Document:

<PAGE>

                                                                    EXHIBIT 10.1

                          AGREEMENT AND PLAN OF MERGER

                                     AMONG

                         THE WILLIAMS COMPANIES, INC.,

                          RESOURCES ACQUISITION CORP.

                                      AND

                         BARRETT RESOURCES CORPORATION

                            DATED AS OF MAY 7, 2001
<PAGE>

                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<S>                                                                           <C>
                                   ARTICLE I
                                   THE OFFER

Section 1.1  The Offer........................................................  2
Section 1.2  Company Actions..................................................  4

                                   ARTICLE II
                                   THE MERGER

Section 2.1  The Merger.......................................................  5
Section 2.2  Closing..........................................................  5
Section 2.3  Effective Time...................................................  5
Section 2.4  Effects of the Merger............................................  6
Section 2.5  Certificate of Incorporation and Bylaws; Officers and Directors..  6
Section 2.6  Principal Offices of the Company.................................  6

                                  ARTICLE III
EFFECT OF THE MERGER ON THE STOCK OF THE  CONSTITUENT CORPORATIONS; EXCHANGE OF
                                  CERTIFICATES

Section 3.1  Effect on Stock..................................................  6
Section 3.2  Exchange of Certificates.........................................  7
Section 3.3  Tax Consequences.................................................  9
Section 3.4  Adjustment of Exchange Ratio.....................................  9

                                   ARTICLE IV
                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Section 4.1  Organization..................................................... 10
Section 4.2  Subsidiaries..................................................... 10
Section 4.3  Capital Structure................................................ 10
Section 4.4  Authority........................................................ 11
Section 4.5  Consents and Approvals; No Violations............................ 12
Section 4.6  SEC Documents and Other Reports.................................. 13
Section 4.7  Absence of Material Adverse Change............................... 13
Section 4.8  Information Supplied............................................. 14
Section 4.9  Compliance with Laws............................................. 14
Section 4.10  Tax Matters..................................................... 15
Section 4.11  Liabilities..................................................... 15
Section 4.12  Litigation...................................................... 15
Section 4.13  Benefit Plans................................................... 15
Section 4.14  State Takeover Statutes; Bylaws Provision; Rights Agreement..... 17
Section 4.15  Brokers......................................................... 17
Section 4.16  Voting Requirements............................................. 17
Section 4.17  Environmental Matters........................................... 17
Section 4.18  Contracts; Debt Instruments..................................... 19
Section 4.19  Title to Properties............................................. 19
Section 4.20  Intellectual Property........................................... 20
</TABLE>
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<TABLE>
<S>                                                                        <C>
Section 4.21  Condition of Assets..........................................  20
Section 4.22  Derivative Transactions......................................  20

                                   ARTICLE V
                REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB

Section 5.1  Organization..................................................  21
Section 5.2  Capital Structure.............................................  21
Section 5.3  Authority.....................................................  22
Section 5.4  Consents and Approvals; No Violations.........................  22
Section 5.5  SEC Documents and Other Reports...............................  23
Section 5.6  Absence of Material Adverse Change............................  23
Section 5.7  Information Supplied..........................................  24
Section 5.8  Compliance with Laws..........................................  24
Section 5.9  Parent Shares.................................................  24
Section 5.10  Reorganization...............................................  24
Section 5.11  Liabilities..................................................  25
Section 5.12  Interim Operations of Sub....................................  25
Section 5.13  Litigation...................................................  25
Section 5.14  California Exposure..........................................  25
Section 5.15  Brokers......................................................  25

                                   ARTICLE VI
                   COVENANTS RELATING TO CONDUCT OF BUSINESS

Section 6.1  Conduct of Business Pending the Merger........................  25
Section 6.2  No Solicitation; Acquisition Proposals........................  28
Section 6.3  Third Party Standstill Agreements.............................  30
Section 6.4  Disclosure of Certain Matters; Delivery of Certain Filings....  30
Section 6.5  Conduct of Business of Sub Pending the Merger.................  31
Section 6.6  Modifications to Recommendations..............................  31

                                  ARTICLE VII
                             ADDITIONAL AGREEMENTS

Section 7.1  Employee Benefits.............................................  32
Section 7.2  Options.......................................................  33
Section 7.3  Shareholder Approval; Preparation of Form S-4 and Proxy
                Statement/Prospectus.......................................  35
Section 7.4  Access to Information.........................................  36
Section 7.5  Fees and Expenses.............................................  36
Section 7.6  Public Announcements..........................................  38
Section 7.7  Transfer Taxes................................................  38
Section 7.8  State Takeover Laws...........................................  38
Section 7.9  Indemnification; Directors and Officers Insurance.............  38
Section 7.10  Board of Directors...........................................  40
Section 7.11  HSR Act Filings; Reasonable Best Efforts.....................  40
Section 7.12  Stay Bonuses; Severance......................................  42
Section 7.13  Section 16 Matters...........................................  42
Section 7.14  Tax Treatment................................................  42
</TABLE>

                                       ii
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<TABLE>
<S>                                                                          <C>
Section 7.15  Affiliate Letters..............................................  43
Section 7.16  Litigation.....................................................  43
Section 7.17  Rights Agreement...............................................  43
Section 7.18  Bank Debt......................................................  43

                                  ARTICLE VIII
                              CONDITIONS PRECEDENT

Section 8.1  Conditions to Each Party's Obligation to Effect the Merger......  44

                                   ARTICLE IX
                           TERMINATION AND AMENDMENT

Section 9.1  Termination.....................................................  44
Section 9.2  Effect of Termination...........................................  46
Section 9.3  Amendment.......................................................  46
Section 9.4  Extension; Waiver...............................................  46

                                   ARTICLE X
                               GENERAL PROVISIONS

Section 10.1  Non-Survival of Representations and Warranties and
                Agreements...................................................  46
Section 10.2  Notices........................................................  46
Section 10.3  Interpretation; Definitions....................................  47
Section 10.4  Counterparts...................................................  54
Section 10.5  Entire Agreement; No Third-Party Beneficiaries.................  54
Section 10.6  Governing Law..................................................  55
Section 10.7  Assignment.....................................................  55
Section 10.8  Severability...................................................  55
Section 10.9  Enforcement of this Agreement..................................  55
Section 10.10  Obligations of Subsidiaries...................................  55
</TABLE>

                                      iii
<PAGE>

                          AGREEMENT AND PLAN OF MERGER
                          ----------------------------

     AGREEMENT AND PLAN OF MERGER, dated as of May 7, 2001 (this "Agreement")
                                                                  ---------
among The Williams Companies, Inc., a Delaware corporation ("Parent"), Resources
                                                             ------
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Sub"), and Barrett Resources Corporation, a Delaware corporation (the
         ---
"Company") (Sub and the Company being hereinafter collectively referred to as
--------
the "Constituent Corporations").  Except as otherwise set forth herein,
     ------------------------
capitalized (and certain other) terms used herein shall have the meanings set
forth in Section 10.3.
         ------------

                              W I T N E S S E T H:

     WHEREAS, the Board of Directors of the Company has, in light of and subject
to the terms and conditions set forth herein, determined that a business
combination between Parent and the Company is fair to the Company's stockholders
and in the best interests of such stockholders;

     WHEREAS, it is intended that the acquisition be accomplished by Sub
commencing a cash tender offer for  16,730,502 outstanding shares of Common
Stock, par value $0.01 per share, of the Company ("Company Common Stock"),
                                                   --------------------
together with the associated Company Rights, upon the terms and subject to the
conditions set forth in this Agreement (the shares of Company Common Stock
subject to the Offer, together with the associated Company Rights, are
hereinafter referred to as the "Shares") in an amount of $73.00 per Share (the
                                ------
"Offer Consideration") to be followed by a merger of the Company with and into
--------------------
Sub (the "Forward Merger");
          --------------

     WHEREAS, subsequent to the purchase by Sub of Shares in the Offer, each
Share (other than Shares held directly or indirectly by Parent or the Company,
which Shares shall be cancelled) would be converted into the right to receive
1.767 (the "Exchange Ratio") duly authorized, validly issued, fully paid and
            --------------
non-assessable shares of common stock, par value $1.00 (the "Parent Common
                                                             -------------
Stock" and, together with associated Parent Rights, the "Parent Shares") of
                                                         -------------
Parent (the "Merger Consideration");
             --------------------

     WHEREAS, if the Tax Opinion Standard (as defined herein) has not been met,
the parties desire to permit an alternate merger structure providing for the
merger of Sub (or other direct or indirect wholly-owned subsidiary of Parent, as
determined by Parent in its sole discretion) with and into the Company (the
"Reverse Merger"), and the surviving corporation shall thereby become a direct
---------------
or indirect wholly-owned subsidiary of Parent;

     WHEREAS, the Board of Directors of the Company has adopted resolutions
approving the Offer, this Agreement and the Merger (as defined herein),
determining that this Agreement is advisable and that the Offer and the Merger
are fair to, and in the best interests of, the Company's stockholders and
recommending that the Company's stockholders accept the Offer, tender their
Shares into the Offer and adopt this Agreement;
<PAGE>

     WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have each approved the Merger, upon the terms and subject to the conditions set
forth in this Agreement;

     WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved and adopted this Agreement and the transactions contemplated
hereby;

     WHEREAS, for Federal income tax purposes, it is intended that the Offer and
the Forward Merger shall be treated as an integrated transaction (together, the
"Transaction") and shall qualify as a "reorganization" within the meaning of
 -----------
Section 368(a) of the Code and the United States Treasury Regulations; and

     WHEREAS, Parent, Sub and the Company each desires to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Sub and the Company hereby agree as follows:

                                   ARTICLE I
                                   THE OFFER

        Section 1.1   The Offer.  (a) Provided that this Agreement shall not
                      ---------
have been terminated in accordance with Section 9.1 and subject to the
                                        -----------
provisions of this Agreement, including the conditions to the Offer set forth in
Exhibit A hereto, as promptly as practicable after the date of the public
announcement by Parent and the Company of this Agreement, Sub shall, and Parent
shall cause Sub to, commence, within the meaning of Rule 14d-2 under the
Exchange Act, the Offer. The obligation of Sub to, and of Parent to cause Sub
to, commence the Offer and accept for payment, and pay for, any Shares tendered
pursuant to the Offer shall be subject only to the conditions set forth in
Exhibit A (the "Offer Conditions") (any one or more of which may be waived in
---------       ----------------
whole or in part by Sub in its sole discretion, provided that, without the prior
written consent of the Company, Sub shall not waive the Minimum Condition (as
defined in Exhibit A)). Sub expressly reserves the right to modify the terms of
           ---------
the Offer, except that, without the prior written consent of the Company, Sub
shall not (i) reduce the number of Shares sought in the Offer, (ii) decrease the
price per Share, (iii) impose any conditions to the Offer in addition to the
Offer Conditions or modify the Offer Conditions in a manner adverse to the
holders of Shares (other than to waive any Offer Conditions to the extent
permitted by this Agreement), (iv) except as provided in (b) below, extend the
Offer, (v) change the form of consideration payable in the Offer (other than by
adding consideration) or (vi) make any other change or modification in any of
the terms of the Offer in any manner that is adverse to the holders of Shares.

        (b)  The Offer shall initially be scheduled to expire 20 business days
following the commencement thereof. Parent and Sub agree that Sub will not
terminate the Offer between scheduled expiration dates (except in the event that
this Agreement is terminated pursuant to Section 9.1) and that, in the event
                                         -----------
that Sub would otherwise be entitled to terminate the Offer at any scheduled
expiration date thereof due to the failure of one or more of the Offer
Conditions,

                                      -2-
<PAGE>

unless this Agreement shall have been terminated pursuant to Section 9.1, Sub
                                                             -----------
shall, and Parent shall cause Sub to, extend the Offer for such period or
periods as shall be determined by Sub until such date as the Offer Conditions
have been satisfied or such later date as required by applicable law; provided,
however, that nothing herein shall require Sub to extend the Offer beyond the
Outside Date. Notwithstanding the foregoing, Sub may, without the consent of the
Company, (i) extend the Offer, if at the scheduled or extended expiration date
of the Offer any of the Offer Conditions shall not be satisfied or waived, until
such time as such conditions are satisfied or waived and (ii) extend the Offer
for any period required by any rule, regulation, interpretation or position of
the SEC or the staff thereof applicable to the Offer or as might be required by
the NYSE. Sub shall not provide for a subsequent offering period in accordance
with Rule 14d-11 under the Exchange Act. Subject to the terms and conditions of
the Offer and this Agreement, Sub shall, and Parent shall cause Sub to, accept
and pay for 16,730,502 Shares validly tendered and not withdrawn pursuant to the
Offer that Sub is permitted to accept and exchange for under applicable law, as
soon as practicable after the expiration of the Offer, and in any event in
compliance with the obligations respecting prompt payment pursuant to Rule 14e-
1(c) under the Exchange Act; provided, however, that no such payment shall be
made until after Parent and Sub shall have calculated how cash should be
prorated if more than 16,730,502 Shares are validly tendered and not withdrawn
pursuant to the Offer. If this Agreement is terminated by either Parent or Sub
or by the Company, Sub shall, and Parent shall cause Sub to, promptly terminate
the Offer.

        (c) On the date of commencement of the Offer, Parent and Sub shall file
with the SEC a Tender Offer Statement on Schedule TO (together with all
supplements and amendments thereto, the "Schedule TO") with respect to the Offer
                                         -----------
and a related letter of transmittal, and Parent and Sub shall cause the Offer
Documents to be disseminated to holders of Shares as and to the extent required
by applicable federal securities laws. Parent and Sub agree that they shall
cause the Schedule TO, the Offer to Purchase and all amendments or supplements
thereto (which together constitute the "Offer Documents") to comply in all
                                        ---------------
material respects with the Exchange Act and the rules and regulations thereunder
and other applicable laws. Parent, Sub and the Company each agrees promptly to
correct any information provided by it for use in the Offer Documents if and to
the extent that such information shall have become false or misleading in any
material respect, and Parent and Sub further agree to take all steps necessary
to cause the Offer Documents as so corrected to be filed with the SEC and the
other Offer Documents as so corrected to be disseminated to holders of Shares,
in each case as and to the extent required by applicable federal securities
laws. The Company and its counsel shall be given reasonable opportunity to
review and comment upon the Offer Documents prior to their filing with the SEC
or dissemination to the Company's stockholders. Parent and Sub agree to provide
the Company and its counsel any comments Parent, Sub or their counsel may
receive from the SEC or its staff with respect to the Offer Documents promptly
after the receipt of such comments and to cooperate with the Company and its
counsel in responding to such comments.

        (d) Parent shall provide or cause to be provided to Sub on a timely
basis all funds necessary to accept for payment, and pay for, any Shares
accepted for payment that are validly tendered and not withdrawn pursuant to the
Offer and that Sub is permitted to accept for payment pursuant to the terms and
conditions of the Offer and under applicable law.

                                      -3-
<PAGE>

        Section 1.2   Company Actions.  (a) The Company hereby approves of and
                      ---------------
consents to the Offer and represents and warrants that the Board of Directors of
the Company, at a meeting duly called and held, duly adopted resolutions by
unanimous vote (i) determining that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, are advisable and are
fair to and in the best interest of the Company's stockholders, (ii) approving
this Agreement and the transactions contemplated hereby, including the Offer and
the Merger, which approval constitutes approval under Section 203 of the DGCL
such that the Offer, the Merger and this Agreement and the other transactions
contemplated hereby are not and shall not be subject to any restriction of
Section 203 of the DGCL, (iii) waiving the application of Article IV of the
Company's bylaws with respect to this Agreement, the Offer and the Merger
pursuant to Section 7 thereof and (iv) resolving to recommend acceptance of the
Offer and to recommend that stockholders of the Company tender their Shares
pursuant to the Offer and to recommend approval and adoption of this Agreement
and the Merger by the Company's stockholders at the Company Stockholders Meeting
(as defined herein) (the recommendations referred to in this clause (iv) are
collectively referred to in this Agreement as the "Recommendations"). The
                                                   ---------------
Company represents and warrants that its Board of Directors has received the
opinion, each dated May 7, 2001, of each of Goldman, Sachs & Co. ("Goldman
                                                                   -------
Sachs") and Petrie Parkman & Co., Inc. ("Petrie Parkman") that, as of such date
-----                                    --------------
and on the basis of and subject to the matters described therein, the Offer
Consideration and the Merger Consideration, taken together, was fair to the
Company's stockholders (other than Parent and the Company) from a financial
point of view.

        (b)  On the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-
9 with respect to the Offer (such Schedule 14D-9, as amended from time to time,
the "Schedule 14D-9") containing the Recommendations (subject to the right of
     --------------
the Board of Directors of the Company to make a Subsequent Determination in
accordance with Section 6.6 and shall cause the Schedule 14D-9 to be
                -----------
disseminated to the Company's stockholders as and to the extent required by
applicable federal securities laws. Each of the Company, Parent and Sub agrees
promptly to correct any information provided by it for use in the Schedule 14D-9
if and to the extent that such information shall have become false or misleading
in any material respect, and the Company further agrees to take all steps
necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule
14D-9 as so amended or supplemented to be filed with the SEC and disseminated to
the Company's stockholders, in each case as and to the extent required by
applicable federal securities laws. Parent and its counsel shall be given
reasonable opportunity to review and comment upon the Schedule 14D-9 prior to
its filing with the SEC or dissemination to the Company's stockholders. The
Company agrees to provide Parent and its counsel any comments the Company or its
counsel may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments and to cooperate with Parent, Sub
and their counsel in responding to such comments.

        (c)  In connection with the Offer and the Merger, the Company shall
cause its transfer agent to furnish Sub promptly with mailing labels containing
the names and addresses of the record holders of Shares as of a recent date and
of those persons becoming record holders subsequent to such date, together with
copies of all lists of stockholders, security position listings and computer
files and all other information in the Company's possession or control regarding
the beneficial owners of Shares and any securities convertible into Shares, and
shall furnish to

                                      -4-
<PAGE>

Sub such information and assistance (including updated lists of stockholders,
security position listings and computer files) as Parent or Sub may reasonably
request in communicating the Offer to the Company's stockholders. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Merger, Parent and Sub and their affiliates, associates and agents shall
hold in confidence the information contained in any such labels, listings and
files, will use such information only in connection with the Offer and the
Merger and, if this Agreement shall be terminated, will promptly, upon request,
deliver, and will use reasonable efforts to cause their affiliates, associates
and agents to deliver, to the Company all copies of such information then in
their possession or control.

                                  ARTICLE II
                                  THE MERGER

        Section 2.1   The Merger. Upon the terms and subject to the conditions
                      ----------
hereof, and in accordance with the DGCL, the Forward Merger shall be effected
and the Company shall be merged with and into Sub at the Effective Time;
provided, however, that if Parent does not obtain a written opinion of Tax
Counsel (as defined herein) that satisfies the Tax Opinion Standard (as defined
herein), then in Parent's reasonable discretion the Reverse Merger may be
effected, and the surviving corporation shall thereby become a direct or
indirect wholly-owned subsidiary of Parent. Following the Effective Time, if the
Forward Merger is effected, then the separate existence of the Company shall
cease and Sub shall continue as the surviving corporation or, if the Reverse
Merger is effected, then the separate existence of Sub shall cease and the
Company shall continue as the surviving corporation. The surviving corporation
of the Forward Merger or the Reverse Merger, as the case may be, shall be herein
referred as the "Surviving Corporation" and the Forward Merger and Reverse
                 ---------------------
Merger shall collectively be referred to as the "Merger." The Surviving
                                                 ------
Corporation shall succeed to and assume all the rights and obligations of Sub
and the Company in accordance with the DGCL.

        Section 2.2   Closing.  The closing of the Merger will take place at
                      -------
10:00 a.m. on a date mutually agreed to by Parent and the Company, which shall
be no later than the second business day after satisfaction or waiver of the
conditions set forth in Article VIII (the "Closing Date"), at the offices of
                        ------------       ------------
Sidley Austin Brown & Wood, Bank One Plaza, 10 South Dearborn Street, Chicago,
Illinois 60603, unless another date, time or place is agreed to in writing by
the parties hereto.

        Section 2.3   Effective Time.  The Merger shall become effective when a
                      --------------
Certificate of Merger (the "Certificate of Merger"), executed in accordance with
                            ---------------------
the relevant provisions of the DGCL, is duly filed with the Secretary of State
of the State of Delaware, or at such other time as Sub and the Company shall
agree should be specified in the Certificate of Merger.  When used in this
Agreement, the term "Effective Time" shall mean the later of the date and time
                     --------------
at which the Certificate of Merger is duly filed with the Secretary of State of
the State of Delaware or such later time established by the Certificate of
Merger.  The filing of the Certificate of Merger shall be made as soon as
practicable after the satisfaction or waiver of the conditions to the Merger set
forth in Article VIII.
         ------------

                                      -5-
<PAGE>

        Section 2.4   Effects of the Merger.  The Merger shall have the effects
                      ---------------------
set forth in the DGCL.

        Section 2.5   Certificate of Incorporation and Bylaws; Officers and
                      -----------------------------------------------------
Directors. (a) At the Effective Time, the Certificate of Incorporation of Sub,
---------
as in effect immediately prior to the Effective Time, shall be the Restated
Certificate of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law; provided, however,
that the Certificate of Incorporation shall provide that the Surviving
Corporation shall initially be named "Barrett Resources Corporation" and shall
contain indemnification provisions consistent with the obligations set forth in
Section 7.9(a).
--------------

        (b)  The Bylaws of Sub, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation until thereafter changed
or amended as provided by the Certificate of Incorporation of the Surviving
Corporation or by applicable law; provided that the Bylaws of the Surviving
Corporation shall contain indemnification provisions consistent with the
obligations set forth in Section 7.9(a).
                         --------------

        (c)  The directors of Sub immediately prior to the Effective Time shall
be the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.

        (d)  The officers of the Company immediately prior to the Effective Time
shall be the officers of the Surviving Corporation until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.

        Section 2.6  Principal Offices of the Company.  Parent currently
                     --------------------------------
anticipates that the Company's current principal offices in Denver, Colorado
will serve as the Rocky Mountain principal offices for Parent's oil and gas
exploration operations after the consummation of the Merger.

                                  ARTICLE III
                   EFFECT OF THE MERGER ON THE STOCK OF THE
              CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

        Section 3.1   Effect on Stock.  As of the Effective Time, by virtue of
                      ---------------
the Merger and without any action on the part of any of Sub, the Company or the
holders of any securities of the Constituent Corporations:

        (a)  Capital Stock of Sub.  In the event of a Forward Merger, each
             --------------------
issued and outstanding share of capital stock of Sub shall remain as one validly
issued, fully paid and nonassessable share of Common Stock, no par value, of the
Surviving Corporation. Notwithstanding the foregoing, in the event of a Reverse
Merger, then each issued and outstanding share of capital stock of Sub shall be
converted into and become one validly issued, fully paid and non-assessable
share of Common Stock of the Surviving Corporation.

        (b)  Treasury Stock and Parent Owned Stock.  Each Share that is owned
             -------------------------------------
by the Company, Parent, Sub (except for Shares that are owned by Sub, in the
event of a Reverse

                                      -6-
<PAGE>

Merger) or any other Subsidiary of Parent shall automatically be cancelled and
retired and shall cease to exist, and no consideration shall be delivered in
exchange therefor.

        (c)  Conversion of Shares.  Each Share issued and outstanding (other
             --------------------
than Shares to be cancelled in accordance with Section 3.1(b) and other than
                                               --------------
Shares owned by Sub in the event of a Reverse Merger), shall be converted into
the right to receive a number of duly authorized, validly issued, fully paid and
non-assessable Parent Shares equal to the Exchange Ratio (the "Merger
                                                               ------
Consideration"). As of the Effective Time, all such Shares, when so converted,
-------------
shall no longer be outstanding and shall automatically be cancelled and retired,
and each holder of a certificate representing any such Shares shall cease to
have any rights with respect thereto, except the right to receive any dividends
or distributions in accordance with Section 3.2(c), certificates representing
                                    --------------
the Parent Shares into which such Shares are converted and any cash, without
interest, in lieu of fractional shares to be issued or paid in consideration
therefor upon the surrender of such certificate in accordance with Section
                                                                   -------
3.2(d).
------

        (d)  Notwithstanding anything expressed or implied to the contrary in
this Agreement, appropriate modifications shall be made to the provisions of
this Agreement (including, without limitation, this Section 3.1) in the event of
                                                    -----------
a Reverse Merger involving a direct or indirect wholly-owned subsidiary of
Parent (other than Sub).

     Section 3.2   Exchange of Certificates.  (a)  At the Effective Time, Parent
                   ------------------------
shall deposit, or shall cause to be deposited, with a banking or other financial
institution mutually acceptable to Parent and the Company (the "Exchange
                                                                --------
Agent"), for the benefit of the holders of Shares, for exchange in accordance
-----
with this Article III, certificates representing the Parent Shares to be issued
          -----------
in connection with the Merger and cash in lieu of fractional shares (such cash
and certificates for Parent Shares, together with any dividends or distributions
with respect thereto (relating to record dates for such dividends or
distributions after the Effective Time), being hereinafter referred to as the
"Exchange Fund") to be issued pursuant to Section 3.1 and paid pursuant to this
--------------                            -----------
Section 3.2 in exchange for outstanding Shares.
-----------

        (b)  Exchange Procedure.  As soon as practicable after the Effective
             ------------------
Time, the Surviving Corporation shall cause the Exchange Agent to mail to each
holder of record of a certificate or certificates that immediately prior to the
Effective Time represented Shares (the "Certificates"), (i) a letter of
                                        ------------
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in a form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the consideration
contemplated by Section 3.1 and this Section 3.2, including cash in lieu of
                -----------          -----------
fractional shares. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor (x)
a certificate representing that number of whole Parent Shares and (y) a check
representing the amount of cash in lieu of fractional shares, if any, and unpaid
dividends and distributions with respect to the Parent Shares as provided for in
Section 3.2(c), if any, that such holder has the right to receive in respect of
--------------
the Certificate surrendered pursuant to the provisions of this Article III,
                                                               -----------
after giving effect to any required withholding tax, and the Shares represented
by the Certificate so surrendered shall forthwith be canceled. No interest will

                                      -7-
<PAGE>

be paid or accrued on the cash payable to holders of Shares. In the event of a
transfer of ownership of Shares that is not registered in the transfer records
of the Company, a certificate representing the proper number of Parent Shares,
together with a check for the cash to be paid pursuant to this Section 3.2 may
                                                               -----------
be issued to such a transferee if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the transferee shall pay any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of such Certificate or establish to the satisfaction of
the Surviving Corporation that such tax has been paid or is not applicable.
Parent or the Exchange Agent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
Shares such amounts as Parent or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code or under any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Parent or the Exchange Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
Shares in respect of which such deduction and withholding was made by Parent or
the Exchange Agent.

        (c)  Dividends.  Notwithstanding any other provisions of this Agreement,
             ---------
no dividends or other distributions declared with a record date after the
Effective Time on Parent Shares shall be paid with respect to any Shares
represented by a Certificate until such Certificate is surrendered for exchange
as provided herein. Following surrender of any such Certificate, there shall be
paid to the holder of the certificates representing whole Parent Shares issued
in exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole Parent Shares and
not paid, less the amount of any withholding taxes which may be required
thereon, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole Parent Shares, less the amount of any withholding taxes which may be
required thereon. Parent will provide the Exchange Agent with the cash necessary
to make the payments contemplated by this Section 3.2(c).
                                          --------------

        (d)  No Fractional Securities.  No fractional Parent Shares shall be
             ------------------------
issued pursuant hereto. In lieu of the issuance of any fractional share of
Parent Shares, cash adjustments will be paid to holders in respect of any
fractional share of Parent Shares that would otherwise be issuable, and the
amount of such cash adjustment shall be equal to the product obtained by
multiplying such stockholder's fractional share of Parent Shares that would
otherwise be issuable to such holder by the closing price per share of Parent
Shares on the NYSE on the Closing Date as reported by The Wall Street Journal
(or, if not reported thereby, any other authoritative source).

        (e)  No Further Ownership Rights in Shares.  All Parent Shares issued
             -------------------------------------
upon the surrender for exchange of Certificates in accordance with the terms of
this Article III (including any cash paid pursuant to this Section 3.2) shall be
     -----------                                           -----------
deemed to have been issued in full satisfaction of all rights pertaining to the
Shares theretofore represented by such Certificates. At the Effective Time, the
stock transfer books of the Company shall be closed, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares that were outstanding immediately prior to the
Effective Time. If, after the Effective

                                      -8-
<PAGE>

Time, Certificates are presented to the Surviving Corporation or the Exchange
Agent for any reason, they shall be cancelled and exchanged as provided in this
Article III.
-----------

        (f)  Termination of Exchange Fund.  Any portion of the Exchange Fund
             ----------------------------
(including the proceeds of any investments thereof and any Parent Shares) which
remains undistributed to the holders of Shares for twelve months after the
Effective Time shall be delivered to Parent, upon demand, and any holders of
Shares who have not theretofore complied with this Article III and the
                                                   -----------
instructions set forth in the letter of transmittal mailed to such holders after
the Effective Time shall thereafter look only to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) for payment of
their Parent Shares, cash and unpaid dividends and distributions on Parent
Shares deliverable in respect of each Share such stockholder holds as determined
pursuant to this Agreement, in each case, without any interest thereon.

        (g)  No Liability.  None of Parent, Sub, the Company or the Exchange
             ------------
Agent shall be liable to any person in respect of any amount properly delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.

        (h)  Lost Certificates.  If any Certificate shall have been lost, stolen
             -----------------
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent, the posting by such Person of a bond in such reasonable amount as Parent
may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed Certificate the applicable Merger Consideration with
respect thereto and, if applicable, any unpaid dividends and distributions on
shares of Parent Shares deliverable in respect thereof and any cash in lieu of
fractional shares, in each case pursuant to this Agreement.

    Section 3.3   Tax Consequences.  It is intended by the parties hereto that
                  ----------------
the Transaction shall constitute a "reorganization" within the meaning of
Section 368(a) of the Code and the United States Treasury Regulations
thereunder.

    Section 3.4   Adjustment of Exchange Ratio.  In the event that Parent
                  ----------------------------
changes or establishes a record date for changing the number of Parent Shares
issued and outstanding as a result of a stock split, stock dividend,
recapitalization, subdivision, reclassification, combination or similar
transaction with respect to the outstanding Parent Shares and the record date
therefor shall be prior to the Effective Time, the Exchange Ratio applicable to
the Merger and any other calculations based on or relating to Parent Shares
shall be appropriately adjusted to reflect such stock split, stock dividend,
recapitalization, subdivision, reclassification, combination or similar
transaction.

                                  ARTICLE IV
                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     Each exception set forth in the Company Letter (as defined herein) to the
representations and warranties in this Article IV and each other response to
this Agreement set forth in the Company Letter is identified by reference to, or
has been grouped under a heading referring to, a specific individual Section of
this Agreement and relates only to such Section, except to the extent that one
section of the Company Letter specifically refers to or reasonably relates to

                                      -9-
<PAGE>

another section thereof.  Except as set forth in the Company Letter, the Company
represents and warrants to Parent and Sub as follows:

    Section 4.1   Organization.  The Company and each of its Significant
                  ------------
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has requisite power and
authority to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority would not reasonably be expected to have a Material Adverse Effect
on the Company.  The Company and each of its Significant Subsidiaries is duly
qualified or licensed to do business and in good standing in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing (individually or in the aggregate) would not reasonably be expected to
have a Material Adverse Effect on the Company or prevent or materially delay the
consummation of the Offer and/or the Merger.  The Company has made available to
Parent complete and correct copies of its certificate of incorporation and
bylaws and the certificate of incorporation and bylaws (or similar
organizational documents) of each of its Significant Subsidiaries, in each case
as amended through the Closing Date.

    Section 4.2   Subsidiaries.  Item 4.2 of the disclosure letter delivered
                  ------------   --------
by the Company to Parent and Sub prior to the execution of this Agreement (the
"Company Letter") lists each Subsidiary of the Company and its respective
 --------------
jurisdiction of incorporation and indicates whether such Subsidiary is a
Significant Subsidiary. All of the outstanding shares of capital stock or
ownership interest of each such Subsidiary of the Company that is a corporation
have been validly issued and are fully paid and nonassessable. Except as set
forth in Item 4.2 of the Company Letter, all of the outstanding shares of
         --------
capital stock or ownership interest of each Subsidiary of the Company are owned
by the Company, by one or more Subsidiaries of the Company or by the Company and
one or more Subsidiaries of the Company, free and clear of all Liens (including
any restriction on the right to vote, sell or otherwise dispose of such capital
stock). Except as set forth in Item 4.2 of the Company Letter and except for the
                               --------
capital stock of its Subsidiaries, the Company does not own, directly or
indirectly, any capital stock or other ownership interest in any Person.

    Section 4.3   Capital Structure.   (a)  The authorized capital stock of the
                  -----------------
Company consists of 45,000,000 shares of Company Common Stock and 1,000,000
Preferred Shares, par value $.001 per share (the "Company Preferred Stock") of
                                                  -----------------------
which 75,000 shares have been designated as Series A Junior Participating
Preferred Stock (the "Company Series A Preferred Shares").  At the close of
                      ---------------------------------
business on May 3, 2001, (i) 33,461,004 shares of Company Common Stock were
issued and outstanding, all of which were validly issued, fully paid and
nonassessable and free of preemptive rights, (ii) 4,999 shares of Company Common
Stock were held by the Company in its treasury, (iii) 2,302,073 shares of
Company Common Stock were reserved for issuance pursuant to outstanding options
to purchase Company Common Stock (the "Company Stock Options") granted under the
                                       ---------------------
Company's 2000 Stock Option Plan, 1999 Stock Option Plan, 1997 Stock Option
Plan, 1994 Stock Option Plan, Plains Petroleum Company 1992 Stock Option Plan,
1990 Barrett Resources Corporation Nondiscretionary Stock Option Plan, Plains
Petroleum Company 1989 Stock Option Plan and Plains Petroleum Company 1985 Stock
Option Plan for Non-Employee Directors (together, and each as amended, the
"Company Stock Plans") and (iv)
--------------------

                                      -10-
<PAGE>

no shares of Company Preferred Stock were issued and outstanding. As of the date
of this Agreement, except for (i) the rights to purchase Company Series A
Preferred Shares (the "Company Rights") issued pursuant to the Rights Agreement
                       --------------
dated as of August 5, 1997, as amended pursuant to the Amendment to Rights
Agreement dated as of February 25, 1999 and May 7, 2001 (as amended, the
"Company Rights Agreement") between the Company and BankBoston, N.A., as Rights
 ------------------------
Agent (the "Company Rights Agent") or (ii) as set forth above, no Shares were
            --------------------
issued, reserved for issuance or outstanding and there are not any phantom stock
or other contractual rights the value of which is determined in whole or in part
by the value of any capital stock of the Company ("Stock Equivalents"). There
                                                   -----------------
are no outstanding stock appreciation rights with respect to the capital stock
of the Company. Each outstanding Share is, and each Share which may be issued
pursuant to the Company Stock Plans will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. There are no outstanding bonds, debentures, notes or other indebtedness
of the Company having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matter on which the Company's
stockholders may vote. Except as set forth above or in Item 4.3 of the Company
                                                       --------
Letter, as of the date of this Agreement, there are no securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Company or any of its Significant Subsidiaries is a
party or by which any of them is bound obligating the Company or any of its
Significant Subsidiaries to issue, deliver or sell or create, or cause to be
issued, delivered or sold or created, additional shares of capital stock or
other voting securities or Stock Equivalents of the Company or of any of its
Significant Subsidiaries or obligating the Company or any of its Significant
Subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. There
are no outstanding rights, commitments, agreements, or undertakings of any kind
obligating the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock or other voting securities of the
Company or any of its Subsidiaries or any securities of the type described in
the two immediately preceding sentences.

        (b)  The Company has delivered or made available to Parent complete and
correct copies of the Company Stock Plans and all forms of Company Stock
Options. Item 4.3 of the Company Letter sets forth a complete and accurate list
         --------
of all Company Stock Options outstanding as of the date of this Agreement and
the exercise price of each outstanding Company Stock Option.

    Section 4.4   Authority.  The Company has the requisite corporate power and
                  ---------
authority to execute and deliver this Agreement and, subject to adoption by the
Company's stockholders of this Agreement with respect to the Merger (if required
by applicable law), to consummate the transactions contemplated hereby.  The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the Merger and of the other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company, subject to adoption by the Company's stockholders of
this Agreement (if required by applicable law).  This Agreement has been duly
executed and delivered by the Company and (assuming the valid authorization,
execution and delivery of this Agreement by Parent and Sub) constitutes the
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that such enforceability (i) may be limited by

                                      -11-
<PAGE>

bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.

    Section 4.5   Consents and Approvals; No Violations.  Except as set forth in
                  -------------------------------------
Item 4.5 of the Company Letter, (a) The execution and delivery of this Agreement
--------
do not, and the consummation of the transactions contemplated by this Agreement
and compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any Lien upon any of the properties or assets of the Company
or any of its Subsidiaries under, (i) the certificate of incorporation or bylaws
of the Company or the comparable charter or organizational documents of any of
its Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to the Company or any of its Subsidiaries or their
respective properties or assets or (iii) subject to the governmental filings and
other matters referred to in clause (b) of this Section 4.5, any judgment,
                                                -----------
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or any of its Subsidiaries or their respective properties or assets,
other than, in the case of clauses (ii) and (iii), any such conflicts,
violations, defaults, rights, losses or Liens that individually or in the
aggregate could not reasonably be expected to (x) have a Material Adverse Effect
on the Company, (y) materially impair the Company's ability to perform its
obligations under this Agreement or (z) prevent or materially delay the
consummation of the transactions contemplated by this Agreement.

        (b)  No consent by a Governmental Entity is required by or with respect
to the Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated by this Agreement, except for (i) the filing of a
premerger notification and report form by the Company under the HSR Act and any
applicable filings under similar foreign antitrust or competition laws and
regulations, (ii) the filing with the SEC of (A) the Schedule 14D-9, (B) a proxy
statement relating to the Company Stockholders Meeting (as amended or
supplemented from time to time, the "Proxy Statement"), and (C) such reports,
                                     ---------------
schedules, forms and statements under the Exchange Act and the Securities Act,
as may be required in connection with this Agreement and the transactions
contemplated hereby, (iii) such filings as may be required under state
securities or "blue sky" laws, (iv) the filing of the Certificate of Merger with
the Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
and (v) such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be made or obtained
individually or in the aggregate could not reasonably be expected to (x) have a
Material Adverse Effect on the Company, (y) impair the Company's ability to
perform its obligations under this Agreement or (z) prevent or materially delay
the consummation of the transactions contemplated by this Agreement.

        (c)  Except as otherwise disclosed in Item 4.5(c) of the Company Letter,
                                              -----------
neither the Company nor any of its Subsidiaries is a party to or subject to any
material agreement, contract, policy, license, Permit, document, instrument,
arrangement or commitment that provides for an express non-competition covenant
with any Person or in any geographic area and

                                      -12-
<PAGE>

which limits in any material respect the ability of the Company to compete in
its current business line.

    Section 4.6  SEC Documents and Other Reports. The Company has filed with the
                 -------------------------------
SEC all required reports, schedules, forms, statements and other documents
required to be filed by it since April 1, 1998 under the Securities Act or the
Exchange Act (the "Company SEC Documents").  As of their respective filing
                   ---------------------
dates, the Company SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, each
as in effect on the date so filed, and at the time filed with the SEC none of
the Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.  The financial statements of the Company included in the
Company SEC Documents comply as of their respective dates in all material
respects with the then applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except in the case of the unaudited statements, as
permitted by Form 10-Q under the Exchange Act) applied on a consistent basis
during the periods involved (except as may be indicated therein or in the notes
thereto) and fairly present in all material respects the consolidated financial
position of the Company and its consolidated Subsidiaries as at the dates
thereof and the consolidated results of their operations and their consolidated
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments and to any other adjustments
described therein not material in amount).

   Section 4.7   Absence of Material Adverse Change.  Except as disclosed in
                 ----------------------------------
Item 4.7 of the Company Letter or in the documents filed by the Company with the
--------
SEC and publicly available prior to the date of this Agreement (the "Company
                                                                     -------
Filed SEC Documents"), since December 31, 2000 the Company and its Subsidiaries
-------------------
have conducted their respective businesses in all material respects only in the
ordinary course consistent with past practice and there has not been (i) any
Material Adverse Change with respect to the Company, (ii) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to its capital stock or any redemption, purchase
or other acquisition of any of its capital stock, (iii) any split, combination
or reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, (iv) any change in
accounting methods, principles or practices by the Company, except insofar as
may have been required by a change in GAAP, (v) except in the ordinary course of
business or as required under plans or agreements in effect prior to January 1,
2001, (A) any granting by the Company or any of its Subsidiaries to any current
or former director, officer or employee of the Company or any of its
Subsidiaries of any increase in compensation, (B) any granting by the Company or
any of its Subsidiaries to any such director, officer or employee of any
increase in severance or termination pay (including the acceleration in the
exercisability of options to purchase, the re-pricing of options to purchase, or
in the vesting of, Company Common Stock (or other property)), in excess of 10%
of the potential amount payable under plans in effect as of December 31, 2000,
or (C) any entry by the Company or any of its Subsidiaries into any material
employment, deferred compensation, severance or termination agreement with any
such current or former director, officer, or employee; (vi) any damage,
destruction or loss, whether or not covered by insurance, that has had or could
reasonably be expected to have a Material Adverse Effect on the Company, (vii)
any amendment

                                      -13-
<PAGE>

of any material term of any outstanding security of the Company or any of its
Subsidiaries, (viii) any incurrence, assumption or guarantee by the Company or
any of its Subsidiaries of any indebtedness for borrowed money other than in the
ordinary course of business consistent with past practice in the amount of more
than $10 million in the aggregate through the date of this Agreement, (ix) any
creation or assumption by the Company or any of its Subsidiaries of any material
Lien on any asset other than in the ordinary course of business consistent with
past practice, (x) any making of any loan, advance or capital contributions to
or investment in any Person other than (A) loans, advances or capital
contributions to or investments in wholly-owned Subsidiaries or entities that
became wholly-owned Subsidiaries made in the ordinary course of business
consistent with past practice, (B) loans or advances made to employees in the
ordinary course of business consistent with past practice and (C) investments
made in the ordinary course of business consistent with past practice, (xi) any
material labor strike or dispute, other than routine individual grievances, or
any material activity or proceeding by a labor union or representative thereof
to organize any employees of the Company or any of its Subsidiaries, which
employees were not subject to a collective bargaining agreement at December 31,
2000, or any lockouts, strikes, slowdowns, work stoppages or threats thereof by
or with respect to such employees, or (xii) any agreement by the Company or any
of its Subsidiaries to perform any action described in clauses (i) through (xi)
above.

    Section 4.8   Information Supplied.  None of the information supplied or
                  --------------------
to be supplied by the Company specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
information to be filed by the Company in connection with the Offer pursuant to
Rule 14f-1 promulgated under the Exchange Act (the "Information Statement") or
                                                    ---------------------
(iv) the Proxy Statement, will, in the case of the Offer Documents, the Schedule
14D-9 and the Information Statement, at the respective times the Offer
Documents, the Schedule 14D-9 and the Information Statement are filed with the
SEC or first published, sent or given to the Company's stockholders, or, in the
case of the Proxy Statement, at the time the Proxy Statement is first mailed to
the Company's stockholders or at the time of the Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading
or necessary to correct any statement in any earlier communication with respect
to the solicitation of proxies for the Stockholders Meeting which has become
false or misleading. The Schedule 14D-9, the Information Statement and the Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act, except that no representation or warranty is made by the
Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Sub specifically for inclusion or
incorporation by reference therein.

    Section 4.9   Compliance with Laws.  The Company and its Subsidiaries have
                  --------------------
been, and are, in compliance in all material respects with all applicable
statutes, laws, ordinances, regulations, rules, judgments, decrees or orders of
any Governmental Entity, except for any non-compliance that could not reasonably
be expected to have a Material Adverse Effect on the Company, and neither the
Company nor any of its Subsidiaries has received any notice from any
Governmental Entity or any other Person that either the Company or any of its
Subsidiaries is in violation of, or has violated, any applicable statutes, laws,
ordinances, regulations, rules, judgments, decrees or orders, except for
violations that could not reasonably be expected to have a Material Adverse
Effect on the Company. Each of the Company and its Subsidiaries has in

                                      -14-
<PAGE>

effect all Federal, state, local and foreign governmental Permits necessary for
it to own, lease or operate its properties and assets and to carry on its
business as now conducted, and there has occurred no default under any such
Permit, except for the absence of Permits and for defaults under Permits which
absence or defaults, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Company.

    Section 4.10   Tax Matters.  Except as set forth in Item 4.10 of the Company
                   -----------                          ---------
Letter, (i) the Company and each of its Subsidiaries has timely filed (after
taking into account any extensions to file) all Tax Returns required to be filed
by them either on a separate or combined or consolidated basis, except where the
failure to timely file a Tax Return (other than a Federal or state income Tax
Return) would not reasonably be expected to have a Material Adverse Effect on
the Company; (ii) all such Tax Returns are complete and accurate, except where
the failure to be complete or accurate would not reasonably be expected to have
a Material Adverse Effect on the Company; (iii) each of the Company and its
Subsidiaries has paid or caused to be paid all Taxes as shown as due on such Tax
Returns and all material Taxes for which no return was filed, except where the
failure to do so would not reasonably be expected to have a Material Adverse
Effect on the Company; (iv) no deficiencies for any Taxes have been asserted in
writing, proposed in writing or assessed in writing against the Company or any
of its Subsidiaries that have not been paid or otherwise settled or are not
otherwise being challenged under appropriate procedures, except for deficiencies
the assertion, proposing or assessment of which would not reasonably be expected
to have a Material Adverse Effect on the Company; and (v) no written requests
for waivers of the time to assess any material Taxes of the Company or its
Subsidiaries are pending.  Neither the Company nor any of its Subsidiaries has
taken or agreed to take any action or knows of any fact, circumstance, plan or
intention that is or would be reasonably likely to prevent the Transaction from
qualifying as a "reorganization" within the meaning of Section 368(a) of the
Code.

    Section 4.11   Liabilities.  Except as set forth in the Company Filed SEC
                   -----------
Documents, neither the Company nor any of its Subsidiaries has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) required by GAAP to be set forth on a consolidated balance sheet of
the Company and its Subsidiaries or in the notes thereto, other than liabilities
and obligations incurred in the ordinary course of business since December 31,
2000 and liabilities which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company.

    Section 4.12   Litigation.  Except as disclosed in Item 4.12 of the Company
                   ----------                          ---------
Letter or in the Company Filed SEC Documents, there is no suit, action,
proceeding or investigation pending or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries that could reasonably
be expected to (i) have a Material Adverse Effect on the Company, (ii)
materially impair the ability of the Company to perform its obligations under
this Agreement or (iii) prevent or materially delay the consummation of the
Offer and/or the Merger; nor is there any outstanding judgment, order, writ,
injunction, rule or decree of any Governmental Entity or arbitrator outstanding
against the Company or any of its Subsidiaries having any such effect.

    Section 4.13   Benefit Plans.  (a) Except as disclosed in the Company Filed
                   -------------
SEC Documents or Item 4.13(a) of the Company Letter or as required by law,
                 ------------
neither the Company nor any of its Subsidiaries has adopted or amended in any
material respect any Benefit Plan since

                                      -15-
<PAGE>

the date of the most recent audited financial statements included in the Company
Filed SEC Documents. Except as disclosed in Item 4.13(a) of the Company Letter
                                            ------------
or in the Company Filed SEC Documents, there exist no material employment,
consulting, severance or termination agreements between the Company or any of
its Subsidiaries and any current or former officer, director, employee or
consultant of the Company or any of its Subsidiaries. The Company has made
available to Parent a copy of each Benefit Plan, including, without limitation,
each Severance Protection Agreement.

        (b)  Except as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, each ERISA Benefit Plan maintained by
the Company or any of its Subsidiaries has been maintained and operated in
compliance with its terms, the applicable requirements of applicable law,
including the Code and ERISA, and each ERISA Benefit Plan intended to be
"qualified" within the meaning of Section 401(a) of the Code has received a
favorable determination letter from the IRS. Except as disclosed in Item 4.13(b)
                                                                    ------------
of the Company Letter, none of the Company, its Subsidiaries or any other person
or entity that together with the Company is treated as a single employer under
Section 414 of the Code (each, an "ERISA Affiliate") has at any time during the
                                   ---------------
five-year period preceding the date hereof contributed to any ERISA Benefit Plan
that is a "multiemployer plan" (as defined in Section 3(37) of ERISA) or
maintained any ERISA Benefit Plan that is subject to Title IV of ERISA or
Section 412 of the Code.

        (c)  Except as disclosed in Item 4.13(c) of the Company Letter, as of
                                    ------------
the date of this Agreement there is no pending dispute, arbitration, claim, suit
or grievance involving a Benefit Plan (other than routine claims for benefits
payable under any such Benefit Plan) that would reasonably be expected to have a
Material Adverse Effect on the Company.

        (d)  No liability under Title IV or Section 302 of ERISA has been
incurred by the Company or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to the Company or
any ERISA Affiliate of incurring any such liability, other than any such
liability that would not have a Material Adverse Effect on the Company. Insofar
as the representation made in this Section 4.13(d) applies to Sections 4064,
4069 or 4204 of Title IV of ERISA, it is made with respect to any employee
benefit plan, program, agreement or arrangement subject to Title IV of ERISA to
which the Company or any ERISA Affiliate made, or was required to make,
contributions during the five-year period ending on the last day of the most
recent plan year ending prior to the Closing Date.

        (e)  Except as disclosed in Item 4.13(e) of the Company Letter, no
                                    ------------
Benefit Plan provides medical, surgical, hospitalization or death benefits
(whether or not insured) for employees or former employees of the Company or any
of its Subsidiaries for periods extending beyond their retirement or other
termination of service, other than (i) coverage mandated by applicable law, (ii)
death benefits under any "pension plan," (iii) benefits the full cost of which
is borne by the current or former employee (or his or her beneficiary) or (iv)
exceptions which would not have a Material Adverse Effect on the Company.

        (f)  Item 4.13(f) of the Company Letter sets forth the Company's good
             ------------
faith estimate of the payments that may be made under the Benefit Plans that
could constitute "excess parachute payments" within the meaning of Section 280G
of the Code.

                                      -16-
<PAGE>

    Section 4.14   State Takeover Statutes; Bylaws Provision; Rights Agreement.
                   ------------------------------------------------------------
The action of the Board of Directors of the Company in approving the Offer
(including the purchase of Shares pursuant to the Offer), the Merger, this
Agreement and the transactions contemplated by this Agreement is sufficient to
render inapplicable to the Offer, the Merger and this Agreement the provisions
of (i) Section 203 of the DGCL and (ii) Article IV of the Bylaws. The Company
has made available to Parent a complete and correct copy of the Company Rights
Agreement, including all current and proposed amendments and exhibits thereto.
The Board of Directors of the Company has taken all action necessary to amend
the Company Rights Agreement (subject only to the execution of such amendment by
the Company Rights Agent, which execution the Company shall cause to take place
within 48 hours of the date hereof) to provide that: (i) a Distribution Date (as
defined in the Company Rights Agreement) shall not occur, the Company Rights
shall not separate (to the extent the Company Rights Agreement otherwise
provides for such separation) or become exercisable and neither Parent nor Sub
shall become an Acquiring Person (as defined in the Company Rights Agreement) as
a result of the execution or delivery of this Agreement by Parent or Sub, the
public announcement of such execution and delivery or, provided that this
Agreement shall not have been terminated in accordance with Section 9.1 and
                                                            -----------
subject to the terms of this Agreement, the public announcement or the
commencement of the Offer or the consummation of the Offer and (ii) the Company
Rights shall cease to be exercisable and the Company Rights Agreement shall
terminate after the consummation of the Offer in accordance with the terms
thereof and the terms and conditions hereof, including the acceptance for
payment of, and the payment for all Shares tendered pursuant to the Offer.  To
the Knowledge of the Company, no other "fair price," "moratorium," "control
share acquisition," or other anti-takeover statute or similar statute or
regulation, applies or purports to apply this Agreement, or the Offer, the
Merger or the other transactions contemplated by this Agreement.

    Section 4.15   Brokers.  No broker, investment banker, financial advisor or
                   -------
other person, other than Goldman, Sachs and Petrie Parkman, the fees and
expenses of which will be paid by the Company (and are reflected in an agreement
between Goldman, Sachs and the Company and an agreement between Petrie Parkman
and the Company, complete copies of which have been furnished to Parent), is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company or any of its
Subsidiaries. If the transactions contemplated by this Agreement are
consummated, no such engagement letter obligates the Company to continue to use
the services or pay fees or expenses in connection with any future transaction.

    Section 4.16  Voting Requirements.  Approval of the Merger requires the
                  -------------------
affirmative vote of a majority of the outstanding Shares (the "Company
                                                               -------
Stockholder Approval").  The Company Stockholder Approval is the only vote of
--------------------
the holders of the Company's capital stock necessary to approve and adopt this
Agreement and the transactions contemplated hereby.

    Section 4.17  Environmental Matters.
                  ---------------------
          Except as disclosed in Item 4.17 of the Company Letter:
                                 ---------

          (a)  The Company and each of its Subsidiaries has been and is in
material compliance with all applicable Environmental Laws, including, but not
limited to, possessing all

                                      -17-
<PAGE>

permits, authorizations, licenses, exemptions and other governmental
authorizations required for its operations under applicable Environmental Laws,
except for such non-compliance that could not reasonably be expected to have a
Material Adverse Effect on the Company.

        (b)  There is no pending or, to the Knowledge of the Company, threatened
written claim, lawsuit, or administrative proceeding against the Company or each
of its Subsidiaries, under or pursuant to any Environmental Law, that could
reasonably be expected to have a Material Adverse Effect on the Company. Neither
the Company nor any of its Subsidiaries has received written notice from any
Person, including, but not limited to, any Governmental Entity, alleging that
the Company or any of its Subsidiaries has been or is in violation or
potentially in violation of any applicable Environmental Law or otherwise may be
liable under any applicable Environmental Law, which violation or liability is
unresolved and could reasonably be expected to have a Material Adverse Effect on
the Company. Neither the Company nor any of its Subsidiaries has received any
written request for information from any Person, including but not limited to
any Governmental Entity, related to liability under or compliance with any
applicable Environmental Law, except for such matters as would not, if they
matured into a claim against the Company or any of its Subsidiaries, have a
Material Adverse Effect on the Company.

        (c)  With respect to the real property that is currently owned, leased
or operated by the Company or any of its Subsidiaries, there have been no
spills, discharges or releases (as such term is defined by the Comprehensive
Environmental Response, Compensation and Liability Act, 42, U.S.C. 9601, et
                                                                         --
seq.) of Hazardous Substances or any other contaminant or pollutant on or
---
underneath any of such real property that could reasonably be expected to have a
Material Adverse Effect on the Company.

        (d)  With respect to real property that was formerly owned, leased or
operated by the Company or any of its Subsidiaries or any of their predecessors
in interest, to the Knowledge of the Company, there were no spills, discharges
or releases (as such term is defined by the Comprehensive Environmental
Response, Compensation and Liability Act, 42, U.S.C. 9601, et seq.) of Hazardous
                                                           ------
Substances or any other contaminant or pollutant on or underneath any of such
real property during or prior to the Company's or any of its Subsidiaries'
ownership or operation of such real property that could reasonably be expected
to result in a Material Adverse Effect on the Company.

        (e)  Except as disclosed on Item 4.17(e) of the Company Letter, neither
                                    ------------
the Company nor any of its Subsidiaries has entered into any written agreement
or incurred any material legal or monetary obligation that may require them to
pay to, reimburse, guarantee, pledge, defend, indemnify or hold harmless any
Person from or against any liabilities or costs arising out of or related to the
generation, manufacture, use, transportation or disposal of Hazardous
Substances, or otherwise arising in connection with or under Environmental Laws,
other than in each case exceptions which would not reasonably be expected to
have a Material Adverse Effect on the Company.

        (f)  To the Knowledge of the Company, neither the Company nor any of its
Subsidiaries has disposed or arranged for the disposal of Hazardous Substances
(or any waste or substance containing Hazardous Substances) at any location that
is: (i) listed on the Federal National Priorities List ("NPL") or identified on
                                                         ---
the CERCLIS, each established pursuant to the

                                      -18-
<PAGE>

Comprehensive Environmental Response, Compensation and Liability Act, 42, U.S.C.
9601, et seq.; (ii) listed on any state list of hazardous waste sites that is
      ------
analogous to the NPL or CERCLIS; or (iii) has been subject to environmental
investigation or remediation, other than, in each case, exceptions which would
not reasonably be expected to have a Material Adverse Effect on the Company.

    Section 4.18  Contracts; Debt Instruments.  (a) Item 4.18(a) of the Company
                  ---------------------------       ------------
Letter and the Company's Annual Report on Form 10-K for the year ended December
31, 2000 (the "2000 10-K") together set forth a true and complete list of (i)
               ---------
all material agreements to which the Company or any of its Subsidiaries is a
party; (ii) all agreements relating to the incurring of indebtedness (including
sale and leaseback and capitalized lease transactions and other similar
financing transactions) providing for payment or repayment in excess of $10
million; (iii) the exhibits contained or incorporated by reference in the 2000
10-K contain or incorporate by reference all of the contracts required to be
included therein; (iv) all agreements requiring capital expenditures in excess
of $5 million individually (other than agreements relating to the drilling,
completion and connection of wells in the ordinary course of business (including
all related service contracts) and agreements relating to joint operation,
development and exploration entered into in the ordinary course of business);
and (v) any non-competition agreements or any other agreements or obligations
which purport to limit in any material respect the manner in which, or the
localities in which, all or any substantial portion of the business of the
Company and its Subsidiaries, taken as a whole, is conducted (the agreements,
contracts and obligations specified above, collectively the "Company
                                                             -------
Contracts").  All Company Contracts are valid and in full force and effect on
---------
the date hereof except to the extent they have previously expired in accordance
with their terms or if the failure to be in full force and effect, individually
and in the aggregate, would not have a Material Adverse Effect on the Company.
Neither the Company nor any of its Subsidiaries has violated any provision of,
or committed or failed to perform any act which with or without notice, lapse of
time or both would constitute a default under the provisions of, any Company
Contract that could reasonably be expected to have a Material Adverse Effect on
the Company.

        (b)  Except as described in Item 4.18(b) of the Company Letter or in the
                                    ------------
Company SEC Documents, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not (i) result in any
material payment (including severance, unemployment compensation, tax gross-up,
bonus or otherwise) becoming due to any current or former director, officer,
employee or independent contractor of the Company or any of its Subsidiaries,
from the Company or any of its Subsidiaries under any Company Stock Plan,
Benefit Plan, agreement or otherwise, (ii) materially increase any benefits
otherwise payable under any Company Stock Plan, Benefit Plan, agreement or
otherwise or (iii) result in the acceleration of the time of payment, exercise
or vesting of any such material benefits.

    Section 4.19  Title to Properties.  Except as set forth in Item 4.19 of the
                  -------------------                          ---------
Company Letter:

        (a)  Each of the Company and its Subsidiaries has good and marketable
title to, or valid leasehold interests in, all its properties and assets, free
and clear of all Liens, except for defects in title, easements, restrictive
covenants and similar encumbrances or impediments that, in the aggregate, do not
and could not reasonably be expected to have a Material Adverse Effect on the
Company.

                                      -19-
<PAGE>

        (b)  Each of the Company and its Subsidiaries has complied in all
material respects with the terms of all material leases to which it is a party
and under which it is in occupancy, and all such leases are in full force and
effect, except for such non-compliance that could not reasonably be expected to
have a Material Adverse Effect on the Company. To the Knowledge of the Company,
each of the Company and each of its Subsidiaries enjoys peaceful and undisturbed
possession under all such leases, except for such noncompliance that could not
reasonably be expected to have a Material Adverse Effect on the Company.

    Section 4.20  Intellectual Property.  (a) As used in this Agreement,
                  ---------------------
"Company Intellectual Property" means all of the following which are necessary
 -----------------------------
to conduct the business of the Company and its Subsidiaries as presently
conducted: (i) trademarks, trade dress, service marks, copyrights, logos, trade
names, corporate names and all registrations and applications to register the
same; (ii) patents and pending patent applications; (iii) all computer software
programs, databases and compilations; and (iv) all material licenses and
agreements to which the Company or any of its Subsidiaries is a party which
relate to any of the foregoing.

        (b)  Except as disclosed in Item 4.20(b) of the Company Letter, the
                                    ------------
Company or its Subsidiaries owns or has the right to use all Company
Intellectual Property necessary to conduct the Company's business as presently
conducted, except as would not, individually or in the aggregate, be expected to
have a Material Adverse Effect on the Company.

        (c)  Except as disclosed in Item 4.20(b) of the Company Letter, to the
                                    ------------
Knowledge of the Company, the conduct of the Company's and its Subsidiaries'
business or the use of the Company Intellectual Property does not infringe,
violate, misappropriate or misuse any intellectual property rights or any other
proprietary right of any Person or give rise to any obligations to any Person as
a result of co-authorship, except in each case for exceptions which would not,
individually or in the aggregate, be expected to have a Material Adverse Effect
on the Company.

    Section 4.21  Condition of Assets.  All of the material property, plant and
                  -------------------
equipment of the Company and its Subsidiaries, has in all material respects been
maintained in reasonable operating condition and repair, ordinary wear and tear
excepted, and is in all material respects, sufficient to permit the Company and
its Subsidiaries to conduct their operations in the ordinary course of business
in a manner consistent with their past practices.

    Section 4.22  Derivative Transactions.
                  -----------------------

        (a)  Except as set forth in Section 4.22(a) of the Company Letter,
                                    ---------------
neither the Company nor its Subsidiaries has entered into any material
Derivative Transactions (as defined below) since December 31, 2000 that have a
continuing financial liability or obligation. All Derivative Transactions
entered into by the Company or any of its Subsidiaries that are currently open
were entered into in material compliance with applicable rules, regulations and
policies of all regulatory authorities.

        (b)  For purposes of this Section 4.22, "Derivative Transactions" means
                                  ------------   -----------------------
derivative transactions within the coverage of FAS 133, including any swap
transaction, option, warrant, forward purchase or sale transaction, futures
transaction, cap transaction, floor transaction or

                                      -20-
<PAGE>

collar transaction relating to one or more currencies, commodities, bonds,
equity securities, loans, interest rates, credit-related events or conditions or
any indexes, or any other similar transaction (including any option with respect
to any of these transactions) or combination of any of these transactions,
including collateralized mortgage obligations or other similar instruments or
any debt or equity instruments evidencing or embedding any such types of
transactions, and any related credit support, collateral, transportation or
other similar arrangements or agreements related to such transactions.

                                   ARTICLE V
               REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB

     Parent and Sub represent and warrant to the Company as follows:

    Section 5.1   Organization.  Parent and each of its Significant
                  ------------
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has requisite power and
authority to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority would not reasonably be expected to have a Material Adverse Effect
on Parent. Parent and each of its Significant Subsidiaries is duly qualified or
licensed to do business and in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not
reasonably be expected to have a Material Adverse Effect on Parent or prevent or
materially delay the consummation of the Offer and/or the Merger. Parent has
delivered to the Company complete and correct copies of its Certificate of
Incorporation and Bylaws and has made available to the Company the charter and
bylaws (or similar organizational documents) of each of its Significant
Subsidiaries.

    Section 5.2   Capital Structure.  Except as set forth in Item 5.2 of the
                  -----------------                          --------
Parent Letter, the authorized capital stock of Parent consists of 960,000,000
shares of common stock (the "Parent Shares") and 30,000,000 shares of preferred
                             -------------
stock. At the close of business on March 23, 2001, (i) 484,040,320 Parent Shares
were issued and outstanding, all of which were validly issued, fully paid and
nonassessable and free of preemptive rights and (ii) 6,311,910 Parent Shares
were held by Parent in its treasury. As of the close of business on April 24,
2001, there were 25,554,954 Parent Shares reserved for issuance pursuant to
outstanding options to purchase Parent Shares (the "Parent Stock Options")
                                                    --------------------
granted under Parent's 1996 Stock Plan, its Stock Plan for Non-Officer
Employees, its 1996 Stock Plan for Non-Employee Directors, and the Williams
International Stock Plan (the "Parent Stock Incentive Plans"), and, as of the
                               ----------------------------
close of business on February 28, 2001, there were 15,122,521 Parent Shares
reserved for the grant of additional awards under Parent Stock Incentive Plans.
The numbers of shares of capital stock and options described in the immediately
preceding sentences have not materially changed as of the date of this
Agreement, except for adjustments made in connection with the April 23, 2001
spin-off of Williams Communications Group, Inc. from Parent.  As of the date of
this Agreement, except as set forth above, no Parent Shares were issued,
reserved for issuance or outstanding and there are not any phantom stock or
other contractual rights the value of which is determined in whole or in part by
the value of any capital stock of Parent ("Parent Stock Equivalents").  There
                                           ------------------------
are no outstanding stock appreciation rights with respect to the capital

                                      -21-
<PAGE>

stock of Parent. Each outstanding Parent Share is, and each Parent Share which
may be issued pursuant to Parent Stock Plans will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no outstanding bonds, debentures, notes or other
indebtedness of Parent having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matter on which
Parent's stockholders may vote. Except as set forth above or in Item 5.3 of the
                                                                --------
Parent Letter, as of the date of this Agreement, there are no securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which Parent or any of its Significant Subsidiaries
is a party or by which any of them is bound obligating Parent or any of its
Significant Subsidiaries to issue, deliver or sell or create, or cause to be
issued, delivered or sold or created, additional shares of capital stock or
other voting securities or Parent Stock Equivalents of Parent or of any of its
Significant Subsidiaries or obligating Parent or any of its Significant
Subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking.

          As of the date of this Agreement, there are no outstanding contractual
obligations of Parent or any of its Significant Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of Parent or any of its
Significant Subsidiaries.

    Section 5.3   Authority.  Each of Parent and Sub has requisite corporate
                  ---------
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.  The execution, delivery and performance of
this Agreement by each of Parent and Sub and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate and stockholder action on the part of each of Parent and Sub.  This
Agreement has been duly executed and delivered by each of Parent and Sub and
(assuming the valid authorization, execution and delivery of this Agreement by
the Company) constitutes the valid and binding obligation of each of Parent and
Sub enforceable against it in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity.

    Section 5.4   Consents and Approvals; No Violations.  Except for filings,
                  -------------------------------------
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the Securities Act, the HSR
Act, the DGCL, the laws of other states in which Parent is qualified to do or is
doing business, state takeover laws and foreign and supranational laws relating
to antitrust and anticompetition clearances, and except as may be required in
connection with the Taxes described in Section 7.7, neither the execution and
                                       -----------
delivery of this Agreement, nor the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will conflict with or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien upon, any of the
properties or assets of Parent or any of its Subsidiaries, (i) the certificate
of incorporation or bylaws of Parent or the comparable charter or organizational
documents of any of Parent's Significant Subsidiaries, (ii) require any filing
with, or permit, authorization, consent or approval of, any Governmental Entity
(except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings would not reasonably be expected to have a
Material Adverse Effect on

                                      -22-
<PAGE>

Parent or prevent or materially delay the consummation of the Offer and/or the
Merger), (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which Parent
or any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Parent, Sub, any of its
Significant Subsidiaries or any of their properties or assets, except in the
case of clauses (iii) or (iv) for violations, breaches or defaults that would
not reasonably be expected to have a Material Adverse Effect on Parent or
prevent or materially delay the consummation of the Offer and/or the Merger.

    Section 5.5   SEC Documents and Other Reports.  Parent has filed with the
                  -------------------------------
SEC all documents required to be filed by it since April 1, 1998 under the
Securities Act or the Exchange Act (the "Parent SEC Documents"). As of their
                                         --------------------
respective filing dates, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, each as in effect on the date so filed, and at the time filed with
the SEC none of the Parent SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of Parent
included in the Parent SEC Documents comply as of their respective dates in all
material respects with the then applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP (except in the case of the unaudited
statements, as permitted by Form 10-Q under the Exchange Act) applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto) and fairly present the consolidated financial position
of Parent and its consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).

    Section 5.6   Absence of Material Adverse Change.  Except as disclosed in
                  ----------------------------------
Item 5.7 of the Parent Letter or in the documents filed by Parent with SEC and
--------
publicly available prior to the date of the Agreement (the "Parent Filed SEC
                                                            ----------------
Documents"), since December 31, 2000 Parent and its Subsidiaries have conducted
---------
their respective businesses in all material respects only in the ordinary course
consistent with past practice, and there has not been (i) any Material Adverse
Change with respect to Parent, (ii) except for (a) ordinary quarterly dividends
paid or payable to stockholders of Parent and (b) the distribution of shares of
Williams Communications Group to holders of Parent Shares, any declaration,
setting aside or payment of any dividend or other distribution with respect to
its capital stock or any redemption, purchase or other acquisition of any of its
capital stock, (iii) any split, combination or reclassification of any of its
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iv) any change in accounting methods, principles or practices
by Parent materially affecting its assets, liabilities or business, except
insofar as may have been required by a change in generally accepted accounting
principles.

                                      -23-
<PAGE>

    Section 5.7   Information Supplied.  None of the information supplied or
                  --------------------
to be supplied by Parent or Sub specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
Information Statement, (iv) the Proxy Statement or (v) the Form S-4 will, in the
case of the Offer Documents, the Schedule 14D-9 and the Information Statement,
at the respective times the Offer Documents, the Schedule 14D-9 and the
Information Statement are filed with the SEC or first published, sent or given
to the Company's stockholders, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading or, in the case of the Form S-4, at the time it
becomes effective under the Securities Act, or, in the case of the Proxy
Statement, if any, at the time the Proxy Statement is first mailed to the
Company's stockholders or at the time of the Stockholders Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they are made, not
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders Meeting which
has become false or misleading, except that no representation or warranty is
made by Parent or Sub in connection with any of the foregoing with respect to
statements made or incorporated by reference therein based on information
supplied by the Company or any of its representatives specifically for inclusion
or incorporation by reference therein.  The Offer Documents will comply as to
form in all material respects with the requirements of the Exchange Act, except
that no representation or warranty is made by Parent or Sub in connection with
any of the foregoing with respect to statements made or incorporated by
reference therein based on information supplied by the Company or any of its
representatives specifically for inclusion or incorporation by reference
therein.

    Section 5.8   Compliance with Laws.  Parent and its Subsidiaries have been
                  --------------------
and are, in compliance in all material respects with all applicable statutes,
laws, ordinances, regulations, rules, judgments, decrees or orders of any
Governmental Entity, except for any non-compliance that could not reasonably be
expected to have a Material Adverse Effect on Parent, and neither Parent nor any
of its Subsidiaries has received any notice from any Governmental Entity or any
other Person that either Parent or any of its Subsidiaries is in violation of,
or has violated, any applicable statutes, laws, ordinances, regulations, rules,
judgments, decrees or orders, except for violation that could not reasonably be
expected to have a Material Adverse Effect on Parent. Each of Parent and its
Subsidiaries has in effect all Federal, state, local and foreign governmental
Permits necessary for it to own, lease or operate properties and assets and to
carry on its business as now conducted, and there has occurred no default under
any such Permit, except for the absence of Permits and for defaults under
Permits which absence or defaults, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Parent.

    Section 5.9   Parent Shares.  All of the Parent Shares issuable in exchange
                  -------------
for Shares in the Merger in accordance with this Agreement will be, when so
issued, duly authorized, validly issued, fully paid and non-assessable and free
of preemptive rights. The issuance of such Parent Shares will be registered
under the Securities Act and registered or exempt from registration under
applicable state securities laws.

    Section 5.10  Reorganization.  Neither Parent nor any of its Subsidiaries
                  --------------
has taken or agreed to take any action or knows of any fact, circumstance, plan
or intention that is or would

                                      -24-
<PAGE>

be reasonably likely to prevent the Transaction from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code.

    Section 5.11   Liabilities.  Except as set forth in the Parent Filed SEC
                   -----------
Documents, neither Parent nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a consolidated balance sheet of Parent and
its Subsidiaries or in the notes thereto, other than liabilities and obligations
incurred in the ordinary course of business since December 31, 2000 and
liabilities which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Parent.

    Section 5.12   Interim Operations of Sub.  Sub was formed solely for the
               -------------------------
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.

    Section 5.13   Litigation.  Except as disclosed in Item 5.13 of the Parent
                   ----------                          ---------
Letter or in the Parent Filed SEC Documents, there is no suit, action,
proceeding or investigation pending against Parent or any of its Subsidiaries
that would reasonably be expected to have a Material Adverse Effect on Parent or
prevent or materially delay the consummation of the Offer and/or the Merger.
Except as disclosed in Item 5.13 of the Parent Letter or in the Parent Filed SEC
Documents, neither Parent nor any of its Subsidiaries is subject to any
outstanding judgment, order, writ, injunction or decree that would reasonably be
expected to have a Material Adverse Effect on Parent or prevent or materially
delay the consummation of the Offer and/or the Merger.

    Section 5.14  California Exposure.  Based on the facts and circumstances
                  -------------------
known to Parent on the date of this Agreement, Parent believes that the reserves
reflected in its most recent financial statements are adequate in all material
respects in relation to Parent's credit, regulatory or litigation exposure
arising from the sale of natural gas or electricity in the State of California.

    Section 5.15  Brokers.  No broker, investment banker, financial advisor or
                  -------
other person, other than Merrill Lynch & Co., the fees and expenses of which
will be paid by Parent, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Sub.

                                  ARTICLE VI
                   COVENANTS RELATING TO CONDUCT OF BUSINESS

    Section 6.1   Conduct of Business Pending the Merger.
                  --------------------------------------
        (a)  Conduct of Business by the Company Pending the Merger. During the
period from the date of this Agreement until the earlier of the Effective Time
or such time as Parent's designees shall constitute a majority of the Board of
Directors of the Company, the Company shall, and shall cause each of its
Subsidiaries to, in all material respects, except as contemplated by this
Agreement, carry on its business in the ordinary course as currently conducted.
Without limiting the generality of the foregoing, and except as otherwise
contemplated by this Agreement (including, without limitation, as permitted or
required by Section 7.9 or Section 7.11), during
            -----------    ------------

                                      -25-
<PAGE>

such period, the Company shall not, and shall not permit any of its Subsidiaries
to, without the prior written consent of Parent (which consent shall not be
unreasonably withheld or delayed):

        (i)  (A) declare, set aside or pay any dividends on, or make any other
     distributions in respect of, any of its capital stock, except for dividends
     by a Subsidiary of the Company to its parent or (B) split, combine or
     reclassify any of its capital stock or issue or authorize the issuance of
     any other securities in respect of, in lieu of or in substitution for
     shares of its capital stock;

        (ii) issue, deliver, sell, pledge or otherwise encumber any shares of
     its capital stock, any other voting securities or any securities
     convertible into, or any rights, warrants or options to acquire, any such
     shares, voting securities or convertible securities, other than (i) the
     issuance of Shares upon exercise of Company Stock Options outstanding on
     the date hereof or (ii) purchase, redeem or otherwise acquire any shares of
     capital stock of the Company or any of its Subsidiaries or any other
     securities thereof or any rights, warrants or options to acquire any such
     shares or other securities;

        (iii)  amend its Restated Certificate of Incorporation or Bylaws or
     other similar organizational documents;

        (iv) except as disclosed in Item 6.1(a) of the Company Letter, acquire,
                                    -----------
     or agree to acquire, in a single transaction or in a series of related
     transactions, any business or assets, other than transactions that are in
     the ordinary course of business, or which involve assets having a purchase
     price not in excess of $5 million individually or $10 million in the
     aggregate;

        (v)  make or agree to make any new capital expenditure other than
     expenditures approved by the Board of Directors of the Company and within
     the Company's capital budget for fiscal 2001, a true, complete and correct
     copy of which has been provided to Parent; provided, however, that no
     individual capital expenditure by the Company pursuant to a single
     authority for expenditure may exceed $2.5 million;

        (vi) except as disclosed in Item 6.1(a) of the Company Letter, sell,
                                    -----------
     lease, license, encumber or otherwise dispose of, or agree to sell, lease,
     license, encumber or otherwise dispose of, any of its assets, other than
     transactions that are in the ordinary course of business or which involve
     assets having a current value not in excess of $1 million individually or
     $5 million in the aggregate;

        (vii)  except as disclosed in Item 6.1(a) of the Company Letter: (i)
                                      -----------
     increase the salary or wages payable or to become payable to its directors,
     officers or employees, except for increases required under employment
     agreements existing on the date hereof, and except for increases for
     officers and employees not in excess of 10% of such person's salary or
     wages as in effect at the date of this Agreement; or (ii) enter into,
     modify or amend any employment or severance agreement with, or establish,
     adopt, enter into or amend any bonus, profit sharing,

                                      -26-
<PAGE>

     thrift, stock option, restricted stock, pension, retirement, deferred
     compensation, employment, termination or severance plan or agreement or
     material policy or arrangement for the benefit of, any director, officer or
     employee, except as may be required by the terms of any such plan,
     agreement, policy or arrangement or to comply with applicable law or as
     contemplated by this Agreement;

        (viii)  except as may be required as a result of a change in law or in
     generally accepted accounting principles, make any material change in its
     method of accounting;

        (ix) make any material Tax election (unless required by law) or enter
     into any settlement or compromise of any material Tax liability that, in
     either case, could reasonably be expected to have a Material Adverse Effect
     on the Company;

        (x)  (i) mortgage or otherwise encumber or subject to any Lien the
     Company's or its Subsidiaries', properties or assets, except in the
     ordinary course of business consistent with past practice or pursuant to
     existing contracts or commitments, or (ii) except in the ordinary course of
     business consistent with past practice or pursuant to existing contracts or
     commitments, license any of the Company's Intellectual Property;

        (xi) pay, discharge or satisfy any claims, liabilities or obligations
     (absolute, accrued, asserted or unasserted, contingent or otherwise), other
     than the payment, discharge or satisfaction, in the ordinary course of
     business consistent with past practice and in accordance with their terms,
     or (i) liabilities reflected or reserved against in, or contemplated by,
     the most recent consolidated financial statements (or the notes thereto) of
     the Company included in the Company SEC Documents, (ii) liabilities
     incurred in the ordinary course of business consistent with past practice,
     or (iii) other liabilities or obligations not to exceed in the aggregate
     $2,500,000;

        (xii)  (i) incur any Indebtedness or guarantee any such Indebtedness of
     another Person, issue or sell any debt securities or warrants or other
     rights to acquire any debt securities of the Company or any of its
     Subsidiaries, guarantee any debt securities of another Person, enter into
     any "Keep Well" or other agreement to maintain any financial statement
     condition of another Person or enter into any arrangement having the
     economic effect of any of the foregoing, except for borrowings incurred in
     the ordinary course of business (or to refund existing or maturing
     indebtedness) consistent with past practice and except for intercompany
     indebtedness between the Company and any of its wholly-owned Subsidiaries
     or between such Subsidiaries and except for Indebtedness, guarantees and
     similar commitments which do not exceed $10 million in the aggregate, or
     (ii) make any loans, advances or capital contributions to, or investments
     in, any other Person, except in the ordinary course of business or pursuant
     to an agreement existing on the date hereof or loans, advances, capital
     contributions or investments which do not exceed $10 million in the
     aggregate; or

                                      -27-
<PAGE>

        (xiii)  enter into or authorize any contract, agreement or binding
     commitment to do any of the foregoing.

     (b)  Conduct of Business by the Parent Pending the Merger.  During the
          ----------------------------------------------------
period from the date of this Agreement until the Effective Time, Parent shall,
and shall cause each of its Subsidiaries to, in all material respects, except as
contemplated by this Agreement, carry on its business in the ordinary course as
currently conducted. Without limiting the generality of the foregoing, and
except as otherwise contemplated by this Agreement, during such period, Parent
shall not, and shall not permit any of its Subsidiaries to, without the prior
written consent of the Company (which consent shall not be unreasonably withheld
or delayed):

          (i)   make any change in or amendment to Parent's Certificate of
     Incorporation that changes any material term or provision of the Parent
     Shares;

          (ii)  make any material change in or amendment to Sub's Certificate of
     Incorporation;

          (iii) engage in any material repurchase at a premium,
     recapitalization, restructuring or reorganization with respect to Parent's
     capital stock, including, without limitation, by way of any extraordinary
     dividend on, or other extraordinary distributions with respect to, Parent's
     capital stock;

          (iv)  acquire by merging or consolidating with, or by purchasing a
     substantial portion of the assets of or equity in, or by any other manner,
     any person or any business or division thereof, or otherwise acquire any
     assets, unless such acquisition or the entering into of a definitive
     agreement relating to or the consummation of such transaction would not (A)
     impose any material delay in the obtaining of, or materially increase the
     risk of not obtaining, any authorizations, consents, orders, declarations
     or approvals of any Governmental Entity necessary to consummate the Offer,
     the Merger or the expiration or termination of any applicable waiting
     period, (B) materially increase the risk of any Governmental Entity
     entering an order prohibiting the consummation of the Offer or the Merger
     or (C) increase the risk of not being able to remove any such order on
     appeal or otherwise; or

          (v)  enter into any contract or agreement to do any of the foregoing.

    Section 6.2  No Solicitation; Acquisition Proposals.  (a) From the date of
                 --------------------------------------
this Agreement until the Effective Time or, if earlier, the termination of this
Agreement in accordance with its terms, (1) the Company shall, and the Company
shall cause its and its Subsidiaries' respective Representatives to, immediately
cease and terminate any existing solicitation, initiation, knowing
encouragement, discussion or negotiation with any Third Party conducted
heretofore by the Company, its Subsidiaries or their respective Representatives
with respect to any Acquisition Proposal and (2) the Company shall not, and the
Company shall cause its and its Subsidiaries' respective Representatives not to,
directly or indirectly, (i) solicit, initiate or knowingly encourage (including
by way of furnishing non-public information), or knowingly take any other action
to facilitate, any inquiries or the making or submission of any proposal that
constitutes, or

                                      -28-
<PAGE>

may reasonably be expected to lead to, any Acquisition Proposal; (ii) enter into
any agreement with respect to any Acquisition Proposal or enter into any
agreement requiring the Company to abandon, terminate or fail to consummate the
acquisition of Shares pursuant to the Offer or the Merger; (iii) participate or
engage in any discussions or negotiations with, or disclose or provide any non-
public information or data relating to the Company or its Subsidiaries to any
Third Party relating to an Acquisition Proposal (except as required by legal
process), or knowingly facilitate any effort or attempt to make or implement an
Acquisition Proposal or accept an Acquisition Proposal; or (iv) enter into any
letter of intent, agreement or similar document relating to any Acquisition
Proposal.

        (b)  Notwithstanding the restrictions set forth in Section 6.2(a), if,
at any time prior to the acquisition of Shares pursuant to the Offer, (1) the
Company has received an unsolicited bona fide written proposal from a Third
Party relating to an Acquisition Proposal (under circumstances in which the
Company has complied in all material respects with its obligations under Section
6.2(a)) and (2) the Board of Directors of the Company concludes in good faith
(after consultation with a financial advisor of nationally recognized reputation
and after receiving the advice of its outside counsel) (i) that such Acquisition
Proposal may reasonably constitute a Superior Proposal and (ii) that the failure
to provide such information or participate in such negotiations or discussions
would result in a breach by the Board of Directors of the Company of its
fiduciary duties to the Company's stockholders under applicable law, the Company
may, subject to its giving Parent 24 hours prior written notice of the identity
of such Third Party and, to the extent known, the terms and conditions of such
Acquisition Proposal and of the Company's intention to furnish nonpublic
information to, or enter into discussions or negotiations with, such Third
Party, (x) furnish information with respect to the Company and its Subsidiaries
to any Third Party pursuant to a customary confidentiality agreement containing
terms not materially less restrictive than the terms of the Confidentiality
Agreement dated March 9, 2001, entered into between the Company and Parent, as
the same may be amended, supplemented or modified (the "Confidentiality
                                                        ---------------
Agreement"), provided that a copy of all such information is delivered
---------
simultaneously to Parent if it has not previously been so furnished to Parent,
and (y) participate in discussions or negotiations regarding such proposal or
take any of the actions described in Section 6.2(a)(2)(i) through (iv),
                                     --------------------         -----

        (c)  The Company shall within 24 hours notify and advise Parent orally
and in writing of any Acquisition Proposal and the terms and conditions of such
Acquisition Proposal. The Company shall inform Parent on a prompt and current
basis of the status of any discussions regarding, or relating to, any
Acquisition Proposal with a Third Party (including amendments and proposed
amendments) and, as promptly as practicable, of any change in the price,
structure or form of the consideration or material terms of and conditions
regarding the Acquisition Proposal. In fulfilling its obligations under this
paragraph (c) of this Section 6.2, the Company shall provide promptly to Parent
copies of all material written correspondence or material written documents
furnished to the Company or its Representatives by or on behalf of such Third
Party.

        (d)  The Company agrees that it will promptly inform its and its
Subsidiaries' respective Representatives of the obligations undertaken in this
Section 6.2.
-----------

                                      -29-
<PAGE>

        (e)  Nothing contained in this Agreement shall prohibit the Company from
taking and disclosing to its stockholders a position as required by Rule 14d-9
or Rule 14e-2(a) promulgated under the Exchange Act.

        (f)  For purposes of this Agreement,

               "Acquisition Proposal" means any inquiry, offer, proposal,
                --------------------
               indication of interest, signed agreement or completed action, as
               the case may be, by any Third Party which relates to a
               transaction or series of transactions (including any merger,
               consolidation, recapitalization, liquidation or other direct or
               indirect business combination) involving the Company or the
               issuance or acquisition of 20% or more of the outstanding Shares
               or any tender or exchange offer that if consummated would result
               in any Person, together with all affiliates thereof, Beneficially
               Owning 20% or more of the outstanding Shares, or the acquisition,
               license, purchase or other disposition of a substantial portion
               of the business or assets of the Company outside the ordinary
               course of business; and

               "Superior Proposal" means any bona fide written Acquisition
                -----------------
               Proposal (provided that for the purposes of this definition, the
               applicable percentages in the definition of Acquisition Proposal
               shall be fifty percent (50%) as opposed to twenty percent (20%)),
               on its most recently amended or modified terms, if amended or
               modified, which the Board of Directors of the Company determines
               in its good faith judgment (after receipt of the advice of a
               financial advisor of nationally recognized reputation and
               receiving advice of its outside counsel), taking into account,
               among other things, all legal, financial, regulatory and other
               aspects of the proposal and the Third Party making the proposal
               (i) would, if consummated, result in a transaction that is more
               favorable to the Company's stockholders (in their capacities as
               stockholders), from a financial point of view, than the
               transactions contemplated by this Agreement and (ii) is
               reasonably capable of being completed.

    Section 6.3   Third Party Standstill Agreements.  During the period from the
                  ---------------------------------
date of this Agreement through the Effective Time, the Company shall enforce and
shall not terminate, amend, modify or waive any standstill provision of any
confidentiality or standstill agreement between the Company and other parties
entered into prior to the date hereof in connection with the process conducted
by the Company to solicit acquisition proposals for the Company.

    Section 6.4   Disclosure of Certain Matters; Delivery of Certain Filings.
                  ----------------------------------------------------------
(a) The Company shall give prompt notice to Parent, and Parent or Sub shall give
prompt notice to the Company, of (i) any representation or warranty made by it
contained in this Agreement becoming untrue or inaccurate in any material
respect and (ii) the failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements of the parties
or the conditions to the obligations of the parties under this Agreement.

                                      -30-
<PAGE>

        (b)  The Company shall give prompt notice to Parent, and Parent or Sub
shall give prompt notice to the Company, of: (i) any material notice or other
communication from any Person alleging that the consent of such Person is or may
be required in connection with the transactions contemplated by this Agreement;
(ii) any material notice or other communication from any Governmental Entity in
connection with the transactions contemplated by this Agreement; and (iii) any
actions, suits, claims, investigations or proceedings commenced or, to the best
of its knowledge threatened against, relating to or involving or otherwise
affecting it or any of its Subsidiaries which, if pending on the date of this
Agreement would have been required to have been disclosed pursuant to Article IV
or Article V or which relate to the consummation of the transactions
contemplated by this Agreement.

        (c)  The Company shall promptly advise Parent orally and in writing if
there occurs, to the Knowledge of the Company, any change or event which results
in the executive officers of the Company having a good faith belief that such
change or event has resulted in or is reasonably likely to result in a Material
Adverse Effect on the Company. Parent shall promptly advise the Company orally
and in writing if there occurs, to the Knowledge of Parent, any change or event
which results in the executive officers of Parent having a good faith belief
that such change or event has resulted in or is reasonably likely to result in a
Material Adverse Effect on Parent. The Company shall provide to Parent, and
Parent shall provide to the Company, copies of all filings made by the Company
or Parent, as the case may be, with any Governmental Entity in connection with
this Agreement and the transactions contemplated hereby.

    Section 6.5   Conduct of Business of Sub Pending the Merger.  During the
                  ---------------------------------------------
period from the date of this Agreement through the Effective Time, Sub shall not
engage in any activity of any nature except as provided in or contemplated by
this Agreement.

    Section 6.6  Modifications to Recommendations.  Except as expressly
                 --------------------------------
permitted by this Section 6.6, neither the Board of Directors of the Company nor
                  -----------
any committee thereof shall (i) withdraw, qualify, modify or amend, in a manner
adverse to Parent, the Recommendations or make any public statement, filing or
release inconsistent with such Recommendations (provided, however, that
following the Board of Directors' consideration and evaluation of an Acquisition
Proposal, it is understood that for the purposes hereof, if the Company adopts a
neutral position or no position with respect to the Acquisition Proposal, it
shall be considered an adverse modification of the Recommendations), (ii)
approve or recommend, or propose publicly to approve or recommend, any
Acquisition Proposal or (iii) cause the Company to enter into any acquisition
agreement or other similar agreement related to any Acquisition Proposal (each,
a "Subsequent Determination"), provided that if prior to the consummation of the
   ------------------------
Offer the Board of Directors of the Company determines in good faith (after it
has received a Superior Proposal and after receipt of advice from outside
counsel) that the failure to make a Subsequent Determination would result in a
breach by the Board of Directors of the Company of its fiduciary duties to the
Company's stockholders under applicable law, the Board of Directors of the
Company may (subject to this and the following sentences) inform the Company's
stockholders that it no longer believes that the Offer and the Merger and the
other transactions contemplated hereby are advisable, but only at a time that is
72 hours following delivery by the Company to Parent of a written notice (a
"Subsequent Determination Notice") (i) advising Parent that the Board of
--------------------------------
Directors of the Company has received a Superior Proposal, (ii) specifying the
terms and conditions of such Superior Proposal, including the amount per share
the Company's

                                      -31-
<PAGE>

stockholders will receive per Share (valuing any non-cash consideration at what
the Board of Directors of the Company determines in good faith, after
consultation with its independent financial advisor, to be the fair value of the
non-cash consideration) and including a copy thereof with all accompanying
documentation, (iii) identifying the person making such Superior Proposal and
(iv) stating that the Company intends to make a Subsequent Determination. After
providing such notice, the Company shall provide a reasonable opportunity to
Parent to make such adjustments in the terms and conditions of this Agreement as
would enable the Company to proceed with its Recommendations to its stockholders
without a Subsequent Determination; provided, however, that any such adjustment
to this Agreement shall be at the discretion of Parent at the time.

                                  ARTICLE VII
                             ADDITIONAL AGREEMENTS

        Section 7.1   Employee Benefits.  (a) Parent shall take all necessary
                      -----------------
action so that each person who is an employee of the Company or any of its
Subsidiaries immediately prior to the consummation of the Merger (including each
such person who is on vacation, temporary layoff, approved leave of absence,
sick leave or short- or long-term disability) (a "Retained Employee") shall
                                                  -----------------
remain an employee of the Company or the Surviving Corporation or a Subsidiary
of the Company or of the Surviving Corporation, as the case may be, immediately
following the consummation of the Merger. Parent shall take all necessary action
so that each Retained Employee shall after the consummation of the Offer
continue to be credited with the unused vacation and sick leave credited to such
employee through the consummation of the Offer under the applicable vacation and
sick leave policies of the Company and its Subsidiaries, and Parent shall permit
or cause the Company, the Surviving Corporation and their Subsidiaries to permit
such employees to use such vacation and sick leave. Parent shall take all
necessary action so that, for purposes of eligibility and vesting service under
each employee benefit plan and determination of benefits under each paid time
off, vacation, severance, short-term disability and service award plans
maintained by Parent or any of its Subsidiaries in which employees or former
employees of the Company and its Subsidiaries become eligible to participate
upon or after the consummation of the Offer, each such person shall be given
credit for all service with the Company and its Subsidiaries (or all service
credited by the Company or its Subsidiaries) to the same extent as if rendered
to Parent or any of its Subsidiaries .

                (b)   Except as otherwise provided in this Section, Section 7.2
                                                                    -----------
or Section 7.12, nothing in this Agreement shall be interpreted as limiting the
   ------------
power of the Surviving Corporation to amend or terminate any particular Benefit
Plan or any other particular employee benefit plan, program, agreement or policy
or as requiring the Surviving Corporation to offer to continue (other than as
required by its terms) any written employment contract, subject to the terms and
conditions of the applicable plan, program, agreement or policies.

                (c)   Parent shall honor or cause to be honored by the Company,
the Surviving Corporation and their Subsidiaries all employment agreements,
bonus agreements, severance agreements, severance plans and non-competition
agreements with the persons who are directors, officers and employees of the
Company and its Subsidiaries (it being understood that nothing herein shall be
deemed to mean that the Company, the Surviving Corporation and their
Subsidiaries shall not be required to honor any of their obligations under any
such agreement).

                                      -32-
<PAGE>

                (d)   Parent shall, or shall cause the Company and the Surviving
Corporation to, (i) waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Retained Employees and former employees of the
Company and its Subsidiaries under any welfare or fringe benefit plan in which
such employees and former employees may be eligible to participate after the
consummation of the Offer, other than limitations or waiting periods that are in
effect with respect to such employees and that have not been satisfied under the
corresponding welfare or fringe benefit plan maintained by the Company for the
Retained Employees and former employees prior to the consummation of the Offer,
and (ii) provide each Retained Employee and former employee with credit under
any welfare plans in which such employee or former employee becomes eligible to
participate after the consummation of the Offer for any co-payments and
deductibles paid by such Retained Employee or former employee for the then
current plan year under the corresponding welfare plans maintained by the
Company prior to the consummation of the Offer.

        Section 7.2   Options.
                      -------

                (a)   Except as set forth in Section 7.2(f), each Company Stock
                                             --------------
Option that is outstanding immediately prior to the date the Offer is
consummated (the "Offer Consummation Date") pursuant to any Company Stock Plan
shall vest and become immediately exercisable at the time of the consummation of
the Offer. On the Offer Consummation Date with respect to Company Stock Options
held by persons who are not subject to the reporting requirements of Section
16(a) of the Exchange Act, and at the Effective Time with respect to Company
Stock Options held by persons who are subject to the reporting requirements of
Section 16(a) of the Exchange Act, each Company Stock Option shall be adjusted
to represent an option to purchase the number of shares of Company Common Stock
(a "Company Adjusted Option") (rounded down to the nearest full share)
determined by multiplying (i) the number of shares of Company Common Stock
subject to such Company Stock Option immediately prior to the Offer Consummation
Date with respect to Company Stock Options held by persons who are not subject
to the reporting requirements of Section 16(a) of the Exchange Act and
immediately prior to the Effective Time with respect to Company Stock Options
held by persons who are subject to the reporting requirements of Section 16(a)
of the Exchange Act, by (ii) 0.5, at an exercise price per share of Company
Common Stock equal to the exercise price per share of Company Common Stock
immediately prior to the Offer Consummation Date. In addition, promptly
following the Offer Consummation Date with respect to holders of Company Stock
Options who are not subject to the reporting requirements of Section 16(a) of
the Exchange Act, and promptly following the Effective Time with respect to
holders of Company Stock Options who are subject to the reporting requirements
of Section 16(a) of the Exchange Act, Parent shall pay to the holder of each
Company Stock Option an amount of cash (rounded up to the nearest cent) equal to
the product of (A) (x) $73.00 minus (y) the exercise price per share of Company
Common Stock immediately prior to the Offer Consummation Date and (B) the number
of shares of Company Common Stock subject to such option multiplied by 0.5
(rounded up to the nearest full share). Each Company Adjusted Option shall be
exercisable upon the same terms and conditions as under the applicable Company
Stock Plan and the applicable option agreement issued thereunder, except as
otherwise provided in this Section 7.2.

                (b)   At the Effective Time, each Company Adjusted Option shall
be assumed by Parent and become and represent an option to purchase the number
of Parent Shares (a "Parent

                                      -33-
<PAGE>

Substitute Option") (rounded to the nearest full share, or if there shall not be
a nearest share, the next greater full share) determined by multiplying (i) the
number of shares of Company Common Stock subject to such Company Adjusted Option
immediately prior to the Effective Time by (ii) 1.767, at an exercise price per
Parent Share (rounded up to the nearest tenth of a cent) equal to (A) the
exercise price per share of Company Common Stock immediately prior to the
Effective Time divided by 1.767. Parent shall pay cash to holders of Parent
Substitute Options in lieu of issuing fractional Parent Shares upon the exercise
of Parent Substitute Options. Each Company Adjusted Option so converted shall be
exercisable upon the same terms and conditions as under the applicable Company
Stock Plan and the applicable option agreement issued thereunder, except as
otherwise provided in this Section 7.2. Parent shall (i) on or prior to the
Effective Time, reserve for issuance the number of Parent Shares that will
become subject to Parent Substitute Options pursuant to this Section 7.2(b),
(ii) from and after the Effective Time, upon exercise of the Parent Substitute
Options in accordance with the terms thereof, make available for issuance all
Parent Shares covered thereby, (iii) at the Effective Time, assume the Company
Stock Plans, with the result that all obligations of the Company under the
Company Stock Plans, including with respect to Company Adjusted Options
outstanding at the Effective Time, shall be obligations of Parent following the
Effective Time, and (iv) as promptly as practicable after the Effective Time,
issue to each holder of an outstanding Company Adjusted Option a document
evidencing the foregoing assumption by Parent.

                (c)   The parties shall take all actions so that the Company
Adjusted Options converted by Parent qualify following the Effective Time as
incentive stock options as defined in Section 422 of the Code to the extent
permitted under Section 422 of the Code and to the extent the Company Adjusted
Options qualified as incentive stock options prior to the Effective Time;
provided, however, that nothing in this Section 7.2(c) shall prevent the
acceleration of the vesting or exercisability of any Company Stock Option, as
provided in Section 7.2(a).

                (d)   Parent shall, as promptly as practicable but in any event
no later than three days after the Effective Time, file a registration statement
on Form S-8 or other applicable form under the Securities Act, covering the
Parent Shares issuable upon the exercise of Parent Substitute Options created
upon the assumption by Parent of Company Adjusted Options under Section 7.2(b),
and will maintain the effectiveness of such registration, and the current status
of the prospectus contained therein, until the exercise or expiration of such
Parent Substitute Options.

                (e)   The parties will cooperate to take all reasonable steps
necessary to give effect to this Section 7.2.

                (f)   Notwithstanding the terms of Section 7.2(a), to the extent
                                                   --------------
an option holder holds any unexercisable incentive stock options ("Unvested
                                                                  ---------
ISO") on the Offer Consummation Date that do not become exercisable upon the
---
consummation of the Offer pursuant to the terms of the Company Stock Plan(s)
under which such Unvested ISOs were granted, then, to the extent possible, each
such Unvested ISO shall be converted into the right to receive cash in full and
the other options held by such option holder shall be appropriately adjusted
such that the aggregate amount of cash payable to such option holder pursuant to
Section 7.2(a) and this Section 7.2(f) does not exceed the amount that would
--------------          --------------
otherwise be payable pursuant to Section 7.2(a).
                                 --------------

                                      -34-
<PAGE>

        Section 7.3   Shareholder Approval; Preparation of Form S-4 and Proxy
             -------------------------------------------------------
Statement/Prospectus.  (a) Parent and the Company shall, as soon as practicable
--------------------
following the acceptance of Shares pursuant to the Offer, prepare and the
Company shall file with the SEC the Proxy Statement and Parent and the Company
shall prepare and Parent shall file with the SEC a registration statement on
Form S-4 (the "Form S-4") for the offer and sale of the Parent Shares pursuant
               --------
to the Merger and in which the Proxy Statement will be included as a prospectus.
Each of the Company and Parent shall use all reasonable efforts to have the Form
S-4 declared effective under the Securities Act as promptly as practicable after
such filing.  The Company will use all reasonable efforts to cause the Proxy
Statement to be mailed to the Company's stockholders as promptly as practicable
after the Form S-4 is declared effective under the Securities Act.  Parent shall
also take any action (other than qualifying to do business in any jurisdiction
in which it is not now so qualified or to file a general consent to service of
process) required to be taken under any applicable state securities laws in
connection with the issuance of Parent Shares in the Merger and the Company
shall furnish all information concerning the Company and the holders of capital
stock of the Company as may be reasonably requested in connection with any such
action and the preparation, filing and distribution of the Proxy Statement.  No
filing of, or amendment or supplement to, or correspondence to the SEC or its
staff with respect to, the Form S-4 will be made by Parent, or the Proxy
Statement will be made by the Company, without providing the other party a
reasonable opportunity to review and comment thereon.  Parent will advise the
Company, promptly after it receives notice thereof, of the time when the Form S-
4 has become effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the qualification of the Parent
Shares issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Form S-4 or
comments thereon and responses thereto or requests by the SEC for additional
information.  The Company will advise Parent, promptly after it receives notice
thereof, of any request by the SEC for the amendment of the Proxy Statement or
comments thereon and responses thereto or requests by the SEC for additional
information.  If at any time prior to the Effective Time any information
relating to the Company or Parent, or any of their respective affiliates,
officers or directors, should be discovered by the Company or Parent which
should be set forth in an amendment or supplement to either of the Form S-4 or
the Proxy Statement, so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other parties hereto and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC and, to the
extent required by law, disseminated to the stockholders of the Company.

                (b)   The Company shall establish, prior to or as soon as
practicable following the date upon which the Form S-4 becomes effective, a
record date (which shall be prior to or as soon as practicable following the
date upon which the Form S-4 beco mes effective) for, duly call, give notice of,
convene and hold a meeting of its stockholders (the "Company Stockholders
                                                     --------------------
Meeting") for the purpose of considering and taking action upon this Agreement
-------
and the Merger and (with the consent of Parent) such other matters as may in the
reasonable judgment of the Company be appropriate for consideration at the
Company Stockholders Meeting. Once the Company Stockholders Meeting has been
called and noticed, the Company shall not postpone or

                                      -35-
<PAGE>

adjourn the Company Stockholders Meeting (other than for the absence of a
quorum) without the consent of Parent. Subject to its fiduciary duties under
applicable law, the Board of Directors of the Company shall include the
Recommendations in the Form S-4 and the Proxy Statement as such Recommendations
pertain to the Merger and this Agreement. The Company shall use its reasonable
best efforts to solicit from stockholders of the Company proxies for use at the
Company Stockholders Meeting and in favor of this Agreement and the Merger and
shall take all other actions reasonably necessary or advisable to secure the
vote or consent of stockholders required by the DGCL to effect the Merger.

                (c)   Parent agrees to cause all Shares owned by Parent or any
Subsidiary of Parent to be voted in favor of the Merger.

        Section 7.4   Access to Information. Upon reasonable notice and subject
                      ---------------------
to the terms of the Confidentiality Agreement, each of Company and Parent shall,
and shall cause each of its respective Subsidiaries to, afford to the other
party, and its respective Representatives all reasonable access, during normal
business hours during the period prior to the Effective Time, to all their
respective properties, books, contracts, commitments, records and
Representatives, during such period, each of Company and Parent shall (and shall
cause each of its respective Subsidiaries to) make available to the other party
(a) a copy of each report, schedule, registration statement and other document
filed or received by it during such period pursuant to the requirements of the
Federal or state securities laws or the Federal tax laws and (b) all other
information concerning its business, properties and personnel as the other party
may reasonably request. In the event of a termination of this Agreement for any
reason, each party shall promptly return or destroy, or cause to be returned or
destroyed, all nonpublic information so obtained from the other party or any of
its Subsidiaries.

        Section 7.5  Fees and Expenses.  (a) If the Offer has not been accepted,
                     -----------------
the Company agrees to pay Parent a fee equal to $75.5 million as a result of the
occurrence of any of the events set forth below (a "Trigger Event"):
                                                    -------------

                      (i)  the Company shall have received an Acquisition
                Proposal (other than the cash tender offer by SRM Acquisition
                Corp (an affiliate of Shell Oil Company), pursuant to its Offer
                to Purchase dated March 12, 2001, as amended to the date of this
                Agreement, at a purchase price of $60 per Share (the "Shell
                Tender Offer"), it being understood that the Company shall be
                deemed to have received an Acquisition Proposal (x) if SRM
                Acquisition Corp amends its tender offer by increasing its
                tender offer price above $60 per Share (including cash,
                securities or any combination thereof offered for Shares) after
                the date of the Agreement, or (y) if an Acquisition Proposal
                other than the Shell Tender Offer is made by any other affiliate
                of Shell Oil Company) after the date of this Agreement (but
                prior to the termination hereof), and at any time prior to, or
                within 12 months after, the termination of this Agreement
                (unless this Agreement is terminated pursuant to Section 9.1(a),
                                                                 --------------
                Section 9.1(b)(iv) or Section 9.1(e)), the Company shall have
                ------------------    --------------
                entered into, or shall have publicly announced its intention to
                enter into, an agreement or an agreement in principle with
                respect to any Acquisition Proposal;

                                      -36-
<PAGE>

                      (ii)  the Company has provided Parent with a Subsequent
                Determination Notice or the Board of Directors of the Company
                (or any committee thereof) (A) shall have made a Subsequent
                Determination, (B) shall include in the Schedule 14D-9 its
                Recommendations with modification or qualification in a manner
                adverse to Parent, or (C) shall have resolved to, or publicly
                announced an intention to, take any of the actions as specified
                in this Section 7.5(a)(ii); or

                      (iii)  (A) as of the final expiration date of the Offer,
                all conditions to the consummation of the Offer shall have been
                met or waived except for satisfaction of the Minimum Condition,
                (B) there shall have been made subsequent to the date of this
                Agreement (but before such expiration date of the Offer) an
                Acquisition Proposal (other than the cash tender offer by SRM
                Acquisition Corp (an affiliate of Shell Oil Company), pursuant
                to the Shell Tender Offer, it being understood that the Company
                shall be deemed to have received an Acquisition Proposal (x) if
                SRM Acquisition Corp amends its tender offer by increasing its
                tender offer price above $60 per Share (including cash,
                securities or any combination thereof offered for Shares) after
                the date of the Agreement, or (y) if an Acquisition Proposal
                other than the Shell Tender Offer is made by any other affiliate
                of Shell Oil Company) and (C) at any time prior to, or within 12
                months after, the expiration or termination of the Offer, the
                Company shall have entered into, or shall have publicly
                announced its intention to enter into, an agreement or
                agreements in principle with respect to any Acquisition
                Proposal.

                Any fee due under Section 7.5(a) shall be payable by wire
                                  --------------
transfer of same day funds on (A) the date of termination of this Agreement if
this Agreement is terminated by the Company pursuant to Section 9.1(d), (B) the
                                                        --------------
date which is the third business date following the date of the termination of
the Agreement if this Agreement is terminated by Parent pursuant to Section
                                                                    -------
9.1(c) and (C) any fee due under clause (i) or (iii) above shall not be payable
------
until the Company shall have entered into, or shall have publicly announced its
intention to enter into an agreement or agreement in principle with respect to
any Acquisition Proposal.

                (b)   Except as set forth in this Section 7.5, all fees and
                                                  -----------
expenses incurred in connection with the Offer and the Merger, this Agreement
and the transactions cont emplated by this Agreement shall be paid by the party
incurring such fees or expenses, whether or not the Offer or the Merger is
consummated; provided, that if this Agreement is terminated as a result of the
occurrence of a Trigger Event, in addition to any amounts paid or payable by the
Company to Parent pursuant to Section 7.5(a), the Company shall assume and pay,
                              -------------
or reimburse Parent for, all out-of-pocket fees payable and expenses reasonably
incurred by Parent (including the fees and expenses of its counsel) in
connection with this Agreement and the transactions contemplated hereby, up to a
maximum of $15 million.

                (c)   If the Company shall have breached or failed to perform in
any material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform (A)
would give rise to the failure of a condition set forth in subclause (c) or (d)
of clause (3) of Exhibit A, and (B) is incapable of being or has not been cured
by the Company prior to or on the earlier of (x) the date which is 10 calendar
days immediately following written notice by Parent to the Company of such
breach or failure to

                                      -37-
<PAGE>

perform and (y) the expiration or termination of the Offer in accordance with
the terms of this Agreement, the Company shall assume and pay, or reimburse
Parent for, all out-of-pocket fees payable and expenses reasonably incurred by
Parent (including the fees and expenses of its counsel) in connection with this
Agreement and the transactions contemplated hereby, up to a maximum of $15
million.

                (d)   If the Company has terminated this Agreement pursuant to
Section 9.1(e) and such breach of a representation, warranty, covenant or other
--------------
agreement contained in this Agreement is incapable of being or has not been
cured by Parent prior to or on the date which is 10 calendar days immediately
following written notice by the Company to Parent of such breach or failure to
perform, Parent shall reimburse the Company for all out-of-pocket fees payable
and expenses reasonably incurred by the Company (including the fees and expenses
of its counsel) in connection with this Agreement and the transactions
contemplated hereby, up to a maximum of $15 million.

                (e)  Parent and the Company agree that the agreements contained
in Sections 7.5(a) and 7.5(b) hereof are an integral part of the transactions
contemplated by this Agreement and constitute liquidated damages and not a
penalty.

        Section 7.6   Public Announcements.  Parent and the Company will consult
                      --------------------
with each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by applicable law, or by
obligations pursuant to any listing agreement with any national securities
exchange.

        Section 7.7   Transfer Taxes.  The Company and Parent shall cooperate
                      --------------
in the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees and any similar taxes which become
payable in connection with the transactions contemplated by this Agreement
(together with any related interest, penalties or additions to tax, "Transfer
Taxes"). All Transfer Taxes shall be paid by the Company (without any
reimbursement whatsoever by Parent, its Subsidiaries or other affiliates) and
expressly shall not be a liability of any holder of Company Common Stock.

        Section 7.8   State Takeover Laws.  If any "fair price" or "control
                      -------------------
share acquisition" statute or other similar statute or regulation shall become
applicable to the transactions contemplated hereby, Parent and the Company and
their respective Boards of Directors shall use reasonable efforts to grant such
approvals and take such actions as are necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to minimize the effects of any such
statute or regulation on the transactions contemplated hereby.

        Section 7.9   Indemnification; Directors and Officers Insurance.
                      -------------------------------------------------
(a) Parent shall, or shall cause the Surviving Corporation to, honor for a
period of not less than six years from the Effective Time (or, in the case of
matters occurring at or prior to the Effective Time that have not

                                      -38-
<PAGE>

been resolved prior to the sixth anniversary of the Effective Time, until such
matters are finally resolved), all rights to indemnification or exculpation,
existing in favor of a director, officer, employee or agent (an "Indemnified
                                                                 -----------
Person") of the Company or any of its Subsidiaries (including, without
------
limitation, rights relating to advancement of expenses and indemnification
rights to which such persons are entitled because they are serving as a
director, officer, agent or employee of another entity at the request of the
Company or any of its Subsidiaries), as provided in the Restated Certificate of
Incorporation of the Company, the Bylaws of the Company, in each case, as in
effect on the date of this Agreement, and relating to actions or events through
the Effective Time; provided, however, that the Surviving Corporation shall not
be required to indemnify any Indemnified Person in connection with any
proceeding (or portion thereof) to the extent involving any claim initiated by
such Indemnified Person unless the initiation of such proceeding (or portion
thereof) was authorized by the Board of Directors of the Company or unless such
proceeding is brought by an Indemnified Person to enforce rights under this
Section 7.9; provided further that any determination required to be made with
-----------
respect to whether an Indemnified Person's conduct complies with the standards
set forth under the DGCL, the Restated Certificate of Incorporation of the
Company, the Bylaws of the Company, as the case may be, shall be made by
independent legal counsel selected by such Indemnified Person and reasonably
acceptable to Parent; and provided further that nothing in this Section 7.9
                                                                -----------
shall impair any rights of any Indemnified Person. Without limiting the
generality of the preceding sentence, in the event that any Indemnified Person
becomes involved in any actual or threatened action, suit, claim, proceeding or
investigation after the Effective Time, Parent shall, or shall cause the
Surviving Corporation to, promptly advance to such Indemnified Person his or her
legal and other expenses (including the cost of any investigation and
preparation incurred in connection therewith), subject to the providing by such
Indemnified Person of an undertaking to reimburse all amounts so advanced in the
event of a non-appealable determination of a court of competent jurisdiction
that such Indemnified Person is not entitled thereto.

                (b)   Prior to the Effective Time and subject to the proviso in
the following sentence relating to the cost thereof, the Company shall have the
right to obtain and pay for in full a "tail" coverage directors' and officers'
liability insurance policy ("D&O Insurance") covering a period of not less than
                             -------------
six years after the Effective Time and providing coverage in amounts and on
terms consistent with the Company's existing D&O Insurance. In the event the
Company is unable to obtain such insurance, Parent shall cause the Surviving
Corporation to maintain the Company's D&O Insurance for a period of not less
than six years after the Effective Time; provided, that the Surviving
Corporation may substitute therefor policies of substantially similar coverage
and amounts containing terms no less advantageous to such former directors or
officers; provided further that if the existing D&O Insurance expires or is
cancelled during such period, Parent or the Surviving Corporation shall use its
best efforts to obtain substantially similar D&O Insurance; and provided further
that the Company shall not, without Parent's consent, expend an amount in excess
of 300% of the last annual premium paid prior to the date hereof to procure the
above described "tail" coverage and neither Parent nor the Surviving Corporation
shall be required to expend, in order to maintain or procure an annual D&O
Insurance policy, in lieu of a tail policy, an amount in excess of 300% of the
last annual premium paid prior to the date hereof, but in such case shall
purchase as much coverage as possible for such amount.

                                      -39-
<PAGE>

                (c)  The provisions of this Section 7.9 are intended to be for
                                            -----------
the benefit of, and shall be enforceable by, each Indemnified Person, his or her
heirs and his or her personal representatives and shall be binding on all
successors and assigns of Parent, the Company and the Surviving Corporation.

        Section 7.10   Board of Directors.  Promptly after such time as Sub
                       ------------------
purchases Shares pursuant to the Offer (but subject to the satisfaction of the
Minimum Condition), Sub shall be entitled, to the fullest extent permitted by
law, to designate at its option up to that number of directors, rounded to the
nearest whole number, of the Company's Board of Directors, subject to compliance
with Section 14(f) of the Exchange Act, as will make the percentage of the
Company's directors designated by Sub equal to the aggregate voting power of the
shares of Common Stock held by Parent or any of its Subsidiaries; provided,
however, that in the event that Sub's designees are elected to the Board of
Directors of the Company, until the Effective Time, such Board of Directors
shall have at least two directors who are directors on the date of this
Agreement and who are not officers of the Company (the "Independent Directors");
                                                        ---------------------
and provided, further that, in such event, if the number of Independent
Directors shall be reduced below two for any reason whatsoever, the remaining
Independent Directors shall, to the fullest extent permitted by law, designate a
person to fill such vacancy who shall be deemed to be an Independent Director
for purposes of this Agreement or, if no Independent Directors then remain, the
other directors shall designate two persons to fill such vacancies who shall not
be officers or affiliates of the Company or any of its Subsidiaries, or officers
or affiliates of Parent or any of its Subsidiaries, and such persons shall be
deemed to be Independent Directors for purposes of this Agreement. Following the
election or appointment of Sub's designees pursuant to this Section 7.10 and
                                                            ------------
prior to the Effective Time, (A) any amendment, or waiver of any term or
condition, of this Agreement or the Restated Certificate of Incorporation or
Bylaws of the Company and (B) any termination of this Agreement by the Company,
any extension by the Company of the time for the performance of any of the
obligations or other acts of Sub or waiver or assertion of any of the Company's
rights hereunder, and any other consent or action by the Board of Directors with
respect to this Agreement, will require the concurrence of a majority of the
Independent Directors and no other action by the Company, including any action
by any other director of the Company, shall be required for purposes of this
Agreement. To the fullest extent permitted by applicable law, the Company shall
take all actions requested by Parent which are reasonably necessary to effect
the election of any such designee, including mailing to its stockholders the
Information Statement containing the information required by Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder, and the Company agrees
to make such mailing with the mailing of the Schedule 14D-9 (provided that Sub
shall have provided to the Company on a timely basis all information required to
be included in the Information Statement with respect to Sub's designees).
Parent and Sub will be solely responsible for any information with respect to
either of them and their nominees, officers, directors and affiliates required
by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. In
connection with the foregoing, the Company will promptly, at the option of
Parent, to the fullest extent permitted by law, either increase the size of the
Company's Board of Directors and/or obtain the resignation of such number of its
current directors as is necessary to enable Sub's designees to be elected or
appointed to the Company's Board of Directors as provided above.

        Section 7.11  HSR Act Filings; Reasonable Best Efforts.  (a)  Each of
                      ----------------------------------------
Parent and the Company shall (i) promptly make or cause to be made the filings
required of such party or any of

                                      -40-
<PAGE>

its Subsidiaries under the HSR Act and any other Antitrust Laws with respect to
the Offer, the Merger and the other transactions contemplate d by this
Agreement, (ii) comply at the earliest practicable date with any request under
the HSR Act or such other Antitrust Laws for additional information, documents,
or other material received by such party or any of its Subsidiaries from the
Federal Trade Commission or the Department of Justice or any other Governmental
Entity in respect of such filings, the Offer, the Merger or such other
transactions, and (iii) cooperate with the other party in connection with any
such filing and in connection with resolving any investigation or other inquiry
of any such agency or other Governmental Entity under any Antitrust Laws with
respect to any such filing, the Offer, the Merger or such other transactions.
Each of Parent and the Company shall promptly inform the other of any
communication with, and any proposed understanding, undertaking, or agreement
with, any Governmental Entity regarding any such filings, the Offer, the Merger
or such other transactions.

                (b)   Each of Parent and the Company shall use all reasonable
best efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the Offer, the Merger or any other
transactions provided for in this Agreement under the Antitrust Laws. In
connection therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging the Offer, the Merger or
any other transactions provided for in this Agreement as violative of any
Antitrust Law, each of Parent and the Company shall cooperate and use all
reasonable best efforts vigorously to contest and resist any such action or
proceeding and to have vacated, lifted, reversed, or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents, or restricts
consummation of the Offer, the Merger or any such other transactions. Each of
Parent and the Company shall use all reasonable best efforts to take such action
as may be required to cause the expiration of the notice periods under the HSR
Act or other Antitrust Laws with respect to the Offer, the Merger and such other
transactions as promptly as possible after the execution of this Agreement.

                (c)   Each of the parties agrees to use all reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Offer, the Merger, and the other
transactions contemplated by this Agreement, including (i) the obtaining of all
other necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all other necessary registrations and
filings (including other filings with Governmental Entities, if any), (ii) the
obtaining of all necessary consents, approvals or waivers from third parties,
(iii) the preparation of the Form S-4, the Offer Documents, the Schedule 14D-9
and the Proxy Statement, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement, in each case subject to the
Company Board of Directors' fiduciary duties under applicable law.

                (d)   Notwithstanding anything to the contrary in this Section
                                                                       -------
7.11, (i) neither Parent nor any of its Subsidiaries shall be required to divest
----
any of their respective businesses, product lines or assets that could
reasonably be expected to have a Material Adverse Effect on Parent, (ii) neither
Parent nor any of its Subsidiaries shall be required to take or agree to take
any other action or agree to any limitation that could reasonably be expected to
have a Material Adverse Effect on Parent, (iii) neither the Company nor its
Subsidiaries shall be required to

                                      -41-
<PAGE>

divest any of their respective businesses, product lines or assets, or to take
or agree to take any other action or agree to any limitation that could
reasonably be expected to have a Material Advers e Effect on the Company, and
(iv) neither Parent nor Sub shall be required to waive any of the conditions to
the Offer set forth in Exhibit A or any of the conditions of to the Merger set
forth in Article VIII.
         ------------

        Section 7.12  Stay Bonuses; Severance.  (a)  Prior to the Effective
                      -----------------------
Time, the Company shall be permitted to award bonuses to employees of the
Company or any of its Subsidiaries in an aggregate amount not to exceed
$2,000,000, with such bonuses to be allocated at the direction of its Chief
Executive Officer with the consent of Parent, which consent shall not be
unreasonably withheld or delayed. Such bonuses shall be paid upon the earlier of
90 days following the Effective Time and 30 days following the date of
termination hereof as described in Article IX (the "Payment Date") to each
                                   ----------
employee to whom such a bonus has been awarded and who continues to be employed
by the Company (or any successor or affiliate of the Company) on the Payment
Date or whose employment terminates prior to the Payment Date due to death,
Disability, termination by the Company (or any successor or affiliate of the
Company) without Cause, or termination by the employee with Good Reason (as such
capitalized terms are defined in the Company's Severance Protection Plan);
provided, however, that no such bonus shall be paid to any employee who has
entered into a Severance Protection Agreement with the Company and whose
employment terminates prior to the Payment Date entitling such employee to a
severance payment pursuant to Section 3.1(b) of such Severance Protection
Agreement.

                (b)   Subject to Section 7.1(c), Parent shall maintain or cause
                      --------------
cause the Company or Surviving Corporation to maintain each of the Company's
severance policy as in effect on the date hereof as set forth in Item 7.12(b) of
                                                                 ------------
the Company Letter or shall replace such policy with a policy providing equal or
more favorable compensation, for a period of at least two years from the
Effective Time.

                (c)  Each employee of the Company or any of its Subsidiaries
whose employment is terminated upon, or within 18 months following, the
consummation of the Offer, other than an employee who has entered into a
Severance Protection Agreement with the Company, shall receive a cash payment
from the Company or Parent in the amount of $8,000 which may, in the sole
discretion of such employee, be used to obtain outplacement services, to assist
in the transition to subsequent employment or for any other purpose.

        Section 7.13   Section 16 Matters. Prior to the Effective Time, Parent
                       ------------------
and the Company shall take all such steps as may reasonably be required to cause
any dispositions of Shares (including derivative securities with respect to the
Shares) or acquisition of Parent Shares (including derivative securities with
respect to the Parent Shares) resulting from the transactions contemplated by
this Agreement by each individual who is subject to the reporting requirements
of Section 16(a) of the Exchange Act with respect to the Company to be exempt
under Rule 16b-3 promulgated under the Exchange Act, such steps to be taken in
accordance with the No-Action Letter, dated January 12, 1999, issued by the SEC
regarding such matters.

        Section 7.14   Tax Treatment. This Agreement is intended to constitute
                       -------------
"plan of reorganization" with respect to the Offer and the Forward Merger for
United States Federal income tax purposes. From and after the date of this
Agreement, each party hereto shall use its

                                      -42-
<PAGE>

reasonable best efforts to cause the Offer and the Forward Merger to qualify,
and shall not, without the prior written consent of the other parties hereto,
knowingly take any actions or cause any actions to be taken which could
reasonably be expected to prevent the Offer and the Forward Merger from
qualifying as a reorganization under the provisions of Section 368(a) of the
Code. Following the Effective Time, neither the Surviving Corporation nor Parent
nor any of their respective affiliates shall take any action or cause any action
to be taken which could reasonably be expected to cause th e Offer and the
Forward Merger to fail to qualify as a reorganization under Section 368(a) of
the Code. Parent shall use its reasonable best efforts to obtain an opinion of
Skadden, Arps, Slate, Meagher & Flom LLP (which includes its affiliated law
practice entities), or another nationally recognized United States Federal
income tax counsel or "Big Five" accounting firm ("Tax Counsel") (based on the
                                                   -----------
facts and customary representations and assumptions) that the Transaction will
be treated as a "reorganization" within the meaning of Section 368(a) of the
Code (the "Tax Opinion Standard"). Notwithstanding anything express or implied
           ---------------------
to the contrary in this Agreement, but subject to the provisions of this Section
                                                                         -------
7.14, if such opinion cannot be obtained, then, in Parent's reasonable
----
discretion, the Reverse Merger shall be effected instead of the Forward Merger.

        Section 7.15  Affiliate Letters. As promptly as practicable, the
                      -----------------
Company shall deliver to Parent a letter identifying all persons who are at the
time this Agreement is submitted for adoption by the stockholders of the
Company, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall use all reasonable efforts to deliver or cause
to be delivered to Parent, prior to the expiration of the Offer, an Affiliate
Letter in a customary form for transactions of this type.

        Section 7.16  Litigation.  The Company shall give Parent a reasonable
                      ----------
opportunity to participate in the defense of any litigation against the Company
and/or its directors relating to the transactions contemplated by this Agreement
or any other Acquisition Proposal and will not settle or compromise any such
action without the prior written consent of Parent, which consent shall not be
unreasonably withheld or delayed.

        Section 7.17  Rights Agreement.  Except as expressly required by this
                      ----------------
Agreement, the Company shall not, without the prior written consent of Parent,
amend the Rights Agreement or take any other action with respect to, or make any
determination under, the Rights Agreement, including a redemption of the Rights
or any action with respect to the Rights Agreement to facilitate an Acquisition
Proposal; provided, however, that the Company may amend or take appropriate
action under the Rights Agreement to delay the occurrence of a Distribution Date
(as defined in the Rights Agreement) in response to the public announcement of
an Acquisition Proposal.

        Section 7.18  Bank Debt.  The Company agrees to use its reasonable best
                      ---------
efforts to seek the consent of its bank lenders and the issuers of letters of
credit to the Company to permit the consummation of the transactions
contemplated hereby, including, without limitation, the Offer and the Merger,
without necessity to repay the indebtedness of the Company to such lenders or to
replace such letters of credit.

                                      -43-
<PAGE>

                                 ARTICLE VIII
                             CONDITIONS PRECEDENT

        Section 8.1   Conditions to Each Party's Obligation to Effect the
                      ---------------------------------------------------
Merger. The respective obligations of each party to effect the Merger shall be
------
subject to the fulfillment at or prior to the Effective Time of the following
conditions:

                (a)  Company Stockholder Approval. The Company Stockholder
                     ----------------------------
Approval shall have been obtained; provided, however, that Parent and Sub shall
vote all of their shares of capital stock of the Company entitled to vote
thereon in favor of the Merger.

                (b)  No Injunction or Restraint. No statute, rule, regulation,
                     --------------------------
executive order, decree, temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
Governmental Entity preventing the consummation of the Merger shall be in
effect; provided, however, that each of the parties shall have used their
reasonable best efforts to prevent the entry of any such temporary restraining
order, injunction or other order, including, without limitation, taking such
action as is required to comply with Section 7.11, and to appeal as promptly as
possible any injunction or other order that may be entered.

                (c)  Purchase of Shares. Sub shall have previously accepted for
                     ------------------
payment and paid for Shares pursuant to the Offer; provided, however, that this
condition shall be deemed satisfied if Parent or Sub fails to accept for payment
and pay for Shares pursuant to the Offer in violation of the terms of this
Agreement and/or the Offer.

                (d)  Form S-4.  The Form S-4 shall have become effective under
                     --------
the Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.

                (e)  Listing Parent Shares.  The Parent Shares to be issued in
                     ---------------------
the Merger shall have been approved for listing on the NYSE.

                                  ARTICLE IX
                           TERMINATION AND AMENDMENT

        Section 9.1   Termination. This Agreement may be terminated at any time
                      -----------
prior to the Effective Time, whether before or after approval of this Agreement
and the Merger by the stockholders of the Company or Sub:

                (a)  by mutual written consent of Parent and the Company

                (b)  by either of Parent or the Company:

                      (i)   if the Offer shall have expired or been terminated
                in accordance with the terms of this Agreement without Parent or
                Sub having accepted for payment any Shares pursuant to the
                Offer, unless the failure to consummate the Offer is the result
                of a willful and material breach of this Agreement by the party
                seeking to terminate this Agreement;

                                      -44-
<PAGE>

                      (ii)  if the Offer shall not have been consummated on or
                before August 31, 2001 (the "Outside Date"), unless the failure
                to consummate the Offer is the result of a willful and material
                breach of this Agreement by the party seeking to terminate this
                Agreement;

                      (iii) if the Merger shall not have been consummated as a
                result of any condition thereto in Article VIII being incapable
                of being satisfied; or

                      (iv)  if any statute, rule, regulation, injunction or
                decree having the effects set forth in subclause (a) or (b) of
                clause (3) of Exhibit A shall be in effect and shall have become
                              ---------
                final and nonappealable; or

                (c)   by Parent, upon the occurrence of the Trigger Event
described in Section 7.5(a)(ii) hereof;
             ----------

                (d)   by the Company, if the Company makes a Subsequent
Determination in material compliance with Section 6.2 hereof and pursuant to the
                                          -----------
provisions of Section 6.6 hereof, provided the Company has paid or concurrently
pays Parent the sums (including providing Parent with an undertaking confirming
the Company's obligation to reimburse expenses as required by Section 7.5)
                                                              -----------
required by Section 7.5(a) hereof; or
            --------------

                (e)   by the Company (i) if Sub or Parent shall have breached in
any material respect any of their respective covenants, obligations or other
agreements under this Agreement, or (ii) if the representations and warranties
of Parent and Sub set forth in this Agreement that are qualified as to
materiality shall not be true and correct as of the date of the Agreement and as
of the expiration of the date of termination of this Agreement (except to the
extent expressly made as of an earlier date, in which case as of such date), or
any of the representations and warranties set forth in the Agreement that are
not so qualified by materiality shall not be true and correct in any material
respect as of the date of this Agreement and as of the date of termination of
this Agreement (except to the extent expressly made as of an earlier date, in
which case as of such date); provided that this right of termination shall not
be deemed to exist unless any such breaches of representation or warranty
(without regard to any "Materiality" or "Material Adverse Effect" or similar
qualifier or threshold), individually or in the aggregate, has had or could
reasonably be expected to have, a Material Adverse Effect on the Parent;
provided, further that the breach of the covenant, obligation, agreement,
representation or warranty is incapable of being or has not been cured by Parent
or Sub prior to or on the date which is 10 calendar days immediately following
written notice by the Company to Parent of such breach or failure to perform.

                (f)   by Parent (i) if the Company shall have breached in any
material respect any of its covenants, obligations or other agreements under
this Agreement, or (ii) if the representations and warranties of the Company set
forth in this Agreement that are qualified as to materiality shall not be true
and correct as of the date of the Agreement and as of the expiration of the date
of termination of this Agreement (except to the extent expressly made as of an
earlier date, in which case as of such date), or any of the representations and
warranties set forth in the Agreement that are not so qualified by materiality
shall not be true and correct in any material respect as of the date of this
Agreement and as of the date of termination of this Agreement

                                      -45-
<PAGE>

(except to the extent expressly made as of an earlier date, in which case as of
such date); provided that this right of termination shall not be deemed to exist
unless any such breaches of representation or warranty (without regard to any
"Materiality" or "Material Adverse Effect" or similar qualifier or threshold),
individually or in the aggregate, has had or could reasonably be expected to
have, a Material Adverse Effect on the Company; provided, further that the
breach of the covenant, obligation, agreement, representation or warranty is
incapable of being or has not been cured by the Company prior to or on the date
which is 10 calendar days immediately following written notice by Parent to the
Company of such breach or failure to perform.

        Section 9.2   Effect of Termination.  In the event of a termination of
                      ---------------------
this Agreement by either the Company or Parent as provided in Section 9.1, this
                                                              -----------
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their respective
officers or directors, except with respect to Section 4.15, Section 5.16,
                                              ------------  ------------
Section 7.5, this Section 9.2 and Article X and the last sentences of each of
-----------       -----------     ---------
Section 1.2(c) and Section 7.4; provided, however, that nothing herein shall
--------------     -----------
relieve any party for liability for any willful or knowing breach hereof.

        Section 9.3   Amendment.  Subject to Section 1.1 and Section 7.10, this
                      ---------              ----------      ------------
Agreement may be amended by the parties hereto at any time before or after
obtaining the Company Stockholder Approval, but if the Company Stockholder
Approval shall have been obtained, thereafter no amendment shall be made which
by law requires further approval by the Company's stockholders without obtaining
such further approval.  This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.

        Section 9.4   Extension; Waiver.  At any time prior to the Effective
                      -----------------
Time, the parties hereto, by action taken or authorized by their respective
Board of Directors, may, to the extent legally allowed, (i) subject to the
provisions of Section 7.10, extend the time for the performance of any of the
              ------------
obligations or other acts of the other parties hereto, (ii) subject to the
provisions of Section 7.10, waive any inaccuracies in the representations and
              ------------
warranties contained herein or in any document delivered pursuant hereto or
(iii) subject to the provisions of Section 7.10, waive compliance with any of
                                   ------------
the agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth in
a written instrument signed on behalf of such party. The failure of any party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of those rights.

                                   ARTICLE X
                              GENERAL PROVISIONS

        Section 10.1  Non-Survival of Representations and Warranties and
                      --------------------------------------------------
Agreements. None of the representations and warranties in this Agreement or in
----------
any instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 10.1 shall not limit any covenant or agreement of the parties
           ------------
which by its terms contemplates performance after the Effective Time of the
Merger.

        Section 10.2   Notices. All notices and other communications hereunder
                       -------
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or

                                      -46-
<PAGE>

sent by overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):

     (a)  if to Parent or Sub, to:

               The Williams Companies, Inc.
               One Williams Center
               Tulsa, Oklahoma 74172
               Attn:  William G. von Glahn and Rebecca H. Hilborne
               Telecopy No.:  (918) 573-5942

     with a copy to:

               Skadden, Arps, Slate, Meagher & Flom LLP
               Four Times Square
               New York, NY  10036
               Attn:  Morris Kramer and Richard Grossman
               Telecopy No.:  212-735-2000

     (b)  if to the Company, to:

               Barrett Resources Corporation
               1515 Arapahoe Street
               Tower 3, Suite 1000
               Denver, Colorado 80202
               Attn:  Eugene A. Lang, Jr.
               Telecopy No.: (303) 629-8275

     with copies to:

               Sidley Austin Brown & Wood
               Bank One Plaza
               10 South Dearborn Street
               Chicago, Illinois  60603
               Attn:  Thomas A. Cole and Paul L. Choi
               Telecopy No.:  (312) 853-7036

        Section 10.3   Interpretation; Definitions.  When a reference is made
                       ---------------------------
in this Agreement to an Article or a Section, such reference shall be to an
Article or a Section of this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."

        As used in this Agreement, the following terms have the meanings
specified or referred to in this Section 10.3 and shall be equally applicable to
                                 ------------
both the singular and plural forms. Any agreement referred to below shall mean
such agreement as amended, supplemented or modified

                                      -47-
<PAGE>

from time to time to the extent permitted by the applicable provisions thereof
and by this Agreement.

     "Acquisition Proposal" shall have the meaning set forth in Section 6.2(f).
      --------------------                                      -------------

     "Agreement" means this Agreement and Plan of Merger, dated as of May 7,
      ---------
2001, among Parent, Sub and the Company.

     "Antitrust Laws" means, collectively, the HSR Act, the Sherman Act, as
      --------------
amended, the Clayton Act, as amended, the Federal Trade Commission Act, as
amended, and any other Federal, state or foreign statutes, rules, regulations,
orders or decrees that are designed to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade.

     "Beneficial Owner" or "Beneficially Owning" shall have the meaning set
      ----------------      -------------------
forth in Rule 13d-3 promulgated under the Exchange Act.

     "Benefit Plan" means any collective bargaining agreement or any bonus,
      ------------
pension, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical, employee stock
purchase, stock appreciation, restricted stock or other employee benefit plan,
agreement or arrangement, in each case that is maintained, sponsored,
contributed to or required to be contributed to by the Company or any ERISA
Affiliate for the benefit of providing benefits to any current or former
employee, officer, director or consultant of the Company or any of its
Subsidiaries.

     "Certificate of Merger" shall have the meaning set forth in Section 2.3.
      ---------------------                                      -----------

     "Certificates" shall have the meaning set forth in Section 3.2(b).
      ------------                                      --------------

     "Closing Date" shall have the meaning set forth in Section 2.2.
      ------------                                      -----------

     "Code" means the Internal Revenue Code of 1986, as amended.
      ----

     "Company" shall have the meaning set forth in the introductory paragraph of
      -------
this Agreement.

     "Company Common Stock" shall have the meaning set forth in the second
      --------------------
recital provision of this Agreement.

     "Company Contracts" shall have the meaning set forth in Section 4.18(a).
      -----------------                                      ---------------

     "Company Filed SEC Documents" shall have the meaning set forth in Section
      ---------------------------                                      -------
4.7.
---

     "Company Intellectual Property" shall have the meaning set forth in Section
      -----------------------------                                      -------
4.20.
----

     "Company Letter" shall have the meaning set forth in Section 4.2.
      --------------                                      -----------

     "Company Preferred Stock" shall have the meaning set forth in Section 4.3.
      -----------------------                                      -----------

                                      -48-
<PAGE>

     "Company Rights" shall have the meaning set forth in Section 4.3.
      --------------                                      -----------

     "Company Rights Agent" shall have the meaning set forth in Section 4.3.
      --------------------                                      -----------

     "Company Rights Agreement" shall have the meaning set forth in Section 4.3.
      ------------------------                                      -----------

     "Company SEC Documents" shall have the meaning set forth in Section 4.6.
      ---------------------                                      -----------

     "Company Series A Preferred Shares" shall have the meaning set forth in
      ---------------------------------
Section 4.3.
-----------

     "Company Stock Options" shall have the meaning set forth in Section 4.3.
      ---------------------                                      -----------

     "Company Stock Plans" shall have the meaning set forth in Section 4.3.
      -------------------

     "Company Stockholder Approval" shall have the meaning set forth in Section
      ----------------------------                                      -------
4.16.
----

     "Company Stockholders Meeting" shall have the meaning set forth in Section
      ----------------------------                                      -------
6.2(b).
------

     "Confidentiality Agreement" shall have the meaning set forth in Section
      -------------------------                                      -------
7.4.

     "Consents" means with respect to a Governmental Entity or Person, any
      --------
consent, approval, order or authorization of, or registration, declaration or
filing with or exemption by such Governmental Entity or Person, as the case may
be.

     "Constituent Corporations" shall have the meaning set forth in the
      ------------------------
introductory paragraph of this Agreement.

     "Consummation of the Offer" means the purchase of Shares pursuant to the
      -------------------------
Offer.

     "Derivative Transactions" shall have the meaning set forth in Section
      -----------------------                                      -------
4.22(b).
-------

     "D&O Insurance" shall have the meaning set forth in Section 7.9(b).
      -------------                                      --------------

     "DGCL" means the General Corporation Law of the State of Delaware.
      ----

     "Effective Time" shall have the meaning set forth in Section 2.3.
      --------------                                      -----------

     "Environmental Laws" shall mean all foreign, Federal, state and local laws,
      ------------------
regulations, rules and ordinances relating to pollution or protection of the
environment or human health and safety, including, without limitation, laws
relating to releases or threatened releases of Hazardous Substances into the
indoor or outdoor environment (including, without limitation, ambient air,
surface water, groundwater, land, surface and subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
Release, transport or handling of Hazardous Substances; all laws and regulations
with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Substances; all laws relating to endangered or
threatened species of fish, wildlife and plants and the management or use of
natural resources; and common law to the extent it relates to or applies to
exposure to or impact of Hazardous Substances on persons or property.

                                      -49-
<PAGE>

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
      -----
amended, together with the rules and regulations promulgated thereunder.

     "ERISA Affiliate" shall have the meaning set forth in Section 4.13(b).
      ---------------                                      ---------------

     "ERISA Benefit Plan" means a U.S. Benefit Plan maintained as of the date of
      ------------------
this Agreement which is also an "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) or which is also an "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA).

     "Exchange Act" means the Securities Exchange Act of 1934, as amended,
      ------------
together with the rules and regulations promulgated thereunder.

     "Exchange Agent" shall have the meaning set forth in Section 3.2(a).
      --------------                                      --------------

     "Exchange Fund" shall have the meaning set forth in Section 3.2(a).
      -------------                                      --------------

     "Exchange Ratio" shall have the meaning set forth in the third recital
      --------------
provision of this Agreement (subject to adjustment as contemplated by Section
                                                                      -------
3.4).
---

     "Expenses" means documented and reasonable out-of-pocket fees and expenses
      --------
incurred or paid by or on behalf of Parent in connection with the Offer, the
Merger or the consummation of any of the transactions contemplated by this
Agreement, including all reasonable fees and expenses of law firms, commercial
banks, investment banking firms, accountants, experts and consultants to Parent.

     "Form S-4" shall have the meaning set forth in Section 7.3.
      --------                                      -----------

     "Forward Merger" shall have the meaning set forth in the second recital
      --------------
provision of this Agreement.

     "GAAP" means United States generally accepted accounting principles.
      ----

     "Goldman, Sachs" shall have the meaning set forth in Section 1.2(a).
      --------------                                      --------------

     "Governmental Entity" means any Federal, state, local or foreign government
      -------------------
or any court, tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency, domestic, foreign or
supranational.

     "Hazardous Substances" shall mean (a) any petrochemical or petroleum
      --------------------
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing polychlorinated biphenyls, and radon gas;
(b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"restricted hazardous materials," "extremely hazardous substances," "toxic
substances," "contaminants" or "pollutants" or words of similar meaning and
regulatory effect; or (c) any other chemical, material or substance, exposure to
which is prohibited, limited, or regulated by any applicable Environmental Law.

                                      -50-
<PAGE>

     "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
      -------
as amended.

     "Indebtedness" shall mean, with respect to any Person, without duplication,
      ------------
(a) all obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, debentures, notes or similar instruments, (c)
all letters of credit issued for the account of such Person (excluding letters
of credit issued for the benefit of suppliers to support accounts payable to
suppliers incurred in the ordinary course of business), (d) all capitalized
lease obligations of such Person, (e) all obligations of such Person under
interest rate or currency swap transactions (valued at the termination value
thereof), and (f) all guarantees and arrangements having the economic effect of
a guarantee of such Person of any indebtedness of any other Person.

     "Indemnified Person" shall have the meaning set forth in Section 7.9(a).
      ------------------                                      --------------

     "Independent Directors" shall have the meaning set forth in Section 7.10.
      ---------------------                                      ------------

     "Information Statement" shall have the meaning set forth in Section 4.8.
      ---------------------                                      -----------

     "Knowledge" shall mean the actual knowledge of the executive officers of
      ---------
the Company or the executive officers of Parent, as the case may be.

     "Liens" means any pledges, claims, liens, charges, encumbrances and
      -----
security interests of any kind or nature whatsoever.

     "Material Adverse Change" or "Material Adverse Effect" means, when used in
      -----------------------      -----------------------
connection with the Company or Parent, as the case may be, any change or effect
(or any development that, insofar as can reasonably be foreseen, is likely to
result in any change or effect) that is materially adverse to the business,
properties, assets, condition (financial or otherwise) or results of operations
of the Company and its Subsidiaries taken as a whole, or Parent and its
Subsidiaries taken as a whole, as the case may be, provided, however, that (i)
any adverse change, effect or development that is caused by or results from
conditions affecting the United States economy generally or the economy of any
nation or region in which the Company or Parent, as the case may be, or its
Subsidiaries conducts business that is material to the business of the Company
or Parent, as the case may be, and its Subsidiaries, taken as a whole, shall not
be taken into account in determining whether there has been (or whether there
could reasonably be foreseen) a "Material Adverse Change" or "Material Adverse
Effect" with respect to the Company or Parent, as the case may be, (ii) any
adverse change, effect or development that is caused by or results from
conditions generally affecting the industries (including the oil and gas
industry) in which the Company or Parent, as the case may be, conducts its
business shall not be taken into account in determining whether there has been
(or whether there could be reasonably be foreseen) a "Material Adverse Change"
or "Material Adverse Effect" with respect to the Company or Parent, as the case
may be, and (iii) any adverse change, effect or development that is caused by or
results from the announcement or pendency of this Agreement, the Offer, the
Merger or the transactions contemplated hereby shall not be taken into account
in determining whether there has been (or whether there could reasonably be
foreseen) a "Material

                                      -51-
<PAGE>

Adverse Change" or "Material Adverse Effect" with respect to the Company or
Parent, as the case may be.

     "Merger" shall have the meaning set forth in Section 2.1.
      ------                                      -----------

     "Merger Consideration" shall have the meaning set forth in the third
      --------------------
recital provision of this Agreement.

     "Minimum Condition" shall have the meaning set forth in Exhibit A of this
      -----------------                                      ---------
Agreement.

     "NYSE" means the New York Stock Exchange, Inc.
      ----

     "Offer" shall have the meaning set forth in the second recital provision of
      -----
this Agreement.

     "Offer Conditions" shall have the meaning set forth in Section 1.1(a).
      ----------------                                      --------------

     "Offer Consideration" shall have the meaning set forth in the second
      -------------------
recital provision of this Agreement.

     "Offer Documents" shall have the meaning set forth in Section 1.1(c).
      ---------------                                      --------------

     "Outside Date" shall have the meaning set forth in Section 9.1(b).
      ------------                                      --------------

     "Parent" shall have the meaning set forth in the introductory paragraph of
      ------
this Agreement.

     "Parent Common Stock" shall have the meaning set forth in the third recital
      -------------------
provision of this Agreement.

     "Parent Filed SEC Documents" shall have the meaning set forth in Section
      --------------------------                                      -------
5.7.
---

     "Parent Letter"  means the letter from Parent to the Company dated the date
      -------------
hereof, which letter relates to this Agreement and is designated therein as the
Parent Letter.

     "Parent Options" shall have the meaning set forth in Section 7.2(b).
      --------------                                      --------------

     "Parent Rights" means the rights to purchase Series A Junior Participating
      -------------
Preferred Stock issued pursuant to the Parent Rights Agreement.

     "Parent Rights Agreement" means the Rights Agreement, dated as of February
      -----------------------
6, 1996, between Parent and First Chicago Trust Company of New York, as rights
agent, as amended.

     "Parent SEC Documents" shall have the meaning set forth in Section 5.6.
      --------------------                                      -----------

     "Parent Shares" shall have the meaning set forth in the second recital
      -------------
provision of this Agreement.

     "Parent Stock Equivalents" shall have the meaning set forth in Section 5.3.
      ------------------------                                      -----------

                                      -52-
<PAGE>

     "Parent Stock Options" shall have the meaning set forth in Section 5.3.
      --------------------                                      -----------

     "Permits" means approvals, authorizations, certificates, filings,
      -------
franchises, licenses, notices, permits and rights.

     "Person" means an individual, corporation, partnership, limited liability
      ------
company, joint venture, association, trust, unincorporated organization or other
entity (including any person as defined in Section 13(d)(3) of the Exchange
Act).

     "Petrie Parkman" shall have the meaning set forth in Section 1.2(a).
      --------------                                      --------------

     "Proxy Statement" shall have the meaning set forth in Section 4.5(b).
      ---------------                                      --------------

     "Recommendations" shall have the meaning set forth Section 1.2.
      ---------------                                   -----------

     "Representative" means with respect to any Person, its officers, directors,
      --------------
investment bankers, attorneys, accountants, consultants or other agents,
advisors or representatives.

     "Retained Employee" shall have the meaning set forth in Section 7.1(a).
      -----------------                                      --------------

     "Reverse Merger" shall have the meaning set forth in the fourth recital
      --------------
provision of this Agreement.

     "Rights Agreement" shall mean that certain Rights Agreement between the
      ----------------
Company and BankBoston, N.A. dated August 5, 1997, as amended.

     "Schedule 14D-9" shall have the meaning set forth in Section 1.2(b).
      --------------                                      --------------

     "Schedule TO" shall have the meaning set forth in Section 1.1(c).
      -----------                                      --------------

     "SEC" means the Securities and Exchange Commission.
      ---

     "Securities Act" means the Securities Act of 1933, as amended, together
      --------------
with the rules and regulations promulgated thereunder.

     "Shares" shall have the meaning set forth in the second recital provision
      ------
of this Agreement.

     "Significant Subsidiary" of any person means a Subsidiary of such person
      ----------------------
that would constitute a "significant subsidiary" of such person within the
meaning of Rule 1.02(v) of Regulation S-X as promulgated by the SEC.

     "Stock Equivalents" shall have the meaning set forth in Section 4.3.
      -----------------                                      -----------

     "Sub" shall have the meaning set forth in the introductory paragraph of
      ---
this Agreement.

     "Subsequent Determination" shall have the meaning set forth in Section 6.6.
      ------------------------                                      -----------

     "Subsequent Determination Notice" shall have the meaning set forth in
      -------------------------------
Section 6.6.
-----------

                                      -53-
<PAGE>

     "Subsidiary" or "Subsidiary" of any person means another person, an amount
      ----------      ----------
of the voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person.

     "Superior Proposal" shall have the meaning set forth in Section 6.2(f).
      -----------------                                      --------------

     "Surviving Corporation" shall have the meaning set forth in Section 2.1.
      ---------------------                                      -----------

     "Tax" and "Taxes" means any federal, state, local or foreign net income,
      ---       -----
gross income, gross receipts, windfall profit, severance, property, production,
sales, use, license, excise, franchise, employment, payroll, withholding,
alternative or add-on minimum or any other tax, custom, duty, levy, tariff,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, addition to tax or additional amount
imposed by any Governmental Entity.

     "Tax Opinion Standard" shall have the meaning set forth in Section 7.14.
      --------------------                                      ------------

     "Tax Return" means any return, report or similar statement (including any
      ----------
related or supporting information) required to be filed with respect to any Tax
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.

     "Termination Fee" shall have the meaning set forth in Section 7.5(b).
      ---------------                                      --------------

     "Third Party" means any Person (or group of Persons) other than Parent and
      -----------
its affiliates.

     "Transaction" shall have the meaning set forth in the eighth recital
      -----------
provision of this Agreement.

     "Transfer Taxes" shall have the meaning set forth in Section 7.7.
      --------------                                      -----------

     "Treasury Regulations" means the final and temporary (but not proposed)
      --------------------
income tax regulations promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).

     "Trigger Event" shall have the meaning set forth in Section 7.5(a).
      -------------                                      --------------

     Section 10.4  Counterparts. This Agreement may be executed in counterparts,
                   ------------
all of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.

     Section 10.5  Entire Agreement; No Third-Party Beneficiaries. Except for
                   ----------------------------------------------
the Confidentiality Agreement, this Agreement constitutes the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the

                                      -54-
<PAGE>

subject matter hereof. This Agreement, except for the provisions of Section 7.1,
                                                                    -----------
Section 7.2, Section 7.9, Section 7.12 and Section 7.13, is not intended to
-----------  -----------  ------------     ------------
confer upon any person other than the parties hereto any rights or remedies
hereunder.

        Section 10.6   Governing Law.  This Agreement shall be governed by, and
                       -------------
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.

        Section 10.7   Assignment. Neither this Agreement nor any of the rights,
                       ----------
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties.  Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.  Notwithstanding the
foregoing, Sub shall have the right, effective upon written notice to the
Company, to transfer or assign, in whole or from time to time in part, to Parent
or to one or more other wholly-owned Subsidiaries of Parent, the right to
purchase Shares tendered pursuant to the Offer, but any such transfer or
assignment shall in no way prejudice the rights of tendering stockholders to
receive payment for their Shares validly tendered and accepted for payment
pursuant to the Offer, adversely affect the ability of the parties to complete
the Transaction or relieve Sub of its obligations hereunder.

        Section 10.8   Severability.  If any term or other provision of this
                       ------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.

        Section 10.9   Enforcement of this Agreement. The parties hereto agree
                       -----------------------------
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, such remedy being in addition to
any other remedy to which any party is entitled at law or in equity.

        Section 10.10   Obligations of Subsidiaries.  Whenever this Agreement
                        ---------------------------
requires any Subsidiary of Parent (including Sub) or of the Company to take any
action, such requirement shall be deemed to include an undertaking on the part
of Parent or the Company, as the case may be, to cause such Subsidiary to take
such action.

                                      -55-
<PAGE>

     IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized all as of
the date first written above.

                         THE WILLIAMS COMPANIES, INC.

                         By: /s/ Keith E. Bailey
                            ----------------------------------
                         Name:  Keith E. Bailey
                         Title: Chairman, President and Chief
                                 Executive Officer

                         RESOURCES ACQUISITION CORP.

                         By: /s/ Steven J. Malcolm
                            ----------------------------------
                         Name:  Steven J. Malcolm
                         Title: President

                         BARRETT RESOURCES CORPORATION

                         By: /s/ Peter A. Dea
                            ----------------------------------
                         Name:  Peter A. Dea
                         Title: Chairman and Chief Executive
                                  Officer

                                      -56-
<PAGE>

                                                                       Exhibit A

                            CONDITIONS OF THE OFFER

          Notwithstanding any other provision of the Offer, subject to the terms
of the Agreement, Sub shall not be required to accept for payment or pay for,
(subject to any applicable rules and regulations of the SEC, including Rule 14e-
1(c) under the Exchange Act (relating to Sub's obligation to pay for or return
tendered Shares after the termination or withdrawal of the Offer)) any Shares
tendered, if by the expiration of the Offer (as it may be extended in accordance
with the requirements of Section 1.1), (1) there shall not have been validly
                         -----------
tendered and not withdrawn prior to the expiration of the Offer 16,730,502
shares of Company Common Stock (the "Minimum Condition"), (2) the applicable
                                     -----------------
waiting period under the HSR Act and any other applicable Antitrust Laws shall
not have expired or been terminated, or (3) at any time on or after the date of
the Agreement and prior to the acceptance for payment of Shares pursuant to the
Offer, any of the following conditions exist:

          (a)  there shall be instituted or pending any action or proceeding by
any Governmental Entity:

                (i)   challenging or seeking to make illegal, to delay
          materially or otherwise directly or indirectly to restrain or prohibit
          the making of the Offer or the Merger, the acceptance for payment of,
          or the payment for, some of or all the Shares by Parent or Sub or the
          consummation by Parent or Sub of the Merger or seeking to obtain
          material damages,

                (ii)  seeking to restrain or prohibit Parent's or Sub's
          ownership or operation (or that of their respective Subsidiaries or
          affiliates) of all or any material portion of the business or assets
          of the Company and its Subsidiaries, taken as a whole, or of Parent
          and its Subsidiaries, taken as a whole, or to compel Parent or any of
          its Subsidiaries or affiliates to dispose of or hold separate all or
          any material portion of the business or assets of the Company and its
          Subsidiaries, taken as a whole, or of Parent and its Subsidiaries,
          taken as a whole,

                (iii) seeking to impose material limitations on the ability of
          Parent or any of its Subsidiaries effectively to exercise full rights
          of ownership of the Shares, including, without limitation, the right
          to vote any Shares acquired or owned by Parent or any of its
          Subsidiaries or affiliates on all matters properly presented to the
          Company's stockholders, or

                (iv)  seeking to require divestiture by Parent or any of its
          Subsidiaries of any Shares; or

          (b)   there shall be any action taken, or any statute, rule,
regulation, injunction, order or decree enacted, enforced, promulgated, issued
or deemed applicable to the Agreement, the Offer or the Merger, by any
Governmental Entity that is reasonably likely, directly or indirectly, to result
in any of the consequences referred to in clauses (i) through (iv) of paragraph
(a) above, subject as aforesaid; or

                                      A-1
<PAGE>

          (c)   the Company shall have breached or failed to perform in any
material respect any of its covenants, obligations or agreements under the
Agreement; or

          (d)   the representations and warranties of the Company set forth in
the Agreement that are qualified as to materiality shall not be true and correct
as of the date of the Agreement and as of the expiration of the Offer (including
any extension thereof) (except to the extent expressly made as of an earlier
date, in which case as of such earlier date), or any of the representations and
warranties set forth in the Agreement that are not so qualified as to
materiality shall not be true and correct in any material respect as of the date
of the Agreement and as of the expiration of the Offer (except to the extent
expressly made as of an earlier date, in which case as of such earlier date);
provided that this condition shall not be deemed to exist unless any such
breaches of representation or warranty (without regard to any "Materiality" or
"Material Adverse Effect" or similar qualifier or threshold), individually or in
the aggregate, has had or could reasonably be expected to have, a Material
Adverse Effect on the Company; or

          (e)   this Agreement shall have been terminated in accordance with its
terms; or

          (f)   the Board of Directors of the Company (or any committee thereof)
shall have made a Subsequent Determination;

which, in the good faith judgment of Parent in any such case makes it
inadvisable to proceed with such acceptance for payment or payment.

          The foregoing conditions are for the sole benefit of Parent and Sub
and may, subject to the terms of this Agreement, be waived by Parent and Sub in
their reasonable discretion in whole at any time or in part from time to time.
The failure by Parent or Sub at any time to exercise its rights under any of the
foregoing conditions shall not be deemed a waiver of any such right; the waiver
of any such right with respect to particular facts and circumstances shall not
be deemed a waiver with respect to any other facts and circumstances, and each
such right shall be deemed an ongoing right which may be asserted at any time or
from time to time. Terms used but not defined herein shall have the meaning
assigned to such terms in the Agreement to which this Exhibit A is a part.
                                                      ---------

                                      A-2EXHIBIT 4.2

               PREFERREDPLUS 7.30% TRUST CERTIFICATES SERIES BLS-1

                                SERIES SUPPLEMENT

                                     between

                         MERRILL LYNCH DEPOSITOR, INC.,

                                  as Depositor,

                                       and

                    UNITED STATES TRUST COMPANY OF NEW YORK,

                     as Trustee and Securities Intermediary

                             Dated as of May 4, 2001

<PAGE>

                  SERIES SUPPLEMENT, dated as of May 4, 2001 (the "Supplement"),
by and between MERRILL LYNCH DEPOSITOR, INC., a Delaware corporation, as
Depositor, UNITED STATES TRUST COMPANY OF NEW YORK, a New York corporation, as
Trustee and Securities Intermediary.

                              W I T N E S S E T H:

                  WHEREAS, the Depositor desires to create the Trust designated
herein (the "Trust") by executing and delivering this Supplement, which shall
incorporate the terms of the Standard Terms for Trust Agreements, dated as of
February 20, 1998 (the "Standard Terms" and, together with this Supplement, the
"Trust Agreement"), by and between the Depositor and the Trustee and Securities
Intermediary, as modified by this Supplement;

                  WHEREAS, the Depositor desires to deposit the Underlying
Securities set forth on Schedule I attached hereto into the Trust;

                  WHEREAS, in connection with the creation of the Trust and the
deposit therein of the Underlying Securities, it is desired to provide for the
issuance of the Certificates evidencing undivided interests in the Trust and
Call Rights; and

                  WHEREAS, the Trustee has joined in the execution of the
Standard Terms and this Supplement to evidence the acceptance by the Trustee of
the Trust;

                  WHEREAS, the Securities Intermediary has joined in the
execution of the Standard Terms and this Supplement to evidence the acceptance
by the Securities Intermediary of its obligations thereunder and hereunder;

                  NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants expressed herein, it is hereby agreed by and between the
Depositor and the Trustee and Securities Intermediary as follows:

                  Section 1. Incorporation of Standard Terms. All of the
provisions of the Standard Terms, a copy of which is attached hereto as Exhibit
A, are hereby incorporated herein by reference in their entirety and this
Supplement and the Standard Terms shall form a single agreement among the
parties. In the event of any inconsistency between the provisions of this
Supplement and the provisions of the Standard Terms, the provisions of this
Supplement will control with respect to the transactions described herein.

                  Section 2. Definitions. Except as otherwise specified herein
or as the context may otherwise require, the following terms shall have the
respective meanings set forth below for all purposes under this Supplement
(Section 2(b) hereof sets forth terms listed in the Standard Terms that are not
applicable to this Series). Capitalized terms used but not defined herein shall
have the meanings assigned to them in the Standard Terms.

                  "Allocation Ratio": The allocation amongst the
Certificateholders in accordance with their pro rata interests in the
Certificates.

                                       2
<PAGE>

                  "Authorized Denomination": With respect to Certificates, an
aggregate stated amount of $1,000.

                  "Business Day": Any day that is not a Saturday, a Sunday or a
legal holiday or a day on which banking institutions or trust companies in the
City of New York are authorized or obligated by law, regulation or executive
order to close and that also is specified as a Business Day with respect to the
Underlying Securities.

                  "Call Date": Any Business Day on or after May 4, 2006 that a
Call Holder designates as a Call Date.

                  "Call Holder": The holder of a Call Right.

                  "Call Price": The aggregate stated amount of the Certificates
being called plus any accrued and unpaid interest on such Certificates to the
Call Date.

                  "Call Right": The right, but not the obligation, pursuant to
the Warrant Agreement and any related Warrant Certificates (as defined in the
Warrant Agreement) of one or more Call Holders to purchase from the
Certificateholders on a Call Date, upon not less than 30 days (or not less than
5 days in the case of an announcement of any redemption or other unscheduled
payment of the Underlying Securities) but not more than 60 days prior to the
Call Date, some or all of the Certificates for the Call Price.

                  "Certificates": The 2,876,600 trust certificates issued in a
stated amount of $25 each and entitled to receive on each Distribution Date
until the Final Scheduled Distribution Date distributions at a rate of 7.30% per
annum on their stated amount.

                  "Closing Date": May 4, 2001.

                  "Collection Period": (i) With respect to each June 1
Distribution Date, the period beginning on the day after the December 1
Distribution Date of the previous year and ending on such June 1 Distribution
Date, inclusive, except for the June 1, 2001 Distribution Date, as to which the
Collection Period shall be the period beginning on the Cut-off Date and ending
on such June 1, 2001 Distribution Date, inclusive, and (ii) with respect to each
December 1 Distribution Date, the period beginning on the day after the June 1
Distribution Date of that year and ending on such December 1 Distribution Date,
inclusive; provided, however, that clauses (i) and (ii) shall be subject to
Section 9(c) hereof.

                  "Corporate Trust Office": The office of the Trustee located at
114 West 47th Street, 25th Floor, New York, New York 10036, Attention: Corporate
Trust Department; provided, however, that the office at which certificated
securities are delivered for registration of transfer, cancellation or exchange
shall be the office of the Trustee, located at 111 Broadway, Lower Level, New
York, New York 10006.

                  "Cut-off Date": May 4, 2001.

                  "Depository": The Depository Trust Company, its nominees and
their respective successors.

                                       3
<PAGE>

                  "Distribution Date": June 1 and December 1 of each year (or if
such date is not a Business Day, the next succeeding Business Day), commencing
on June 1, 2001 and ending on the Final Scheduled Distribution Date.

                  "Distribution Election": Upon notice of the event set forth in
clause (a) of Section 3.04 of the Standard Terms, the Trustee shall exercise the
remedy set forth in clause (i) of such Section; upon notice of the event set
forth in clause (b) or (c) of Section 3.04 of the Standard Terms, the Trustee
shall exercise the remedy set forth in clause (ii) of such Section.

                  "Eligible Investments": As defined in the Standard Terms;
provided, however, that (i) the minimum required rating for long-term
instruments will be equal to the lower of the rating of the Underlying
Securities or the Trust Certificates, and (ii) the rating of any short-term
instruments will be A-l+ by S&P and P1 by Moody's; and provided, further, that
any such investment matures no later than the Business Day prior to the next
succeeding Distribution Date.

                  "Escrow Agent": As will be set forth in the Escrow Agreement.

                  "Escrow Agreement": The escrow agreement to be entered into on
the Call Date among a given Call Holder, the Trustee and the Escrow Agent
pursuant to Section 14(c)(iii)(2) hereof.

                  "Event of Default": (i) A default in the payment of any
interest on any Underlying Security after the same becomes due and payable
(subject to any applicable grace period), (ii) a default in the payment of the
principal of or any installment of principal of any Underlying Security when the
same becomes due and payable and (iii) any other event specified as an event of
default in the Underlying Securities Indenture. For a summary of certain events
of default in the Underlying Securities Indenture, please refer to the
Prospectus Supplement.

                  "Final Scheduled Distribution Date": December 1, 2095 (or if
such date is not a Business Day, the next succeeding Business Day).

                  "Fixed Pass-Through Rate": 7.30% per annum.

                  "Optional Exchange Date": Any Distribution Date.

                  "Ordinary Expenses": The compensation due to the Trustee for
Ordinary Expenses as defined in the Standard Terms, which, with respect to
Ordinary Expenses other than those referred to in clause (iii) of such
definition and other than the costs of converting to EDGAR format the periodic
reports required for the Trust under the Exchange Act, shall be fixed at $2,000
per annum (payable in semi-annual installments of $1,000).

                  "Pass-Through Rate": The Fixed Pass-Through Rate.

                  "Prepaid Ordinary Expenses": Zero (0).

                  "Prospectus Supplement": The Prospectus Supplement dated April
20, 2001 relating to the Certificates.

                                       4
<PAGE>

                  "Rating Agency": Moody's and S&P.

                  "Record Date": The Business Day immediately preceding each
Distribution Date.

                  "Series": PREFERREDPLUS 7.30% Trust Certificates Series BLS-1.

                  "Underlying Securities": The $75,000,000 aggregate principal
amount of 7.00% Debentures due December 1, 2095 issued by the Underlying
Securities Issuer, as described in Schedule I hereto.

                  "Underlying Securities Issuer": Bellsouth Telecommunications,
Inc., a Georgia corporation.

                  "Warrant Agreement": The Warrant Agreement, dated as of May 4,
2001, by and between the Trust and the Warrant Agent (as defined in the Warrant
Agreement).

                  (b) The terms listed below are not applicable to this Series.

                  "Accounting Date"

                  "Administration Account"

                  "Administrative Agent"

                  "Administration Agreement"

                  "Administrative Agent Termination Event"

                  "Advance"

                  "Calculation Agent"

                  "Eligible Expense"

                  "Exchange Rate Agent"

                  "Floating Pass-Through Rate"

                  "Letter of Credit"

                  "Limited Guarantor"

                  "Limited Guaranty"

                  "Notional Amount"

                  "Related Assets"

                  "Reserve Account"

                                       5
<PAGE>

                  "Requisite Reserve Amount"

                  "Retained Interest"

                  "Surety Bond"

                  "Swap Agreement"

                  "Swap Counterparty"

                  "Swap Distribution Amount"

                  "Swap Guarantee"

                  "Swap Guarantor"

                  "Swap Receipt Amount"

                  "Swap Termination Payment"

                  Section 3. Designation of Trust and Certificates. (a) The
Trust created hereby shall be known as the "PREFERREDPLUS Trust Series BLS-l".
The Certificates evidencing certain undivided ownership interests therein shall
be known as the "PREFERREDPLUS 7.30% Trust Certificates Series BLS-1.

                  (b) The Certificates shall be held through the Depository in
book-entry form and shall be substantially in the form attached hereto as
Exhibit B. The Certificates shall be issued in authorized denominations of $25
(the "Authorized Denomination") and integral multiples thereof. Except as
provided in the Standard Terms, the Trust shall not issue additional
Certificates or incur any indebtedness; provided, however, from time to time,
upon obtaining prior written confirmation by each Rating Agency that such action
will not result in a downgrading or withdrawal of its rating of the
Certificates, the Depositor may, without the consent of the Certificateholders,
increase the amount of the Underlying Securities in the Trust and the Trust may
issue a corresponding amount of additional Certificates in accordance with
Section 5.12(a) of the Standard Terms except that clauses (v), (vi) and (vii) of
Section 5.12(a) shall not apply to this Series.

                  (c) On each Distribution Date, commencing on June 1, 2001 and
ending on the Final Scheduled Distribution Date or such earlier date if the
Underlying Securities are redeemed prior to the Final Scheduled Distribution
Date, the Certificates will be entitled to receive distributions at a rate of
7.30% per annum on the stated amount of the Certificates.

                  (d) On the Final Scheduled Distribution Date, the Certificates
will be entitled to a distribution of the stated amount of such Certificates.

                  (e) Any reference to the principal amount of the Certificates
shall be construed as a reference to the stated amount of the Certificates,
unless otherwise indicated.

                                       6
<PAGE>

                  Section 4. Satisfaction of Conditions to Initial Execution and
Delivery of Trust Certificates. The Trustee hereby acknowledges receipt, on or
prior to the Closing Date, of:

                  (i) the Underlying Securities set forth on Schedule I hereto;
         and

                  (ii) all documents set forth in Section 5.12 of the Standard
         Terms except that clauses (v), (vi) and (vii) of Section 5.12(a) shall
         not apply to this Series.

                  Section 5. Distributions. (a) On each Distribution Date, the
Trustee shall apply solely to the extent of Available Funds in the Certificate
Account as follows:

                  (i) first, to the Trustee, reimbursement for any approved
         Extraordinary Trust Expenses incurred by the Trustee in accordance with
         Section 6(b) hereof and approved by not less than 100% of the
         Certificateholders;

                  (ii) second, to the Certificateholders, distributions accrued
         during the related Collection Period at the rate of 7.30% per annum on
         the stated amount of such Certificates and distributable on such
         Certificates on such Distribution Date;

                  (iii) third, to the Certificateholders, if available, any
         additional distribution owed and paid by the Underlying Securities
         Issuer as a result of a delay in the receipt by the Trustee of any
         payment on the Underlying Securities;

                  (iv) fourth, to the Certificateholders, on the Final Scheduled
         Distribution Date only, a distribution of the stated amount of the
         Certificates;

                  (v) fifth, to the extent there remain Available Funds in the
         Certificate Account, to any creditors of the Trust in satisfaction of
         liabilities thereto; and

                  (vi) sixth, to the extent there remain Available Funds in the
         Certificate Account, to Merrill Lynch Capital Services, Inc. and if no
         Available Funds remain in the Certificate Account then no distribution
         will be made pursuant to this Section 5(a)(vi).

Subject to Section 9(c) hereof, to the extent Available Funds are insufficient
to make any required distributions due to the Certificates on any Distribution
Date, any shortfall will be carried over and will be distributed on the next
Distribution Date on which sufficient funds are available on the Available Funds
to pay such shortfall. Neither Merrill Lynch & Co. nor any of its Affiliates
will have any claim against the Trust pursuant to Section 5(a)(vi) if the Trust
fails to make a distribution on a Distribution Date to such person because no
Available Funds remain in the Certificate Account on such Distribution Date.

                  (b) On the Optional Exchange Date, if applicable, the Trustee
shall distribute to Merrill Lynch & Co. or any of its Affiliates, other than the
Depositor, or any other Person exercising an optional exchange pursuant to
Section 7 hereof, as the case may be. Underlying Securities in accordance with
Section 7 hereof.

                  Section 6. Trustee's Fees; Escrow Agent's Fees. (a) Payment to
the Trustee of Ordinary Expenses shall be as set forth in a separate agreement
between the Trustee

                                       7
<PAGE>

and the Depositor. The Trustee agrees that in the event Ordinary Expenses are
not paid in accordance with such agreement, it shall (i) not have any claim or
recourse against the Trust or the property of the Trust with respect thereto and
(ii) continue to perform all of its services as set forth herein unless it
elects to resign as Trustee in accordance with Section 7.08 of the Standard
Terms.

                  (b) Extraordinary Trust Expenses shall not be paid out of the
Deposited Assets unless (i) the Trustee is satisfied that it will have adequate
security or indemnity in respect of such costs, expenses and liabilities, and
(ii) all the Certificateholders of Certificates then outstanding have voted to
require the Trustee to incur such Extraordinary Trust Expenses. If Extraordinary
Trust Expenses are not approved unanimously as set forth in clause (ii), such
Extraordinary Trust Expenses shall not be an obligation of the Trust, and the
Trustee shall not file any claim against the Trust therefor notwithstanding
failure of Certificateholders to reimburse the Trustee. In addition, if the
conditions in (i) and (ii) are not both satisfied, the Trustee shall not be
obligated to incur any Extraordinary Trust Expense.

                  (c) In the event that one or more Call Holders is required to
deposit the Call Price with the Escrow Agent on the Exercise Date pursuant to
Section 14(c)(iii)(2) hereof, the Depositor and the Escrow Agent shall enter
into an agreement reasonably acceptable to both parties thereto whereby the
Depositor shall pay to the Escrow Agent a fee in consideration for its services
under the Escrow Agreement or Escrow Agreements, as applicable.

                  Section 7. Optional Exchange. (a) Merrill Lynch & Co. or any
of its Affiliates (other than the Depositor), if it holds Certificates, or any
other Person (other than the Depositor) holding Certificates with an aggregate
stated amount of $5 million or more acquired pursuant to the exercise of Call
Rights held by it, may notify the Trustee, not less than 30 days but not more
than 60 days prior to any Optional Exchange Date, that:

                  (i) such Person intends to tender an Authorized Denomination
         of Certificates that it holds to the Trustee on such Optional Exchange
         Date in exchange for a like amount of Underlying Securities;

                  (ii) such exchange will not cause the Trust or Depositor to
         fail to satisfy the applicable requirements for exemption under Rule
         3a-7 under the Investment Company Act of 1940, as amended;

                  (iii) such exchange will not affect the characterization of
         the Trust as a "grantor trust" under the Code,

                  (iv) in the case of an exchange of less than all outstanding
         Certificates, such exchange will not cause a failure to satisfy the
         minimum requirements for the Certificates to remain listed on the New
         York Stock Exchange, unless the Person tendering such Certificates will
         hold all remaining outstanding Certificates upon completion of the
         exchange for such Certificates pursuant to this Section 7;

                  (v) such exchange will not be made with respect to
         Certificates subject to outstanding Call Rights held by any Person
         other than the Person exercising such exchange; and

                                       8
<PAGE>

                  (vi) in the case of an exchange by a person other than Merrill
         Lynch & Co. or any of its Affiliates (other than the Depositor), such
         exchange will be made with respect to an aggregate stated amount of
         Certificates equal to the aggregate stated amount of Certificates
         acquired by such Person pursuant to the exercise of Call Rights held by
         it.

Upon tender of such Certificates on such Optional Exchange Date, the Trustee
will deliver to the Person tendering such Certificates an amount of Underlying
Securities having a principal amount equal to the principal amount of the
Certificates being tendered.

                  (b) The requirements set forth in paragraphs (a)(ii), (a)(v)
and (a)(vi) of Section 4.07 of the Standard Terms do not apply to an Optional
Exchange pursuant to this Section 7.

                  (c) Any costs associated with the exercise of the rights
granted under paragraph (a) of this Section 7 will be borne by the Person
exercising such rights and not by the Trust.

                  Section 8. Events of Default. Within 30 days of its receipt of
notice of the occurrence of an Event of Default, the Trustee will give notice to
the Certificateholders, transmitted by mail, of all such uncured or unwaived
Events of Default actually known to it. However, unless there is an Event of
Default relating to the payment of principal of or interest on any of the
Underlying Securities, the Trustee will be protected in withholding such notice
if in good faith it determines that the withholding of such notice is in the
interest of the Certificateholders.

                  Section 9. Miscellaneous. (a) The provisions of Section 4.04,
Advances, of the Standard Terms shall not apply to the Certificates.

                  (b) The Certificateholders shall not be entitled to terminate
the Trust or cause the sale or other disposition of the Underlying Securities;
provided, however, that Certificateholders holding all, but not less than all,
of the outstanding Certificates may exercise their rights under Section 13(b)
with respect to all such Certificates.

                  (c) If the Trustee has not received payment with respect to a
Collection Period on the Underlying Securities on or prior to the related
Distribution Date, such distribution will be made promptly upon receipt of such
payment. No additional amounts shall accrue on the Certificates or be owed to
Certificateholders as a result of such delay; provided, however, that any
additional interest owed and paid by the Underlying Securities Issuer as a
result of such delay shall be paid to the Certificateholders, proportionately to
the ratio of their respective entitlements to interest payments.

                  (d) The outstanding principal balance of the Certificates
shall not be reduced by the amount of any Realized Loss.

                  (e) The Trust may not engage in any business or activities
other than in connection with, or relating to, the holding, protecting and
preserving of the Deposited Assets and the issuance of the Certificates, and
other than those required or authorized by the Trust Agreement or incidental and
necessary to accomplish such activities. The Trust may not issue or

                                       9
<PAGE>

sell any certificates or other obligations other than the Certificates or
otherwise incur, assume or guarantee any indebtedness for money borrowed.

                  (f) The Trust may not consolidate, amalgamate, merge with or
into, or be replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to, any another entity or permit any other entity
to consolidate, amalgamate, merge with or into, or replace the Trust.

                  (g) Except as expressly provided in the Trust Agreement, the
Trust may not sell the Underlying Securities.

                  (h) Notwithstanding anything in the Trust Agreement to the
contrary, the Trustee may be removed upon 60 days prior written notice delivered
by Certificateholders holding Certificates that represent the Required
Percentage-Removal, and such removal shall take effect upon the appointment of a
successor Trustee and its acceptance of such appointment as provided in the
Trust Agreement.

                  (i) Merrill Lynch & Co. shall act as the Market Agent and
shall serve in such capacity in accordance with the terms of the Market Agent
Agreement attached hereto as Exhibit C.

                  Section 10. Notices. All directions, demands and notices
hereunder or under the Standard Terms shall be in writing and shall be delivered
as set forth below (unless written notice is otherwise provided to the Trustee).

                  If to the Depositor, to:

                  Merrill Lynch Depositor, Inc.
                  c/o Merrill Lynch & Co.
                  World Financial Center
                  New York, NY 10281
                  Attention:  Barry N.  Finkelstein
                  Telephone:  (212) 449-9001
                  Facsimile:  (212) 449-9054

                  If to the Trustee, to:

                  United States Trust Company of New York
                  114 West 47th Street
                  25th Floor
                  New York, New York 10036
                  Attention:  Corporate Trust Department
                              -PREFERREDPLUS Trust Series BLS-1
                  Telephone:  (212) 852-1667
                  Facsimile:  (212) 852-1625

                  If to the Securities Intermediary, to:

                                       10
<PAGE>

                  United States Trust Company of New York
                  114 West 47th Street
                  25th Floor
                  New York, New York 10036
                  Attention:  Corporate Trust Department
                              - PREFERREDPLUS Trust Series BLS-1
                  Telephone:  (212) 852-1667
                  Facsimile:  (212) 852-1625

                  If to the Rating Agencies, to:

                  Moody's Investors Service, Inc.
                  99 Church Street 21 W
                  New York, New York 10007
                  Attention:  CBO/CLO Monitoring Department
                  Telephone:  (212) 553-1494
                  Facsimile:  (212) 553-0355

                  and to:

                  Standard & Poor's
                  55 Water Street, 41st Floor
                  New York, New York 10041
                  Attention:  Structured Finance Surveillance Group
                  Telephone:  (212) 438-2482
                  Facsimile:  (212) 438-2664

                  Section 11. Governing Law. This Supplement and the
transactions described herein shall be construed in accordance with and governed
by the law of the State of New York.

                  Section 12. Counterparts. This Supplement may be executed in
any number of counterparts, each of which shall be deemed to be an original, and
all such counterparts shall constitute but one and the same instrument.

                  Section 13. Termination of the Trust. (a) The Trust shall
terminate upon the earlier of (i) the payment in full at maturity or sale by the
Trust after a payment default on or an acceleration or other early payment of
the Underlying Securities and the distribution in full of all amounts due to the
Certificateholders, (ii) the exchange of all outstanding Certificates and Call
Rights for Underlying Securities pursuant to one or more Optional Exchanges,
(iii) the Final Scheduled Distribution Date and (iv) the holders of all, but not
less than all, of the Certificates exercising their election in Section 13(b)
below.

                  (b) Certificateholders who hold all, but not less than all, of
the outstanding Certificates may, upon prior written notice to the Rating
Agencies, elect to terminate the Trust at any time; provided that (i) the
exercise of such termination right would not cause the Trust or the Depositor to
fail to satisfy the applicable requirements for exemption under Rule 3a-7 under
the

                                       11
<PAGE>

Investment Company Act of 1940, as amended and (ii) if and for so long as
the call warrants remain outstanding, all of the Call Holders have consented to
such termination.

                  (c) To the extent that the provisions of this Section 13
conflict with Section 10.01 of the Standard Terms, the latter shall control.

                  Section 14. Sale of Underlying Securities; Call Right

                  (a) In the case of Extraordinary Trust Expenses approved by
100% of the Certificateholders of a given Class, pursuant to Section 6(b)
hereof, the Trustee may sell all or a portion of the Underlying Securities to
pay such Extraordinary Trust Expenses.

                  (b) [Intentionally omitted]

                  (c) The Call Terms are as follows:

                  (i) The initial holder of the Call Rights is an affiliate of
         Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
         and such affiliate may transfer the Call Rights, in whole or in part,
         to one or more third parties in privately negotiated transactions;

                  (ii) A Call Holder that has met the exercise requirements set
         forth in paragraph (c)(iii) of this Section 14 may, on the Call Date,
         exercise its option to purchase, in whole or in part, an Authorized
         Denomination of Certificates at the Call Price;

                  (iii) In order to exercise its Call Right on a Call Date, a
         Call Holder must, not less than 30 days (or not less than 5 days in the
         case of an announcement of any redemption or other unscheduled payment
         of the underlying securities) but not more than 60 days prior to such
         Call Date:

                           (1) notify the Trustee in writing of its intention to
                  exercise such Call Right (which notice is irrevocable),

                           (2) deposit the Call Price with the Escrow Agent (the
                  "Escrow Deposit") to be held in escrow pursuant to an Escrow
                  Agreement reasonably satisfactory to the Trustee and
                  substantially in the form attached hereto as Exhibit D (to be
                  entered into immediately preceding delivery of the Call Price
                  by such Call Holder to the Escrow Agent) until such Call Price
                  is paid by the Trustee to the Certificateholders in accordance
                  with paragraph (d) of this Section 14,

                           (3) provide the Trustee with any other documents
                  customary for a transaction of this nature, including a
                  certificate of the Call Holder certifying the solvency of such
                  Call Holder on such date; provided that the Call Holder need
                  not provide any such solvency certificate if the rating of the
                  senior, unsecured long-term debt of the Call Holder, or the
                  Call Holder's credit support provider, if applicable, by
                  Moody's and S&P is in one of the investment grade categories
                  of Moody's and S&P, respectively, on such date.

                                       12
<PAGE>

                  (d) In connection with any exercise of the Call Rights, the
Trustee shall select by lot a stated amount of the outstanding Certificates to
be surrendered by the Certificateholders thereof to the Trustee upon any such
exercise, deliver such Certificates to the exercising Call Holder and the
proceeds of the Call Price shall be distributed pro rata among such
Certificateholders on the Call Date in accordance with the provisions of the
Warrant Agreement.

                  Section 15. Amendments. Notwithstanding anything in the Trust
Agreement to the contrary, in addition to the other restrictions on modification
and amendment contained herein, the Trustee shall not enter into any amendment
or modification of the Trust Agreement that would adversely affect in any
material respect the interests of the Certificateholders or the Call Holders
without the consent of 100% of such Certificateholders or Call Holders, as the
case may be; provided, however, that no such amendment or modification will be
permitted if the Trustee has been advised by the Depositor that such amendment
or modification would alter the status of the Trust as a "grantor trust" for
federal income tax purposes. Further, no amendment shall be permitted pursuant
to paragraphs (vi), (vii) and (x) of Section 11.0 1 (a) of the Standard Terms
without prior written confirmation by each Rating Agency that such amendment
will not result in a downgrading or withdrawal of its rating of the
Certificates. The Trustee may consult with counsel and shall be entitled to rely
upon an Opinion of Counsel for purposes of determining compliance with the
provisions of this Section 15.

                  Section 16. Voting of Underlying Securities, Modification of
Indenture. The Trustee, as holder of the Underlying Securities, has the right to
vote and give consents and waivers in respect of the Underlying Securities as
permitted by the Depository and except as otherwise limited by the Trust
Agreement. In the event that the Trustee receives a request from the Depository,
the Underlying Securities trustee or the Underlying Securities Issuer for its
consent to any amendment, modification or waiver of the Underlying Securities,
the Underlying Securities Indenture or any other document thereunder or relating
thereto, or receives any other solicitation for any action with respect to the
Underlying Securities, the Trustee shall mail a notice of such proposed
amendment, modification, waiver or solicitation to each Certificateholder of
record as of such date. The Trustee shall request instructions from the
Certificateholders as to whether or not to consent to or vote to accept such
amendment, modification, waiver or solicitation. The Trustee shall consent or
vote, or refrain from consenting or voting, in the same proportion (based on the
relative outstanding principal balances of the Certificates) as the Certificates
of the Trust were actually voted or not voted by the Certificateholders thereof
as of a date determined by the Trustee prior to the date on which such consent
or vote is required; provided, however, that, notwithstanding anything in the
Trust Agreement to the contrary, the Trustee shall at no time vote on or consent
to any matter (i) unless such vote or consent would not (based on an Opinion of
Counsel) alter the status of the Trust as a "grantor trust" for federal income
tax purposes or result in the imposition of tax upon the Certificateholders, or
(ii) that would alter the timing or amount of any payment on the Underlying
Securities, including, without limitation, any demand to accelerate the
Underlying Securities, except in the event of a default under the Underlying
Securities or an event that with the passage of time would become an event of
default under the Underlying Securities and with the consent of 100% of the
Certificateholders, or (iii) that would result in the exchange or substitution
of any of the outstanding Underlying Securities pursuant to a plan for the
refunding or refinancing of such Underlying Securities except in the event of a
default under the Underlying Securities Indenture and only with the consent of
100% of the Certificateholders and

                                       13
<PAGE>

100% of the Call Holders. The Trustee shall have no liability for any failure to
act resulting from Certificateholders' or Call Holders' late return of, or
failure to return, directions requested by the Trustee from the
Certificateholders and Call Holders.

                  If an offer is made by the Underlying Securities Issuer to
issue new obligations in exchange and substitution for any of the Underlying
Securities, pursuant to a plan for the refunding or refinancing of the
outstanding Underlying Securities or any other offer is made for the Underlying
Securities, the Trustee shall notify the Certificateholders, the Call Holders
and the Rating Agencies of such offer promptly. The Trustee must reject any such
offer unless the Trustee is directed by the affirmative vote of 100% of the
Certificateholders and 100% of the Call Holders to accept such offer, the
Trustee has received the tax opinion described above and if the Trustee is so
directed, the Trustee shall promptly notify the Rating Agencies of such
direction accompanied by evidence of the affirmative vote of such
Certificateholders and Call Holders.

                  If an event of default under the Underlying Securities
Indenture occurs and is continuing, and if directed by 100% of the
Certificateholders, the Trustee shall vote the Underlying Securities in favor of
directing, or take such other action as may be appropriate to direct, the
Underlying Securities trustee to declare the unpaid principal amount of the
Underlying Securities and any accrued and unpaid interest thereon to be due and
payable.

                  Section 17. Call Right Documentation. Simultaneously with the
execution hereof, the Depositor hereby directs the Trustee, in the name of and
on behalf of the Trust, to enter into a Warrant Agreement and any related
Warrant Certificates (as defined in the Warrant Agreement) evidencing the Call
Rights and to make representations contained therein on behalf of the Trust. At
the direction of the Depositor, the Trustee shall execute such further documents
as may be required to evidence any transfer of any or all of the rights,
interests or obligations under the Warrant Agreement and any related Warrant
Certificates.

                  Section 18. Third Party Beneficiary. The Escrow Agent and each
Call Holder shall be third party beneficiaries of this Trust Agreement.

                  Section 19. Nonpetition Covenant. Solely with respect to the
Trust and the Series and for no other purpose, Section 11.07 of the Standard
terms is hereby deleted and replaced with the following:

                        Section 11.07. Nonpetition Covenant. Notwithstanding any
     prior termination of this Trust Agreement, each of the Trustee (including
     any Administrative Agent, Authenticating Agent and Paying Agent) and the
     Depositor agrees that it shall not, until the date which is one year and
     one day after the termination of the PREFERREDPLUS Trust Series BLS-1,
     acquiesce, petition or otherwise invoke or cause the Trust to invoke the
     process of the United States, any State or other political subdivision
     thereof or any entity exercising executive, legislative, judicial,
     regulatory or administrative functions of or pertaining to government for
     the purpose of commencing or sustaining a case by or against the Trust
     under a Federal or state bankruptcy, insolvency or similar law or
     appointing a receiver, liquidator, assignee, trustee, custodian,
     sequestrator or other similar official of such Trust or all or any part of
     the

                                       14
<PAGE>

     property or assets of such Trust or ordering the winding up or liquidation
     of the affairs of such Trust.

                                       15
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this
Supplement to be duly executed by their respective authorized officers as of the
date first written above.

                              Merrill Lynch Depositor, Inc.,
                                as Depositor

                              By: /s/   Barry N. Finkelstein
                                 -----------------------------------------------
                                 Name:  Barry N. Finkelstein
                                 Title: President

                              United States Trust Company of New York,
                                as Trustee

                              By: /s/   Andres E. Serrano
                                 -----------------------------------------------
                                 Name:  Andres E. Serrano
                                 Title: Vice President

                              United States Trust Company of New York,
                                as Securities Intermediary

                              By: /s/   Andres E. Serrano
                                 -----------------------------------------------
                                 Name:  Andres E. Serrano
                                 Title: Vice President

                                       16
<PAGE>

SCHEDULE I

              PREFERREDPLUS 7.30% TRUST CERTIFICATES, SERIES BLS-1
                         UNDERLYING SECURITIES SCHEDULE

Underlying Securities:                  $75,000,000 7.00% Debentures (principal
                                        amount $1,000 per debenture) due
                                        December 1, 2095 of the Underlying
                                        Securities Issuer.

Underlying Securities Indenture:        The indenture dated as of November 15,
                                        1995 as supplemented by the supplemental
                                        indenture dated December 1, 1995, each
                                        as executed by Bellsouth
                                        Telecommunications, Inc. and the
                                        Underlying Securities Trustee.

Underlying Securities Issuer:           Bellsouth Telecommunications, Inc., a
                                        Georgia corporation.

Underlying Securities Trustee:          First Alabama Bank

Underlying Securities
CUSIP Number:                           079867AP2

Underlying Securities
Original Issue Date:                    December 1, 1995

Underlying Securities
Original Amount Issued:                 $500,000,000 7.00% Debentures due
                                        December 1, 2095 (principal amount
                                        $1,000 per debenture)

Underlying Securities
Listing:                                NYSE

Underlying Securities
Commission Filing Number:               33-60351

Underlying Securities
Maturity Date:                          December 1, 2095

Underlying Securities
Principal Payment Date:                 December 1, 2095

Interest Rate:                          7.00 % per annum.

Underlying Securities
Interest Dates:                         June 1 and December 1.

<PAGE>

Underlying Securities
Record Dates:                           May 15 and November 15.

Underlying Securities
Collateral:                             None.

Underlying Securities
Amortization:                           None.

Underlying Securities
Accrual Periods:                        Semi-annual.

Underlying Securities
Authorized Denomination
and Specified Currency:                 The Underlying Securities are
                                        denominated and payable in U.S. dollars
                                        and are available in minimum
                                        denominations of $1,000 and integral
                                        multiples thereof.

Underlying Securities
Rating as of Closing:                   "Aa2" by Moody's and "AA-" by S&P.

Underlying Securities Form:             Book-entry security with DTC.

Underlying Securities
Redemption:                             The Underlying Securities are not
                                        redeemable by the underlying securities
                                        issuer or the underlying securities
                                        holders.

<PAGE>

EXHIBIT A

                       Standard Terms for Trust Agreements

                              (begins on next page)

<PAGE>

                       STANDARD TERMS FOR TRUST AGREEMENTS

                                     between

                         MERRILL LYNCH DEPOSITOR, INC.,

                                  as Depositor,

                                      and

                    UNITED STATES TRUST COMPANY OF NEW YORK,

                   as Trustee and as Securities Intermediary

                               TRUST CERTIFICATES

                          Dated as of February 20, 1998

<PAGE>

                  Reconciliation and tie between the Standard Terms, dated as of
February 20, 1998, and the Trust Indenture Act of 1939, as amended. This
reconciliation and tie does not constitute part of the Standard Terms.

================================================================================
                Trust Indenture Act                     Standard
                  of 1939 Section                     Terms Section
--------------------------------------------------------------------------------
                  310(a)(1)                                          7.07
--------------------------------------------------------------------------------
                      (a)(2)                                         7.07
--------------------------------------------------------------------------------
                      (a)(5)                                         7.07
--------------------------------------------------------------------------------
                  312(a)                                             7.14
--------------------------------------------------------------------------------
                  313(a)                                             7.16
--------------------------------------------------------------------------------
                  314(a)                                             3.10
--------------------------------------------------------------------------------
                      (c)(1)                                         1.03
--------------------------------------------------------------------------------
                      (c)(2)                                         1.03
--------------------------------------------------------------------------------
                      (e)                                            1.03
--------------------------------------------------------------------------------
                  315(a)(1)                                          7.01
--------------------------------------------------------------------------------
                  315(a)(2)                                          7.03
--------------------------------------------------------------------------------
                  315(b)                                             7.01(d)
--------------------------------------------------------------------------------
                  315(d)                                             7.01(c)
--------------------------------------------------------------------------------
                  316(a)(1)(A)                                       5.19
--------------------------------------------------------------------------------
                      (a)(1)(B)                                      5.20
--------------------------------------------------------------------------------
                      (b)                                            5.21
--------------------------------------------------------------------------------
                      (c)                                            1.03(b)
--------------------------------------------------------------------------------
                  317(a)(1)                                          5.18
--------------------------------------------------------------------------------
                      (b)                                            5.13
--------------------------------------------------------------------------------
                  318(a)                                            11.11
================================================================================

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
                                                                                          Page
                                                                                          ----

                                    ARTICLE I

                           DEFINITIONS AND ASSUMPTIONS

<S>            <C>                                                                          <C>
Section 1.01.  Definitions.................................................................  1
Section 1.02.  Rules of Construction....................................................... 19
Section 1.03.  Compliance Certificates and Opinions; Record Date........................... 20

                                   ARTICLE II

                DECLARATION OF TRUSTS; ISSUANCE OF CERTIFICATES;
                      PURPOSE AND CLASSIFICATION OF TRUSTS

Section 2.01.  Creation and Declaration of Trusts; Assignment of Deposited Assets.......... 21
Section 2.02.  Acceptance by Trustee....................................................... 23
Section 2.03.  Representations and Warranties of the Depositor............................. 23
Section 2.04.  Breach of Representation, Warranty or Covenant.............................. 24
Section 2.05.  Agreement to Execute, Authenticate and Deliver Certificates................. 25
Section 2.06.  Custody and Holding of Deposited Assets..................................... 25

                                   ARTICLE III

                          ADMINISTRATION OF EACH TRUST

Section 3.01.  Administration of Each Trust................................................ 26
Section 3.02.  Collection of Certain Underlying Security Payments.......................... 27
Section 3.03.  Certificate Accounts........................................................ 27
Section 3.04.  Distribution or Sale of the Underlying Securities........................... 28
Section 3.05.  Investment of Funds in the Accounts......................................... 29
Section 3.06.  Maintenance of Credit Support............................................... 30
Section 3.07.  Realization upon Defaulted Underlying Securities............................ 30
Section 3.08.  Retained Interest........................................................... 31
Section 3.09.  Access to Certain Documentation............................................. 31
Section 3.10.  Reports by the Depositor.................................................... 31
Section 3.11.  Charges and Expenses........................................................ 32

                                   ARTICLE IV

                 DISTRIBUTIONS AND REPORTS TO CERTIFICATEHOLDERS

Section 4.01.  Distributions............................................................... 32
Section 4.02.  Distributions on Certificates............................................... 33
Section 4.03.  Reports to Certificateholders............................................... 34
</TABLE>

<PAGE>

<TABLE>
<S>            <C>                                                                          <C>
Section 4.04.  Advances.................................................................... 35
Section 4.05.  Allocation of Realized Losses and Trust Expenses............................ 36
Section 4.06.  Compliance with Withholding Requirements.................................... 36
Section 4.07.  Optional Exchange........................................................... 37
Section 4.08.  Call Right.................................................................. 39

                                    ARTICLE V

                                THE CERTIFICATES

Section 5.01.  The Certificates............................................................ 41
Section 5.02.  Execution, Authentication and Delivery...................................... 42
Section 5.03.  Temporary Certificates...................................................... 42
Section 5.04.  Registration; Registration of Transfer and Exchange......................... 43
Section 5.05.  Mutilated, Destroyed, Lost and Stolen Certificates.......................... 44
Section 5.06.  Persons Deemed Owners....................................................... 45
Section 5.07.  Cancellation................................................................ 45
Section 5.08.  Global Securities........................................................... 46
Section 5.09.  Notices to Depository....................................................... 47
Section 5.10.  Definitive Certificates..................................................... 47
Section 5.11.  Currency of Distributions................................................... 49
Section 5.12.  Conditions of Execution, Authentication and Delivery of New Series.......... 49
Section 5.13.  Appointment of Paying Agent................................................. 51
Section 5.14.  Authenticating Agent........................................................ 52
Section 5.15.  Voting Rights with Respect to Underlying Securities......................... 53
Section 5.16.  Actions by Certificateholders............................................... 54
Section 5.17.  Events of Default........................................................... 54
Section 5.18.  Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit.......... 55
Section 5.19.  Control by Certificateholders............................................... 55
Section 5.20.  Waiver of Past Defaults..................................................... 55
Section 5.21.  Right of Certificateholders to Receive Payments Not to Be Impaired.......... 56
Section 5.22.  Remedies Cumulative......................................................... 56

                                   ARTICLE VI

                                  THE DEPOSITOR

Section 6.01.  Liability of the Depositor.................................................. 56
Section 6.02.  Limitation on Liability of the Depositor.................................... 56
Section 6.03.  Depositor May Purchase Certificates......................................... 57
Section 6.04.  Merger or Consolidation of the Depositor.................................... 58
Section 6.05.  No Liability of the Depositor with Respect to the Underlying
                      Securities; Certificateholders to Proceed Directly Against the
                      Underlying Securities Issuer(s)...................................... 58
</TABLE>

<PAGE>

<TABLE>
                                   ARTICLE VII

                                   THE TRUSTEE

<S>            <C>                                                                          <C>
Section 7.01.  Duties of Trustee........................................................... 58
Section 7.02.  Agreements Between Trustee and Administrative Agents........................ 62
Section 7.03.  Certain Matters Affecting the Trustee....................................... 64
Section 7.04.  Trustee Not Liable for Recitals in Certificates or Underlying Securities.... 65
Section 7.05.  Trustee May Own Certificates................................................ 65
Section 7.06.  Trustee's Fees and Expenses................................................. 65
Section 7.07.  Eligibility Requirements for Trustee........................................ 66
Section 7.08.  Resignation or Removal of the Trustee; Appointment of Successor
                      Trustee.............................................................. 67
Section 7.09.  Appointment of Office or Agency............................................. 68
Section 7.10.  Representations and Warranties of Trustee................................... 68
Section 7.11.  Indemnification of Trustee by the Depositor; Contribution................... 70
Section 7.12.  No Liability of the Trustee with Respect to the Underlying Securities;
                      Certificateholders to Proceed Directly Against the Underlying
                      Securities Issuer(s)................................................. 71
Section 7.13.  The Depositor to Furnish Trustee with Names and Addresses of
                      Certificateholders................................................... 71
Section 7.14.  Preservation of Information................................................. 72
Section 7.15.  Reports by Trustee.......................................................... 72
Section 7.16.  Trustee's Application for Instructions from the Depositor................... 72

                                  ARTICLE VIII

                                  MARKET AGENT

Section 8.01.  Market Agent................................................................ 72

                                   ARTICLE IX

                             SECURITIES INTERMEDIARY

Section 9.01.  Resignation or Removal of the Securities Intermediary; Appointment of
                      Successor Securities Intermediary.................................... 73

                                    ARTICLE X

                                   TERMINATION

Section  10.01.  Termination upon Liquidation of All Underlying Securities................. 75
</TABLE>

<PAGE>

<TABLE>
                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

<S>            <C>                                                                          <C>
Section 11.01.  Amendment.................................................................. 76
Section 11.02.  Limitation on Rights of Certificateholders................................. 77
Section 11.03.  Governing Law.............................................................. 79
Section 11.04.  Notices.................................................................... 79
Section 11.05.  Notice to Rating Agencies.................................................. 80
Section 11.06.  Severability of Provisions................................................. 81
Section 11.07.  Nonpetition Covenant....................................................... 81
Section 11.08.  No Recourse................................................................ 81
Section 11.09.  Article and Section References............................................. 81
Section 11.10.  Counterparts............................................................... 82
Section 11.11.  Trust Indenture Act........................................................ 82
</TABLE>

<PAGE>

                  STANDARD TERMS FOR TRUST AGREEMENTS dated as of February 20,
1998 between MERRILL LYNCH DEPOSITOR, INC., a Delaware corporation, as Depositor
(the "Depositor"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New York
corporation, as Trustee (in such capacity, the "Trustee") and as securities
intermediary (in such capacity, the "Securities Intermediary").

                              PRELIMINARY STATEMENT

                  The Depositor, the Trustee and the Securities Intermediary
have duly authorized the execution and delivery of these Standard Terms for
Trust Agreements (the "Standard Terms") to provide for one or more Series (and
one or more Classes within each such Series) of Certificates, issuable from time
to time as provided in these Standard Terms.

                  Each such Series (inclusive of any Classes specified within
such Series) will be issued under a separate Supplement to these Standard Terms,
duly executed and delivered by the Depositor, the Trustee and the Securities
Intermediary. With respect to each Series, these Standard Terms and all
amendments hereof and, unless the context otherwise requires, the related
Supplement and all amendments thereto shall be known as the "Trust Agreement".

                  All representations, covenants and agreements made herein by
each of the Depositor, the Trustee and the Securities Intermediary are for the
benefit and security of the Holders and, to the extent provided in the
applicable Supplement, for the benefit and security of any Credit Support
Provider or any other party as specified therein.

                  The Depositor and the Securities Intermediary are entering
into these Standard Terms, and the Trustee is accepting the trust created
hereby, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged.

                                    ARTICLE I

                           DEFINITIONS AND ASSUMPTIONS

                  Section 1.01. Definitions. Except as otherwise specified
herein or in the applicable Supplement or as the context may otherwise require,
the following terms have the respective meanings set forth below for all
purposes of this Trust Agreement.

                  "Account":  As defined in Section 3.05.

                  "Accounting Date": With respect to any Series, if applicable,
as defined in the related Supplement.

<PAGE>

                                        2

                  "Administration Account":  As defined in Section 7.02.

                  "Administrative Agent": Any Person with which the Trustee has
entered into an Administration Agreement and that meets the qualifications of an
Administrative Agent, pursuant to Section 7.02.

                  "Administration Agreement": The written contract, if any,
between the Trustee and an Administrative Agent and any successor Trustee or
Administrative Agent providing that the Trustee can delegate certain of its
administrative obligations with respect to any Series hereunder.

                  "Administrative Agent Termination Event": With respect to any
given Series, any of the following: (i) any failure by an Administrative Agent
to remit to the Trustee any funds in respect of collections on the Underlying
Securities and Credit Support, if any, as required under this Trust Agreement,
that continues unremedied for five days after the giving of written notice of
such failure to the Administrative Agent by the Trustee or the Depositor, or to
the Administrative Agent, the Depositor and the Trustee by the Holders of not
less than 25% of the Voting Rights; (ii) any failure by an Administrative Agent
duly to observe or perform in any material respect any of its other covenants or
obligations under the Administration Agreement with respect to such Series that
continues unremedied for thirty days after the giving of written notice of such
failure to the Administrative Agent by the Trustee or the Depositor, or to the
Administrative Agent, the Depositor and the Trustee by the Holders of not less
than 25% of the Voting Rights; and (iii) events of insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings and certain
actions by or on behalf of an Administrative Agent indicating its insolvency or
inability to pay its obligations. Any additional Administrative Agent
Termination Event with respect to any given Series may be set forth in the
applicable Supplement.

                  "Advance":  As defined in Section 4.04.

                  "Affiliate": With respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control", when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.

                  "Allocation Ratio": With respect to any Series, as defined in
the related Supplement.

                  "Authenticating Agent":   As defined in Section 5.14.

<PAGE>

                                        3

                  "Authorized Denomination": The minimum denomination in which a
Certificate may be issued, or any multiple thereof, as specified in the related
Supplement.

                  "Available Funds": Unless otherwise specified in the
applicable Supplement, for any Distribution Date in respect of a given Series or
Class, the sum of (i) all amounts actually received on or with respect to the
Underlying Securities (including Liquidation Proceeds and investment income
earned on Account funds invested pursuant to Section 3.05) with respect to such
Series during the related Collection Period, (ii) all amounts received pursuant
to any Credit Support Instruments with respect to such Series for such
Distribution Date and (iii) all other amounts, if any, specified by the
applicable Supplement less any amount held for the benefit of the Retained
Interest.

                  "Beneficial Owner": With respect to Certificates held through
a Depository, the beneficial owner of a Certificate. For purposes only of
Section 5.16, the Trustee shall be obligated to treat a Person who claims to be
a beneficial owner of a Certificate as a "Beneficial Owner" within the meaning
of the Supplement only if such Person has first delivered to the Trustee, (i) a
certificate or other writing executed by such Person stating the full name and
address of such Person, the principal distribution amount of the Certificate
with respect to which such Person claims to be the Beneficial Owner, and the
participant in the Depository ("such Person's Participant") through which such
Person holds its beneficial ownership interest in the Certificates and (ii) a
certificate or other writing executed by such Person's Participant confirming
that such Person's Participant holds on its own books and records Certificates
for the account of such Beneficial Owner and identifying the principal
distribution amount held for such Beneficial Owner.

                  "Book-Entry Securities": Securities maintained in the form of
entries (including, without limitation, the Security Entitlements in such
Securities) in the commercial book-entry system of the Fed and held for the
Trustee, directly or indirectly, by any Trustee's Fed Member. Book-Entry
Securities shall not include, in any event, any Certificated Security (or any
Security Entitlement in any Certificated Security) held, directly or indirectly,
through a Clearing Corporation.

                  "Business Day": With respect to any Series, as defined in the
related Supplement.

                  "Calculation Agent": If applicable with respect to any Series,
as specified in the applicable Supplement.

                  "Call Date": The date on which the Call Right may be
exercised, as specified in the applicable Supplement.

<PAGE>

                                        4

                  "Call Price": If applicable with respect to any Series, as
specified in the applicable Supplement.

                  "Callable Series": A Series or Class within such Series
subject to a Call Right, as specified in the applicable Supplement.

                  "Call Right": The right of the holder thereof (or any
successor), as named in the applicable Supplement, to purchase Certificates from
the Holders thereof or to purchase Underlying Securities from the Trust.

                  "Call Terms": The terms pursuant to which a Call Right may be
exercised, as set forth in the applicable Supplement.

                  "Certificate" and "Certificates": Any trust certificate or
trust certificates authorized by, executed pursuant to and authenticated and
delivered under, this Trust Agreement, and unless the context requires
otherwise, "Certificate" and "Certificates" shall also be deemed to refer to the
Retained Interest.

                  "Certificate Account":  As defined in Section 3.03.

                  "Certificate Principal Balance": With respect to an
Outstanding Certificate, as determined at any time, the maximum amount that the
Holder thereof is entitled to receive as distributions allocable to principal
payments on the Underlying Securities. The Certificate Principal Balance, if
any, of any Class within a given Series (other than those Classes, if any,
specified in the related Supplement), as of any date of determination, shall be
equal to the aggregate initial Certificate Principal Balance thereof less the
sum of (i) all amounts allocable to prior distributions made to such Class in
respect to principal of the Underlying Securities, (ii) any reductions
attributable to Certificates surrendered in exchange for Underlying Securities,
as and to the extent provided in the applicable Supplement, and (iii) any
reductions in the Certificate Principal Balance thereof deemed to have occurred
in connection with allocations of (A) Realized Losses in respect of principal of
the Underlying Securities and (B) expenses of the Trust if any only to the
extent specified in the applicable Supplement, each as allocated to such Class
pursuant to the applicable Supplement.

                  "Certificate Register" and "Certificate Registrar": As defined
in Section 5.04.

                  "Certificated Security": As defined in Section 8-102(a)(4) of
the UCC.

                  "Certificateholder": Any holder of a Certificate or a Retained
Interest.

                  "Class": With respect to any Series, any one of the classes of
Certificates of such Series, each class consisting of Certificates having
identical terms.

<PAGE>

                                        5

                  "Clearing Agency": An organization that (i) is registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act and (ii) is a
Clearing Corporation.

                  "Clearing Agency Participant": At any time, in respect of any
Clearing Agency, a securities intermediary that maintains Securities Accounts
with such Clearing Agency at such time.

                  "Clearing Corporation": The meaning specified in Section
8-102(a)(5) of the UCC.

                  "Closing Date": With respect to any Series, the day on which
Certificates of such Series are first executed, authenticated and delivered, as
specified in the related Supplement.

                  "Code": The Internal Revenue Code of 1986, as amended, and
Treasury Regulations promulgated thereunder.

                  "Collection Period": With respect to any Distribution Date for
a Series (or Class within such Series), the period specified in the related
Supplement.

                  "Commission": The Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act or, if at any time
after the execution and delivery of this Trust Agreement such Commission is not
existing and performing the duties now assigned to it, then the body then
performing such duties.

                  "Concentrated Underlying Securities": Any Underlying
Securities that constitute 10% or more of the total Underlying Securities with
respect to a Series of Certificates.

                  "Corporate Trust Office": The principal corporate trust office
of the Trustee located at the address set forth in the related Supplement or
such other address as the Trustee may designate from time to time by notice to
the Holders and the Depositor, or the principal corporate trust office of any
successor Trustee (or such other addresses as a successor Trustee may designate
from time to time by notice to the Holders and the Depositor).

                  "Credit Support": As specified in the related Supplement, a
Letter of Credit, Limited Guaranty, Surety Bond, Swap Agreement, Swap Guarantee,
or other asset intended to support or ensure the timely or ultimate
distributions of amounts due in respect of a Series (or Class within such
Series).

<PAGE>

                                        6

                  "Credit Support Instrument": The instrument or document
pursuant to which the Credit Support for a given Series (or Class within such
Series) is provided, as specified in the applicable Supplement.

                  "Credit Support Provider": With respect to any Series (or
Class within such Series), the Person, if any, that will provide any Credit
Support with respect to all or a portion of a Series or Class, as specified in
the applicable Supplement.

                  "Cut-off Date": With respect to any Series, the date specified
as such in the related Supplement. For purposes of this Trust Agreement, any
Underlying Security acquired by the Depositor after the applicable Cut-off Date
but prior to the applicable Closing Date and included in the related Trust as of
such Closing Date shall be deemed to have been Outstanding as of such Cut-off
Date and references to the principal balance of such Underlying Security as of
such Cut-off Date shall be deemed to be to the principal balance of such
Underlying Security as of the date on which it was acquired by the Depositor.

                  "Definitive Certificates":  As defined in Section 5.10.

                  "Deposited Assets": With respect to any Series, the following
assets, properties and items (together with the accounts and book-entry accounts
containing or reflecting, directly or indirectly, such assets, properties and
items), in each case, wherever located, however held and whether now existing or
hereafter acquired:

                  (i)  all Underlying Securities and Related Assets;

                  (ii) all payments receivable or received in respect of the
         Underlying Securities including the immediate and continuing right to
         claim for, collect, receive and give receipt for principal, premium, if
         any, and interest payments in respect of the Underlying Securities and
         all other monies payable thereunder;

                  (iii) all Financial Assets, Security Entitlements and
         Investment Property in, constituting, evidenced by, resulting from or
         otherwise related to, any of the Deposited Assets;

                  (iv) all other rights and remedies (but none of the
         obligations) comprising, arising or resulting from or related to the
         Grant of the Deposited Assets including, without limitation, the right
         to give and receive notices and other communications, to make waivers
         or other agreements, to exercise all rights and options of the
         Depositor, to bring Proceedings in the name of the Depositor or
         otherwise, and generally to exercise all of the rights and remedies of
         the Depositor and to do and receive anything

<PAGE>

                                        7

         that the Depositor is or may be entitled to do or receive thereunder or
         with respect thereto; and

                  (v) any other assets identified as Deposited Assets in the
         related Supplement, which assets may include cash, cash equivalents,
         guarantees, letters of credit, financial insurance, interest rate,
         currency, equity, commodity and credit-linked swaps, caps, floors,
         collars and options, forward contracts, structured securities and other
         instruments and transactions that credit enhance, hedge or otherwise
         support the Underlying Securities designed to assure the servicing or
         timely distribution of payments to Holders.

                  "Depositor": Merrill Lynch Depositor, Inc., a Delaware
corporation, and, if a successor Person shall have become the Depositor pursuant
to any applicable provisions of this Trust Agreement, "Depositor" shall mean
such successor Person. With respect to any provisions of this Trust Agreement
that relate to the provisions of the TIA, "Depositor" shall include any obligor
on the Certificates as the term obligor is defined in the TIA.

                  "Depositor Order": A written order or request, respectively,
signed in the name of the Depositor by any one of its Executive Officers.

                  "Depository": With respect to the Certificates of any Series
(or Class within such Series) issuable in whole or in part in the form of one or
more Global Securities, the Person so designated in the applicable Supplement,
and, if at any time there is more than one such Person, "Depository" as used
with respect to the Certificates of any such Series or Class shall mean the
Depository with respect to the Certificates of that Series or Class.

                  "Discount Certificate": Any Certificate that is issued with
"original issue discount" within the meaning of Section 1273(a) of the Code and
any other Certificate designated by the Depositor as issued with original issue
discount for United States Federal income tax purposes.

                  "Distribution Date": With respect to any Series (or Class
within such Series), each date specified as a "Distribution Date" for such
Series (or Class) in the related Supplement.

                  "Distribution Election": With respect to any Series, as
specified in the related Supplement.

                  "Dollar" or "$" or "USD": Such currency of the United States
as at the time of payment is legal tender for the payment of public and private
debts.

<PAGE>

                                        8

                  "Depository Securities": Securities consisting of Security
Entitlements to Certificated Securities, held by the Depository or a Clearing
Corporation or a nominee of either subject to the control of the Depository and
in bearer form or indorsed in blank by an appropriate Person or registered on
the books of the issuer thereof in the name of the Depository or its Clearing
Corporation or a nominee of either.

                  "DCR": Duff & Phelps Credit Rating Co. and any successor
thereto.

                  "Eligible Account": Either (i) an account or accounts
maintained with a Federal or State chartered depository institution or trust
company the long-term unsecured obligations of which are rated by the Rating
Agency the higher of (x) at least the then current long-term rating of the
Certificates or (y) in one of its two highest long-term rating categories
(unless otherwise specified in the Supplement) at the time any amounts are held
in deposit therein or (ii) a trust account(s) maintained as a segregated
account(s) and held by a Federal or State chartered depository institution or
trust company in trust for the benefit of the Certificateholders; provided,
however, that such depository institution or trust company has a long-term
rating in one of the four highest categories by the Rating Agency.

                  "Eligible Investments": With respect to any Series, unless
otherwise specified in the related Supplement, any one or more of the following
obligations or securities; provided, however, that the total stated return
specified by the terms of each such obligation or security is at least equal to
the purchase price thereof; and provided further that no such instrument may
carry the symbol "r" from S&P in its rating:

                  (i) direct obligations of, and obligations fully guaranteed
         by, the United States, the Federal Home Loan Mortgage Corporation, the
         Federal National Mortgage Association, the Federal Farm Credit System
         or any agency or instrumentality of the United States the obligations
         of which are backed by the full faith and credit of the United States;
         provided, however, that obligations of, or guaranteed by, the Federal
         Home Loan Mortgage Corporation, the Federal National Mortgage
         Association or the Federal Farm Credit System shall be Eligible
         Investments only if, at the time of investment, such investment has the
         rating specified in such Supplement for Eligible Investments;

                  (ii) demand and time deposits in, certificates of deposit of,
         or banker's acceptances issued by any depository institution or trust
         company (including the Trustee or any agent of the Trustee acting in
         their respective commercial capacities) incorporated under the laws of
         the United States or any State and subject to supervision and
         examination by Federal and/or State banking authorities so long as the
         commercial paper and/or the short-term debt obligations of such
         depository institution or trust company (or, in the case of a
         depository institution which is the principal subsidiary of a holding
         company, the commercial paper or other short-term

<PAGE>

                                        9

         debt obligations of such holding company) at the time of such
         investment or contractual commitment providing for such investment have
         the rating specified in such Supplement for Eligible Investments;
         provided, however, that such rating shall be no lower than the lower of
         the rating on the Underlying Securities or the Trust Certificates at
         the time of purchase of the investments;

                  (iii) securities bearing interest or sold at a discount issued
         by any corporation incorporated under the laws of the United States or
         any State that have the rating specified in such Supplement for
         Eligible Investments at the time of such investment or contractual
         commitment providing for such investment; provided, however, that such
         rating shall be no lower than the lower of the rating on the Underlying
         Securities or the Trust Certificates; and provided further that
         securities issued by any particular corporation will not be Eligible
         Investments to the extent that investment therein will cause the then
         outstanding principal amount of securities issued by such corporation
         and held as part of the Trust for such Series to exceed 10% of the
         aggregate outstanding principal balances and amounts of all the
         Underlying Securities and Eligible Investments held as part of the
         Trust for such Series; and

                  (iv) commercial paper having at the time of such investment
         the rating specified in the Supplement for Eligible Investments.

                  "Entitlement Holder": As defined in Section 8-102(a)(7) of the
UCC.

                  "Event of Default": With respect to any Series (or Class
within such Series), as specified in the related Supplement.

                  "Exchange Act": The Securities Exchange Act of 1934, as
amended.

                  "Exchange Rate Agent":  As specified in the Supplement.

                  "Executive Officer": With respect to any limited liability
company or corporation, the chief executive officer, the chief operating
officer, the chief financial officer, the president, any vice president, the
secretary or the treasurer of such limited liability company or corporation;
with respect to any partnership, any general partner thereof.

                  "Extraordinary Trust Expenses": Any and all costs, expenses or
liabilities arising out of the establishment, existence or administration of the
Trust, other than (i) Ordinary Expenses, and (ii) costs and expenses payable by
a particular Certificateholder, the Trustee or the Depositor pursuant to this
Trust Agreement.

<PAGE>

                                       10

                  "Fed":  The Federal Reserve Bank of New York.

                  "Fed Member Securities Account": In respect of any Person, an
account in the name of such Person at the Fed, to which account Book-Entry
Securities held for such Person are or may be credited.

                  "Federal Book-Entry Regulations": (a) the Federal regulations
contained in Subpart B ("Treasury/Reserve Automated Debt Entry System (TRADES)"
governing Book-Entry Securities consisting of U.S. Treasury bonds, notes and
bills) and Subpart D ("Additional Provisions") of 31 C.F.R. Part 357, 31 C.F.R.
ss. 357.10 through ss. 357.14 and ss. 357.41 through ss. 357.44 (including
related defined terms in 31 C.F.R. ss. 357.2) and (b) to the extent
substantially identical to the federal regulations referred to in clause (a)
above (as in effect from time to time), the federal regulations governing other
Book-Entry Securities.

                  "Final Scheduled Distribution Date": With respect to any
Certificate, the date on which all the unpaid principal of (and premium, if any,
on) and interest on such Certificate is scheduled, without giving effect to any
prepayment, exchange or early termination, to become due and payable as provided
therein and in the applicable Supplement.

                  "Financial Asset": As defined in Section 8-102(a)(9) of the
UCC.

                  "Fitch": Fitch Investors Service, L.P., and any successor
thereof.

                  "Fixed Pass-Through Rate": With respect to any Fixed Rate
Certificate, as defined in the related Supplement.

                  "Fixed Rate Certificate": A Certificate that provides for a
payment of interest at a Fixed Pass-Through Rate.

                  "Floating Pass-Through Rate": With respect to any Floating
Rate Certificate, as defined in the related Supplement.

                  "Floating Rate Certificate": A Certificate that provides for
the payment of interest at a Floating Pass-Through Rate determined periodically
by reference to a formula specified in the related Supplement.

                  "Global Security": A registered Certificate evidencing all or
part of a Series (or Class within such Series), issued to the Depository for
such Series or Class in accordance with Section 5.08 and bearing the legend
prescribed therein.

<PAGE>

                                       11

                  "Grant": To grant, bargain, sell, warrant, alienate, remise,
demise, release, convey, assign, transfer, deposit, set over and confirm to the
Trustee pursuant to these Standard Terms and the applicable Supplement; and the
terms "Granted" and "Granting" have the meanings correlative to the foregoing.

                  "Holder": The Person in whose name a Certificate or Retained
Interest is registered in the Certificate Register on the applicable Record
Date. Where the context requires, "Holder" may refer to the person entitled to
exercise the Voting Rights accompanying a Certificate.

                  "Independent": When used with respect to any Person means that
such Person (1) is in fact independent of the Depositor and of any Affiliate,
(2) does not have any direct or indirect material financial interest in the
Depositor or in any Affiliate and (3) is not connected with the Depositor or any
Affiliate as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.

                  "Investment Property": As defined in Section 9-115 of the UCC.

                  "Letter of Credit": With respect to any Series (or Class
within such Series), the letter of credit, if any, providing for the payment of
all or a portion of amounts due in respect of such Series (or Class), issued to
the Trustee for the benefit of the Holders of such Series (or Class), issued by
the related Credit Support Provider, all as specified in the related Supplement.

                  "Limited Guarantor": With respect to any Series (or Class
within such Series), a Person specified in the related Supplement as providing a
guarantee or insurance policy or other credit enhancement supporting the
distributions in respect of such Series (or Class within such Series) as and to
the extent specified in such Supplement.

                  "Limited Guaranty": With respect to any Series (or Class
within such Series), any guarantee of, or insurance policy or other comparable
form of credit enhancement with respect to, amounts required to be distributed
in respect of such Series (or Class) or payments under all or certain of the
Underlying Securities relating to such Series or Class, executed and delivered
by a Limited Guarantor in favor of the Trustee, for the benefit of the
Certificateholders, as specified in the related Supplement.

                  "Liquidation Price": If applicable with respect to any Series,
the price at which the Market Agent sells the Underlying Securities on behalf of
the Trustee, as specified in the applicable Supplement.

                  "Liquidation Proceeds": The amounts received by the Trustee in
connection with (i) the liquidation of a defaulted Underlying Security,
collateral, if any, related thereto,

<PAGE>

                                       12

or Related Asset or (ii) the repurchase, substitution or sale of an Underlying
Security or Related Asset.

                  "Market Agent": The market agent or market agents, if any,
appointed pursuant to Section 8.01, and its or their successors or assigns.

                  "Market Agent Agreement": With respect to any Series, the
agreement, if any, dated as of the Closing Date, between the Trustee and the
Market Agent, the form of which will be attached to the related Supplement, and
any similar agreement with a successor Market Agent, in each case as from time
to time amended or supplemented.

                  "Merrill Lynch & Co.": Merrill Lynch & Co., a Delaware
corporation.

                  "Minimum Wire Denomination": $10,000,000 or the equivalent in
any Specified Currency.

                  "Moody's": Moody's Investors Service, Inc. and any successors
thereto.

                  "Notional Amount": With respect to any Class of Certificates,
if applicable, the initial notional amount specified in the related Supplement
on which distributions of interest may be determined at the applicable
Pass-Through Rate, as the same may be adjusted as specified in such Supplement.

                  "Officer's Certificate": A certificate signed by any (or, if
specified in these Standard Terms or any Supplement, more than one) Executive
Officer of the Depositor, and delivered to the Trustee.

                  "Opinion of Counsel": A written opinion of counsel, who may,
except as otherwise expressly provided in this Trust Agreement, be counsel for
the Depositor acceptable to the Trustee, except that any opinion of counsel
relating to the qualification of any account required to be maintained pursuant
to this Trust Agreement as an Eligible Account must be an opinion of counsel who
is in fact Independent of the Depositor.

                  "Optional Exchange": shall mean the exchange of Certificates
of any Series (or Class within such Series) for a pro rata portion of the
Deposited Assets of the related Trust.

                  "Optional Exchange Date": With respect to any Series (or Class
within such Series), as defined, if applicable, in the related Supplement.

                  "Optional Redemption": The right of an Underlying Securities
Issuer to redeem such Underlying Securities in accordance with the terms of the
Underlying Securities Indenture.

<PAGE>

                                       13

                  "Ordinary Expenses": The Trustee's customary fee for its
services as Trustee, as set forth in the related Supplement, including but not
limited to (i) the costs and expenses of preparing, sending and receiving all
reports, statements, notices, returns, filings, solicitation of consent or
instructions, or other communications required by this Trust Agreement, (ii) the
costs and expenses of holding and making ordinary collection or payments on the
assets of the Trust and of determining and making distributions, (iii) the costs
and expenses of the Trust's or Trustee's counsel, accountants and other experts
for ordinary or routine consultation or advice in connection with the
establishment, administration and termination of the Trust, and (iv) any other
costs and expenses that are, or reasonably should have been, expected to be
incurred in the ordinary course of administration of the Trust.

                  "Outstanding": With respect to Certificates of a specified
Series (or Class within such Series), as of any date of determination, all such
Certificates theretofore executed, authenticated and delivered under these
Standard Terms and the related Supplement except:

                  (i) Certificates theretofore cancelled by the Certificate
         Registrar; and

                  (ii) Certificates, including Predecessor Certificates, in
         exchange for or in lieu of which other Certificates have been executed,
         authenticated and delivered pursuant to this Trust Agreement, unless
         proof satisfactory to the Trustee is presented that any such
         Certificates are held by a bona fide purchaser in whose hands such
         Certificates are valid obligations of the Trust;

provided, however, that in determining whether any request, demand,
authorization, direction, notice, consent or waiver hereunder has been given by
the required percentage of the aggregate Voting Rights, Voting Rights
accompanying Certificates beneficially owned by the Depositor, the Trustee, or
any Affiliate thereof shall be disregarded and deemed not to be Outstanding, and
such Voting Rights shall not be taken into account in determining whether the
requisite percentage of aggregate Voting Rights necessary to effect any such
consent or take any such action has been obtained except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Certificates with
respect to which the Depositor has provided the Trustee an Officer's Certificate
stating that such Certificates are so owned shall be so disregarded.
Certificates so owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Certificates.

                  "Participant": A broker, dealer, bank, other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.

<PAGE>

                                       14

                  "Pass-Through Rate": With respect to any Series (or Class
within such Series) (except certain Discount Certificates and Certificates
entitled to nominal or no interest distributions), the annual rate at which
interest accrues on the Certificates of such Series (or Class), which may be a
fixed rate or a floating rate of interest, determined upon the basis and in the
manner specified in the related Supplement.

                  "Paying Agent":  As defined in Section 5.13.

                  "Person": Any individual, limited liability company,
corporation, partnership, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.

                  "Predecessor Certificate":  As defined in Section 5.05.

                  "Prepaid Ordinary Expenses": The amount (if any) paid by the
Depositor to the Trustee on or before the Closing Date to cover Ordinary
Expenses, as specified in the related Supplement.

                  "Proceeding": Any suit in equity, action at law or other
judicial or administrative proceeding.

                  "Rating Agency": With respect to any Series or Class within
such Series), each nationally recognized statistical rating organization,
specified in the related Supplement, that initially rates the Certificates of
such Series (or Class within such Series).

                  "Rating Agency Condition": With respect to any action or
occurrence, unless otherwise specified in the applicable Supplement, that each
Rating Agency shall have been given 10 days (or such shorter period acceptable
to each Rating Agency) prior written notice thereof and that each Rating Agency
shall have notified the Depositor and the Trustee in writing that such action or
occurrence will not result in a reduction or withdrawal of the then current
rating of any Certificate of the applicable Series.

                  "Realized Loss": With respect to any defaulted and liquidated
Underlying Security, the excess, if any, of (x) the price paid by the Depositor
for such Underlying Security plus expenses incurred by the Trustee in connection
with the practices and procedures referred to in Section 3.07(b) of these
Standard Terms, to the extent reimbursable under these Standard Terms and the
related Supplement, over (y) Liquidation Proceeds with respect thereto.

                  "Record Date": With respect to any Distribution Date for any
Series (or Class within such Series), the date specified in the related
Supplement.

<PAGE>

                                       15

                  "Related Assets": Any assets held by a Trust the return of
which is linked to one or more Underlying Securities and which, if applicable,
shall be described in the related Supplement or a schedule thereto.

                  "Required Percentage--Amendment": Unless otherwise specified
in the related Supplement, if a Rating Agency Condition is specified in such
Supplement and such Rating Agency Condition is met, or, if a Rating Agency
Condition is not so specified in such Supplement, 66-2/3% of the aggregate
Voting Rights of such Series, and 100% otherwise.

                  "Required Percentage--Direction of Trustee": Unless otherwise
specified in the related Supplement, 66-2/3% of the aggregate Voting Rights of
such Series.

                  "Required Percentage--Remedies": Unless otherwise specified in
the related Supplement, 66-2/3% of the aggregate Voting Rights of such Series.

                  "Required Percentage--Removal of Securities Intermediary":
Unless otherwise specified in the related Supplement, more than 50% of the
aggregate Voting Rights of such Series.

                  "Required Percentage--Removal of Trustee": Unless otherwise
specified in the related Supplement, more than 50% of the aggregate Voting
Rights of a Series.

                  "Required Percentage--Waiver": Unless otherwise specified in
the related Supplement, 66-2/3% of the aggregate Voting Rights of a Series.

                  "Required Principal": As determined for any Distribution Date
for a given Series (or Class within such Series), unless otherwise specified in
the related Supplement, the amounts on deposit in the Certificate Account
allocable to principal payments on the Underlying Securities (including from
Credit Support, if any, and Advances, if any, but excluding amounts in respect
of principal payments to the extent that Advances with respect thereto were
distributed as Required Principal on a prior Distribution Date) and required to
be distributed in respect of the Certificates of such Series (or Class) in
accordance with the terms of such Certificates and such related Supplement.

                  "Requisite Reserve Amount": As of any date with respect to any
Series (or Class within such Series), the amount, if any, required to be
maintained in the Reserve Account, if any, for such Series or Class as specified
in or determined pursuant to the related Supplement.

                  "Reserve Account": An Eligible Account, if any, created and
maintained pursuant to Section 3.06.

<PAGE>

                                       16

                  "Responsible Officer": With respect to the Trustee, any
officer within the Corporate Trust Office, including any Managing Director,
Senior Vice President, Vice President, Assistant Vice President, Assistant
Secretary or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's actual knowledge of and familiarity with the
particular subject.

                  "Retained Interest": If applicable, with respect to any
Underlying Security, an ownership interest in and a right to a portion of the
payments thereon by the obligor thereof, as specified in the related Supplement,
held by the Person so specified in such Supplement.

                  "Sale Procedures": Unless otherwise specified in the
Supplement, shall mean that, with respect to any sale of one or more Underlying
Securities or Related Assets, the Market Agent, on behalf of the Trust, shall
sell such Underlying Securities or Related Assets to the highest bidders among
not less than two solicited bidders for such Underlying Securities or Related
Assets (one of which bidders may include Merrill Lynch & Co. or any Affiliate
thereof; provided, however, that neither Merrill Lynch & Co. nor any of its
Affiliates will be under any obligation to bid, and which bidders need not be
limited to recognized broker dealers). In the sole judgment of the Market Agent,
bids may be evaluated on the basis of bids for a single Underlying Security or
Related Asset, a portion of the Underlying Securities or Related Assets, or all
of the Underlying Securities or Related Assets being sold or any other basis
selected in good faith by the Market Agent.

                  "S&P": Standard & Poor's Ratings Services, and any successor
thereof.

                  "Securities Account": As defined in Section 8-501(a) of the
UCC.

                  "Securities Control": "Control" as defined in Section 8-106 of
the UCC and, for purposes of determining an interest in investment property
under UCC Article 9, Section 9-115(1)(e) of the UCC.

                  "securities intermediary": As defined in Section 8-102(a)(14)
of the UCC and, in respect of any Book-Entry Security, a "securities
intermediary" (as defined in 31 C.F.R. ss. 357.2 or, as applicable to such
Book-Entry Security, the corresponding Federal Book-Entry Regulations).

                  "Securities Intermediary": With respect to any Series, the
Securities Intermediary shall be the Person so specified in the applicable
Supplement until a successor Person shall have become the Securities
Intermediary pursuant to the applicable provisions of these Standard Terms and
the applicable Supplement, and thereafter "Securities Intermediary" shall mean
such successor Person.

<PAGE>

                                       17

                  "Security":  As defined in Section 8-102(a)(15) of the UCC.

                  "Security Certificate": As defined in Section 8-102(a)(9) of
the UCC.

                  "Security Entitlement": As defined in Section 8-102(a)(17) of
the UCC or, in respect of any Book-Entry Security, as defined in 31 C.F.R.
Section 357.2 (or, as applicable to such Book-Entry Security, the corresponding
Federal Book-Entry Regulations).

                  "Series": A separate series of Certificates issued pursuant to
these Standard Terms and a related Supplement, which series may be divided into
two or more Classes, as provided in such Supplement.

                  "Specified Currency": As specified in the related Supplement
for the applicable Series or Class, which may be a currency issued by the
government of any country or a composite currency the value of which is
determined by reference to the values of the currencies of any group of
countries. If not specified in the related Supplement, the Specified Currency
shall be Dollars.

                  "State": Any one of the 50 states of the United States, or the
District of Columbia.

                  "Supplement": An agreement incorporating these Standard Terms
that authorizes the issuance of a particular Series (and each Class within such
Series) of Certificates.

                  "Surety Bond": If so specified in the Supplement with respect
to any Series (or Class within such Series), the surety bond providing for the
distribution under certain circumstances specified in such Supplement of amounts
to the Certificateholders of such Series (or Class), which surety bond will be
issued to the Trustee for the benefit of such Certificateholders by the related
Credit Support Provider, all as specified in such Supplement.

                  "Swap Agreement": If so specified in the Supplement with
respect to any Series, the ISDA Master Agreement dated as of the Closing Date by
and between the Trust and the Swap Counterparty, as the same may be amended or
supplemented from time to time as provided therein.

                  "Swap Counterparty": If so specified in the Supplement with
respect to any Series (or Class within such Series), as specified in such
Supplement.

<PAGE>

                                       18

                  "Swap Distribution Amount": If so specified in the Supplement
with respect to any Series, all amounts then due and owing to the Swap
Counterparty pursuant to the Swap Agreement, other than Swap Termination
Payments.

                  "Swap Guarantee": If so specified in the Supplement with
respect to any Series, the guarantee issued by the Swap Guarantor in favor of
the Trust substantially in the form attached as an exhibit to the Swap
Agreement.

                  "Swap Guarantor": If so specified in the Supplement with
respect to any Series, the guarantor specified as such in such Supplement.

                  "Swap Receipt Amount": If so specified in the Supplement with
respect to any Series, all amounts due and owing to the Trust pursuant to the
Swap Agreement other than Swap Termination Payments.

                  "Swap Termination Payment": If so specified in the Supplement
with respect to any Series, the amount payable by the Swap Counterparty to the
Trust, or by the Trust to the Swap Counterparty, pursuant to the Swap Agreement.

                  "Tax Event": The right of an Underlying Securities Issuer to
shorten the maturity of or repurchase such Underlying Securities, in accordance
with the terms of the Underlying Securities Indenture, due to a change in the
treatment of such Underlying Securities under the Code.

                  "Trust": With respect to any Series, the segregated asset or
pool of assets subject hereto, constituting the trust created hereby and by the
related Supplement and to be administered hereunder and thereunder, consisting
of those Deposited Assets, the Credit Support, if applicable, and all sums
distributed in respect thereof that are specified as being part of the Trust for
such Series in the related Supplement, all for the benefit of the
Certificateholders of such Series as of any particular time.

                  "Trust Agreement": With respect to each Series, these Standard
Terms and all amendments hereof and, unless the context otherwise requires, the
related Supplement and all amendments thereto.

                  "Trustee": With respect to any Series, the Person so specified
in the applicable Supplement until a successor Person shall have become the
Trustee pursuant to the applicable provisions of these Standard Terms and the
applicable Supplement, and thereafter "Trustee" shall mean such successor
Person.

<PAGE>

                                       19

                  "Trustee's Fed Member": Any Person that is eligible to
maintain a Fed Member Securities Account in such Person's name with the Fed and
through which the Trustee holds Book-Entry Securities.

                  "TIA": The Trust Indenture Act of 1939, as amended, as the
same is in force and effect as of the date hereof.

                  "UCC": The Uniform Commercial Code as in effect from time to
time in the State of New York and any successor statute.

                  "Underlying Securities Indenture": The indenture pursuant to
which the Underlying Securities were issued, as identified in the Underlying
Securities Schedule.

                  "Underlying Securities Issuer": With respect to an Underlying
Security, the issuer thereof (including, if applicable, the guarantor of the
Underlying Security), as identified in the Underlying Securities Schedule.

                  "Underlying Securities Schedule": Schedule I to the
Supplement.

                  "Underlying Security" or "Underlying Securities": With respect
to any Series, the asset or assets identified in the Underlying Securities
Schedule. The Underlying Securities for any Series or the related Trust shall
not constitute Underlying Securities for any other Series or any other Trust.

                  "Underlying Security Interest Payment Date": With respect to
an Underlying Security, each date specified in the Underlying Securities
Schedule as a date on which interest is scheduled, as of the Closing Date, to be
payable by or on behalf of the Underlying Securities Issuer on such Underlying
Security in accordance with its terms.

                  "United States": The United States of America (including the
States), its territories, its possessions and other areas subject to its
jurisdiction.

                  "Voting Rights": The voting rights with respect to the
Underlying Securities, which voting rights shall be allocated to
Certificateholders of each Class within a given Series (and to the holders of
the Retained Interest and Call Right, if any) in accordance with the Allocation
Ratio.

                  Section 1.02. Rules of Construction. Unless the context
otherwise requires:

                  (i) a term has the meaning assigned to it;

<PAGE>

                                       20

                  (ii) an accounting term not otherwise defined has the meaning
         assigned to it in accordance with generally accepted accounting
         principles as in effect in the United States from time to time;

                  (iii) "or" is not exclusive;

                  (iv) the words "herein", "hereof", "hereunder" and other words
         of similar import refer to this Trust Agreement as a whole and not to
         any particular Article, Section or other subdivision;

                  (v) "including" means including without limitation; and

                  (vi) words in the singular include the plural and words in the
         plural include the singular.

                  Section 1.03. Compliance Certificates and Opinions; Record
Date. (a) Upon any application or request by the Depositor to the Trustee to
take any action under any provision of this Trust Agreement other than the
initial issuance of the Certificates, the Depositor shall furnish to the Trustee
an Officer's Certificate stating that, in the opinion of the signer thereof, all
conditions precedent, if any, provided for in this Trust Agreement relating to
the proposed action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that in the case of any such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Trust Agreement relating to such particular application or
request, no additional certificate or opinion need be furnished.

                  Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Trust Agreement (other than a
certificate provided pursuant to Section 3.10(d)) shall include:

                  (i) a statement that the individual signing such certificate
         or opinion has read such covenant or condition and the definitions
         herein relating thereto;

                  (ii) a brief statement as to the nature and scope of the
         examination or investigation upon which the statements or opinions
         contained in such certificate or opinion are based;

                  (iii) a statement that, in the opinion of such individual, he
         or she has made such examination or investigation as is necessary to
         enable him or her to express an informed opinion as to whether or not
         such covenant or condition has been complied with; and

<PAGE>

                                       21

                  (iv) a statement as to whether, in the opinion of such
         individual, such condition or covenant has been complied with.

                  (b) The Depositor may at its option by delivery of an
Officer's Certificate to the Trustee set a record date to determine the Holders
entitled to give any consent, request, demand, authorization, direction, notice,
waiver or other act. Notwithstanding TIA Section 316(c), such record date shall
be the record date specified in such Officer's Certificate, which shall be a
date not more than 30 days prior to the first solicitation of Certificateholders
in connection therewith. If such a record date is fixed, such consent, request,
demand, authorization, direction, notice, waiver or other act may be given
before or after such record date, but only the Holders of record at the close of
business on such record date shall be deemed to be Holders for the purposes of
determining whether the requisite aggregate Voting Rights have authorized or
agreed or consented to such consent, request, demand, authorization, direction,
notice, waiver or other act, and for that purpose the aggregate Voting Rights
shall be computed as of such record date; provided, however, that no such
consent, request, demand, authorization, direction, notice, waiver or other act
by the Holders on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Trust Agreement not later
than one year after the record date.

                                   ARTICLE II

                DECLARATION OF TRUSTS; ISSUANCE OF CERTIFICATES;
                      PURPOSE AND CLASSIFICATION OF TRUSTS

                  Section 2.01. Creation and Declaration of Trusts; Assignment
of Deposited Assets. (a) The Depositor, concurrently with the execution and
delivery of the related Supplement, does hereby agree to Grant to the Trustee
for the benefit of the Trustee and the Certificateholders of each given Series
and without recourse, all the right, title and interest of the Depositor,
including any security interest therein for the benefit of the Depositor, in, to
and under the Underlying Securities and other Deposited Assets. Unless otherwise
specified in the Supplement, each such Grant will include all interest, premium
(if any) and principal of, on or with respect to any such Underlying Securities
due after the Cut-off Date and received by the Depositor, and will exclude all
interest, premium (if any) and principal of, on or with respect to any such
Underlying Securities due on or before the Cut-off Date. With respect to any
Concentrated Underlying Security, the Underlying Securities Schedule shall
include information regarding the payment terms of the Concentrated Underlying
Security, the maturity or terms thereof, the rating, if any, thereof and any
other material information with respect thereto.

<PAGE>

                                       22

                  (b) In connection with each Grant referred to in paragraph (a)
of this Section 2.01, the Depositor shall, not later than the applicable Closing
Date, either

                  (i) deposit the Underlying Securities for a given Series
         (except for the Underlying Securities attributable to such Series that
         are to be acquired from a Person other than the Depositor, as specified
         on the Underlying Securities Schedule to the applicable Supplement)
         with the Trustee by physical delivery of such Underlying Securities
         duly endorsed, together with any documents necessary to transfer
         ownership of such Underlying Securities, to the Trustee, or

                  (ii) have ensured that the Underlying Securities have been
         delivered to a Clearing Agency, in which event (A) the Securities
         Intermediary or its agent, on behalf of the Trustee, has accepted
         delivery of such Underlying Securities through such Clearing Agency,
         and (B) the Underlying Securities have been credited to a Securities
         Account of the Trustee and maintained by the Securities Intermediary on
         behalf of the Trustee, and the Securities Intermediary or its agent
         shall have the right to hold and maintain such Underlying Securities on
         deposit with such Clearing Agency for all purposes of this Trust
         Agreement.

                  (c) In the case of each delivery of Underlying Securities
referred to in paragraph (b) of this Section 2.01, the Depositor shall be deemed
thereby to represent and warrant to the Trustee and the Securities Intermediary
that:

                  (i) the Depositor is duly authorized to so deliver the
         Underlying Securities;

                  (ii)     the Underlying Securities so delivered are genuine;

                  (iii) at the time of delivery of the Underlying Securities,
         such Underlying Securities are free and clear of any lien, pledge,
         encumbrance, right, charge, claim or other security interest (other
         than the lien created by this Trust Agreement); and

                  (iv) such delivery is irrevocable and free of any continuing
         claim by the Depositor except such as the Depositor may have as a
         Certificateholder.

                  The above representations and warranties shall survive the
delivery of the Underlying Securities and the Certificates in respect thereof.
The Depositor shall further be deemed by such delivery to have made the
representations that to the Depositor's knowledge but without having made any
independent inquiry, as of the Closing Date, no default or event of default with
respect to the Underlying Securities has occurred and is continuing.

                  (d) Unless otherwise specified in the related Supplement, the
Grant of the Deposited Assets accomplished by this Trust Agreement is absolute
and shall constitute a

<PAGE>

                                       23

sale. In addition, the Trust created hereunder and thereunder shall constitute a
fixed investment trust for federal income tax purposes under Treasury Regulation
Section 301.7701-4, and all parties hereto and thereto agree to treat the Trust,
any distributions therefrom and the beneficial interest in the Certificates
consistently with such characterization. The provisions of this Trust Agreement
shall be interpreted consistently with such characterization.

                  (e) Any Trust created hereunder shall not engage in any
business or activities other than in connection with, or relating to, the
holding, protecting and preserving of the Deposited Assets and the issuance of
the Certificates, and other than those required or authorized by this Trust
Agreement or incidental to and necessary to accomplish such activities. Any
Trust created hereunder shall not issue or sell any certificates or other
obligations other than the Certificates or otherwise incur, assume or guarantee
any indebtedness for money borrowed.

                  (f) Anything herein to the contrary notwithstanding, none of
the Trustee, the Securities Intermediary or any of the Certificateholders
assumes any of the obligations of the Depositor or any other Person in respect
of the Underlying Securities.

                  (g) The Securities Intermediary expressly agrees with the
Trustee and the Certificateholders that, at all times from and after the date
hereof, any and all of the Deposited Assets held by the Securities Intermediary
in the Certificate Account are to be treated as Financial Assets under, and for
all purposes of, UCC Article 8 and UCC Article 9.

                  Section 2.02. Acceptance by Trustee. With respect to each
Series, the Trustee will acknowledge receipt by it, or by a custodian on its
behalf, of the related Underlying Securities now existing or hereafter acquired,
and declares that it will hold such Underlying Securities and all other
documents delivered to it pursuant to this Trust Agreement, and that it will
hold all such assets and such other assets (including Underlying Securities
acquired from a Person other than the Depositor) comprising the Trust for a
given Series, in trust for the exclusive use and benefit of all present and
future Certificateholders of such Series and for the purposes and subject to the
terms and conditions set forth in this Trust Agreement.

                  Section 2.03. Representations and Warranties of the Depositor.
The Depositor hereby represents and warrants to the Trustee that as of the
Closing Date or as of such other date specifically provided herein or in the
applicable Supplement:

                  (i) the Depositor is a corporation duly organized, validly
         existing and in good standing under the laws of the State of Delaware;

<PAGE>

                                       24

                  (ii) with respect to each Supplement, to the Depositor's
         knowledge but without having made any independent inquiry, the
         information set forth in the Underlying Securities Schedule with
         respect to each Underlying Security is true and correct in all material
         respects at the date or dates, respecting which, such information is
         furnished;

                  (iii) the execution and delivery of this Trust Agreement by
         the Depositor and its performance of and compliance with the terms of
         this Trust Agreement will not violate the Depositor's certificate of
         incorporation or by-laws or constitute a default (or an event which,
         with notice or lapse of time, or both, would constitute a default)
         under, or result in the breach or acceleration of, any material
         contract, agreement or other instrument to which the Depositor is a
         party or which may be applicable to the Depositor or any of its assets;

                  (iv) the Depositor has the full power and authority to enter
         into and consummate all transactions contemplated by this Trust
         Agreement, has duly authorized the execution, delivery and performance
         of this Trust Agreement and has duly executed and delivered this Trust
         Agreement. This Trust Agreement, upon its execution and delivery by the
         Depositor and assuming due authorization, execution and delivery by the
         Trustee, will constitute a valid, legal and binding obligation of the
         Depositor, enforceable against it in accordance with the terms hereof,
         except as such enforcement may be limited by bankruptcy, insolvency,
         reorganization, receivership, moratorium or other laws relating to or
         affecting the rights of creditors generally, and by general equity
         principles (regardless of whether such enforcement is considered a
         Proceeding in equity or at law); and

                  (v) any additional representations and warranties, if any,
         that may be specified in the applicable Supplement.

                  It is understood and agreed that the representations and
warranties of the Depositor set forth in this Section 2.03 shall survive
delivery of the respective documents and the Underlying Securities to the
Trustee and shall inure to the benefit of the Trustee on behalf of the
Certificateholders notwithstanding any restrictive or qualified endorsement or
assignment. Upon discovery by any of the Depositor or the Trustee of a breach of
any of the foregoing representations and warranties which materially and
adversely affects the interests of the Certificateholders, the party discovering
such breach shall give prompt written notice thereof to the other party.

                  Section 2.04. Breach of Representation, Warranty or Covenant.
Within 90 days of the earlier of discovery by the Depositor or receipt of notice
by the Depositor of a breach of any representation or warranty of the Depositor
set forth in Section 2.03 that

<PAGE>

                                       25

materially and adversely affects the interests of the Certificateholders of a
given Series, the Depositor shall cure such breach in all material respects.

                  Section 2.05. Agreement to Execute, Authenticate and Deliver
Certificates. With respect to each Series and the related Trust, the Trustee
hereby agrees and acknowledges that it will, concurrently with the Grant to and
receipt by it of the related Underlying Securities, cause to be executed,
authenticated and delivered to or upon the written order of the Depositor, in
exchange for the Underlying Securities and such other assets constituting the
Trust for a given Series, Certificates duly authenticated by or on behalf of the
Trustee in an Authorized Denomination evidencing ownership of the entire Trust
for such Series, all in accordance with the terms and subject to the conditions
of Section 5.02.

                  Section 2.06. Custody and Holding of Deposited Assets. (a)
With respect to each Series, the Trustee shall hold and maintain the Deposited
Assets with the Securities Intermediary in and through, and hereby directs the
Securities Intermediary to credit any and all such Deposited Assets to, the
Certificate Account (all as further provided in this Article II) in such manner
as shall enable the Trustee to be and have the rights of an Entitlement Holder
with respect to, and have sole dominion and control (including, without
limitation, Securities Control) over, such Deposited Assets.

                  (b) The Securities Intermediary hereby represents, warrants,
covenants and agrees that from and after the Closing Date:

                  (i) Each Certificate Account is a Securities Account, with the
         Trustee (for its benefit and the benefit of the Certificateholders) as
         the Entitlement Holder in, and having sole dominion and control
         (including, without limitation, Securities Control) over, any and all
         Deposited Assets (including, without limitation, any and all assets and
         properties referred to in clause (ii) below) in such Certificate
         Account.

                  (ii) All assets and properties from time to time transferred
         or credited to the Certificate Account constitute Financial Assets.

                  (iii) The Securities Intermediary is (and will remain) a
         securities intermediary and is acting (and will continue to act) as
         such with respect to the Certificate Account, the Deposited Assets
         therein and the Trustee as Entitlement Holder. Unless otherwise
         instructed by the Trustee in writing, the Securities Intermediary will
         treat the Trustee (for its benefit and the benefit of the
         Certificateholders) as entitled to exercise the rights that comprise
         the Deposited Assets in each Certificate Account. Further, the
         Securities Intermediary is and will remain (A) a bank, banking
         institution, financial firm or similar party, in each case, that
         regularly accepts in its course of its business Book-Entry Securities
         as a custodial

<PAGE>

                                       26

         service for customers and maintains Securities Accounts in the name of
         such customers reflecting ownership of or interest in such Securities,
         (B) will maintain its books and records reflecting such Book-Entry
         Securities in the State of New York and (C) if the Trustee maintains
         one or more Certificate Accounts with the Securities Intermediary, will
         have entered into, and will maintain in full force and effect, an
         agreement with the Trustee (which, on the date hereof, is comprised of
         this Trust Agreement) to the effect that their respective rights and
         obligations in respect of each other, said Underlying Securities and
         said Certificate Accounts are governed by the laws of the State of New
         York.

                  (iv) The Securities Intermediary shall hold any and all assets
         and properties from time to time comprising the Deposited Assets
         (whether individually or as part of a fungible bulk) in a manner such
         that the Trustee will have dominion and control (including, without
         limitation, Securities Control) over such Deposited Assets. The
         Securities Intermediary will credit to the appropriate Certificate
         Account (and will thereby or by book entry or otherwise identify as
         being subject to the Grant to the Trustee hereunder) any and all assets
         and properties from time to time comprising the Deposited Assets in
         accordance with Section 2.06(a) hereof.

                  (v) To effect the intention of clauses (i) through (iv) above,
         the Securities Intermediary or its agent maintains (and will continue
         to maintain)

                           (A) one or more Securities Accounts with the
                  Depository. The Securities Intermediary or its agent will
                  instruct the Depository to credit such Securities Accounts of
                  the Securities Intermediary or its agent with the Depository
                  with the Depository Securities comprising from time to time
                  the Deposited Assets; and

                           (B) one or more Fed Member Securities Accounts to
                  which the Securities Intermediary through its agent will
                  instruct the Fed to credit, in accordance with the Book-Entry
                  Regulations, all Book-Entry Securities from time to time
                  comprising the Deposited Assets.

                                   ARTICLE III

                          ADMINISTRATION OF EACH TRUST

                  Section 3.01. Administration of Each Trust. (a) The Trustee
shall administer the Underlying Securities for each given Trust for the benefit
of the Certificateholders of the related Series. In engaging in such activities,
the Trustee shall follow or cause to be followed collection procedures in
accordance with the terms of these Standard Terms and the

<PAGE>

                                       27

applicable Supplement, the respective Underlying Securities and any applicable
Credit Support Instruments. With respect to each Trust, and subject only to the
above-described standards and the terms of these Standard Terms, the related
Supplement and the respective Underlying Securities and applicable Credit
Support Instruments, if any, the Trustee shall have full power and authority,
acting alone or through Administrative Agents as provided in Section 7.02, to do
or cause to be done any and all things in connection with such administration
which it deems necessary to comply with the terms of these Standard Terms and
the applicable Supplement.

                  (b) The duties of the Trustee shall be performed in accordance
with applicable local, State and Federal law, and the Trustee shall, at the
direction of the Depositor, make any and all filings, reports, notices or
applications with (as prepared by the Depositor), and seek any comments and
authorizations from, the Commission and any State securities authority on behalf
of the Trust for each Series.

                  Section 3.02. Collection of Certain Underlying Security
Payments. With respect to any Series or Class, the Trustee shall make reasonable
efforts to collect all payments required to be made pursuant to the terms of the
Underlying Securities in a manner consistent with the terms of this Trust
Agreement, such Underlying Securities and any related Credit Support
Instruments, if applicable.

                  Section 3.03. Certificate Accounts. (a) For each Series, the
Trustee shall establish and maintain one or more Eligible Accounts
(collectively, the "Certificate Accounts"), which shall be Securities Accounts
and shall be held in trust in the name of the Trustee for its benefit and the
benefit of Certificateholders of such Series. The Trustee on behalf of such
Certificateholders shall possess all right, title and interest in all funds on
deposit from time to time in each Certificate Account and in all proceeds
thereof. With respect to each Series and in accordance with Section 2.06, the
Certificate Accounts shall be under the sole dominion and control (including,
without limitation, Securities Control) of the Trustee for the benefit of the
related Certificateholders. With respect to each Series, not later than the
close of business on the Business Day on which the Trustee receives such amounts
in the form of immediately available funds (so long as such funds are received
by the Trustee by 3:00 p.m., New York City time, and on the next Business Day
otherwise), the Trustee shall deposit or cause to be deposited in the
Certificate Accounts all amounts received by it with respect to the Deposited
Assets, any Credit Support and all Liquidation Proceeds related to such Series
including:

                  (i) all payments on account of principal of such Underlying
         Securities;

                  (ii) all payments on account of interest on such Underlying
         Securities;

<PAGE>

                                       28

                  (iii) all payments on account of premium (if any) on such
         Underlying Securities;

                  (iv) any payments in respect of any such Credit Support;

                  (v) any Advances made as required pursuant to Section 4.04;
         and

                  (vi) any interest or investment income earned on funds
         deposited in the related Accounts.

                  Unless otherwise specified in the applicable Supplement, it is
understood and agreed that payments in the nature of prepayment or redemption
penalties, late payment charges, default interest or reinvestment income which
may be received by the Trustee shall be deposited by the Trustee in the
Certificate Account and shall not be retained by the Trustee for its own
account.

                  If, at any time, the Certificate Account for any Series ceases
to be an Eligible Account, the Trustee shall within five Business Days (or such
longer period, not to exceed 30 calendar days, as to which the Rating Agency
Condition is met) establish a new Certificate Account meeting the conditions
specified above and the Trustee shall within five Business Days transfer any
cash and any investments on deposit in the Certificate Account to such new
Certificate Account, and from the date such new Certificate Account is
established, it shall be the Certificate Account for such Series.

                  (b) The Trustee shall give notice to the Depositor of the
location of each Eligible Account constituting the Certificate Account and prior
to any change thereof, if such Eligible Account is or will be located at an
institution other than United States Trust Company of New York.

                  Section 3.04. Distribution or Sale of the Underlying
Securities. If (a) there occurs a payment default on the Underlying Securities,
(b) there occurs an acceleration of the date of maturity of the Underlying
Securities, or (c) the Underlying Securities Issuer of any Concentrated
Underlying Securities ceases to be a reporting company under the Exchange Act,
then the Trustee, upon receiving notice of the events set forth in (a), (b) or
(c) shall exercise one of the following remedies, in accordance with the
Distribution Election:

                  (i) immediately direct the Market Agent to sell the Underlying
         Securities and a pro rata portion of the Related Assets held by such
         Trust, in accordance with the Sale Procedures, and the Liquidation
         Proceeds, if any, shall be deposited into the Certificate Account for
         distribution in accordance with the Allocation Ratio on the first
         Business Day following such deposit into the Certificate Account;

<PAGE>

                                       29

                  (ii) distribute the Underlying Securities and a pro rata
         portion of the Related Assets in accordance with the Allocation Ratio
         to each Holder's last address as it appears in the Certificate Register
         within three Business Days of receiving the notice referred to in the
         first sentence of this Section 3.04; or

                  (iii) provide that the Holders of a given Series or Class may
         vote in favor of either (i) or (ii), in accordance with the procedures
         set forth in the applicable Supplement.

In the case of a sale by the Market Agent of Underlying Securities and Related
Assets pursuant to clause (i) of this Section 3.04, the Trustee shall deliver
such Underlying Securities and Related Assets to the purchaser of such
Underlying Securities and Related Assets only against payment in same day funds
and the Trustee shall deposit the same into the Certificate Account.

                  Section 3.05. Investment of Funds in the Accounts. The Trustee
may direct any depository institution maintaining the Certificate Account or the
Reserve Account, if any, for the Series and any other segregated Eligible
Account, which Eligible Account shall be a Securities Account the contents of
which are held for the benefit of Certificateholders of such applicable Series
(each, an "Account"), to invest the funds therein at the specific written
direction of the Depositor in one or more Eligible Investments bearing interest
or sold at a discount, which shall be held to maturity unless payable on demand
and which funds shall not be reinvested upon the maturity or demand for payment
of such Eligible Investment. If the Depositor does not provide any investment
directions by 10:00 a.m. on any Business Day, funds held in any Account will be
invested in the Eligible Investments specified in clause (iv) of the definition
thereof until receipt of investment directions to the contrary. Investments of
such funds shall be invested in Eligible Investments that will mature so that
such funds will be available for distribution on the next Distribution Date.
Except as otherwise provided in the applicable Supplement, any earnings with
respect to such Eligible Investments shall be paid to, and any losses with
respect to such Eligible Investments shall be solely for the account of, the
Certificateholders in proportion to their interest in the invested funds. In the
event amounts on deposit in an Account are at any time invested in an Eligible
Investment payable on demand, the Securities Intermediary, on behalf of the
Trustee and the Trust, shall:

                  (i) consistent with any notice required to be given
         thereunder, demand that payment thereon be made on the last day such
         Eligible Investment may otherwise mature hereunder in an amount equal
         to the lesser of (1) all amounts then payable thereunder and (2) the
         amount required to be withdrawn on such date; and

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                                       30

                  (ii) demand same day payment of all amounts due thereunder
         upon a determination by the Trustee that such Eligible Investment would
         not constitute an Eligible Investment in respect of funds thereafter on
         deposit in any Account.

None of the Trustee, the Depositor or the Securities Intermediary shall in any
way be held liable by reason of any insufficiency in any Account resulting from
any loss on any Eligible Investment made in accordance with this Trust
Agreement.

                  Section 3.06. Maintenance of Credit Support. (a) On the
applicable Closing Date, the Trustee at the written direction of the Depositor
or, if so specified in the applicable Supplement, the Depositor shall, to the
extent specified in the applicable Supplement, establish and maintain, or enter
into, as applicable, in the name of the Trustee, either as part of the related
Trust or outside it, for the benefit of the Certificateholders of the related
Series, the Credit Support specified in the applicable Supplement. To the extent
specified in the applicable Supplement, the Depositor will make or cause to be
made any initial deposit to the Certificate Account or any Reserve Account
(which shall be an Eligible Account) for the related Series as of the Closing
Date. Unless the Supplement for a given Series provides otherwise, if a Reserve
Account exists for such Series, collections with respect to the Underlying
Securities for such Series not distributed to the Certificateholders of such
Series shall be deposited in the Reserve Account. The Reserve Account, if any,
shall be an asset of the Depositor (and the income earned on any amounts held in
the Reserve Account shall be allocable to the Depositor, who agrees to include
any such income in its gross income for all federal, state and local income and
franchise tax purposes) and will not be a part of or otherwise be included in
the Trust but will be held for the benefit of the Certificateholders.

                  (b) Amounts on deposit in the Reserve Account and amounts
available pursuant to any other Credit Support for such Series shall be applied
by the Trustee to make distributions of principal of and premium (if any) and
interest on the Certificates of such Series as required pursuant to Section 4.01
and the applicable Supplement to the extent that funds are not otherwise
available for such purpose. If specified in such Supplement, immediately after
each Distribution Date, amounts on deposit in the Reserve Account for such
Series in excess of a specified amount shall be paid to the Person so specified
in such Supplement.

                  Section 3.07. Realization upon Defaulted Underlying
Securities. (a) The Trustee on behalf of the Certificateholders, shall assert
claims under each applicable Credit Support Instrument, and shall take such
reasonable steps as are necessary to receive payment or to permit recovery
thereunder with respect to any defaulted Underlying Securities, subject in all
cases to the provisions of Article VII hereof.

                  (b) Unless otherwise provided in the related Supplement, if
the Trustee is unable to obtain full recovery in respect of a defaulted
Underlying Security and any related

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                                       31

Credit Support Instrument pursuant to Section 3.07(a), the Trustee shall follow
or cause to be followed such normal practices and procedures as it deems
necessary or advisable to realize upon such defaulted Underlying Security and
such Credit Support Instrument, subject in all cases to the provisions of
Article VII hereof.

                  (c) If the Liquidation Proceeds of a defaulted Underlying
Security are less than the sum of (i) the outstanding principal balance of the
defaulted Underlying Security and (ii) the aggregate amount of expenses incurred
by the Trustee in connection with the practices and procedures referred to in
paragraph (b) of this Section 3.07 to the extent reimbursable under these
Standard Terms and the related Supplement, the Trust for the applicable Series
shall recognize a Realized Loss equal to the amount of such difference. Any such
Realized Loss shall be allocated in accordance with Section 4.05.

                  Section 3.08. Retained Interest. The Retained Interest, if
any, in any Underlying Security shall initially be held by the Person so
specified in the related Supplement as and to the extent specified therein.

                  Section 3.09. Access to Certain Documentation. The Trustee
shall provide to any Federal, State or local regulatory authority that may
exercise authority over any Certificateholder access to the documentation in the
Trustee's possession regarding the Underlying Securities required by applicable
laws and regulations. Such access shall be afforded without charge, but only
upon reasonable written request and during normal business hours at the offices
of the Trustee designated by it. In addition, access to the documentation in the
Trustee's possession regarding the Underlying Securities related to a given
Series (or Class within such Series) will be provided to any Certificateholder
of such Series (or Class) upon reasonable written request during normal business
hours at the offices of the Trustee designated by it at the expense of the
Certificateholder requesting such access.

                  Section 3.10. Reports by the Depositor. The Depositor shall:

                  (i) file with the Trustee, within 30 days after the Depositor
         is required to file the same with the Commission, copies of the annual
         reports and of the information, documents and other reports (or copies
         of such portions of any of the foregoing as the Commission may from
         time to time by rules and regulations prescribe) which the Depositor is
         required to file with the Commission pursuant to Section 13 or Section
         15(d) of the Exchange Act; or, if the Depositor is not required to file
         information, documents or reports pursuant to either of such Sections,
         then to file with the Trustee and the Commission, in accordance with
         rules and regulations prescribed by the Commission, such of the
         supplementary and periodic information, documents and reports which may
         be required pursuant to Section 13 of the Exchange Act in respect of a
         security listed and registered on a national securities exchange as may
         be prescribed in such rules and regulations;

<PAGE>

                                       32

                  (ii) file with the Trustee and the Commission, in accordance
         with the rules and regulations prescribed by the Commission, such
         additional information, documents and reports with respect to
         compliance by the Depositor with the conditions and covenants provided
         for in this Trust Agreement, as may be required by such rules and
         regulations, certificates or opinions of independent accountants,
         conforming to the requirements of TIA Section 314(e);

                  (iii) supply to the Trustee (and the Trustee shall transmit to
         all Certificateholders, in the manner and to the extent provided in TIA
         Section 313(c)), such summaries of any information, documents and
         reports required to be filed by the Depositor pursuant to clauses (i)
         and (ii) of this Section 3.10 as may be required by rules and
         regulations prescribed by the Commission; and

                  (iv) furnish to the Trustee, not less often than annually, a
         certificate from the principal executive, financial or accounting
         officer of the Depositor as to his or her knowledge of the Depositor's
         compliance with all conditions and covenants under this Trust
         Agreement. For purposes of this clause (iv), such compliance shall be
         determined without regard to any period of grace or requirement of
         notice provided under this Trust Agreement.

Any reports, statements, documents or other information required to be furnished
by the Depositor to the Trustee pursuant to these Standard Terms or any
Supplement shall be deemed to have been delivered to the Trustee if the Trustee
is in possession of such reports, statements, documents or other information at
the time they are to be furnished pursuant to these Standard Terms or any
Supplement.

                  Section 3.11. Charges and Expenses. Except as otherwise
provided in these Standard Terms or the related Supplement, no amounts in the
nature of fees or charges shall be payable by or withheld from the Trust, the
Depositor or any other person and there shall be no recourse or claim against
the Trust or the property of the Trust for all or any part of any fees or
charges payable to any person.

                                   ARTICLE IV

                 DISTRIBUTIONS AND REPORTS TO CERTIFICATEHOLDERS

                  Section 4.01. Distributions. (a) On each Distribution Date for
a given Series, the Trustee shall apply Available Funds in the Certificate
Account for such Series in the manner and priority set forth in the Supplement
for such Series. In any event, however, any amounts collected during any period
shall be distributed to the Holders no later than the Distribution Date
immediately following the receipt thereof.

<PAGE>

                                       33

                  (b) All distributions to Holders shall be payable only from
Available Funds, and no provision of this Trust Agreement shall be deemed to
create any obligation on the part of the Trustee or the Depositor to make any
distribution from any other source.

                  Section 4.02. Distributions on Certificates. (a) Distributions
on any Certificate that are payable and are punctually paid or duly provided for
on any Distribution Date shall be distributed to the Person in whose name such
Certificate (or one or more Predecessor Certificates) is registered at the close
of business on the related Record Date notwithstanding the cancellation of such
Certificate upon any transfer or exchange subsequent to such related Record
Date.

                  The distribution of interest and principal on Certificates
shall be made:

                  (i) if the Certificateholder is a Depository, to the
         Depository, which shall credit the relevant Participant's account at
         such Depository in accordance with the policies and procedure of the
         Depository; or

                  (ii) if the Holder is not a Depository, at the Corporate Trust
         Office (except as otherwise specified pursuant to the applicable
         Supplement) or, at the option of the Trustee, by check mailed to the
         address of the Person entitled thereto as such address shall appear in
         the Certificate Register or, if provided pursuant to the applicable
         Supplement and in accordance with arrangements satisfactory to the
         Trustee, at the option of the registered Holder by wire transfer to an
         account designated by the registered Holder. Notwithstanding clause (i)
         of this paragraph (a), with respect to a Holder of Certificates not
         held in a Depository and having at least the Minimum Wire Denomination,
         such payment shall be made by wire transfer of immediately available
         funds to the account designated by such Holder in a written request
         received by the Trustee not later than 10 days prior to such
         Distribution Date; provided, however, that if a wire transfer cannot be
         made for any reason, payment shall be made by check. The Trustee shall
         not be required to send federal funds wires until any corresponding
         payments which were not same day funds when received by it have become
         same day funds.

                  (b) Each Certificate delivered under this Trust Agreement upon
transfer of or in exchange for or in lieu of any other Certificate shall carry
the rights to interest accrued and undistributed, and to accrue, that were
carried by such other Certificate.

                  (c) All computations of interest due with respect to any
Certificate of any Series or Class within such Series shall be made as specified
in the Supplement applicable to that particular Series or Class.

<PAGE>

                                       34

                  (d) With respect to any computations or calculations to be
made under these Standard Terms, the applicable Supplement and the Certificates,
except as otherwise provided, all percentages resulting from any calculation of
accrued interest will be rounded, if necessary, to the nearest 1/100,000 of 1%
(.0000001), with five one-millionths of a percentage point rounded upward.

                  (e) The final distribution of principal and/or premium shall
be made upon presentation and surrender of such Certificates at the Corporate
Trust Office.

                  Section 4.03. Reports to Certificateholders. On the fifth
Business Day following each such Distribution Date the Trustee shall forward or
cause to be forwarded to the Depositor, each Holder of such Series, to each
Rating Agency rating such Series and such other Persons as may be specified in
such Supplement, a statement setting forth:

                  (i) the amounts received by the Trustee as of the last such
         statement in respect of principal, interest and premium on the
         Underlying Securities, the Swap Receipt Amount, if any, and any other
         derivatives transaction that may be entered into by the Trust pursuant
         to the terms of these Standard Terms and the related Supplement;

                  (ii) the Swap Distribution Amount, if any, received by the
         Trustee as of such Distribution Date and any other amounts payable
         pursuant to any other derivatives transaction that may be entered into
         by the Trust pursuant to the terms of these Standard Terms and the
         related Supplement;

                  (iii) the amount of compensation received by the Trustee, and
         any Administrative Agent, for the period relating to such Distribution
         Date, and such other customary and sufficient information as is
         reasonably necessary to enable Holders to calculate their federal
         income tax liability with respect to the Certificates; provided,
         however, the Trustee shall be permitted to seek the advice of counsel
         and such other experts as it may deem necessary in its reasonable
         judgment in order to determine that information which is reasonably
         necessary to provide to the Holders;

                  (iv) the amount of the distribution on such Distribution Date
         to Holders allocable to principal of and premium, if any, and interest
         on the Certificates of each such Class and to the Retained Interest,
         and the amount of aggregate unpaid interest accrued as of such
         Distribution Date;

                  (v) in the case of each Class of Floating Rate Certificates of
         such Series, the respective Floating Pass-Through Rate applicable to
         each such Class on such Distribution Date, as calculated in accordance
         with the method specified in such Certificates and the related
         Supplement;

<PAGE>

                                       35

                  (vi) if the Supplement provides for Advances, the aggregate
         amount of Advances, if any, included in such distribution, and the
         aggregate amount of unreimbursed Advances, if any, at the close of
         business on such Distribution Date;

                  (vii) the aggregate stated principal amount and, if
         applicable, notional amount of the Underlying Securities related to
         such Series, the current interest rate or rates thereon at the close of
         business on such Distribution Date, and the current rating assigned to
         the Certificates, as provided to the Trustee in writing in an
         instrument specifically referring to this Trust Agreement by the
         applicable rating agency;

                  (viii) the aggregate Certificate Principal Balance (or
         Notional Amount, if applicable) of each Class of such Series at the
         close of business on such Distribution Date, separately identifying any
         reduction in such aggregate Certificate Principal Balance (or Notional
         Amount) due to the allocation of any Realized Losses on such
         Distribution Date or otherwise as may be specified by the Depositor;

                  (ix) as to any Series (or any Class within such Series) for
         which Credit Support has been obtained, the amount or notional amount
         of coverage of each element of Credit Support (and rating, if any,
         thereof) included therein as of the close of business on such
         Distribution Date; and

                  (x) any other information appropriate for a Series, as
         specified in the applicable Supplement.

Within a reasonable period of time after the end of each calendar year, the
Trustee shall furnish to each Person who at any time during each such calendar
year was a Holder a statement containing the information set forth in clause
(iii) above, aggregated for such calendar year during which such person was a
Holder. Such obligation of the Trustee shall be deemed to have been satisfied to
the extent that substantially comparable information shall be provided by the
Trustee pursuant to any requirements of the Code as are from time to time in
effect. The Trustee shall supply to Holders in writing at such Holder's expense
who so request all materials received by the Trustee from the Underlying
Securities Issuer.

                  Section 4.04. Advances. (a) Unless otherwise specified in the
applicable Supplement, the Trustee shall have no obligation to make Advances (as
defined below) with respect to the Underlying Securities or in favor of the
Holders of any Series (or Class within such Series) of Certificates.

                  (b) However, as and to the extent provided in the Supplement
for a given Series, and subject to the terms of paragraphs (c) and (d) of this
Section 4.04, on or prior to each Distribution Date, the Trustee shall advance
or cause to be advanced in immediately available funds for deposit in the
Certificate Account for such Series an advance (each, an

<PAGE>

                                       36

"Advance") in an amount equal, unless otherwise specified in the related
Supplement, to the aggregate of distributions of principal, premium (if any) and
interest due on the Underlying Securities for such Series (or Class) during the
related Collection Period, to the extent remaining unpaid at the time of such
Advance. In satisfaction of its obligation to make such Advances, the Trustee
shall make such Advances from its own funds and may recover Advances from late
collections received by the Trustee on the applicable Underlying Securities,
proceeds from any applicable Credit Support, if any, and Liquidation Proceeds
with respect to the Underlying Securities for such Series or Class, as specified
in the related Supplement, as to which any such Advance was made.

                  (c) Notwithstanding any provision herein to the contrary, no
Advance shall be required to be made hereunder if the Trustee reasonably
believes that it will be unable to recover such Advance from related late
collections, Credit Support proceeds, if any, or Liquidation Proceeds with
respect to the applicable Underlying Securities. It is further understood and
agreed that the Trustee shall not be obligated to make any Advances in respect
of reductions in the amount of collections on the Underlying Securities due to
bankruptcy proceedings with respect to the Underlying Securities or the obligors
thereof.

                  (d) Notwithstanding any provision herein to the contrary,
unless otherwise provided in the related Supplement for a given Series, any
Advances made in respect of any Underlying Securities related to such Series (or
Class within such Series) that subsequently are deemed by the Trustee to be
nonrecoverable from related late collections, Credit Support proceeds, if any,
or Liquidation Proceeds may be reimbursed to the Trustee through the application
of amounts on deposit in the Certificate Account for such Series allocable to
any of such Underlying Securities prior to the distributions of interest,
premium (if any) and principal with respect to the Certificates of such Series
or Class.

                  Section 4.05. Allocation of Realized Losses and Trust
Expenses. With respect to any Series, Realized Losses and Extraordinary Trust
Expenses, if any, shall be allocated on any Distribution Date in accordance with
the Allocation Ratio, provided, however, that distributions pursuant to Section
3.04 shall be completed as the earliest practicable date.

                  Section 4.06. Compliance with Withholding Requirements. (a)
Notwithstanding any other provision of this Trust Agreement to the contrary, the
Trustee shall comply with all Federal withholding requirements respecting
distributions to Holders of interest or original issue discount that the Trustee
believes are applicable under the Code. The consent of Holders shall not be
required for such withholding.

                  (b) Each Holder will provide the Trustee (and, so long as the
Certificates are held at a Depository in the form of Global Certificates, each
Beneficial Owner of the Certificates will provide such Depository and the
Trustee) with evidence that there should not

<PAGE>

                                       37

be any withholding tax assessed for Federal income tax purposes in respect of
distributions to such Holder, such evidence to take the form of a statement, on
a duly executed and up-to-date Internal Revenue Service Form W-8 (or successor
form), Form W-9 (or successor form), or Form 4224 (or successor form), as
applicable, that identifies the Beneficial Owner of the Certificate; provided,
however, that for so long as the Certificates are held at a Depository in the
form of Global Certificates, the Holder shall have no obligation to provide the
Trustee with any such evidence except to the extent it has received such
evidence from Beneficial Owners of the Certificates. The Trustee shall not be
required to accept any such Internal Revenue Service forms if it believes that
they are not accurate (but the Trustee shall not be required to make any
independent investigation to determine their accuracy).

                  (c) If any tax or other governmental charge shall become
payable by or on behalf of the Trustee, including any tax or governmental charge
required to be withheld from any payment by the Trustee under the provisions of
any applicable law or regulation with respect to any Underlying Securities or
the Certificates, such tax or governmental charge shall be payable by the Holder
and may be withheld by the Trustee. The consent of the Holder shall not be
required for such withholding. In the event the Trustee does withhold any amount
from interest or original issue discount distributions or Advances thereof to
any Holder pursuant to Federal withholding requirements, the Trustee shall
indicate in the statement required pursuant to Section 4.03 the amount so
withheld.

                  (d) The Depositor and the Trustee shall have the right to
refuse the surrender, registration of transfer or exchange of any Certificate
with respect to which such tax or other governmental charge shall be payable
until such payment shall have been made by the Holder thereof.

                  Section 4.07. Optional Exchange. (a) The terms and conditions,
if any, of an Optional Exchange will be specified in the related Supplement;
provided, however, that any right of Optional Exchange shall be exercisable only
to the extent that the Depositor provides upon the Trustee's request an Opinion
of Counsel that (i) such exchange would not be inconsistent with continued
satisfaction of the applicable requirements for exemption under Rule 3a-7 (or
other applicable rule or exemption) under the Investment Company Act of 1940, as
amended, and all applicable rules, regulations and interpretations thereunder
and (ii) such exchange would not affect the characterization of the Trust as a
"grantor trust" under the Code. The terms of an Optional Exchange may include,
but are not limited to, the following:

                  (i) a requirement that the exchanging Holder tender to the
         Trustee Certificates of each Class within such Series;

<PAGE>

                                       38

                  (ii) a minimum Certificate Principal Balance or Notional
         Amount, as applicable, with respect to Certificates being tendered for
         exchange by a single Holder;

                  (iii) a requirement that the Certificate Principal Balance or
         Notional Amount, as applicable, of each Certificate tendered for
         exchange be an Authorized Denomination;

                  (iv) specified dates on which a Holder may effect such an
         Optional Exchange (each, an "Optional Exchange Date"), as specified in
         the applicable Supplement;

                  (v) limitations on the right of an exchanging Holder to
         receive any benefit upon Optional Exchange from any Credit Support; and

                  (vi) adjustments to the value of the proceeds of any Optional
         Exchange based upon required prepayment of future expense allocations
         and the establishment of a reserve for any unanticipated Extraordinary
         Trust Expenses.

                  (b) Unless otherwise provided in the applicable Supplement, no
Certificate may be exchanged pursuant to this Section 4.07 unless the Trustee
has received at least 30 days (or such shorter period acceptable to the Trustee
or specified in the applicable Supplement) but not more than 45 days prior to an
Optional Exchange Date a telegram, telex, facsimile transmission or letter from
a member of a national securities exchange or the National Association of
Securities Dealers, Inc., the Depository (in accordance with its normal
procedures) or a commercial bank or trust company in the United States setting
forth the name of the Holder, the Certificate Principal Balance or Notional
Amount of such Registered Certificate to be exchanged and the number or a
description of the tenor and the terms of such Certificate, a statement that the
Optional Exchange is being exercised thereby and an assurance that the
Registered Certificate to be exchanged with the form entitled "Option to Elect
Exchange" on the reverse of the Registered Certificate duly completed will be
received by such Trustee not later than five Business Days after the date of
such telegram, telex, facsimile transmission or letter, and such Certificate and
form duly completed must be received by such Trustee by such fifth Business Day.
Any tender by the Holder thereof for Optional Exchange shall be irrevocable.
Unless otherwise provided in the applicable Supplement, the Optional Exchange
option may be exercised pursuant to this Section 4.07 by the Holder of a
Certificate for less than the aggregate Certificate Principal Balance or
Notional Amount of such Certificate as long as the Certificate Principal Balance
or Notional Amount remaining Outstanding after such Optional Exchange is an
Authorized Denomination and all other requirements set forth in the related
Supplement are satisfied. Upon such partial exchange, such Certificate shall be
cancelled and a new Certificate or Certificates for

<PAGE>

                                       39

the remaining Certificate Principal Balance or Notional Amount thereof shall be
issued (which shall be in the name of the Holder of such exchanged Certificate).

                  (c) Upon the completion of any such Optional Exchange, the
Trustee shall give prompt written notice thereof to each Rating Agency.

                  Section 4.08. Call Right. (a) The holder of a Call Right may
purchase Certificates of a given Series or Class from the Holders thereof prior
to maturity if the applicable Supplement designates such Series or Class as a
Callable Series, or upon the occurrence of a Tax Event or an Optional
Redemption. The Call Terms shall be set forth in the applicable Supplement and
shall include, without limitation, the following:

                  (i) the initial holder of the Call Right;

                  (ii) whether the Certificate Principal Balance or Notional
         Amount of each Certificate being purchased pursuant to the Call Right
         must be an Authorized Denomination;

                  (iii) the Call Date or Dates; and

                  (iv) the Call Price.

                  (b) A Call Right may be exercised at the option of the holder
thereof, in accordance with the Call Terms, upon not less than 35 days' (or such
shorter period acceptable to the Trustee or specified in the applicable
Supplement) nor more than 60 days' prior notice sent via facsimile with
transmission confirmed to the Trustee at the Corporate Trust Office. Such notice
to the Trustee shall include the Certificate Principal Balance (or Notional
Amount) of the Certificates to be purchased and shall reference the Call Price
and the Call Date. On or prior to the second Business Day following receipt of
such notice from the holder of the Call Right, the Trustee shall notify the
Holders of the Certificates by first class mail; such notices shall state:

                  (i)      the Certificate Principal Balance (or Notional
         Amount) of Certificates to be purchased;

                  (ii)     the Call Price;

                  (iii)    the name and address of the Paying Agent;

                  (iv) that Certificates called for purchase must be surrendered
         to the Paying Agent in order to collect the Call Price;

<PAGE>

                                       40

                  (v) that interest on Certificates called for purchase pursuant
         to the Call Right ceases to accrue on and after the Call Date, and the
         only remaining right of Holders of such Certificates is to receive
         payment of the Call Price upon surrender of the Certificates to the
         Paying Agent; and

                  (vi) that, if any Certificate contains a CUSIP, CINS or ISIN
         number, no representation is being made as to the correctness of the
         CUSIP, CINS or ISIN number either as printed on the Certificates or as
         contained in such notice and that reliance may be placed only on the
         other identification numbers printed on the Certificates.

                  (c) If less than all of the Certificates are to be purchased
pursuant to the exercise of the Call Right, the Trustee shall select the
Certificates to be purchased in accordance with the requirements of the
principal national securities exchange on which the Certificates are listed or,
if the Certificates are not listed on a national securities exchange, on a pro
rata basis, by lot or by such other method as such Trustee in its sole
discretion shall deem to be fair and appropriate. The Trustee shall notify the
Depositor and the Certificate Registrar promptly in writing of the Certificates
or portions of the Certificates to be purchased by the holder of the Call Right,
provided, however, that this Section 4.08(c) shall not apply to Certificates
subject to a Call Right due to a Tax Event or an Optional Redemption.

                  (d) Once such notice is mailed to the Holders, the
Certificates called for purchase become due and payable on the Call Date and at
the Call Price. Upon surrender of any Certificates to the Paying Agent, the
Holders of such Certificates shall be paid the Call Price. Notice of purchase
shall be deemed to be given when mailed, whether or not the Holder receives the
notice. In any event, failure to give such notice, or any defect therein, shall
not affect the validity of the proceedings for the purchase of Certificates held
by Holders to whom such notice was properly given.

                  (e) At or prior to 12:00 noon on the Call Date, the holder of
the Call Right to be exercised shall deposit with the Paying Agent by wire
transfer in same-day funds money sufficient to pay the Call Price of the
Certificates to be redeemed on that date.

                  (f) If a notice has been given in the manner provided above,
the Certificates or portion of Certificates specified in such notice to be
purchased shall become due and payable on the Call Date at the Call Price stated
therein, together with accrued interest (if applicable) on and after such dates.
Upon surrender of any Certificate in connection with the Call Right, such
Certificate shall be paid and redeemed by the holder of the Call Right at the
Call Price.

<PAGE>

                                       41

                  (g) Upon surrender of any Certificate that is purchased in
part, the Depositor shall execute and the Trustee shall authenticate and deliver
to the Holder a new Certificate equal in principal amount to the unredeemed
portion of such surrendered Certificate.

                  (h) Notwithstanding anything to the contrary in these Standard
Terms or any Supplement, a Series or Class will be subject to a Call Right of
the Underlying Securities Issuer if the Underlying Securities Issuer gives
notice of a Tax Event or an Optional Redemption, regardless of whether such
Series or Class is also designated a Callable Series in the applicable
Supplement, and in the case of a Tax Event or an Optional Redemption the
required notice of the Call Right shall be the lesser of the time set forth in
Section 4.08(b) and the time set forth in the notice provisions relating to such
Tax Event or Optional Redemption, respectively, in the Underlying Securities
Indenture, as specified in the related Supplement.

                                    ARTICLE V

                                THE CERTIFICATES

                  Section 5.01. The Certificates. (a) The Certificates of any
Series (or Class within such Series) shall be issued in fully registered form
without coupons and shall be substantially in the form of the exhibit attached
to the applicable Supplement.

                  (b) Each Series (and all Classes within such Series) shall be
created by a Supplement authorized by the Depositor and establishing the terms
and provisions of such Series. Each Trust must be a fixed investment trust under
the Code. Each such Series may be issued in one or more Classes, with such
further particular designation added or incorporated in such title for the
Certificates of any particular Series or Class within such Series as the
Depositor may determine. Each Certificate shall bear upon its face the
designation so selected for the Series and Class to which it belongs. All
Certificates of the same Series and Class shall be identical in all respects
except for the denominations thereof. All Certificates of all Classes within any
one Series at any time Outstanding shall be identical except for differences
among the Certificates of the different Classes within such Series specified in
the applicable Supplement. Except as otherwise provided in the related
Supplement, all Certificates of a particular Series (and all Classes within such
Series) issued under this Trust Agreement shall be in all respects equally and
ratably entitled to the benefits hereof without preference, priority or
distinction on account of the actual time or times of authentication and
delivery, all in accordance with the terms and provisions of this Trust
Agreement.

<PAGE>

                                       42

                  Section 5.02. Execution, Authentication and Delivery. (a) The
Certificates shall be executed by the Trustee by one of its Responsible
Officers, which may be in facsimile form and imprinted or otherwise reproduced
thereon. The signature of any of the Responsible Officers may be manual or
facsimile. Certificates bearing the manual or facsimile signature of individuals
who were at any time the Responsible Officers of the Trustee shall be binding,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Certificates.

                  (b) Each Certificate shall be dated as of the later of the
date specified in the related Supplement and the date of its authentication.

                  (c) No Certificate shall be entitled to any benefit under this
Trust Agreement or be valid or obligatory for any purpose, unless there appears
on such Certificate a certificate of authentication substantially in one of the
forms provided for herein executed by the Trustee by the manual signature of one
of its Responsible Officers, and such signature upon any Certificate shall be
conclusive evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder and is entitled to the benefits of this
Trust Agreement.

                  Section 5.03. Temporary Certificates. Pending the preparation
of Definitive Certificates or permanent Global Securities of any Series (or
Class within each such Series), and upon receipt of a Depositor Order, the
Trustee shall execute, authenticate and deliver temporary Certificates which are
printed, lithographed, typewritten, mimeographed or otherwise produced, in any
Authorized Denomination, substantially of the tenor of the Definitive
Certificates or permanent Global Securities in lieu of which they are issued, in
registered form and with such appropriate insertions, omissions, substitutions
and other variations as may be authorized by such Depositor Order. Any such
temporary Certificate may be in global form, representing all or a portion of
the Outstanding Certificates of such Series or Class. Every such temporary
Certificate shall be executed, authenticated and delivered by the Trustee upon
the same conditions and in substantially the same manner, and with the same
effect, as the Definitive Certificates or permanent Global Securities in lieu of
which is issued.

                  If temporary Certificates of any Series (or Class within such
Series) are issued, the Trustee will cause Definitive Certificates or Global
Securities of such Series or Class to be prepared without unreasonable delay.
After the preparation of Definitive Certificates of such Series or Class, the
temporary Certificates of such Series or Class shall be exchangeable for
Definitive Certificates or permanent Global Securities of such Series or Class
upon surrender of the temporary Certificates of such Series or Class at the
Corporate Trust Office, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Certificates of any Series or Class
within such Series, the Trustee, upon receipt of a Depositor Order, shall
execute, authenticate and deliver in exchange therefor Definitive

<PAGE>

                                       43

Certificates or permanent Global Securities with a like Certificate Principal
Balance or Notional Amount, as applicable, of the same Series (or Class within
such Series) of Authorized Denomination and of like tenor. Until so exchanged,
temporary Certificates of any Series (or Class within such Series) shall in all
respects be entitled to the same benefits under this Trust Agreement as
Definitive Certificates or permanent Global Securities of such Series or Class,
except as otherwise specified in the applicable Supplement.

                  Upon any exchange of a portion of a temporary Global Security
for a permanent definitive Global Security or for the individual Definitive
Certificates represented thereby, the temporary Global Security shall be
endorsed by the Trustee to reflect the reduction of the aggregate Certificate
Principal Balance or Notional Amount, as applicable, evidenced thereby,
whereupon the aggregate Certificate Principal Balance or Notional Amount, as
applicable, of such temporary Global Security shall be reduced for all purposes
by the amount so exchanged and endorsed.

                  Section 5.04. Registration; Registration of Transfer and
Exchange. (a) The Trustee shall cause to be kept a register for each Series (the
registers maintained in such office and in any other office or agency of the
Trustee being herein sometimes collectively referred to as the "Certificate
Register") in which a transfer agent and registrar (which may be the Trustee)
(the "Certificate Registrar") shall provide for the registration of Certificates
and the registration of transfers and exchanges of Certificates. The Trustee is
hereby initially appointed Certificate Registrar for the purpose of registering
Certificates and transfers and exchanges of Certificates as herein provided;
provided, however, that the Trustee may appoint one or more co-Certificate
Registrars. Upon any resignation of any Certificate Registrar, the Depositor
shall promptly appoint a successor or, in the absence of such appointment,
assume the duties of Certificate Registrar.

                  If a Person other than the Trustee is appointed by the
Depositor as Certificate Registrar, the Depositor will give the Trustee prompt
written notice of the appointment of a Certificate Registrar and of the
location, and any change in the location, of the Certificate Register, and the
Trustee shall have the right to rely upon a certificate executed on behalf of
the Certificate Registrar by an Executive Officer thereof as to the names and
addresses of the Holders and the principal amounts and numbers of the
Certificates held by each Holder.

                  (b) Upon surrender for registration of transfer any
Certificate of any Series (or Class within such Series) at the office or agency
of the Trustee, if the requirements of Section 8-401(a) of the UCC are met to
the Depositor's satisfaction, the Depositor shall execute, and the Trustee, upon
receipt of a Depositor Order, shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of any
Authorized Denominations, of a like Series, Class and aggregate Certificate
Principal Balance or Notional Amount, as applicable.

<PAGE>

                                       44

                  (c) Notwithstanding any other provisions of this Section 5.04,
unless and until it is exchanged in whole or in part for the individual
Certificates represented thereby, a Global Security representing all or a
portion of the Certificates of a Series (or Class within such Series) may not be
transferred except as a whole by the Depository for such Series or Class to a
nominee of such Depository or by a nominee of such Depository to such Depository
or another nominee of such Depository or by such Depository or any such nominee
to a successor Depository for such Series or Class or a nominee of such
successor Depository.

                  (d) At the option of the Holder, Certificates of any Series
(or Class within such Series) (other than a Global Security, except as set forth
below) may be exchanged for other Certificates of the same Series or Class of
any Authorized Denomination of like tenor and aggregate Certificate Principal
Balance or Notional Amount, as applicable, upon surrender of the Certificates to
be exchanged at the office or agency of the Trustee maintained for such purpose.

                  (e) All Certificates issued upon any registration of transfer
or exchange of Certificates shall constitute complete and indefeasible evidence
of ownership in the Trust related to such Certificates and be entitled to the
same benefits under this Trust Agreement as the Certificates surrendered upon
such registration of transfer or exchange.

                  (f) Every Certificate presented or surrendered for
registration of transfer or exchange shall (if so required by the Depositor, the
Trustee or the Certificate Registrar) be duly endorsed, or be accompanied by a
written instrument of transfer in form satisfactory to the Depositor, the
Trustee or the Certificate Registrar, duly executed, by the Holder thereof or
his attorney duly authorized in writing, with such signature guaranteed by a
brokerage firm or financial institution that is a member of a Securities
Approved Medallion Program such as Securities Transfer Agents Medallion Program
(STAMP), Stock Exchange Medallion Program (SEMP) or New York Stock Exchange Inc.
Medallion Signature Program (MSP).

                  (g) No service charge shall be made to a Holder for any
registration of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Certificates, other than exchanges pursuant to Section 5.03 not
involving any transfer.

                  Section 5.05. Mutilated, Destroyed, Lost and Stolen
Certificates. If (i) any mutilated Certificate is surrendered to the Trustee at
its Corporate Trust Office or (ii) the Depositor and the Trustee receive
evidence to their satisfaction of the destruction, loss or theft of any
Certificate, and there is delivered to the Depositor and the Trustee such
security or indemnity as they may require to hold each of them and any Paying
Agent harmless, and

<PAGE>

                                       45

neither the Depositor nor the Trustee receives notice that such Certificate has
been acquired by a bona fide purchaser, then the Depositor shall execute and the
Trustee, upon receipt of a Depositor Order, shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of the same Series or Class of like tenor, form,
terms and principal amount, bearing a number not contemporaneously Outstanding.
Any Certificate executed, authenticated and delivered under this Section 5.05 in
lieu of a lost, destroyed or stolen Certificate (a "Predecessor Certificate")
shall be deemed to evidence the same interest as the Predecessor Certificate.

                  Upon the issuance of any new Certificate under this Section
5.05, the Trustee may require the payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in respect thereto and any
other expenses (including the fees and expenses of the Trustee) connected
therewith.

                  Every new Certificate of any Series or Class issued pursuant
to this Section 5.05 shall constitute complete and indefeasible evidence of
ownership in the Trust related to such Series, whether or not the Predecessor
Certificate shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Trust Agreement equally and proportionately with any
and all other Certificates of that Series or Class duly issued hereunder.

                  The provisions of this Section 5.05 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of Predecessor Certificates.

                  Section 5.06. Persons Deemed Owners. (a) The Depositor, the
Trustee, the Securities Intermediary and any agent of the Depositor, the Trustee
or the Securities Intermediary may treat the Person in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving distributions of principal of (and premium, if any) and (subject to
Section 4.02) interest, if any, on such Certificate and for all other purposes
whatsoever, whether or not such Certificate be overdue, and neither the
Depositor, the Trustee or the Securities Intermediary, nor any agent of the
Depositor, the Trustee or the Securities Intermediary shall be affected by
notice to the contrary.

                  (b) None of the Depositor, the Trustee, the Securities
Intermediary or any of their agents will have any responsibility or liability
for any aspect of the records relating to or distributions made by the
Depository to Beneficial Owners of interests in a Global Security or for
maintaining, supervising or reviewing any records relating to such Beneficial
Owners.

                  Section 5.07. Cancellation. Unless otherwise specified
pursuant to Section 5.01 for Certificates of any Series, all Certificates
surrendered for payment, redemption,

<PAGE>

                                       46

transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by the Trustee. No
Certificates shall be authenticated in lieu of or in exchange for any
Certificates cancelled as provided in this Section 5.07, except as expressly
permitted by this Trust Agreement.

                  Section 5.08. Global Securities. (a) If the Supplement
provides that a Series (or Class within such Series) of Certificates shall be
held by the Depository in book-entry form, then the Depositor shall execute and,
upon receipt of a Depositor Order, the Trustee shall authenticate and deliver
one or more Global Securities that (i) shall represent an aggregate initial
Certificate Principal Balance or Notional Amount, as applicable, equal to the
aggregate initial Certificate Principal Balance or Notional Amount, as
applicable, of the Certificates of such Series or Class to be represented by
such one or more Global Securities, (ii) shall be registered in the name of the
Depository for such Global Security or Securities or the nominee of such
Depository, (iii) shall be delivered by the Trustee to such Depository or
pursuant to such Depository's instruction and (iv) shall bear a legend
substantially to the following effect:

"UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF A NOMINEE OF THE DEPOSITORY (AND
ANY PAYMENT IS MADE TO A NOMINEE OF THE DEPOSITORY), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF HAS AN INTEREST HEREIN.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUAL
CERTIFICATES REPRESENTED HEREBY, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR TO ANOTHER NOMINEE OF THE
DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITORY."

                  (b) No Holder of a Certificate of such Series or Class will
receive a Definitive Certificate representing such Holder's interest in such
Certificate or Certificates, except as provided in Section 5.10. Unless and
until Definitive Certificates have been issued to Holders of such Series or
Class pursuant to Section 5.10:

                  (i) the provisions of this Section 5.08 shall be in full force
         and effect;

                  (ii) the Certificate Registrar and the Trustee shall be
         entitled to deal with the Depository for all purposes of this Trust
         Agreement (including the distribution of

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                                       47

         principal of, and premium, if any, and interest on the Certificates and
         the giving of instructions or directions hereunder) as the sole Holder
         of the Certificates of such Series or Class, and shall have no
         obligation to the Beneficial Owners of interests in such Series or
         Class;

                  (iii) to the extent that the provisions of this Section 5.08
         conflict with any other provisions of this Trust Agreement, the
         provisions of this Section 5.08 shall control;

                  (iv) the rights of Beneficial Owners of such Series or Class
         shall be exercised only through the Depository and shall be limited to
         those established by law and agreements between such Beneficial Owners
         and the Depository or its Participants; and

                  (v) whenever this Trust Agreement requires or permits actions
         to be taken based upon instructions or directions of Holders of a
         specified percentage of the aggregate Voting Rights of a Series or
         Class, the Depository shall be deemed to represent such percentage only
         to the extent that it has received instructions to such effect from
         Beneficial Owners of such Series or Class or Participants in such
         Depository's system owning or representing, respectively, such required
         percentage of the beneficial interest in the Certificates of such
         Series or Class and has delivered such instructions to the Trustee.

                  (c) Each Depository for a Global Security must, at the time of
its designation and at all times while it serves as such Depository, be a
Clearing Agency registered under the Exchange Act and any other applicable
statute or regulation.

                  Section 5.09. Notices to Depository. Whenever a notice or
other communication to the Holders of a Series or Class within such Series
represented by one or more Global Securities is required under this Trust
Agreement, unless and until Definitive Certificates for such Series or Class
shall have been issued to such Beneficial Owners pursuant to Section 5.10, the
Trustee shall give all such notices and communications specified herein to be
given to Holders of the Certificates of such Series to the Depository, and shall
have no obligation to the Beneficial Owners.

                  Section 5.10. Definitive Certificates. (a) If in respect of a
Series (or Class within such Series) represented by one or more Global
Securities (i) the Depositor advises the Trustee and the Securities Intermediary
in writing that the Depository is no longer willing or able to properly
discharge its responsibilities with respect to the Certificates of such Series
or Class and the Depositor does not appoint a successor within 90 days or (ii)
the Depositor at its option advises the Trustee and the Securities Intermediary
in writing that it elects to terminate the book-entry system of such Series or
Class through the Depository, then the

<PAGE>

                                       48

Depository shall notify all Beneficial Owners or Participants in the
Depository's system with respect to such Series or Class and the Trustee of the
occurrence of any such event and of the availability of definitive, fully
registered Certificates ("Definitive Certificates") for such Series or Class to
Beneficial Owners of such Series or Class requesting the same.

                  Upon surrender to the Trustee of the Global Securities of such
Series or Class by the Depository, accompanied by registration instructions, the
Trustee upon receipt of a Depositor Order for the execution, authentication and
delivery of Definitive Certificates of such Series or Class, will execute,
authenticate and deliver Definitive Certificates of such Series or Class in an
aggregate Certificate Principal Balance or Notional Amount, as applicable, equal
to the aggregate Certificate Principal Balance or Notional Amount, as
applicable, of the Global Security or Securities representing Certificates of
such Series or Class in exchange for such Global Security or Securities. None of
the Depositor, the Certificate Registrar, the Trustee or the Securities
Intermediary shall be liable for any delay in delivery of such instructions and
may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the exchange of a Global Security for Definitive
Certificates, such Global Security shall be cancelled by the Trustee. Definitive
Certificates issued in exchange for a Global Security shall be registered in
such names and in such Authorized Denominations as the Depository for such
Global Security, pursuant to instructions from its Participants, any indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall deliver
such Certificates to the Person in whose names such Certificates are so
registered. Upon the issuance of Definitive Certificates of Series or Class, the
Trustee shall recognize the holders of the Definitive Certificates of such
Series or Class as Holders.

                  (b) In addition, if the Depositor so specifies with respect to
the Certificates of a given Series, a Beneficial Owner may, on terms acceptable
to the Depositor and the Depository for such Global Security, receive individual
Definitive Certificates in exchange for such beneficial interest. Upon the
request of such Beneficial Owner, the Trustee upon receipt of a Depositor Order
shall execute, authenticate and deliver, without service charge,

                  (i) to each such Person specified, a new individual
         Certificate or Certificates of the same Series or Class, of any
         Authorized Denomination as requested by such Person in an aggregate
         Certificate Principal Balance or Notional Amount, as applicable, equal
         to and in exchange for such Person's beneficial interest in the Global
         Security; and

                  (ii) to such Depository a new Global Security in an Authorized
         Denomination equal to the difference, if any, between the aggregate
         Certificate Principal Balance or Notional Amount, as applicable, of the
         surrendered Global Security and the aggregate Certificate Principal
         Balance or Notional Amount, as applicable, of individual Certificates
         delivered to Holders thereof.

<PAGE>

                                       49

                  In any exchange provided for above, the Trustee, upon receipt
of a Depositor Order, will execute, authenticate and deliver individual
Certificates in registered form in Authorized Denominations.

                  Section 5.11. Currency of Distributions. (a) Except as
otherwise specified pursuant to the applicable Supplement, distributions of the
principal of (and premium, if any) and interest in respect of Certificates of
any Series or Class will be made in Dollars.

                  (b) In the case of a Series denominated in a Specified
Currency other than the Dollar, all exchange rate calculations shall be based
upon the noon buying rate in New York City for cable transfers as certified for
customs purposes by the Fed for such Specified Currency. If the Fed does not
publish a noon buying rate for the applicable Specified Currency, the applicable
Supplement will designate the source for calculating the Dollar value of such
Specified Currency.

                  (c) With respect to any Series, any decision or determination
to be made regarding exchange rates shall be made by an Exchange Rate Agent,
provided, however, that such Exchange Rate Agent shall accept such appointment
in writing and the terms of such appointment shall be acceptable to the Trustee
and shall require such Exchange Rate Agent to make such determination by the
method provided in Section 5.11(b) for the making of such decisions or
determination. All decisions and determinations of such Exchange Rate Agent
regarding exchange rates shall be in its sole discretion and shall, in the
absence of manifest error, be conclusive for all purposes and irrevocably
binding upon the Depositor, the Trustee and all Holders of such Series.

                  (d) If distributions in respect of a Series must be made in a
Specified Currency other than Dollars and such currency is unavailable due to
the imposition of exchange controls or other circumstances beyond the control of
the Trustee and the Depositor or is no longer used by the government of the
country issuing such Specified Currency or is no longer commonly used for the
settlement of transactions by public institutions of or within the international
banking community, then all distributions in respect of such Series shall be
made in Dollars until such Specified Currency is available.

                  Section 5.12. Conditions of Execution, Authentication and
Delivery of New Series. (a) Certificates of a new Series may be issued at any
time and from time to time after the execution and delivery of these Standard
Terms and the related Supplement. The Trustee shall execute, authenticate and
deliver such Certificates upon a Depositor Order and upon delivery by the
Depositor to the Trustee of the following:

                  (i) The delivery of the Underlying Securities in accordance
         with Section 2.01(b);

                  (ii) An Opinion of Counsel to the Depositor, addressed to the
         Trustee, stating:

<PAGE>

                                       50

                  1. The Certificates are in the form contemplated by the Trust
         Agreement and assuming that the Certificates have been duly executed,
         authenticated and delivered by the Trustee in the manner described in
         its certificate delivered today, the Certificates are entitled to the
         benefits provided in the Trust Agreement and constitute valid and
         binding obligations of the Trust, enforceable against the Trust in
         accordance with their terms, except as the enforcement thereof may be
         limited by bankruptcy, insolvency (including, without limitation, all
         laws relating to fraudulent transfers), reorganization, moratorium or
         similar laws affecting enforcement of creditors' rights generally and
         except as enforcement thereof is subject to general principles of
         equity (regardless of whether enforcement is considered in a proceeding
         in equity or at law), and will be entitled to the benefits of the Trust
         Agreement.

                  2. Execution, authentication and delivery of such Certificates
         by the Trustee will not violate the terms of the Trust Agreement.

                  3. The execution and delivery of the Trust Agreement will not
         contravene the certificate of incorporation or by-laws of the Company
         or result in any violation of any of the terms or provisions of any law
         or regulation or, to our knowledge of any indenture, mortgage or other
         agreement by which the Company is bound.

                  4. The Trust Agreement has been duly authorized, executed and
         delivered by the Company and (assuming the due authorization, execution
         and delivery thereof by the Trustee and the Securities Intermediary)
         constitutes a legal, valid and binding obligation of the Company
         enforceable against the Company in accordance with its terms, except as
         enforcement thereof may be limited by bankruptcy, insolvency
         (including, without limitation, all laws relating to fraudulent
         transfers), reorganization, moratorium or other similar laws affecting
         enforcement of creditors' rights generally and except as enforcement
         thereof is subject to general principles of equity (regardless of
         whether enforcement is considered in a proceeding in equity or at law).

         (iii) An Officer's Certificate of the Depositor, dated as of the
Closing Date, to the effect that all of the requirements of this Section 5.12
have been satisfied, and that the Depositor is not in breach of this Trust
Agreement and that the execution and delivery of this Trust Agreement and the
Certificates will not result in any breach of any of the terms, conditions, or
provisions of, or constitute a default under, the Depositor's certificate of
incorporation and by-laws, or any indenture, mortgage, deed of transfer or other
agreement or instrument to which the Depositor is a party or by which it or its
property is bound or any order of any court or administrative agency entered in
any Proceeding to which the Depositor is a party or by which it or its property
may be bound or to which it or its property may be subject;

<PAGE>

                                       51

         (iv) A Supplement consistent with the applicable provisions of these
Standard Terms;

         (v) All agreements, instruments or other documents called for by the
applicable Supplement as a condition to the issuance of the Certificates of such
Series;

         (vi) If applicable, a fully executed copy of any Swap Agreement or
other Credit Support Instrument, together with all documents and opinions
required to be delivered to the Trust upon execution thereof pursuant to the
terms thereof; and

         (vii) Written instructions by the Depositor to the Trustee directing
the Trustee to enter into and perform any obligations under any Swap Agreement
or other Credit Support Instrument, if applicable, and/or the Market Agent
Agreement, if applicable.

         (b) If all the Certificates of a Series are not to be originally issued
at the same time, then the documents required to be delivered pursuant to this
Section 5.12 must be delivered only once, prior to the authentication and
delivery of the first Certificate of such Series; provided, however, that any
subsequent Depositor Order to the Trustee to authenticate Certificates of such
Series upon original issuance shall constitute a representation and warranty by
the Depositor that, as of the date of such request, the statements made in this
Section 5.12 shall be true and correct as if made on such date.

                  Section 5.13. Appointment of Paying Agent. The Trustee may
appoint one or more paying agents (each, a "Paying Agent") with respect to the
Certificates of any Series. Any such Paying Agent shall be authorized to make
distributions to Certificateholders of such Series from the Certificate Account
for such Series pursuant to the provisions of the Supplement and shall report
the amounts of such distributions to the Trustee. Any Paying Agent shall have
the revocable power to withdraw funds from such Certificate Account for the
purpose of making the distributions referred to above. The Trustee may revoke
such power and remove the Paying Agent if the Trustee determines in its sole
discretion that the

<PAGE>

                                       52

Paying Agent shall have failed to perform its obligations under this Trust
Agreement in any material respect; provided, however, no Paying Agent may be
removed or replaced until a successor (which successor may be the Trustee) has
been appointed as provided for herein and has accepted the appointment. The
Paying Agent shall initially be the Trustee and any co-paying agent chosen by
the Trustee and acceptable to the Depositor, including, if and so long as any
Series or Class within such Series is listed on the Luxembourg Stock Exchange
and such exchange so requires, a co-paying agent in Luxembourg or another
European city, as specified in the related Supplement. Any Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' notice to the Trustee. In the
event that the Trustee shall no longer be the Paying Agent, the Trustee shall
appoint a successor or additional Paying Agent. The Trustee shall cause each
successor to act as Paying Agent to execute and deliver to Trustee an instrument
in which such successor or additional Paying Agent shall agree with

<PAGE>

                                       53

the Trustee that it will hold all sums, if any, held by it for distribution to
the Certificateholders in trust for the benefit of the Certificateholders
entitled thereto until such sums shall be distributed to such Certificateholders
and will agree to such other matters as are required by TIA Section 317(b). The
Paying Agent shall return all unclaimed funds to the Trustee and upon removal
shall also return all funds in its possession to the Trustee. The provisions of
Sections 7.01, 7.03, 7.04 and 7.06 shall apply to the Trustee also in its role
as Paying Agent, for so long as the Trustee shall act as Paying Agent. Any
reference in this Trust Agreement to the Paying Agent shall include any
co-paying agent unless the context requires otherwise. Notwithstanding anything
contained herein to the contrary, the appointment of a Paying Agent pursuant to
this Section 5.13 shall not release the Trustee from the duties, obligations,
responsibilities or liabilities arising under this Trust Agreement other than
with respect to funds paid to such Paying Agent.

                  Section 5.14. Authenticating Agent. (a) The Trustee may
appoint one or more Authenticating Agents (each, an "Authenticating Agent") with
respect to the Certificates of any Series which shall be authorized to act on
behalf of the Trustee in authenticating such Certificates in connection with the
issuance, delivery and registration of transfer or exchange of such
Certificates. Whenever reference is made in this Trust Agreement to the
authentication of Certificates by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication on
behalf of the Trustee by an Authenticating Agent and a certificate of
authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent must be acceptable to the Depositor. Notwithstanding
anything contained herein to the contrary, the appointment of an Authenticating
Agent pursuant to this Section 5.14 shall not release the Trustee from the
duties, obligations, responsibilities or liabilities arising under this Trust
Agreement.

                  (b) Any institution succeeding to the corporate agency
business of any Authenticating Agent shall continue to be an Authenticating
Agent without the execution or filing of any power or any further act on the
part of the Trustee or such Authenticating Agent. An Authenticating Agent may at
any time resign by giving notice of resignation to the Trustee and to the
Depositor. The Trustee may at any time terminate the agency of an Authenticating
Agent by giving notice of termination to such Authenticating Agent and to the
Depositor. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time an Authenticating Agent shall cease to be
acceptable to the Trustee or the Depositor, the Trustee promptly may appoint a
successor Authenticating Agent which may be the Trustee. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless acceptable to the Depositor. The
Trustee agrees to pay to each Authenticating Agent from time to time reasonable
compensation for its services under this Section. The provisions of Sections
7.01, 7.03 and 7.04 shall be applicable to any Authenticating Agent.

<PAGE>

                                       54

                  (c) Pursuant to an appointment made under this Section, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:

                  "This is one of the Certificates described in the Standard
Terms and the related Supplement.

                  Dated:          [NAME OF AUTHENTICATING AGENT]
                                           as Authenticating Agent
                                                for the Trustee,

                                           By:
                                               ---------------------------------
                                                    Authorized Officer"

                  Section 5.15. Voting Rights with Respect to Underlying
Securities. (a) Within five Business Days after receipt of notice of any meeting
of, or other occasion for the exercise of voting rights or the giving of
consents by owners of any of the Underlying Securities, the Trustee shall give
notice to the Holders, setting forth (i) such information as is contained in
such notice to owners of Underlying Securities, (ii) a statement that Holders
will be entitled, subject to any applicable provision of law and any applicable
provisions of such Underlying Securities to instruct the Trustee as to the
exercise of Voting Rights, if any, pertaining to such Underlying Securities and
(iii) a statement as to the manner in which instructions may be given to the
Trustee to give a discretionary proxy to a person designated in the notice
received by the Trustee. Such notice shall be given by the Trustee to the
Holders of record on such Record Date.

                  Upon the written request of the applicable Holder, received on
or before the date established by the Trustee for such purpose, the Trustee
shall endeavor, insofar as practicable and permitted under any applicable
provision of law and any applicable provision of or governing the Underlying
Securities, to vote in accordance with any nondiscretionary instruction set
forth in such written request. The Trustee shall not vote except as specifically
authorized and directed in written instructions from the applicable Holder
entitled to give such instructions. Notwithstanding the foregoing, if the
Trustee determines (based solely upon advice furnished by nationally recognized
independent tax counsel, whether at the request of any Holder or otherwise) that
the exercise of voting rights with respect to any Underlying Securities could
result in a "sale or other disposition" of such Underlying Securities within the
meaning of Section 1001(a) of the Code, as amended, the Trustee shall exercise
such voting rights in a manner that would not result in any such sale or other
disposition. The Trustee will have no responsibility to undertake on its own
initiative to determine that any exercise of voting rights will result in any
such sale or other disposition.

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                                       55

                  (b) By accepting delivery of a Certificate, whether upon
original issuance or subsequent transfer, exchange or replacement thereof, and
without regard to whether ownership is beneficial or otherwise, the Holder
agrees so long as it is an owner thereof that it shall not grant any consent (i)
to any conversion of the timing of payment of, or the method or rate of
accruing, interest on the Underlying Securities underlying the Certificates held
by such Holder or (ii) to any redemption or prepayment of the Underlying
Securities underlying the Certificates held by such Holder. The Trustee shall
not grant any consent solicited from the owners of the Underlying Securities
underlying the Certificates with respect to the matters set forth in this
Section nor shall it accept or take any action in respect of any consent, proxy
or instructions received from any Holder in contravention of the provisions of
this Section.

                  Section 5.16. Actions by Certificateholders. (a) Wherever in
this Trust Agreement a provision is made that an action may be taken or a
notice, demand or instruction given by Certificateholders or Beneficial Owners,
such action, notice or instruction may be taken or given by any
Certificateholder or Beneficial Owner.

                  (b) Each Certificateholder or Beneficial Owner shall have the
right to assert any rights and privileges of a Certificateholder or Beneficial
Owner, and shall have the right to proceed directly and individually against any
Person to enforce any remedies hereunder and shall not be required to act in
concert with any other Certificateholder or Beneficial Owner or any other
Person.

                  (c) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Certificateholder or Beneficial Owner of a
Certificate shall bind such Certificateholder or Beneficial Owner and every
subsequent Certificateholder or Beneficial Owner of such Certificate or any
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, suffered or omitted to
be done by the Certificateholder or Beneficial Owner or the Trustee in reliance
thereon, whether or not notation of such action is made upon such Certificate.

                  (d) Holders are beneficial owners of the right to receive
principal payments and interest payments to which such Certificates relate and,
as such, will have the right following an event of default with respect to any
Underlying Security to proceed directly against the Underlying Securities
Issuer(s). Such Certificateholders are not required to join other Holders of
Certificates, the Depositor, the Trustee or the Securities Intermediary in order
to proceed against the Underlying Securities Issuer(s).

                  Section 5.17. Events of Default. If any Event of Default shall
occur and be continuing with respect to any Class of Certificates, then, and in
each and every case, the Trustee shall exercise any rights in respect of the
related Underlying Securities as provided in the applicable Supplement.

<PAGE>

                                       56

                  Section 5.18. Judicial Proceedings Instituted by Trustee;
Trustee May Bring Suit. If there shall be a failure to make payment of the
principal of or premium, if any, or interest on any Underlying Security, then
the Trustee, in its own name, and as trustee of an express trust, as holder of
such Underlying Security, shall be, to the extent permitted by and in accordance
with the terms of the Underlying Security, subject to the limitations on
acceleration and the exercise of remedies set forth therein, and further subject
to the provisions of Sections 7.01(c) and 7.06(f) herein, entitled and empowered
to institute Proceedings at law, in equity or otherwise, including the power to
make a demand on the trustee in respect of such Underlying Security, if provided
for, to take action to enforce the Underlying Security for the collection of the
sums so due and unpaid on such Underlying Security and may prosecute any such
Proceeding to judgment or final decree with respect to the whole amount of any
such sums so due and unpaid.

                  Section 5.19. Control by Certificateholders. The Holders of
Certificates of any Class holding Certificates representing not less than the
Required Percentage--Direction of Trustee of the aggregate Voting Rights of the
Outstanding Certificates of such Class shall have the right to direct the time,
method and place of conducting any Proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee under this
Trust Agreement, including any right of the Trustee as holder of the Underlying
Securities; provided that:

                  (i) such direction shall not be in conflict with any rule of
         law or with this Trust Agreement and would not involve the Trustee in
         personal liability or expense;

                  (ii) the Trustee shall determine, based upon an Opinion of
         Counsel, that the action so directed would not be unjustly prejudicial
         to the Holders of Certificates of such Class not taking part in such
         direction; and

                  (iii) the Trustee may take any other action deemed proper by
         the Trustee which is not inconsistent with such direction.

                  Section 5.20. Waiver of Past Defaults. The Holders of the
Required Percentage--Waiver of Certificates of any Series may (a) waive any past
default under this Trust Agreement and its consequences or (b) direct the
Trustee to vote such percentage of the Underlying Securities held by the Trustee
as corresponds to the percentage of the aggregate Principal Amount of the
Certificates of such Series held by such Holders to waive any past default
thereunder and its consequences with respect to such Series; provided that such
Holders may not waive or direct the Trustee to waive a default

                  (i) in the payment of the principal of or premium, if any, or
         interest on the Underlying Securities; or

<PAGE>

                                       57

                  (ii) in respect of a covenant or provision hereof that under
         Section 11.01 hereof cannot be modified or amended without the consent
         of the Holder of each Outstanding Certificate affected.

Upon any waiver of a default under this Trust Agreement or direction that is
effective to waive a default in respect of the Underlying Securities, such
default shall cease to exist with respect to this Trust Agreement, any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Trust Agreement and any direction given by the Trustee on behalf of such
Holders in respect of any Underlying Securities shall be annulled with respect
thereto; but no such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon.

                  Section 5.21. Right of Certificateholders to Receive Payments
Not to Be Impaired. Anything in this Trust Agreement to the contrary
notwithstanding, the right of any Certificateholder to receive distributions of
payments required pursuant to Section 4.01 hereof on the Certificates when due,
or to institute suit for enforcement of any such payment on or after the
applicable Distribution Date or other date specified herein for the making of
such payment, shall not be impaired or affected without the consent of such
Certificateholder.

                  Section 5.22. Remedies Cumulative. Every remedy given
hereunder to the Trustee or to any of the Certificateholders shall not be
exclusive of any other remedy or remedies, and every such remedy shall be
cumulative and in addition to every other remedy given hereunder or now or
hereafter given by statute, law, equity or otherwise.

                                   ARTICLE VI

                                  THE DEPOSITOR

                  Section 6.01. Liability of the Depositor. The Depositor shall
be liable in accordance herewith only to the extent of the obligations
specifically imposed by these Standard Terms and the related Supplement.

                  Section 6.02. Limitation on Liability of the Depositor. (a)
The Depositor shall not be under any obligation to expend or risk its own funds
or otherwise incur financial liability in the performance of its duties
hereunder or under a Supplement or in the exercise of any of its rights or
powers if reasonable grounds exist for believing that the repayment or such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.

                  (b) Neither the Depositor nor any of its directors, officers,
employees or agents shall be under any liability to any Trust or the
Certificateholders of any Series for any

<PAGE>

                                       58

action taken, or for refraining from the taking of any action, in good faith
pursuant to this Trust Agreement, or for errors in judgment; provided, however,
that this provision shall not protect the Depositor against any breach of
representations, warranties or covenants made herein, or against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder.

                  (c) The Depositor shall not be under any obligation to appear
in, prosecute or defend any legal action unless such action is related to its
respective duties under this Trust Agreement and, in its opinion, does not
involve it in any expense or liability; provided, however, that the Depositor
may in its discretion undertake any such action which it may deem necessary or
desirable with respect to this Trust Agreement and the rights and duties of the
parties hereto and the interests of the Certificateholders hereunder. The
Depositor shall be under no obligation whatsoever to appear in, prosecute or
defend any action, suit or other Proceeding in respect of any Underlying
Securities.

                  (d) The Depositor shall not be liable to any Certificateholder
for any action or non-action by it in reliance upon the advice of or information
from legal counsel, accountants, and a Certificateholder of a Certificate or any
other person believed by it in good faith to be competent to give such advice or
information, including, without limitation, the Market Agent or the other
parties to this Trust Agreement. The Depositor may rely and shall be protected
in acting upon any written notice, request, direction or other document believed
by it to be genuine and to have been signed or presented by the proper party or
parties.

                  (e) The Depositor shall not incur any liability to any
Certificateholder if, by reason of any provision of any present or future law,
or regulation thereunder, or any governmental authority, or by any reason of any
act of God or war or other circumstance beyond the control of the relevant
party, the Depositor shall be prevented or forbidden from doing or performing
any act or thing which the terms of this Trust Agreement provide shall be done
or performed; and the Depositor shall not incur any liability to any
Certificateholder by reason of any non-performance or delay, caused as
aforesaid, in the performance of any act or thing which the terms of this Trust
Agreement provide shall or may be done or performed, or by reason of any
exercise of, or failure to exercise, any discretion provided for in this Trust
Agreement.

                  Section 6.03. Depositor May Purchase Certificates. The
Depositor may at any time purchase Certificates in the open market or otherwise.
Certificates so purchased by the Depositor may, at the discretion of the
Depositor, be held or resold. Certificates beneficially owned by the Depositor
will be disregarded for purposes of determining whether the required percentage
of the aggregate Voting Rights has given any request, demand, authorization,
direction, notice, consent or waiver hereunder.

<PAGE>

                                       59

                  Section 6.04. Merger or Consolidation of the Depositor.
Nothing in this Trust Agreement shall prevent any consolidation or merger of the
Depositor with or into any other corporation, or any consolidation or merger of
any other corporation with or into the Depositor or any sale or transfer of all
or substantially all of the property and assets of the Depositor to any other
Person lawfully entitled to acquire the same; provided, however, that, so long
as Certificates are outstanding hereunder, the Depositor covenants and agrees
that any such consolidation, merger, sale or transfer shall be upon the
condition that the due and punctual performance and observance of all the terms,
covenants and conditions of this Trust Agreement to be kept or performed by the
Depositor shall be assumed by the Person (if other than the Depositor) formed by
or resulting from any such consolidation or merger, or which shall have received
the transfer of all or substantially all of the property and assets of the
Depositor, just as fully and effectually as if successor Person had been the
original party of the first part hereto; and in the event of any such sale or
transfer the predecessor Depositor may be dissolved, wound up and liquidated at
any time thereafter.

                  Section 6.05. No Liability of the Depositor with Respect to
the Underlying Securities; Certificateholders to Proceed Directly Against the
Underlying Securities Issuer(s). (a) The sole obligor with respect to any
Underlying Security is the Underlying Securities Issuer(s). The Depositor shall
not have any obligation on or with respect to the Underlying Securities; and its
obligations with respect to Certificates shall be solely as set forth in this
Trust Agreement.

                  (b) The Depositor is not authorized to proceed against the
Underlying Securities Issuer in the event of a default or to assert the rights
and privileges of Certificateholders and has no duty in respect thereof.

                                   ARTICLE VII

                                   THE TRUSTEE

                  Section 7.01. Duties of Trustee. (a) The Trustee undertakes to
perform such duties and only such duties as are specifically set forth in these
Standard Terms and the related Supplement. The Trustee shall exercise in case of
receipt of notice of Default (as such term is defined in paragraph (d) below)
such of the rights and powers vested in it by this Trust Agreement, and shall
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs. In the event that the Underlying Securities Issuer ceases to file
periodic reports under the Exchange Act, the Depositor shall notify the Trustee
of that fact and the Trustee shall take such actions as specifically set forth
in the Supplement. The Trustee shall exercise those rights in a manner
consistent with the status of any Trust created hereunder as a fixed investment
trust for federal income tax purposes as directed by the

<PAGE>

                                       60

Depositor. The Trustee shall not have any power to vary the investment of any
Certificateholders of any Series or to accept any assets (other than proceeds of
the Underlying Securities) other than the Underlying Securities transferred to
it on the Closing Date of any Series. Any permissive right of the Trustee
enumerated in this Trust Agreement shall not be construed as a duty and shall be
interpreted consistently with the status of the Trust as a fixed investment
trust.

                  (b) The Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Trustee which are specifically required to be
furnished pursuant to any provision of this Trust Agreement, shall examine them
to determine, in its best judgment, whether they conform to the requirements of
this Trust Agreement. If any such instrument is found not to conform to the
requirements of this Trust Agreement, the Trustee shall take action as it deems
appropriate to have the instrument corrected, and if the instrument is not
corrected to the Trustee's satisfaction, the Trustee will provide notice thereof
to the Depositor and Certificateholders.

                  (c) No provision of this Trust Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own misconduct; provided, however, that:

                  (i) the duties and obligations of the Trustee shall be
         determined solely by the express provisions of this Trust Agreement,
         the Trustee shall not be liable except for the performance of such
         duties and obligations as are specifically set forth in this Trust
         Agreement, no implied covenants or obligations shall be read into this
         Trust Agreement against the Trustee and, in the absence of bad faith on
         the part of the Trustee, the Trustee may conclusively rely, as to the
         truth of the statements and the correctness of the opinions expressed
         therein, upon any certificates or opinions furnished to the Trustee
         that conform to the requirements of this Trust Agreement;

                  (ii) the Trustee shall not be personally liable for an error
         of judgment made in good faith by a Responsible Officer or Responsible
         Officers of the Trustee, unless it shall be proved that the Trustee was
         negligent in ascertaining the pertinent facts;

                  (iii) the Trustee shall not be personally liable with respect
         to any action taken, suffered or omitted to be taken by it in good
         faith in accordance with the direction of Holders of the Required
         Percentage--Direction of Trustee of the aggregate Voting Rights of a
         given Series (or Class or group of Classes within such Series), as
         specified in the applicable Supplement relating to the time, method and
         place of conducting any Proceeding for any remedy available to the
         Trustee, or exercising any trust or power conferred upon the Trustee,
         under this Trust Agreement;

<PAGE>

                                       61

                  (iv) the Trustee shall not be required to expend or risk its
         own funds or otherwise incur financial liability in the performance of
         any of its duties hereunder or in the exercise of any of its rights or
         powers if there is reasonable ground for believing that the repayment
         of such funds or adequate indemnity against such risk or liability is
         not reasonably assured to it;

                  (v) except for actions expressly authorized by this Trust
         Agreement, the Trustee shall take no actions reasonably likely to
         impair the interests of the Trust in any Underlying Security now
         existing or hereafter acquired or to impair the value of any Underlying
         Security now existing or hereafter acquired;

                  (vi) except as expressly provided in this Trust Agreement, the
         Trustee shall have no power to vary the corpus of the Trust including
         by (A) accepting any substitute obligation or asset for an Underlying
         Security initially assigned to the Trustee under Section 2.01, (B)
         adding any other investment, obligation or security to the Trust or (C)
         withdrawing from the Trust any Underlying Securities;

                  (vii) in the event that the Paying Agent or the Certificate
         Registrar shall fail to perform any obligation, duty or agreement in
         the manner or on the day required to be performed by the Paying Agent
         or Certificate Registrar, as the case may be, under this Trust
         Agreement, the Trustee shall be obligated promptly upon its knowledge
         thereof to perform such obligation, duty or agreement in the manner so
         required;

                  (viii) the Trustee shall not be liable to any
         Certificateholder for any action or non-action by it in reliance upon
         the advice of or information from legal counsel, accountants, any
         Certificateholder or any other person believed by it in good faith to
         be competent to give such advice or information, including, without
         limitation, the Market Agent or the other parties to this Trust
         Agreement. The Trustee may rely and shall be protected in acting upon
         any written notice, facsimile transmission, request, direction or other
         document believed by it to be genuine and to have been signed or
         presented by the proper party or parties;

                  (ix) the Trustee shall not incur any liability to any
         Certificateholder if, by reason of any provision of any present or
         future law, or regulation thereunder, or any governmental authority, or
         by any reason of any act of God or war or other circumstance beyond the
         control of the relevant party, the Trustee shall be prevented or
         forbidden from doing or performing any act or thing which the terms of
         this Trust Agreement provide shall be done or performed; and the
         Trustee shall not incur any liability to any Certificateholder by
         reason of any non-performance or delay, caused as aforesaid, in the
         performance of any act or thing which the terms of this Trust Agreement
         provide shall or may be done or performed, or by reason of any exercise
         of, or failure to exercise, any discretion provided for in this Trust
         Agreement;

<PAGE>

                                       62

                  (x) the Trustee shall be under no obligation whatsoever to
         appear in, prosecute or defend any Proceeding in respect of any
         Underlying Securities;

                  (xi) whenever in the administration of this Trust Agreement
         the Trustee shall deem it desirable that a matter be proved or
         established prior to taking, suffering or omitting any action
         hereunder, the Trustee (unless other evidence be herein specifically
         prescribed) may, in the absence of bad faith on its part, conclusively
         rely upon an Officers' Certificate; and

                  (xii) the Trustee may consult with counsel of its selection
         and, the advice of such counsel or any Opinion of Counsel selected by
         the Trustee with due care shall be full and complete authorization and
         protection in respect of any action taken, suffered or omitted by it
         hereunder in reliance thereon.

                  (d) As promptly as practicable after, and in any event within
10 days after, the occurrence of any Default (as such term is defined below)
hereunder with respect to any Class of Certificates, the Trustee shall transmit
by mail to the Depositor and the Holders of Certificates of such Class in
accordance with TIA Section 313(c), notice of such Default hereunder actually
known to the Trustee, unless such Default shall have been cured or waived;
provided, however, that, except in the case of a Default in the payment of the
principal of or premium, if any, or interest on any Underlying Security, the
Trustee shall be protected in withholding such notice if and so long as a trust
committee of Responsible Officers of the Trustee in good faith determines that
the withholding of such notice is in the interests of the Holders of the
Certificates of such Class. For the purpose of this Section 7.01(d), the term
"Default" means, with respect to any Class of Certificates, any event that is,
or after notice or lapse of time or both would become, an Event of Default with
respect to such Class of Certificates.

                  (e) Within five (5) Business Days after the receipt by the
Trustee of a written application by any three or more Certificateholders stating
that such Certificateholders desire to communicate with other Certificateholders
with respect to their rights under this Trust Agreement or under the
Certificates, and accompanied by a copy of the form of proxy or other
communication which such Certificateholders propose to transmit, and by
reasonable proof that each such Certificateholder has owned its Certificates for
a period of at least six (6) months preceding the date of such application, the
Trustee shall, at its election, either:

                  (i) afford to such Certificateholders access to all
         information so furnished to or received by the Trustee; or

                  (ii) inform such Certificateholders as to the approximate
         number of

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                                       63

         Certificateholders according to the most recent information so
         furnished to or received by the Trustee, and as to the approximate cost
         of mailing to such Certificateholders the form of proxy or other
         communication, if any, specified in such application.

If the Trustee shall elect not to afford to such Certificateholders access to
such information, the Trustee shall, upon the written request of such
Certificateholders, mail to all such Certificateholders copies of the form of
proxy or other communication which is specified in such request, with reasonable
promptness after a tender to the Trustee of the material to be mailed and of
payment, or provision for the payment, of the reasonable expenses of such
mailing.

                  (f) The Trustee shall prepare for filing, at the direction of
and with information provided by the Depositor, periodic reports for the Trust
pursuant to the Exchange Act, and the rules and regulations promulgated
thereunder on behalf of the Depositor. The Depositor shall respond reasonably
promptly to any inquiry of the Trustee concerning such reports and shall provide
the information required for such reports within three days of the filing due
date.

                  Section 7.02. Agreements Between Trustee and Administrative
Agents. (a) The Trustee may enter into Administration Agreements with one or
more Administrative Agents in order to delegate to such Administrative Agents
certain of its administrative obligations with respect to a Series hereunder;
provided, however, that:

                  (i) such delegation shall not release the Trustee from the
         duties, obligations, responsibilities or liabilities arising hereunder;

                  (ii) the Rating Agency Condition shall have been satisfied
         with respect to the entering into of any such agreement;

                  (iii) such agreement must be consistent with these Standard
         Terms and, with respect to Certificates of any Series, the related
         Supplement;

                  (iv) the Trustee will remain solely liable for all fees and
         expenses it may owe to such Administrative Agent;

                  (v) the Administrative Agent shall give representations and
         warranties in such Administration Agreement that are the same in
         substance as those set forth in Section 7.10 herein (references therein
         to the Trust Agreement, the Trustee and the Depositor shall be to the
         applicable Administration Agreement, Administrative Agent and Trustee,
         respectively, for purposes of this Section 7.02(a)); and

<PAGE>

                                       64

                  (vi) such Administrative Agent shall meet the eligibility
         requirements of a Trustee pursuant to Section 7.07 herein.

An Administration Agreement must provide that an entity serving as
Administrative Agent may resign from its obligations and duties under this Trust
Agreement with respect to any Series only if such resignation, and the
appointment of a successor, would satisfy the Rating Agency Condition or upon a
determination that the duties of the Administrative Agent with respect to such
Series are no longer permissible under applicable law. No such resignation shall
become effective until the Trustee or a successor Administrative Agent has
assumed the obligations of such Administrative Agent with respect to such
Series. In addition, with respect to any Series (or Class within such Series),
each Administration Agreement shall impose on the Administrative Agent
requirements conforming to the provisions set forth in Section 3.01 and provide
for administration of the related Trust and all or certain specified Underlying
Securities for such Series consistent with the terms of this Trust Agreement.
Additional requirements relating to the scope and contents of any Administration
Agreement may be provided in the applicable Supplement. The Trustee shall
deliver to the Depositor copies of all Administration Agreements into which it
enters, and any amendments or modifications thereof, promptly upon the Trustee's
execution and delivery of any such instruments.

                  (b) Upon the occurrence of an Administrative Agent Termination
Event, the Trustee shall be entitled to terminate the relevant Administration
Agreement and the rights and obligations of any such Administrative Agent under
any Administration Agreement in accordance with the terms and conditions of any
such Administration Agreement. If such Administration Agreement is terminated,
the Trustee shall simultaneously reassume direct responsibility for all
obligations delegated in such Administration Agreement without any act or deed
on the part of the applicable Administrative Agent, and the Trustee shall
administer directly the related Underlying Securities or shall enter into an
Administration Agreement with a successor Administrative Agent which so
qualifies under Section 7.02(a). If the Trustee is unwilling or unable to act,
it may appoint, or petition a court of competent jurisdiction for the
appointment of, an Administrative Agent which so qualifies under Section
7.02(a). Pending such appointment, the Trustee must act in such capacity (except
that if the Trustee is prohibited by law from doing so, then the Trustee will
not be so obligated).

                  (c) If an Administrative Agent is administering one or more
Underlying Securities pursuant to an Administration Agreement, the
Administrative Agent shall deposit into an Eligible Account established by such
Administrative Agent (an "Administration Account") any amounts collected with
respect thereto, and all such amounts shall be distributed to the Trustee for
deposit into the related Certificate Account not later than the Business Day
after receipt thereof.

<PAGE>

                                       65

                  Section 7.03. Certain Matters Affecting the Trustee. (a)
Except as otherwise provided in this Article VII:

                  (i) the Trustee may request and rely upon and shall be
         protected in acting or refraining from acting upon any resolution,
         Officer's Certificate, certificate of auditors or any other
         certificate, statement, instrument, opinion, report, notice, facsimile
         transmission, request, consent, order, appraisal, bond or other paper
         or document reasonably believed by it to be genuine and to have been
         signed or presented by the proper party or parties;

                  (ii) the Trustee may consult with counsel and any Opinion of
         Counsel shall be full and complete authorization and protection in
         respect of any action taken or suffered or omitted by it hereunder in
         good faith and in accordance with such Opinion of Counsel;

                  (iii) the Trustee shall be under no obligation to exercise any
         of the trusts or powers vested in it by this Trust Agreement or to
         institute, conduct or defend any litigation hereunder or in relation
         hereto, at the request, order or direction of any of the
         Certificateholders, pursuant to the provisions of this Trust Agreement,
         unless such Certificateholders shall have offered to the Trustee
         reasonable security or indemnity against the costs, expenses and
         liabilities which may be incurred therein or thereby;

                  (iv) the Trustee shall not be personally liable for any action
         taken, suffered or omitted by it in good faith and believed by it to be
         authorized or within the discretion or rights or powers conferred upon
         it by this Trust Agreement;

                  (v) the Trustee shall not be bound to make any investigation
         into the facts of matters stated in any resolution, certificate,
         statement, instrument, opinion, report, notice, facsimile transmission,
         request, consent, order, appraisal, approval, bond or other paper or
         document believed by it to be genuine, unless requested in writing to
         do so by Holders of the Required Percentage--Direction of Trustee of
         the aggregate Voting Rights of the affected Series (or Class or Classes
         within any such Series), as specified by the applicable Supplement;
         provided, however, that if the payment within a reasonable time to the
         Trustee of the costs, expenses or liabilities likely to be incurred by
         it in the making of such investigation is, in the opinion of the
         Trustee, not reasonably assured to the Trustee by the security afforded
         to it by the terms of this Trust Agreement, the Trustee may require
         reasonable indemnity against such expense or liability as a condition
         to taking any such action;

                  (vi) the Trustee may execute any of the trusts or powers
         hereunder or perform any duties hereunder either directly or by or
         through agents or attorneys or a

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                                       66

         custodian and shall not be liable for any misconduct or negligence of
         any such agents or attorneys selected with due care by it; and

                  (vii) the Trustee shall not be personally liable for any loss
         resulting from the investment of funds held in any Certificate Account
         or Reserve Account in accordance with Section 3.05.

                  (b) All rights of action under this Trust Agreement or under
any of the Certificates, enforceable by the Trustee, may be enforced by it
without the possession of any of the Certificates of any Series (or Class within
such Series), or the production thereof at the trial or other Proceeding
relating thereto, and any such Proceeding instituted by the Trustee shall be
brought in its name for the benefit of all the Holders of such Certificates,
subject to the provisions of this Trust Agreement.

                  Section 7.04. Trustee Not Liable for Recitals in Certificates
or Underlying Securities. The Trustee assumes no responsibility for the
correctness of the recitals contained herein and in the Certificates or in any
document issued in connection with the sale of the Certificates (other than the
signature and authentication on the Certificates). Except as set forth in
Section 7.10, the Trustee makes no representations or warranties as to the
validity or sufficiency of this Trust Agreement or of the Certificates of any
Series (other than the signature and authentication on the Certificates) or of
any Underlying Security or related document. The Trustee shall not be
accountable for the use or application by the Depositor, of any of the
Certificates or of the proceeds of such Certificates.

                  Section 7.05. Trustee May Own Certificates. The Trustee in its
individual capacity or any other capacity may become the owner or pledgee of
Certificates with the same rights it would have if it were not Trustee;
provided, however, that in determining whether the required percentage of
aggregate Voting Rights shall have consented to any action hereunder requiring
the consent of the Certificateholders, any interest beneficially held by the
Trustee in its individual capacity shall be excluded.

                  Section 7.06. Trustee's Fees and Expenses. (a) The applicable
Supplement shall specify the amount and circumstances of the Trustee's
compensation and the source thereof.

                  (b) If the Prepaid Ordinary Expenses set forth in the
Supplement is greater than zero, the Trustee acknowledges that the Depositor has
paid to the Trustee an amount equal to the Prepaid Ordinary Expenses specified
therein, and the Trustee agrees that the payment of such amount shall constitute
full and final satisfaction of and payment for all such expenses.

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                                       67

                  (c) If the Prepaid Ordinary Expenses set forth in the
Supplement is zero, the Supplement may indicate that Ordinary Expenses will be
paid for by the Trust, in which case the Trustee shall be paid on a periodic
basis by the Trust at the rate or amount and on the terms provided for in the
Supplement. In such cases, the Trustee agrees that its right to receive such
payments from the Trust shall constitute full and final satisfaction of and
payment for all Ordinary Expenses and that the Trustee shall have no claim on
payment of Ordinary Expenses from any other source, including the Depositor.

                  (d) If the Prepaid Ordinary Expenses set forth in the
Supplement is zero, the Supplement may provide that the Depositor shall pay to
the Trustee from time to time a fee for its services and expenses as Trustee as
set forth in the Supplement payable at the times set forth therein. In such
cases, the Trustee agrees that its right to receive such payments from the
Depositor shall constitute full and final satisfaction of and payment for all
Ordinary Expenses and that the Trustee shall have no claim for payment of
Ordinary Expenses from the Trust. The Trustee further agrees that,
notwithstanding any failure by the Depositor to make such periodic payments of
the Ordinary Expenses, the Trustee shall continue to perform its obligations
under this Trust Agreement. The Depositor's obligations to pay Ordinary Expenses
under this Trust Agreement shall be extinguished and of no further effect upon
the payment of Ordinary Expenses due and owing on the termination of the Trust
pursuant to Section 10.01 hereof.

                  (e) Subject to paragraph (f) of this Section 7.06, all
Extraordinary Trust Expenses, to the extent not paid by a third party are, and
shall be, obligations of the Trust and when due and payable shall be satisfied
solely by the Trust.

                  (f) The Trustee shall not take any action, including appearing
in, instituting or conducting any action or suit hereunder or in relation hereto
which is not indemnifiable under Section 7.11 hereof which, in the Trustee's
opinion, would or might cause it to incur costs, expenses or liabilities that
are Extraordinary Trust Expenses unless (i) the Trustee is satisfied that it
will have adequate security or indemnity in respect of such costs, expenses and
liabilities, (ii) the Trustee has been instructed to do so by Certificateholders
representing not less than 100% of the aggregate principal amount of
Certificates then outstanding and (iii) such Certificateholders have agreed that
such costs, expenses or liabilities shall be paid by the Trustee from the Trust.

                  Section 7.07. Eligibility Requirements for Trustee. (a) The
Trustee hereunder shall at all times be a corporation or an association which is
not an Affiliate of the Depositor (but may have normal banking relationships
with the Depositor and its Affiliates) organized and doing business under the
laws of any State or the United States, authorized under such laws to exercise
corporate trust powers which shall be eligible to act as a trustee under TIA
Section 310(a), having a combined capital and surplus of at least $50,000,000,
subject to supervision or examination by Federal or State authority and have a
rating from

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                                       68

S&P of BBB- or higher. If such corporation or association publishes reports of
conditions at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section 7.07 the combined capital and surplus of such corporation or association
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of conditions so published. In the event that at any time such
Trustee shall cease to be eligible in accordance with the provisions of this
Section 7.07, such Trustee shall resign immediately in the manner and with the
effect specified in Section 7.08.

                  (b) In determining whether the Trustee has a conflicting
interest under TIA Section 310(b) with respect to any Class of Certificates and
this Section 7.07, each other Class of Certificate will be treated as having
been issued under an indenture other than this Trust Agreement.

                  Section 7.08. Resignation or Removal of the Trustee;
Appointment of Successor Trustee. (a) The Trustee may at any time resign as
Trustee hereunder by written notice of its election so to do, delivered to the
Depositor, and such resignation shall take effect upon the appointment of a
successor Trustee and its acceptance of such appointment as hereinafter
provided; provided, however, that in the event of such resignation, the Trustee
shall (i) assist the Depositor in finding a successor Trustee acceptable to the
Depositor and (ii) negotiate in good faith concerning any prepaid but unaccrued
fees.

                  (b) The Depositor or Holders of the Required
Percentage--Removal of Trustee of Certificates may at any time remove the
Trustee as Trustee hereunder by written notice delivered to the Trustee in the
manner provided in Section 11.04 hereof, and such removal shall take effect upon
the appointment of the successor Trustee and its acceptance of such appointment
as provided in paragraph (e) of this Section 7.08; provided, however, that in
the event of such removal, the Depositor shall negotiate in good faith with the
Trustee in order to agree regarding payment of the termination costs of the
Trustee resulting from such removal.

                  (c) Upon the designation and acceptance thereof of a successor
Trustee, following either resignation or removal of the Trustee, the Trustee
shall deliver to the successor Trustee all records relating to the Certificates
in the form and manner then maintained by the Trustee, which shall include a
hard copy thereof upon written request of the successor Trustee.

                  (d) If at any time the Trustee shall become incapable of
acting or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property of affairs for the purpose
of rehabilitation, conservation or liquidation, the Depositor shall petition any
court of competent jurisdiction for the removal of the Trustee and the

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                                       69

appointment of a successor Trustee. In the event the Trustee resigns or is
removed, the Trustee shall reimburse the Depositor for any fees or charges
previously paid to the Trustee in respect of duties not yet performed under this
Trust Agreement which remain to be performed by a successor Trustee.

                  (e) In case at any time the Trustee acting hereunder notifies
the Depositor that it elects to resign or the Depositor or Holders of the
Required Percentage--Removal of Trustee of Certificates notifies or notify the
Trustee that it or they elects or elect to remove the Trustee as Trustee, the
Depositor shall, within sixty (60) days after the delivery of the notice of
resignation or removal, appoint a successor Trustee, which shall satisfy the
requirements for a trustee under Section 7.07. If no successor Trustee has been
appointed within sixty (60) days after the Trustee has given written notice of
its election to resign or the Depositor or Holders of the Required
Percentage--Removal of Trustee of Certificates have given written notice to the
Trustee of its or their election to remove the Trustee, as the case may be, the
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee. Every successor Trustee shall execute and deliver to its
predecessor and to the Depositor an instrument in writing accepting its
appointment hereunder, and thereupon such successor Trustee, without any further
act or deed, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor and for all purposes shall be the Trustee under
this Trust Agreement, and such predecessor, upon payment of all sums due it and
on the written request of the Depositor, shall execute and deliver an instrument
transferring to such successor all rights, obligations and powers of such
predecessor hereunder, and shall duly assign, transfer and deliver all right,
title and interest in the Deposited Assets and parts thereof to such successor.
Any successor Trustee shall promptly give notice of its appointment to the
Certificateholders of Certificates for which it is successor Trustee in the
manner provided in Section 11.04 hereof.

                  (f) Any corporation into or with which the Trustee may be
merged, consolidated or converted shall be the successor of such Trustee without
the execution or filing of any document or any further act.

                  Section 7.09. Appointment of Office or Agency. As specified in
a Supplement, the Trustee shall appoint an office or agency in The City of New
York where the Certificates may be surrendered for registration of transfer or
exchange, and presented for the final distribution with respect thereto, and
where notices and demands to or upon the Trustee in respect of the Certificates
of the related Series and this Trust Agreement may be served.

                  Section 7.10. Representations and Warranties of Trustee. The
Trustee represents and warrants that:

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                                       70

                  (i) the Trustee is duly organized, validly existing and in
         good standing under the laws of its jurisdiction of incorporation or
         association;

                  (ii) neither the execution nor the delivery by the Trustee of
         this Trust Agreement, nor the consummation by it of the transactions
         contemplated hereby nor compliance by it with any of the terms or
         provisions hereof will contravene any Federal or New York law,
         governmental rule or regulation governing the banking or trust powers
         of the Trustee or any judgment or order binding on it, or violate its
         charter documents or by-laws or constitute a default under (or an event
         which, without notice or lapse of time or both, would constitute a
         default) under, or result in the breach or acceleration of any material
         contract, indenture, mortgage, agreement or instrument to which it is a
         party or by which any of its properties may be bound;

                  (iii) the Trustee has full power, authority and right to
         execute, deliver and perform its duties and obligations as set forth
         herein and in each Supplement to which it is a party and has taken all
         necessary action to authorize the execution, delivery and performance
         by it of this Trust Agreement;

                  (iv) this Trust Agreement has been duly executed and delivered
         by the Trustee and constitutes, subject to due execution by the
         Depositor, the legal, valid and binding obligation of the Trustee,
         enforceable in accordance with its terms, except as enforcement may be
         limited by the applicable bankruptcy, insolvency, reorganization,
         moratorium or similar laws affecting the rights of creditors generally
         and general principles of equity (regardless of whether such
         enforceability is considered in a proceeding in equity or at law);

                  (v) the Trustee is not in violation, and the execution and
         delivery of the Trust Agreement by the Trustee and its performance and
         compliance with the terms thereof will not constitute a violation, of
         any order or decree of any court or any order or regulation of any
         federal, state, municipal or governmental agency having jurisdiction
         over the Trustee or its properties, which violation would reasonably be
         expected to have a material adverse effect on the condition (financial
         or otherwise) or operations of the Trustee or its properties or on the
         performance of its duties hereunder;

                  (vi) there are no actions or proceedings against, or
         investigations of, the Trustee pending, or, to the knowledge of the
         Trustee, threatened, before any court, administrative agency or other
         tribunal (A) that could reasonably be expected to prohibit its entering
         into the Trust Agreement, (B) seeking to prevent the issuance of the
         Certificates contemplated by the Trust Agreement or (C) that could
         reasonably affect the performance by the Trustee of its obligations
         under, or the validity or enforceability against the Trustee of, the
         Trust Agreement; and

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                                       71

                  (vii) no consent, approval, authorization or order of any
         court, governmental agency or body is required for the execution,
         delivery and performance by the Trustee of, or compliance by the
         Trustee with, the Trust Agreement, or for the consummation of the
         transactions contemplated by the Trust Agreement, except for such
         consents, approvals, authorizations and orders, if any, that have been
         obtained prior to the Closing Date.

The representations and warranties of the Trustee set forth in this Section 7.10
shall survive the receipt of Underlying Securities by the Trustee and shall
survive the delivery of the Trust Agreement by the Trustee to the Depositor.

                  Section 7.11. Indemnification of Trustee by the Depositor;
Contribution. (a) The Depositor agrees, to the extent the Trustee is not
reimbursed pursuant to Section 7.06 hereof, to indemnify the Trustee against,
and hold it harmless from, any loss, expense or liability incurred in connection
with any Proceeding relating to this Trust Agreement or the Certificates or the
performance of any of the Trustee's duties hereunder, other than any loss,
liability or expense incurred by reason of wilful misfeasance, bad faith or
negligence in the performance of the Trustee's duties hereunder or by reason of
reckless disregard of the Trustee's obligations and duties hereunder.

                  (b) If the indemnification provided for in paragraph (a) of
this Section 7.11 is invalid or unenforceable in accordance with its terms, then
the Depositor shall contribute to the amount paid or payable by the Trustee as a
result of such liability in such proportion as is appropriate to reflect the
relative benefits received by the Depositor on one hand and the Trustee as
Trustee on the other hand. For this purpose (i) the benefits received by the
Depositor shall be the aggregate amount received by it upon the sale of such
Certificates, less the costs and expenses of such sale, including the cost of
acquisition of the Underlying Securities or parts thereof evidenced thereby, and
(ii) the benefits received by the Trustee, as Trustee shall be the aggregate
amount of fees received by it as Trustee, less costs and expenses incurred by it
as Trustee in relation to such Certificates. If, however, the allocation
provided by the immediately preceding two sentences is not permitted by
applicable law, then the Depositor shall contribute to such amount paid or
payable by the Trustee in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Depositor on the one
hand and the Trustee on the other in connection with the actions or omissions
which resulted in such liability, as well as any other relevant equitable
considerations.

                  (c) In case any claim shall be made or action brought against
the Trustee for any reason for which indemnity may be sought against the
Depositor as provided above, the Trustee may promptly notify the Depositor in
writing setting forth the particulars of such claim or action and the Depositor
may assume the defense thereof. In the event that the Depositor assumes the
defense, the Trustee shall have the right to retain separate counsel in

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                                       72

any such action but shall bear the fees and expenses of such counsel unless (i)
the Depositor shall have specifically authorized the retaining of such counsel
or (ii) the parties to such suit include the Trustee and the Depositor, and the
Trustee has been advised in writing by such counsel that one or more legal
defenses may be available to it which may not be available to the Depositor, in
which case the Depositor shall not be entitled to assume the defense of such
suit notwithstanding its obligation to bear the reasonable fees and expenses of
such counsel.

                  (d) The term "Liability", as used in this Section 7.11, shall
include any losses, claims, damages, expenses (including without limitation the
Trustee's reasonable costs, expenses and attorneys' fees and expenses) in
defending itself against any losses, claims or investigations of any nature
whatsoever.

                  (e) The obligations of the Depositor under this Section 7.11
shall be in addition to any liability which the Depositor may otherwise have and
shall extend, upon the same terms and conditions, to each officer and director
of the Trustee, and to each person, if any, who controls the Trustee within the
meaning of the Exchange Act.

                  (f) Notwithstanding anything to the contrary contained in this
Section 7.11, the Depositor shall not be liable for settlement of any such claim
by the Trustee entered into without the prior written consent of the Depositor,
which consent shall not be unreasonably withheld.

                  (g) The indemnity provided in this Section 7.11 shall survive
the termination or discharge of this Trust Agreement.

                  Section 7.12. No Liability of the Trustee with Respect to the
Underlying Securities; Certificateholders to Proceed Directly Against the
Underlying Securities Issuer(s). (a) The sole obligor with respect to any
Underlying Security is the Underlying Securities Issuer(s). The Trustee shall
not have any obligation on or with respect to the Underlying Securities; and its
obligations with respect to Certificates shall be solely as set forth in this
Trust Agreement.

                  (b) The Trustee is not authorized to proceed against the
Underlying Securities Issuer in the event of a default or to assert the rights
and privileges of Certificateholders of Certificates and has no right or duty in
respect thereof except as expressly provided herein.

                  Section 7.13. The Depositor to Furnish Trustee with Names and
Addresses of Certificateholders. The Depositor will furnish to the Trustee
within 15 days after each Record Date with respect to any Distribution Date, and
at such other times as the Trustee may request in writing, within 30 days after
receipt by the Depositor of any such request, a list, in such form as the
Trustee may reasonably require, of all information in the possession

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                                       73

or control of the Depositor as to the names and addresses of the
Certificateholders, in each case as of a date not more than 15 days prior to the
time such list is furnished; provided, however, that so long as the Trustee is
the sole Registrar, no such list need be furnished.

                  Section 7.14. Preservation of Information. The Trustee shall
preserve, in as current a form as is reasonably practicable, the names and
addresses of Certificateholders contained in the most recent list furnished to
the Trustee as provided in Section 7.14, and the names and addresses of
Certificateholders received by the Trustee in its capacity as Registrar, if so
acting. The Trustee may destroy any list furnished to it as provided in Section
7.14, upon receipt of a new list so furnished.

                  Section 7.15. Reports by Trustee. If required, within 60 days
after May 15 of each year, commencing with the year 1998, the Trustee shall
transmit to the Certificateholders, as provided in TIA Section 313(c), a brief
report dated as of such May 15, if required by TIA Section 313(a).

                  Section 7.16. Trustee's Application for Instructions from the
Depositor. Any application by the Trustee for written instructions from the
Depositor may, at the option of the Trustee, set forth in writing any action
proposed to be taken or omitted by the Trustee under this Trust Agreement and
the date on and/or after which such action shall be taken or such omission shall
be effective, if, but only if, the obligations of the Trustee with respect to
such proposed action or omission, in the view of the Trustee, are not set forth
reasonably clearly in these Standard Terms and the related Supplement. The
Trustee shall not be liable for any action taken by, or omission of, the Trustee
in accordance with a proposal included in such application on or after the date
specified in such application (which date shall not be less than ten (10)
Business Days after the date a Responsible Officer of the Depositor actually
receives such application, unless any such Responsible Officer shall have
consented in writing to any earlier date) unless, prior to taking any such
action (or the effective date in the case of an omission), the Trustee shall
have received written instructions in response to such application specifying
the action to be taken or omitted; provided, however, that this provision shall
not protect the Trustee from liability for any action or omission constituting
willful misconduct, bad faith or negligence.

                                  ARTICLE VIII

                                  MARKET AGENT

                  Section 8.01. Market Agent. (a) If specified for a given
Series, on the Closing Date the Trustee shall enter into a Market Agent
Agreement with Merrill Lynch & Co. as the initial Market Agent, in the form
attached to the related Supplement. The Market Agent shall serve as such under
the terms and provisions hereof and of the Market Agent

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                                       74

Agreement. The Market Agent, including any successor appointed pursuant hereto,
shall be a member of the National Association of Securities Dealers, Inc., have
capitalization of at least $25,000,000, and be authorized by law to perform all
the duties imposed upon it by this Trust Agreement and the Market Agent
Agreement. The Market Agent may be removed at any time by the Trustee, acting at
the written direction of the Depositor; provided, however, that such removal
shall not take effect until the appointment of a successor Market Agent. The
Market Agent may resign upon 30 days' written notice delivered to the Trustee.
The Depositor shall use its best efforts to appoint a successor Market Agent
that is a qualified institution, effective as of the effectiveness of any such
resignation or removal.

                                   ARTICLE IX

                             SECURITIES INTERMEDIARY

                  Section 9.01. Resignation or Removal of the Securities
Intermediary; Appointment of Successor Securities Intermediary. (a) The
Securities Intermediary may at any time resign as Securities Intermediary
hereunder by written notice of its election so to do, delivered to the Trustee
and the Depositor, and such resignation shall take effect upon the appointment
of a successor Securities Intermediary and its acceptance of such appointment as
hereinafter provided; provided, however, that in the event of such resignation,
the Securities Intermediary shall (i) assist the Trustee and the Depositor in
finding a successor Securities Intermediary acceptable to the Trustee and the
Depositor and (ii) negotiate in good faith concerning any prepaid but unaccrued
fees.

                  (b) The Trustee, the Depositor or the Holders of the Required
Percentage--Removal of Securities Intermediary of Certificates may at any time
remove the Securities Intermediary as Securities Intermediary hereunder by
written notice delivered to the Securities Intermediary in the manner provided
in Section 11.04 hereof, and such removal shall take effect upon the appointment
of the successor Securities Intermediary and its acceptance of such appointment
as provided in paragraph (e) of this Section 9.01; provided, however, that in
the event of such removal, the Depositor shall negotiate in good faith with the
Securities Intermediary in order to agree regarding payment of the termination
costs of the Securities Intermediary resulting from such removal.

                  (c) Upon the designation and acceptance thereof of a successor
Securities Intermediary, following either resignation or removal of the
Securities Intermediary, the Securities Intermediary shall deliver to the
successor Securities Intermediary all records relating to the Certificates in
the form and manner then maintained by the Securities Intermediary, which shall
include a hard copy thereof upon written request of the successor Securities
Intermediary.

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                                       75

                  (d) If at any time the Securities Intermediary shall become
incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver
of the Securities Intermediary or of its property shall be appointed, or any
public officer shall take charge or control of the Securities Intermediary or of
its property of affairs for the purpose of rehabilitation, conservation or
liquidation, the Depositor shall petition any court of competent jurisdiction
for the removal of the Securities Intermediary and the appointment of a
successor Securities Intermediary. In the event the Securities Intermediary
resigns or is removed, the Securities Intermediary shall reimburse the Depositor
for any fees or charges previously paid to the Securities Intermediary in
respect of duties not yet performed under this Trust Agreement which remain to
be performed by a successor Securities Intermediary.

                  (e) In case at any time the Securities Intermediary acting
hereunder notifies the Trustee or the Depositor that it elects to resign or the
Trustee, the Depositor or Holders of the Required Percentage--Removal of
Securities Intermediary of Certificates notifies or notify the Securities
Intermediary that it or they elects or elect to remove the Securities
Intermediary as Securities Intermediary, the Depositor shall, within sixty (60)
days after the delivery of the notice of resignation or removal, appoint a
successor Securities Intermediary, which shall satisfy the requirements set
forth in Section 2.06. If no successor Securities Intermediary has been
appointed within sixty (60) days after the Securities Intermediary has given
written notice of its election to resign or the Trustee, the Depositor or
Holders of the Required Percentage--Removal of Securities Intermediary of
Certificates have given written notice to the Securities Intermediary of its or
their election to remove the Securities Intermediary, as the case may be, the
Securities Intermediary may petition any court of competent jurisdiction for the
appointment of a successor Securities Intermediary. Every successor Securities
Intermediary shall execute and deliver to its predecessor, to the Trustee and to
the Depositor an instrument in writing accepting its appointment hereunder, and
thereupon such successor Securities Intermediary, without any further act or
deed, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor and for all purposes shall be the Securities
Intermediary under this Trust Agreement, and such predecessor, upon payment of
all sums due it and on the written request of the Trustee and the Depositor,
shall execute and deliver an instrument transferring to such successor all
rights, obligations and powers of such predecessor hereunder, and shall duly
assign, transfer and deliver all right, title and interest in the Deposited
Assets and parts thereof to such successor. Any successor Securities
Intermediary shall promptly give notice of its appointment to the
Certificateholders of Certificates for which it is successor Securities
Intermediary in the manner provided in Section 11.04 hereof.

                  (f) Any corporation into or with which the Securities
Intermediary may be merged, consolidated or converted shall be the successor of
such Securities Intermediary without the execution or filing of any document or
any further act.

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                                       76

                                    ARTICLE X

                                   TERMINATION

                  Section 10.01. Termination upon Liquidation of All Underlying
Securities. (a) The respective obligations and responsibilities under this Trust
Agreement of the Depositor and the Trustee (other than the obligations of the
Trustee to make distributions to Holders of the Certificates of any given Series
as hereafter set forth and to provide information reports and information tax
reporting) shall terminate upon the distribution to such Holders of all amounts
held in all the Accounts for such Series and required to be paid to such Holders
pursuant to this Trust Agreement on the Distribution Date coinciding with the
final payment on or other liquidation (which may include redemption or other
purchase thereof by the applicable Underlying Securities Issuer) (or any Advance
with respect thereto) of the last Underlying Security remaining in the Trust for
such Series or the disposition of all property acquired upon liquidation of any
such Underlying Security; provided, however, that in no event shall any trust
created hereby continue beyond the earlier of (1) any date set forth in Section
13 of the applicable Supplement as the termination date for such trust or (2)
the expiration of 21 years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late ambassador of the United States to
the Court of St. James, living on the date hereof.

                  (b) The Depositor shall provide the Trustee with written
notice of any of the events set forth in paragraph (a) of this Section 10.01.

                  (c) Upon presentation and surrender of the Certificates by the
Certificateholders on the Final Scheduled Distribution Date, or the Distribution
Date coinciding with or next following the earlier to occur of the occurrences
specified in paragraph (a) of this Section 10.01, with respect to the applicable
Series of Certificates, the Trustee shall distribute to each Holder presenting
and surrendering its Certificates (i) the amount otherwise distributable on such
Distribution Date in accordance with Section 4.01 in respect of the Certificates
so presented and surrendered, or (ii) as specified in the applicable Supplement,
if in connection with the Trustee's sale of all the remaining Underlying
Securities. Any funds not distributed on such Distribution Date shall be set
aside and held in trust for the benefit of Certificateholders not presenting and
surrendering their Certificates in the aforesaid manner, and shall be disposed
of in accordance with this Section 10.01 and Section 4.01 hereof. Immediately
following the deposit of funds in trust hereunder, the Trust for such Series
shall terminate. Subject to applicable escheat laws, the Trustee shall pay to
the Depositor any cash that remains unclaimed, together with interest, if any,
thereon, held by the Trustee on the date two years after such termination.

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                                       77

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

                  Section 11.01. Amendment. (a) Unless otherwise specified in
the applicable Supplement, this Trust Agreement may be amended from time to time
by the Depositor, the Trustee and the Securities Intermediary without notice to
or consent of any of the Certificateholders, for any of the following purposes:

                  (i) to cure any ambiguity;

                  (ii) to correct or supplement any provision herein that may be
         inconsistent with any other provision herein or in the Supplement;

                  (iii) to change the Trustee or the Securities Intermediary for
         a Series subsequent to the Closing Date for such Series;

                  (iv) to provide for administration of separate Trusts by more
         than one trustee;

                  (v) to provide for a successor Trustee or successor Securities
         Intermediary with respect to Certificates of one or more Series;

                  (vi) to provide for the issuance of a new Series pursuant to a
         Supplement issued hereunder pursuant to Sections 5.01 and 5.12 hereof;

                  (vii) to add or supplement any Credit Support for the benefit
         of any Certificateholders (provided, however, that if any such addition
         affects any Series or Class of Certificateholders differently than any
         other Series or Class of Certificateholders, then such addition will
         not, as evidenced by an Opinion of Counsel, have a material adverse
         effect on the interests of any affected Series or Class of
         Certificateholders);

                  (viii) to add to the covenants, restrictions or obligations of
         the Depositor, the Trustee, the Securities Intermediary or the
         Administrative Agent, if any, for the benefit of the
         Certificateholders;

                  (ix) to comply with any requirements imposed by the Code; or

                  (x) to add, change or eliminate any other provisions with
         respect to matters or questions arising under this Trust Agreement.

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                                       78

Any amendment made pursuant to this paragraph (a) is subject to the condition
that such amendment shall satisfy the Rating Agency Condition with respect to
such amendment and shall not cause any Trust created hereunder to fail to
qualify as a fixed investment trust (or "grantor trust") for federal income tax
purposes.

                  (b) Without limiting the generality of the foregoing, unless
otherwise specified in the applicable Supplement, with respect to any Series,
this Trust Agreement may also be modified or amended from time to time by the
Depositor, the Trustee and the Securities Intermediary with the consent of the
Holders of Certificates representing the Required Percentage--Amendment of the
aggregate Voting Rights of those Certificates that are adversely affected by
such modification or amendment for the purpose of adding any provision to or
changing in any manner or eliminating any of the provisions of this Trust
Agreement or of modifying in any manner the rights of the Holders of
Certificates; provided, however, that no such amendment shall (i) reduce in any
manner the amount of, or delay the timing of, payments received on Underlying
Securities which are required to be distributed on any Certificate without the
consent of the Holders of such Certificates, (ii) reduce the percentage of
aggregate Voting Rights required to take any action specified in this Trust
Agreement, without the consent of the Holders of all Certificates of such Series
or Class then Outstanding, or (iii) cause any Trust created hereunder to fail to
qualify as a fixed investment trust (or "grantor trust") for federal income tax
purposes.

                  Notwithstanding any other provision of this Trust Agreement,
for purposes of the giving or withholding of consents pursuant to this Section
11.01, Certificates registered in the name of the Depositor, the Trustee, the
Securities Intermediary or any Affiliate of the Depositor, the Trustee or the
Securities Intermediary shall be entitled to Voting Rights with respect to
matters affecting such Certificates. Notwithstanding any other provision of this
Trust Agreement, this paragraph (b) shall not be amended without the unanimous
consent of the Holders of all such Certificates.

                  (c) Promptly after the execution of any such amendment or
modification, the Trustee shall furnish a copy of such amendment or modification
to each Certificateholder of the affected Series or Class and to the Rating
Agency. It shall not be necessary for the consent of Certificateholders under
this Section 11.01 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.

                  Section 11.02. Limitation on Rights of Certificateholders. (a)
The death or incapacity of any Certificateholder shall not operate to terminate
this Trust Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
Proceeding in any court for a partition or winding up of

<PAGE>

                                       79

the applicable Trust, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.

                  (b) No Certificateholder of a given Series shall have any
right to vote (except as expressly provided for herein) or in any manner
otherwise control the operation and management of any Trust, or the obligations
of the parties hereto, nor shall anything herein set forth, or contained in the
terms of the Certificates, be construed so as to constitute the
Certificateholders from time to time as partners or members of an association;
nor shall any Certificateholder be under any liability to any third person by
reason of any action taken by the parties to this Trust Agreement other than
pursuant to the provisions hereof.

                  (c) No Certificateholder of a given Series shall have any
right by virtue of any provision of this Trust Agreement to institute any
Proceeding in equity or at law upon or under or with respect to this Trust
Agreement, unless:

                  (i) such Holder previously shall have given to the Trustee a
         written notice of breach of this Trust Agreement and of the continuance
         thereof;

                  (ii) the Holders of Certificates of such Series evidencing not
         less than the Required Percentage--Remedies of the aggregate Voting
         Rights of such Series shall have made written request upon the Trustee
         to institute such Proceeding in its own name as Trustee hereunder;

                  (iii) such Certificateholder or Certificateholders shall have
         offered to the Trustee such reasonable indemnity as it may require
         against the costs, expenses and liabilities to be incurred therein or
         thereby;

                  (iv) the Trustee, for 15 days after its receipt of such
         notice, request and offer of indemnity, shall have neglected or refused
         to institute any such Proceeding; and

                  (v) no direction inconsistent with such written request has
         been given to the Trustee during such 15-day period by
         Certificateholders evidencing not less than the Required
         Percentage--Remedies of the aggregate Voting Rights of such Series.

It is understood and agreed that the Trustee shall not be obligated to make any
investigation of matters arising under this Trust Agreement or to institute,
conduct or defend any Proceeding hereunder or in relation hereto at the request,
order or direction of any Certificateholders unless such Certificateholders have
offered to the Trustee the reasonable indemnity referred to above. It is further
understood and agreed, and expressly covenanted by each Certificateholder of
each Series with every other Certificateholder of such Series and the Trustee,
that no one or more Holders of Certificates of such Series shall have any right

<PAGE>

                                       80

in any manner whatever by virtue of any provision of this Trust Agreement to
affect, disturb or prejudice the rights of the Holders of any other of the
Certificates of such Series, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any right under this Trust
Agreement, except in the manner herein provided and for the equal, ratable and
common benefit of all Certificateholders of such Series. For the protection and
enforcement of the provisions of this Section 11.02, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.

                  Section 11.03. Governing Law. This Trust Agreement (including,
without limitation, the establishment and maintenance of Certificate Accounts
and all interests, duties and obligations of the parties hereunder or thereunder
or with respect hereto or thereto) and each Certificate shall be construed in
accordance with and governed by the law of the State of New York.

                  Section 11.04. Notices. (a) All directions, demands and
notices hereunder shall be in writing and shall be delivered as set forth in the
applicable Supplement.

                  (b) Any notice required to be provided to a Holder shall be
given by first class mail, postage prepaid, at the last address of such Holder
as shown in the Certificate Register. Any notice so mailed within the time
prescribed in this Trust Agreement shall be conclusively presumed to have been
duly given when mailed, whether or not the Certificateholder receives such
notice.

                  (c) Any and all notices to be given to the Depositor shall be
deemed to have been duly given if sent by facsimile transmission to the
Depositor at Merrill Lynch & Co., World Financial Center, New York, New York
10281, Attention: Frank D. Ronan, facsimile transmission number (212) 449-9054,
telephone confirmation number (212) 449- 6177. The Depositor may change this
information by written notice to the Trustee and to the Securities Intermediary.

                  (d) Any and all notices to be given to the Trustee shall be
deemed to have been duly given if sent by facsimile transmission to the Trustee
at United States Trust Company of New York, 114 West 47th Street, 25th Floor,
New York, New York 10036, Attention: STEERS, referencing the designation of the
applicable Series, facsimile transmission number (212) 852-1625, telephone
confirmation number (212) 852-1623. The Trustee may change this information by
notice to the Depositor and to the Securities Intermediary.

                  (e) Any and all notices to be given to the Securities
Intermediary shall be deemed to have been duly given if sent by facsimile
transmission to the Securities Intermediary at United States Trust Company of
New York, 114 West 47th Street, 25th

<PAGE>

                                       81

Floor, New York, New York 10036, Attention: STEERS, referencing the designation
of the applicable Series, facsimile transmission number (212) 852-1625,
telephone confirmation number (212) 852-1623. The Securities Intermediary may
change this information by notice to the Depositor and to the Trustee.

                  (f) Any and all notices to be given to the Swap Counterparty,
if any, will be specified in the Supplement.

                  Section 11.05. Notice to Rating Agencies. (a) The Trustee
shall use its best efforts promptly to provide notice to each Rating Agency with
respect to each of the following of which it has actual knowledge:

                  (i) any change or amendment to this Trust Agreement;

                  (ii) the resignation or termination of the Trustee;

                  (iii) the final payment to Holders of the Certificates of any
         Class;

                  (iv) any change in the location of the Certificate Account;
         and

                  (v) any event that would result in the inability of the
         Trustee to make Advances.

                  (b) In addition, the Trustee shall promptly furnish to each
Rating Agency copies of each report to Certificateholders described in Section
4.03.

                  (c) Any such notice pursuant to this Section 11.05 shall be in
writing and shall be deemed to have been duly given if personally delivered or
mailed by first class mail, postage prepaid, or by express delivery service to
each Rating Agency at the address specified below or in the applicable
Supplement.

                  (d) (i) Any and all notices to be given to Moody's shall be
deemed to have been duly given if sent by facsimile transmission to Moody's at
Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007,
Attention: CBO/CLO Monitoring Department, facsimile transmission number (212)
553-0355, telephone confirmation number (212) 553-1494. Moody's may change this
information by notice to the Depositor and the Trustee.

                  (ii) Any and all notices to be given to S&P shall be deemed to
have been duly given if sent by facsimile transmission to S&P at Standard &
Poor's Rating Group, 26 Broadway, New York, New York 10004, Attention:
Structured Finance Surveillance Group,

<PAGE>

                                       82

facsimile transmission number (212) 208-0030, telephone confirmation number
(212) 208-1191. S&P may change this information by notice to the Depositor and
the Trustee.

                  (iii) Any and all notices to be given to DCR shall be deemed
to have been duly given in sent by facsimile transmission to DCR at Duff &
Phelps Credit Rating Co., 55 E. Monroe Street, Suite 3500, Chicago, IL
60603-5701, Attention: Karen O'Donnell, facsimile transmission number (312)
368-3155, telephone confirmation number (312) 368- 3100. DCR may change this
information by notice to the Depositor and the Trustee.

                  (iv) Any and all notices to be given to Fitch shall be deemed
to have been duly given in sent by facsimile transmission to Fitch at Fitch
Investors Service, L.P., One State Street Plaza, New York, NY 10004, facsimile
transmission number (212) 480-4435, telephone confirmation number (212)
908-0500. Fitch may change this information by notice to the Depositor and the
Trustee.

                  Section 11.06. Severability of Provisions. If any one or more
of the covenants, agreements, provisions or terms of this Trust Agreement shall
be for any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Trust Agreement and shall in no way
affect the validity or enforceability of the other provisions of this Trust
Agreement or of the Certificates or the rights of the Holders thereof.

                  Section 11.07. Nonpetition Covenant. Notwithstanding any prior
termination of this Trust Agreement, each of the Trustee (including any
Administrative Agent, Authenticating Agent and Paying Agent) and the Depositor
agrees that it shall not, until the date which is one year and one day after the
termination of a Series, acquiesce, petition or otherwise invoke or cause a
Trust to invoke the process of the United States, any State or other political
subdivision thereof or any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government for the
purpose of commencing or sustaining a case by or against the Trust under a
Federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of such Trust or all or any part of the property or assets of such Trust or
ordering the winding up or liquidation of the affairs of such Trust.

                  Section 11.08. No Recourse. None of the Trustee (including any
Administrative Agent, Authenticating Agent or Paying Agent), the Securities
Intermediary or the Depositor shall have any recourse to the Underlying
Securities, except as specifically provided in the related Supplement.

                  Section 11.09. Article and Section References. All Article and
Section references used in these Standard Terms, unless otherwise provided, are
to Articles and Sections in these Standard Terms.

<PAGE>

                                       83

                  Section 11.10. Counterparts. These Standard Terms may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute one and the same instrument.

                  Section 11.11. Trust Indenture Act. This Trust Agreement is
subject to the provisions of the TIA and shall, to the extent applicable, be
governed by such provisions. The Trustee agrees to take all actions within its
control to prevent these Standard Terms, as supplemented by any Supplements,
from failing to qualify under the TIA.

<PAGE>

                                       84

                  IN WITNESS WHEREOF, the Depositor, the Trustee and the
Securities Intermediary have caused these Standard Terms to be duly executed by
their respective officers thereunto duly authorized, in each case as of the day
and year first above written.

                              MERRILL LYNCH DEPOSITOR, INC.,
                                              as Depositor

                              By: /s/ Frank D. Ronan
                                 ---------------------------------
                                   Name:  Frank D. Ronan
                                   Title: President

                              UNITED STATES TRUST COMPANY OF NEW YORK,
                                as Trustee

                              By: /s/ Andy Serrano
                                 ---------------------------------
                                   Name:  Andres E. Serrano
                                   Title: Vice President

                              UNITED STATES TRUST COMPANY OF NEW YORK,
                                as Securities Intermediary

                              By: /s/ Andy Serrano
                                 ---------------------------------
                                   Name:  Andres E. Serrano
                                   Title: Vice President

<PAGE>

EXHIBIT B

                               Form of Certificate

                              (begins on next page)

<PAGE>

                               TRUST CERTIFICATE

No.       1                         $71,915,000            CUSIP NO. 740434504
    -------------

                       SEE REVERSE FOR CERTAIN DEFINITIONS

                  UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

                  UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE
INDIVIDUAL CERTIFICATES REPRESENTED HEREBY, THIS CERTIFICATE MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY DTC TO CEDE & CO. OR BY CEDE & CO. TO DTC OR TO
ANOTHER NOMINEE OF DTC OR BY DTC OR CEDE & CO. TO A SUCCESSOR DEPOSITORY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITORY.

                  THIS CERTIFICATE REPRESENTS A FRACTIONAL UNDIVIDED INTEREST IN
THE TRUST AND DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, AND IS NOT
GUARANTEED BY THE DEPOSITOR OR THE TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES. NEITHER THIS CERTIFICATE NOR THE DEPOSITED ASSETS ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR ANY OTHER PERSON.

                  THE HOLDER OF THIS CERTIFICATE SHALL HAVE NO RIGHT TO
PRINCIPAL PAYMENTS IN RESPECT OF THE UNDERLYING SECURITIES. THE REGISTERED
HOLDER HEREOF, BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL LOOK SOLELY TO THE
DEPOSITED ASSETS (TO THE EXTENT OF ITS RIGHTS THEREIN) FOR DISTRIBUTIONS
HEREUNDER.

<PAGE>

                        PREFERREDPLUS TRUST SERIES BLS-1

          2,876,600 PREFERREDPLUS 7.30% TRUST CERTIFICATES SERIES BLS-1

                  $71,915,000 STATED AMOUNT TRUST CERTIFICATES
                    ($25 STATED AMOUNT PER TRUST CERTIFICATE)

evidencing a fractional undivided beneficial ownership interest in the Trust, as
defined below, the property of which consists principally of $75,000,000
aggregate principal amount of 7.00% Debentures (the "Underlying Securities") of
Bellsouth Telecommunications, Inc., a Georgia corporation (the "Underlying
Securities Issuer"), and all payments received thereon, deposited in trust by
Merrill Lynch Depositor, Inc. (the "Depositor").

                  THIS CERTIFIES THAT CEDE & CO. is the registered owner of a
nonassessable, fully-paid, fractional undivided interest in the PreferredPLUS
Trust Series BLS-1 formed by the Depositor. Under the Trust Agreement, the
Certificates are entitled to receive on each Distribution Date until December 1,
2095, the distributions, if any, received on the Underlying Securities, which
will represent distributions at a rate of 7.30% per annum on the Stated Amount
of the Certificates.

                  The Trust was created pursuant to a Standard Terms for Trust
Agreements, dated as of February 20, 1998 (the "Standard Terms"), between the
Depositor and United States Trust Company of New York, a New York corporation,
not in its individual capacity but solely as Trustee (the "Trustee") and as
securities intermediary (the "Securities Intermediary"), as supplemented by the
PreferredPLUS Trust Series BLS-1 Supplement, dated as of May 4, 2001 (the
"Supplement" and, together with the Standard Terms, the "Trust Agreement"),
between the Depositor and the Trustee and the Securities Intermediary. This
Certificate does not purport to summarize the Trust Agreement and reference is
hereby made to the Trust Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and obligations of the Trustee with respect hereto. A
copy of the Trust Agreement may be obtained from the Trustee by written request
sent to the Corporate Trust Office. Capitalized terms used but not defined
herein have the meanings assigned to them in the Trust Agreement.

                  This Certificate is one of the duly authorized Certificates
designated as the "PreferredPLUS 7.30% Trust Certificates Series BLS-1" (herein
called the "Certificates"). This Certificate is issued under and is subject to
the terms, provisions and conditions of the Trust Agreement, to which Trust
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound. Further, subject to the terms,
provisions and conditions of the Trust Agreement, the Trust will issue Call
Rights, which will be sold in one or more privately negotiated transactions. The
property of the Trust consists of the Underlying Securities, all payments
received or receivable on the Underlying Securities accrued on or after the
Cut-off Date, and the other Deposited Assets, if any, all as more fully
specified in the Trust Agreement.

<PAGE>

                  Subject to the terms and conditions of the Trust Agreement
(including the availability of funds for distributions) and until the obligation
created by the Trust Agreement shall have terminated in accordance therewith,
distributions will be made on each Distribution Date to the Person in whose name
this Certificate is registered on the applicable Record Date, in an amount equal
to such Certificateholder's fractional undivided interest in the amount required
to be distributed to the Holders of the Certificates on such Distribution Date.
The Record Date applicable to any Distribution Date is the close of business on
the day immediately preceding such Distribution Date.

                  Each Certificateholder, by its acceptance of a Certificate,
covenants and agrees that such Certificateholder will not at any time institute
against the Trust, or join in any institution against the Trust of, any
bankruptcy proceedings under any United States Federal or state bankruptcy or
similar law in connection with any obligations relating to the Certificates or
the Trust Agreement.

                  Distributions made on this Certificate will be made as
provided in the Trust Agreement by the Trustee by check mailed to the
Certificateholder of record in the Certificate Register or by wire transfer to
an account designated by such Holder without the presentation or surrender of
this Certificate or the making of any notation hereon of, except that with
respect to Certificates registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee shall be Cede & Co.), payments
will be made by wire transfer in immediately available funds to the account
designated by such nominee. Except as otherwise provided in the Trust Agreement
and notwithstanding the above, the final distribution on this Certificate will
be made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the Corporate Trust
Office or such other location as may be specified in such notice.

                  Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.

                  The Trustee does not assume responsibility for the accuracy of
the statements in the Certificate (and the reverse hereof).

                  Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee, this Certificate shall not entitle the
Holder hereof to any benefit under the Trust Agreement or be valid for any
purpose.

                  THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed as of the date set forth below.

                                 UNITED STATES TRUST COMPANY OF NEW YORK, not in
                                 its individual capacity but solely as Trustee

Dated: May __, 2001              By:
                                     -------------------------------------------
                                        Authorized Signatory

                     TRUSTEE'S CERTIFICATE OF AUTHENTICATION

                  This is one of the Certificates described in the Trust
Agreement referred to herein.

                                 UNITED STATES TRUST COMPANY OF NEW YORK, not in
                                 its individual capacity but solely as Trustee

Dated: May __, 2001              By:
                                    --------------------------------------------
                                        Authorized Signatory

<PAGE>

                            (REVERSE OF CERTIFICATE)

                  The Certificates are limited in right of distribution to
certain payments and collections respecting the Underlying Securities, all as
more specifically set forth herein and in the Trust Agreement. The registered
Holder hereof, by its acceptance hereof, agrees that it will look solely to the
Deposited Assets (to the extent of its rights therein) for interest
distributions hereunder. Both the Underlying Securities and Call Holders that
exercise their Call Rights may be sources of principal distributions on the
Trust Certificates.

                  The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the Trustee and the rights of the
Certificateholders under the Trust Agreement at any time by the Depositor and
the Trustee with the consent of the Holders of Certificates evidencing greater
than 66 2/3% of the aggregate Voting Rights of the Certificates subject to
certain provisions set forth in the Trust Agreement. Any such consent by the
Holder of this Certificate (or any predecessor Certificate) shall be conclusive
and binding on such Holder and upon all future Holders of this Certificate and
of any Certificate issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Trust Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the Holders of any of the
Certificates.

                  As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Trustee in the Borough of Manhattan, The City of New York, duly endorsed
by, or accompanied by an assignment in the form below and by such other
documents as required by the Trust Agreement signed by, the Holder hereof, and
thereupon one or more new Certificates of the same class in Authorized
Denominations evidencing the same principal amount will be issued to the
designated transferee or transferees. The initial Certificate Registrar
appointed under the Trust Agreement is United States Trust Company of New York.

                  No service charge will be made for any registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.

                  The Depositor, the Trustee and the Securities Intermediary and
any agent of the Depositor, the Trustee or the Securities Intermediary may treat
the Person in whose name this Certificate is registered as the owner hereof for
all purposes, and neither the Depositor, the Trustee, or the Securities
Intermediary nor any such agent shall be affected by any notice to the contrary.

                  It is the intention of the parties to the Trust Agreement that
the Trust created thereunder shall constitute a fixed investment trust for
federal income tax purposes under Treasury Regulation Section 301.7701-4, and
the Certificateholder, by its acceptance of this Certificate, agrees to treat
the Certificates, the distributions from the Trust and its beneficial interest
in the Trust consistently with such characterization.
<PAGE>

                  The Trust may not engage in any business or activities other
than in connection with, or relating to, the holding, protecting and preserving
of the Deposited Assets and the issuance of the Certificates and the Call
Rights, and other than those required or authorized by the Trust Agreement or
incidental and necessary to accomplish such activities. The Trust may not issue
or sell any certificates or other obligations other than the Certificates and
the Call Rights or otherwise incur, assume or guarantee any indebtedness for
money borrowed.

                  The Trust and the obligations of the Depositor, the Trustee
and the Securities Intermediary created by the Trust Agreement with respect to
the Certificates shall terminate upon the earlier of (i) the payment in full at
maturity or sale by the Trust after a payment default on or an acceleration or
other early payment of the Underlying Securities and the distribution in full of
all amounts due in respect of the Certificates and (ii) June 15, 2027.

                  If an employee benefit plan subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), including an individual
retirement account or Keogh plan (each, a "Plan"), purchases Certificates,
certain aspects of such investment, including the operation of the Trust, might
be subject to the prohibited transaction provisions under ERISA and the Internal
Revenue Code of 1986, as amended (the "Code"), unless certain exemptions apply.
A Plan should consult its advisors concerning the ability of such Plan to
purchase Certificates under ERISA or the Code.

<PAGE>

                                   ASSIGNMENT

          FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto

PLEASE INSERT SOCIAL SECURITY OR
TAXPAYER IDENTIFICATION OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

--------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)

--------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing

____________________________________________________ Attorney to transfer said
Certificate on the books of the Certificate Registrar, with full power of
substitution in the premises.

Dated:

                                                                            *
                                        -----------------------------------
                                        Signature Guaranteed:

                                                                            *
                                        -----------------------------------

* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a brokerage firm or financial institution that is a member of a
Securities Approved Medallion Program such as Securities Transfer Agents
Medallion Program (STAMP), Stock Exchange Medallion Program (SEMP) or New York
Stock Exchange Inc. Medallion Signature Program (MSP).

<PAGE>

                            OPTION TO ELECT EXCHANGE

         If you wish to have this Certificate, or a portion thereof, exchanged
by the Trustee pursuant to Section 4.07 of the Standard Terms, check the Box: _

         If you wish to have less than all of this Certificate exchanged, state
the amount:
$_______________________

Date:

Your Signature:   __________________
                  (Sign exactly as your name appears on the other side of this
                   Certificate)

Signature Guarantee:  ______________________________

<PAGE>

EXHIBIT C

                             Market Agent Agreement

                              (begins on next page)

<PAGE>

                             MARKET AGENT AGREEMENT

                  MARKET AGENT AGREEMENT, dated as of May 4, 2001 (the
"Agreement"), by and between Merrill Lynch & Co. ("Merrill Lynch & Co.") and the
PreferredPLUS Trust Series BLS-1 (the "Trust"), a New York trust created under
the Standard Terms for Trust Agreements, dated as of the date hereof (the
"Standard Terms"), between Merrill Lynch Depositor, Inc., as depositor (the
"Depositor") and United States Trust Company of New York, as trustee (the
"Trustee") and as securities intermediary (the "Securities Intermediary"), as
amended and supplemented by the Series Supplement, dated as of the date hereof,
between the Depositor and the Trustee and Securities Intermediary (the Standard
Terms, together with the Series Supplement, the "Trust Agreement"). Capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the Trust Agreement. This Agreement shall constitute the "Market Agent
Agreement" as defined in the Trust Agreement.

                              W I T N E S S E T H:
                              -------------------

                  WHEREAS, the Trust desires to retain Merrill Lynch & Co. to
render certain services to the Trust in the manner and on the terms hereinafter
set forth;

                  WHEREAS, Merrill Lynch & Co. is a recognized broker dealer
meeting the qualifications for a Market Agent set forth in the Trust Agreement
and desires to provide such services to the Trust on the terms and conditions
hereinafter set forth; and

                  WHEREAS, the Trustee has been directed to enter into and
execute this Market Agent Agreement with Merrill Lynch & Co. as the initial
Market Agent pursuant to Section 8.01 of the Standard Terms;

                  NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, Merrill Lynch & Co. and the Trust hereby agree
as follows:

                  Section 1. Duties of the Market Agent. The Trust hereby
employs Merrill Lynch & Co. to act as the Market Agent for the Trust and to
furnish to the Trust all of the services of the Market Agent set forth herein
and in the Trust Agreement, including but not limited to acting on behalf of the
Trust in connection with the sale and purchase of Underlying Securities as
provided in the Trust Agreement. The Market Agent may solicit and accept bids
from Certificateholders for the Underlying Securities. Merrill Lynch & Co.
hereby accepts such employment and agrees during the term of the Certificates to
render such services and to assume the obligations of the Market Agent under the
Trust Agreement under the terms and conditions herein set forth.

                  Section 2. Compensation of Merrill Lynch & Co. The Depositor
shall pay Merrill Lynch & Co. a fee as shall be separately agreed between the
Depositor and Merrill Lynch & Co. It shall be the sole responsibility of the
Depositor to pay such fee and the Trust shall have no

<PAGE>

obligation to compensate Merrill Lynch & Co. for the services it renders
pursuant to the terms of this Market Agent Agreement, except that the Trust
shall pay Merrill Lynch & Co. a fee for any sale of the Underlying Securities in
an amount that is customary for such a sale at the time of such sale.

                  Section 3. Limitation of Liability of the Market Agent. The
Market Agent shall not be liable in contract, tort or otherwise to the Trust for
any losses, costs or damages arising out of its performance of its obligations
and duties hereunder except for willful misconduct or negligence in the
performance of its duties, or by reason of reckless disregard of its obligations
and duties hereunder.

                  Section 4. Term of this Agreement. This Agreement, which shall
be a binding agreement as of the date hereof and shall inure to the benefit of
the respective successors and permitted assigns of the parties hereto, shall
terminate upon the earlier to occur of (a) the termination of the Trust
Agreement, (b) the removal of the Market Agent by the Trustee in accordance with
the Trust Agreement or (c) 30 days after written notice of Merrill Lynch & Co.'s
resignation as Market Agent is delivered to the Trustee.

                  Section 5. Amendments. No amendment or waiver of any provision
of this Agreement nor consent to any departure herefrom by any party hereto
shall in any event be effective unless the same shall be in writing and signed
by the party against which enforcement of such amendment or waiver or consent is
sought, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it is given.

                  Section 6. Notice Addresses. Except as otherwise expressly
provided herein, all notices and other communications provided for hereunder
shall be deemed to have been duly given if sent by facsimile transmission (a) if
to the Market Agent, as set forth below and (b) if to the Trustee, as set forth
in the Trust Agreement;

         If to Merrill Lynch & Co.:   Merrill Lynch & Co.
                                      World Financial Center
                                      New York, New York 10281
                                      Attention: Barry N. Finkelstein
                                      Facsimile:  (212) 449-9054
                                      Telephone confirmation no.: (212) 449-9001

                  Section 7. Assignment. Except as provided in this Section 7,
this Agreement may not be assigned by the Market Agent without the prior consent
of the Trustee in accordance with the Trust Agreement.

                  The Market Agent shall have the right to transfer and assign
all of its rights, duties, obligations and liabilities under this Agreement to
an Affiliate of the Market Agent; provided, however, that such transfer and
assignment shall be on the condition that the due and punctual performance and
observance of all the terms and conditions of this Agreement to be performed by
the Market Agent shall, by an agreement supplemental hereto, be assumed by such

                                       2
<PAGE>

Affiliate just as fully and effectually as if such Affiliate had been the
original party of the first part to this Agreement.

                  Section 8. Applicable Law. This Agreement shall be governed by
the laws of the State of New York.

                  Section 9. Entire Agreement. This Agreement embodies the
entire agreement and understanding between Merrill Lynch & Co. and the Trust and
supersedes any and all prior agreements and understandings between Merrill Lynch
& Co. and the Trust relating to the subject matter hereof.

                  Section 10. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.

                  Section 11. Severability of Provisions. If one or more of the
provisions of this Agreement shall be for any reason whatsoever held invalid or
unenforceable, such provisions shall be deemed severable from the remaining
covenants, agreements and provisions of this Agreement and such invalidity or
unenforceability shall in no way affect the validity or enforceability of such
remaining provisions or the rights of any parties thereunder. To the extent
permitted by law, the parties hereto hereby waive any provision of law that
renders any provision of this Agreement invalid or unenforceable in any respect.

                  Section 12. Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement, Merrill Lynch & Co. agrees that it shall not,
until the date which is one year and one day after the termination of the
PreferredPLUS Trust Series BLS-1 pursuant to the terms of Section 13 of the
Series Supplement, acquiesce, petition or otherwise invoke or cause the Trust to
invoke the process of the United States, any State or other political
subdivision thereof or any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government for the
purpose of commencing or sustaining a case by or against the Trust under a
Federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Trust or all or any part of the property or assets of the Trust or
ordering the winding up or liquidation of the affairs of the Trust.

                  Section 13. No Recourse. Merrill Lynch & Co. shall have no
recourse to the Underlying Securities with respect to any fees owed to Merrill
Lynch & Co. under Section 2 of this agreement. This Section 13 shall not be read
as limiting any right Merrill Lynch & Co. may have to the Underlying Securities
pursuant to any security, call right or other instrument, obligation or
agreement the Trust may issue or enter into from time to time.

                                       3
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Market Agent Agreement as of the day and year first above
written.

                                        MERRILL LYNCH & CO.

                                        By:  /s/  Barry N. Finkelstein
                                           -------------------------------------
                                           Name:  Barry N. Finkelstein
                                           Title:

                                        UNITED STATES TRUST COMPANY OF
                                        NEW YORK, not in its individual capacity
                                        but as Trustee

                                        By:  /s/  Andres E. Serrano
                                           -------------------------------------
                                           Name:  Andres E. Serrano
                                           Title: Vice President

<PAGE>

EXHIBIT D

                            Form of Escrow Agreement

                              (begins on next page)

<PAGE>

                                     FORM OF
                            ESCROW DEPOSIT AGREEMENT

                  THIS ESCROW DEPOSIT AGREEMENT, dated as of this ___ day
of_____ among PreferredPlus Trust Series BLS-1 (the "Trust"), by United States
Trust Company of New York, a New York corporation, as Trustee of the Trust
("Trustee"), [ ], a [ ] corporation, as Escrow Agent ("Escrow Agent"), and [ ],
a [ ] corporation ("Holder").

                              W I T N E S S E T H:
                              - - - - - - - - - -

                  WHEREAS, the Trustee and Merrill Lynch Depositor, Inc.
("Depositor") entered into a Standard Terms for Trust Agreement dated February
20, 1998 (the "Standard Terms"), as supplemented by a Series Supplement dated
May __, 2001 (the "Series Supplement," and, together with the Standard Terms,
the "Trust Agreement"), providing for the issuance by the Trust of PreferredPlus
7.30% Trust Certificates Series BLS-1 (the "Trust Certificates") and related
call warrants on the Trust Certificates (each a "Warrant," and collectively, the
"Warrants") as described in the Warrant Agreement dated May __, 2001 (the
"Warrant Agreement") among the Trust and United States Trust Company of New
York, as Warrant Agent (the "Warrant Agent"); and

                  WHEREAS, the Holder is [one of the holders] [the holder] of
the Warrants; and

                  WHEREAS, it is a condition precedent to the exercise of the
Warrants that the Holder enter into this Agreement and deliver the Escrow
Deposit (as defined herein) to the Escrow Agent not less than 30 days (or not
less than 5 days in the case of an announcement of any redemption or other
unscheduled payment of the Underlying Securities) but not more than 60 days
prior to the Exercise Date (as defined in the Warrant Agreement); and

                  WHEREAS, the parties desire that Escrow Agent shall hold, and
Escrow Agent has agreed to hold, the Escrow Deposit in escrow on the terms and
conditions provided in this Agreement.

                  NOW THEREFORE, the parties hereto mutually agree as follows:

                  1. Escrow Deposit. Concurrently with the execution and
delivery of this Agreement, the Holder will deliver the sum of
____________________ Dollars ($_____________) (the "Escrow Deposit") in lawful
money of the United States of America by wire transfer of immediately available
funds to Escrow Agent, to be held by Escrow Agent in escrow on the terms and
conditions hereinafter provided. Escrow Agent hereby acknowledges receipt of the
Escrow Deposit.

                  2. Investment of Escrow Deposit. Following the delivery of the
Escrow Deposit to Escrow Agent, Escrow Agent shall cause the Escrow Deposit to
be deposited in an interest bearing account, designated as the "PreferredPlus
Trust Series BLS-1 Warrant Escrow Account," and shall advise the Trust by
telephone by 5:00 p.m., New York City time, on

<PAGE>

the date hereof of the amount so deposited in its account. The Escrow Agent will
promptly confirm such telephone advice in writing to the Trust. The Escrow Agent
is hereby directed to invest the Escrow Deposit in (i) U.S. Treasury Securities
or (ii) money market accounts in banks having combined capital, surplus and
undivided profits of $50,000,000 or more. All investments shall [have a maturity
of ________ days or less during the _______ days immediately after deposit of
the Escrow Deposit, and thereafter shall] be available on demand without penalty
unless Escrow Agent is otherwise directed in writing by both the Holder and the
Trust.

                  3. Disposition of Escrow Deposit Prior to and at Closing.

                  (a) On the Exercise Date, simultaneously with the transfer of
Trust Certificates to the Holder that were subject to the Holder's Warrants (the
"Closing," the period of time between the initial deposit of the Escrow Deposit
and the Closing being referred to as the "Escrow Period") in accordance with the
terms of the Warrant Agreement (i) the Escrow Agent shall pay to the Holder all
interest, and interest earned on interest, on the Escrow Deposit to the Closing
Date in lawful money of the United States of America by wire transfer of
immediately available funds to a bank account or bank accounts designated by the
Holder or, at the Holder's option, by a bank check or bank checks payable to the
order of a payee or payees designated by the Holder and (ii) the Escrow Agent
shall pay the Escrow Deposit in lawful money of the United States of America by
wire transfer of immediately available funds to a single bank account or bank
accounts designated by the Warrant Agent, or, at the Warrant Agent's option, by
a bank check or bank checks payable to the order of a payee or payees designated
by the Warrant Agent.

                  (b) If, during the Escrow Period, the Trust Agreement is
terminated in accordance with Section 10 of the Standard Terms and Section 13 of
the Series Supplement, then Escrow Agent shall, ten (10) business days after
written notice by Trust and the Holder of such termination, pay to the Holder
the Escrow Deposit, plus all interest, and interest earned on interest, on the
Escrow Deposit, in lawful money of the United States of America by wire transfer
of immediately available funds to a bank account or bank accounts designated by
the Holder or, at the Holder's option, by a bank check or bank checks payable to
the order of a payee or payees designated by the Holder; provided, however, that
if the Escrow Agent receives a written objection from the Trust to such release
of the Escrow Deposit within seven (7) business days after the Holder gives such
written notice, then the Escrow Agent shall pay the Escrow Deposit and any
interest, and interest earned on interest, on the Escrow Deposit in accordance
with joint written instructions from the Holder and the Trust, or, in the
absence of such joint written instructions, the provisions of Section 6 hereof
shall apply.

                  4. Liability of Escrow Agent. The Escrow Agent shall not incur
any liability to any party for damages, losses or expenses for (a) any act or
failure to act made or omitted in good faith and without gross negligence or
willful misconduct or (b) any action taken or omitted in reliance upon any
instrument that the Escrow Agent shall in good faith believe to be genuine, nor
will the Escrow Agent be liable or responsible for forgeries, fraud,
impersonations, or determining the scope of any representative authority. In
addition, the Escrow Agent may consult with legal counsel in connection with the
Escrow Agent's duties under this Agreement and shall be fully protected in any
act taken, suffered, or permitted by it in good faith in accordance with the
advice of counsel. The Escrow Agent is not responsible for determining and

                                       2
<PAGE>

verifying the authority of any person acting or purporting to act on behalf of
any party to this Agreement.

                  5. Escrow. The Escrow Agent can incur reasonable expenses in
connection with its duties and incur legal fees and expenses in connection with
this Agreement with any firm, and such expenses shall be paid or reimbursed, as
the case may be, in accordance with Section 7 of this Agreement. In the event
that the conditions of this Agreement are not properly fulfilled, or if the
Escrow Agent renders any service not provided for in this Agreement, or if the
parties request a substantial modification of its terms, or if any controversy
arises, or if the Escrow Agent is made a party to, or intervenes in, any
litigation pertaining to this escrow or its subject matter, the Escrow Agent
shall be reasonably compensated for such extraordinary service and reimbursed
for all reasonable costs, attorneys' fees and expenses of any firm occasioned by
such default, delay, controversy or litigation and the Escrow Agent shall have
the right to retain all documents and/or other things of value at any time held
by Escrow Agent in this escrow until such compensation, fees, costs, and
expenses are paid.

                  6. Controversies. If any controversy arises relating to this
Agreement, or with any other party concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold the Escrow Funds (as hereinafter defined) and may wait for settlement
of any such controversy by final appropriate legal proceedings or other means,
as, in the Escrow Agent's discretion, the Escrow Agent may deem appropriate
despite what may be set forth elsewhere in this Agreement. In such event, the
Escrow Agent will not be liable for damages as long as the Escrow Agent acts in
good faith and without gross negligence or willful misconduct. The Escrow Agent
is authorized to deposit with the clerk of any court the Escrow Funds held
hereunder. Upon initiating an interpleader or declaratory judgment or any other
action seeking to determine the rights of the parties hereunder and depositing
the Escrow Funds, the Escrow Agent shall be fully released and discharged of and
from all further obligations and liability imposed by the terms of this
Agreement, but not as to acts of the Escrow Agent prior thereto. As used herein,
the term "Escrow Funds" means the Escrow Deposit plus all interest, and interest
earned on interest, on the Escrow Deposit.

                  7. Indemnification of Escrow Agent. The Holder and its
successors and assigns agrees to indemnify and hold Escrow Agent harmless
against any and all losses, claims, damages, liabilities and expenses, including
reasonable costs of investigation and reasonable counsel fees and disbursements,
that may be imposed on the Escrow Agent or incurred by the Escrow Agent in good
faith and without gross negligence or willful misconduct in connection with the
performance of the duties under this Agreement, including, but not limited to,
any litigation arising from this Agreement or involving its subject matter.

                  8. Termination. Except for the provisions of Section 7, which
shall survive this Agreement, this Agreement shall terminate upon the day on
which all of the Escrow Funds are disbursed in full in accordance with this
Agreement.

                  9. Mailing Instructions, Etc. Instructions and other documents
delivered under this Agreement shall be valid if (i) hand-delivered, (ii) sent
by registered or certified mail,

                                       3
<PAGE>

return receipt requested, (iii) sent by Federal Express or other reliable
overnight courier service, or (iv) transmitted by telecopy.

                  (a)      If to the Holder at:

                           -----------------------------------
                           -----------------------------------
                           -----------------------------------
                           Attn:
                                    --------------------------
                           Telecopy (   )
                           Telephone (   )

                  (b)      If to the Trust, at:

                           PREFERREDPLUS Trust Series BLS-1
                           c/o United States Trust Company of New York
                           114 West 47th Street, 25H
                           New York, NY 10036-1532 CTD
                           Attn: Corporate Trust _____________
                           Telecopy (212) 852-1626/27/32
                           Telephone (212) 852-1___

                  (c)      If to the Escrow Agent, at:

                           -----------------------------------
                           -----------------------------------
                           -----------------------------------
                           Attn:
                                    --------------------------
                           Telecopy (   )
                           Telephone (   )

Each notice, demand, instruction or communication which shall be given or made
in the manner described above shall be deemed sufficiently given or made at such
time as it is delivered to the addressee in the case of personal delivery or
registered or certified mail, one (1) business day following delivery to the
courier if sent by Federal Express or other reliable overnight courier or upon
receipt of the telecopy if sent by telecopy, followed by a written confirmation
within two (2) business days.

                  10. Trust Agreement; Defined Terms. Defined terms used herein
shall have the respective meanings set forth in the Trust Agreement unless
otherwise defined herein.

                  11. Binding. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by the parties hereto and their respective
successors and assigns.

                  12. Governing Law. This Agreement shall be deemed a contract
made under the laws of the State of New York, and together with the rights and
obligations of the parties hereunder, shall be construed and enforced in
accordance with and governed by the laws of such state (but not including the
choice-of-law rules thereof).

                                       4
<PAGE>

                  13. Counterparts. This Agreement may be executed
simultaneously in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.

                  14. Captions. Any captions are solely for convenience of
reference and shall not be used in construing or interpreting this Agreement.

                  15. Entire Agreement. This Agreement sets forth the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior or oral agreements or understandings with respect thereto.

                  16. Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement, the Escrow Agent agrees that it shall not, until
the date which is one year and one day after the termination of the
PreferredPLUS Trust Series BLS-1 pursuant to the terms of Section 13 of the
Series Supplement, acquiesce, petition or otherwise invoke or cause the Trust to
invoke the process of the United States, any State or other political
subdivision thereof or any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government for the
purpose of commencing or sustaining a case by or against the Trust under a
Federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Trust or all or any part of the property or assets of the Trust or
ordering the winding up or liquidation of the affairs of the Trust.

                  17. No Recourse. The Escrow Agent shall have no recourse to
the Underlying Securities with respect to any fees owed to the Escrow Agent
under Section 7 of this agreement. This Section 17 shall not be read as limiting
any right the Escrow Agent may have to the Underlying Securities pursuant to any
security, call right or other instrument, obligation or agreement the Trust may
issue or enter into from time to time.

                                       5
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have executed this
Escrow Agreement as of the day and year first above written.

                                        PreferredPlus Trust Series BLS-1

                                        By:  UNITED STATES TRUST COMPANY OF
                                             NEW YORK, solely in its capacity as
                                             Trustee under the Trust Agreement
                                             and not in its individual capacity

                                        By:
                                            ------------------------------------
                                        Name:
                                        Title:

                                                              , as Escrow Agent
                                        ----------------------

                                        By:
                                            ------------------------------------
                                        Name:
                                        Title:

                                                              , as Holder
                                        ----------------------

                                        By:
                                            ------------------------------------
                                        Name:
                                        Title:

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