITUFORM  shall  pay  any  such  benefit  to  the
         Executive's  spouse,  if his spouse is then surviving or, if the spouse
         is not  surviving or the Executive  has no spouse,  to the  Executive's
         estate.

                  "Change  in  Control"  means the  occurrence  of either of the
         following events: (1) a change of a nature that would be required to be
         reported, by persons or entities subject to the reporting  requirements
         of  Section  13(d)  of  the   Securities   and  Exchange  Act  of  1934
         (hereinafter  called the "Exchange Act"), in Schedule 13D of Regulation
         13D-G,  or any  successor  provisions  thereto,  promulgated  under the
         Exchange Act; provided that a Change in Control shall be deemed to have
         occurred  only if (a) any  "person"  (as that term is used in  Sections
         13(d) and 14(d) of the  Exchange  Act) is or  becomes  the  "beneficial
         owner" (as  defined  in Rule  13d-3  issued  under the  Exchange  Act),
         directly or indirectly,  of securities of INSITUFORM  representing  ten
         percent (10%) or more of the combined voting power of INSITUFORM's then
         outstanding  securities;  and (b) at any  time  during  the  period  of
         thirty-six  (36) months  subsequent to the ownership  change  described
         above,  individuals  who at the  beginning  of such  period  constitute
         INSITUFORM's  Board  cease  for any  reason  to  constitute  at least a
         majority thereof unless the election, or the nomination for election by
         INSITUFORM's shareholders,  of each new Director was approved by a vote
         of at  least  two-thirds  of the  Directors  still in  office  who were
         Directors at the beginning of such thirty-six (36) month period; or (2)
         any "person", as described above, is or becomes the "beneficial owner,"
         directly or indirectly,  of securities of INSITUFORM representing forty
         percent (40%) or more of the combined voting power of INSITUFORM's then
         outstanding securities.

                  "Final  Monthly  Salary"  means the monthly  equivalent of the
         Executive's  highest  combined rate of base annual salary earned by him
         from  INSITUFORM and all of its parent,  affiliates  and  subsidiaries,
         before  any  salary  reductions  elected  by the  Executive;  provided,
         however,  that the Executive's  "Final Monthly Salary" shall not exceed
         the amount of his monthly  base  salary rate in effect on December  31,
         1997, increased by 2% (compounded annually) for each full calendar year
         that elapses between December 31, 1997 and the Executive's  Termination
         Date.

                  "Normal Retirement Date" means the Executive's 65th birthday.

                  "Termination   Date"  means  the  date  that  the  Executive's
         employment  by  the  INSITUFORM   group   terminates  for  any  reason,
         voluntarily or involuntarily.

         IN WITNESS WHEREOF, the Executive and INSITUFORM have entered into this
Agreement, effective as of January 1, 1998.

ATTEST:                                 INSITUFORM EAST, INCORPORATED

/s/ Raymond T. Verrey                   By: /s/ Robert F. Hartman
Assistant Secretary                     Vice President of Administration

[Corporate Seal]

WITNESS:                                EXECUTIVE

/s/ D. Huiatt                           /s/ John F. Mulhall

<PAGE>

                             FIRST AMENDMENT TO THE
                          INSITUFORM EAST, INCORPORATED
               SUPPLEMENTAL EXECUTIVE RETIREMENT INCOME AGREEMENT
                              WITH JOHN F. MULHALL

         THIS AGREEMENT is made by and between Insituform East, Incorporated,  a
Delaware corporation ("INSITUFORM"), and John F. Mulhall ("Executive").

         A.  WHEREAS,  INSITUFORM  and  Executive  entered  into a  Supplemental
Executive  Retirement  Income  Agreement,  effective  as of January 1, 1998 (the
"Agreement"),  to provide certain supplemental  retirement and death benefits to
the  Executive  and  his  beneficiary  in   consideration  of  his  services  to
INSITUFORM.

         B.  WHEREAS,  INSITUFORM  and the  Executive  now  desire  to amend the
Agreement  to provide for the payment of the  Executive's  or his  beneficiary's
legal expenses incurred in obtaining any benefit under the Agreement.

         NOW THEREFORE, INSITUFORM and the Executive agree as follows:

         The following new Section 11 "Legal Fees" shall be added immediately at
the end of Section 10:

                  11. Legal Fees:  INSITUFORM  shall  reimburse the Executive or
         his Beneficiary all reasonable legal fees and expenses  incurred by the
         Executive or his  Beneficiary to obtain or enforce any right or benefit
         provided under this Agreement,  unless it is determined by a court (or,
         if applicable,  another  binding  decision maker) that the Executive or
         his  Beneficiary has not brought the claim for such right or benefit in
         good faith.

         The Agreement,  as amended by the foregoing  change, is hereby ratified
and confirmed in all respects.

         IN WITNESS WHEREOF, the Executive and INSITUFORM have entered into this
Agreement on this 11th day of June, 1999.

ATTEST:                                 INSITUFORM EAST, INCORPORATED

/s/ Robert F. Hartman                   By: /s/ Robert W. Erikson
Secretary                               Its: President

[Corporate Seal]

WITNESS:                                EXECUTIVE

/s/ Sharon Lavelle                      /s/ John Mulhall3Rd Amended and Restated 1993 STOCK OPTION PLAN OF SUNRISE MEDICAL INC

3Rd Amended and Restated

1993 STOCK OPTION PLAN

OF

SUNRISE MEDICAL INC.

 

SUNRISE MEDICAL INC., a corporation
organized under the laws of the State of Delaware, adopted the 1993 Stock Option
Plan of Sunrise Medical Inc. by the action of its Board of Directors as of
August 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 of
November 13, 1997; and was amended and restated for a second time by action of
the Board of Directors as of April 28, 1998; and is hereby amended and restated
for 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 additional
incentives to certain of its executive and other key Associates who have been or
will be given responsibility for the management or administration of the
Company's business affairs, by assisting them to become owners of the Company's
Common Stock and thus to benefit directly from its growth, development and
financial success.

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

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

 

ARTICLE I

DEFINITIONS

 

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

Section 1.1 - Administrator

"Administrator" shall mean the entity
that conducts the administration of the Plan (including the grant of Options) as
provided herein. With reference to the administration of the Plan with respect
to an Option granted or to be granted to Non-Associate Directors, the term
"Administrator" shall refer to the Board. With reference to the
administration of the Plan with respect to an Option granted or to be granted to
Associates, the term "Administrator" shall refer to the Committee,
unless and to the extent (a) the Board has assumed the authority for
administration 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 of
the Plan as permitted by Section 6.5.

Section 1.2 - Associate

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

Section 1.3 - Board

"Board" shall mean the Board of Directors of
the Company, as constituted from time to time.

Section 1.4 - Code

"Code" shall mean the Internal Revenue Code
of 1986, as amended.

 Section 1.5 - Committee

"Committee" shall mean the Compensation
Committee 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. In
addition, "Company" shall mean any corporation assuming, or
issuing new stock options in substitution for, Options outstanding under the
Plan. 

Section 1.7 - Director

"Director" shall mean a member of the Board.

Section 1.8 - Exchange Act

"Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time.

Section 1.9 - Executive Officers

"Executive Officers" shall mean in any one
of the Company's fiscal years (a) the Chief Executive Officer of the Company (or
the individual acting in such capacity) and (b) the four most highly compensated
Officers of the Company (other than the Chief Executive Officer) whose total
compensation is required to be reported to the Company's stockholders under the
Exchange Act.

Section 1.10 - Incentive Stock Option

"Incentive Stock Option" shall mean an
Option which qualifies under Section 422 of the Code and which is designated as
an Incentive Stock Option by the Administrator.

Section 1.11 - Non-Associate Director

"Non-Associate Director" shall mean a
Director who is not an Associate.

Section 1.12 - Non-Qualified Option

"Non-Qualified Option" shall mean an Option
which is not an Incentive Stock Option and which is designated as a
Non-Qualified Option by the Administrator.

Section 1.13 - Officer

"Officer" shall mean an officer of the
Company, as defined in Rule 16a-1(f) under the Exchange Act, as such Rule
may be amended in the future.

Section 1.14 - Option

"Option" shall mean an option to purchase
Common 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 a
Non-Associate Director to whom an Option is granted under the Plan.

Section 1.16 - Parent Corporation

"Parent Corporation" shall mean any
corporation in an unbroken chain of corporations ending with the Company if each
of the corporations other than the Company then owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

Section 1.17 - Plan

"Plan" shall mean this Third Amended and
Restated 1993 Stock Option Plan of Sunrise Medical Inc., as amended and/or
restated from time to time.

Section 1.18 - Rule 16b-3

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

Section 1.19 - Secretary

"Secretary" shall mean the Secretary of the
Company.\

Section 1.20 - Securities Act

"Securities Act" shall mean the Securities
Act of 1933, as amended from time to time.

Section 1.21 - Subsidiary

"Subsidiary" shall mean any corporation in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.

Section 1.22 - Termination of Directorship

"Termination of Directorship" shall mean the
time 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. The
Board, in its sole and absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Directorship.

Section 1.23 - Termination of Employment

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

 

ARTICLE II

SHARES SUBJECT TO PLAN

Section 2.1 - Shares Subject to Plan

(a) The shares of stock subject to Options shall be shares of
the Company's $1.00 par value Common Stock. The aggregate number of such shares
which 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 Company
beginning with July 1, 1994 such maximum number shall be increased by a number
equal to 1.5% of the number of shares of Common Stock issued and outstanding as
of the close of business on such day; provided, further, that the
aggregate number of shares which may be issued upon exercise of Options granted
to the Executive Officers as a group in any fiscal year of the Company under the
Plan shall not exceed 60% of the shares which may be issued upon exercise of all
Options granted in such fiscal year under the Plan.

(b) In no event shall the aggregate number of shares which
may be issued upon exercise of Options under the Plan exceed 4,000,000. All
shares remaining available for grant as of the termination or expiration of this
Plan shall be and become available for option grant under the Company's Year
2000 Non-Qualified Stock Option Plan, as the same may be amended and/or restated
from time to time.

Section 2.2 - Unexercised Options; Retained or Surrendered
Shares

If any Option expires or is canceled without having been
fully exercised, the number of shares subject to such Option but as to which
such Option was not exercised prior to its expiration or cancellation may again
be optioned hereunder, subject to the overall limitation of section 2.1(b) but
not subject to the limitations of Section 2.1(a). Shares of stock which are
received or retained by the Company upon the exercise of options pursuant to
Section 5.3(b) or Sections 5.3(c) and 5.4(d) may also again be optioned
hereunder, subject to the overall limitation of section 2.1(b) but not subject
to 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 of
the Company are hereafter changed into or exchanged for a different number or
kind of shares or other securities of the Company, or of another corporation, by
reason 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 and
kind of shares for the purchase of which Options may be granted, including
adjustments of the limitations in Section 2.1 on the maximum number and kind of
shares which may be issued on exercise of Options.

 

ARTICLE III

GRANTING OF OPTIONS

 

Section 3.1 - Eligibility

Any executive or other key Associate of the Company or of any
corporation which is then a Parent Corporation or a Subsidiary, including the
Executive Officers, shall be eligible to be granted Options. Non-Associate
Directors 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 such
Option, when granted, qualifies as an "incentive stock option"
under Section 422 of the Code. Incentive Stock Options shall not be granted to
Non-Associate Directors, but may, in the discretion of the Administrator, be
granted to Directors who are also Associates.

 

Section 3.3 - Granting of Options to Associates

 

(a)  In the case of Options to be granted to
Associates, the Administrator shall from time to time, in its absolute
discretion:

  (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 such
Options, 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 to
Non-Associate Directors

(a)  In the case of Options to be granted to
Non-Associate Directors, the Administrator shall from time to time, in its
absolute 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 IV

TERMS OF OPTIONS

 

Section 4.1 - Option Agreement

Each Option shall be evidenced by a written Stock Option
Agreement, which shall be executed by the Optionee and an authorized Officer of
the Company and which shall contain such terms and conditions as the
Administrator shall determine, consistent with the Plan. Stock Option Agreements
evidencing Incentive Stock Options shall contain such terms and conditions as
may 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 Option
shall be set by the Administrator; provided, however, that, in the
case of an Incentive Stock Option granted to an individual then owning (within
the meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company, any Subsidiary or any
Parent Corporation, the price per share shall not be less than 110% of the fair
market value of such shares on the date such Option is granted.

(b)  For purposes of the Plan, the fair market
value 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 principal
exchange 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 the
trading day previous to such date, then on the next preceding trading day during
which a sale occurred; or (ii) if such Common Stock is not traded on an exchange
but is quoted on NASDAQ or a successor quotation system, (1) the last sales
price (if the Company's Common Stock is then listed as a National Market Issue
under the NASD National Market System) or (2) the mean between the closing
representative bid and asked prices (in all other cases) for the Company's
Common Stock on the trading day previous to such date as reported by NASDAQ or
such successor quotation system; or (iii) if such Common Stock is not publicly
traded 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 Common
Stock, on the trading day previous to such date, as determined in good faith by
the 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 times
and in such installments (which may be cumulative) as the Administrator shall
provide 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, accelerate
the time at which such Option or any portion thereof may be exercised.

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

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

Section 4.4 - Expiration of Options

(a)  No Option may be exercised to any extent by
anyone 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, when
such Option expires and becomes unexercisable. Without limiting the generality
of the foregoing, the Administrator may provide in the terms of individual
Options that said Options expire immediately upon a Termination of Employment or
Termination of Directorship, as applicable, for any reason.

(c)  Except as limited by requirements of Section
422 of the Code and regulations and rulings thereunder applicable to Incentive
Stock Options, the Administrator may extend the term of any outstanding Option
in connection with any Termination of Employment or Termination of Directorship
of the Optionee, or amend any other term or condition of such Option relating to
such a termination.

Section 4.5 - Consideration

In consideration of the granting of an Option, the Optionee
shall 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 Parent
Corporation or a Subsidiary for a period of at least one year after the Option
is granted. Nothing in this Plan or in any Stock Option Agreement hereunder
shall confer upon any Optionee any right to continue in the employ or as a
Director of the Company, any Parent Corporation or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and its Parent
Corporation and Subsidiaries, which are hereby expressly reserved, to discharge
(or, in the case of a Non-Associate Director, to remove) any Optionee at any
time 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 subject
to Options are changed into or exchanged for a different number or kind of
shares of the Company or other securities of the Company or of another
corporation by reason of merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend or combination of shares, the
Administrator shall make an appropriate and equitable adjustment in the number
and kind of shares as to which all outstanding Options, or portions thereof then
unexercised, shall be exercisable, to the end that after such event the
Optionee's proportionate interest shall be maintained as before the occurrence
of such event. Such adjustment in an outstanding Option shall be made without
change in the total price applicable to the Option or the unexercised portion of
the Option (except for any change in the aggregate price resulting from
rounding-off of share quantities or prices) and with any necessary corresponding
adjustment in Option price per share; provided, however, that, in
the case of Incentive Stock Options, each such adjustment shall be made in such
manner as not to constitute a "modification" within the meaning
of Section 424(h)(3) of the Code. Any such adjustment made by the Administrator
shall be final and binding upon all Optionees, the Company and all other
interested persons.

Section 4.7 - Merger, Consolidation, Acquisition, Liquidation
or Dissolution

Notwithstanding the provisions of Section 4.6, in its
absolute 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 another
corporation, the acquisition by another corporation, person or group of persons
of all or substantially all of the Company's assets or 40% or more of the
Company's then outstanding voting stock, or the liquidation or dissolution of
the Company or any other transaction deemed by the Board to involve a change in
control of the Company (a "Corporate Transaction"), the Administrator
may, but is not obligated to, provide by the terms of any Option or by that a
resolution adopted prior to the occurrence of such Corporate Transaction that (i)
upon such Corporate Transaction, such Option shall be exercisable as to all
shares covered thereby, notwithstanding anything to the contrary in Section 4.3
and/or any installment provisions of such Option, or (ii) such Option cannot be
exercised and is terminated after the Corporate Transaction, and if the
Administrator so provides, it must on such terms and conditions as it deems
appropriate, also provide that for some period of time prior to such Corporate
Transaction that such Option shall be exercisable as to all shares covered
thereby, notwithstanding anything to the contrary in Section 4.3 and/or any
installment provisions of such Option.

ARTICLE V

EXERCISE OF OPTIONS

Section 5.1 - Person Eligible to Exercise

During the lifetime of the Optionee, only the Optionee, or
any permitted transferee pursuant to Section 7.1 hereof, may exercise an Option
(or any portion thereof) granted to the Optionee. After the death of the
Optionee, any exercisable portion of an Option may, prior to the time when such
portion becomes unexercisable under the Plan or the applicable Stock Option
Agreement, be exercised by his personal representative or by any person
empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.

Section 5.2 - Partial Exercise

At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes unexercisable under
the Plan or the applicable Stock Option Agreement, such Option or portion
thereof may be exercised in whole or in part; provided, however,
that the Company shall not be required to issue fractional shares and the
Administrator may, by the terms of the Option, require any partial exercise to
be 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 the
following prior to the time when such Option or such portion becomes
unexercisable 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 and
deliverable upon the exercise of an Option, or any portion thereof, may be
either previously authorized but unissued shares or issued shares which have
then been reacquired by the Company. The Company shall not be required to issue
or deliver any certificate or certificates for shares of stock purchased upon
the exercise of any Option or portion thereof prior to fulfillment of all of the
following 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 the
rights or privileges of, stockholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the Company to such
holders.

Section 5.6 - Transfer Restrictions

The Administrator, in its absolute discretion, may impose
such other restrictions on the transferability of the shares purchasable upon
the exercise of an Option as it deems appropriate. Any such other restriction
shall be set forth in the respective Stock Option Agreement and may be referred
to on the certificates evidencing such shares. The Administrator may require an
Associate to give the Company prompt notice of any disposition of shares of
stock, acquired by exercise of an Incentive Stock Option, within two years from
the date of granting such Option or one year after the transfer of such shares
to such Associate. The Administrator may direct that the certificates evidencing
shares acquired by exercise of an Incentive Stock Option refer to such
requirement to give prompt notice of disposition.

ARTICLE VI

ADMINISTRATION

 

Section 6.1 - Committee

The Compensation Committee of the Board (or another committee
or a subcommittee of the Board assuming the functions of the Administrator under
this Plan) shall serve as the Committee and shall consist of two or more
Directors appointed by and holding office at the pleasure of the Board,
provided, however, that grants to Associates who are considered reporting
persons under Section 16 of the Exchange Act are to be administered by a
committee or subcommittee consisting of two or more Directors each of whom
satisfies the applicable requirements of Rule 16b-3 and Section 162(m) of the
Code. Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice 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 the
general administration of the Plan in accordance with its provisions. The
Administrator shall have the power to interpret the Plan and the Options and to
adopt such rules for the administration, interpretation and application of the
Plan as are consistent therewith and to interpret, amend or revoke any such
rules. Any such interpretations and rules in regard to (a) Incentive Stock
Options shall be consistent with the basic purpose of the Plan to grant "incentive
stock options" within the meaning of Section 422 of the Code. In its
absolute discretion, the Board may at any time and from time to time exercise
any and all rights and duties of the Committee under this Plan, except with
respect to matters which under Rule 16b-3 or Section 162(m) of the Code, or any
regulations or rules issued thereunder, are required to be determined in the
sole discretion of the Committee.

Section 6.3 - Majority Rule

The Administrator shall act by a majority of its members in
office. The Administrator may act either by vote at a meeting or by a memorandum
or other written instrument signed by a majority of the Administrator.

Section 6.4 - Compensation; Professional Assistance; Good
Faith Actions

Members of the Administrator shall receive such compensation
for their services as members as may be determined by the Board. All expenses
and liabilities incurred by members of the Administrator in connection with the
administration of the Plan shall be borne by the Company. The Administrator may
employ attorneys, consultants, accountants, appraisers, brokers or other
persons. The Administrator, the Company and its Officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Administrator in good faith shall be final and binding upon all Optionees, the
Company and all other interested persons. No member of the Administrator shall
be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan or the Options, and all members of the
Administrator shall be fully protected by the Company in respect to any such
action, determination or interpretation.

Section 6.5 - Delegation of Authority to Grant Awards

The Committee may, but need not, delegate from time to time
some or all of its authority to grant (and administer the terms of) Options
under the Plan to a committee consisting solely of one or more members of the
Committee 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 Section
16(a) of the Exchange Act, (ii) who is an Executive Officer or (iii) who is an
Officer. Any delegation hereunder shall be subject to the restrictions and
limits that the Committee specifies at the time of such delegation of authority
and may be rescinded at any time by the Committee. At all times, any committee
appointed under this Section 6.5 shall serve in such capacity at the pleasure of
the Committee.

ARTICLE VII

OTHER PROVISIONS

 

Section 7.1 - Transferability of Options

(a)  No Option or interest or right therein or part
thereof shall be liable for the debts, contracts or engagements of the Optionee
or his successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law, by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that nothing
in this Section 7.1 shall prevent transfers by will or by the applicable laws of
descent and distribution, or permitted transfers pursuant to the Section 7.1(b)
hereof.

(b)  Notwithstanding the foregoing
provisions of this Section 7.1, the Administrator, in its sole discretion, may
determine to grant an Option, which, by its terms or by resolution of the
Administrator after its grant, may be transferred by the Optionee, in writing
and with prior written notice to the Administrator, by (i) gift or contribution,
to a "family member" of the Optionee (as defined under the
instructions to use of Form S-8), or (ii) pursuant to a domestic relations
order, provided, that an Option that has been so transferred shall continue to
be subject to all of the terms and conditions as applicable to the original
Optionee, and the transferee shall execute any and all such documents requested
by the Administrator in connection with the transfer, including without
limitation to evidence the transfer and to satisfy any requirements for an
exemption for the transfer under applicable federal and state securities laws.

Section 7.2 - Amendment, Suspension or Termination of the
Plan

The Plan may be wholly or partially amended or otherwise
modified, 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 months
before or after the action by the Board, no action of the Board may, except as
provided in Section 2.3, increase any limit imposed in Section 2.1 on the
maximum number of shares which may be issued on exercise of Options or amend or
modify the Plan in a manner requiring stockholder approval under Section 422 of
the Code. Neither the amendment, suspension nor termination of the Plan shall,
without the consent of the holder of the Option, impair any rights or
obligations under any Option theretofore granted. No Option may be granted
during any period of suspension nor after termination of the Plan, and in no
event may any Option be granted under this Plan after the first to occur of the
following 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 the
Stockholders 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 other
compensation or incentive plans in effect for the Company, any Parent
Corporation or any Subsidiary. Nothing in this Plan shall be construed to limit
the right of the Company, any Parent Corporation or any Subsidiary (a) to
establish any other forms of incentives or compensation for Associates of the
Company, any Parent Corporation or any Subsidiary or (b) to grant or assume
options otherwise than under this Plan in connection with any proper corporate
purpose, including, but not by way of limitation, the grant or assumption of
options 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 not
to 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 with
all provisions of the Securities Act and the Exchange Act and any and all
regulations and rules promulgated by the Securities and Exchange Commission
thereunder, including without limitation Rule 16b-3. Notwithstanding anything
herein to the contrary, the Plan shall be administered, and Options shall be
granted 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 and
Options granted hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.

 

* * * *

 

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

 

Executed as of _______________, 2000.

 

 

  
    
      
        
          
            
                        __________________________________________

                        Steven A. Jaye, Secretary

              
                
                  
                    
                      
                         

                      

                    

                  

                

              

            

          

        

      

    

  

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