<PAGE>   1

                                                                   EXHIBIT 10.46

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                                 MERRILL LYNCH


                                    -------

                                    SPECIAL

                                    -------


                               PROTOTYPE DEFINED

                               CONTRIBUTION PLAN

                               ADOPTION AGREEMENT


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                                  401(k) PLAN

                              EMPLOYEE THRIFT PLAN

                              PROFIT-SHARING PLAN


                         LETTER SERIAL NUMBER: D359287b
                      NATIONAL OFFICE LETTER DATE: 6/29/93


THIS PROTOTYPE PLAN AND ADOPTION AGREEMENT ARE IMPORTANT LEGAL INSTRUMENTS WITH
LEGAL AND TAX IMPLICATIONS FOR WHICH THE SPONSOR, MERRILL LYNCH, PIERCE, FENNER
& SMITH, INCORPORATED, DOES NOT ASSUME RESPONSIBILITY. THE EMPLOYER IS URGED TO
CONSULT WITH ITS OWN ATTORNEY WITH REGARD TO THE ADOPTION OF THIS PLAN AND ITS
SUITABILITY TO ITS CIRCUMSTANCES.

<PAGE>   2

ADOPTION OF PLAN

The Employer named below hereby establishes or restates a profit-sharing plan
that includes a [X] 401(k), [X] profit-sharing and/or [ ] thrift plan feature
(the "Plan") by adopting the Merrill Lynch Special Prototype Defined
Contribution Plan and Trust as modified by the terms and provisions of this
Adoption Agreement.

EMPLOYER AND PLAN INFORMATION

Employer Name:*   INNER DYNE, INC.

Business Address: 1244 REAMWOOD AVENUE

                  SUNNYVALE, CA 94089

Telephone Number: (408) 745-6010

Employer Taxpayer ID Number: 87-0431168

Employer Taxable Year ends on: DECEMBER 31ST

Plan Name: INNER DYNE, INC. DEFINED CONTRIBUTION PLAN

Plan Number: 001

<TABLE>
<CAPTION>
                                      401(k)          PROFIT SHARING     THRIFT
<S>                                 <C>                 <C>
Effective Date of Adoption
           or Restatement:          01/01/1999          01/01/1999      __/__/__

Original Effective Date:            01/01/1988          01/01/1988      __/_/__
</TABLE>

IF THIS PLAN IS A CONTINUATION OR AN AMENDMENT OF A PRIOR PLAN, ALL OPTIONAL
FORMS OF BENEFITS PROVIDED IN THE PRIOR PLAN MUST BE PROVIDED UNDER THIS PLAN
TO ANY PARTICIPANT WHO HAD AN ACCOUNT BALANCE, WHETHER OR NOT VESTED, IN THE
PRIOR PLAN.

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

* If there are any Participating Affiliates in this Plan, list below the proper
  name of each Participating Affiliate.

___.

___.

___.



                                       2
<PAGE>   3
                             ARTICLE I. DEFINITIONS

A. "COMPENSATION"

(1)  With respect to each Participant, except as provided below, Compensation
     shall mean the (select all those applicable for each column):


401(k) and/    Profit
 or Thrift     Sharing

    [ ]         [ ]   (a) amount reported in the "Wages Tips and Other
                          Compensation" Box on Form W-2 for the applicable
                          period selected in Item 5 below.

    [ ]         [ ]   (b) Compensation for Code Section 415 safe-harbor purposes
                          (as defined in Section 3.9.1 (H)(i) of basic plan
                          document #03) for the applicable period selected in
                          Item 5 below.

    [X]         [X]   (c) amount reported pursuant to Code Section 3401(a) for
                          the applicable period selected in Item 5 below.

    [ ]         [ ]   (d) all amounts received (under either option (a) (b) or
                      (c) above) for personal services rendered to the Employer
                          but excluding (select one):

                      [ ] overtime
                      [ ] bonuses
                      [ ] commissions
                      [ ] amounts in excess of $
                      [ ] other (specify) __


(2)  Treatment of Elective Contributions (select one):

    [x] (a) For purposes of contributions, Compensation shall include Elective
            Deferrals and amounts excludable from the gross income of the
            Employee under Code Section 125, Code Section 402(e)(3), Code
            Section 402(h) or Code Section 403(b) ("elective contributions").

    [ ] (b) For purposes of contributions, Compensation shall not include
            "elective contributions."

(3)  CODA Compensation (select one):

        [x] (a) For purposes of the ADP and ACP Tests, Compensation shall
                include "elective contributions."

        [ ] (b) For purposes of the ADP and ACP Tests, Compensation shall not
                include "elective contributions."




                                       3
<PAGE>   4
(4)  With respect to Contributions to an Employer Contributions Account,
     Compensation shall include all Compensation (select one):

     [ ] (a) during the Plan Year in which the Participant enters the Plan.

     [X] (b) after the Participant's Entry Date.

(5)  The applicable period for determining Compensation shall be (select one):

     [X] (a) the Plan Year.

     [ ] (b) the Limitation Year.

     [ ] (c) the consecutive 12-month period ending on ___________.

B.   "DISABILITY"

(1)  Definition

     Disability shall mean a condition which results in the Participant's
     (select one):

     [ ] (a) inability to engage in any substantial gainful activity by reason
             of any medically determinable physical or mental impairment that
             can be expected to result in death or which has lasted or can be
             expected to last for a continuous period of not less than 12
             months.

     [X] (b) total and permanent inability to meet the requirements of the
             Participant's customary employment which can be expected to last
             for a continuous period of not less than 12 months.

     [ ] (c) qualification for Social Security disability benefits.

     [ ] (d) qualification for benefits under the Employer's long-term
             disability plan.

(2)  Contributions Due to Disability (select one):

     [X] (a) No contributions to an Employer Contributions Account will be made
             on behalf of a Participant due to his or her Disability.

     [ ] (b) Contributions to an Employer Contributions Account will be made on
             behalf of a Participant due to his or her Disability provided that:
             the Employer elected option (a) or (c) above as the definition of
             Disability, contributions are not made on behalf of a Highly
             Compensated Employee, the contribution is based on the Compensation
             each such Participant would have received for the Limitation Year
             if the Participant had been paid at the rate of Compensation paid
             immediately before his or her Disability, and contributions made on
             behalf of such Participant will be nonforfeitable when made.


                                       4
<PAGE>   5


C. "EARLY RETIREMENT" is (select one):

   [ ] (1) not permitted.

   [X] (2) permitted if a Participant terminates Employment before Normal
           Retirement Age and has (select one):

           [ ] (a) attained age __,

           [X] (b) attained age 55 and completed 7 Years of Service.

           [ ] (c) attained age __ and completed __ Years of Service as a
                   Participant.

D. "ELIGIBLE EMPLOYEES" (select one):

   [ ] (1) All Employees are eligible to participate in the Plan.

   [X] (2) The following Employees are not eligible to participate in the Plan
           (select all those applicable):

           [X] (a) Employees included in a unit of Employees covered by a
                   collective bargaining agreement between the Employer or a
                   Participating Affiliate and the Employee representatives (not
                   including any organization more than half of whose members
                   are Employees who are owners, officers, or executives of the
                   Employer or Participating Affiliate) in the negotiation of
                   which retirement benefits were the subject of good faith
                   bargaining, unless the bargaining agreement provides for
                   participation in the Plan.

           [X] (b) non-resident aliens who received no earned income from the
                   Employer or a participating Affiliate which constitutes
                   income from sources within the United States.

           [ ] (c) Employees of an Affiliate.

           [ ] (d) Employees employed in or by the following specified division,
                   plant, location, job category or other identifiable
                   individual or group of Employees: __.



                                       5

<PAGE>   6
E. "ENTRY DATE" Entry Date shall mean (select as applicable):

<TABLE>
<CAPTION>
 401(k)
and/or     Profit
Thrift    Sharing
<S>       <C>       <C>       <C>
 [ ]        [ ]     (1)       If the initial Plan Year is less than twelve months, the ___ day of _____ and
                              thereafter.

 [ ]        [ ]     (2)       the first day of the Plan Year following the date the Employee meets the
                              eligibility requirements. If the Employer elects this option (2) establishing
                              only one Entry Date, the eligibility "age and service" requirements
                              elected in Article II must be no more than age 20-1/2 and 6 months of
                              service.

 [X]        [X]     (3)       the first day of the month following the date the Employee meets the
                              eligibility requirements.

 [ ]        [ ]     (4)       the first day of the Plan Year and the first day of the seventh month of
                              the Plan Year following the date the Employee meets the eligibility
                              requirements.

 [ ]        [ ]     (5)       the first day of the Plan Year, the first day of the fourth month of the Plan
                              Year, the first day of the seventh month of the Plan Year, and the first
                              day of the tenth month of the Plan Year following the date the Employee
                              meets the eligibility requirements.

 [ ]        [ ]     (6)       other:
                              provided that the Entry Date or Dates selected are no later than any of
                              the options above.
</TABLE>

F. "HOURS OF SERVICE"

Hours of Service for the purpose of determining a Participant's Period of
Severance and Year of Service shall be determined on the basis of the method
specified below:

     (1) Eligibility Service: For purposes of determining whether a Participant
         has satisfied the eligibility requirements, the following method shall
         be used (select one):

     <TABLE>
     <CAPTION>
      401(k)
     and/or     Profit
     Thrift    Sharing
     <S>       <C>       <C>   <C>
      [X]        [X]     (a)   elapsed time method

      [ ]        [ ]     (b)   hourly records method
     </TABLE>


                                       6


<PAGE>   7
      (2)   Vesting Service: A Participant's nonforfeitable interest shall be
            determined on the basis of the method specified below (select one):

            [ ]   (a)   elapsed time method

            [X]   (b)   hourly records method

            [ ]   (c)   if this item (c) is checked, the Plan only provides for
                        contributions that are always 100% vested and this item
                        (2) will not apply.

      (3)   Hourly Records: For the purpose of determining Hours of Service
            under the hourly record method (select one):

            [ ]   (a)   only actual hours for which an Employee is paid or
                        entitled to payment shall be counted.

            [X]   (b)   an Employee shall be credited with 45 Hours of Service
                        if such Employee would be credited with at least 1 Hour
                        of Service during the week.

G.    "INTEGRATION LEVEL"

      [X]   (1)   This Plan is not integrated with Social Security.

      [ ]   (2)   This Plan is integrated with Social Security. The Integration
                  Level shall be (select one):

                  [ ]   (a)   the Taxable Wage Base.

                  [ ]   (b)   $___ (a dollar amount less than the Taxable Wage
                              Base).

                  [ ]   (c)   ___% of the Taxable Wage Base (not to exceed
                              100%).

                  [ ]   (d)   the greater of $10,000 or 20% of the Taxable Wage
                              Base.

H.    "LIMITATION COMPENSATION"

For purposes of Code Section 415, Limitation Compensation shall be compensation
as determined for purposes of (select one):

      [ ]   (1)   Code Section 415 Safe-Harbor as defined in Section 3.9.1(H)(i)
                  of basic plan document #03.

      [ ]   (2)   the "Wages, Tips and Other Compensation" Box on Form W-2.

      [X]   (3)   Code Section 3401(a) Federal Income Tax Withholding.

I.    "LIMITATION YEAR"

For purposes of Code Section 415, the Limitation Year shall be (select one):

[X]   (1)   the Plan Year.

[ ]   (2)   the twelve consecutive month period ending on the _____ day of the
            month of __________.


                                       7
<PAGE>   8
J. "NET PROFITS" are (select one):

   [X] (1) not necessary for any contribution.

   [ ] (2) necessary for (select all those applicable):

       [ ] (a) Profit-Sharing Contributions.
       [ ] (b) Matching 401(k) Contributions.
       [ ] (c) Matching Thrift Contributions.

K. "NORMAL RETIREMENT AGE"

Normal Retirement Age shall be (select one):

       [X] (1) attainment of age 65 (not more than 65) by the Participant.

       [ ] (2) attainment of age __ (not more than 65) by the Participant or
               the ___ anniversary (not more than the 5th) of the first day of
               the Plan Year in which the Eligible Employee became a
               Participant, whichever is later.

       [ ] (3) attainment of age __ (not more than 65) by the Participant or
               the ___ anniversary (not more than the 5th) of the first day on
               which the Eligible Employee performed an Hour of Service,
               whichever is later.

L. "PARTICIPANT DIRECTED ASSETS" ARE:

<TABLE>
   401(k) AND/    PROFIT
    OR THRIFT    SHARING
   <S>           <C>       <C>
       [X]         [X]     (1) permitted.

       [ ]         [ ]     (2) not permitted.
</TABLE>

M. "PLAN YEAR"

   The Plan Year shall end on the 31ST day of DECEMBER.

N. "PREDECESSOR SERVICE"

   Predecessor service will be credited (select one):

   [ ] (1) only as required by the Plan.

   [X] (2) to include, in addition to the Plan requirements and subject to the
           limitations set forth below, service with the following predecessor
           employer(s) determined as if such predecessors were the Employer:
           INNER DYNE MEDICAL, INC.; CARDIO PULMONICS.



                                       8
<PAGE>   9
   Service with such predecessor employer applies [select either or both (a)
   and/or (b); (c) is only available in addition to (a) and/or (b)]:

       [X] (a) for purposes of eligibility to participate;
       [X] (b) for purposes of vesting;
       [ ] (c) except for the following service: ______________________________.

O. "VALUATION DATE"

   Valuation Date shall mean (select one for each column, as applicable):

<TABLE>
   401(k) AND/    PROFIT
    OR THRIFT    SHARING
   <S>           <C>       <C>
       [ ]         [ ]     (1) the last business day of each month.

       [ ]         [ ]     (2) the last business day of each quarter within the
                               Plan Year.

       [ ]         [ ]     (3) the last business day of each semi-annual period
                               within the Plan Year.

       [ ]         [ ]     (4) the last business day of the Plan Year.

       [X]         [X]     (5) other: DAILY BASIS.
</TABLE>

                           ARTICLE II. PARTICIPATION

PARTICIPATION REQUIREMENTS

An Eligible Employee must meet the following requirements to become a
Participant (select one or more for each column, as applicable):

<TABLE>
   401(k) AND/    PROFIT
    OR THRIFT    SHARING
   <S>           <C>       <C>
       [ ]         [ ]     (1) Performance of one Hour of Service.

       [ ]         [ ]     (2) Attainment of age __ (maximum 20 1/2) and
                               completion of __ (not more than 1/2) Year(s) of
                               Service. If this item is selected, no Hours of
                               service shall be counted.

       [X]         [X]     (3) Attainment of age 21 (maximum 21) and completion
                               of 1/12 Year(s) of Service. If more than one
                               Year of Service is selected, the immediate 100%
                               vesting schedule must be selected in Article VII
                               of this Adoption Agreement.
</TABLE>




                                       9
<PAGE>   10
401(k) AND/         PROFIT
 OR THRIFT          SHARING

    [ ]               [ ]    (4) Attainment of age __ (maximum 21) and
                                 completion of __ Years of Service. If more than
                                 one Year of Service is selected, the immediate
                                 100% vesting schedule must be selected in
                                 Aritcle VII of this Adoption Agreement.

    [ ]               [ ]    (5) Each Employee who is an Eligible Employee on __
                                 will be deemed to have satisfied the
                                 participation requirements on the effective
                                 date without regard to such Eligible Employee's
                                 actual age and/or service.


            ARTICLE III. 401(k) CONTRIBUTIONS AND ACCOUNT ALLOCATION

A. ELECTIVE DEFERRALS

If selected below, a Partnership's Elective Deferrals will be (select all
applicable):

     [X] (1) a dollar amount or percentage of Compensation, as specified by the
             Participant on his or her 401(k) Election form, which may not
             exceed 18% of his or her Compensation.

     [ ] (2) with respect to bonuses, such dollar amount or percentage as
             specified by the Participant on his or her 401(k) Election form
             with respect to such bonus.

B. MATCHING 401(k) Contributions

If selected below, the Employer may make Matching 401(k) Contributions for each
Plan Year (select one):

     [X] (1) Discretionary Formula:

          Discretionary Matching 401(k) Contribution equal to such a dollar
          amount or percentage of Elective Deferrals, as determined by the
          Employer, which shall be allocated (select one):

           [ ] (a) based on the ratio of each Participant's Elective Deferral
                   for the Plan Year to the total Elective Deferrals of all
                   Participants for the Plan Year. If inserted, Matching 401(k)
                   Contributions shall be subject to a maximum amount of $___
                   for each Participant or __% of each Participant's
                   Compensation.






                                       10
<PAGE>   11
     [X] (b)   in an amount not to exceed 100% of each Participant's first 18%
               of Compensation contributed as Elective Deferrals for the Plan
               Year. If any Matching 401(k) Contribution remains, it is
               allocated to each such Participant in an amount not to exceed __%
               of the next __% of each Participant's Compensation contributed as
               Elective Deferrals for the Plan Year.

     Any remaining Matching 401(k) Contribution shall be allocated to each such
     Participant in the ratio that such Participant's Elective Deferral for the
     Plan Year bears to the total Elective Deferrals of all such Participants
     for the Plan Year. If inserted, Matching 401(k) Contributions shall be
     subject to a maximum amount of $__ for each Participant or __% of each
     Participant's Compensation.

[ ] (2)   Nondiscretionary Formula:

     A nondiscretionary Matching 401(k) Contribution for each Plan Year equal
     to (select one):

     [ ] (a)   __% of each Participant's Compensation contributed as Elective
               Deferrals. If inserted, Matching 401(k) Contributions shall be
               subject to a maximum amount of $__ for each Participant or __%
               of each Participant's Compensation.

     [ ] (b)   __% of the first __% of the Participant's Compensation
               contributed as Elective Deferrals and __% of the next __% of the
               Participant's Compensation contributed as Elective Deferrals. If
               inserted, Matching 401(k) Contributions shall be subject to a
               maximum amount of $__ for each Participant or __% of each
               Participant's Compensation.


C.   PARTICIPANTS ELIGIBLE FOR MATCHING 401(k) CONTRIBUTION ALLOCATION.

The following Participants shall be eligible for an allocation to their
Matching 401(k) Contributions Account (select all those applicable):

     [X] (1)   Any Participant who makes Elective Deferrals.

     [ ] (2)   Any Participant who satisfies those requirements elected by the
               Employer for an allocation to his or her Employer Contribution
               Account as provided in Article IV Section C.

     [ ] (3)   Solely with respect to a Plan in which Matching 401(k)
               Contributions are made quarterly (or on any other regular
               interval that is more frequent than annually) any Participant
               whose 401(k) Election is in effect throughout such entire
               quarter (or other interval).  (quarterly, monthly or semi-annual)



                                       11
<PAGE>   12
D.   QUALIFIED MATCHING CONTRIBUTIONS

If selected below, the Employer may make Qualified Matching Contributions for
each Plan Year (select all those applicable):

     (1)  In its discretion, the Employer may make Qualified Matching
          Contributions on behalf of (select one):

               [X] (a) all Participants who make Elective Deferrals in that
                       Plan Year.

               [ ] (b) only those Participants who are Nonhighly Compensated
                       Employees and who make Elective Deferrals for that Plan
                       Year.

     (2)  Qualified Matching Contributions will be contributed and allocated to
          each Participant in an amount equal to (select one):

               [ ] (a) __% of the Participant's Compensation contributed as
                       Elective Deferrals. If inserted, Qualified Matching
                       Contributions shall not exceed __% of the Participant's
                       Compensation.

               [X] (b) Such an amount, determined by the Employer, which is
                       needed to meet the ACP Test.

     (3)  In its discretion, the Employer may elect to designate all or any
          part of Matching 401(k) Contributions as Qualified Matching
          Contributions that are taken into account as Elective Deferrals --
          included in the ADP Test and excluded from the ACP Test -- on behalf
          of (select one):

               [X] (a) all Participants who make Elective Deferrals for that
                       Plan Year.

               [ ] (b) Only Participants who are Nonhighly Compensated Employees
                       who make Elective Deferrals for that Plan Year.

E.   QUALIFIED NONELECTIVE CONTRIBUTIONS

If selected below, the Employer may make Qualified Nonelective Contributions for
each Plan Year (select all those applicable):

     (1)  In its discretion, the Employer may make Qualified Nonelective
          Contributions on behalf of (select one):

               [ ] (a) all Eligible Participants.

               [X] (b) only Eligible Participants who are Nonhighly Compensated
                       Employees.


                                       12

<PAGE>   13
     (2)  Qualified Nonelective Contributions will be contributed and allocated
          to each Eligible Participant in an amount equal to (select one):

          [ ]  (a)  ___% (no more than 15%) of the Compensation of each
                    Eligible Participant eligible to share in the allocation.

          [X]  (b)  Such an amount determined by the Employer, which is
                    needed to meet either the ADP Test or ACP Test.

     (3)  At the discretion of the Employer, as needed and taken into account as
          Elective Deferrals included in the ADP Test on behalf of (select one):

          [ ]  (a)  all Eligible Participants.

          [X]  (b)  only those Eligible Participants who are Nonhighly
                    Compensated Employees.

F. ELECTIVE DEFERRALS USED IN ACP TEST (select one):

          [X]  (1) At the discretion of the Employer, Elective Deferrals may be
                   used to satisfy the ACP Test.

          [ ]  (2) Elective Deferrals may not be used to satisfy the ACP Test.

G. MAKING AND MODIFYING A 401(k) ELECTION

An Eligible Employee shall be entitled to increase, decrease or resume his or
her Elective Deferral percentage with the following frequency during the Plan
Year (select one):

     [ ] (1) annually.
     [ ] (2) semi-annually.
     [ ] (3) quarterly.
     [X] (4) monthly.
     [ ] (5) other (specify):___.


Any such increase, decrease or resumption shall be effective as of the first
payroll period coincident with or next following the first day of each period
set forth above. A Participant may completely discontinue making Elective
Deferrals at any time effective for the payroll period after written notice is
provided to the Administrator.


                                       13
<PAGE>   14
        ARTICLE IV. PROFIT-SHARING CONTRIBUTIONS AND ACCOUNT ALLOCATION

     A. PROFIT-SHARING CONTRIBUTIONS:

If selected below, the following contributions for each Plan Year will be made:

Contributions to Employer Contributions Accounts (select one):

     [X] (b) Such an amount, if any, as determined by the Employer.
     [ ] (b) ___% of each Participant's Compensation.

     B. ALLOCATION OF CONTRIBUTIONS TO EMPLOYER CONTRIBUTIONS ACCOUNTS (select
one):

     [X] (1)   Non-Integrated Allocation

               The Employer Contributions Account of each Participant eligible
               to share in the allocation for a Plan year shall be credited with
               a portion of the contribution, plus any forfeitures if
               forfeitures are reallocated to Participants, equal to the ratio
               that the Participant's Compensation for the Plan Year bears to
               the Compensation for that Plan Year of all Participants entitled
               to share in the contribution.

     [ ] (2)   Integrated Allocation

               Contributions to Employer Contributions Accounts with respect to
               a Plan Year, plus any forfeitures if forfeitures are reallocated
               to Participants, shall be allocated to the Employer Contributions
               Account of each eligible Participant as follows:

               (a) First, in the ratio that each such eligible Participant's
                   Compensation for the Plan Year bears to the Compensation for
                   that Plan Year of all eligible Participants but not in excess
                   of 3% of each Participant's Compensation.

               (b) Second, any remaining contributions and forfeitures will be
                   allocated in the ratio that each eligible Participant's
                   Compensation for the Plan Year in excess of the Integration
                   Level bears to all such Participants' excess Compensation for
                   the Plan Year but not in excess of 3%.

<PAGE>   15
          (c)  Third, any remaining contributions and forfeitures will be
               allocated in the ratio that the sum of each Participant's
               Compensation and Compensation in excess of the Integration Level
               bears to the sum of all Participants' Compensation and
               Compensation in excess of the Integration Level, but not in
               excess of the Maximum Profit-Sharing Disparity Rate (defined
               below).

          (d)  Fourth, any remaining contributions or forfeitures will be
               allocated in the ratio that each Participant's Compensation for
               that year bears to all Participants' Compensation for that year.

     The Maximum Profit-Sharing Disparity Rate is equal to the lesser of:

          (a)  2.7% or

          (b)  The applicable percentage determined in accordance with the
               following table:

<TABLE>
<CAPTION>
          IF THE INTEGRATION LEVEL IS
          (AS A % OF THE TAXABLE WAGE
          BASE ("TWB")).                     THE APPLICABLE PERCENTAGE IS:
<S>                                          <C>
          20% (or $10,000 if greater)
          or less of the TWB                             2.7%

          More than 20% (but not less
          than $10,001 but not
          more than 80% of the TWB                       1.3%

          More than 80% but not less
          than 100% of the TWB                           2.4%

          100% of the TWB                                2.7%
</TABLE>




                                       15
<PAGE>   16
C.   PARTICIPANTS ELIGIBLE FOR EMPLOYER CONTRIBUTION ALLOCATION

The following Participants shall be eligible for an allocation to their
Employer Contributions Account (select all those applicable):

     [ ] (1)  Any Participant who was employed during the Plan Year.

     [ ] (2)  In the case of a Plan using the hourly record method for
              determining Vesting Service, any Participant who was credited
              with a Year of Service during the Plan Year.

     [ ] (3)  Any Participant who was employed on the last day of the Plan Year.

     [ ] (4)  Any Participant who was on a leave of absence on the last day of
              the Plan Year.

     [X] (5)  Any Participant who during the Plan Year died or became Disabled
              while an Employee or terminated employment after attaining Normal
              Retirement Age.

     [ ] (6)  Any Participant who was credited with at least 501 Hours of
              Service whether or not employed on the last day of the Plan Year.

     [X] (7)  Any Participant who was credited with at least 1,000 Hours of
              Service and was employed on the last day of the Plan Year.

                        ARTICLE V.  THRIFT CONTRIBUTIONS

A.   EMPLOYEE THRIFT CONTRIBUTIONS

If selected below, Employee Thrift Contributions, which are required for
Matching Thrift Contributions, may be made by a Participant in an amount equal
to (select one):

     [ ] (1)  A dollar amount or a percentage of the Participant's Compensation
              which may not be less than __% nor may not exceed __% of his or
              her Compensation.

     [ ] (2)  An amount not less than __% and not more than __% of each
              Participant's Compensation.

                                       16
<PAGE>   17
B. MAKING AND MODIFYING AN EMPLOYEE THRIFT CONTRIBUTION ELECTION

A Participant shall be entitled to increase, decrease or resume his or her
Employee Thrift Contribution percentage with the following frequency during
the Plan Year (select one):

     [ ] (1) annually
     [ ] (2) semi-annually
     [ ] (3) quarterly
     [ ] (4) monthly
     [ ] (5) other (specify): ________________

Any such increase, decrease or resumption shall be effective as of the first
payroll period coincident with or next following the first day of each period
set forth above. A Participant may completely discontinue making Employee
Thrift Contributions at any time effective for the payroll period after written
notice is provided to the Administrator.

C. THRIFT MATCHING CONTRIBUTIONS

If selected below, the Employer will make Matching Thrift Contributions for
each Plan Year (select one):

     [ ] (1) Discretionary Formula:

          A discretionary Matching Thrift Contribution equal to such a dollar
          amount or percentage as determined by the Employer, which shall be
          allocated (select one):

          [ ]  (a)  based on the ratio of each Participant's Employee
                    Thrift Contribution for the Plan Year to the total Employee
                    Thrift Contributions of all Participants for the Plan Year.
                    If inserted, Matching Thrift Contributions shall be subject
                    to a maximum amount of $__ for each Participant or __% of
                    each Participant's Compensation.

          [ ]  (b)  in an amount not to exceed __% of each Participant's first
                    __% of Compensation contributed as Employee Thrift
                    Contributions for the Plan Year. If any Matching Thrift
                    Contribution remains, it is allocated to each such
                    participant in an amount not to exceed __% of the next __%
                    of each Participant's Compensation contributed as Employee
                    Thrift Contributions for the Plan Year.

          Any remaining Matching Thrift Contribution shall be allocated to each
          such Participant in the ratio that such Participant's Employee Thrift
          Contributions for the Plan Year bears to the total Employee Thrift
          Contributions of all such Participants for the Plan Year. If inserted,
          Matching Thrift Contributions shall be subject to a maximum amount of
          $__ for each Participant or __% of each Participant's Compensation.



                                       17
<PAGE>   18
     [ ]  (2)  Nondiscretionary Formula:

          A nondiscretionary Matching Thrift Contribution for each Plan Year
          equal to (select one):

          [ ]  (a)  __% of each Participant's Compensation contributed as
                    Employee Thrift Contributions. If inserted, Matching Thrift
                    Contributions shall be subject to a maximum amount of $__
                    for each Participant or __% of each Participant's
                    Compensation.

          [ ]  (b)  __% of the first __% of the Participant's Compensation
                    contributed as Employee Thrift Contributions and __% of the
                    next __% of the Participant's Compensation contributed as
                    Employee Thrift Contributions. If inserted, Matching Thrift
                    Contributions shall be subject to a maximum amount of $__
                    for each Participant or __% of each Participant's
                    Compensation.

D. QUALIFIED MATCHING CONTRIBUTIONS

If selected below, the Employer may make Qualified Matching Contributions for
each Plan Year (select all those applicable):

     (1)  In its discretion, the Employer may make Qualified Matching
          Contributions on behalf of (select one):

          [ ]  (a)  all Participants who make Employee Thrift Contributions.

          [ ]  (b)  only those Participants who are Nonhighly Compensated
                    Employees and who make Employee Thrift Contributions.

     (2)  Qualified Matching Contributions will be contributed and allocated to
          each Participant in an amount equal to:

          [ ]  (a)  __% of the Participant's Employee Thrift Contributions. If
                    inserted, Qualified Matching Contributions shall not exceed
                    __% of the Participant's Compensation.

          [ ]  (b)  such amount, determined by the Employer, which is needed to
                    meet the ACP Test.



                     ARTICLE VI. PARTICIPANT CONTRIBUTIONS


PARTICIPANT VOLUNTARY NONDEDUCTIBLE CONTRIBUTIONS

Participant Voluntary Nondeductible Contributions are (select one):

          [X]  (a)  permitted.

          [ ]  (b)  not permitted.




                                       18




<PAGE>   19

                              ARTICLE VII. VESTING

A. EMPLOYER CONTRIBUTION ACCOUNTS

   (1)     A Participant shall have a vested percentage in his or her
           Profit-Sharing Contributions, Matching 401(k) Contributions and/or
           Matching Thrift Contributions, if applicable, in accordance with the
           following schedule (Select one):

<TABLE>
<CAPTION>
  MATCHING 401(k)
  AND/OR MATCHING                 PROFIT-SHARING
THRIFT CONTRIBUTIONS               CONTRIBUTIONS
--------------------              --------------
<S>                               <C>                   <C>
        [ ]                             [ ]             (a)     100% vesting immediately upon participation;

        [X]                             [X]             (b)     100% after 1 (not more than 5) years of Vesting
                                                                Service;

        [ ]                             [ ]             (c)     Graded vesting schedule;

        __%                             __%             after 1 year of Vesting Service;

        __%                             __%             after 2 years of Vesting Service;

        __%                             __%             (not less than 20%) after 3 years of Vesting Service;


        __%                             __%             (not less than 40%) after 4 years of Vesting Service;


        __%                             __%             (not less than 60%) after 5 years of Vesting Service;


        __%                             __%             (not less than 60%) after 6 years of Vesting Service;

             100% after 7 years of Vesting Service.
</TABLE>


                                       19
<PAGE>   20

        (2)     TOP HEAVY PLAN

<TABLE>
<CAPTION>
  MATCHING 401(k)
  AND/OR MATCHING                 PROFIT-SHARING
THRIFT CONTRIBUTIONS               CONTRIBUTIONS
--------------------              --------------
<S>                               <C>                   <C>
Vesting Schedule (Select one):

        [ ]                             [ ]             (a)     100% vesting immediately upon participation.

        [X]                             [X]             (b)     100% after 1 (not more than 3) years of Vesting
                                                                Service.

        [ ]                             [ ]             (c)     Graded vesting schedule:

        __%                             __%                     after 1 year of Vesting Service;

        __%                             __%                     (not less than 20%) after 2 years of Vesting Service;

        __%                             __%                     (not less than 40%) after 3 years of Vesting Service;

        __%                             __%                     (not less than 60%) after 4 years of Vesting Service;

        __%                             __%                     (not less than 80%) after 5 years of Vesting Service;

             100% after 6 years of Vesting Service.
</TABLE>

Top Heavy Ratio:

        (a)     If the adopting Employer maintains or has ever maintained a
                qualified defined benefit plan, for purposes of establishing
                present value to compute the top-heavy ratio, any benefit shall
                be discounted only for mortality and interest based on the
                following:

                        Interest Rate:            8%
                                               ------
                        Mortality Table:       UP '84
                                               ------

        (b)     For purposes of computing the top-heavy ratio, the valuation
                date shall be the last business day of each Plan Year.



                                       20
<PAGE>   21
B. ALLOCATION OF FORFEITURES

     Forfeitures shall be (select one from each applicable column):

MATCHING 401(k)
AND/OR MATCHING          PROFIT-SHARING
THRIFT CONTRIBUTIONS     CONTRIBUTIONS
--------------------     --------------

     [X]                      [ ] (1) used to reduce Employer contributions for
                                      succeeding Plan Year.

     [ ]                      [X] (2) allocated in the succeeding Plan Year in
                                      the ratio which the Compensation of each
                                      Participant for the Plan Year bears to the
                                      total Compensation of all Participants
                                      entitled to share in the Contributions. If
                                      the Plan is integrated with Social
                                      Security, forfeitures shall be allocated
                                      in accordance with the formula elected by
                                      the Employer.

C. VESTING SERVICE

For purposes of determining Years of Service for Vesting Service [select (1) or
(2) and/or (3)]:

     [X] (1) All Years of Service shall be included.

     [ ] (2) Years of Service before the Participant attained age 18 shall be
             excluded.

     [ ] (3) Service with the Employer prior to the effective date of the Plan
             shall be excluded.

                ARTICLE VIII. DEFERRAL OF BENEFIT DISTRIBUTIONS,
                        IN-SERVICE WITHDRAWALS AND LOANS


A. DEFERRAL OF BENEFIT DISTRIBUTIONS

     401(k) AND/    PROFIT
     OR THRIFT      SHARING
     -----------    -------

         [ ]          [ ]  If this item is checked, a Participant's vested
                           benefit in his or her Employer Accounts shall be
                           payable as soon as practicable after the earlier of:
                           (1) the date the Participant terminates Employment
                           due to Disability or (2) the end of the Plan Year in
                           which a terminated Participant attains Early
                           Retirement Age, if applicable, or Normal Retirement
                           Age.

                                       21
<PAGE>   22
B. IN-SERVICE DISTRIBUTIONS

     [X] (1) In-service distributions may be made from any of the Participant's
             vested Accounts at any time upon or after the occurrence of the
             following events (select all applicable):

            [X] (a) a Participant's attainment of age 59-1/2.

            [X] (b) due to hardships as defined in Section 5.9 of the Plan.

     [ ] (2) In-service distributions are not permitted.

C. LOANS ARE:

401(k) AND/    PROFIT
OR THRIFT      SHARING
-----------    -------

     [X]         [X] (1) permitted.

     [ ]         [ ] (2) not permitted.


                            ARTICLE IX. GROUP TRUST

[ ]  If this item is checked, the Employer elects to establish a Group Trust
     consisting of such Plan assets as shall from time to time be transferred to
     the Trustee pursuant to Article X of the Plan. The Trust Fund shall be a
     Group Trust consisting of assets of this Plan plus assets of the following
     plans of the Employer or of an Affiliate: ___.


                            ARTICLE X. MISCELLANEOUS

A. IDENTIFICATION OF SPONSOR

     The address and telephone number of the Sponsor's authorized representative
     is 800 Scudders Mill Road, Plainsboro, New Jersey 08536; (609) 282-2272.
     This authorized representative can answer inquiries regarding the adoption
     of the Plan, the intended meaning of any Plan provisions, and the effect of
     the opinion letter.

     The Sponsor will inform the adopting Employer of any amendments made to the
     Plan or the discontinuance or abandonment of the Plan.


                                       22
<PAGE>   23

B.      PLAN REGISTRATION

        1.      Initial Registration

                This Plan must be registered with the Sponsor, Merrill Lynch,
                Pierce, Fenner & Smith Incorporated, in order to be considered a
                Prototype Plan by the Sponsor. Registration is required so that
                the Sponsor is able to provide the Administration with
                documents, forms and announcements relating to the
                administration of the Plan and with Plan amendments and other
                documents, all of which relate to administering the Plan in
                accordance with applicable law and maintaining compliance of the
                Plan with the law.

                The Employer must complete and sign the Adoption Agreement. Upon
                receipt of the Adoption Agreement, the Plan will be registered
                as a Prototype Plan of Merrill Lynch, Pierce, Fenner & Smith
                Incorporated. The Adoption Agreement will be countersigned by an
                authorized representative and a copy of the countersigned
                Adoption Agreement will be returned to the Employer.

        2.      Registration Renewal

                Annual registration renewal is required in order for the
                Employer to continue to receive any and all necessary updating
                documents. There is an annual registration renewal fee in the
                amount set forth with the initial registration material. The
                adopting Employer authorizes Merrill Lynch, Pierce, Fenner &
                Smith Incorporated, to debit the account established for the
                Plan for payment of agreed upon annual fee; provided, however,
                if the assets of an account are invested solely in
                Participant-Directed Assets, a notice for this annual fee will
                be sent to the Employer annually. The Sponsor reserves the right
                to change this fee from time to time and will provide written
                notice in advance of any change.

C.      PROTOTYPE REPLACEMENT PLAN

        This Adoption Agreement is a replacement prototype plan for the (1)
        Merrill Lynch Special Prototype Defined Contribution Plan and Trust --
        401(k) Plan #03-004 and (2) Merrill Lynch Assets Management, Inc.,
        Special Prototype Defined Contribution Plan and Trust -- 401(k) Plan
        Adoption Agreement #03-004.

D.      RELIANCE

        The adopting Employer may not rely on the opinion letter issued by the
        National Office of the Internal Revenue Service as evidence that this
        Plan is qualified under Code Section 401. In order to obtain reliance,
        the Employer must apply to the appropriate Key District Director of the
        Internal Revenue Service for a determination letter with respect to the
        Plan.


                                       23
<PAGE>   24
                                               EMPLOYER'S SIGNATURE


                                   Name of Employer: Innerdyne, Inc.

                                        By:       /s/ LINDA M. FINN
                                           -------------------------------------
                                                  Authorized Signature


                                                      Linda M. Finn
                                           -------------------------------------
                                                       Print Name


                                                       Controller
                                           -------------------------------------
                                                         Title


DATED: October 22, 1999(X)


TO BE COMPLETED BY MERRILL LYNCH:

SPONSOR ACCEPTANCE:

Subject to the terms and conditions of the Prototype Plan and this Adoption
Agreement, this Adoption Agreement is accepted by Merrill Lynch, Pierce, Fenner
& Smith Incorporated as the Prototype Sponsor.


Authorized
Signature: /s/ LAURIE WAINRIGHT


                                       24
<PAGE>   25
                              TRUSTEE(S) SIGNATURE


This Trustee Acceptance is to be completed only if the Employer appoints one or
more Trustees and does not appoint a Merrill Lynch Trust Company as Trustee.

The undersigned hereby accept all of the terms, conditions, and obligations of
appointment as Trustee under the Plan. If the Employer has elected a Group Trust
in this Adoption Agreement, the undersigned Trustee(s) shall be the Trustee(s)
of the Group Trust.

                                  AS TRUSTEE:



-------------------------------------        --------------------------------(X)
          (Signature)                              (print or type name)


-------------------------------------        --------------------------------(X)
          (Signature)                              (print or type name)


-------------------------------------        --------------------------------(X)
          (Signature)                              (print or type name)


-------------------------------------        --------------------------------(X)
          (Signature)                              (print or type name)


-------------------------------------        --------------------------------(X)
          (Signature)                              (print or type name)


-------------------------------------        --------------------------------(X)
          (Signature)                              (print or type name)


Dated: ______________________, 19__(X)


                                       25
<PAGE>   26
                  THE MERRILL LYNCH TRUST COMPANIES AS TRUSTEE

This Trustee Acceptance and designation of Investment Committee are to be
completed only when a Merrill Lynch Trust Company is appointed as Trustee.

TO BE COMPLETED BY THE EMPLOYER:

                      DESIGNATION OF INVESTMENT COMMITTEE

The Investment Committee for the Plan is (print or type names):

Name:      Linda M. Finn
     ---------------------------------------------------------------------------
Name:      James E. Barnes
     ---------------------------------------------------------------------------
Name:      Rick Gaykowski
     ---------------------------------------------------------------------------
Name:      Daniel J. Genter
     ---------------------------------------------------------------------------
Name:
     ---------------------------------------------------------------------------
Name:
     ---------------------------------------------------------------------------

TO BE COMPLETED BY MERRILL LYNCH TRUST COMPANY:

                             ACCEPTANCE BY TRUSTEE:

The undersigned hereby accept all of the terms, conditions, and obligations of
appointment as Trustee under the Plan. If the Employer has elected a Group
Trust in this Adoption Agreement, the undersigned Trustee(s) shall be the
Trustee(s) of the Group Trust.


SEAL                         MERRILL LYNCH TRUST COMPANY  [_______________]


                                 By:  /s/ CHERYL LOSADA
                                    ------------------------------------------

Dated  3/16/00
     -----------


                                       26