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Exhibit 4.5  

  ADOPTION AGREEMENT #005
  NONSTANDARDIZED CODE 401(k) PROFIT SHARING PLAN         

    The undersigned, Direct Focus, Inc., ("Employer"), by executing this Adoption Agreement, elects to
become a participating Employer in the Deloitte & Touche LLP Defined Contribution Prototype Plan (basic plan document #01) by adopting the
accompanying Plan and Trust in full as if the Employer were a signatory to that Agreement. The Employer makes the following elections granted under the provisions of the Prototype Plan. 

  ARTICLE I
  DEFINITIONS         

    1.02  TRUSTEE.  The Trustee executing this Adoption Agreement is: (Choose
(a) or (b))

	/
	/  (a) A
discretionary Trustee. See Section 10.03[A] of the Plan.

	/x/
	(b) A
nondiscretionary Trustee. See Section 10.03[B] of the Plan. [Note: The Employer
may not elect Option (b) if a Custodian executes the Adoption Agreement.] 

    1.03  PLAN.  The name of the Plan as adopted by the Employer is Direct
Focus, Inc. 401(k) Savings Plan.

    1.07  EMPLOYEE.  The following Employees are not eligible to participate in the Plan:  (Choose (a) or at least one of (b) through (g))

	/
	/  (a) No
exclusions.

	/
	/  (b) Collective
bargaining employees (as defined in Section 1.07 of the Plan). [Note: If the Employer excludes
union employees from the Plan, the Employer must be able to provide evidence that retirement benefits were the subject of good faith bargaining.]

	/x/
	(c) Nonresident
aliens who do not receive any earned income (as defined in Code 911(d)(2)) from the Employer which constitutes United States source income
(as defined in Code 8 61(a)(3)).

	/
	/  (d) Commission
Salesmen.

	/
	/  (e) Any
Employee compensated on a salaried basis.

	/
	/  (f) Any
Employee compensated on an hourly basis.

	/x/
	(g) (Specify) Employees who are subject to Section 16(b) of the Securities Exchange Act shall not be eligible to invest in
Employer Stock, but are otherwise eligible to participate.

Leased Employees.  Any Leased Employee treated as an Employee under Section 1.31 of the Plan, is:  (Choose (h) or (i))

	/x/
	(h) Not
eligible to participate in the Plan.

	/
	/  (i) Eligible
to participate in the Plan, unless excluded by reason of an exclusion classification elected under this Adoption Agreement
Section 1.07. 

Related Employers.  If any member of the Employer's related group (as defined in Section 1.30 of the Plan)
executes a Participation Agreement to this Adoption Agreement, such member's Employees are eligible to participate in this Plan, unless excluded by reason of an exclusion classification elected under
this Adoption Agreement Section 1.07. In addition: (Choose (j) or (k))

	/x/
	(j) No
other related group member's Employees are eligible to participate in the Plan. 

	/
	/  (k) The
following nonparticipating related group member's Employees are eligible to participate in the Plan unless excluded by reason of an exclusion
classification elected under this Adoption Agreement Section 1.07:            . 

    1.12  COMPENSATION.  

Treatment of elective contributions.  (Choose (a) or (b))

	/x/
	(a) "Compensation"
includes elective contributions made by the Employer on the Employee's behalf.

	/
	/  (b) "Compensation"
does not include elective contributions. 

Modifications to Compensation definition.  (Choose (c) or at least one of
(d) through (j))

	/x/
	(c) No
modifications other than as elected under Options (a) or (b).

	/
	/  (d) The
Plan excludes Compensation in excess of $      .

	/
	/  (e) In
lieu of the definition in Section 1.12 of the Plan, Compensation means any earnings reportable as W-2 wages for Federal income
tax withholding purposes, subject to any other election under this Adoption Agreement Section 1.12.

	/
	/  (f) The
Plan excludes bonuses.

	/
	/  (g) The
Plan excludes overtime.

	/
	/  (h) The
Plan excludes Commissions.

	/
	/  (i) Compensation
will not include Compensation from a related employer (as defined in Section 1.30 of the Plan) that has not executed a
Participation Agreement in this Plan unless, pursuant to Adoption Agreement Section 1.07, the Employees of that related employer are eligible to participate in this Plan.

	/
	/  (j) (Specify)                     . 

If,
for any Plan Year, the Plan uses permitted disparity in the contribution or allocation formula elected under Article III, any election of Options (f), (g), (h) or (j) is
ineffective for such Plan Year with respect to any Nonhighly Compensated Employee. 

Special definition for matching contributions.  "Compensation" for purposes of any matching contribution formula under
Article III means: (Choose (k) or (l) only if applicable)

	/x/
	(k) Compensation
as defined in this Adoption Agreement Section 1.12.

	/
	/  (l) (Specify)            . 

Special definition for salary reduction contributions.  An Employee's salary reduction agreement applies to his
Compensation determined prior to the reduction authorized by that salary reduction agreement, with the following exceptions: (Choose (m) or at least one of (n) or
(o), if applicable)

	/x/
	(m) No
exceptions.

	/
	/  (n) If
the Employee makes elective contributions to another plan maintained by the Employer, the Advisory Committee will determine the amount of the
Employee's salary reduction contribution for the withholding period: (Choose (1) or (2))

	/
	/  (1) After
the reduction for such period of elective contributions to the other plan(s).

	/
	/  (2) Prior
to the reduction for such period of elective contributions to the other plan(s). 

	/
	/  (o) (Specify)            . 

2

    1.17  PLAN YEAR/LIMITATION YEAR.  

Plan Year.  Plan Year means: (Choose (a) or (b))

	/x/
	(a) The
12 consecutive month period ending every December 31.

	/
	/  (b) (Specify)            . 

Limitation Year.  The Limitation Year is: (Choose (c) or (d))

	/x/
	(c) The
Plan Year.

	/
	/  (d) The
12 consecutive month period ending every            . 

    1.18  EFFECTIVE DATE.  

New Plan.  The "Effective Date" of the Plan is January 1, 1999. 

Restated Plan.  The restated Effective Date is            . 

This
Plan is a substitution and amendment of an existing retirement plan(s) originally established            . [Note: See the Effective Date
Addendum.] 

    1.27  HOUR OF SERVICE.  The crediting method for Hours of Service is: (Choose
(a) or (b))

	/x/
	(a) The
actual method.

	/
	/  (b) The
equivalency method, except:

	/
	/  (1) No
exceptions.

	/
	/  (2) The
actual method applies for purposes of: (Choose at least one)

	/
	/  (i) Participation
under Article II.

	/
	/  (ii) Vesting
under Article V.

	/
	/  (iii) Accrual
of benefits under Section 3.06. 

[Note: On the blank line, insert "daily," "weekly," "semi-monthly payroll periods" or "monthly."] 

    1.29  SERVICE FOR PREDECESSOR EMPLOYER.  In addition to the predecessor service the Plan must credit by
reason of Section 1.29 of the Plan, the Plan credits Service with the following predecessor employer(s): N/A. Service with the designated predecessor employer(s) applies:  (Choose at least one of (a) or (b); (c)
 is available only in addition to (a) or (b))

	/
	/  (a) For
purposes of participation under Article II.

	/
	/  (b) For
purposes of vesting under Article V.

	/
	/  (c) Except
the following Service: . 

[Note: If the Plan does not credit any predecessor service under this provision, insert "N/A" in the first blank line. The Employer may attach a schedule to this
Adoption Agreement, in the same format as this Section 1.29, designating additional predecessor employers and the applicable service crediting elections.] 

    1.31  LEASED EMPLOYEES.  If a Leased Employee is a Participant in the Plan and also participates in a
plan maintained by the leasing organization: (Choose (a) or (b)) 

	/x/
	(a) The
Advisory Committee will determine the Leased Employee's allocation of Employer contributions under Article III without taking into account
the Leased Employee's allocation, if any, under the leasing organization's plan. 

3

	/
	/  (b) The
Advisory Committee will reduce a Leased Employee's allocation of Employer nonelective contributions (other than designated qualified nonelective
contributions) under this Plan by the Leased Employee's allocation under the leasing organization's plan, but only to the extent that allocation is attributable to the Leased Employee's service
provided to the Employer. The leasing organization's plan:

	/
	/  (1) Must
be a money purchase plan which would satisfy the definition under Section 1.31 of a safe harbor plan, irrespective of whether the safe
harbor exception applies.

	/
	/  (2) Must
satisfy the features and, if a defined benefit plan, the method of reduction described in an addendum to this Adoption Agreement, numbered 1.31. 

  ARTICLE II
  EMPLOYEE PARTICIPANTS         

    2.01  ELIGIBILITY.  

Eligibility conditions.  To become a Participant in the Plan, an Employee must satisfy the following eligibility
conditions: (Choose (a) or (b) or both; (c) is optional as an additional election)

	/x/
	(a) Attainment
of age 18 (specify age, not exceeding 21).

	/x/
	(b) Service
requirement. (Choose one of (1) through (3))

	/
	/  (1) One
Year of Service.

	/x/
	(2) 3
months (not exceeding 12) following the Employee's Employment Commencement Date.

	/
	/  (3) One
Hour of Service. 

	/x/
	(c) Special
requirements for non-401(k) portion of plan. (Make elections under (1) and under
(2))

	(1)
	The
requirements of this Option (c) apply to participation in: (Choose at least one of (i) through (iii))

	/
	/  (i) The
allocation of Employer nonelective contributions and Participant forfeitures.

	/x/
	(ii) The
allocation of Employer matching contributions (including forfeitures allocated as matching contributions).

	/x/
	(iii) The
allocation of Employer qualified nonelective contributions. 

	(2)
	For
participation in the allocations described in (1), the eligibility conditions are: (Choose at least one of (i) through
(iv))

	/x/
	(i) 1
(one or two) Year(s) of Service, without an intervening Break in Service (as described in Section 2.03(A) of the Plan) if the requirement is
two Years of Service.

	/
	/  (ii)   months
(not exceeding 24) following the Employee's Employment Commencement Date.

	/
	/  (iii) One
Hour of Service.

	/x/
	(iv) Attainment
of age 18 (Specify age, not exceeding 21).

Plan Entry Date.  "Plan Entry Date" means the Effective Date and: (Choose (d), (e) or
(f))

	/x/
	(d) Semi-annual
Entry Dates. The first day of the Plan Year and the first day of the seventh month of the Plan Year.

	/
	/  (e) The
first day of the Plan Year. 

4

	/
	/  (f) (Specify entry dates)            . 

Time of Participation.  An Employee will become a Participant (and, if applicable, will participate in the allocations
described in Option (c)(1)), unless excluded under Adoption Agreement Section 1.07, on the Plan Entry Date (if employed on that date): (Choose (g), (h) or
(i))

	/x/
	(g) immediately
following

	/
	/  (h) immediately
preceding

	/
	/  (i) nearest 

the
date the Employee completes the eligibility conditions described in Options (a) and (b) (or in Option (c)(2) if applicable) of this Adoption Agreement Section 2.01.
[Note: The Employer must coordinate the selection of (g), (h) or (i) with the "Plan Entry Date" selection in (d), (e) or (f). Unless otherwise
excluded under Section 1.07, the Employee must become a Participant by the earlier of: (1) the first day of the Plan Year beginning after the date the Employee completes the age and
service requirements of Code 410(a); or (2) 6 months after the date the Employee completes those requirements.] 

Dual eligibility.  The eligibility conditions of this Section 2.01 apply to: (Choose
(j) or (k))

	/x/
	(j) All
Employees of the Employer, except: (Choose (1) or (2))

	/x/
	(1) No
exceptions.

	/
	/  (2) Employees
who are Participants in the Plan as of the Effective Date. 

	/
	/  (k) Solely
to an Employee employed by the Employer after            . If the Employee was employed by the Employer on or before the specified date,
the Employee will become a Participant: (Choose (1), (2) or (3))

	/
	/  (1) On
the latest of the Effective Date, his Employment Commencement Date or the date he attains age  (not to exceed 21).

	/
	/  (2) Under
the eligibility conditions in effect under the Plan prior to the restated Effective Date. If the restated Plan required more than one Year of
Service to participate, the eligibility condition under this Option (2) for participation in the Code 401(k) arrangement under this Plan is one Year of Service for Plan Years beginning after
December 31, 1988. [For restated plans only]

	/
	/  (3) (Specify)            . 

    2.02  YEAR OF SERVICE—PARTICIPATION.  

Hours of Service.  An Employee must complete: (Choose (a) or (b))

	/x/
	(a) 1,000
Hours of Service

	/
	/  (b)   Hours
of Service 

during
an eligibility computation period to receive credit for a Year of Service. [Note: The Hours of Service requirement may not exceed
1,000.] 

5

 

Eligibility computation period.  After the initial eligibility computation period described in Section 2.02 of the
Plan, the Plan measures the eligibility computation period as: (Choose (c) or (d))

	/
	/  (c) The
12 consecutive month period beginning with each anniversary of an Employee's Employment Commencement Date.

	/x/
	(d) The
Plan Year, beginning with the Plan Year which includes the first anniversary of the Employee's Employment Commencement Date. 

    2.03  BREAK IN SERVICE—PARTICIPATION.  The Break in Service rule described in
Section 2.03(B) of the Plan: (Choose (a) or (b))

	/
	/  (a) Does
not apply to the Employer's Plan.

	/x/
	(b) Applies
to the Employer's Plan. 

    2.06  ELECTION NOT TO PARTICIPATE.  The Plan: (Choose (a) or
(b))

	/x/
	(a) Does
not permit an eligible Employee or a Participant to elect not to participate.

	/
	/  (b) Does
permit an eligible Employee or a Participant to elect not to participate in accordance with Section 2.06 and with the following rules:  (Complete (1), (2), (3) and (4))

	(1)
	An
election is effective for a Plan Year if filed no later than            .

	(2)
	An
election not to participate must be effective for at least    Plan Year(s).

	(3)
	Following
a re-election to participate, the Employee or Participant:

	/
	/  (i) May
not again elect not to participate for any subsequent Plan Year.

	/
	/  (ii) May
again elect not to participate, but not earlier than the Plan Year following the Plan Year in which the re-election first was
effective. 

	(4)
	(Specify)            [Insert "N/A" if no other rules
apply]. 

  ARTICLE III
  EMPLOYER CONTRIBUTIONS AND FORFEITURES         

    3.01  AMOUNT.  

Part I. [Options (a) through (g)] Amount of Employer's contribution.  The
Employer's annual contribution to the Trust will equal the total amount of deferral contributions, matching contributions, qualified nonelective contributions and nonelective contributions, as
determined under this Section 3.01. (Choose any combination of (a), (b), (c) and (d), or choose (e))

	/x/
	(a) Deferral contributions (Code 401(k) arrangement). (Choose (1) or (2) or
both)

	/x/
	(1) Salary
reduction arrangement. The Employer must contribute the amount by which the Participants have reduced their Compensation for the Plan Year,
pursuant to their salary reduction agreements on file with the Advisory Committee. A reference in the Plan to salary reduction contributions is a reference to these amounts.

	/
	/  (2) Cash
or deferred arrangement. The Employer will contribute on behalf of each Participant the portion of the Participant's proportionate share of the
cash or deferred contribution which he has not elected to receive in cash. See Section 14.02 of the Plan. The Employer's cash or deferred contribution is the amount the Employer may from time
to time deem advisable which the Employer designates as a cash or deferred contribution prior to making that contribution to the Trust. 

6

	/x/
	(b) Matching contributions. The Employer will make matching contributions in accordance with the formula(s)
elected in Part II of this Adoption Agreement Section 3.01.

	/x/
	(c) Designated qualified nonelective contributions. The Employer, in its sole discretion, may contribute an
amount which it designates as a qualified nonelective contribution.

	/
	/  (d) Nonelective contributions. (Choose any combination of (1) through (4))

	/
	/  (1) Discretionary
contribution. The amount (or additional amount) the Employer may from time to time deem advisable.

	/
	/  (2) The
amount (or additional amount) the Employer may from time to time deem advisable, separately determined for each of the following classifications of
Participants: (Choose (i) or (ii))

	/
	/  (i) Nonhighly
Compensated Employees and Highly Compensated Employees.

	/
	/  (ii) (Specify classifications)            . 

Under
this Option (2), the Advisory Committee will allocate the amount contributed for each Participant classification in accordance with Part II of Adoption Agreement Section 3.04, as
if the Participants in that classification were the only Participants in the Plan. 

	/
	/  (3)   %
of the Compensation of all Participants under the Plan, determined for the Employer's taxable year for which it makes the
contribution. [Note: The percentage selected may not exceed 15%.]

	/
	/  (4)   %
of Net Profits but not more than $      . 

	/
	/  (e) Frozen Plan. This Plan is a frozen Plan effective         . The Employer will not contribute
to the Plan with respect to any period following the stated date. 

Net Profits.  The Employer: (Choose (f) or (g))

	/x/
	(f) Need
not have Net Profits to make its annual contribution under this Plan.

	/
	/  (g) Must
have current or accumulated Net Profits exceeding $      to make the following contributions: (Choose at least
one)

	/
	/  (1) Cash
or deferred contributions described in Option (a)(2).

	/
	/  (2) Matching
contributions described in Option (b), except:            .

	/
	/  (3) Qualified
nonelective contributions described in Option (c).

	/
	/  (4) Nonelective
contributions described in Option (d). 

The
term "Net Profits" means the Employer's net income or profits for any taxable year determined by the Employer upon the basis of its books of account in accordance with generally accepted
accounting practices consistently applied without any deductions for Federal and state taxes upon income or for contributions made by the Employer under this Plan or under any other employee benefit
plan the Employer maintains. The term "Net Profits" specifically excludes            . [Note: Enter "N/A" if no exclusions
apply.] 

If
the Employer requires Net Profits for matching contributions and the Employer does not have sufficient Net Profits under Option (g), it will reduce the matching contribution under a fixed formula
on a prorata basis for all Participants. A Participant's share of the reduced contribution will bear the same ratio as the matching contribution the Participant would have received if Net Profits were
sufficient bears to the total matching contribution all Participants would have received if Net Profits 

7

were sufficient. If more than one member of a related group (as defined in Section 1.30) execute this Adoption Agreement, each participating member will determine Net Profits separately but
will not apply this reduction unless, after combining the separately determined Net Profits, the aggregate Net Profits are insufficient to satisfy the matching contribution liability. "Net Profits"
includes both current and accumulated Net Profits. 

Part II.  [Options (h) through (j)] Matching contribution
formula.  [Note: If the Employer elected Option (b), complete Options (h), (i) and
(j).] 

	/x/
	(h) Amount
of matching contributions. For each Plan Year, the Employer's matching contribution is: (Choose any combination of (1),
(2), (3), (4) and (5))

	/x/
	(1) An
amount equal to 50% of each Participant's eligible contributions for the Plan Year.

	/
	/  (2) An
amount equal to  % of each Participant's first tier of eligible contributions for the Plan Year, plus the following matching
percentage(s) for the following subsequent tiers of eligible contributions for the Plan.            .

	/
	/  (3) Discretionary
formula.

	/
	/  (i) An
amount (or additional amount) equal to a matching percentage the Employer from time to time may deem advisable of the Participant's eligible
contributions for the Plan Year.

	/
	/  (ii) An
amount (or additional amount) equal to a matching percentage the Employer from time to time may deem advisable of each tier of the Participant's
eligible contributions for the Plan Year. 

	/
	/  (4) An
amount equal to the following percentage of each Participant's eligible contributions for the Plan Year, based on the Participant's Years of
Service: 

The
Advisory Committee will apply this formula by determining Years of Service as follows:            . 

	/
	/  (5) A
Participant's matching contributions may not: (Choose (i) or (ii))

	/
	/  (i) Exceed            .

	/
	/  (ii) Be
less than            . 

*Related Employers.  If two or more related employers (as defined in Section 1.30) contribute to this Plan, the related employers
may elect different matching contribution formulas by attaching to the Adoption Agreement a separately completed copy of this Part II. Note: Separate matching
contribution formulas create separate current benefit structures that must satisfy the minimum participation test of Code 401(a)(26).] 

	/x/
	(i) Definition of eligible contributions. Subject to the requirements of Option (j), the term "eligible
contributions" means: (Choose any combination of (1) through (3))

	/x/
	(1) Salary
reduction contributions.

	/
	/  (2) Cash
or deferred contributions (including any part of the Participant's proportionate share of the cash or deferred contribution which the Employer
defers without the Participant's election).

	/
	/  (3) Participant
mandatory contributions, as designated in Adoption Agreement Section 4.01. See Section 14.04 of the Plan. 

8

	/x/
	(j) Amount of eligible contributions taken into account. When determining a Participant's eligible
contributions taken into account under the matching contributions formula(s), the following rules apply: (Choose any combination of (1) through
(4))

	/
	/  (1) The
Advisory Committee will take into account all eligible contributions credited for the Plan Year.

	/x/
	(2) The
Advisory Committee will disregard eligible contributions exceeding 6% of compensation.

	/
	/  (3) The
Advisory Committee will treat as the first tier of eligible contributions, an amount not exceeding:            . 

The
subsequent tiers of eligible contributions are:            . 

	/
	/  (4)  (Specify)            . 

Part III.  [Options (k) and (l)]. Special rules for Code 401(k)
Arrangement.  (Choose (k) or (l), or both, as applicable)

	/x/
	(k) Salary
Reduction Agreements. The following rules and restrictions apply to an Employee's salary reduction agreement: (Make a
selection under (1), (2), (3) and (4))

	(1)
	Limitation
on amount.  The Employee's salary reduction contributions: (Choose (i) or at least one of (ii) or
(iii))

	/
	/  (i) No
maximum limitation other than as provided in the Plan.

	/x/
	(ii) May
not exceed 15% of Compensation for the Plan Year, subject to the annual additions limitation described in Part 2 of Article III and
the 402(g) limitation described in Section 14.07 of the Plan.

	/
	/  (iii) Based
on percentages of Compensation must equal at least            . 

	(2)
	An
Employee may revoke, on a prospective basis, a salary reduction agreement: (Choose (i), (ii), (iii) or (iv))

	/
	/  (i) Once
during any Plan Year but not later than            of the Plan Year.

	/
	/  (ii) As
of any Plan Entry Date.

	/
	/  (iii) As
of the first day of any month.

	/x/
	(iv) (Specify, but must be at least once per Plan Year) As of the beginning of the next payroll period.

	(3)
	An
Employee who revokes his salary reduction agreement may file a new salary reduction agreement with an effective date: (Choose (i), (ii),
(iii) or (iv))

	/
	/  (i) No
earlier than the first day of the next Plan Year.

	/x/
	(ii) As
of any subsequent Plan Entry Date.

	/
	/  (iii) As
of the first day of any month subsequent to the month in which he revoked an Agreement.

	/
	/  (iv) (Specify, but must be at least once per Plan Year following the Plan Year of revocation)
            . 

	(4)
	A
Participant may increase or may decrease, on a prospective basis, his salary reduction percentage or dollar amount: (Choose (i), (ii), (iii) or
(iv))

	/
	/  (i) As
of the beginning of each payroll period.

	/
	/  (ii) As
of the first day of each month. 

9

	/x/
	(iii) As
of any Plan Entry Date.

	/
	/  (iv) (Specify, but must permit an increase or a decrease at least once per Plan Year)            . 

	/
	/  (l) Cash or deferred contributions. For each Plan Year for which the Employer makes a designated cash or
deferred contribution, a Participant may elect to receive directly in cash not more than the following portion (or, if less, the 402(g) limitation described in Section 14.07 of the Plan) of his
proportionate share of that cash or deferred contribution: (Choose (1) or (2))

	/
	/  (1) All
or any portion.

	/
	/  (2)             %.

    3.04  CONTRIBUTION ALLOCATION.  The Advisory Committee will allocate deferral contributions, matching
contributions, qualified nonelective contributions and nonelective contributions in accordance with Section 14.06 and the elections under this Adoption Agreement Section 3.04. 

Part I.  [Options (a) through (d)]. Special Accounting
Elections.  (Choose whichever elections are applicable to the Employer's Plan)

	/x/
	(a) Matching Contributions Account. The Advisory Committee will allocate matching contributions to a
Participant's: (Choose (1) or (2); (3) is available only in addition to (1))

	/x/
	(1) Regular
Matching Contributions Account.

	/
	/  (2) Qualified
Matching Contributions Account.

	/
	/  (3) Except,
matching contributions under Option(s) of Adoption Agreement Section 3.01 are allocable to the Qualified Matching Contributions Account. 

	/
	/  (b) Special Allocation Dates for Salary Reduction Contributions. The Advisory Committee will allocate
salary reduction contributions as of the Accounting Date and as of the following additional allocation dates:            .

	/
	/  (c) Special Allocation Dates for Matching Contributions. The Advisory Committee will allocate matching
contributions as of the Accounting Date and as of the following additional allocation dates:            .

	/x/
	(d) Designated Qualified Nonelective Contributions—Definition of Participant. For purposes of
allocating the designated qualified nonelective contribution, "Participant" means: (Choose (1), (2) or (3))

	/
	/  (1) All
Participants.

	/x/
	(2) Participants
who are Nonhighly Compensated Employees for the Plan Year.

	/
	/  (3) (Specify)

Part II. Method of Allocation—Nonelective Contribution.  Subject to any restoration allocation
required under Section 5.04, the Advisory Committee will allocate and credit each annual nonelective contribution (and Participant forfeitures treated as nonelective contributions) to the
Employer Contributions Account of each Participant who satisfies the conditions of Section 3.06, in accordance with the allocation method selected under this Section 3.04. If the
Employer elects Option (e)(2), Option (g)(2) or Option (h), for the first 3% of Compensation allocated to all Participants, "Compensation" does not include any exclusions elected under Adoption
Agreement Section 1.12 (other than the exclusion of elective contributions), and the Advisory Committee must take into account the Participant's Compensation for the entire Plan Year.  (Choose an allocation method under (e)
, (f), (g) or (h); (i) is mandatory if the Employer elects (f), (g) or (h); (j) is optional in addition to any
other election.)

10

	/
	/  (e) Nonintegrated Allocation Formula.(Choose (1)
or (2))

	/
	/  (1) The
Advisory Committee will allocate the annual nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year
bears to the total Compensation of all Participants for the Plan Year.

	/
	/  (2) The
Advisory Committee will allocate the annual nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year
bears to the total Compensation of all Participants for the Plan Year. For purposes of this Option (2), "Participant" means, in addition to a Participant who satisfies the requirements of
Section 3.06 for the Plan Year, any other Participant entitled to a top heavy minimum allocation under Section 3.04(B), but such Participant's allocation will not exceed 3% of his
Compensation for the Plan Year. 

	/
	/  (f) Two-Tiered Integrated Allocation Formula—Maximum Disparity. First, the Advisory
Committee will allocate the annual Employer nonelective contributions in the same ratio that each Participant's Compensation plus Excess Compensation for the Plan Year bears to the total Compensation
plus Excess Compensation of all Participants for the Plan Year. The allocation under this paragraph, as a percentage of each Participant's Compensation plus Excess Compensation, must not exceed the
applicable percentage (5.7%, 5.4% or 4.3%) listed under the Maximum Disparity Table following Option (i). 

The
Advisory Committee then will allocate any remaining nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all
Participants for the Plan Year. 

	/
	/  (g) Three-Tiered Integrated Allocation Formula. First, the Advisory Committee will allocate the annual
Employer nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. The allocation under
this paragraph, as a percentage of each Participant's Compensation may not exceed the applicable percentage (5.7%, 5.4% or 4.3%) listed under the Maximum Disparity Table following Option (i). Solely
for purposes of the allocation in this first paragraph, "Participant" means, in addition to a Participant who satisfies the requirements of Section 3.06 for the Plan Year:  (Choose (1) or (2))

	/
	/  (1) No
other Participant.

	/
	/  (2) Any
other Participant entitled to a top heavy minimum allocation under Section 3.04(B), but such Participant's allocation under this Option
(g) will not exceed 3% of his Compensation for the Plan Year. 

As
a second tier allocation, the Advisory Committee will allocate the nonelective contributions in the same ratio that each Participant's Excess Compensation for the Plan Year bears to the total
Excess Compensation of all Participants for the Plan Year. The allocation under this paragraph, as a percentage of each Participant's Excess Compensation, may not exceed the allocation percentage in
the first paragraph. 

Finally,
the Advisory Committee will allocate any remaining nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all
Participants for the Plan Year. 

	/
	/  (h) Four-Tiered Integrated Allocation Formula. First, the Advisory Committee will allocate the
annual Employer nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year, but not
exceeding 3% of each Participant's Compensation. Solely for purposes of this first tier allocation, a "Participant" means, in addition to any Participant who satisfies the requirements of
Section 3.06 

11

for
the Plan Year, any other Participant entitled to a top heavy minimum allocation under Section 3.04(B) of the Plan. 

As
a second tier allocation, the Advisory Committee will allocate the nonelective contributions in the same ratio that each Participant's Excess Compensation for the Plan Year bears to the total
Excess Compensation of all Participants for the Plan Year, but not exceeding 3% of each Participant's Excess Compensation. 

As
a third tier allocation, the Advisory Committee will allocate the annual Employer contributions in the same ratio that each Participant's Compensation plus Excess Compensation for the Plan Year
bears to the total Compensation plus Excess Compensation of all Participants for the Plan Year. The allocation under this paragraph, as a percentage of each Participant's Compensation plus Excess
Compensation, must not exceed the applicable percentage (2.7%, 2.4% or 1.3%) listed under the Maximum Disparity Table following Option (i). 

The
Advisory Committee then will allocate any remaining nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all
Participants for the Plan Year. 

	/
	/  (i) Excess Compensation. For purposes of Option (f), (g) or (h), "Excess Compensation" means
Compensation in excess of the following Integration Level: (Choose (1) or (2))

	/
	/  (1)   %
(not exceeding 100%) of the taxable wage base, as determined under Section 230 of the Social Security Act, in effect on the
first day of the Plan Year: (Choose any combination of (i) and (ii) or choose (iii))

	/
	/  (i) Rounded
to            (but not exceeding the taxable wage base).

	/
	/  (ii) But
not greater than $  .

	/
	/  (iii) Without
any further adjustment or limitation. 

	/
	/  (2) $         [Note: Not exceeding the taxable wage base for the Plan Year in which this Adoption Agreement
first is effective.] 

Maximum Disparity Table.  For purposes of Options (f), (g) and (h), the applicable percentage is: 

	Integration Level (as

percentage of taxable wage base)
 
	 	Applicable Percentages for

Option (f) or Option (g)
	 	Applicable Percentages

for Option (h)
	 
	100%	 	5.7	%	2.7	%
	 

More than 80% but less than 100%	 
 	 

5.4	 
%	 

2.4	 
%
	 

More than 20% (but not less than $10,001) and not more than 80%	 
 	 

4.3	 
%	 

1.3	 
%
	 

20% (or $10,000, if greater) or less	 
 	 

5.7	 
%	 

2.7	 
%
	 

 	 
 	 

 	 
 	 

 	 
 

	/
	/  (j) Allocation offset. The Advisory Committee will reduce a Participant's allocation otherwise made under
Part II of this Section 3.04 by the Participant's allocation under the following qualified plan(s) maintained by the Employer:            

The
Advisory Committee will determine this allocation reduction: (Choose (1) or (2))

	/
	/  (1) By
treating the term "nonelective contribution" as including all amounts paid or accrued by the Employer during the Plan Year to the qualified plan(s)
referenced under this Option (j). If a Participant under this Plan also participates in that other plan, the Advisory Committee will treat the amount the Employer contributes for or during a
Plan Year on behalf of a particular Participant under such other plan as an amount allocated under this 

12

Plan to that Participant's Account for that Plan Year. The Advisory Committee will make the computation of allocation required under the immediately preceding sentence before making any allocation of
nonelective contributions under this Section 3.04. 

	/
	/  (2) In
accordance with the formula provided in an addendum to this Adoption Agreement, numbered 3.04(j). 

Top Heavy Minimum Allocation—Method of Compliance.  If a Participant's allocation under this
Section 3.04 is less than the top heavy minimum allocation to which he is entitled under Section 3.04(B): (Choose (k) or (l))

	/x/
	(k) The
Employer will make any necessary additional contribution to the Participant's Account, as described in Section 3.04(B)(7)(a) of the Plan.

	/
	/  (l) The
Employer will satisfy the top heavy minimum allocation under the following plan(s) it maintains:            . However, the Employer will
make any necessary additional contribution to satisfy the top heavy minimum allocation for an Employee covered only under this Plan and not under the other plan(s) designated in this Option (l). See
Section 3.04(B)(7)(b) of the Plan. 

If
the Employer maintains another plan, the Employer may provide in an addendum to this Adoption Agreement, numbered Section 3.04, any modifications to the Plan necessary to satisfy the top
heavy requirements under Code 416. 

Related employers.  If two or more related employers (as defined in Section 1.30) contribute to this Plan, the
Advisory Committee must allocate all Employer nonelective contributions (and forfeitures treated as nonelective contributions) to each Participant in the Plan, in accordance with the elections in this
Adoption Agreement Section 3.04: (Choose (m) or (n))

	/
	/  (m) Without
regard to which contributing related group member employs the Participant.

	/
	/  (n) Only
to the Participants directly employed by the contributing Employer. If a Participant receives Compensation from more than one contributing
Employer, the Advisory Committee will determine the allocations under this Adoption Agreement Section 3.04 by prorating among the participating Employers the Participant's Compensation and, if
applicable, the Participant's Integration Level under Option (i). 

    3.05  FORFEITURE ALLOCATION.  Subject to any restoration allocation required under Sections 5.04 or 9.14,
the Advisory Committee will allocate a Participant forfeiture in accordance with Section 3.04: (Choose (a) or (b); (c) and (d) are optional in
addition to (a) or (b))

	/x/
	(a) As
an Employer nonelective contribution for the Plan Year in which the forfeiture occurs, as if the Participant forfeiture were an additional
nonelective contribution for that Plan Year.

	/
	/  (b) To
reduce the Employer matching contributions and nonelective contributions for the Plan Year: (Choose (1)
or (2))

	/
	/  (1) in
which the forfeiture occurs.

	/
	/  (2) immediately
following the Plan Year in which the forfeiture occurs. 

	/x/
	(c) To
the extent attributable to matching contributions: (Choose (1), (2) or (3))

	/
	/  (1) In
the manner elected under Options (a) or (b).

	/
	/  (2) First
to reduce Employer matching contributions for the Plan Year: (Choose (i) or (ii))

	/
	/  (i) in
which the forfeiture occurs,

	/
	/  (ii) immediately
following the Plan Year in which the forfeiture occurs, then as elected in Options (a) or (b). 

13

	/x/
	(3) As
a discretionary matching contribution for the Plan Year in which the forfeiture occurs, in lieu of the manner elected under Options (a) or
(b). 

	/
	/  (d) First
to reduce the Plan's ordinary and necessary administrative expenses for the Plan Year and then will allocate any remaining forfeitures in the
manner described in Options (a), (b) or (c), whichever applies. If the Employer elects Option (c), the forfeitures used to reduce Plan expenses: (Choose (1)
or (2))

	/
	/  (1) relate
proportionately to forfeitures described in Option (c) and to forfeitures described in Options (a) or (b).

	/
	/  (2) relate
first to forfeitures described in Option  . 

Allocation of forfeited excess aggregate contributions.  The Advisory Committee will allocate any forfeited excess
aggregate contributions (as described in Section 14.09): (Choose (e), (f) or (g))

	/x/
	(e) To
reduce Employer matching contributions for the Plan Year: (Choose (1) or (2))

	/x/
	(1) in
which the forfeiture occurs.

	/
	/  (2) immediately
following the Plan Year in which the forfeiture occurs. 

	/
	/  (f) As
Employer discretionary matching contributions for the Plan Year in which forfeited, except the Advisory Committee will not allocate these
forfeitures to the Highly Compensated Employees who incurred the forfeitures.

	/
	/  (g) In
accordance with Options (a) through (d), whichever applies, except the Advisory Committee will not allocate these forfeitures under Option
(a) or under Option (c)(3) to the Highly Compensated Employees who incurred the forfeitures. 

    3.06  ACCRUAL OF BENEFIT.  

Compensation taken into account.  For the Plan Year in which the Employee first becomes a Participant, the Advisory
Committee will determine the allocation of any cash or deferred contribution, designated qualified nonelective contribution or nonelective contribution by taking into account:  (Choose (a) or (b))

	/
	/  (a) The
Employee's Compensation for the entire Plan Year.

	/x/
	(b) The
Employee's Compensation for the portion of the Plan Year in which the Employee actually is a Participant in the Plan. 

Accrual Requirements.  Subject to the suspension of accrual requirements of Section 3.06(E) of the Plan, to
receive an allocation of cash or deferred contributions, matching contributions, designated qualified nonelective contributions, nonelective contributions and Participant forfeitures, if any, for the
Plan Year, a Participant must satisfy the conditions described in the following elections: (Choose (c) or at least one of (d) through (f))

	/
	/  (c) Safe harbor rule. If the Participant is employed by the Employer on the last day of the Plan Year, the
Participant must complete at least one Hour of Service for that Plan Year. If the Participant is not employed by the Employer on the last day of the Plan Year, the Participant must complete at least
501 Hours of Service during the Plan Year.

	/x/
	(d) Hours of Service condition. The Participant must complete the following minimum number of Hours of
Service during the Plan Year: (Choose at least one of (1) through (5))

	/x/
	(1) 1,000
Hours of Service.

	/
	/  (2) (Specify, but the number of Hours of Service may not exceed 1,000)            . 

14

	/x/
	(3) No
Hour of Service requirement if the Participant terminates employment during the Plan Year on account of: (Choose (i), (ii)
or (iii))

	/x/
	(i) Death.

	/x/
	(ii) Disability.

	/x/
	(iii) Attainment
of Normal Retirement Age in the current Plan Year or in a prior Plan Year. 

	/
	/  (4)     Hours
of Service (not exceeding 1,000) if the Participant terminates employment with the Employer during the Plan Year, subject to
any election in Option (3).

	/
	/  (5) No
Hour of Service requirement for an allocation of the following contributions:            . 

	/x/
	(e) Employment condition. The Participant must be employed by the Employer on the last day of the Plan
Year, irrespective of whether he satisfies any Hours of Service condition under Option (d), with the following exceptions: (Choose (1) or at least one of (2)
through (5))

	/
	/  (1) No
exceptions.

	/x/
	(2) Termination
of employment because of death.

	/x/
	(3) Termination
of employment because of disability.

	/x/
	(4) Termination
of employment following attainment of Normal Retirement Age.

	/
	/  (5) No
employment condition for the following contributions:            . 

	/
	/  (f) (Specify other conditions, if applicable):            . 

Suspension of Accrual Requirements.  The suspension of accrual requirements of Section 3.06(E) of the Plan:  (Choose (g), (h) or (i))

	/
	/  (g) Applies
to the Employer's Plan.

	/x/
	(h) Does
not apply to the Employer's Plan.

	/
	/  (i) Applies
in modified form to the Employer's Plan, as described in an addendum to this Adoption Agreement, numbered Section 3.06(E). 

Special accrual requirements for matching contributions.  If the Plan allocates matching contributions on two or more
allocation dates for a Plan Year, the Advisory Committee, unless otherwise specified in Option (l), will apply any Hours of Service condition by dividing the required Hours of Service on a prorata
basis to the allocation periods included in that Plan Year. Furthermore, a Participant who
satisfies the conditions described in this Adoption Agreement Section 3.06 will receive an allocation of matching contributions (and forfeitures treated as matching contributions) only if the
Participant satisfies the following additional condition(s): (Choose (j) or at least one of (k) or (l))

15

 

	/x/
	(j) No
additional conditions.

	/
	/  (k) The
Participant is not a Highly Compensated Employee for the Plan Year. This Option (k) applies to: (Choose
(1)or (2))

	/
	/  (1) All
matching contributions.

	/
	/  (2) Matching
contributions described in Option(s)            of Adoption Agreement Section 3.01. 

	/
	/  (l) (Specify)            . 

    3.15  MORE THAN ONE PLAN LIMITATION.  If the provisions of Section 3.15 apply, the Excess Amount
attributed to this Plan equals: (Choose (a), (b) or (c))

/ /  (a) The
product of: 

    (i)  the total
Excess Amount allocated as of such date (including any amount which the Advisory Committee would have allocated but for the limitations of
Code 415), times 

    (ii)  the ratio
of (1) the amount allocated to the Participant as of such date under this Plan divided by (2) the total amount allocated as
of such date under all qualified defined contribution plans (determined without regard to the limitations of Code 415). 

	/x/
	(b) The
total Excess Amount.

	/
	/  (c) None
of the Excess Amount. 

    3.18  DEFINED BENEFIT PLAN LIMITATION.  

Application of limitation.  The limitation under Section 3.18 of the Plan: (Choose (a)
or (b))

	/x/
	(a) Does
not apply to the Employer's Plan because the Employer does not maintain and never has maintained a defined benefit plan covering any Participant
in this Plan.

	/
	/  (b) Applies
to the Employer's Plan. To the extent necessary to satisfy the limitation under Section 3.18, the Employer will reduce:  (Choose (1) or (2))

	/
	/  (1) The
Participant's projected annual benefit under the defined benefit plan under which the Participant participates.

	/
	/  (2) Its
contribution or allocation on behalf of the Participant to the defined contribution plan under which the Participant participates and then, if
necessary, the Participant's projected annual benefit under the defined benefit plan under which the Participant participates. 

[Note: If the Employer selects (a), the remaining options in this Section 3.18 do not apply to the Employer's Plan.] 

Coordination with top heavy minimum allocation.  The Advisory Committee will apply the top heavy minimum allocation
provisions of Section 3.04(B) of the Plan with the following modifications: (Choose (c) or at least one of (d) or (e))

	/
	/  (c) No
modifications.

	/
	/  (d) For
Non-Key Employees participating only in this Plan, the top heavy minimum allocation is the minimum allocation described in
Section 3.04(B) determined by substituting  % (not less than 4%) for "3%," except: (Choose (i) or (ii))

	/
	/  (i) No
exceptions.

	/
	/  (ii) Plan
Years in which the top heavy ratio exceeds 90%. 

16

	/
	/  (e) For
Non-Key Employees also participating in the defined benefit plan, the top heavy minimum is: (Choose (1)
or (2))

	/
	/  (1) 5%
of Compensation (as determined under Section 3.04(B) or the Plan) irrespective of the contribution rate of any Key Employee, except:  (Choose (i) or (ii))

	/
	/  (i) No
exceptions.

	/
	/  (ii) Substituting
"71/2%" for "5%" if the top heavy ratio does not exceed 90%. 

	/
	/  (2) 0%.
[Note: The Employer may not select this Option (2) unless the defined benefit plan satisfies the top
heavy minimum benefit requirements of Code 416 for these Non-Key Employees.] 

Actuarial Assumptions for Top Heavy Calculation.  To determine the top heavy ratio, the Advisory Committee will use the
following interest rate and mortality assumptions to value accrued benefits under a defined benefit plan:            . 

If
the elections under this Section 3.18 are not appropriate to satisfy the limitations of Section 3.18, or the top heavy requirements under Code 416, the Employer must provide the
appropriate provisions in an addendum to this Adoption Agreement. 

  ARTICLE IV
  PARTICIPANT CONTRIBUTIONS         

    4.01  PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS.  The Plan: (Choose (a) or
(b); (c) is available only with (b)) 

	/x/
	(a) Does
not permit Participant nondeductible contributions.

	/
	/  (b) Permits
Participant nondeductible contributions, pursuant to Section 14.04 of the Plan.

	/
	/  (c) The
following portion of the Participant's nondeductible contributions for the Plan Year are mandatory contributions under Option (i)(3) of Adoption
Agreement Section 3.01: (Choose (1) or (2))

	/
	/  (1) The
amount which is not less than:            .

	/
	/  (2) The
amount which is not greater than:            . 

Allocation dates.  The Advisory Committee will allocate nondeductible contributions for each Plan Year as of the
Accounting Date and the following additional allocation dates: (Choose (d) or (e))

	/
	/  (d) No
other allocation dates.

	/
	/  (e) (Specify)            . 

As
of an allocation date, the Advisory Committee will credit all nondeductible contributions made for the relevant allocation period. Unless otherwise specified in (e), a nondeductible contribution
relates to an allocation period only if actually made to the Trust no later than 30 days after that allocation period ends. 

    4.05  PARTICIPANT CONTRIBUTION—WITHDRAWAL/DISTRIBUTION.  Subject to the restrictions of
Article VI, the following distribution options apply to a Participant's Mandatory Contributions Account, if any, prior to his Separation from Service: (Choose
(a) or at least one of (b) through (d))

	/x/
	(a) No
distribution options prior to Separation from Service.

	/
	/  (b) The
same distribution options applicable to the Deferral Contributions Account prior to the Participant's Separation from Service, as elected in
Adoption Agreement Section 6.03. 

17

	/
	/  (c) Until
he retires, the Participant has a continuing election to receive all or any portion of his Mandatory Contributions Account if:  (Choose (1) or at least one of (2) through (4))

	/
	/  (1) No
conditions.

	/
	/  (2) The
mandatory contributions have accumulated for at least   Plan Years since the Plan Year for which contributed.

	/
	/  (3) The
Participant suspends making nondeductible contributions for a period of   months.

	/
	/  (4) (Specify)            . 

	/
	/  (d) (Specify)            . 

  ARTICLE V
  TERMINATION OF SERVICE—PARTICIPANT VESTING         

    5.01  NORMAL RETIREMENT.  Normal Retirement Age under the Plan is: (Choose (a)
or (b))

	/x/
	(a) 65
[State age, but may not exceed age 65].

	/
	/  (b) The
later of the date the Participant attains   years of age or the   anniversary of the first day of the
Plan Year in which the Participant commenced participation in the Plan. [The age selected may not exceed age 65 and the anniversary selected may not exceed the
5th.] 

    5.02  PARTICIPANT DEATH OR DISABILITY.  The 100% vesting rule under Section 5.02 of the Plan:  (Choose (a) or choose one or both of (b) and (c))

	/
	/  (a) Does
not apply.

	/x/
	(b) Applies
to death.

	/x/
	(c) Applies
to disability. 

    5.03  VESTING SCHEDULE.  

Deferral Contributions Account/Qualified Matching Contributions Account/Qualified Nonelective Contributions Account/Mandatory Contributions
Account.  A Participant has a 100% Nonforfeitable interest at all times in his Deferral Contributions Account, his Qualified Matching Contributions Account, his
Qualified Nonelective Contributions Account and in his Mandatory Contributions Account. 

Regular Matching Contributions Account/Employer Contributions Account.  With respect to a Participant's Regular Matching
Contributions Account and Employer Contributions Account, the Employer elects the following vesting schedule: (Choose (a) or (b); (c) and (d) are available
only as additional options)

	/
	/  (a) Immediate
vesting. 100% Nonforfeitable at all times. [Note: The Employer must elect Option (a) if the
eligibility conditions under Adoption Agreement Section 2.01(c) require 2 years of service or more than 12 months of employment.] 

18

	/x/
	(b) Graduated
Vesting Schedules. 

	Top Heavy Schedule

(Mandatory)
	 	Non Top Heavy Schedule

(Optional)

	Years of Service
	 	Service Percentage
	 	Years of Service
	 	Nonforfeitable Percentage

	Less than 1	 	0	 	Less than 1	 	NA
	1	 	25	 	1	 	NA
	2	 	50	 	2	 	NA
	3	 	75	 	3	 	NA
	4	 	100	 	4	 	NA
	5	 	 	 	 	 	NA

	/
	/  (c) Special
vesting election for Regular Matching Contributions Account. In lieu of the election under Options (a) or (b), the Employer elects the
following vesting schedule for a Participant's Regular Matching Contributions Account: (Choose (1) or (2))

	/
	/  (1) 100%
Nonforfeitable at all times.

	/
	/  (2) In
accordance with the vesting schedule described in the addendum to this Adoption Agreement, numbered 5.03(c).
[Note: If the Employer elects this Option (c)(2), the addendum must designate the applicable vesting schedule(s) using the same format as used in Option
(b).] 

[Note: Under Options (b) and (c)(2), the Employer must complete a Top Heavy Schedule which satisfies Code 416. The Employer, at its option, may complete a
Non Top Heavy Schedule. The Non Top Heavy Schedule must satisfy Code 411(a)(2). Also see Section 7.05 of the Plan.] 

	/
	/  (d) The
Top Heavy Schedule under Option (b) (and, if applicable, under Option (c)(2)) applies: (Choose (1)
or (2))

	/
	/  (1) Only
in a Plan Year for which the Plan is top heavy.

	/
	/  (2) In
the Plan Year for which the Plan first is top heavy and then in all subsequent Plan Years. [Note: The Employer
may not elect Option (d) unless it has completed a Non Top Heavy Schedule.] 

Minimum vesting.  (Choose (e) or (f))

	/x/
	(e) The
Plan does not apply a minimum vesting rule.

	/
	/  (f) A
Participant's Nonforfeitable Accrued Benefit will never be less than the lesser of $         or his entire Accrued Benefit, even if the
application of a graduated vesting schedule under Options (b) or (c) would result in a smaller Nonforfeitable Accrued Benefit. 

Life Insurance Investments.  The Participant's Accrued Benefit attributable to insurance contracts purchased on his
behalf under Article XI is: (Choose (g) or (h))

	/x/
	(g) Subject
to the vesting election under Options (a), (b) or (c).

	/
	/  (h) 100%
Nonforfeitable at all times, irrespective of the vesting election under Options (b) or (c)(2). 

    5.04  CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/ RESTORATION OF FORFEITED ACCRUED
BENEFIT.  The deemed cash-out rule described in Section 5.04(C) of the Plan: (Choose
(a) or (b))

	/
	/  (a) Does
not apply. 

19

	/x/
	(b) Will
apply to determine the timing of forfeitures for 0% vested Participants. A Participant is not a 0% vested Participant if he has a Deferral
Contributions Account. 

    5.06  YEAR OF SERVICE—VESTING.  

Vesting computation period.  The Plan measures a Year of Service on the basis of the following 12 consecutive month
periods: (Choose (a) or (b))

	/x/
	(a) Plan
Years.

	/
	/  (b) Employment
Years. An Employment Year is the 12 consecutive month period measured from the Employee's Employment Commencement Date and each successive
12 consecutive month period measured from each anniversary of that Employment Commencement Date. 

Hours of Service.  The minimum number of Hours of Service an Employee must complete during a vesting computation period
to receive credit for a Year of Service is: (Choose (c) or (d))

	/x/
	(c) 1,000
Hours of Service.

	/
	/  (d)   Hours
of Service. [Note: The Hours of Service requirement may not exceed
1,000.] 

    5.08  INCLUDED YEARS OF SERVICE—VESTING.  The Employer specifically excludes the following
Years of Service: (Choose (a) or at least one of (b) through (e))

	/x/
	(a) None
other than as specified in Section 5.08(a) of the Plan.

	/
	/  (b) Any
Year of Service before the Participant attained the age of  . Note: The age selected may not exceed age 18.]

	/
	/  (c) Any
Year of Service during the period the Employer did not maintain this Plan or a predecessor plan.

	/
	/  (d) Any
Year of Service before a Break in Service if the number of consecutive Breaks in Service equals or exceeds the greater of 5 or the aggregate number
of the Years of Service prior to the Break. This exception applies only if the Participant is 0% vested in his Accrued Benefit derived from Employer contributions at the time he has a Break in
Service. Furthermore, the aggregate number of Years of Service before a Break in Service do not include any Years of Service not required to be taken into account under this exception by reason of any
prior Break in Service.

	/
	/  (e) Any
Year of Service earned prior to the effective date of ERISA if the Plan would have disregarded that Year of Service on account of an Employee's
Separation from Service under a Plan provision in effect and adopted before January 1, 1974. 

  ARTICLE VI
  TIME AND METHOD OF PAYMENTS OF BENEFITS         

Code 411(d)(6) Protected Benefits.  The elections under this Article VI may not eliminate Code 411(d)(6) protected
benefits. To the extent the elections would eliminate a Code 411(d)(6) protected benefit, see Section 13.02 of the Plan. Furthermore, if the elections liberalize the optional forms of benefit
under the Plan, the more liberal options apply on the later of the adoption date or the Effective Date of this Adoption Agreement. 

    6.01  TIME OF PAYMENT OF ACCRUED BENEFIT.  

Distribution date.  A distribution date under the Plan means: any day in a Plan Year.
[Note: The Employer must specify the appropriate date(s). The specified distribution dates primarily establish annuity starting dates and the notice and consent
periods prescribed by the Plan. The Plan allows the Trustee an administratively practicable period of time to make the actual distribution relating to a particular distribution
date.] 

20

 

Nonforfeitable Accrued Benefit Not Exceeding $3,500.  Subject to the limitations of Section 6.01(A)(1), the
distribution date for distribution of a Nonforfeitable Accrued Benefit not exceeding $3,500 is: (Choose (a), (b), (c), (d) or (e))

	/
	/  (a)             of
the    Plan Year beginning after the Participant's Separation from Service.

	/x/
	(b) The
first distribution date following the Participant's Separation from Service.

	/
	/  (c)             of
the Plan Year after the Participant incurs Break(s) in Service (as defined in Article V).

	/
	/  (d)             following
the Participant's attainment of Normal Retirement Age, but not earlier than      days following his Separation
from Service.

	/
	/  (e) (Specify)            . 

Nonforfeitable Accrued Benefit Exceeds $3,500.  See the elections under Section 6.03. 

Disability.  The distribution date, subject to Section 6.01(A)(3), is: (Choose (f),
(g) or (h))

	/
	/  (f)             after
the Participant terminates employment because of disability.

	/x/
	(g) The
same as if the Participant had terminated employment without disability.

	/
	/  (h) (Specify)      . 

Hardship.  (Choose (i) or (j))

	/x/
	(i) The
Plan does not permit a hardship distribution to a Participant who has separated from Service.

	/
	/  (j) The
Plan permits a hardship distribution to a Participant who has separated from Service in accordance with the hardship distribution policy stated in:  (Choose (1), (2) or (3))

	/
	/  (1) Section 6.01(A)(4)
of the Plan.

	/
	/  (2) Section 14.11
of the Plan.

	/
	/  (3) The
addendum to this Adoption Agreement, numbered Section 6.01. 

Default on a Loan.  If a Participant or Beneficiary defaults on a loan made pursuant to a loan policy adopted by the
Advisory Committee pursuant to Section 9.04, the Plan: (Choose (k), (l) or (m))

	/x/
	(k) Treats
the default as a distributable event. The Trustee, at the time of the default, will reduce the Participant's Nonforfeitable Accrued Benefit by
the lesser of the amount in default (plus accrued interest) or the Plan's security interest in that Nonforfeitable Accrued Benefit. To the extent the loan is attributable to the Participant's Deferral
Contributions Account, Qualified Matching Contributions Account or Qualified Nonelective Contributions Account, the Trustee will not reduce the Participant's Nonforfeitable Accrued Benefit unless the
Participant has separated from Service or unless the Participant has attained age 591/2.

	/
	/  (l) Does
not treat the default as a distributable event. When an otherwise distributable event first occurs pursuant to Section 6.01 or
Section 6.03 of the Plan, the Trustee will reduce the Participant's
Nonforfeitable Accrued Benefit by the lesser of the amount in default (plus accrued interest) or the Plan's security interest in that Nonforfeitable Accrued Benefit.

	/
	/  (m) (Specify)            . 

    6.02  METHOD OF PAYMENT OF ACCRUED BENEFIT.  The Advisory Committee will apply Section 6.02 of the
Plan with the following modifications: (Choose (a) or at least one of (b), (c), (d) and (e))

21

	/
	/  (a) No
modifications.

	/
	/  (b) Except
as required under Section 6.01 of the Plan, a lump sum distribution is not available:            .

	/x/
	(c) An
installment distribution: (Choose (1) or at least one of (2) or (3))

	/x/
	(1) Is
not available under the Plan.

	/
	/  (2) May
not exceed the lesser of  years or the maximum period permitted under Section 6.02.

	/
	/  (3) (Specify)            . 

	/
	/  (d) The
Plan permits the following annuity options:            . 

Any
Participant who elects a life annuity option is subject to the requirements of Sections 6.04(A), (B), (C) and (D) of the Plan. See Section 6.04(E).  [Note: The Employer may specify additional annuity options in
an addendum to this Adoption Agreement, numbered 6.02(d).]

	/
	/  (e) If
the Plan invests in qualifying Employer securities, as described in Section 10.03(F), a Participant eligible to elect distribution under
Section 6.03 may elect to receive that distribution in Employer securities only in accordance with the provisions of the addendum to this Adoption Agreement, numbered 6.02(e). 

    6.03  BENEFIT PAYMENT ELECTIONS.  

Participant Elections After Separation from Service.  A Participant who is eligible to make distribution elections under
Section 6.03 of the Plan may elect to commence distribution of his.Nonforfeitable Accrued Benefit: (Choose at least one of (a) through
(c))

	/
	/  (a) As
of any distribution date, but not earlier than      of the      Plan Year beginning after the Participant's Separation from
Service.

	/x/
	(b) As
of the following date(s): (Choose at least one of Options (1) through (6))

	/
	/  (1) Any
distribution date after the close of the Plan Year in which the Participant attains Normal Retirement Age.

	/x/
	(2) Any
distribution date following his Separation from Service with the Employer.

	/
	/  (3) Any
distribution date in the      Plan Year(s) beginning after his Separation from Service.

	/
	/  (4) Any
distribution date in the Plan Year after the Participant incurs    Break(s) in Service (as defined in Article V).

	/
	/  (5) Any
distribution date following attainment of age    and completion of at least    Years of Service (as defined in
Article V).

	/
	/  (6) (Specify)            . 

	/
	/  (c) (Specify)            . 

    The
distribution events described in the election(s) made under Options (a), (b) or (c) apply equally to all Accounts maintained for the Participant unless otherwise
specified in Option (c). 

Participant Elections Prior to Separation from Service—Regular Matching Contributions Account and Employer Contributions
Account.  Subject to the restrictions of Article VI, the following distribution options apply to a Participant's Regular Matching Contributions Account
and Employer Contributions Account prior to his Separation from Service: (Choose (d) or at least one of (e) through (h))

22

	/x/
	(d) No
distribution options prior to Separation from Service.

	/
	/  (e) Attainment
of Specified Age. Until he retires, the Participant has a continuing election to receive all or any portion of his Nonforfeitable interest
in these Accounts after he attains: (Choose (1) or (2))

	/
	/  (1) Normal
Retirement Age.

	/
	/  (2)    years
of age and is at least  % vested in these Accounts. [Note: If the percentage
is less than 100%, see the special vesting formula in Section 5.03.]

	/
	/  (f) After
a Participant has participated in the Plan for a period of not less than years and he is 100% vested in these Accounts, until he retires, the
Participant has a continuing election to receive all or any portion of the Accounts. [Note: The number in the blank space may not be less than
5.]

	/
	/  (g) Hardship. A
Participant may elect a hardship distribution prior to his Separation from Service in accordance with the hardship
distribution policy: (Choose (1), (2) or (3); (4) is available only as an additional option)

	/
	/  (1) Under
Section 6.01(A)(4) of the Plan.

	/
	/  (2) Under
Section 14.11 of the Plan.

	/
	/  (3) Provided
in the addendum to this Adoption Agreement, numbered Section 6.03.

	/
	/  (4) In
no event may a Participant receive a hardship distribution before he is at least  % vested in these Accounts.  [Note: If the percentage in the blank is less than 100%, see the special vesting formula in Section
 5.03.]

	/
	/  (h) (Specify)            . 

[Note: The Employer may use an addendum, numbered 6.03, to provide additional language authorized by Options (b)(6), (c), (g)(3) or (h) of this Adoption
Agreement Section 6.03.]

Participant Elections Prior to Separation from Service—Deferral Contributions Account, Qualified Matching Contributions Account and Qualified
Nonelective Contributions Account.  Subject to the restrictions of Article VI, the following distribution options apply to a Participant's Deferral
Contributions Account, Qualified Matching Contributions Account and Qualified Nonelective Contributions Account prior to his Separation from Service: (Choose (i) or at
least one of (j) through (l))

	/
	/  (i) No
distribution options prior to Separation from Service.

	/
	/  (j) Until
he retires, the Participant has a continuing election to receive all or any portion of these Accounts after he attains:  (Choose (1) or (2))

	/
	/  (1) The
later of Normal Retirement Age or age 591/2.

	/
	/  (2) Age  (at
least 591/2). 

	/x/
	(k) Hardship. A
Participant, prior to his Separation from Service, may elect a hardship distribution from his Deferral Contributions Account
in accordance with the hardship distribution policy under Section 14.11 of the Plan.

	/
	/  (l) (Specify)            . [Note: Option (l) may not permit in service distributions prior to age
591/2 (other than hardship) and may not modify the hardship policy described in Section 14.11.]

Sale of trade or business/subsidiary.  If the Employer sells substantially all of the assets (within the meaning of Code
409(d)(2)) used in a trade or business or sells a subsidiary (within the meaning of Code 409(d)(3)), a Participant who continues employment with the acquiring corporation is eligible for 

23

distribution from his Deferral Contributions Account, Qualified Matching Contributions Account and Qualified Nonelective Contributions Account: (Choose (m) or
(n))

	/x/
	(m) Only
as described in this Adoption Agreement Section 6.03 for distributions prior to Separation from Service.

	/
	/  (n) As
if he has a Separation from Service. After March 31, 1988, a distribution authorized solely by reason of this Option (n) must
constitute a lump sum distribution, determined in a manner consistent with Code 401(k)(10) and the applicable Treasury regulations. 

    6.04  ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES.  The annuity distribution requirements
of Section 6.04: (Choose (a) or (b))

	/x/
	(a) Apply
only to a Participant described in Section 6.04(E) of the Plan (relating to the profit sharing exception to the joint and survivor
requirements).

	/
	/  (b) Apply
to all Participants. 

  ARTICLE IX
  ADVISORY COMMITTEE—DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS         

    9.10  VALUE OF PARTICIPANT'S ACCRUED BENEFIT.  If a distribution (other than a distribution from a
segregated Account and other than a corrective distribution described in Sections 14.07, 14.08, 14.09 or 14.10 of the Plan) occurs more than 90 days after the most recent valuation date, the
distribution will include interest at: (Choose (a), (b) or (c))

	/x/
	(a) 0%
per annum. [Note: The percentage may equal 0%.]

	/
	/  (b) The
90 day Treasury bill rate in effect at the beginning of the current valuation period.

	/
	/  (c) (Specify)            . 

    9.11  ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS.  Pursuant to Section 14.12, to
determine the allocation of net income, gain or loss: (Complete only those items, if any, which are applicable to the Employer's Plan)

	/x/
	(a) For
salary reduction contributions, the Advisory Committee will: (Choose (1), (2), (3), (4) or
(5))

	/
	/  (1) Apply
Section 9.11 without modification.

	/
	/  (2) Use
the segregated account approach described in Section 14.12.

	/x/
	(3) Use
the weighted average method described in Section 14.12, based on a daily weighting period.

	/
	/  (4) Treat
as part of the relevant Account at the beginning of the valuation period % of the salary reduction contributions: (Choose
(i) or (ii))

	/
	/  (i) made
during that valuation period.

	/
	/  (ii) made
by the following specified time:            . 

	/
	/  (5) Apply
the allocation method described in the addendum to this Adoption Agreement numbered 9.11(a). 

	/x/
	(b) For
matching contributions, the Advisory Committee will: (Choose (1), (2), (3) or (4))

	/
	/  (1) Apply
Section 9.11 without modification. 

24

	/x/
	(2) Use
the weighted average method described in Section 14.12, based on a daily weighting period.

	/
	/  (3) Treat
as part of the relevant Account at the beginning of the valuation period  % of the matching contributions allocated during the
valuation period.

	/
	/  (4) Apply
the allocation method described in the addendum to this Adoption Agreement numbered 9.11(b). 

	/
	/  (c) For
Participant nondeductible contributions, the Advisory Committee will: (Choose (1), (2), (3), (4) or
(5))

	/
	/  (1) Apply
Section 9.11 without modification.

	/
	/  (2) Use
the segregated account approach described in Section 14.12.

	/
	/  (3) Use
the weighted average method described in Section 14.12, based on a      weighting period.

	/
	/  (4) Treat
as part of the relevant Account at the beginning of the valuation period % of the Participant nondeductible contributions:  (Choose (i) or (ii))

	/
	/  (i) made
during that valuation period.

	/
	/  (ii) made
by the following specified time:            . 

	/
	/  (5) Apply
the allocation method described in the addendum to this Adoption Agreement numbered 9.11(c). 

25

 

  ARTICLE X
  TRUSTEE AND CUSTODIAN, POWERS AND DUTIES         

    10.03  INVESTMENT POWERS.  Pursuant to Section 10.03[F] of the Plan, the
aggregate investments in qualifying Employer securities and in qualifying Employer real property: (Choose (a) or (b))

	/
	/  (a) May
not exceed 10% of Plan assets.

	/x/
	(b) May
not exceed 100% of Plan assets. [Note: The percentage may not exceed 100%.] 

    10.14  VALUATION OF TRUST.  In addition to each Accounting Date, the Trustee must value the Trust Fund on
the following valuation date(s): (Choose (a) or (b))

	/x/
	(a) No
other mandatory valuation dates.

	/
	/  (b) (Specify)            . 

26

  Execution Page         

    The Trustee (and Custodian, if applicable), by executing this Adoption Agreement, accepts its position and agrees to all of the obligations, responsibilities
and duties imposed upon the Trustee (or Custodian) under the Prototype Plan and Trust. The Employer hereby agrees to the provisions of this Plan and Trust, and in witness of its agreement, the
Employer by its duly authorized officers, has executed this Adoption Agreement, and the Trustee (and Custodian, if applicable) signified its acceptance, on this      day of February,
1999. 

Name
and EIN of Employer: Direct Focus, Inc., 94-3002667 

Signed: 

Name(s)
of Trustee: 

Signed:

Name
of Custodian: 

Signed:

[Note: A Trustee is mandatory, but a Custodian is optional. See Section 10.03 of the Plan.] 

Plan Number.  The 3-digit plan number the Employer assigns to this Plan for ERISA reporting purposes
(Form 5500 Series) is: 001. 

Use of Adoption Agreement.  Failure to complete properly the elections in this Adoption Agreement may result in
disqualification of the Employer's Plan. The 3-digit number assigned to this Adoption Agreement (see page 1) is solely for the Regional Prototype Plan Sponsor's recordkeeping
purposes and does not necessarily correspond to the plan number the Employer designated in the prior paragraph. 

Reliance on Notification Letter.  The Employer may not rely on the Regional Prototype Plan Sponsor's notification letter
covering this Adoption Agreement. For reliance on the Plan's qualification, the Employer must obtain a determination letter from the applicable IRS Key District office. 

27

  PARTICIPATION AGREEMENT         

  For Participation by Related Group Members (Plan Section 1.30)         

    The undersigned Employer, by executing this Participation Agreement, elects to become a Participating Employer in the Plan identified in Section 1.03 of
the accompanying Adoption Agreement, as if the Participating Employer were a signatory to that Agreement. The Participating Employer accepts, and agrees to be bound by, all of the elections granted
under the provisions of the Prototype Plan as made by Direct Focus, Inc., the Signatory Employer to the Execution Page of the Adoption Agreement. 

	1.
	The
Effective Date of the undersigned Employer's participation in the designated Plan is: January 1, 1999.

	2.
	The
undersigned Employer's adoption of this Plan constitutes: 

	/x/
	(a) The
adoption of a new plan by the Participating Employer.

	/
	/  (b) The
adoption of an amendment and restatement of a plan currently maintained by the Employer, identified as            , and having an original
effective date of            . 

Dated
this      day of February, 1999. 

                            Name
of Participating Employer: Nautilus, H.P.S., Inc. 

                            Signed:

                            Participating
Employer's EIN: 54-1921549 

Acceptance by the Signatory Employer to the Execution Page of the Adoption Agreement and by the Trustee.  

                            Name
of Signatory Employer: Direct Focus, Inc. 

Accepted: 

              [Date] 

                                       
    Signed:

                            Name(s)
of Trustee: 

Accepted: 

              [Date] 

                                       
    Signed:

[Note: Each Participating Employer must execute a separate Participation Agreement. See the Execution Page of the Adoption Agreement for
important Prototype Plan information.]  

28

 Nautilus, H.P.S., Inc.  

Part II. [Options (h) through (j)] Matching contribution
formula.  [Note: If the Employer elected Option (b), complete Options (h), (i) and
(j).] 

	/x/
	(h) Amount of matching contributions. For each Plan Year, the Employer's matching contribution is:  (Choose any combination of (1), (2), (3), (4) and (5))

	/x/
	(1) An
amount equal to 35% of each Participant's eligible contributions for the Plan Year.

	/
	/  (2) An
amount equal to  % of each Participant's first tier of eligible contributions for the Plan Year, plus the following matching
percentage(s) for the following subsequent tiers of eligible contributions for the Plan.            .

	/
	/  (3) Discretionary
formula.

	/
	/  (i) An
amount (or additional amount) equal to a matching percentage the Employer from time to time may deem advisable of the Participant's eligible
contributions for the Plan Year.

	/
	/  (ii) An
amount (or additional amount) equal to a matching percentage the Employer from time to time may deem advisable of each tier of the Participant's
eligible contributions for the Plan Year. 

	/
	/  (4) An
amount equal to the following percentage of each Participant's eligible contributions for the Plan Year, based on the Participant's Years of
Service: 

The
Advisory Committee will apply this formula by determining Years of Service as follows:            . 

	/
	/  (5) A
Participant's matching contributions may not: (Choose (i) or (ii))

	/
	/  (i) Exceed            .

	/
	/  (ii) Be
less than            . 

*Related Employers.  If two or more related employers (as defined in Section 1.30) contribute to this Plan, the
related employers may elect different matching contribution formulas by attaching to the
Adoption Agreement a separately completed copy of this Part II. Note: Separate matching contribution formulas create separate current benefit structures that must
satisfy the minimum participation test of Code 401(a)(26).] 

29

 

Nautilus, H.P.S., Inc.  

	/x/
	(i) Definition of eligible contributions. Subject to the requirements of Option (j), the term "eligible
contributions" means: (Choose any combination of (1) through (3))

	/x/
	(1) alary
reduction contributions.

	/
	/  (2) Cash
or deferred contributions (including any part of the Participant's proportionate share of the cash or deferred contribution which the Employer
defers without the Participant's election).

	/
	/  (3) Participant
mandatory contributions, as designated in Adoption Agreement Section 4.01. See Section 14.04 of the Plan. 

	/x/
	(j) Amount of eligible contributions taken into account. When determining a Participant's eligible
contributions taken into account under the matching contributions formula(s), the following rules apply: (Choose any combination of (1) through
(4))

	/
	/  (1) The
Advisory Committee will take into account all eligible contributions credited for the Plan Year.

	/x/
	(2) The
Advisory Committee will disregard eligible contributions exceeding 4% of compensation.

	/
	/  (3) The
Advisory Committee will treat as the first tier of eligible contributions, an amount not exceeding:            . 

The
subsequent tiers of eligible contributions are:            . 

	/
	/  (4) (Specify)            . 

30

  CHECKLIST OF EMPLOYER ADMINISTRATIVE ELECTIONS         

    The Prototype Plan permits the adopting employer (or the advisory committee) to make certain administrative elections not reflected in the adoption agreement.
This form lists those administrative elections and provides a means of recording your decisions. 

Section 1.09—Definition of highly compensated employee. The plan permits the employer to make a calendar year election for purposes
of identifying highly compensated employees. 

	/x/
	The
plan will use the calendar year election.

	/
	/  The
plan will not use the calendar year election. 

Section 1.12(B)—Nondiscrimination definition of compensation. When testing discrimination under the plan, the plan permits the
employer to elect to "gross up" an employee's compensation by the amount of his elective contributions for the year. 

	/x/
	The
plan will "gross up" compensation for elective contributions.

	/
	/  The
plan will exclude elective contributions. 

[Note: This election solely is for purposes of testing discrimination. The election does not affect the employer's election under Options
(a) or (b) of Adoption Agreement Section 1.12. The elections under Adoption Agreement Section 1.12 apply to the definition of compensation for purposes of making
allocations of employer contributions and participant forfeitures.] 

Section 4.03—Rollover contributions. 

	/x/
	The
plan accepts rollover contributions.

	/
	/  The
plan does not accept rollover contributions. 

Section 7.04—If your plan has a discretionary trustee, Section 7.04 authorizes the employer to enter into a written agreement
with the trustee permitting the employer to direct investments. Legal counsel should assist you with this agreement. 

Section 8.10—If the trustee agrees, the plan authorizes participant direction of investment. The adopting employer, the advisory
committee and the trustee should agree to the conditions and limitations of participant direction of investment. Legal counsel should assist you with this election. 

	/x/
	The
plan will permit participant direction of investment.

	/
	/  The
plan will not permit participant direction of investment. 

Section 9.04—The plan authorizes the advisory committee to adopt a written loan policy to permit participant loans. 

	/
	/  The
plan will permit participant loans.

	/x/
	The
plan will not permit participant loans. 

Section 11.01—The plan may invest in live insurance on behalf of a participants account, subject to participant consent. 

	/
	/  The
plan will invest in life insurance contracts.

	/x/
	The
plan will not invest in life insurance contracts. 

31

QuickLinks

ADOPTION AGREEMENT #005 NONSTANDARDIZED CODE 401(k) PROFIT SHARING PLAN

ARTICLE I DEFINITIONS

ARTICLE II EMPLOYEE PARTICIPANTS

ARTICLE III EMPLOYER CONTRIBUTIONS AND FORFEITURES

ARTICLE IV PARTICIPANT CONTRIBUTIONS

ARTICLE V TERMINATION OF SERVICE—PARTICIPANT VESTING

ARTICLE VI TIME AND METHOD OF PAYMENTS OF BENEFITS

ARTICLE IX ADVISORY COMMITTEE—DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS

ARTICLE X TRUSTEE AND CUSTODIAN, POWERS AND DUTIES

Execution Page

PARTICIPATION AGREEMENT

For Participation by Related Group Members (Plan Section 1.30)

CHECKLIST OF EMPLOYER ADMINISTRATIVE ELECTIONS<PAGE>

             [CONFIDENTIAL TREATMENT OF CERTAIN PORTIONS REQUESTED]

                              SETTLEMENT AGREEMENT

         Having successfully mediated their dispute with mediator, Anthony
Piazza on August 11, 2000, Candela Corporation, The Regents of the University of
California and Cool Touch, Inc. agree to a settlement on the following terms:

         1. The parties will exchange full, mutual general release.

         2. Effective July 1, 2000:

                  a. Candela and Cool Touch will pay to The Regents a royalty
rate of [CONFIDENTIAL TREATMENT REQUESTED] on the good faith list price of DCDs
sold as an accessory or upgrade to a laser system;

                  b. Candela and Cool Touch will pay to The Regents a royalty
rate of [CONFIDENTIAL TREATMENT REQUESTED] on the good faith list price of laser
systems sold with an integrated DCD. ([CONFIDENTIAL TREATMENT REQUESTED] );

                  c. In the case of sales to resellers (e.g. distributors or
OEM's), the [CONFIDENTIAL TREATMENT REQUESTED] royalty (in 2a and 2b) will be
based on Candela's or Cool Touch's price to its reseller.

         3. Subject to the limitations of the final licenses, The Regents will
grant to Candela and Cool Touch a co-exclusive license to The Regents' Patent
Rights for the following fields of use: (i) for procedures that involve
non-oblative laser skin rejuvenation including collagen formation, collagen
remodeling, skin smoothing and wrinkle treatment, (ii) for procedures that
involve the treatment of facial and lower extremities telangiestasias and spider
veins and (iii) for procedures using a long pulse [0.2-500 milliseconds] 1.06
Vbi Nd: yAG laser. Subject to the limitations of the final licenses, The Regents
will grant to Candela an exclusive license to The Regents' Patent Rights for the
following fields of use: for procedures that involve (i) vascular skin lesions
and (ii) laser hair removal.

         4. Cool Touch's license to The Regents' Patent Rights shall not be
assigned ("assigned" shall include all restrictions of paragraph 19.2 of the
1/10/00 Agreement) to Coherent, Cynosure, Palomar or ESC, without Candela's
prior written consent. Otherwise, Cool Touch may assign its license.

         5. Upon closing and as a prepayment for the annual exclusivity fee
granted by The Regents, Candela will pay [CONFIDENTIAL TREATMENT REQUESTED] to
The Regents [CONFIDENTIAL TREATMENT REQUESTED] . [CONFIDENTIAL TREATMENT
REQUESTED], Candela will deliver to the University of California a Vbeam laser.

         6. The Regents shall pay Candela [CONFIDENTIAL TREATMENT REQUESTED]of
all royalties paid to it by any licensee. Candela shall pay[CONFIDENTIAL
TREATMENT REQUESTED]of the [CONFIDENTIAL TREATMENT

<PAGE>

REQUESTED]which Cool Touch paid to Candela in connection with their conditional
interim Sublicense Agreement.

         7. Cool Touch will receive an earned royalty credit of [CONFIDENTIAL
TREATMENT REQUESTED] which will be applied against all royalties and license
issue fees owed until the credit has been reached.

         8. Candela covenants that it will not sue Cool Touch regarding the
Anderson-Hsia patent. This covenant will become null and void upon any
assignment or any competitor of Candela acquiring more than a [CONFIDENTIAL
TREATMENT REQUESTED] interest in Cool Touch.

         9. This agreement is fully binding, subject only to the formal approval
by The Regents. The parties will negotiate in good faith full documentation of
this Agreement. All disputes related to the documentation of this Agreement will
be resolved by Anthony Piazza whose decisions will be final and binding. The
Regents and Candela have the right to an independent audit of royalties as
provided in the original Candela license.

         10. Upon consummation of the final documentation, the parties will
dismiss with prejudice the pending litigation in the Eastern District of
California and the District of Massachusetts and the arbitration.

         11. Each party will [CONFIDENTIAL TREATMENT REQUESTED] .

Dated:     August 11, 2000

THE REGENTS OF THE                    CANDELA CORPORATION
UNIVERSITY OF CALIFORNIA

By: /s/ P. Martin Simpson             By: /s/ Gerard E. Puorro
   --------------------------------      -----------------------------------

By: /s/ Valentin Fikovsky
   --------------------------------

COOL TOUCH, INC.

By: /s/ Dale Koop
   --------------------------------

Approved as to form:

/s/ Donn P. Pickett
-------------------------------------------------

/s/ Scott Birnbaum
-------------------------------------------------

/s/ Dale Campbell
-------------------------------------------------

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