-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HZxTB3rRX8RN4Fx6FSTy+JEcDcHuENpUQYmMH0SLA1K2I8ZYJPXWyFscLmd+CkK/ xT7RAyzifKAUdVk4hSbZVw== /in/edgar/work/0000912057-00-047660/0000912057-00-047660.txt : 20001108 0000912057-00-047660.hdr.sgml : 20001108 ACCESSION NUMBER: 0000912057-00-047660 CONFORMED SUBMISSION TYPE: SC 14D9/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20001107 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SUNRISE MEDICAL INC CENTRAL INDEX KEY: 0000720577 STANDARD INDUSTRIAL CLASSIFICATION: [3842 ] IRS NUMBER: 953836867 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 14D9/A SEC ACT: SEC FILE NUMBER: 005-34928 FILM NUMBER: 754866 BUSINESS ADDRESS: STREET 1: 2382 FARADAY AVENUE STE 200 CITY: CARLSBAD STATE: CA ZIP: 92008 BUSINESS PHONE: 6199301500 MAIL ADDRESS: STREET 1: 2382 FARADAY AVENUE SUITE 200 CITY: CARLSBAD STATE: CA ZIP: 92008 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SUNRISE MEDICAL INC CENTRAL INDEX KEY: 0000720577 STANDARD INDUSTRIAL CLASSIFICATION: [3842 ] IRS NUMBER: 953836867 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 14D9/A BUSINESS ADDRESS: STREET 1: 2382 FARADAY AVENUE STE 200 CITY: CARLSBAD STATE: CA ZIP: 92008 BUSINESS PHONE: 6199301500 MAIL ADDRESS: STREET 1: 2382 FARADAY AVENUE SUITE 200 CITY: CARLSBAD STATE: CA ZIP: 92008 SC 14D9/A 1 a2029408zsc14d9a.txt SC 14D9/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 7, 2000. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 1 TO SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ SUNRISE MEDICAL INC. (NAME OF SUBJECT COMPANY) SUNRISE MEDICAL INC. (NAME OF PERSON FILING STATEMENT) ------------------------ COMMON STOCK, PAR VALUE $1.00 PER SHARE (TITLE OF CLASS OF SECURITIES) 867910 10 1 (CUSIP NUMBER OF CLASS OF SECURITIES) ------------------------ MURRAY H. HUTCHISON CHAIRMAN OF THE BOARD OF DIRECTORS SUNRISE MEDICAL INC. 2382 FARADAY AVENUE, SUITE 200 CARLSBAD, CALIFORNIA 92008 (760) 930-1500 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT) ------------------------ COPIES TO: PAUL TOSETTI, ESQ. LATHAM & WATKINS 633 WEST FIFTH STREET, SUITE 4000 LOS ANGELES, CA 90071 (213) 485-1234 / / CHECK THE BOX IF THE FILING RELATES SOLELY TO PRELIMINARY COMMUNICATIONS MADE BEFORE THE COMMENCEMENT OF A TENDER OFFER. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This statement amends and supplements the Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission (the "Commission") on October 30, 2000 (the "Schedule 14D-9") by Sunrise Medical Inc., a corporation organized under the laws of the State of Delaware (the "Company"), relating to an offer by V.S.M. Acquisition Corp., a corporation organized under the laws of the State of Delaware ("Purchaser") and a wholly owned subsidiary of V.S.M. Holdings, Inc., a corporation organized under the laws of State of Delaware ("Holdings") and a wholly owned subsidiary of V.S.M. Investors, LLC, a Delaware limited liability company ("Parent"), disclosed in a Tender Offer Statement on Schedule TO, dated October 30, 2000 (the "Schedule TO"), to purchase all of the issued and outstanding Shares at a price of $10.00 per Share, net to the seller in cash (the "Offer Price"), upon the terms and subject to the conditions set forth in the offer to purchase (the "Offer to Purchase"), dated October 30, 2000, and the related letter of transmittal (the "Letter of Transmittal," which, as may be amended and supplemented from time to time, together with the Offer to Purchase, constitute the "Offer"). ITEM 8. ADDITIONAL INFORMATION (b) OTHER MATERIAL INFORMATION. The response to Item 8 is hereby amended by adding the following after the second paragraph of Item 8(b): On November 2, 2000, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, for the consummation of the Offer and the Merger terminated. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. Item 9 is hereby amended by filing the indicated exhibit:
EXHIBIT - --------------------- (a)(1)(A) Offer to Purchase dated October 30, 2000 ("Offer to Purchase") (incorporated herein by reference to Exhibit (a)(1)(i) to Schedule TO filed by Purchaser with respect to the Company on October 30, 2000 ("Schedule TO")). (a)(1)(B) Letter of Transmittal (incorporated herein by reference to Exhibit (a)(1)(ii) to Schedule TO). (a)(1)(C)* Information Statement Pursuant to Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1 thereunder (incorporated by reference herein and attached hereto as Annex A). (a)(1)(D)* Letter to Stockholders of the Company dated October 30, 2000 (incorporated by reference herein and attached hereto as Annex D). (a)(1)(E) Notice of Guaranteed Delivery (incorporated herein by reference to Exhibit (a)(1)(iii) to Schedule TO). (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (incorporated herein by reference to Exhibit (a)(1)(iv) to Schedule TO). (a)(1)(G) Form of letter to brokers, dealers, commercial banks, trust companies and other nominees (incorporated herein by reference to Exhibit (a)(1)(v) to Schedule TO).
EXHIBIT - --------------------- (a)(1)(H) Form of letter to be used by brokers, dealers, commercial banks, trust companies and other nominees to their clients (incorporated herein by reference to Exhibit (a)(1)(vi) to Schedule TO). (a)(1)(I) Summary newspaper advertisement, dated October 30, 2000, published in The Wall Street Journal (incorporated herein by reference to Exhibit (a)(1)(vii) to Schedule TO). (a)(1)(J) Direction form for the 401(K) Plan (incorporated herein by reference to Exhibit (a)(1)(viii) to Schedule TO) (a)(5)(A) Text of Press Release dated October 16, 2000 (incorporated herein by reference to Exhibit (a)(5)(A) of the Company's Schedule 14D-9 filed with the Securities and Exchange Commission (the "Commission") on October 17, 2000 (the "October 17 Schedule 14D-9"). (a)(5)(B) Letter to Associates of the Company dated October 17, 2000 (incorporated herein by reference to Exhibit (a)(5)(B) of the October 17 Schedule 14D-9). (a)(5)(C) Letter to Option Holders of the Company, dated October 17, 2000 (incorporated herein by reference to Exhibit (a)(5)(C) of the October 17 Schedule 14D-9). (a)(5)(D) Letter to Performance Bonus Unit Holders of the Company, dated October 17 (incorporated herein by reference to Exhibit (a)(5)(D) of the October 17 Schedule 14D-9). (a)(5)(E) "Questions and Answers" Memorandum to Associates (incorporated herein by reference to Exhibit (a)(5)(E) of the October 17 Schedule 14D-9). (a)(5)(F) Script for Michael Hammes videotaped address for employees, delivered October 17, 2000 (incorporated herein by reference to Exhibit (a)(5)(F) of the October 17 Schedule 14D-9). (a)(5)(G) Summary Advertisement as published in The Wall Street Journal on October 30, 2000 (incorporated herein by reference to Exhibit (a)(5)(B) to Schedule TO). (a)(5)(H) Complaint of Frank Rogers against Sunrise Medical Inc., et. al. filed in the Superior Court of the State of California, County of San Diego, on October 17, 2000 (incorporated herein by reference to Exhibit (a)(5)(vii) to schedule TO). (a)(5)(I) Complaint of Jerry Krim against Sunrise Medical Inc., et. al. filed in the Court of Chancery of the State of Delaware on October 18, 2000 (incorporated herein by reference to Exhibit (a)(5)(viii) to Schedule TO). (a)(5)(J) Complaint of Harbor Finance Partners against Sunrise Medical Inc., et. al. filed in the Court of Chancery of the State of Delaware on October 20, 2000 (incorporated herein by reference to Exhibit (a)(5)(iv) to Schedule TO). (a)(5)(K)+ Forms of letters to option holders, unit holders, Megagrant holders of units and options and former employees dated November 7, 2000. (b)(i) Commitment Letter, dated October 16, 2000, to V.S.M. Acquisition Corp. from Bankers Trust Company re: Acquisition Financing (incorporated herein by reference to Exhibit (b)(i) to Schedule TO). (b)(ii) Commitment Letter, dated October 16, 2000, to V.S.M. Acquisition Corp. from Bankers Trust Company re: Subordinated Debt Financing (incorporated herein by reference to Exhibit (b)(ii) to Schedule TO).
EXHIBIT - --------------------- (e)(1) Agreement and Plan of Merger, dated as of October 16, 2000, by and among Parent, Holdings, Purchaser and the Company (incorporated herein by reference to the Company's Current Report on Form 8-K filed with the Commission on October 24 and included as Schedule V to the Offer to Purchase). (e)(2)* Confidentiality/Standstill Agreement among the Company, Vestar Capital Partners IV, L.P. and Park Avenue Equity Partners, L.P. dated May 4, 2000. (e)(3)* Opinion of Deutsche Bank Securities Inc., dated October 16, 2000 (incorporated by reference herein and attached hereto as Annex B). (e)(4)* Opinion of Batchelder & Partners, Inc., dated October 16, 2000 (incorporated by reference herein and attached hereto as Annex C). (e)(5) Presentation of Deutsche Bank Securities Inc. to the Special Committee on October 16, 2000 (incorporated herein by reference to Exhibit (c)(iv) to Schedule TO). (e)(6) Presentation of Batchelder & Partners, Inc. to the Special Committee on October 16, 2000 (incorporated herein by reference to Exhibit (c)(iii) to Schedule TO). (e)(7)* Form of Change in Control Agreements dated June 27, 1997 between Sunrise Medical Inc. and certain employees. (e)(8)* Supplemental Executive Retirement Plan. (e)(9)* Third Amended and Restated 1993 Stock Option Plan. (e)(10)* Associate Stock Purchase Plan 2000. (e)(11)* 2000 Stock Option Plan. (e)(12)* Form of Indemnification Agreement. (e)(13) Form of Letter Agreement, dated October 14, 2000, between V.S.M. Investors, LLC and each of Ben Anderson-Ray, Geoffrey Cooper, Jim Fetter, Michael N. Hammes, Raymond Huggenberger, Steven Jaye, Robert J. Logemann, John Radak, Peter Riley, Sam Sinasohn and Carey Winkel, respectively, and the forms of Equity Term Sheet, Employment Agreements, Management Unit Subscription Agreement, Securityholders Agreement and Management Agreement attached as exhibits thereto (incorporated herein by reference to Exhibit (d)(13) to Schedule TO). (e)(14) Equity Commitment Letter, dated October 16, 2000, from Vestar Capital Partners IV, L.P. to V.S.M. Acquisition Corp (incorporated herein by reference to Exhibit (d)(14) to Schedule TO).
- ------------------------ * Previously filed. + Filed herewith. SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: November 7, 2000 SUNRISE MEDICAL INC. By: /s/ MURRAY H. HUTCHISON -------------------------------------- Name: Murray H. Hutchison Title: Chairman of the Board of Directors EXHIBIT INDEX
EXHIBIT - --------------------- (a)(1)(A) Offer to Purchase dated October 30, 2000 ("Offer to Purchase") (incorporated herein by reference to Exhibit (a)(1)(i) to Schedule TO filed by Purchaser with respect to the Company on October 30, 2000 ("Schedule TO")). (a)(1)(B) Letter of Transmittal (incorporated herein by reference to Exhibit (a)(1)(ii) to Schedule TO). (a)(1)(C)* Information Statement Pursuant to Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1 thereunder (incorporated by reference herein and attached hereto as Annex A). (a)(1)(D)* Letter to Stockholders of the Company dated October 30, 2000 (incorporated by reference herein and attached hereto as Annex D). (a)(1)(E) Notice of Guaranteed Delivery (incorporated herein by reference to Exhibit (a)(1)(iii) to Schedule TO). (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (incorporated herein by reference to Exhibit (a)(1)(iv) to Schedule TO). (a)(1)(G) Form of letter to brokers, dealers, commercial banks, trust companies and other nominees (incorporated herein by reference to Exhibit (a)(1)(v) to Schedule TO). (a)(1)(H) Form of letter to be used by brokers, dealers, commercial banks, trust companies and other nominees to their clients (incorporated herein by reference to Exhibit (a)(1)(vi) to Schedule TO). (a)(1)(I) Summary newspaper advertisement, dated October 30, 2000, published in The Wall Street Journal (incorporated herein by reference to Exhibit (a)(1)(vii) to Schedule TO). (a)(1)(J) Direction form for the 401(K) Plan (incorporated herein by reference to Exhibit (a)(1)(viii) to Schedule TO). (a)(5)(A) Text of Press Release dated October 16, 2000 (incorporated herein by reference to Exhibit (a)(5)(A) of the Company's Schedule 14D-9 filed with the Securities and Exchange Commission (the "Commission") on October 17, 2000 (the "October 17 Schedule 14D-9")). (a)(5)(B) Letter to Associates of the Company dated October 17, 2000 (incorporated herein by reference to Exhibit (a)(5)(B) of the October 17 Schedule 14D-9). (a)(5)(C) Letter to Option Holders of the Company, dated October 17, 2000 (incorporated herein by reference to Exhibit (a)(5)(C) of the October 17 Schedule 14D-9). (a)(5)(D) Letter to Performance Bonus Unit Holders of the Company, dated October 17 (incorporated herein by reference to Exhibit (a)(5)(D) of the October 17 Schedule 14D-9). (a)(5)(E) "Questions and Answers" Memorandum to Associates (incorporated herein by reference to Exhibit (a)(5)(E) of the October 17 Schedule 14D-9). (a)(5)(F) Script for Michael Hammes videotaped address for employees, delivered October 17, 2000 (incorporated herein by reference to Exhibit (a)(5)(F) of the October 17 Schedule 14D-9). (a)(5)(G) Summary Advertisement as published in The Wall Street Journal on October 30, 2000 (incorporated herein by reference to Exhibit (a)(5)(B) to Schedule TO). (a)(5)(H) Complaint of Frank Rogers against Sunrise Medical Inc., et al. filed in the Superior Court of the State of California, County of San Diego, on October 17, 2000 (incorporated herein by reference to Exhibit (a)(5)(vii) to Schedule TO). (a)(5)(I) Complaint of Jerry Krim against Sunrise Medical Inc., et al. filed in the Court of Chancery of the State of Delaware on October 18, 2000 (incorporated herein by reference to Exhibit (a)(5)(viii) to Schedule TO).
EXHIBIT - --------------------- (a)(5)(J) Complaint of Harbor Finance Partners against Sunrise Medical Inc., et al. filed in the Court of Chancery of the State of Delaware on October 20, 2000 (incorporated herein by reference to Exhibit (a)(5)(iv) to Schedule TO). (a)(5)(K)+ Forms of letters to option holders, unit holders, Megagrant holders of units and options and former employees dated November 7, 2000. (b)(i) Commitment Letter, dated October 16, 2000, to V.S.M. Acquisition Corp. from Bankers Trust Company re: Acquisition Financing (incorporated herein by reference to Exhibit (b)(i) to Schedule TO). (b)(ii) Commitment Letter, dated October 16, 2000, to V.S.M. Acquisition Corp. from Bankers Trust Company re: Subordinated Debt Financing (incorporated herein by reference to Exhibit (b)(ii) to Schedule TO). e)(1) Agreement and Plan of Merger, dated as of October 16, 2000, by and among Parent, Holdings, Purchaser and the Company (incorporated herein by reference to the Company's Current Report on Form 8-K filed with the Commission on October 24 and included as Schedule V to the Offer to Purchase). (e)(2)* Confidentiality/Standstill Agreement among the Company, Vestar Capital Partners IV, L.P. and Park Avenue Equity Partners, L.P. dated May 4, 2000. (e)(3)* Opinion of Deutsche Bank Securities Inc., dated October 16, 2000 (incorporated by reference herein and attached hereto as Annex B). (e)(4)* Opinion of Batchelder & Partners, Inc., dated October 16, 2000 (incorporated by reference herein and attached hereto as Annex C). (e)(5) Presentation of Deutsche Bank Securities Inc. to the Special Committee on October 16, 2000 (incorporated herein by reference to Exhibit (c)(iv) to Schedule TO). (e)(6) Presentation of Batchelder & Partners, Inc. to the Special Committee on October 16, 2000 (incorporated herein by reference to Exhibit (c)(iii) to Schedule TO). (e)(7)* Form of Change in Control Agreements dated June 27, 1997 between Sunrise Medical Inc. and certain employees. (e)(8)* Supplemental Executive Retirement Plan. (e)(9)* Third Amended and Restated 1993 Stock Option Plan. (e)(10)* Associate Stock Purchase Plan 2000. (e)(11)* 2000 Stock Option Plan. (e)(12)* Form of Indemnification Agreement. (e)(13) Form of Letter Agreement, dated October 14, 2000, between V.S.M. Investors, LLC and each of Ben Anderson-Ray, Geoffrey Cooper, Jim Fetter, Michael N. Hammes, Raymond Huggenberger, Steven Jaye, Robert J. Logemann, John Radak, Peter Riley, Sam Sinasohn and Carey Winkel, respectively, and the forms of Equity Term Sheet, Employment Agreements, Management Unit Subscription Agreement, Securityholders Agreement and Management Agreement attached as exhibits thereto (incorporated herein by reference to Exhibit (d)(13) to Schedule TO). (e)(14) Equity Commitment Letter, dated October 16, 2000, from Vestar Capital Partners IV, L.P. to V.S.M. Acquisition Corp. (incorporated herein by reference to Exhibit (d)(14) to Schedule TO).
- -------------------------- * Previously filed. + Filed herewith. EX-99.(A)(5)(K) 2 a2029408zex-99_a5k.txt EX-99.(A)(5)(K) November 7, 2000 Dear [insert name]: As you know, Sunrise Medical is being sold to an investor group that includes senior managers of the Company. The sale involves a tender offer for all shares at an offering price of $10 per share, followed by the merger of the Company with a corporation formed by the investor group (the "Transaction"). The Transaction is currently expected to close around calendar-year end, assuming (as we expect) that our stockholders will embrace this deal. This letter and the attached statement provide you with a detailed account of how your stock options are affected by the deal. Under the terms of the Transaction, the vesting of all of your unvested stock options is accelerated so that you are 100% vested in all of your stock options for a period of at least 20 days prior to the closing of the Transaction. As of the closing date, you are entitled to receive a cash payment for all stock options that have an exercise price below the offering price of $10 per share. This payment will equal the amount by which the $10 per share offering price is greater than the exercise price, multiplied by the number of shares covered by such stock options (see the table below for details). YOU DO NOT HAVE TO TAKE ANY ACTION TO RECEIVE THIS PAYMENT. Specifically, you do NOT have to exercise your stock options or tender the shares you would receive on exercise to receive this payment. IF YOU DO NOTHING, YOU WILL RECEIVE A CHECK FOR THE OPTION "SPREAD" (THE EXCESS OF THE OFFERING PRICE OF $10 PER SHARE OVER YOUR EXERCISE PRICE) FOLLOWING THE CLOSING. Any stock options with an exercise price of $10 or more per share will have no value and you will not receive any payment for them. STOCK OPTION TABLE The attached statement provides details on all of the stock options you hold, including their exercise prices. The table below shows the number of stock options for which you are entitled to receive payment and indicates the exercise price of each grant and the resulting "spread." Your pretax gain is the "spread" multiplied by the number of shares covered by such options. [Insert table] Please note that the gain shown above is BEFORE taxes. Taxes at the appropriate rate will be withheld automatically by the Company. Information in the above table and attached personnel option summary is as of October 23, 2000. This letter and the option summary assume that you are a current Associate as of the close of the Transaction. At the closing of the Transaction, all outstanding stock options will be canceled and all stock option programs will be terminated. Because Sunrise Medical will no longer be a publicly held company, a new program more appropriate to a privately held company is being finalized. This new program will provide cash compensation to eligible Associates (other than those in the ownership group) if the Company meets specific performance goals, in accordance with the terms of the program. If you have any questions about your stock options or the payment you will receive, or if you wish to exercise your vested stock options, please call Debi Ward at (760) 930-1547 or Suzanne DeSpain at (760) 930-1542. REMEMBER, YOU DO NOT NEED TO EXERCISE YOUR STOCK OPTIONS TO RECEIVE THE PAYMENT OUTLINED ABOVE. Sincerely, Steven A. Jaye Senior Vice President and CAO Enclosure November 7, 2000 Dear [insert name]: As you know, Sunrise Medical is being sold to an investor group that includes senior managers of the Company. The sale involves a tender offer for all shares at an offering price of $10 per share, followed by the merger of the Company with a corporation formed by the investor group (the "Transaction"). The Transaction is currently expected to close around calendar-year end, assuming (as we expect) that our stockholders will embrace this deal. This letter and the attached statement provide you with a detailed account of how your stock options are affected by the deal. REGULAR STOCK OPTIONS "Regular Stock Options" are those stock options that vest solely on the basis of the passage of time, generally vesting 25% per year on the first, second, third, and fourth anniversaries of the stock option grant date. Under the terms of the Transaction, the vesting of all of your unvested Regular Stock Options is accelerated so that you are 100% vested in all of your Regular Stock Options for a period of at least 20 days prior to the closing of the Transaction. As of the closing date, you are entitled to receive a cash payment for all Regular Stock Options that have an exercise price below the offering price of $10 per share. This payment will equal the amount by which the $10 per share offering price is greater than the exercise price, multiplied by the number of shares covered by such Regular Stock Options (see the tables below for details). YOU DO NOT HAVE TO TAKE ANY ACTION TO RECEIVE THIS PAYMENT. Specifically, you do NOT have to exercise your stock options or tender the shares you would receive on exercise to receive this payment. IF YOU DO NOTHING, YOU WILL RECEIVE A CHECK FOR THE OPTION "SPREAD" (THE EXCESS OF THE OFFERING PRICE OF $10 PER SHARE OVER YOUR EXERCISE PRICE) FOLLOWING THE CLOSING. Any Regular Stock Options with an exercise price of $10 or more per share will have no value and you will not receive any payment for them. MEGAGRANT STOCK OPTIONS "Megagrant Stock Options" are those stock options granted under the Year 2000 Non-Qualified Stock Option Plan, whose vesting occurs in three equal tranches: (i) One-third (1/3) time vesting (equal time vesting over four years); (ii) One-third (1/3) performance vesting based on attainment of earnings per share targets; and (iii) One-third (1/3) performance vesting based on attainment of stock price targets. As a result of the Transaction, vesting of the first two-thirds (2/3) of your total Megagrant Stock Options (time vesting and earnings per share performance vesting) accelerates. The one-third (1/3) of your total Megagrant Stock Options that vest on the basis of stock price performance do not vest or accelerate as a result of the Transaction because the offering price of $10 per share does not exceed the per share stock price performance targets. Thus, [number of options vested] of your Megagrant Stock Options are 100% vested as of the closing of the Transaction for a total value of $[Total Megagrant Spread] before tax. As you previously authorized, 100% of the net after-tax gain from the acceleration and payout of your vested Megagrant Stock Options will rollover into an equity investment in the new company. STOCK OPTION TABLES The attached statement provides details on all of the stock options you hold, including their exercise prices. The tables below show the number of stock options for which you are entitled to receive payment and indicate the exercise price of each grant and the resulting "spread." Your pretax gain is the "spread" multiplied by the number of shares covered by such options. [Insert tables] Please note that the gain shown above is BEFORE taxes. Taxes at the appropriate rate will be withheld automatically by the Company. Information in the above table and attached personnel option summary is as of October 23, 2000. This letter and the option summary assume that you are a current Associate as of the close of the Transaction. At the closing of the Transaction, all stock option programs will be terminated and all outstanding options will be cancelled to the fullest extent permitted by the applicable plans or as consented to by optionees. Because Sunrise Medical will no longer be a publicly held company, a new program more appropriate to a privately held company is being finalized. The new program will provide cash compensation to eligible Associates (other than the ownership group) if the Company meets specific performance goals, in accordance with the terms of the program. CONFIDENTIALITY REMINDER Certain benefits being provided to you are being provided to only a handful of Associates in the Company and are not being provided to Associates generally. There is a significant risk of substantial harm to the Company if the existence or matters discussed in this letter are made known to other Associates. The Company is therefore relying on your promise to keep this letter and the matters discussed in this letter confidential. YOU SHOULD NOT DISCUSS THESE MATTERS WITH OTHER ASSOCIATES, EVEN THOSE IN THE SENIOR LEADERSHIP GROUP (BUT IT IS ALL RIGHT TO DISCUSS WITH ME AND OTHER MEMBERS OF THE G7). And, you may discuss the terms of this letter with your spouse (if any) or any outside legal counsel or financial adviser you may choose to consult, so long as they agree to be bound by such secrecy obligation and you remain liable for any breach of such secrecy by them. If you have any questions about your stock options or the payment you will receive, or if you wish to exercise your vested stock options, please call Debi Ward at (760) 930-1547 or Suzanne DeSpain at (760) 930-1542. REMEMBER, YOU DO NOT NEED TO EXERCISE YOUR STOCK OPTIONS TO RECEIVE THE PAYMENT OUTLINED ABOVE. Sincerely, Steven A. Jaye Senior Vice President and CAO Enclosure November 7, 2000 Dear [insert name]: As you know, Sunrise Medical is being sold to an investor group that includes senior managers of the Company. The sale involves a tender offer for all shares at an offering price of $10 per share, followed by the merger of the Company with a corporation formed by the investor group (the "Transaction"). The Transaction is currently expected to close around calendar-year end, assuming (as we expect) that our stockholders will embrace this deal. This letter and the attached statement provide you with a detailed account of how your stock options are affected by the deal. REGULAR STOCK OPTIONS "Regular Stock Options" are those stock options that vest solely on the basis of the passage of time, generally vesting 25% per year on the first, second, third, and fourth anniversaries of the stock option grant date. Under the terms of the Transaction, the vesting of all of your unvested Regular Stock Options is accelerated so that you are 100% vested in all of your Regular Stock Options for a period of at least 20 days prior to the closing of the Transaction. As of the closing date, you are entitled to receive a cash payment for all Regular Stock Options that have an exercise price below the offering price of $10 per share. This payment will equal the amount by which the $10 per share offering price is greater than the exercise price, multiplied by the number of shares covered by such Regular Stock Options (see the tables below for details). YOU DO NOT HAVE TO TAKE ANY ACTION TO RECEIVE THIS PAYMENT. Specifically, you do NOT have to exercise your stock options or tender the shares you would receive on exercise to receive this payment. IF YOU DO NOTHING, YOU WILL RECEIVE A CHECK FOR THE OPTION "SPREAD" (THE EXCESS OF THE OFFERING PRICE OF $10 PER SHARE OVER YOUR EXERCISE PRICE) FOLLOWING THE CLOSING. Any Regular Stock Options with an exercise price of $10 or more per share will have no value and you will not receive any payment for them. MEGAGRANT STOCK OPTIONS "Megagrant Stock Options" are those stock options granted under the Year 2000 Non-Qualified Stock Option Plan, whose vesting occurs in three equal tranches: (i) One-third (1/3) time vesting (equal time vesting over four years); (ii) One-third (1/3) performance vesting based on attainment of earnings per share targets; and (iii) One-third (1/3) performance vesting based on attainment of stock price targets. As a result of the Transaction, vesting of the first two-thirds (2/3) of your total Megagrant Stock Options (time vesting and earnings per share performance vesting) accelerates. The one-third (1/3) of your total Megagrant Stock Options that vest on the basis of stock price performance do not vest or accelerate as a result of the Transaction because the offering price of $10 per share does not exceed the per share stock price performance targets. Thus, [number of options vested] of your Megagrant Stock Options are 100% vested as of the closing of the Transaction for a total value of $[Total Megagrant Spread] before tax. You can roll over 100% of this amount (less applicable taxes) into an investment in the new company in accordance with the terms and conditions of an investment agreement to be entered into with the new company. This is the investment opportunity mentioned during the Senior Leadership Group meeting in Carlsbad. We will cover the details of this investment opportunity with you in the near future. As we discussed at the Senior Leadership Group meeting, this investment opportunity is limited to a small group of people. If you decide to not be part of the ownership group going forward, you can elect to receive a cash payment for the vested two-thirds (2/3). STOCK OPTION TABLES The attached statement provides details on all of the stock options you hold, including their exercise prices. The tables below show the number of stock options for which you are entitled to receive payment and indicate the exercise price of each grant and the resulting "spread." Your pretax gain is the "spread" multiplied by the number of shares covered by such options. [Insert tables] Please note that the gain shown above is BEFORE taxes. Taxes at the appropriate rate will be withheld automatically by the Company. Information in the above table and attached personnel option summary is as of October 23, 2000. This letter and the option summary assume that you are a current Associate as of the close of the Transaction. At the closing of the Transaction, all stock option programs will be terminated and all outstanding options will be cancelled to the fullest extent permitted by the applicable plans or as consented to by optionees. Because Sunrise Medical will no longer be a publicly held company, a new program more appropriate to a privately held company is being finalized. The new program will provide cash compensation to eligible Associates (other than those in the ownership group) if the Company meets specific performance goals, in accordance with the terms of the program. CONFIDENTIALITY REMINDER Certain benefits being provided to you are being provided to only a handful of Associates in the Company and are not being provided to Associates generally. There is a significant risk of substantial harm to the Company if the existence or matters discussed in this letter are made known to other Associates. The Company is therefore relying on your promise to keep this letter and the matters discussed in this letter confidential. YOU SHOULD NOT DISCUSS THESE MATTERS WITH OTHER ASSOCIATES, EVEN THOSE IN THE SENIOR LEADERSHIP GROUP (BUT IT IS ALL RIGHT TO DISCUSS WITH ME AND OTHER MEMBERS OF THE G7). And, you may discuss the terms of this letter with your spouse (if any) or any outside legal counsel or financial adviser you may choose to consult, so long as they agree to be bound by such secrecy obligation and you remain liable for any breach of such secrecy by them. If you have any questions about your stock options or the payment you will receive, or if you wish to exercise your vested stock options, please call Debi Ward at (760) 930-1547 or Suzanne DeSpain at (760) 930-1542. Also, Larry Cagney at Debevoise & Plimpton has been hired to advise management on the going private investment plan. We will make Larry available to answer questions you may have in this regard. REMEMBER, YOU DO NOT NEED TO EXERCISE YOUR STOCK OPTIONS TO RECEIVE THE PAYMENT OUTLINED ABOVE. Sincerely, Steven A. Jaye Senior Vice President and CAO Enclosure November 7, 2000 Dear [insert name]: As you know, Sunrise Medical is being sold to an investor group that includes senior managers of the Company. The sale involves a tender offer for all shares at an offering price of $10 per share, followed by the merger of the Company with a corporation formed by the investor group (the "Transaction"). The Transaction is currently expected to close around calendar-year end, assuming (as we expect) that our stockholders will embrace this deal. This letter and the attached statement provide you with a detailed account of how your stock options are affected by the deal. REGULAR STOCK OPTIONS "Regular Stock Options" are those stock options that vest solely on the basis of the passage of time, generally vesting 25% per year on the first, second, third, and fourth anniversaries of the stock option grant date. Under the terms of the Transaction, the vesting of all of your unvested Regular Stock Options is accelerated so that you are 100% vested in all of your Regular Stock Options for a period of at least 20 days prior to the closing of the Transaction. As of the closing date, you are entitled to receive a cash payment for all Regular Stock Options that have an exercise price below the offering price of $10 per share. This payment will equal the amount by which the $10 per share offering price is greater than the exercise price, multiplied by the number of shares covered by such Regular Stock Options (see the tables below for details). YOU DO NOT HAVE TO TAKE ANY ACTION TO RECEIVE THIS PAYMENT. Specifically, you do NOT have to exercise your stock options or tender the shares you would receive on exercise to receive this payment. IF YOU DO NOTHING, YOU WILL RECEIVE A CHECK FOR THE OPTION "SPREAD" (THE EXCESS OF THE OFFERING PRICE OF $10 PER SHARE OVER YOUR EXERCISE PRICE) FOLLOWING THE CLOSING. Any Regular Stock Options with an exercise price of $10 or more per share will have no value and you will not receive any payment for them. MEGAGRANT STOCK OPTIONS "Megagrant Stock Options" are those stock options granted under the Year 2000 Non-Qualified Stock Option Plan, whose vesting occurs in three equal tranches: (i) One-third (1/3) time vesting (equal time vesting over four years); (ii) One-third (1/3) performance vesting based on attainment of earnings per share targets; and (iii) One-third (1/3) performance vesting based on attainment of stock price targets. As a result of the Transaction, vesting of the first two-thirds (2/3) of your total Megagrant Stock Options (time vesting and earnings per share performance vesting) accelerates. The one-third (1/3) of your total Megagrant Stock Options that vest on the basis of stock price performance do not vest or accelerate as a result of the Transaction because the offering price of $10 per share does not exceed the per share stock price performance targets. Thus, [number of options vested] of your Megagrant Stock Options are 100% vested as of the closing of the Transaction for a total value of $[Total Megagrant Spread] before tax. STOCK OPTION TABLES The attached statement provides details on all of the stock options you hold, including their exercise prices. The tables below show the number of stock options for which you are entitled to receive payment and indicate the exercise price of each grant and the resulting "spread." Your pretax gain is the "spread" multiplied by the number of shares covered by such options. [Insert tables] Please note that the gain shown above is BEFORE taxes. Taxes at the appropriate rate will be withheld automatically by the Company. Information in the above table and attached personnel option summary is as of October 23, 2000. At the closing of the Transaction, all stock option programs will be terminated and all outstanding options will be cancelled to the fullest extent permitted by the applicable plans or as consented to by optionees. CONFIDENTIALITY REMINDER Certain benefits being provided to you are being provided to only a handful of Associates in the Company and are not being provided to Associates generally. There is a significant risk of substantial harm to the Company if the existence or matters discussed in this letter are made known to other Associates. The Company is therefore relying on your promise to keep this letter and the matters discussed in this letter confidential. YOU SHOULD NOT DISCUSS THESE MATTERS WITH OTHER ASSOCIATES, EVEN THOSE IN THE SENIOR LEADERSHIP GROUP (BUT IT IS ALL RIGHT TO DISCUSS WITH ME AND OTHER MEMBERS OF THE G7). And, you may discuss the terms of this letter with your spouse (if any) or any outside legal counsel or financial adviser you may choose to consult, so long as they agree to be bound by such secrecy obligation and you remain liable for any breach of such secrecy by them. If you have any questions about your stock options or the payment you will receive, or if you wish to exercise your vested stock options, please call Debi Ward at (760) 930-1547 or Suzanne DeSpain at (760) 930-1542. Also, Larry Cagney at Debevoise & Plimpton has been hired to advise management on the going private investment plan. We will make Larry available to answer questions you may have in this regard. REMEMBER, YOU DO NOT NEED TO EXERCISE YOUR STOCK OPTIONS TO RECEIVE THE PAYMENT OUTLINED ABOVE. Sincerely, Steven A. Jaye Senior Vice President and CAO Enclosure November 7, 2000 Dear [insert name]: As you know, Sunrise Medical is being sold to an investor group that includes senior managers of the Company. The sale involves a tender offer for all shares at an offering price of $10 per share, followed by the merger of the Company with a corporation formed by the investor group (the "Transaction"). The Transaction is currently expected to close around calendar-year end, assuming (as we expect) that our stockholders will embrace this deal. This letter and the attached statement provide you with a detailed account of how your PBUs are affected by the deal. Under the terms of the Transaction, the vesting of all of your unvested PBUs is accelerated so that you are 100% vested in all of your PBUs for a period of at least 20 days prior to the closing of the Transaction. As of the closing date, you are entitled to receive a cash payment for all PBUs that have an exercise price below the offering price of $10 per share. This payment will equal the amount by which the $10 per share offering price is greater than the PBU exercise price, multiplied by the number of units covered by such PBUs (see the table below for details). YOU DO NOT HAVE TO TAKE ANY ACTION TO RECEIVE THIS PAYMENT. Specifically, you do NOT have to exercise your PBUs. IF YOU DO NOTHING, YOU WILL RECEIVE A CHECK FOR THE PBU "SPREAD" (THE EXCESS OF THE OFFERING PRICE OF $10 PER SHARE OVER YOUR EXERCISE PRICE) FOLLOWING THE CLOSING. Any PBUs with an exercise price of $10 or more per unit will have no value and you will not receive any payment for them. PERFORMANCE BONUS UNIT TABLE The attached statement provides details on all of the PBUs you hold, including their exercise prices. The table below shows the number of PBUs for which you are entitled to receive payment and indicates the exercise price of each grant and the resulting "spread." Your pretax gain is the "spread" multiplied by the number of units covered by such PBUs. [Insert table] Please note that the gain shown above is BEFORE taxes. Taxes at the appropriate rate will be withheld automatically by the Company. Information in the above table and attached personnel summary is as of October 23, 2000. This letter and the PBU summary assume that you are a current Associate as of the close of the Transaction. At the closing of the Transaction, all outstanding PBUs will be canceled and all PBU programs will be terminated. Because Sunrise Medical will no longer be a publicly held company, a new program more appropriate to a privately held company is being finalized. This new program will provide cash compensation to eligible Associates (other than those in the ownership group) if the Company meets specific performance goals, in accordance with the terms of the program. If you have any questions about your PBUs or the payment you will receive, or if you wish to exercise your vested PBUs, please call Debi Ward at (760) 930-1547 or Suzanne DeSpain at (760) 930-1542. REMEMBER, YOU DO NOT NEED TO EXERCISE YOUR PBUS TO RECEIVE THE PAYMENT OUTLINED ABOVE. Sincerely, Steven A. Jaye Senior Vice President and CAO Enclosure November 7, 2000 Dear [insert name]: As you know, Sunrise Medical is being sold to an investor group that includes senior managers of the Company. The sale involves a tender offer for all shares at an offering price of $10 per share, followed by the merger of the Company with a corporation formed by the investor group (the "Transaction"). The Transaction is currently expected to close around calendar-year end, assuming (as we expect) that our stockholders will embrace this deal. This letter and the attached statement provide you with a detailed account of how your PBUs are affected by the deal. Under the terms of the Transaction, the vesting of all of your unvested PBUs is accelerated so that you are 100% vested in all of your PBUs for a period of at least 20 days prior to the closing of the Transaction. As of the closing date, you are entitled to receive a cash payment for all PBUs that have an exercise price below the offering price of $10 per share. This payment will equal the amount by which the $10 per share offering price is greater than the PBU exercise price, multiplied by the number of units covered by such PBUs (see the table below for details). YOU DO NOT HAVE TO TAKE ANY ACTION TO RECEIVE THIS PAYMENT. Specifically, you do NOT have to exercise your PBUs. IF YOU DO NOTHING, YOU WILL RECEIVE A CHECK FOR THE PBU "SPREAD" (THE EXCESS OF THE OFFERING PRICE OF $10 PER SHARE OVER YOUR EXERCISE PRICE) FOLLOWING THE CLOSING. Any PBUs with an exercise price of $10 or more per unit will have no value and you will not receive any payment for them. PERFORMANCE BONUS UNIT TABLE The attached statement provides details on all of the PBUs you hold, including their exercise prices. The table below shows the number of PBUs for which you are entitled to receive payment and indicates the exercise price of each grant and the resulting "spread." Your pretax gain is the "spread" multiplied by the number of units covered by such PBUs. [Insert table] Please note that the gain shown above is BEFORE taxes. Taxes at the appropriate rate will be withheld automatically by the Company. Information in the above table and attached personnel summary is as of October 23, 2000. This letter and the PBU summary assume that you are a current Associate as of the close of the Transaction. At the closing of the Transaction, all outstanding PBUs will be canceled and all PBU programs will be terminated. Because Sunrise Medical will no longer be a publicly held company, a new program more appropriate to a privately held company is being finalized. This new program will provide cash compensation to eligible Associates (other than those in the ownership group) if the Company meets specific performance goals, in accordance with the terms of the program. If you have any questions about your PBUs or the payment you will receive, or if you wish to exercise your vested PBUs, please call Debi Ward at (760) 930-1547 or Suzanne DeSpain at (760) 930-1542. REMEMBER, YOU DO NOT NEED TO EXERCISE YOUR PBUS TO RECEIVE THE PAYMENT OUTLINED ABOVE. Sincerely, Steven A. Jaye Senior Vice President and CAO Enclosure November 7, 2000 Dear [insert name]: As you know, Sunrise Medical is being sold to an investor group that includes senior managers of the Company. The sale involves a tender offer for all shares at an offering price of $10 per share, followed by the merger of the Company with a corporation formed by the investor group (the "Transaction"). The Transaction is currently expected to close around calendar-year end, assuming (as we expect) that our stockholders will embrace this deal. This letter and the attached statement provide you with a detailed account of how your PBUs are affected by the deal. REGULAR PBU PROGRAM "Regular PBUs" are those PBUs that vest solely on the basis of the passage of time, generally vesting 25% per year on the first, second, third, and fourth anniversaries of the PBU grant date. Under the terms of the Transaction, the vesting of all of your unvested Regular PBUs is accelerated so that you are 100% vested in all of your Regular PBUs for a period of at least 20 days prior to the closing of the Transaction. As of the closing date, you are entitled to receive a cash payment for all Regular PBUs that have an exercise price below the offering price of $10 per share. This payment will equal the amount by which the $10 per share offering price is greater than the PBU exercise price, multiplied by the number of units covered by such Regular PBUs (see the tables below for details). YOU DO NOT HAVE TO TAKE ANY ACTION TO RECEIVE THIS PAYMENT. Specifically, you do NOT have to exercise your PBUs. IF YOU DO NOTHING, YOU WILL RECEIVE A CHECK FOR THE PBU "SPREAD" (THE EXCESS OF THE OFFERING PRICE OF $10 PER SHARE OVER YOUR EXERCISE PRICE) FOLLOWING THE CLOSING. Any Regular PBUs with an exercise price of $10 or more will have no value and you will not receive any payment for them. MEGAGRANT PBU PROGRAM "Megagrant PBUs" are those PBUs whose vesting occurs in three equal tranches: (i) One-third (1/3) time vesting (equal time vesting over four years); (ii) One-third (1/3) performance vesting based on attainment of earnings per share targets; and (iii) One-third (1/3) performance vesting based on attainment of stock price targets. As a result of the Transaction, vesting of the first two-thirds (2/3) of your total Megagrant PBUs (time vesting and earnings per share performance vesting) accelerates. The one-third (1/3) of your total Megagrant PBUs that vest on the basis of stock price performance do not vest or accelerate as a result of the Transaction because the offering price of $10 per share does not exceed the per unit stock price performance targets. Thus, [number of options vested] of your Megagrant PBUs are 100% vested as of the closing of the Transaction for a total value of $[Total Megagrant Spread] before tax. You can roll over 100% of this amount (less applicable taxes) into an investment in the new company in accordance with the terms and conditions of an investment agreement to be entered into with the new company. This is the investment opportunity mentioned during the Senior Leadership Group meeting in Carlsbad. We will cover the details of this investment opportunity with you in the near future. As we discussed at the Senior Leadership Group meeting, this investment opportunity is limited to a small group of people. If you decide to not be part of the ownership group going forward, you can elect to receive a cash payment for the vested two-thirds (2/3). PERFORMANCE BONUS UNIT TABLES The attached statement provides details on all of the PBUs you hold, including their exercise prices. The tables below show the number of PBUs for which you are entitled to receive payment and indicate the exercise price of each grant and the resulting "spread." Your pretax gain is the "spread" multiplied by the number of units covered by such PBUs. [Insert tables] Please note that the gain shown above is BEFORE taxes. Taxes at the appropriate rate will be withheld automatically by the Company. Information in the above table and attached personnel summary is as of October 23, 2000. This letter and the PBU summary assume that you are a current Associate as of the close of the Transaction. At the closing of the Transaction, the Performance Bonus Unit program will be terminated and all outstanding units will be cancelled to the fullest extent permitted by the applicable plan or as consented to by optionees. Because Sunrise Medical will no longer be a publicly held company, a new program more appropriate to a privately held company is being finalized. The new program will provide cash compensation to eligible Associates (other than those in the ownership group) if the Company meets specific performance goals, in accordance with the terms of the program. CONFIDENTIALITY REMINDER Certain benefits being provided to you are being provided to only a handful of Associates in the Company and are not being provided to Associates generally. There is a significant risk of substantial harm to the Company if the existence or matters discussed in this letter are made known to other Associates. The Company is therefore relying on your promise to keep this letter and the matters discussed in this letter confidential. YOU SHOULD NOT DISCUSS THESE MATTERS WITH OTHER ASSOCIATES, EVEN THOSE IN THE SENIOR LEADERSHIP GROUP (BUT IT IS ALL RIGHT TO DISCUSS WITH ME AND OTHER MEMBERS OF THE G7). And, you may discuss the terms of this letter with your spouse (if any) or any outside legal counsel or financial adviser you may choose to consult, so long as they agree to be bound by such secrecy obligation and you remain liable for any breach of such secrecy by them. If you have any questions about your PBUs or the payment you will receive, or if you wish to exercise your vested PBUs, please call Debi Ward at (760) 930-1547 or Suzanne DeSpain at (760) 930-1542. Also, Larry Cagney at Debevoise & Plimpton has been hired to advise management on the going private investment plan. We will make Larry available to answer questions you may have in this regard. REMEMBER, YOU DO NOT NEED TO EXERCISE YOUR PBUS TO RECEIVE THE PAYMENT OUTLINED ABOVE. Sincerely, Steven A. Jaye Senior Vice President and CAO Enclosure November 7, 2000 Dear [insert name]: As you know, Sunrise Medical is being sold to an investor group that includes senior managers of the Company. The sale involves a tender offer for all shares at an offering price of $10 per share, followed by the merger of the Company with a corporation formed by the investor group (the "Transaction"). The Transaction is currently expected to close around calendar-year end, assuming (as we expect) that our stockholders will embrace this deal. This letter and the attached statement provide you with a detailed account of how your stock options are affected by the deal. Under the terms of the Transaction, the vesting of all of your unvested stock options is accelerated so that you are 100% vested in all of your stock options for a period of at least 20 days prior to the closing of the Transaction. As of the closing date, you are entitled to receive a cash payment for all stock options that have an exercise price below the offering price of $10 per share. This payment will equal the amount by which the $10 per share offering price is greater than the exercise price, multiplied by the number of shares covered by such stock options (see the table below for details). YOU DO NOT HAVE TO TAKE ANY ACTION TO RECEIVE THIS PAYMENT. Specifically, you do NOT have to exercise your stock options or tender the shares you would receive on exercise to receive this payment. IF YOU DO NOTHING, YOU WILL RECEIVE A CHECK FOR THE OPTION "SPREAD" (THE EXCESS OF THE OFFERING PRICE OF $10 PER SHARE OVER YOUR EXERCISE PRICE) FOLLOWING THE CLOSING. Any stock options with an exercise price of $10 or more per share will have no value and you will not receive any payment for them. STOCK OPTION TABLE The attached statement provides details on all of the stock options you hold, including their exercise prices. The table below shows the number of stock options for which you are entitled to receive payment and indicates the exercise price of each grant and the resulting "spread." Your pretax gain is the "spread" multiplied by the number of shares covered by such options. [Insert table] Please note that the gain shown above is BEFORE taxes. Taxes at the appropriate rate will be withheld automatically by the Company. Information in the above table and attached personnel option summary is as of October 23, 2000. This letter and the option summary assume that you are a current Associate as of the close of the Transaction. At the closing of the Transaction, all stock option programs will be terminated and the payment of the spread will effectively cancel all of your outstanding options. Because Sunrise Medical will no longer be a publicly held company, a new program more appropriate to a privately held company is being finalized. This new program will provide cash compensation to eligible Associates (other than those in the ownership group) if the Company meets specific performance goals, in accordance with the terms of the program. If you have any questions about your stock options or the payment you will receive, or if you wish to exercise your vested stock options, please call Debi Ward at (760) 930-1547 or Suzanne DeSpain at (760) 930-1542. REMEMBER, YOU DO NOT NEED TO EXERCISE YOUR STOCK OPTIONS TO RECEIVE THE PAYMENT OUTLINED ABOVE. Sincerely, Steven A. Jaye Senior Vice President and CAO Enclosure November 7, 2000 Dear [insert name]: As you know, Sunrise Medical is being sold to an investor group that includes senior managers of the Company. The sale involves a tender offer for all shares at an offering price of $10 per share, followed by the merger of the Company with a corporation formed by the investor group (the "Transaction"). The Transaction is currently expected to close around calendar-year end, assuming (as we expect) that our stockholders will embrace this deal. This letter and the attached statement provide you with a detailed account of how your stock options are affected by the deal. Under the terms of the Transaction, the vesting of all of your unvested stock options is accelerated so that you are 100% vested in all of your stock options for a period of at least 20 days prior to the closing of the Transaction. Only stock options with an exercise price less than the $10 per share offering price will result in any payment in the Transaction. Stock options with an exercise price of $10 or more per share offering price will have no value. The attached statement provides details on all of the stock options you hold, including their exercise prices. As the statement illustrates, all of your stock options have an exercise price greater than the $10 per share offering price and thus you will not receive any payment for these options in the Transaction. At the closing of the Transaction, all outstanding stock options will be canceled and all stock option programs will be terminated. Because Sunrise Medical will no longer be a publicly held company, a new program more appropriate to a privately held company is being finalized. This new program will provide cash compensation to eligible Associates (other than those in the ownership group) if the Company meets specific performance goals, in accordance with the terms of the program. Information in your personnel summary is as of October 23, 2000. This letter and the option summary assume that you are a current Associate as of the close of the Transaction. If you have any questions about your stock options, or if you wish to exercise your vested stock options, please call Debi Ward at (760) 930-1547 or Suzanne DeSpain at (760) 930-1542. Sincerely, Steven A. Jaye Senior Vice President and CAO Enclosure November 7, 2000 Dear Former Sunrise Medical Associate: The Sunrise Medical Board of Directors has agreed to sell the company to an investor group that includes senior managers of the Company. The sale involves a tender offer for all shares at an offering price of $10 per share, followed by the merger of the Company with a corporation formed by the investor group (the "Transaction"). The Transaction is currently expected to close around calendar-year end, assuming (as we expect) that our stockholders will embrace this deal. Although you are no longer an Associate, you still hold options granted to you during your employment. This letter and the attached statement will describe what happens regarding your options. 1. All option programs will terminate, and all options (regardless of the exercise price and regardless of whether vested or unvested) will be cancelled when the transaction is completed. Your options, however, may terminate sooner by their own terms. 2. Your unvested options expired upon your termination of employment. 3. If your vested options are priced lower than the offering price of $10.00 per share, you can exercise your options and tender the shares received upon exercise in the tender offer (separate documentation concerning the tender offer will be forwarded to you). Thereby you will receive payment for the difference between the offering price and your option price. 4. If your vested options are priced higher than the offering price, they have no value and you will not receive any payment if you exercise and tender those shares. 5. In order to exercise any vested options, you will need to complete the enclosed Option Exercise and Disposition forms for each separate option grant that you hold. Please complete the attached form(s) and return them to the address indicated on the form. For your ease of reference, we have enclosed a summary of your option holdings (including exercise prices, termination dates and vesting schedule). If you have any questions, please call Debi Ward at (760) 930-1547 or Suzanne DeSpain at (760) 930-1542. Sincerely, Steven A. Jaye Senior Vice President and CAO Enclosure -----END PRIVACY-ENHANCED MESSAGE-----