Document:

<PAGE>
                                                                     EXHIBIT 4.1

                 STANDARD TERMS FOR DEPOSITARY TRUST AGREEMENTS

                                     between

                            SALOMON SMITH BARNEY INC.

                                       and

                      U.S. BANK TRUST NATIONAL ASSOCIATION,

                                   as Trustee

                               Dated as of , 2002
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                PAGE
<S>                                                                             <C>
                                    ARTICLE 1

                           DEFINITIONS AND ASSUMPTIONS

      Section 1.1.      Definitions..........................................     1

      Section 1.2.      Rules of Construction................................     3

                                    ARTICLE 2

       FORM OF RECEIPTS, DEPOSIT OF SECURITIES, DELIVERY, REGISTRATION
                      OF TRANSFER AND SURRENDER OF RECEIPTS

      Section 2.1.      Depositary Trust Agreements..........................     4

      Section 2.2.      Creation and Declaration of Trusts; Deposit of
                        Securities...........................................     4

      Section 2.3.      Acceptance by Trustee................................     5

      Section 2.4.      Form and Transferability of Receipts.................     5

      Section 2.5.      Delivery of Receipts.................................     6

      Section 2.6.      Registration; Registration of Transfer;
                        Combination and Split-up of Certificates.............     7

      Section 2.7.      Surrender of Receipts and Withdrawal of
                        Underlying Securities................................     7

      Section 2.8.      Limitations on Delivery, Registration of
                        Transfer and Surrender of Receipts...................     8

      Section 2.9.      Lost Certificates, Etc...............................     8

      Section 2.10.     Cancellation and Destruction of Surrendered
                        Certificates.........................................     9

      Section 2.11.     Reconstitution Events................................     9
</TABLE>

                                       i
<PAGE>
                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                PAGE
<S>                                                                             <C>
                                    ARTICLE 3

                  CERTAIN OBLIGATIONS OF OWNERS OF RECEIPTS

      Section 3.1.      Filing Proofs, Certificates and Other
                        Information..........................................     9

      Section 3.2.      Liability of Owner for Taxes.........................    10

      Section 3.3.      Warranties on Deposit of Shares......................    10

                                    ARTICLE 4

                            THE UNDERLYING SECURITIES

      Section 4.1.      Cash Distributions...................................    10

      Section 4.2.      Distributions Other Than Cash or Securities..........    10

      Section 4.3.      Distributions in Securities..........................    11

      Section 4.4.      Rights Offerings.....................................    11

      Section 4.5.      Fixing of Record Date................................    11

      Section 4.6.      Reports..............................................    12

      Section 4.7.      Voting Instructions for Underlying Securities........    12

      Section 4.8.      Changes Affecting Underlying Securities..............    12

      Section 4.9.      Withholding..........................................    13

      Section 4.10.     Limitation on Distributions..........................    13

                                    ARTICLE 5

                      THE TRUSTEE AND THE INITIAL DEPOSITOR

      Section 5.1.      Maintenance of Office and Transfer Books by the
                        Trustee..............................................    13

      Section 5.2.      Prevention or Delay in Performance by the
                        Initial Depositor or the Trustee.....................    14
</TABLE>

                                       ii
<PAGE>
                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                PAGE
<S>                                                                             <C>
      Section 5.3.      Obligations of the Initial Depositor and the
                        Trustee..............................................    14

      Section 5.4.      Resignation or Removal of the Trustee;
                        Appointment of Successor Trustee.....................    15

      Section 5.5.      Indemnification......................................    16

      Section 5.6.      Charges of Trustee...................................    17

      Section 5.7.      Retention of Trust Documents.........................    17

      Section 5.8.      Federal Securities Law Filings.......................    17

      Section 5.9.      Prospectus Delivery..................................    18

      Section 5.10.     Tax Returns and Reports..............................    18

                                    ARTICLE 6

                            AMENDMENT AND TERMINATION

      Section 6.1.      Amendment............................................    18

      Section 6.2.      Early Termination....................................    18

                                    ARTICLE 7

                                  MISCELLANEOUS

      Section 7.1.      Counterparts.........................................    20

      Section 7.2.      Third-Party Beneficiaries............................    20

      Section 7.3.      Severability.........................................    20

      Section 7.4.      Owners and Beneficial Owners as Parties;
                        Binding Effect.......................................    20

      Section 7.5.      Notices..............................................    20

      Section 7.6.      Governing Law........................................    21
</TABLE>

                                      iii
<PAGE>
      STANDARD TERMS FOR DEPOSITARY TRUST AGREEMENTS agreed to as of , 2002
(these "Standard Terms"), between SALOMON SMITH BARNEY INC., a New York
corporation (the "Initial Depositor") and U.S. BANK TRUST NATIONAL ASSOCIATION,
a national banking association, as trustee (the "Trustee").

                             W I T N E S S E T H

      WHEREAS, from time to time, the Initial Depositor and the Trustee may
enter into one or more depositary trust agreements providing for the deposit
with the Trustee of specified Securities (as hereinafter defined), the creation
of Depositary Trust Receipts representing the Securities so deposited and the
execution and delivery of certificates evidencing the Depositary Trust Receipts;
and

      WHEREAS, the Initial Depositor and the Trustee wish to establish the
general terms and conditions of such depositary trust agreements and the form of
the certificates evidencing Depositary Trust Receipts;

      NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in these Standard Terms, the parties hereby agree as follows:

                                   ARTICLE 1

                          DEFINITIONS AND ASSUMPTIONS

            Section 1.1. Definitions. Except as otherwise specified in these
Standard Terms or in the applicable Depositary Trust Agreement or as the context
may otherwise require, the following terms have the respective meanings set
forth below for all purposes of these Standard Terms and the applicable
Depositary Trust Agreement.

      "Additional Securities" means any securities which are issued to the
stockholders of a Securities Issuer pursuant to Sections 2.11(a), 4.3 and 4.8(a)
as a dividend or other distribution, if such securities are listed for trading
on a United States securities exchange or through NASDAQ and the issuer of such
securities belongs to the same industry classification of any of the issuers of
the Underlying Securities.

      "Beneficial Owner" means any Person owning a beneficial interest in any
Receipt.

      "Closing Date" means the day on which the initial deposit of Securities is
to be made, which date may be specified in the applicable Depositary Trust
Agreement.

      "Commission" means the Securities and Exchange Commission of the United
States or any successor governmental agency in the United States.

      "Corporate Trust Office" means the office of the Trustee at which its
depositary receipt business is administered which, at the date of these Standard
Terms, is 100 Wall Street, Suite 1600, New York, New York 10005.

                                       1
<PAGE>
      "Deliver" means (a) when used with respect to Securities, either (i) one
or more book-entry transfers of such Securities to an account at DTC designated
by the Person entitled to such delivery for further credit as specified by such
Person or (ii) in the case of Securities for which DTC book-entry settlement is
not available, the delivery of certificates evidencing such Securities to the
Person entitled to such delivery, duly endorsed for transfer or accompanied by
proper instruments of transfer and (b) when used with respect to Receipts,
either (i) one or more book-entry transfers of Receipts to an account at DTC
designated by the Person entitled to such delivery for further credit as
specified by such Person or (ii) in the event DTC ceases to make its book-entry
settlement system available for the Receipts, execution and delivery at the
Corporate Trust Office of the Trustee of one or more certificates evidencing
such Receipts.

      "Depositary Trust Agreement" means a depositary trust agreement entered
into by the Initial Depositor and the Trustee pursuant to these Standard Terms
which incorporates by reference these Standard Terms.

      "Depositor" means any Person who deposits Securities into the Trust,
either for its own account or on behalf of another Person who is the Owner or
beneficial Owner of such Securities.

      "Depositor Order" means a written order or request signed in the name of
the Initial Depositor or any other Depositor, as applicable.

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

      "Initial Depositor" means Salomon Smith Barney Inc., a New York
corporation, or its successor.

      "Issuance Denomination" is defined in Section 2.4, subject to increase as
provided in Sections 4.3 and 4.8.

      "Owner" means the Person in whose name a Receipt is registered in the
books of the Trustee maintained for that purpose.

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

      "Receipt" means a depositary trust receipt which is issued under the
Depositary Trust Agreement and which represents the Owner's right to receive the
Underlying Securities which must be deposited into the Trust for issuance of a
Receipt plus any other Underlying Securities received by the Trustee with
respect to such Underlying Securities and held by the Trustee under the
Depositary Trust Agreement at such time. The Trustee shall only accept for
deposit whole Securities and shall not issue Receipts except to the extent such
Receipts represent, in the aggregate, whole Underlying Securities.

      "Registrar" means any bank or trust company having an office in the
Borough of Manhattan, The City of New York, which shall be appointed to register
Receipts and transfers of Receipts as herein provided.

                                       2
<PAGE>
      "Restricted Securities" means Securities, or Receipts representing such
Securities, which are acquired directly or indirectly from the issuer or its
affiliates (as defined in Rule 144 under the Securities Act of 1933, as amended)
in a transaction or chain of transactions not involving any public offering, or
which are held by an officer or director (or person performing similar
functions) or other affiliate of the issuer, or which would require registration
under the Securities Act of 1933, as amended, in connection with the public
offer and sale thereof in the United States, or which are subject to other
restrictions on sale or deposit under the federal securities laws of the United
States, a shareholder agreement or the corporate documents of the issuer.

      "Round Lot" means 100.

      "Securities" means any shares of a class of securities, including American
depositary shares and American depositary receipts, and Additional Securities,
which must be deposited for issuance of Receipts.

      "Securities Issuer" means, as of any time, the issuer of a class of
Securities.

      "Securities Registrar" means the entity that presently carries out the
duties of registrar for any Securities or any successor as registrar for any
Securities and any other appointed agent of a Securities Issuer for the transfer
and registration of Securities.

      "Surrender" means, when used with respect to Receipts, (a) one or more
book-entry transfers of Receipts to the DTC account of the Trustee or (b)
surrender to the Trustee at its Corporate Trust Office of one or more
certificates evidencing such Receipts, in each case in a Round Lot or an
integral multiple thereof.

      "Trust" means the trust entity created by the Depositary Trust Agreement.

      "Trustee" means U.S. Bank Trust National Association, a national banking
association, in its capacity as Trustee under the Depositary Trust Agreement, or
any successor as Trustee thereunder.

      "Underlying Securities" means, as of any time, Securities of each of the
classes and in the quantities required by the Depositary Trust Agreement to be
deposited in the Trust for the issuance of Receipts and which are at such time
deposited under the applicable Depositary Trust Agreement and any other
securities, property or cash received by the Trustee in respect thereof and at
such time held hereunder.

            Section 1.2 .Rules of Construction. Unless the context otherwise
requires:

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

                  (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;

                                       3
<PAGE>
                  (iv) the words "herein", "hereof", "hereunder" and other words
of similar import refer to these Standard Terms or the Depositary 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.

                                    ARTICLE 2

       FORM OF RECEIPTS, DEPOSIT OF SECURITIES, DELIVERY, REGISTRATION OF
                       TRANSFER AND SURRENDER OF RECEIPTS

            Section 2.1 Depositary Trust Agreements. Each Depositary Trust
Agreement entered into between the Initial Depositor and the Trustee for the
purposes set forth herein shall be in substantially the form of Exhibit A to
these Standard Terms and shall provide that these Standard Terms shall be
incorporated by reference into, and form a part of, such Depositary Trust
Agreement.

            Section 2.2 Creation and Declaration of Trusts; Deposit of
Securities. (a) The Initial Depositor, concurrently with the execution and
delivery of the Depositary Trust Agreement, does hereby agree to deposit with
the Trustee under the Depositary Trust Agreement all the right, title and
interest of the Initial Depositor in, to and under Securities, of each of the
classes and in the quantities necessary to create Receipts in accordance with
Section 2 of the Depositary Trust Agreement in effect at the time of deposit.
Unless otherwise specified in the Depositary Trust Agreement, such deposit shall
include all cash dividends and distributions in respect of such Securities. The
Initial Depositor shall make such deposit on or prior to the Closing Date.

            (b) From time to time after the date of the Depositary Trust
Agreement, a Depositor may deposit with the Trustee, in the manner specified in
subsection (a), Securities, of each of the classes and in the quantities
necessary to create Receipts in accordance with Section 2 of the Depositary
Trust Agreement in effect at the time of deposit by Delivery of such Securities
to the Trustee.

            (c) The Trustee shall only accept for deposit whole Securities and
shall not issue Receipts except to the extent such Receipts represent, in the
aggregate, whole Underlying Securities.

            (d) So long as this Trust Agreement remains in effect, the Trust (or
the Trustee acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustee shall not (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement, (ii) sell,
assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of
any of the trust property or interests therein, including to Owners, except as
expressly provided herein, (iii) take any action that would reasonably be
expected to cause the Trust to become taxable as a corporation or classified as
other than a grantor trust or custodial arrangement for U.S. federal

                                       4
<PAGE>
income tax purposes, (iv) incur any indebtedness for borrowed money or issue any
other debt, or (v) take or consent to any action that would result in the
placement of a lien on any of the trust property. The Trustee shall defend all
claims and demands of all persons at anytime claiming any lien on any of the
trust property adverse to the interest of the Trust or the Owners in their
capacity as Owners.

            (e) Anything herein to the contrary notwithstanding, the Trustee
does not assume any of the duties, responsibilities, obligations or liabilities
of the Initial Depositor or any other Depositor in respect of the Underlying
Securities.

            (f) Underlying Securities shall be held by the Trustee at such place
and in such manner as the Trustee shall determine.

            Section 2.3 Acceptance by Trustee. The Trustee will hold the
Underlying Securities for the benefit of the Owners for the purposes, and
subject to and limited by the terms and conditions, set forth in these Standard
Terms and the applicable Depositary Trust Agreement.

            Section 2.4 Form and Transferability of Receipts. (a) The
certificates evidencing Receipts shall be substantially in the form set forth in
Exhibit B annexed to these Standard Terms, with appropriate insertions,
modifications and omissions, as hereinafter provided or as may be provided in
the Depositary Trust Agreement. The Issuance Denominations of a certificate
shall be any integral multiple of a Round Lot of Receipts, subject to increase
or decrease as provided in Sections 4.3 and 4.8. No Receipt shall be entitled to
any benefits under the Depositary Trust Agreement or be valid or obligatory for
any purpose unless a certificate evidencing such Receipt shall have been
executed by the Trustee by the manual or facsimile signature of a duly
authorized signatory of the Trustee and, if a Registrar (other than the Trustee)
for the Receipts shall have been appointed, countersigned by the manual or
facsimile signature of a duly authorized officer of the Registrar. The Trustee
shall maintain books on which the registered Ownership of each Receipt and
transfers, if any, of such registered Ownership shall be recorded. Certificates
evidencing Receipts bearing the manual or facsimile signature of a duly
authorized signatory of the Trustee and Registrar, if applicable, who was at the
time such certificates were executed a proper signatory of the Trustee or
Registrar, if applicable, shall bind the Trustee, notwithstanding that such
signatory has ceased to hold such office prior to the delivery of such
certificates.

            (b) The certificates evidencing Receipts may be endorsed with or
have incorporated in the text thereof such legends or recitals or modifications
not inconsistent with the provisions of the Depositary Trust Agreement as may be
required by the Trustee or required to comply with any applicable law or
regulations thereunder or with the rules and regulations of any securities
exchange upon which Receipts may be listed or to conform with any usage with
respect thereto, or to indicate any special limitations or restrictions to which
any particular Receipts are subject by reason of the date of issuance of the
Underlying Securities or otherwise.

            (c) The Initial Depositor and the Trustee will apply to DTC for
acceptance of the Receipts in its book-entry settlement system. Receipts
deposited with DTC shall be represented

                                       5
<PAGE>
by one or more global certificates which shall be registered in the name of Cede
& Co., as nominee for DTC, and shall bear the following legend:

            UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
            OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
            THE AGENT AUTHORIZED BY THE ISSUER 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 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.

            (d) So long as the Receipts are eligible for book-entry settlement
with DTC and such settlement is available, unless otherwise required by law,
notwithstanding anything to the contrary in the Depositary Trust Agreement, all
Receipts shall be evidenced by one or more global certificates registered in the
name of a nominee of DTC and no person acquiring beneficial Ownership of such
Receipts shall receive or be entitled to receive physical delivery of Receipts
Ownership of beneficial interests in Receipts evidenced by such global
certificate or certificates shall be shown on, and the transfer of such
Ownership shall be effected only through, records maintained by (i) DTC or (ii)
institutions that have accounts with DTC.

            (e) If, at any time when Receipts are evidenced by a global
certificate, DTC ceases to make its book-entry settlement system available for
such Receipts, the Trustee shall issue separate certificates evidencing Receipts
to the DTC book-entry settlement system participants entitled thereto, with such
additions, deletions and modifications to the Depositary Trust Agreement and to
the form of certificate evidencing Receipts as the Initial Depositor and the
Trustee may, from time to time, agree.

            (f) Title to a certificate evidencing Receipts (and to the Receipts
evidenced thereby), when properly endorsed or accompanied by proper instruments
of transfer, shall be transferable by delivery with the same effect as in the
case of a negotiable instrument under the laws of New York; provided, however,
that the Trustee, notwithstanding any notice to the contrary, may treat the
Owner of Receipts as the absolute Owner thereof for the purpose of determining
the person entitled to distribution of dividends or other distributions or to
any notice provided for in the Depositary Trust Agreement and for all other
purposes.

            Section 2.5 Delivery of Receipts. Upon receipt by the Trustee of any
deposit pursuant to Section 2.2, together with a Depositor Order and the other
documents required as above specified, if any, the Trustee, subject to the terms
and conditions of the applicable Depositary Trust Agreement, shall Deliver to or
upon the written order of the Depositor the

                                       6
<PAGE>
number of Receipts issuable in respect of such deposit, provided such number is
an integral multiple of an Issuance Denomination, but only upon payment to the
Trustee of the fees and expenses of the Trustee as provided in Section 5.6 and
of all taxes and governmental charges and fees payable in connection with such
deposit and the transfer of the Underlying Securities.

            Section 2.6 Registration; Registration of Transfer; Combination and
Split-up of Certificates. (a) The Trustee shall keep or cause to be kept a
register of Owners of Receipts and shall provide for the registration of
Receipts and the registration of transfers and exchanges of Receipts.

            (b) The Trustee, subject to the terms and conditions of these
Standard Terms and the applicable Depositary Trust Agreement, shall register
transfers of Ownership of Receipts on its transfer books from time to time, upon
any Surrender of a certificate evidencing such Receipts in any integral multiple
of a Round Lot, by the Owner in person or by a duly authorized attorney,
properly endorsed or accompanied by proper instruments of transfer, and duly
stamped as may be required by the laws of the State of New York and of the
United States of America. Thereupon the Trustee shall execute a new certificate
or certificates evidencing such Receipts in any integral multiple of a Round Lot
requested, and deliver the same to or upon the order of the Person entitled
thereto.

            (c) The Trustee, subject to the terms and conditions of these
Standard Terms and the applicable Depositary Trust Agreement, shall, upon
Surrender of a certificate evidencing Receipts for the purposes of effecting a
split-up or combination of such certificate or certificates, execute and deliver
one or more new certificate or certificates evidencing such Receipts in any
integral multiple of a Round Lot requested.

            (d) The Trustee may appoint one or more co-transfer agents for the
purpose of effecting transfers, combinations and split-ups of Receipts at
designated transfer offices on behalf of the Trustee. In carrying out its
functions, a co-transfer agent may require evidence of authority and compliance
with applicable laws and other requirements by Owners or Persons entitled to
Receipts and will be entitled to protection and indemnity to the same extent as
the Trustee.

            Section 2.7 Surrender of Receipts and Withdrawal of Underlying
Securities. (a) Upon Surrender at the Corporate Trust Office of the Trustee of a
Round Lot of Receipts or integral multiple thereof for the purpose of withdrawal
of the Underlying Securities represented thereby, and upon payment of the fee of
the Trustee in connection with the Surrender of Receipts as provided in Section
5.6 and payment of all taxes and charges payable in connection with such
Surrender and withdrawal of the Underlying Securities, and subject to the terms
and conditions of the applicable Depositary Trust Agreement, including, without
limitation, Section 4.10, the Owner of such Receipts shall be entitled to
Delivery of the amount of Underlying Securities at the time represented by such
Receipts. Delivery of such Underlying Securities may be made by (i) Delivery of
Securities to such Owner or as ordered by such Owner and (ii) any available form
of delivery of any other securities, property and cash to which such Owner is
then entitled to such Owner or as ordered by such Owner. The Trustee shall make
such delivery as promptly as practicable.

                                       7
<PAGE>
            (b) A certificate evidencing Receipts Surrendered for such purposes
may be required by the Trustee to be properly endorsed in blank or accompanied
by proper instruments of transfer in blank, and if the Trustee so requires, the
Owner thereof shall execute and deliver to the Trustee a written order directing
the Trustee to cause the Underlying Securities being withdrawn to be delivered
to or upon the written order of a Person or Persons designated in such order.
Thereupon the Trustee shall Deliver through the facilities of DTC or, if
applicable, at its Corporate Trust office, subject to Sections 2.8, 3.1, 3.2 and
4.10 and to the other terms and conditions of the Depositary Trust Agreement, to
or upon the written order of the Person or Persons designated in the order
delivered to the Trustee as above provided, the amount of Underlying Securities
represented by such Receipts.

            Section 2.8 Limitations on Delivery, Registration of Transfer and
Surrender of Receipts. (a) As a condition precedent to the Delivery,
registration of transfer, split-up, combination or Surrender (including, for the
avoidance of doubt, any Surrender in connection with an exchange) of any Receipt
or withdrawal of any Underlying Securities, the Trustee or Registrar may require
payment from the Depositor of Securities or the presentor of the Receipts of a
sum sufficient to reimburse it for any tax or other charge and any stock
transfer or registration fee with respect thereto (including any such tax or
charge and fee with respect to Securities being deposited or withdrawn) and
payment of any applicable fees as herein provided, may require the production of
proof satisfactory to it as to the identity and genuineness of any signature and
may also require compliance with any regulations the Trustee may establish
consistent with the provisions of the Depositary Trust Agreement, including,
without limitation, this Section 2.8.

            (b) The Delivery of Receipts against deposits of Securities, the
registration of transfer of Receipts or the Surrender of Receipts for the
purpose of withdrawal of Underlying Securities may be suspended, generally or in
particular instances, during any period when the transfer books of the Trustee
are closed or the transfer books of a Securities Issuer are closed or if any
such action is deemed necessary or advisable by the Trustee at any time or from
time to time, subject to the provisions of the following sentence.
Notwithstanding any other provision of any applicable Depositary Trust Agreement
or the Receipts, the Surrender of Receipts and withdrawal of Underlying
Securities may not be suspended except for (i) temporary delays caused by
closing the transfer books of the Trustee or a Securities Issuer, (ii) the
payment of fees, taxes and applicable charges, and (iii) compliance with any
U.S. laws or governmental regulations relating to the Receipts or to the
withdrawal of the Underlying Securities. Without limitation of the foregoing,
the Trustee shall not knowingly accept for deposit under the Depositary Trust
Agreement any Securities required to be registered under the provisions of the
Securities Act of 1933, as amended, for the public offer and sale thereof in the
United States unless a registration statement is in effect as to such Securities
for such offer and sale.

            Section 2.9 Lost Certificates, Etc. In case any certificate
evidencing Receipts shall be mutilated, destroyed, lost or stolen, the Trustee
shall execute and deliver a new certificate of like tenor in exchange and
substitution for such mutilated certificate upon cancellation thereof, or in
lieu of and in substitution for such destroyed, lost or stolen certificate.
Before the Trustee shall execute and deliver a new certificate in substitution
for a destroyed, lost or stolen certificate, the Owner thereof shall have (a)
filed with the Trustee (i) a request for such execution and delivery before the
Trustee has notice that the Receipts have been acquired by a

                                       8
<PAGE>
bona fide purchaser and (ii) a sufficient indemnity bond, and (b) satisfied any
other reasonable requirements imposed by the Trustee.

            Section 2.10 Cancellation and Destruction of Surrendered
Certificates. All certificates evidencing Receipts Surrendered to the Trustee
shall be canceled by the Trustee. The Trustee is authorized to destroy
certificates so canceled.

            Section 2.11 Reconstitution Events. (a) If any class of Securities
ceases to be outstanding as a result of a merger, consolidation or other
corporate combination of the Securities Issuer and, as a result, securities
which are not Underlying Securities or Additional Securities are received by the
Trustee in exchange for, in conversion of or in respect of the Underlying
Securities, the Trustee shall, to the extent lawful and feasible and subject to
Section 4.10, distribute any securities which shall be received by the Trustee
to the Owners in proportion to their Ownership of Receipts. In the event of a
merger, consolidation or other corporate combination in which stockholders of a
Securities Issuer are provided an option of receiving either cash or securities,
the Trustee shall not respond and shall instead accept the default option
regardless of whether it is cash or securities. Effective on the date that such
Securities cease to be outstanding, such class of Securities shall cease to be
part of the Securities which must be deposited for issuance of Receipts.

            (b) If any class of Securities is delisted from trading on its
primary exchange or market and is not listed for trading on another national
securities exchange or through NASDAQ within five business days from the date of
such delisting, the Trustee shall, to the extent lawful and feasible and subject
to Section 4.10, distribute the Underlying Securities of such class to the
Owners in proportion to their Ownership of Receipts. Effective on the date of
such distribution, such class of Securities shall cease to be a part of the
securities which must be deposited for issuance of Receipts.

            (c) In the event that any Securities Issuer no longer has a class of
common stock registered under section 12 of the Securities Exchange Act of 1934,
as amended, the Trustee shall, to the extent lawful and feasible and subject to
Section 4.10, distribute the Underlying Securities of such Securities Issuer to
the Owners in proportion to their Ownership of Receipts. Effective on the date
of such distribution, such class of Securities shall cease to be part of the
securities which must be deposited for issuance of Receipts.

            (d) If the Commission determines that a Securities Issuer is an
investment company under the Investment Company Act of 1940, and the Trustee has
actual knowledge of such Commission determination, then the Trustee shall, to
the extent lawful and feasible and subject to Section 4.10, distribute the
Underlying Securities of such Securities Issuer to the Owners in proportion to
their Ownership of Receipts. Effective on the date of such distribution, such
class of Securities shall cease to be part of the securities which must be
deposited for issuance of Receipts.

                                    ARTICLE 3

                    CERTAIN OBLIGATIONS OF OWNERS OF RECEIPTS

            Section 3.1 Filing Proofs, Certificates and Other Information. Any
Person presenting Securities for deposit or any Owner of Receipts may be
required from time to time to file with the Trustee such proof of citizenship or
residence, exchange control approval, or such

                                       9
<PAGE>
information relating to the registration on the books of any Securities Issuer
or Securities Registrar, if applicable, to execute such certificates and to make
such representations and warranties, as the Trustee may require. The Trustee may
withhold the Delivery or registration of transfer of any Receipts or the
delivery of any Underlying Securities until such proof or other information is
filed or such certificates are executed or such representations and warranties
made.

            Section 3.2 Liability of Owner for Taxes. If any tax or other charge
shall become payable with respect to any Receipts or any Underlying Securities
represented thereby, such tax or other charge shall be payable by the Owner of
such Receipts to the Trustee. The Trustee shall refuse to effect any
registration of transfer of such Receipts or any withdrawal of Underlying
Securities represented by such Receipt until such payment is made, and may
withhold any dividends or other distributions, or may sell for the account of
the Owner thereof Underlying Securities constituting any multiples of the
securities which must be deposited for issuance of Receipts, and may apply such
dividends or other distributions or the proceeds of any such sale in payment of
such tax or other charge and the Owner of such Receipt shall remain liable for
any deficiency.

            Section 3.3 Warranties on Deposit of Shares. Every Person depositing
Securities under the Depositary Trust Agreement shall be deemed thereby to
represent and warrant that such Securities and each certificate therefor are
validly issued and fully paid, that the person making such deposit is duly
authorized to do so and that at the time of delivery, such Securities are free
and clear of any lien, pledge, encumbrance, right, charge or claim (other than
the rights created by the Depositary Trust Agreement). Every such person shall
also be deemed to represent that such Securities are not, and Receipts
representing such Securities would not be, Restricted Securities. Such
representations and warranties shall survive the deposit of Securities, issuance
of Receipts or termination of the Depositary Trust Agreement.

                                    ARTICLE 4

                            THE UNDERLYING SECURITIES

            Section 4.1 Cash Distributions. Whenever the Trustee shall receive
any cash dividend or other cash distribution on any Underlying Securities, the
Trustee shall distribute the amount thus received (net of the fees of the
Trustee as provided in Section 5.6, if applicable) to the Owners entitled
thereto, in proportion to the number of Receipts held by them respectively;
provided, however, that in the event that the respective Securities Issuer or
the Trustee shall be required to withhold and does withhold from such cash
dividend or such other cash distribution an amount on account of taxes, the
amount distributed to the Owners shall be reduced accordingly. The Trustee shall
distribute only such amount, however, as can be distributed without attributing
to any Owner a fraction of one cent. Any such fractional amounts shall be
rounded to the nearest whole cent and so distributed to Owners entitled thereto.

      In the event that a Securities Issuer provides holders of any Underlying
Securities with an option to receive either cash, securities or any other
distribution, the Trustee shall not respond to the Securities Issuer and shall
accept the default option provided by the Securities Issuer regardless of
whether it is cash or securities or any other distribution.

                                       10
<PAGE>
            Section 4.2 Distributions Other Than Cash or Securities. Subject to
the provisions of Sections 4.9 and 5.6, whenever the Trustee shall receive any
distribution other than a distribution described in Sections 4.1, 4.3 or 4.4 or
any distribution which would otherwise be distributed hereunder except that the
Trustee deems such distribution not to be lawful and feasible, the Trustee
shall, subject to Section 4.10, cause the securities or property received by it
to be distributed to the Owners entitled thereto, in proportion to the number of
Receipts held by them respectively, in any manner that the Trustee may deem
equitable and practicable for accomplishing such distribution; provided,
however, that if in the opinion of the Trustee such distribution cannot be made
proportionately among the Owners entitled thereto, or if for any other reason
(including, but not limited to, any requirement that a Securities Issuer or the
Trustee withhold an amount on account of taxes or other governmental charges or
that such securities must be registered under the Securities Act of 1933, as
amended, in order to be distributed to Owners) the Trustee, after consultation
with the Initial Depositor, deems such distribution not to be feasible, the
Trustee may adopt, with the Initial Depositor's approval, which approval shall
not be unreasonably withheld, such method as it deems equitable and practicable
for the purpose of effecting such distribution such that each Owner receives
substantially identical property (less any applicable taxes), including, but not
limited to, the public or private sale of the securities or property thus
received, or any part thereof, and the net proceeds of any such sale (net of the
fees of the Trustee as provided in Section 5.6) shall be distributed by the
Trustee to the Owners entitled thereto as in the case of a distribution received
in cash.

            Section 4.3 Distributions in Securities. If any distribution by a
Securities Issuer consists of a divided in, or free distribution of, Securities
or Additional Securities, the Trustee shall, to the extent lawful and feasible,
retain such Securities or Additional Securities under the Depositary Trust
Agreement, and, in such case, (i) the amount of such Securities or Additional
Securities so retained in respect of each Receipt shall be added to the classes
and quantities of securities which must be deposited for issuance of Receipts
and (ii) the number of Receipts in an Issuance Denomination may be increased or
decreased by the Trustee to the lowest multiple of 100 Receipts such that no
fractional shares are thereby represented in such Issuance Denomination.

            Section 4.4 Rights Offerings. (a) If a Securities Issuer offers or
causes to be offered to the holders of any Underlying Securities any rights to
subscribe for additional Securities or other securities, the Trustee shall have
discretion in accordance with this Section 4.4 as to the procedure to be
followed in making such rights available to any Owners or in disposing of such
rights on behalf of Owners and making the net proceeds available to Owners or,
if by the terms of such rights offering or for any other reason (including the
absence of an effective registration statement covering the distribution of
securities underlying the rights), the Trustee may not make such rights
available to any Owners or dispose of such rights and make the net proceeds
available to Owners, then the Trustee shall allow the rights to lapse.

            (b) The Trustee will not offer rights to Owners unless both the
rights and the securities to which such rights relate are either exempt from
registration under the Securities Act of 1933, as amended, with respect to a
distribution to all Owners or are registered under the provisions of such act.

                                       11
<PAGE>
            (c) The Trustee shall not be responsible for any failure to
determine that it may be lawful or feasible to make such rights available to
Owners in general or any Owner in particular.

            Section 4.5 Fixing of Record Date. Whenever any cash dividend or
other cash distribution shall become payable or any distribution other than cash
shall be made, or whenever the Trustee receives notice of any meeting of or
solicitation of proxies from holders of any Underlying Securities, or whenever a
fee shall be charged by the Trustee under Section 5.6, or whenever for any
reason there is a reconstitution or other event under the Depositary Trust
Agreement that causes a change in the composition of the securities which must
be deposited for issuance of Receipts, or whenever the Trustee shall find it
necessary or convenient in respect of any matter, the Trustee shall fix a record
date (a) for the determination of the Owners who shall be (i) entitled to
receive such dividend or distribution or the net proceeds of the sale thereof,
(ii) entitled to give instructions to the Trustee for the exercise of voting
rights at any such meeting or solicitation or (iii) required to pay such fee, or
(b) on or after which each Receipt will represent such changed group of
Securities. In the case of subsections (a)(i) and (a)(ii) of this Section 4.5,
the Trustee shall use its best efforts to fix a record date that will coincide
with the record date fixed by the issuer of the Underlying Securities; however,
if a coinciding record date is not practicable, the Trustee shall fix a record
date is near as practicable to the record date set by the Securities Issuer.
Subject to the terms and conditions of the Depositary Trust Agreement, the
Owners on such record date shall be entitled, as the case may be, to receive the
amount distributable by the Trustee with respect to such dividend or other
distribution or the net proceeds of sale thereof, or to give voting
instructions, or to act in respect of any other such matter, or shall be
obligated to pay such fee.

            Section 4.6 Reports. The Trustee shall, to the extent lawful,
forward to Owners any reports and communications, including any proxy statement
or other soliciting material, received from a Securities Issuer which are
received by the Trustee as the holder of the Underlying Securities or its
appointed agent, unless such reports and communications have been forwarded
directly to Owners by such Securities Issuer or its appointed agent.

            Section 4.7 Voting Instructions for Underlying Securities. Upon
receipt by the Trustee or its appointed agent of notice of any meeting of, or
solicitation of proxies from, holders of Underlying Securities, the Trustee
shall, to the extent lawful, mail to the Owners a notice which shall contain (a)
such information as is contained in such notice of meeting or solicitation, and
(b) a statement that the Owners as of the close of business on a specified
record date will be entitled, subject to applicable law and the provisions of
the corporate documents of the Securities Issuer, to instruct the Trustee as to
the exercise of the voting rights, if any, or giving of proxies, as applicable,
in respect of the amount of Underlying Securities represented by their
respective Receipts and (c) a statement as to the manner in which such
instructions may be given. Upon the written request of an Owner of a Receipt on
such record date, received on or before the date established by the Trustee for
such purpose, the Trustee shall, insofar as practicable, vote or cause to be
voted, or to give a proxy, as applicable, in respect of the amount of Underlying
Securities represented by such Receipt in accordance with the instructions set
forth in such request. The Trustee shall not vote or attempt to exercise the
right to vote that attaches to, or give a proxy with respect to, Underlying
Securities other than in accordance with such instructions.

                                       12
<PAGE>
            Section 4.8 Changes Affecting Underlying Securities. (a) In
circumstances where the provisions of Sections 2.11, 4.2 and 4.3 do not apply,
upon any change in nominal value, change in par value, split-up, consolidation
or any other reclassification of any Underlying Securities, or upon any
recapitalization, reorganization, merger or consolidation or sale of assets
affecting the issuer of any Underlying Security, regardless of whether the
Securities Issuer survives, the Trustee shall, to the extent lawful and
feasible, retain any Securities or Additional Securities under the Depositary
Trust Agreement, and, in such case, the (i) the amount of such Securities or
Additional Securities so retained in respect of each Receipt shall be added to
the classes and quantities of securities which must be deposited for issuance of
Receipts and (ii) the number of Receipts in an Issuance Denomination may be
increased or decreased by the Trustee to the lowest multiple of 100 Receipts
such that no fractional shares are thereby represented in such Issuance
Denomination.

            (b) Securities of any class which are surrendered by the Trustee in
connection with any such conversion or exchange shall, effective on the date of
such surrender, no longer be part of the securities which must be deposited for
issuance of Receipts. In any such case, or in the case of an event to which
Section 2.11 applies, the Trustee may call for the Surrender of outstanding
certificates evidencing Receipts to be exchanged for new certificates
specifically describing any applicable change in the classes and quantities of
securities which must be deposited for issuance of Receipts.

            Section 4.9 Withholding. In the event that the Trustee determines
that any distribution in property (including Securities and rights to subscribe
therefor) is subject to any tax or other charge which the Trustee is obligated
to withhold, notwithstanding anything to the contrary in these Standard Terms or
the applicable Depositary Trust Agreement, the Trustee may by public or private
sale dispose of all or a portion of such property (including Securities and
rights to subscribe therefor) in such amounts and in such manner as the Trustee
deems necessary and practicable to pay any such taxes or charges and the Trustee
shall distribute the net proceeds of any such sale after deduction of such taxes
or charges to the Owners entitled thereto in proportion to the number of
Receipts held by them respectively.

            Section 4.10 Limitation on Distributions. Notwithstanding any
provision of the Depositary Trust Agreement which requires or permits the
Trustee to distribute or Deliver any securities to Owners, the Trustee shall not
distribute to any Owner any fraction of a share. Instead, the Trustee shall, to
the extent lawful, sell the minimum necessary number of shares, distribute the
cash value of the fraction to such Owner and distribute the remaining cash to
all other Owners.

                                    ARTICLE 5

                      THE TRUSTEE AND THE INITIAL DEPOSITOR

            Section 5.1 Maintenance of Office and Transfer Books by the Trustee.
(a) Until termination of this Depositary Trust Agreement in accordance with its
terms, the Trustee shall maintain in the Borough of Manhattan, The City of New
York, facilities for the execution and Delivery, registration, registration of
transfers and Surrender of Receipts in accordance with the provisions of these
Standard Terms and the applicable Depositary Trust Agreement.

                                       13
<PAGE>
            (b) The Trustee shall keep books for the registration of Receipts
and transfers of Receipts which at all reasonable times shall be open for
inspection by the Owners.

            (c) The Trustee may close the transfer books at any time or from
time to time.

            (d) If any Receipts evidenced thereby are listed on one or more
stock exchanges in the United States, the Trustee shall act as Registrar or
appoint a registrar or one or more co-registrars for registry of such receipts
in accordance with any requirements of such exchange or exchanges.

            Section 5.2 Prevention or Delay in Performance by the Initial
Depositor or the Trustee. Neither the Initial Depositor nor the Trustee nor any
of their respective directors, employees, agents or affiliates shall incur any
liability to any Owner or Beneficial Owner of any Receipt, if by reason of any
provision of any present or future law or regulation of the United States or any
other country, or of any governmental or regulatory authority or stock exchange,
or by reason of any provision, present or future, of the corporate documents of
any Securities Issuer, or by reason of any provisions of any securities issued
or distributed by any Securities Issuer, or any offering or distribution
thereof, or by reason of any act of God or war or other circumstances beyond its
control, the Initial Depositor or the Trustee shall be prevented or forbidden
from, or be subject to any civil or criminal penalty on account of, doing or
performing any act or thing which by the terms of these Standard Terms or the
applicable Depositary Trust Agreement it is provided shall be done or performed;
nor shall the Initial Depositor or the Trustee incur any liability to any Owner
or Beneficial Owner of any Receipt by reason of any non-performance or delay,
caused as aforesaid, in the performance of any act or thing which by the terms
of these Standard Terms or the applicable Depositary Trust Agreement it is
provided shall or may be done or performed, or by reason of any exercise of, or
failure to exercise, any discretion provided for in these Standard Terms or the
applicable Depositary Trust Agreement. Where, by the terms of an offering or
distribution to which Sections 2.11, 4.2 or 4.4 applies, or for any other
reason, it is not lawful and feasible to make such distribution or offering
available to Owners, and the Trustee may not dispose of such distribution or
offering on behalf of such Owners and make the net proceeds available to such
Owners, then the Trustee shall not make such distribution or offering available
to Owners and shall allow any rights, if applicable, to lapse.

            Section 5.3 Obligations of the Initial Depositor and the Trustee.
(a) Neither the Initial Depositor nor the Trustee assumes any obligation nor
shall they be subject to any liability under these Standard Terms or the
applicable Depositary Trust Agreement to any Owner or Beneficial Owner of any
Receipt (including, without limitation, liability with respect to the validity
or worth of the Underlying Securities), except that each agrees to perform its
respective obligations specifically set forth in these Standard Terms and the
applicable Depositary Trust Agreement without negligence or bad faith.

            (b) Neither the Initial Depositor nor the Trustee shall be under any
obligation to prosecute any action, suit or other proceeding in respect of any
Underlying Securities or in respect of the Receipts.

                                       14
<PAGE>
            (c) Neither the Initial Depositor nor the Trustee shall be liable
for any action or non-action by it in reliance upon the advice of or information
from legal counsel, accountants, any person presenting Securities for deposit,
any Owner or any other person believed by it in good faith to be competent to
give such advice or information.

            (d) The Trustee shall not be liable for any acts or omissions made
by a successor Trustee whether in connection with a previous act or omission of
the Trustee or in connection with any matter arising wholly after the
resignation of the Trustee, provided that in connection with the issue out of
which such potential liability arises the Trustee performed its obligations
without negligence or bad faith while it acted as Trustee.

            (e) The Trustee shall not be responsible for any failure to carry
out any instructions to vote any of the Underlying Securities, or for the manner
in which any such vote is cast or the effect of any such vote, provided that any
such action or non-action is without negligence or bad faith.

            (f) Except as specifically provided in Section 4.6, the Trustee
shall have no obligation to monitor or to obtain any information concerning the
business or affairs of any Securities Issuer or to advise Owners or Beneficial
Owners of any event or condition affecting any Securities Issuer.

            (g) The Trustee shall have no obligation to comply with any
direction or instruction from any Owner or Beneficial Owner regarding Receipts
except to the extent specifically provided in these Standard Terms or any
applicable Depositary Trust Agreement.

            (h) The Trustee shall be a fiduciary under these Standard Terms and
the applicable Depositary Trust Agreement; provided, however, that the fiduciary
duties and responsibilities and liabilities of the Trustee shall be limited by,
and shall be only those specifically set forth in, these Standard Terms and the
applicable Depositary Trust Agreement.

            Section 5.4 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 Initial Depositor,
and such resignation shall take effect upon the appointment of a successor
Trustee and its acceptance of such appointment as hereinafter provided.

            (b) If at any time the Trustee is in material breach of its
obligations under the Depositary Trust Agreement and the Trustee fails to cure
such breach within 30 days after receipt by the Trustee of written notice from
the Initial Depositor or Owners of 25% or more of the outstanding Receipts
specifying such default and requiring the Trustee to cure such default, the
Initial Depositor, acting on behalf of the Owners, may remove the Trustee by
written notice delivered to the Trustee in the manner provided in Section 7.5,
and such removal shall take effect upon the appointment of the successor Trustee
and its acceptance of such appointment as hereinafter provided.

            (c) In case at any time the Trustee acting hereunder shall resign or
be removed, the Initial Depositor, acting on behalf of the Owners, shall use its
reasonable efforts to appoint a successor Trustee, which shall be a bank or
trust company having an office in the Borough of

                                       15
<PAGE>
Manhattan, The City of New York. Every successor Trustee shall execute and
deliver to its predecessor and to the Initial Depositor, acting on behalf of the
Owners, 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; but such predecessor, nevertheless, upon payment of all sums due it
and on the written request of the Initial Depositor, acting on behalf of the
Owners, shall execute and deliver an instrument transferring to such successor
all rights and powers of such predecessor hereunder, shall duly assign, transfer
and deliver all right, title and interest in the Underlying Securities to such
successor, and shall deliver to such successor a list of the Owners of all
outstanding Receipts. The Initial Depositor or any such successor Trustee shall
promptly mail notice of the appointment of such successor Trustee to the Owners.

            (d) 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 5.5 Indemnification. (a) The Initial Depositor shall
indemnify the Trustee, its directors, employees, agents and affiliates against,
and hold each of them harmless from, any loss, liability, cost, expense or
judgment (including, but not limited to, the fees and expenses of counsel)
(collectively "Indemnified Amounts") which is incurred by any of them and which
arises out of acts performed or omitted pursuant to the provisions of these
Standard Terms or any Depositary Trust Agreement, as the same may be amended,
modified or supplemented from time to time, or any filings with or submissions
to the Commission in connection with or with respect to such Receipts (which by
way of illustration and not by way of limitation, include any registration
statement and any amendments or supplements thereto filed with the Commission or
any periodic reports or updates that may be filed under the Securities Exchange
Act of 1934, as amended, or any failure to make any filings or submissions to
the Commission which are required to be made in connection with or with respect
to such Receipts), except that the Initial Depositor shall not have any
obligations under this Section 5.5(a) to pay Indemnified Amounts incurred as a
result of and attributable to (i) the negligence or bad faith of, or material
breach of the terms of this Agreement by, the Trustee, (ii) written information
regarding the name and address of the Trustee furnished in writing to the
Initial Depositor (and not materially changed or altered) expressly for use in
the registration statement filed with the Commission relating to the Receipts,
or (iii) any misrepresentations or omissions made by a Depositor (other than
Initial Depositor) in connection with such Depositor's offer and sale of
Receipts.

            (b) The Trustee shall indemnify the Initial Depositor, its
directors, employees, agents and affiliates against, and hold each of them
harmless from, any Indemnified Amounts (i) caused by the negligence or bad faith
of the Trustee or (ii) arising out of any written information regarding the name
and address of the Trustee furnished in writing to the Initial Depositor (and
not materially changed or altered) expressly for use in the registration
statement filed with the Commission relating to the Receipts.

            (c) If the indemnification provided for in this Section 5.5 is
unavailable or insufficient to hold harmless the indemnified party under
subsection (a) or

                                       16
<PAGE>
(b) above, then the indemnifying party shall contribute to the Indemnified
Amounts referred to in subsection (a) or (b) above (i) in such proportion as is
appropriate to reflect the relative benefits received by the Initial Depositor
on the one hand and the Trustee on the other hand from the offering of the
Receipts which are the subject of the action or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Initial Depositor on the one hand and
the Trustee on the other hand in connection with the action, statement or
omission which resulted in such Indemnified Amount as well as any other relevant
equitable considerations. The relative benefits received by the Initial
Depositor on the one hand and the Trustee on the other shall be deemed to be in
the same proportions as the total commissions from the offering of the Receipts
which are the subject of the action (before deducting expenses) received by the
Initial Depositor bear to the total fees received by the Trustee from the
offering of such Receipts. The relative fault shall be determined by reference
to, among other things, whether any untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact which
from which the action arises relates to information supplied by the Initial
Depositor or the Trustee and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission or the act or omission from which the action arises. The amount of
Indemnified Amounts referred to in the first sentence of this subsection (c)
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any action
or claim which is the subject of this subsection (c).

            Section 5.6 Charges of Trustee. The following charges shall be
incurred by any party depositing or withdrawing Securities or by any party
Surrendering Receipts or to whom Receipts are Delivered or any Owner, as
applicable: (1) taxes and charges and other fees payable in respect of the
Underlying Securities assessed by third-party custodians, depositories, transfer
agents, and other service providers in the ordinary course of their respective
businesses (whether in connection with the deposit of Securities or withdrawal
of Underlying Securities or otherwise), (2) a fee of $10 or less per 100
Receipts for the execution and Delivery of Receipts pursuant to Section 2.5, and
the Surrender of Receipts pursuant to Section 2.7, and (3) a fee which shall
accrue on the first day of each calendar quarter at a rate of $.02 or less per
Receipt per quarter for the Trustee's services as such under the Depositary
Trust Agreement (which fee shall be assessed against Owners of record as of the
date or dates set by the Trustee in accordance with Section 4.5 and shall be
collected at the Trustee's discretion by deducting such fee from one or more
cash dividends or other cash distributions); provided, however, that with
respect to the aggregate fee accrued in any calendar year under this clause (3)
with respect to each Receipt, the Trustee will waive that portion which exceeds
the total cash dividends and other cash distributions the record date for which
falls in such calendar year and payable with respect to such Receipt.

            Section 5.7 Retention of Trust Documents. The Trustee is authorized
to destroy those documents, records, bills and other data compiled during the
term of the Depositary Trust Agreement at the times permitted by the laws or
regulations governing the Trustee.

            Section 5.8 Federal Securities Law Filings. The Initial Depositor
shall (i) prepare and file a registration statement with the Commission and take
such action as is necessary from time to time to qualify the Receipts for
offering and sale under the federal

                                       17
<PAGE>
securities laws of the United States, including the preparation and filing of
amendments and supplements to such registration statement, (ii) promptly notify
the Trustee of any amendment or supplement to the registration statement or
prospectus, of any order preventing or suspending the use of any prospectus, of
any request for the amending or supplementing of the registration statement or
prospectus or if any event or circumstance occurs as a result of which the
registration statement or prospectus, as then amended or supplemented, would
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, (iii) provide the Trustee from time
to time with copies of the prospectus, as amended and supplemented, in such
quantities as the Trustee may request and (iv) prepare and file any periodic
reports or updates that may be required under the Securities Exchange Act of
1934, as amended.

            Section 5.9 Prospectus Delivery. The Trustee shall, if required by
the federal securities laws of the United States, in any manner permitted by
such laws, deliver at the time of issuance of Receipts, a copy of the relevant
prospectus, as amended and supplemented at such time, to each Person depositing
Underlying Securities into the Trust for issuance of Receipts.

            Section 5.10 Tax Returns and Reports. The Trustee shall prepare (or
cause to be prepared) and file all U.S. federal, state and local tax and
information returns and reports required to be filed by or in respect of the
Trust. In this regard, the Trustee shall (a) prepare and file (or cause to be
prepared and filed) all Internal Revenue Service forms and returns required to
be filed in respect of the Trust in each taxable year of the Trust, and (b)
prepare and furnish (or cause to be prepared and furnished) to each Owner all
Internal Revenue Service forms and returns required to be provided by the Trust.

                                    ARTICLE 6

                            AMENDMENT AND TERMINATION

            Section 6.1 Amendment. The Trustee and the Initial Depositor may
amend any provisions of the Depositary Trust Agreement without the consent of
any Owner, provided that the Trustee or the Initial Depositor is provided with
an opinion of counsel to the effect that such amendment will not affect the
trust's status as a grantor trust or custodial arrangement for U.S. federal
income tax purposes. Any amendment that imposes or increases any fees or charges
(other than taxes and other charges, registration fees or other such expenses),
or that otherwise prejudices any substantial existing right of the Owners will
not become effective until 30 days after notice of such amendment is given to
the Owners. Every Owner and Beneficial Owner, at the time any amendment so
becomes effective, shall be deemed, by continuing to hold any Receipt or an
interest therein, to consent and agree to such amendment and to be bound by the
Depositary Trust Agreement as amended thereby. In no event shall any amendment
impair the right of the Owner of any Receipt to Surrender such Receipt and
receive therefor the Underlying Securities represented thereby, except in order
to comply with mandatory provisions of applicable law.

                                       18
<PAGE>
            Section 6.2 Early Termination. (a) The Trust shall terminate by the
Trustee mailing notice of such termination to the Owners of all Receipts then
outstanding at least 30 days prior to the date set for termination if any of the
following occurs:

                  (i) The Trustee is notified that the Receipts are delisted
from a national securities exchange and are not approved for listing on another
national securities exchange within 5 business days of their delisting;

                  (ii) Owners of at least 75% of the outstanding Receipts notify
the Trustee that they elect to terminate the Trust; or

                  (iii) 60 days shall have expired after the Trustee shall have
delivered to the Initial Depositor and the Owners a written notice of its
election to resign and a successor trustee shall not have been appointed and
accepted its appointment as provided in section 5.4.

            (b) on and after the date of termination, the Owner of a Receipt
will, upon (i) Surrender of such Receipt at the Corporate Trust Office of the
Trustee, (ii) payment of the fee of the Trustee for the Surrender of Receipts
referred to in Section 2.7, and (iii) payment of any applicable taxes or
charges, be entitled to Delivery, to the Owner or upon the Owner's order, of the
amount of Underlying Securities evidenced by such Receipt. If any Receipts shall
remain outstanding after the date of termination, the Trustee thereafter shall
discontinue the registration of transfers of Receipts, shall suspend the
distribution of dividends or other distribution to the Owners thereof, and shall
not give any further notices or perform any further acts under these Standard
Terms or the applicable Depositary Trust Agreement, except that the Trustee
shall continue to collect dividends and other distributions pertaining to
Underlying Securities and hold the same uninvested and without liability for
interest, shall sell rights as provided in these Standard Terms or the
applicable Depositary Trust Agreement, and shall continue to deliver Underlying
Securities, together with any dividends or other distributions received with
respect thereto and the net proceeds of the sale of any rights or other
property, in exchange for Receipts Surrendered to the Trustee (after deducting
or upon payment of, in each case, the fee of the Trustee set forth in 5.6 for
the Surrender of Receipts, any expenses for the account of the Owner of such
Receipts in accordance with the terms and conditions of the Depositary Trust
Agreement, and any applicable taxes or charges). At any time after the
expiration of one year following the date of termination, the Trustee may sell
the Underlying Securities then held hereunder and may thereafter hold uninvested
the net proceeds of any such sale, together with any other cash then held by it
hereunder, unsegregated and without liability for interest, for the pro rata
benefit of the Owners of Receipts which have not theretofore been Surrendered,
such Owners thereupon becoming general creditors of the Trustee with respect to
such net proceeds. After making such sale, the Trustee shall be discharged from
all obligations under these Standard Terms with respect to the Receipts and the
applicable Depositary Trust Agreement, except to account for such net proceeds
and other cash (after deducting, in each case, the fee of the Trustee for the
Surrender of Receipts, any fees of the Trustee due and owing from the Owner of
such Receipts pursuant to Section 5.6, any expenses for the account of the Owner
of such Receipts in accordance with the terms and conditions of the Depositary
Trust Agreement, and any applicable taxes or governmental charges). Upon the
termination of the applicable Depositary Trust Agreement, the Initial Depositor
shall be discharged from all obligations under such Depositary Trust Agreement
except for its obligations to the Trustee under Section 5.5.

                                       19
<PAGE>
                                    ARTICLE 7

                                  MISCELLANEOUS

            Section 7.1 Counterparts. These Standard Terms and each Depositary
Trust Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and all of such counterparts shall constitute one
and the same instrument. Copies of these Standard Terms and the applicable
Depositary Trust Agreement shall be filed with the Trustee and shall be open to
inspection by any Owner of a Receipt during business hours.

            Section 7.2 Third-Party Beneficiaries. These Standard Terms and each
Depositary Trust Agreement are for the exclusive benefit of the respective
parties hereto and thereto, and shall not be deemed to give any legal or
equitable right, remedy or claim whatsoever to any other person.

            Section 7.3 Severability. In case any one or more of the provisions
contained in these Standard Terms or the applicable Depositary Trust Agreement
or in the Receipts should be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein or therein shall in no way be affected, prejudiced or disturbed
thereby.

            Section 7.4 Owners and Beneficial Owners as Parties; Binding Effect.
The Owners, Beneficial Owners and Depositors from time to time shall be parties
to the applicable Depositary Trust Agreement and shall be bound by all of the
terms and conditions hereof and thereof and of the Receipts by their acceptance
of Receipts or any interest therein or by their depositing Securities, as the
case may be.

            Section 7.5 Notices. (a) Any and all notices to be given to the
Initial Depositor shall be deemed to have been duly given if personally
delivered or sent by mail or cable, telex or facsimile transmission confirmed by
letter addressed to Salomon Smith Barney Inc., 388 Greenwich Street, NewYork,
New York 10013, Attention: Manager, Investment Banking Division or any other
place to which the Initial Depositor may have transferred its principal office
with notice to the Trustee.

            (b) Any and all notices to be given to the Trustee shall be deemed
to have been duly given if personally delivered or sent by mail or cable, telex
or facsimile transmission confirmed by letter, addressed to U.S. Bank Trust
National Association, 100 Wall Street, Suite 1600, New York, New York 10005,
Attention: Salomon Smith Barney Inc., or any other place to which the Trustee
may have transferred its Corporate Trust Office with notices to the Initial
Depositor.

            (c) Any and all notices to be given to any Owner shall be deemed to
have been duly given if personally delivered or sent by mail or cable, telex or
facsimile transmission confirmed by letter, addressed to such Owner at the
address of such Owner as it appears on the transfer books of the Trustee, or, if
such Owner shall have filed with the Trustee a written request that notices
intended for such Owner be mailed to some other address, at the address
designated in such request.

                                       20
<PAGE>
            (d) Delivery of a notice sent by mail or cable, telex or facsimile
transmission shall be deemed to be effected at the time when a duly addressed
letter containing the same (or a confirmation thereof in the case of a cable,
telex or facsimile transmission) is deposited, postage prepaid, in a post-office
letter box. The Trustee may, however, act upon any cable, telex or facsimile
transmission received by them, notwithstanding that such cable, telex or
facsimile transmission shall not subsequently be confirmed by letter as
aforesaid.

            Section 7.6 Governing Law. This Depositary Trust Agreement and the
Receipts shall be interpreted and all rights hereunder and thereunder and
provisions hereof and thereof shall be governed by the substantive laws (but not
the choice of law rules) of the State of New York.

                                       21
<PAGE>
      IN WITNESS WHEREOF, SALOMON SMITH BARNEY INC. and U.S. BANK TRUST
NATIONAL ASSOCIATION have duly executed these Standard Terms as of the day
and year first set forth above.

                                          SALOMON SMITH BARNEY INC.

                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                          U.S. BANK TRUST NATIONAL
                                             ASSOCIATION,
                                             as Trustee

                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                       22
<PAGE>
                                                                       EXHIBIT A

                               [NAME OF TRUST]

                      [FORM OF] DEPOSITARY TRUST AGREEMENT

      DEPOSITARY TRUST AGREEMENT dated as of [specify date] (this "Depositary
Trust Agreement"), among SALOMON SMITH BARNEY INC., a New York corporation (the
"Initial Depositor"), U.S. Bank Trust National Association, a national banking
association, as trustee (the "Trustee"), all Owners and Beneficial Owners (each
as hereinafter defined) from time to time of Depositary Trust Receipts issued
hereunder and all Depositors (as hereinafter defined) from time to time.

      Section 1. Incorporation of Standard Terms. The Standard Terms for
Depositary Trust Agreements agreed to as of , 2002 (the "Standard Terms"),
between the Initial Depositor and the Trustee are hereby incorporated by
reference into and made a part of this Depositary Trust Agreement. If there is
any conflict between the provisions of this Depositary Trust Agreement and the
Standard Terms, the provisions of this Depositary Trust Agreement shall control.

      Section 2. Securities to be Deposited. Initially, the securities which
must be deposited for issuance of one Receipt and which shall be represented
thereby shall be as follows:

<TABLE>
<CAPTION>
                                                              Quantity which
                                                             must be deposited
            Issuer and Title of Security                        per Receipt
            ----------------------------                        -----------
<S>                                                          <C>
            [Issuer and title of security]                        [Quantity]
            [Issuer and title of security]                        [Quantity]
</TABLE>

; provided, however, that if an event to which Section 2.11 of the Standard
Terms applies or an event described in Sections 4.3 or 4.8 of the Standard Terms
occurs, the definition of the securities that must be deposited for issuance of
one Receipt shall be changed as provided in such Sections, if applicable.

      Section 3. Creation and Declaration of Trust; Termination Date. The trust
created hereby shall be known as [Name of Trust], for which the Trustee, or the
Initial Depositor to the extent provided herein, may conduct the business of the
Trust, make and execute contracts, and sue and be sued. [The termination date of
the Trust will be December 31, 2042].

      Section 4. Closing. The "Closing Date" shall be [specify date].

                                      A-1
<PAGE>
      IN WITNESS WHEREOF, SALOMON SMITH BARNEY INC. and U.S. BANK TRUST NATIONAL
ASSOCIATION have duly executed this agreement as of the day and year first set
forth above. All Owners and Beneficial Owners shall become parties hereto upon
acceptance by them of Receipts issued in accordance with the terms hereof or any
interest therein, and all Depositors shall become parties hereto upon depositing
any Securities hereunder.

                                          SALOMON SMITH BARNEY INC.

                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                          U.S. BANK TRUST NATIONAL
                                             ASSOCIATION, as Trustee

                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                      A-2
<PAGE>
                                                                       EXHIBIT B

                                [Form of Receipt]

      THE RECEIPTS EVIDENCED HEREBY REPRESENT RIGHTS WITH RESPECT TO UNDERLYING
SECURITIES (AS DEFINED IN THE DEPOSITARY TRUST AGREEMENT REFERRED TO HEREIN)
HELD BY THE TRUST AND DO NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, AND
ARE NOT GUARANTEED BY THE INITIAL DEPOSITOR OR THE TRUSTEE OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THE RECEIPTS NOR THE UNDERLYING SECURITIES ARE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR ANY OTHER PERSON.

      UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE AGENT
AUTHORIZED BY THE ISSUER 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 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.

                            DEPOSITARY TRUST RECEIPTS
                                    ISSUED BY
                               [NAME OF TRUST]
                         REPRESENTING [COMMON STOCK] OF

                            [LIST COMPANIES HERE]

               U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee

No. [    ]                                                  CUSIP NO. [    ]

      U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee (hereinafter called the
"Trustee"), hereby certifies that CEDE & CO., as nominee of the Depositary Trust
Company, or registered assigns, is the owner of [Number*] Depositary Trust
Receipts issued by [Name of Trust], each representing the securities described
in the within-mentioned Depositary Trust Agreement. At the date hereof, each
Receipt represents the right to receive the following securities:

----------
*     That number of Receipts held at The Depository Trust Company at any given
      point in time.

                                      B-1
<PAGE>
<TABLE>
<CAPTION>
                                                      Quantity Initially
                                                        Represented by
         Issuer and Title of Security                    Each Receipt
<S>                                               <C>
------------------------------------------        ------------------------------

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

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

------------------------------------------        ------------------------------
</TABLE>

which are deposited under the Depositary Trust Agreement referred to herein at
the Corporate Trust office of the Trustee. The specification of the securities
represented by each Receipt is subject to change as provided in the Depositary
Trust Agreement. The Trustee's Corporate Trust Office and its principal
executive office is located at 100 Wall Street, Suite 1600, New York, New York
10005.

               THE TRUSTEE'S CORPORATE TRUST OFFICE ADDRESS IS
            100 WALL STREET, SUITE 1600, NEW YORK, NEW YORK 10005

(1)   THE DEPOSITARY TRUST AGREEMENT.

      This Receipt is issued upon the terms and conditions set forth in the
Depositary Trust Agreement, dated as of , 2002 (the "Depositary Trust
Agreement"), agreed to by and among the Initial Depositor, the Trustee, all
Owners and Beneficial Owners from time to time of Receipts issued thereunder and
all Depositors. By becoming an Owner or Beneficial Owner, or by depositing
Securities, such Person agrees to become a party to the Depositary Trust
Agreement and become bound by all the terms and conditions thereof. The
Depositary Trust Agreement sets forth the rights of Owners and the rights and
duties of the Trustee in respect of the Securities deposited thereunder and any
and all other securities, property and cash from time to time received in
respect of such Securities and held thereunder (such Securities, other
securities, property, and cash are herein called "Underlying Securities").
Copies of the Depositary Trust Agreement are on file at the Trustee's Corporate
Trust office in New York City.

      The statements made on the face and reverse of this Receipt are summaries
of certain provisions of the Depositary Trust Agreement and are qualified by and
subject to the detailed provisions of the Depositary Trust Agreement, to which
reference is hereby made. Capitalized terms not defined herein shall have the
meanings set forth in the Depositary Trust Agreement.

(2)   SURRENDER OF RECEIPTS AND WITHDRAWAL OF SECURITIES.

      Upon Surrender at the Corporate Trust Office of the Trustee of a Round Lot
of Receipts or integral multiples thereof for the purpose of withdrawal of the
Underlying Securities represented thereby, and upon payment of the fee of the
Trustee in connection with the Surrender

                                      B-2
<PAGE>
of Receipts as provided in Section 5.6 of the Standard Terms and payment of all
taxes and charges payable in connection with such Surrender and withdrawal of
the Underlying Securities, and subject to the terms and conditions of the
applicable Depositary Trust Agreement, including, without limitation, Section
4.10 thereof, the Owner of such Receipts shall be entitled to Delivery of the
amount of Underlying Securities at the time represented by such Receipts.
Delivery of such Underlying Securities may be made by (i) Delivery of Securities
to such Owner or as ordered by such Owner and (ii) any available form of
delivery of any other securities, property and cash to which such Owner is then
entitled to such Owner or as ordered by such Owner. The Trustee shall only
deliver whole Underlying Securities upon Surrender of Receipts representing such
Underlying Securities.

(3)   REGISTRATION OF TRANSFERS, SPLIT-UPS AND COMBINATIONS OF CERTIFICATES;
      LIMITATIONS.

      The transfer of Ownership of Receipts evidenced by this certificate is
registrable on the books of the Trustee at its Corporate Trust Office by the
Owner hereof in person or by a duly authorized attorney, upon Surrender of this
certificate evidencing Receipts, properly endorsed or accompanied by proper
instruments of transfer, and duly stamped as may be required by the laws of the
State of New York and of the United States of America. This certificate
evidencing Receipts may be split up into other such certificates, each
evidencing any integral multiple of a Round Lot of Receipts, or may be combined
with other certificates evidencing Receipts into one such certificate, in each
case evidencing the same aggregate number of Receipts as the certificate or
certificates Surrendered.

      As a condition precedent to the Delivery, registration of transfer,
split-up, combination or Surrender (including, for the avoidance of doubt, any
Surrender in connection with an exchange) of any Receipt or withdrawal of any
Underlying Securities, the Trustee or Registrar may require payment from the
Depositor of Securities or the presentor of the Receipts of a sum sufficient to
reimburse it for any tax or other charge and any stock transfer or registration
fee with respect thereto (including any such tax or charge and fee with respect
to Securities being deposited or withdrawn) and payment of any applicable fees
as herein provided, may require the production of proof satisfactory to it as to
the identity and genuineness of any signature and may also require compliance
with any regulations the Trustee may establish consistent with the provisions of
the Depositary Trust Agreement, including, without limitation, Section 2.8 of
the Standard Terms.

      The Delivery of Receipts against deposits of Securities, the registration
of transfer of Receipts or the Surrender of Receipts for the purpose of
withdrawal of Underlying Securities may be suspended, generally or in particular
instances, during any period when the transfer books of the Trustee are closed
or the transfer books of a Securities Issuer are closed or if any such action is
deemed necessary or advisable by the Trustee at any time or from time to time
for any reason, subject to the provisions of the following sentence.
Notwithstanding any other provision of any applicable Depositary Trust Agreement
or the Receipts, the Surrender of Receipts and withdrawal of Underlying
Securities may not be suspended subject to only (i) temporary delays caused by
closing the transfer books of the Trustee or a Securities Issuer, (ii) the
payment of fees, taxes and similar charges, and (iii) compliance with any U.S.
laws or governmental regulations relating to the Receipts or to the withdrawal
of the Underlying Securities. Without limitation of the foregoing, the Trustee
shall not knowingly accept for

                                      B-3
<PAGE>
deposit under the Depositary Trust Agreement any Securities required to be
registered under the provisions of the Securities Act of 1933, as amended, for
the public offer and sale thereof in the United States unless a registration
statement is in effect as to such Securities for such offer and sale.

(4)   RECONSTITUTION EVENTS.

      (a) If any class of Securities ceases to be outstanding as a result of a
merger, consolidation or other corporate combination of the Securities Issuer
and, as a result, securities which are not Underlying Securities or Additional
Securities are received by the Trustee in exchange for, in conversion of or in
respect of the Underlying Securities, and Section 4.8 of the Standard Terms does
not apply, the Trustee shall, to the extent lawful and feasible and subject to
Section 4.10 of the Standard Terms, distribute any securities which shall be
received by the Trustee to the Owners in proportion to their Ownership of
Receipts. Effective on the date that such Securities cease to be outstanding,
such class of Securities shall cease to be part of the securities which must be
deposited for issuance of Receipts.

      (b) If any class of Securities is delisted from trading on its primary
exchange or market and is not listed for trading on another national securities
exchange or through NASDAQ within five business days from the date of such
delisting, the Trustee shall, to the extent lawful and feasible and subject to
Section 4.10 of the Standard Terms, distribute the Underlying Securities of such
class to the Owners in proportion to their Ownership of Receipts. Effective on
the date of such distribution, such class of Securities shall cease to be a part
of the securities which must be deposited for issuance of Receipts.

      (c) In the event that any Securities Issuer no longer has a class of
common stock registered under section 12 of the Securities Exchange Act of 1934,
as amended, the Trustee shall, to the extent lawful and feasible and subject to
Section 4.10 of the Standard Terms, distribute the Underlying Securities of such
Securities Issuer to the Owners in proportion to their Ownership of Receipts.
Effective on the date of such distribution, such class of Securities shall cease
to be part of the securities which must be deposited for issuance of Receipts.

      (d) If the Commission determines that a Securities Issuer is an investment
company under the Investment Company Act of 1940, and the Trustee has actual
knowledge of such Commission determination, then the Trustee shall, to the
extent lawful and feasible and subject to Section 4.10 of the Standard Terms,
distribute the Underlying Securities of such Securities Issuer to the Owners in
proportion to their Ownership of Receipts. Effective on the date of such
distribution, such class of Securities shall cease to be part of the securities
which must be deposited for issuance of Receipts.

(5)   LIABILITY OF OWNER FOR TAXES.

      If any tax or other governmental charge shall become payable with respect
to any Receipts or any Underlying Securities represented thereby, such tax or
other governmental charge shall be payable by the Owner hereof to the Trustee.
The Trustee shall refuse to effect any registration of transfer of such Receipts
or any withdrawal of Underlying Securities represented by such Receipt until
such payment is made, and may withhold any dividends or

                                      B-4
<PAGE>
other distributions, or may sell for the account of the Owner hereof Underlying
Securities constituting any multiples of the securities which must be deposited
for issuance of Receipts, and may apply such dividends or other distributions of
the proceeds of any such sale in payment of such tax or other charge and the
Owner hereof shall remain liable for any deficiency.

(6)   WARRANTIES ON DEPOSIT OF SECURITIES.

      Every Person depositing Securities under the Depositary Trust Agreement
shall be deemed thereby to represent and warrant that such Receipts and each
certificate therefor are validly issued and fully paid, that the person making
such deposit is duly authorized to do so and that at the time of delivery, such
Securities are free and clear of any lien, pledge, encumbrance, right, charge or
claim (other than the rights created by the Depositary Trust Agreement). Every
such person shall also be deemed to represent that such Securities are not, and
Receipts representing such Securities would not be, Restricted Securities. Such
representations and warranties shall survive the deposit of Securities, issuance
of Receipts or termination of the Depositary Trust Agreement.

(7)   FILING PROOFS, CERTIFICATES AND OTHER INFORMATION.

      Any person presenting Securities for deposit or any Owner of a Receipt may
be required from time to time to file with the Trustee such proof of citizenship
or residence, exchange control approval, or such information relating to the
registration on the books of any Securities Issuer or Securities Registrar, if
applicable, to execute such certificates and to make such representations and
warranties, as the Trustee may require. The Trustee may withhold the Delivery or
registration of transfer of any Receipts or the delivery of any Underlying
Securities until such proof or other information is filed or such certificates
are executed or such representations and warranties made.

(8)   CHARGES OF TRUSTEE.

      The following charges shall be incurred by any party depositing or
withdrawing Securities or by any party Surrendering Receipts or to whom Receipts
are Delivered or any Owner, as applicable: (1) taxes and charges and other fees
payable in respect of the Underlying Securities assessed by third-party
custodians, depositories, transfer agents, and other service providers in the
ordinary course of their respective businesses (whether in connection with the
deposit of Securities or withdrawal of Underlying Securities or otherwise), (2)
a fee of $10 or less per 100 Receipts for the execution and Delivery of Receipts
pursuant to Section 2.5 of the Standard Terms, and the Surrender of Receipts
pursuant to Section 2.7 Standard Terms, and (3) a fee which shall accrue on the
first day of each calendar quarter at a rate of $.02 or less per Receipt per
quarter for the Trustee's services as such under the Depositary Trust Agreement
(which fee shall be assessed against Owners of record as of the date or dates
set by the Trustee in accordance with Section 4.5 of the Standard Terms and
shall be collected at the Trustee's discretion by deducting such fee from one or
more cash dividends or other cash distributions); provided, however, that with
respect to the aggregate fee accrued in any calendar year under this clause (3)
with respect to each Receipt, the Trustee will waive that portion which exceeds
the total cash dividends and other cash distributions the record date for which
falls in such calendar year and payable with respect to such Receipt.

                                      B-5
<PAGE>
(9)   TITLE TO RECEIPTS.

      It is a condition of the Receipts, and every successive Owner of the
Receipts by accepting or holding a certificate for Receipts consents and agrees,
that title to such certificate (and the Receipts evidenced thereby), when
properly endorsed or accompanied by proper instruments of transfer, is
transferable by delivery with the same effect as in the case of a negotiable
instrument under the laws of New York; provided, however, that the Trustee,
notwithstanding any notice to the contrary, may treat the person in whose name
Receipts are registered on the books of the Trustee as the absolute Owner
thereof for the purpose of determining the person entitled to distribution or
dividends or other distributions or to any notice provided for in the Depositary
Trust Agreement and for all other purposes.

(10)  VALIDITY OF RECEIPTS.

      Receipts shall not be entitled to any benefits under the Depositary Trust
Agreement or be valid or obligatory for any purpose, unless a certificate
evidencing such Receipts shall have been executed by the Trustee by the manual
or facsimile signature of a duly authorized signatory of the Trustee and, if a
Registrar for the Receipts shall have been appointed, countersigned by the
manual or facsimile signature of a duly authorized officer of the Registrar.

(11)  REPORTS; INSPECTION OF TRANSFER BOOKS.

      The issuer of each class of Securities is subject to the periodic
reporting requirements of the Securities Exchange Act of 1934 and, accordingly,
files certain reports with the Securities and Exchange Commission (herein called
the "Commission"). Such reports will be available for inspection and copying at
the public reference facilities maintained by the Commission located at 450
Fifth Street, NW, Washington, DC 20549.

      The Trustee shall, to the extent lawful, forward to Owners, any reports
and communications, including any proxy statement or other soliciting material,
received from a Securities Issuer which are received by the Trustee as the
holder of the Underlying Securities, unless such reports and communications have
been forwarded directly to Owners by such Securities Issuer.

      The Trustee shall keep books for the registration of Receipts and
transfers of Receipts which at all reasonable times shall be open for inspection
by the Owners.

(12)  DIVIDENDS AND DISTRIBUTIONS.

      Whenever the Trustee shall receive any cash dividend or other cash
distribution on any Underlying Securities, the Trustee shall, subject to the
Depositary Trust Agreement, distribute the amount thus received (net of the fees
of the Trustee as provided in the Depositary Trust Agreement, if applicable) to
the Owners of Receipts entitled thereto; provided, however, that in the event
that the respective Securities Issuer or the Trustee shall be required to
withhold and does withhold from such cash dividend or such other cash
distribution in respect of any Underlying Securities an amount on account of
taxes, the amount distributed to the Owners of the Receipts representing such
Underlying Securities shall be reduced accordingly.

                                      B-6
<PAGE>
      In the event that a Securities Issuer provides holders of any Underlying
Securities with an option to receive either cash, securities or any other
distribution, the Trustee shall not respond to the Securities Issuer and shall
accept the default option provided by the Securities Issuer regardless of
whether it is cash or securities or any other distribution.

      Subject to the provisions of Sections 4.8 and 5.6 of the Standard Terms,
whenever the Trustee shall receive any distribution other than a distribution
described in Sections 4.1, 4.3 or 4.4 of the Standard Terms or a distribution
which would otherwise be distributed under the Depositary Trust Agreement except
that the Trustee deems such distribution not to be lawful and feasible, the
Trustee shall, subject to Section 4.10 of the Standard Terms, cause the
securities or property received by it to be distributed to the Owners of
Receipts entitled thereto, in any manner that the Trustee may deem equitable and
practicable for accomplishing such distribution; provided, however, that if in
the opinion of the Trustee such distribution cannot be made proportionately
among the Owners entitled thereto, or if for any other reason (including, but
not limited to, any requirement that a Securities Issuer or the Trustee withhold
an amount on account of taxes or other governmental charges or that such
securities must be registered under the Securities Act of 1933, as amended, in
order to be distributed to Owners) the Trustee, after consultation with the
Initial Depositor, deems such distribution not to be feasible, the Trustee may
adopt, with the Initial Depositor's approval, which approval shall not be
unreasonably withheld, such method as it deems equitable and practicable for the
purpose of effecting such distribution such that each Owner receives
substantially identical property (less any applicable taxes), including, but not
limited to, the public or private sale of the securities or property thus
received, or any part thereof, and the net proceeds of any such sale (net of the
fees of the Trustee as provided in Section 5.6 of the Standard Terms) shall be
distributed by the Trustee to the Owners entitled thereto as in the case of a
distribution received in cash.

      If any distribution by a Securities Issuer consists of a dividend in, or
free distribution of, Securities or Additional Securities, the Trustee shall, to
the extent lawful and feasible, retain such Securities or Additional Securities
under the Depositary Trust Agreement, and, in such case, (i) the amount of such
Securities or Additional Securities so retained in respect of each Receipt shall
be added to the classes and quantities of securities which must be deposited for
issuance of Receipts and (ii) the number of Receipts in an Issuance Denomination
may be increased or decreased by the Trustee to the lowest multiple of 100
Receipts such that no fractional shares are thereby represented in such Issuance
Denomination.

      In the event that the Trustee determines that any distribution in property
(including Securities and rights to subscribe therefor) is subject to any tax or
other charge which the Trustee is obligated to withhold, notwithstanding
anything to the contrary in the Standard Terms or the applicable Depositary
Trust Agreement, the Trustee may by public or private sale dispose of all or a
portion of such property (including Securities and rights to subscribe therefor)
in such amounts and in such manner as the Trustee deems necessary and
practicable to pay any such taxes or charges and the Trustee shall distribute
the net proceeds or any such sale after deduction of such taxes or charges to
the Owners entitled thereto.

                                      B-7
<PAGE>
(13)  RIGHTS OFFERINGS.

      (a) If a Securities Issuer offers or causes to be offered to the holders
of any Underlying Securities any rights to subscribe for additional Securities
or other securities, the Trustee shall have discretion in accordance with
Section 4.4 of the Standard Terms as to the procedure to be followed in making
such rights available to any Owners or in disposing of such rights on behalf of
Owners and making the net proceeds available to Owners or, if by the terms of
such rights offering or for any other reason (including the absence of an
effective registration statement covering the distribution of securities
underlying the rights), the Depositary may not make such rights available to any
Owners or dispose of such rights and make the net proceeds available to Owners,
then the Trustee shall allow the rights to lapse.

      (b) The Trustee will not offer rights to Owners unless both the rights and
the securities to which such rights relate are either exempt from registration
under the Securities Act of 1933, as amended, with respect to a distribution to
all Owners or are registered under the provisions of such act.

      (c) The Trustee shall not be responsible for any failure to determine that
it may be lawful or feasible to make such rights available to Owners in general
or any Owner in particular.

(14)  RECORD DATES.

      Whenever any cash dividend or other cash distribution shall become payable
or any distribution other than cash shall be made, or whenever the Trustee
receives notice of a meeting of or solicitation of proxies from holders of any
Underlying Securities, or whenever a fee shall be changed by the Trustee under
Section 5.6 of the Standard Terms, or whenever for any reason there is a
reconstitution or other event under the Depositary Trust Agreement that causes a
change in the composition of the Securities which must be deposited for issuance
of Receipts, or whenever the Trustee shall find it necessary or convenient in
respect of any matter, the Trustee shall fix a record date (a) for the
determination of the Owners who shall be (i) entitled to receive such dividend,
distribution or rights or the net proceeds of the sale thereof or (ii) entitled
to give instructions for the exercise of voting rights at any such meeting or
solicitation, or (iii) required to pay such fee, or (b) on or after which each
Receipt will represent such changed group of Securities, subject to the
provisions of the Depositary Trust Agreement. In the case of subsections (a)(i)
and (a)(ii) of this Article (14), the Trustee shall use its best efforts to fix
a record date that will coincide with the record date fixed by the issuer of the
Underlying Securities; however, if a coinciding record date is not practicable,
the Trustee shall fix a record date as near as is practicable to the record date
set by the Securities Issuer.

(15)  VOTING OF UNDERLYING SECURITIES.

      Upon receipt by the Trustee or its appointed agent of notice of any
meeting of, or solicitation of proxies from, holders of Underlying Securities,
the Trustee shall, to the extent lawful, mail to the Owners a notice which shall
contain (a) such information as is contained in such notice of meeting or
solicitation, (b) a statement that the Owners of Receipts as of the close of
business on a specified record date will be entitled, subject to applicable law
and the provisions of the corporate documents of the Securities Issuer, to
instruct the Trustee as to the

                                      B-8
<PAGE>
exercise of the voting rights, if any, or giving of proxies, as applicable, in
respect of the amount of Underlying Securities represented by their respective
Receipts and (c) a statement as to the manner in which such instructions may be
given. Upon the written request of an Owner of a Receipt on such record date,
received on or before the date established by the Trustee, the Trustee shall,
insofar as practicable, vote or cause to be voted, or to give a proxy, as
applicable, in respect of the amount of Underlying Securities represented by
such Receipt in accordance with the instructions set forth in such request. The
Trustee shall not vote or attempt to exercise the right to vote that attaches
to, or give a proxy with respect to, Underlying Securities other than in
accordance with such instructions.

(16)  CHANGES AFFECTING UNDERLYING SECURITIES.

      (a) In circumstances where the provisions of Sections 2.11, 4.2 and 4.3 of
the Standard Terms do not apply, upon any change in nominal value, change in par
value, split-up, consolidation or any other reclassification of any Underlying
Securities, or upon any recapitalization, reorganization, merger or
consolidation or sale of assets affecting the issuer of any Underlying Security,
regardless of whether the Securities Issuer survives, the Trustee shall, to the
extent lawful and feasible, retain any Securities or Additional Securities under
the Depositary Trust Agreement, and, in such case, the (i) the amount of such
Securities or Additional Securities so retained in respect of each Receipt shall
be added to the classes and quantities of Securities which must be deposited for
issuance of Receipts and (ii) the number of Receipts in an Issuance Denomination
may be increased or decreased by the Trustee to the lowest multiple of 100
Receipts such that no fractional shares are thereby represented in such Issuance
Denomination.

      (b) Securities of any class which are surrendered by the Trustee in
connection with any such conversion or exchange shall, effective on the date of
such surrender, no longer be part of the securities which must be deposited for
issuance of Receipts. In any such case, or in the case of an event to which
Section 2.11 of the Standard Terms applies, the Trustee may call for the
Surrender of outstanding certificates evidencing Receipts to be exchanged for
new certificates specifically describing any applicable change in the classes
and quantities of securities which must be deposited for issuance of Receipts.

(17)  LIABILITY OF THE INITIAL DEPOSITOR AND THE TRUSTEE.

      Neither the Initial Depositor nor the Trustee nor any of their respective
directors, employees, agents or affiliates shall incur any liability to any
Owner or Beneficial Owner of any Receipt, if by reason of any provision of any
present or future law or regulation of the United States or any other country,
or of any governmental or regulatory authority or stock exchange, or by reason
of any act of God or war or other circumstances beyond its control, the Initial
Depositor or the Trustee shall be prevented or forbidden from, or be subject to
any civil or criminal penalty on account of, doing or performing any act or
thing which by the terms of the Standard Terms or the applicable Depositary
Trust Agreement it is provided shall be done or performed; nor shall the Initial
Depositor or the Trustee incur any liability to any Owner or Beneficial Owner of
any Receipt by reason of any non-performance or delay, caused as aforesaid, in
the performance of any act or thing which by the terms of the Standard Terms or
the applicable Depositary Trust Agreement it is provided shall or may be done or
performed, or by

                                      B-9
<PAGE>
reason of any exercise of, or failure to exercise, any discretion provided for
in the Standard Terms or the applicable Depositary Trust Agreement. Where, by
the terms of an offering or distribution to which Sections 2.11, 4.2 or 4.4 of
the Standard Terms applies, or for any other reason, it is not lawful and
feasible to make such distribution or offering available to Owners, and the
Trustee may not dispose of such distribution or offering on behalf of such
Owners and make the net proceeds available to such Owners, then the Trustee
shall not make such distribution or offering available to Owners and shall allow
any rights, if applicable, to lapse. The Trustee shall not be subject to any
liability with respect to the validity or worth of the Underlying Securities.
Neither the Initial Depositor nor the Trustee shall be under any obligation to
prosecute any action, suit or other proceeding in respect of any Underlying
Securities or in respect of the Receipts. Neither the Initial Depositor nor the
Trustee shall be liable for any action or non-action by it in reliance upon the
advice of or information from legal counsel, accountants, any person presenting
Securities for deposit, any Owner or Beneficial Owner, or any other person
believed by it in good faith to be competent to give such advice or information.

      The Trustee shall not be liable for any acts or omissions made by a
successor depositary whether in connection with a previous act or omission of
the Trustee or in connection with any matter arising wholly after the
resignation of the Trustee, provided that in connection with the issue out of
which such potential liability arises the Trustee performed its obligations
without negligence or bad faith while it acted as Trustee. The Trustee shall not
be responsible for any failure to carry out any instructions to vote any of the
Underlying Securities, or for the manner in which any such vote is cast or the
effect of any such vote, provided that any such action or non-action is without
negligence or bad faith. Except as specifically provided in Section 4.6 of the
Standard Terms, the Trustee shall have no obligation to monitor or to obtain any
information concerning the business or affairs of any Securities Issuer or to
advise Owners or Beneficial Owners of any event or condition affecting any
Securities Issuer. The Trustee shall have no obligation to comply with any
direction or instruction from any Owner or Beneficial Owner regarding Receipts
except to the extent specifically provided in the Standard Terms or any
applicable Depositary Trust Agreement. The Trustee shall be a fiduciary under
the Standard Terms and the applicable Depositary Trust Agreement; provided,
however, that the fiduciary duties and responsibilities and liabilities of the
Trustee shall be limited by, and shall be only those specifically set forth in,
the Standard Terms and the applicable Depositary Trust Agreement. No disclaimer
of liability under the Securities Act of 1933, as amended, is intended by any
provision of the Depositary Trust Agreement.

(18)  RESIGNATION OR REMOVAL OF THE TRUSTEE.

      (a) The Trustee may at any time resign as Trustee under the Depositary
Trust Agreement by written notice of its election so to do, delivered to the
Initial Depositor, and such resignation shall take effect upon the appointment
of a successor Trustee and its acceptance of such appointment.

      (b) If at any time the Trustee is in material breach of its obligations
under the Depositary Trust Agreement and the Trustee fails to cure such breach
within 30 days after receipt by the Trustee of written notice from the Initial
Depositor or the Owners of 25% or more of the outstanding Receipts specifying
such default and requiring the Trustee to cure such default, the Initial
Depositor, acting on behalf of the Owners, may remove the Trustee by written

                                      B-10
<PAGE>
notice delivered to the Trustee, and such removal shall take effect upon the
appointment of the successor Trustee and its acceptance of such appointment.

      (c) In case at any time the Trustee acting hereunder shall resign or be
removed, the Initial Depositor, acting on behalf of the Owners, shall use its
reasonable efforts to appoint a successor Trustee, which shall be a bank or
trust company having an office in the Borough of Manhattan, The City of New
York.

(19)  AMENDMENT.

      The Trustee and the Initial Depositor may amend any provisions of the
Depositary Trust Agreement without the consent of any Owner, provided that the
Trustee or the Initial Depositor is provided with an opinion of counsel to the
effect that such amendment will not affect the trust's status as a grantor trust
or custodial arrangement for U.S. federal income tax purposes. Any amendment
that imposes or increases any fees or charges (other than taxes and other
charges, registration fees or other such expenses), or that otherwise prejudices
any substantial existing right of the Owners will not become effective until 30
days after notice of such amendment is given to the Owners. Every Owner and
Beneficial Owner, at the time any amendment so becomes effective, shall be
deemed, by continuing to hold any Receipt or an interest therein, to consent and
agree to such amendment and to be bound by the Depositary Trust Agreement as
amended thereby. In no event shall any amendment impair the right of the Owner
of any Receipt to Surrender such Receipt and receive therefor the Underlying
Securities represented thereby, except in order to comply with mandatory
provisions of applicable law.

(20)  EARLY TERMINATION OF DEPOSITARY TRUST AGREEMENT.

      (a) The Trust shall terminate by the Trustee mailing notice of such
termination to the Owners of all Receipts then outstanding at least 30 days
prior to the date set for termination if any of the following occurs:

      (i) The Trustee is notified that the Receipts are delisted from a national
securities exchange and are not approved for listing on another national
securities exchange within 5 business days of their delisting;

      (ii)  Owners of at least 75% of the outstanding Receipts notify the
Trustee that they elect to terminate the Trust; or

      (iii) 60 days shall have expired after the Trustee shall have delivered to
the Initial Depositor and the Owners a written notice of its election to resign
and a successor trustee shall not have been appointed and accepted its
appointment.

      (b) On and after the date of termination, the Owner of a Receipt will,
upon (a) Surrender of such Receipt at the Corporate Trust Office of the Trustee,
(b) payment of the fee of the Trustee for the Surrender of Receipts referred to
in Section 2.7 of the Standard Terms, and (c) payment of any applicable taxes or
charges, be entitled to Delivery, to him or upon his order, of the amount of
Underlying Securities evidenced by such Receipt. If any Receipts shall remain
outstanding after the date of termination, the Trustee thereafter shall
discontinue the registration of transfers of Receipts, shall suspend the
distribution of dividends or other distribution to the

                                      B-11
<PAGE>
Owners thereof, and shall not give any further notices or perform any further
acts under these Standard Terms or the applicable Depositary Trust Agreement,
except that the Trustee shall continue to collect dividends and other
distributions pertaining to Underlying Securities and hold the same uninvested
and without liability for interest, shall sell rights as provided in these
Standard Terms or the applicable Depositary Trust Agreement, and shall continue
to deliver Underlying Securities, together with any dividends or other
distributions received with respect thereto and the net proceeds of the sale of
any rights or other property, in exchange for Receipts Surrendered to the
Trustee (after deducting or upon payment of, in each case, the fee of the
Trustee set forth in 5.6 of the Standard Terms for the Surrender of Receipts,
any expenses for the account of the Owner of such Receipts in accordance with
the terms and conditions of the Depositary Trust Agreement, and any applicable
taxes or charges). At any time after the expiration of one year following the
date of termination, the Trustee may sell the Underlying Securities then held
hereunder and may thereafter hold uninvested the net proceeds of any such sale,
together with any other cash then held by it hereunder, unsegregated and without
liability for interest, for the pro rata benefit of the Owners of Receipts which
have not theretofore been Surrendered, such Owners thereupon becoming general
creditors of the Trustee with respect to such net proceeds.

      After making such sale, the Trustee shall be discharged from all
obligations under these Standard Terms with respect to the Receipts and the
applicable Depositary Trust Agreement, except to account for such net proceeds
and other cash (after deducting, in each case, the fee of the Trustee for the
Surrender of Receipts, any fees of the Trustee due and owing from the Owner of
such Receipts pursuant to Section 5.6 of the Standard Terms, any expenses for
the account of the Owner of such Receipts in accordance with the terms and
conditions of the Depositary Trust Agreement, and any applicable taxes or
charges). Upon the termination of the applicable Depositary Trust Agreement, the
Initial Depositor shall be discharged from all obligations under such Depositary
Trust Agreement except for its obligations to the Trustee under Section 5.5 of
the Standard Terms.

                                      B-12<PAGE>
                                                                    Exhibit 10.1

                                                                  EXECUTION COPY

                          AGREEMENT AND PLAN OF MERGER

                                  BY AND AMONG

                      FIRST STEP DISTRIBUTION NETWORK, INC.

                              AND ITS SHAREHOLDERS

                          FIRST STEP ACQUISITION CORP.

                                       AND

                                K2 DIGITAL, INC.

                          DATED AS OF JANUARY 15, 2002
<PAGE>
                          AGREEMENT AND PLAN OF MERGER

      This AGREEMENT AND PLAN OF MERGER is made and entered into as of January
15, 2002 by and among K2 Digital, Inc., a Delaware corporation ("Parent"), First
Step Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
the Parent ("Merger Sub"), First Step Distribution Network, Inc., a California
corporation (the "Company"), (collectively the "Parties") and the shareholders
of the Company identified on Exhibit A hereto (the "Shareholders").

      A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2) and in accordance with the California Corporation Code
("California Law") and the Delaware General Corporation Law ("Delaware Law"),
the Parent, the Merger Sub and the Company intend to enter into a business
combination transaction.

      B. The Parties wish to provide for the terms and conditions of a merger of
the Merger Sub with and into the Company, in a transaction that is intended to
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code") and as a reverse triangular merger
under Code Sections 368(a)(1)(A) and Section 368(a)(2)(E) and provide for the
representations, warranties, agreements and conditions applicable to the merger.

      C. The Parties intend that this Agreement constitutes a "plan of
reorganization" for the purposes of Section 368 of the Code.

      D. The Board of Directors of the Company (i) has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of the Company and fair to, and in the best interests of, the Company and its
stockholders, (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) has recommended that the
stockholders of the Company adopt and approve this Agreement and approve the
Merger.

      E. The Board of Directors of the Parent (i) has determined that the Merger
is consistent with and in furtherance of the long-term business strategy of the
Parent and fair to, and in the best interests of, the Parent and its
stockholders, (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) has recommended that the
stockholders of the Parent vote to approve the reverse stock split of the
Parent's Common Stock described in Section 3.2 this Agreement.

      NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
<PAGE>
                                    ARTICLE I
                                   THE MERGER

      1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law and California Law, Merger Sub shall be
merged with and into the Company (the "Merger"), the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation. The Company as the surviving corporation after the Merger
is hereinafter sometimes referred to as the "Surviving Corporation."

      1.2 EFFECTIVE TIME; CLOSING. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger, substantially in the form of Exhibit B hereto (the
"Certificate of Merger"), with the Secretary of State of the State of Delaware
and the Secretary of State of the State of California, in accordance with the
relevant provisions of Delaware and California Law (the time of such filing (or
such later time as may be agreed in writing by the parties and specified in the
Certificate of Merger) being the "Effective Time") as soon as practicable on or
after the Closing Date (as defined herein). Unless the context otherwise
requires, the term "Agreement" as used herein refers collectively to this
Agreement and Plan of Merger and the Certificate of Merger. The closing of the
Merger (the "Closing") shall take place at the offices of Sokolow, Dunaud,
Mercadier & Carreras LLP, 770 Lexington Avenue, Sixth Floor, New York, New York
10021, at a time and date to be specified by the parties, which shall be no
later than the second business day after the satisfaction or waiver of the
conditions set forth in Article VI, or at such other time, date and location as
the parties hereto agree in writing (the "Closing Date").

      1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of Delaware
Law and California Law. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time all the property, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.

      1.4 CERTIFICATE OF INCORPORATION; BYLAWS.

      (a) At the Effective Time, the Certificate of Incorporation of the
Company, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law.

      (b) The Bylaws of the Company, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.

      (c) The Certificate of Incorporation of the Parent as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Parent at and as of the Effective Time; provided that, the
Certificate of Incorporation of the Parent shall be amended at the Effective
Time and simultaneously with the Merger in order to change the name of the
Parent to a name other than "K2 Digital, Inc." that does not contain the term
"K2".

                                       2
<PAGE>
      1.5 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:

      (a) CONVERSION OF COMPANY COMMON STOCK. Each share of Common Stock, $.0001
par value per share of the Company ("Company Common Stock") issued and
outstanding immediately prior to the Effective Time, (other than any shares of
the Company Common Stock to be canceled pursuant to Section 1.5(c)) will be
canceled and extinguished and automatically converted (subject to Sections
1.5(f) and (g)) into the right to receive 16.609 Shares (the "Exchange Ratio")
of Common Stock, $.01 par value, of the Parent ("Parent Common Stock") upon
surrender of the certificate representing such share of Company Common Stock in
the manner provided in Section 1.6 (or in the case of a lost, stolen or
destroyed certificate, upon delivery of an affidavit (and bond, if required) in
the manner provided in Section 1.9). If any shares of Company Common Stock
outstanding immediately prior to the Effective Time are unvested or are subject
to a repurchase option, risk of forfeiture or other condition under any
applicable restricted stock purchase agreement or other agreement with the
Company, then the shares of Parent Common Stock issued in exchange for such
shares of Company Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the certificates
representing such shares of Parent Common Stock may accordingly be marked with
appropriate legends. The Company shall take all action that may be necessary to
ensure that, from and after the Effective Time, the Parent is entitled to
exercise any such repurchase option or other right set forth in any such
restricted stock purchase agreement or other agreement.

      (b) PERCENTAGE OWNERSHIP. It is understood and agreed by the Parties that
the aggregate number of shares of Parent Common Stock issuable to the Company
stockholders by virtue of the Merger as of the date hereof shall equal
approximately ninety percent (90%) of the issued and outstanding common stock of
the Parent (which, for the avoidance of doubt, assumes that all outstanding
securities exercisable for, or convertible into, shares of Parent Common Stock
have been so exercised or converted), as adjusted to appropriately reflect the
effect of any stock split, reverse stock split, stock dividend (including any
dividend or distribution of securities convertible into Parent Common Stock or
Company Common Stock), reorganization, recapitalization or other like change
with respect to Parent Common Stock or Company Common Stock occurring on or
after the date hereof and prior to the Effective Time.

      (c) CANCELLATION OF PARENT-OWNED STOCK. Each share of Company Common Stock
held by the Company or owned by the Merger Sub, the Parent or any direct or
indirect wholly owned subsidiary of the Company or of the Parent immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof.

      (d) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock, $.01 par
value per share, of Merger Sub (the "Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of Common Stock, $.01 par
value, of the Surviving Corporation. Each certificate evidencing ownership of
shares of Merger Sub Common Stock shall continue to evidence ownership of such
shares of capital stock of the Surviving Corporation.

                                       3
<PAGE>
      (e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be adjusted
(such adjustment to be subject to the consent of the Company, which shall not be
unreasonably withheld) to reflect appropriately the effect of any stock split,
reverse stock split, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Company Common Stock),
reorganization, recapitalization or other like change with respect to Parent
Common Stock or Company Common Stock occurring on or after the date hereof and
prior to the Effective Time.

      (f) FRACTIONAL SHARES. No fraction of a share of Parent Common Stock will
be issued by virtue of the Merger, but in lieu thereof each holder of shares of
Company Common Stock who would otherwise be entitled to a fraction of a share of
Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock to be received by such holder) shall receive from Parent one full share of
Parent Common Stock (i.e. rounded up to the nearest whole share).

      1.6 SURRENDER OF CERTIFICATES.

      (a) EXCHANGE AND TRANSFER AGENT. Parent shall select Continental Stock
Transfer & Trust Company to act as the exchange agent (the "Exchange Agent") in
the Merger.

      (b) THE PARENT TO PROVIDE COMMON STOCK. Promptly after the Effective Time,
the Parent shall make available to the Exchange Agent, for exchange in
accordance with this Article I, certificates representing the shares of Parent
Common Stock issuable pursuant to Section 1.5 in exchange for outstanding shares
of Company Common Stock.

      (c) EXCHANGE PROCEDURES. Promptly after the Effective Time, the Parent
shall cause the Exchange Agent to mail to each holder of record (as of the
Effective Time) of a certificate or certificates (the "Certificates") which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into the right to receive
shares of Parent Common Stock pursuant to Section 1.5, (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 such form and have such other
provisions as the Parent may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock. Upon surrender of Certificates for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by the Parent, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, the
holders of such Certificates shall be entitled to receive in exchange therefor
certificates representing the number of whole shares of Parent Common Stock
which such holders have the right to receive and the Certificates so surrendered
shall forthwith be canceled. Until so surrendered, outstanding Certificates will
be deemed from and after the Effective Time, for all corporate purposes to
evidence only the ownership of the number of full shares of Parent Common Stock
into which such shares of Company Common Stock shall be exchanged.

      (d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered Certificates with respect to the
shares of Parent Common Stock represented thereby until the

                                       4
<PAGE>
holders of record of such Certificates shall surrender such Certificates.
Following surrender of any such Certificates, the Exchange Agent shall deliver
to the record holders thereof, without interest, certificates representing whole
shares of Parent Common Stock issued in exchange thereof and, subject to
applicable law, the amount of any such dividends or other distributions with a
record date after the Effective Time payable with respect to such whole shares
of Parent Common Stock.

      (e) TRANSFERS OF OWNERSHIP. If certificates for shares of Parent Common
Stock are to be issued in a name other than that in which the Certificates
surrendered in exchange therefor are registered, it will be a condition of the
issuance thereof that the Certificates so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the persons requesting such
exchange will have paid to the Parent or any agent designated by it any transfer
or other taxes required by reason of the issuance of certificates for shares of
Parent Common Stock in any name other than that of the registered holder of the
Certificates surrendered, or established to the satisfaction of the Parent or
any agent designated by it that such tax has been paid or is not payable.

      (f) NO LIABILITY. Notwithstanding anything to the contrary in this Section
1.6, neither the Exchange Agent, the Parent, the Surviving Corporation nor any
party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Common Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.

      1.7 NO FURTHER OWNERSHIP RIGHTS IN THE COMPANY COMMON STOCK. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of the
Company Common Stock in accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If after the Effective
Time Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.

      1.8 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, the number of shares of Parent
Common Stock that the holder of such lost, stolen or destroyed Certificates
would otherwise be entitled to receive under this Article I; provided, however,
that the Parent may, in its discretion and as a condition precedent to the
issuance thereof, require the registered holder of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against the Parent, the
Surviving Corporation or the Exchange Agent with respect to the Certificates
alleged to have been lost, stolen or destroyed.

      1.9 TAX AND ACCOUNTING CONSEQUENCES.

      It is intended by the parties hereto that the Merger shall constitute a
reorganization within the meaning of Section 368 of the Code. The parties hereto
adopt this Agreement as a "plan of

                                       5
<PAGE>
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.

      1.10 TAKING OF NECESSARY ACTION, FURTHER ACTION. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub will take all such lawful and necessary action, so long
as such action is consistent with this Agreement.

                                   ARTICLE II
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

      The Company represents and warrants to the Parent and the Merger Sub,
subject to the exceptions specifically disclosed in writing and referencing a
specific representation in the disclosure letter supplied by the Company to the
Parent dated as of the date hereof and certified by a duly authorized officer of
the Company (the "Company Disclosure Letter"), as follows:

      2.1 ORGANIZATION OF THE COMPANY.

      (a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation; has the
corporate power and authority to own, lease and operate its assets and property
and to carry on its business as now being conducted and as proposed to be
conducted; and is duly qualified or licensed to do business and is in good
standing in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary.

      (b) The Company has no subsidiaries.

      (c) The Company has delivered or made available to the Parent a true and
correct copy of the Certificate of Incorporation and Bylaws of the Company, as
amended to date, and each such instrument is in full force and effect. The
Company is not in violation of any of the provisions of its Certificate of
Incorporation or Bylaws or equivalent governing instruments.

      2.2 COMPANY CAPITAL STRUCTURE.

      The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, $.0001 par value per share, of which there were 900,000 shares
issued and outstanding as of the date of this Agreement. All outstanding shares
of Company Common Stock are duly authorized, validly issued, fully paid and
nonassessable and are not subject to preemptive rights created by statute, the
Certificate of Incorporation or Bylaws of the Company or any agreement or
document to which the Company is a party or by which it is bound.

                                       6
<PAGE>
      2.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set forth in
Section 2.2 of the Company Disclosure Letter, there are no equity securities,
partnership interests or similar ownership interests of any class of the
Company, or any securities exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. There are no equity securities,
partnership interests or similar ownership interests of the Company, or any
security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except as set forth in Section 2.2, there
are no options, warrants, equity securities, partnership interests or similar
ownership interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which the Company is a party or by which it is
bound obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition, of any shares of capital stock,
partnership interests or similar ownership interests of the Company or
obligating the Company to grant, extend, accelerate the vesting of or enter into
any such option, warrant, equity security, call, right, commitment or agreement.
There are no registration rights and, to the knowledge of the Company, as of the
date of this Agreement, there are no voting trusts, proxies or other agreements
or understandings (except for the Company Voting Agreements) with respect to any
equity security of any class of the Company.

      2.4 AUTHORITY.

      (a) The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the filing of the
Certificate of Merger pursuant to Delaware Law. This Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by the Parent and, if applicable, Merger Sub, constitutes
a valid and binding obligation of the Company, enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy and other
similar laws and general principles of equity. The execution and delivery of
this Agreement by the Company does not, and the performance of this Agreement by
the Company will not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws of the Company, (ii) subject to compliance with the
requirements set forth in Section 2.4(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to the Company or by
which its or any of their respective properties is bound or affected, or (iii)
assuming the receipt of all material consents, waivers and approvals referred to
in the last sentence of this Section 2.4(a), result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair the Company's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company pursuant to, any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company is a party or by which the Company or its or any of their
respective properties are bound or affected. The Company Schedules list all
material consents, waivers and approvals under any of the Company's agreements,
contracts, licenses or

                                       7
<PAGE>
leases required to be obtained in connection with the consummation of the
transactions contemplated hereby.

      (b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("Governmental Entity"), is required by or with respect to the Company in
connection with the execution and delivery of this Agreement or the consummation
of the Merger, except for (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, (ii) such consents, approvals,
orders, authorizations, registrations, declarations and filings (if any) as may
be required under applicable federal and state securities laws and the
securities or antitrust laws of any foreign country, and (iii) such other
consents, authorizations, filings, approvals and registrations (if any) which if
not obtained or made would not be material to the Company or the Parent or have
a material adverse effect on the ability of the parties to consummate the
Merger.

      2.5 COMPANY FINANCIAL STATEMENTS. Each of the financial statements
(including, in each case, any related notes thereto) of the Company (the
"Company Financials"), (x) was prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, and (y) fairly presented the
consolidated financial position of the Company and its subsidiaries as of and at
the respective dates thereof and the consolidated results of the Company's
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements may not contain footnotes and were or are subject
to normal and recurring year-end adjustments. The balance sheet of the Company
as of September 30, 2001 is hereinafter referred to as the "Company Balance
Sheet." Except as disclosed in the Company Financials, since the date of the
Company Balance Sheet the Company has no liabilities (absolute, accrued,
contingent or otherwise) of a nature required to be disclosed on a balance sheet
or in the related notes to the consolidated financial statements prepared in
accordance with GAAP which are, individually or in the aggregate, material to
the business, results of operations or financial condition of the Company taken
as a whole, except liabilities (i) provided for in the Company Balance Sheet, or
(ii) incurred since the date of the Company Balance Sheet in the ordinary course
of business consistent with past practices.

      2.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the Company
Balance Sheet there has not been: (i) any material adverse effect on the
business, assets (including intangible assets), financial condition or results
of operations of the Company, (ii) any declaration, setting aside or payment of
any dividend on, or other distribution (whether in cash, stock or property) in
respect of, any of the Company's capital stock, or any purchase, redemption or
other acquisition by the Company of any of the Company's capital stock or any
other securities of the Company or any options, warrants, calls or rights to
acquire any such shares or other securities except for repurchases from
employees following their termination pursuant to the terms of their
pre-existing stock option or purchase agreements, (iii) any split, combination
or reclassification of any of the Company's capital stock, (iv) any granting by
the Company of any increase in compensation or fringe benefits, except for
normal increases of cash compensation in the ordinary course of business
consistent with past practice, or any payment by the Company of any bonus,
except for bonuses made in the ordinary course of business consistent with past
practice, or any granting by the Company of any increase in severance or
termination pay or any

                                       8
<PAGE>
entry by the Company into any currently effective employment, severance,
termination or indemnification agreement or any agreement the benefits of which
are contingent or the terms of which are materially altered upon the occurrence
of a transaction involving the Company of the nature contemplated hereby, (v)
entry by the Company into any licensing or other agreement with regard to the
acquisition or disposition of any material Company IP Rights (as defined in
Section 2.8) other than licenses in the ordinary course of business consistent
with past practice, (vi) any material change by the Company in its accounting
methods, principles or practices, except as required by concurrent changes in
GAAP, or (vii) any revaluation by the Company of any of its assets, including,
without limitation, writing down the value of capitalized inventory or writing
off notes or accounts receivable other than in the ordinary course of business.

      2.7 TAXES.

      (a) DEFINITION OF TAXES. For the purposes of this Agreement, "Tax" or
"Taxes" refers to any and all (i) federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, (ii) all interest, penalties and additions imposed with respect
to such amounts, and (iii) any obligations to any tax authority under Treasury
Regulation 1.1502-6 or any similar provision of state, local or foreign law.

      (b) TAX RETURNS AND AUDITS.

            (i) The Company has timely filed all federal, state, local and
      foreign returns, estimates, information statements and reports ("Returns")
      relating to Taxes required to be filed by the Company, except such Returns
      which are not material to the Company, and have paid all Taxes shown to be
      due on such Returns. All such Returns are true, correct and complete in
      all material respects.

            (ii) The Company as of the Effective Time will have withheld and
      paid over, as appropriate, with respect to its employees all federal and
      state, local and/or foreign income taxes, Taxes pursuant to the Federal
      Insurance Contribution Act ("FICA"), Taxes pursuant to the Federal
      Unemployment Tax Act ("FUTA") and other Taxes required to be withheld.

            (iii) The Company has not been delinquent in the payment of any Tax
      nor is there any Tax deficiency outstanding, proposed or assessed against
      the Company, nor has the Company executed any waiver of any statute of
      limitations on or extending the period for the assessment or collection of
      any Tax.

            (iv) No audit or other examination of any Return of the Company is
      presently in progress, nor has the Company been notified of any request
      for such an audit or other examination. The Company has not received a
      request for or an inquiry regarding a Return from any jurisdiction where
      it does not currently file a Return.

            (v) No adjustment relating to any Returns filed by the Company has
      been proposed formally or informally by any Tax authority to the Company
      or any

                                       9
<PAGE>
      representative thereof and, to the knowledge of the Company, no basis
      exists for any such adjustment, which would be material to the Company.

            (vi) The Company does not have any liability for unpaid Taxes which
      has not been accrued for or reserved on the Company Balance Sheet, whether
      asserted or unasserted, contingent or otherwise, which is material to the
      Company, and the Company has not incurred any liability for Taxes other
      than in the ordinary course of business since the date of the Company
      Balance Sheet. There is no lien for Taxes on the assets of the Company
      other than inchoate liens for Taxes not yet due.

            (vii) None of the Company's assets are treated as "tax-exempt use
      property" within the meaning of Section 168(h) of the Code.

            (viii) There is no contract, agreement, plan or arrangement,
      including but not limited to the provisions of this Agreement, covering
      any employee or former employee of the Company that, individually or
      collectively, could give rise to the payment of any amount that would not
      be deductible pursuant to Sections 162, 280G or 404 of the Code.

            (ix) The Company has not filed any consent agreement under Section
      341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
      to any disposition of a subsection (f) asset (as defined in Section
      341(f)(4) of the Code) owned by the Company.

            (x) The Company is not, and has not been at any time, a "United
      States real property holding corporation" within the meaning of Section
      897(c)(2) of the Code.

            (xi) No power of attorney that is currently in force has been
      granted with respect to any matter relating to Taxes payable by the
      Company.

            (xii) The Company has never been a member of a consolidated,
      combined or affiliated group and is not a party to or affected by any
      tax-sharing or allocation agreement or arrangement.

            (xiii) The Company Disclosure Letter lists (A) any Tax exemption,
      Tax holiday or other Tax-sparing arrangement that the Company has in any
      jurisdiction, including the nature, amount and lengths of such Tax
      exemption, Tax holiday or other Tax-sparing arrangement and (B) any
      expatriate tax programs or policies affecting the Company. The Company is
      in full compliance with all terms and conditions of any Tax exemption, Tax
      holiday or other Tax-sparing arrangement or order of any Governmental
      Entity and the consummation of the transactions contemplated hereby will
      not have any adverse effect on the continued validity and effectiveness of
      any such Tax exemption, Tax holiday or other Tax-sparing arrangement or
      order.

            (xiv) The Company is not a party to or otherwise subject to any
      arrangement entered into in anticipation of the Closing, not in accordance
      with past practice and not required by this Agreement, that could
      reasonably be expected to have the effect of (i) the recognition of a
      deduction or loss before the Closing Date and a corresponding recognition
      of taxable income or gain by the Company after the Closing Date or (ii)
      the recognition of taxable income or gain by the Company after the Closing
      Date without the receipt of or entitlement to a corresponding amount of
      cash.

                                       10
<PAGE>
            (xv) Except as set forth in Section 2.7(b)(xv) of the Company
      Disclosure Letter, no closing agreement, written ruling, or determination
      letter with respect to Taxes, or any equivalent written decision from a
      foreign jurisdiction, has been received from, and no closing or other
      similar agreement has been executed with, any Tax or other governmental
      authority that will be binding upon the Company after the Closing.

            (xvi) The Company has properly withheld on all amounts paid to
      Persons located or incorporated outside of the United States and have paid
      the appropriate amounts withheld to the proper governmental authorities.

            (xvii) The Company has not been a party to a transaction intended to
      qualify under Section 355 of the Code (whether as distributing or
      distributed company) within the last five years.

      2.8 INTELLECTUAL PROPERTY.

      (a) To the knowledge of the Company, the Company owns, or has the right to
use, sell or license all intellectual property necessary or required for the
conduct of its business as presently conducted (such intellectual property and
the rights thereto are collectively referred to herein as the "Company IP
Rights").

      (b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any of the Company IP Rights to
which the Company is a party or by which, to its knowledge, it is bound or
affected, will not cause the forfeiture or termination or give rise to a right
of forfeiture or termination of any the Company IP Rights or materially impair
the right of the Company, the Surviving Corporation or the Parent to use, sell
or license any the Company IP Rights or portion thereof.

      (c) To the knowledge of the Company, the manufacture, marketing, license,
sale or intended use of any product or technology currently licensed or sold or
under development by the Company does not violate any license or agreement
between the Company and any third party nor infringe any intellectual property
right of any other party.

      (d) There is no pending or, to the knowledge of the Company, threatened
claim or litigation contesting the validity, ownership or right to use, sell,
license or dispose of any the Company IP Rights, nor has the Company received
any written notice asserting that any the Company IP Rights or the proposed use,
sale, license or disposition thereof conflicts or will conflict with the rights
of any other party. Schedule 2.8 of the Company Disclosure Letter lists each
patent held by the Company and the expiration date of each such patent.

      (e) The Company has taken commercially reasonable steps designed to
safeguard and maintain the confidentiality of, and its proprietary rights in,
all the Company IP Rights.

      2.9 COMPLIANCE; PERMITS; RESTRICTIONS.

      (a) The Company is not in any material respect, in conflict with, or in
default or violation of (i) any law, rule, regulation, order, judgment or decree
applicable to the Company or by which the Company or any of its respective
properties is bound or affected, or (ii) any note,

                                       11
<PAGE>
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company is a party or
by which the Company or its properties is bound or affected. No investigation or
review by any Governmental Entity is pending or, to the Company's knowledge,
threatened against the Company, nor has any Governmental Entity indicated an
intention to conduct the same. There is no agreement, judgment, injunction,
order or decree binding upon the Company which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any business
practice of the Company, any acquisition of material property by the Company or
the conduct of business by the Company as currently conducted.

      (b) The Company holds all permits, licenses, variances, exemptions, orders
and approvals from governmental authorities which are material to the operation
of the business of the Company (collectively, the "Company Permits"). The
Company is in compliance in all material respects with the terms of the Company
Permits.

      (c) Except as disclosed in Section 2.9(c) of the Company Disclosure
Letter, the Company has no knowledge of any pending regulatory action of any
sort against the Company, or the Company's products by any regulatory agency or
any other duly authorized governmental authority. Except as set forth on Section
2.9(c) of the Company Disclosure Letter, the Company has not knowingly committed
or permitted to exist any violation of the rules and regulations of any
regulatory agency or any other duly authorized governmental authority.

      2.10 LITIGATION. Except as disclosed in Section 2.10 of the Company
Disclosure Letter, there is no action, suit, proceeding, claim, arbitration or
investigation pending, or as to which the Company has received any notice of
assertion nor, to the Company's knowledge, is there a threatened action, suit,
proceeding, claim, arbitration or investigation against the Company which
reasonably would be likely to be material to the Company, or which in any manner
challenges or seeks to prevent, enjoin, alter or delay any of the transactions
contemplated by this Agreement.

      2.11 EMPLOYEE BENEFIT PLANS AND EMPLOYMENT MATTERS.

      (a) The Company has no employee benefit plans, pension plans or
multi-employee plans.

      (b) To the Company's knowledge, the Company (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Company Employees; (ii) has withheld all amounts required by law or by agreement
to be withheld from the wages, salaries and other payments to Company Employees;
(iii) is not liable for any arrears of wages or any taxes or any penalty for
failure to comply with any of the foregoing; and (iv) is not liable for any
material payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Company Employees (other
than routine payments to be made in the normal course of business and consistent
with past practice). There are no pending, threatened or reasonably anticipated
claims or actions against the Company under any worker's compensation policy or
long-term disability policy. To the Company's knowledge, no employee of the
Company has violated any employment contract,

                                       12
<PAGE>
nondisclosure agreement or noncompetition agreement by which such employee is
bound due to such employee being employed by the Company and disclosing to the
Company or using trade secrets or proprietary information of any other person or
entity.

      2.12 ABSENCE OF LIENS AND ENCUMBRANCES. Except as set forth in Section
2.12 of the Company Disclosure Letter, the Company has good and valid title to,
or, in the case of leased properties and assets, valid leasehold interests in,
all of its material tangible properties and assets, real, personal and mixed,
used in its business, free and clear of any liens or encumbrances except as
reflected in the Company Financials and except for liens for taxes not yet due
and payable and such imperfections of title and encumbrances, if any, which
would not be material to the Company.

      2.13 ENVIRONMENTAL MATTERS.

            The Company has complied and is in compliance with all Federal,
State, and local material environmental, health and safety requirements.

      2.14 LABOR MATTERS. The Company has two employees.

      2.15 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth in Section
2.15 and Section 2.2(b) of the Company Disclosure Letter, the Company is not a
party to and is not bound by:

      (a) any employment or consulting agreement, contract or commitment with
any officer or director level employee or member of the Company's Board of
Directors, other than those that are terminable by the Company on no more than
thirty (30) days notice without liability or financial obligation;

      (b) any agreement or plan, including, without limitation, any stock option
plan, stock appreciation right plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;

      (c) any agreement of indemnification or guaranty not entered into in the
ordinary course of business other than indemnification agreements between the
Company and any of its officers or directors;

      (d) any agreement, contract or commitment containing any covenant limiting
the freedom of the Company to engage in any line of business or compete with any
person or granting any exclusive distribution rights;

      (e) any agreement, contract or commitment currently in force relating to
the disposition or acquisition of assets not in the ordinary course of business
or any ownership interest in any corporation, partnership, joint venture or
other business enterprise;

      (f) any material joint marketing or development agreement; or

      (g) any other material contract.

                                       13
<PAGE>
      Neither the Company, nor to the Company's knowledge any other party to a
Company Contract (as defined herein), has breached, violated or defaulted under,
or received notice that it has breached, violated or defaulted under, any of the
material terms or conditions of any of the agreements, contracts or commitments
to which the Company is a party or by which it is bound of the type described in
clauses (a) through (g) above (any such agreement, contract or commitment, a
"Company Contract") in such a manner as would permit any other party to cancel
or terminate any such Company Contract, or would permit any other party to seek
damages, which would be reasonably likely to be material to the Company.

      2.16 BOARD APPROVAL. The Board of Directors of the Company has, as of the
date of this Agreement, determined that the Merger is fair to, and in the best
interests of the Company and its shareholders and the shareholders of the
Company have approved the merger.

      2.17 COMPANY STOCKHOLDERS. Each stockholder of the Company (each a
"Company Stockholder" and, collectively, the "Company Stockholders") represents
and warrants to the Parent as follows:

      (a) Such Company Stockholder is an "accredited investor" as such term is
defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended
(the "Securities Act").

      (b) Such Company Stockholder has full power and authority to enter into
this Agreement and this Agreement constitutes its valid and legally binding
obligation, enforceable in accordance with its terms.

      (c) The Parent has entered into this Agreement with such Company
Stockholder in reliance upon such Company Stockholder's representation to the
Parent, which by the Company Stockholder's execution of this Agreement the
Company Stockholder hereby confirms, that the Parent Common Stock to be received
by the Company Stockholder (collectively, the "Securities") will be acquired for
investment for the Company Stockholder's own account, not as a nominee or agent,
and not with a view to the resale or distribution of any part thereof, and that
the Company Stockholder has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, the Company Stockholder further represents that the Company
Stockholder does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participations to such person or to
any third person, with respect to any of the Securities.

      (d) Such Company Stockholder is aware that an investment in the Purchaser
involves a high degree of risk. The Company Stockholder acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, including
a total loss of such investment, and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Parent Common Stock. In evaluating the
suitability of an investment in the Securities, the Company Stockholder has not
relied upon any representations or other information (whether written or oral)
from the Parent, other than the representations and warranties contained herein
and upon investigations made by the Company Stockholder in making the decision
to invest in the Parent. The Company Stockholder acknowledges that any
information furnished by the Parent does not constitute investment, accounting,
tax or legal advice. Moreover, such Company Stockholder is not relying upon any
information furnished by the Parent with respect to such Company Stockholder's
tax and other

                                       14
<PAGE>
economic considerations in connection with its investment in Parent. In regard
to the tax and other economic considerations related to such investment, the
Company Stockholder has relied on the advice of, or has consulted with, only its
own professional advisors.

      (e) Such Company Stockholder recognizes that no regulatory body has
recommended or endorsed the purchase of the Securities or passed upon the
adequacy or accuracy of the information set forth herein, and that the Parent is
relying on the truth and accuracy of the representations, declarations and
warranties made by each Company Stockholder as contained herein in selling the
Securities.

      (f) Such Company Stockholder has at all times been given the opportunity
to obtain additional information, to verify the accuracy of the information
received and to ask questions of and receive answers from certain
representatives of the Parent concerning the terms and conditions of such
Company Stockholder's investment in the Parent and the nature and prospects of
the Parent's business.

      (g) To its knowledge, the execution, delivery and performance of this
Agreement and the acquisition of the Securities by the Company Stockholder will
not result in a violation by the Parent or the Company of any NASD rule or
regulation, including the "bad boy" provisions thereof.

      (h) The Company Stockholder understands that the Securities it is
purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Parent in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act, only in certain limited circumstances. In this connection, the Company
Stockholder represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.

      (i) Each certificate representing Parent Common Stock pursuant to Section
1.5 shall contain the following legend:

            "The shares represented by this certificate have not been registered
            under the Securities Act of 1933, as amended, or any state
            securities laws. The shares may not be transferred, assigned, sold,
            offered for sale, except pursuant to an effective registration
            statement under such Act or any applicable state securities law or
            an opinion of counsel, in form and substance acceptable to the
            Parent, that registration is not required because of an applicable
            exemption from such registration requirements. The sale or transfer
            of shares evidenced by this certificate are subject to the terms and
            conditions of an agreement and plan of merger dated as of January
            15, 2002, and effective no later than April 30, 2002. Any transfer
            in violation of such Agreement is invalid. A copy of the Agreement
            is on file at the office of the Parent."

      2.19 BROKERS OR FINDERS. Neither the Company nor any of its
representatives has incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees

                                       15
<PAGE>
transactions contemplated by this Agreement for which the Parent will or could
be liable or responsible.

                                   ARTICLE III
                        REPRESENTATIONS AND WARRANTIES OF
                          THE PARENT AND THE MERGER SUB

      The Parent and the Merger Sub represent and warrant to the Company,
subject to the exceptions specifically disclosed in writing in the disclosure
letter supplied by the Parent to the Company dated as of the date hereof and
certified by a duly authorized officer of the Parent (the "Parent Disclosure
Letter"), as follows:

      3.1 ORGANIZATION OF THE PARENT.

      (a) Each of the Parent and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
their incorporation; has the corporate power and authority to own, lease and
operate its assets and property and to carry on its business as now being
conducted and as proposed to be conducted; and is duly qualified or licensed to
do business and is in good standing in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except where the failure to be
so qualified would not have a Material Adverse Effect (as defined herein) on the
Parent.

      (b) The Parent has delivered to the Company a true and complete list of
all of the Parent's subsidiaries, indicating the jurisdiction of incorporation
of each subsidiary and listing the stockholders of each such subsidiary and the
number of shares held by each such stockholder.

      (c) The Parent has delivered or made available to the Company a true and
correct copy of the Certificate of Incorporation and Bylaws of the Parent and
similar governing instruments of each of its subsidiaries, each as amended to
date, and each such instrument is in full force and effect. The Parent is not in
violation of any of the provisions of its Certificate of Incorporation or Bylaws
or equivalent governing instruments.

      (d) When used in connection with the Parent, the term "Material Adverse
Effect" means, for purposes of this Agreement, any change, event or effect that
is materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of the Parent and its subsidiaries
taken as a whole except for those changes, events and effects that are directly
caused by (i) conditions affecting the United States economy as a whole, or (ii)
conditions affecting the internet industry as a whole, which conditions (in the
case of clause (i) or (ii)) do not affect the Parent in a disproportionate
manner), or (iii) conditions that in the good faith judgment of the Parent's
Board of Directors result principally from the execution or delivery of this
Agreement or the announcement of the pendency of the Merger.

      3.2 THE PARENT AND THE MERGER SUB CAPITAL STRUCTURE.

      The authorized capital stock of the Parent consists of 24,000,000 shares
of Common Stock, $.01 par value per share, of which as of October 31, 2001 there
were 4,982,699 shares issued and outstanding (prior to, and without giving
effect to, the proposed "3 for 1" reverse stock

                                       16
<PAGE>
split of the Parent's Common Stock), 1,000,000 shares of Preferred Stock, $.001
par value per share, of which no shares are issued or outstanding as of the date
of this Agreement and 417,417 Treasury Shares. All outstanding shares of Parent
Common Stock are duly authorized, validly issued, fully paid and nonassessable
and are not subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of the Parent or any agreement or document to which the
Parent is a party or by which it is bound. The authorized capital stock of the
Merger Sub consists of 1,000 shares of Common Stock, $.01 par value per share,
all of which, as of the date hereof, are issued and outstanding and are held by
the Parent. The Merger Sub was formed on January 10, 2002, for the purpose of
consummating the Merger, has no material assets or liabilities except as
necessary for such purpose and has not, and prior to the Effective Time will not
have, conducted any business except as necessary for such purpose.

      3.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set forth in
Section 3.3 or in the Parent Disclosure Letter, there are no equity securities,
partnership interests or similar ownership interests of any class of Parent, or
any securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except for securities the Parent owns,
directly or indirectly through one or more subsidiaries and except as set forth
in Section 3.3 of the Parent Disclosure Letter, there are no equity securities,
partnership interests or similar ownership interests of any class of any
subsidiary of the Parent, or any security exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except as set
forth in Section 3.2, there are no options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which the
Parent is a party or by which it is bound obligating Parent to issue, deliver or
sell, or cause to be issued, delivered or sold, or repurchase, redeem or
otherwise acquire, or cause the repurchase, redemption or acquisition, of any
shares of capital stock, partnership interests or similar ownership interests of
the Parent or obligating the Parent to grant, extend, accelerate the vesting of
or enter into any such option, warrant, equity security, call, right, commitment
or agreement. There are no registration rights and, to the knowledge of the
Parent, as of the date of this Agreement, there are no voting trusts, proxies or
other agreements or understandings with respect to any equity security of any
class of the Parent or with respect to any equity security, partnership interest
or similar ownership interest of any class of any of its subsidiaries.

      3.4 AUTHORITY.

      (a) Each of the Parent and the Merger Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Parent and the
Merger Sub, subject only to the filing of the Certificate of Merger pursuant to
Delaware Law and the requisite approval by the Parent's stockholders of the
transactions contemplated by this Agreement. This Agreement has been duly
executed and delivered by each of the Parent and the Merger Sub and, assuming
the due authorization, execution and delivery by the Company, constitutes the
valid and binding obligation of each of the Parent and the Merger Sub,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy and other similar laws and general principles of equity.
The execution and delivery

                                       17
<PAGE>
of this Agreement by each of the Parent and the Merger Sub do not, and the
performance of this Agreement by each of the Parent and the Merger Sub will not
(i) conflict with or violate the Certificate of Incorporation or Bylaws of the
Parent or the Certificate of Incorporation or Bylaws of the Merger Sub, (ii)
subject to obtaining the requisite approval of the Parent's stockholders with
respect to the transactions contemplated by this Agreement and compliance with
the requirements set forth in Section 3.4(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to the Parent or the
Merger Sub or by which they or any of their respective properties is bound or
affected, or (iii) assuming the receipt of all material consents, waivers and
approvals referred to in the last sentence of this Section 3.4(a), result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or impair the Parent's rights or alter
the rights or obligations of any third party under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Parent or the Merger Sub pursuant to, any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Parent or the Merger Sub is a party or by
which the Parent or the Merger Sub or any of their respective properties are
bound or affected. The Parent Disclosure Letter lists all material consents,
waivers and approvals under any of the Parent's agreements, contracts, licenses
or leases required to be obtained in connection with the consummation of the
transactions contemplated hereby.

      (b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to the Parent or the Merger Sub in connection with the execution and
delivery of this Agreement or the consummation of the Merger, except for (i) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and the Secretary of State of the State of California, (ii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings (if any) as may be required under applicable federal and state
securities laws and the securities or antitrust laws of any foreign country, and
(iii) such other consents, authorizations, filings, approvals and registrations
(if any) which if not obtained or made would not be material to the Parent or
the Merger Sub or have a material adverse effect on the ability of the parties
to consummate the Merger.

      3.5 PARENT SEC FILINGS; PARENT FINANCIAL STATEMENTS.

      (a) The Parent has filed all forms, reports and documents required to be
filed with the United States Securities and Exchange Commission ("SEC") since
the date of this Agreement, and has made available to the Company such forms,
reports and documents in the form filed with the SEC. All such required forms,
reports and documents (including those that the Parent may file subsequent to
the date hereof) are referred to herein as the "Parent SEC Reports." As of their
respective dates, the Parent SEC Reports (i) were prepared in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such Parent SEC Reports, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in

                                       18
<PAGE>
the light of the circumstances under which they were made, not misleading. The
Merger Sub is not required to file any forms, reports or other documents with
the SEC.

      (b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports (the
"Parent Financials") (x) complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, (y) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-QSB under the Exchange Act) and (z) fairly presented the financial
position of the Parent as at the respective dates thereof and the results of the
Parent's operations and cash flows for the periods indicated, except that the
unaudited interim financial statements may not contain footnotes and were or are
subject to normal and recurring year-end adjustments. The balance sheet of the
Parent contained in the Parent SEC Reports as of September 30, 2001 is
hereinafter referred to as the "Parent Balance Sheet." Except as disclosed in
the Parent Financials, since the date of the Parent Balance Sheet, the Parent
has no liabilities (absolute, accrued, contingent or otherwise) of a nature
required to be disclosed on a balance sheet or in the related notes to the
consolidated financial statements prepared in accordance with GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of the Parent and its subsidiaries taken as a
whole, except liabilities (i) provided for in the Parent Balance Sheet, or (ii)
incurred since the date of the Parent Balance Sheet in the ordinary course of
business consistent with past practices.

      3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of Parent Balance
Sheet there has not been: (i) any Material Adverse Effect on Parent, (ii) any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of the Parent's capital
stock, or any purchase, redemption or other acquisition by the Parent of any of
the Parent's capital stock or any other securities of the Parent or its
subsidiaries or any options, warrants, calls or rights to acquire any such
shares or other securities except for repurchases from employees following their
termination pursuant to the terms of their pre-existing stock option or purchase
agreements, (iii) any split, combination or reclassification of any of the
Parent's capital stock, (iv) any granting by the Parent of any increase in
compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by Parent of any bonus, except for bonuses made in the ordinary
course of business consistent with past practice, or any granting by Parent of
any increase in severance or termination pay or any entry by the Parent into any
currently effective employment, severance, termination or indemnification
agreement or any agreement the benefits of which are contingent or the terms of
which are materially altered upon the occurrence of a transaction involving the
Parent of the nature contemplated hereby, (v) entry by the Parent into any
licensing or other agreement with regard to the acquisition or disposition of
any material Parent IP Rights (as defined in Section 3.8) other than licenses in
the ordinary course of business consistent with past practice, (vi) any material
change by the Parent in its accounting methods, principles or practices, except
as required by concurrent changes in GAAP, or (vii) any revaluation by the
Parent of any of its assets, including, without limitation, writing down the
value of capitalized inventory or writing off notes or accounts receivable other
than in the ordinary course of business.

                                       19
<PAGE>
      3.7 TAX.

      (a) TAX RETURNS AND AUDITS.

            (i) The Parent and each of its subsidiaries have timely filed all
      Returns relating to Taxes required to be filed by the Parent and each of
      its subsidiaries, except such Returns which are not material to the
      Parent, and have paid all Taxes shown to be due on such Returns.

            (ii) The Parent and each of its subsidiaries as of the Effective
      Time will have withheld and paid over, as appropriate, with respect to its
      employees all federal and state, local and/or foreign income taxes, FICA,
      FUTA and other Taxes required to be withheld.

            (iii) The Parent has not been delinquent in the payment of any Tax
      nor is there any Tax deficiency outstanding, proposed or assessed against
      the Parent, nor has the Parent executed any waiver of any statute of
      limitations on or extending the period for the assessment or collection of
      any Tax.

            (iv) No audit or other examination of any Return of the Parent is
      presently in progress, nor has Parent been notified of any request for
      such an audit or other examination.

            (v) No adjustment relating to any Returns filed by the Parent has
      been proposed formally or informally by any Tax authority to the Parent or
      any representative thereof and, to the knowledge of the Parent, no basis
      exists for any such adjustment, which would be material to the Parent.

            (vi) The Parent has no liability for unpaid Taxes which has not been
      accrued for or reserved on the Parent Balance Sheet, whether asserted or
      unasserted, contingent or otherwise, which is material to the Parent, and
      the Parent has not incurred any liability for Taxes other than in the
      ordinary course of business since the date of the Parent Balance Sheet.

            (vii) None of the Parent's assets are treated as "tax-exempt use
      property" within the meaning of Section 168(h) of the Code.

            (viii) There is no contract, agreement, plan or arrangement,
      including but not limited to the provisions of this Agreement, covering
      any employee or former employee of the Parent that, individually or
      collectively, could give rise to the payment of any amount that would not
      be deductible pursuant to Sections 280G or 404 of the Code.

            (ix) The Parent has not filed any consent agreement under Section
      341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
      to any disposition of a subsection (f) asset (as defined in Section
      341(f)(4) of the Code) owned by the Parent.

            (x) The Parent is not, and has not been at any time, a "United
      States real property holding corporation" within the meaning of Section
      897(c)(2) of the Code.

            (xi) No power of attorney that is currently in force has been
      granted with respect to any matter relating to Taxes payable by the
      Parent.

                                       20
<PAGE>
            (xii) The Parent is not, nor has it been, a member of a
      consolidated, combined or affiliated group or is a party to or affected by
      any tax-sharing or allocation agreement or arrangement.

            (xiii) The Parent Disclosure Letter lists (y) any Tax exemption, Tax
      holiday or other Tax-sparing arrangement that the Parent has in any
      jurisdiction, including the nature, amount and lengths of such Tax
      exemption, Tax holiday or other Tax-sparing arrangement and (z) any
      expatriate tax programs or policies affecting the Parent. Each of the
      Parent and its subsidiaries is in full compliance with all terms and
      conditions of any Tax exemption, Tax holiday or other Tax-sparing
      arrangement or order of any Governmental Entity and the consummation of
      the transactions contemplated hereby will not have any adverse effect on
      the continued validity and effectiveness of any such Tax exemption, Tax
      holiday or other Tax-sparing arrangement or order.

      3.8 INTELLECTUAL PROPERTY. The Parent owns or is validly licensed or
otherwise has the right to use, free and clear of all liens, claims and
restrictions of any kind or nature, the patents, trademarks, trade names,
service marks, copyrights, trade secrets, technology, know-how and processes (
collectively, " Intellectual Property") listed in Section 3.8 of the Parent
Disclosure Letter.

      3.9 COMPLIANCE; PERMITS; RESTRICTIONS.

      (a) The Parent is not, in any material respect, in conflict with, or in
default or violation of (i) any law, rule, regulation, order, judgment or decree
applicable to the Parent or by which the Parent or any of its is bound or
affected, or (ii) except as set forth in Section 3.9 of the Parent Disclosure
Letter, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the Parent
is a party or by which the Parent or its properties is bound or affected. No
investigation or review by any Governmental Entity is pending or, to the
Parent's knowledge, threatened against the Parent, nor has any Governmental
Entity indicated an intention to conduct the same. There is no agreement,
judgment, injunction, order or decree binding upon the Parent which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of the Parent, any acquisition of material property by the
Parent or the conduct of business by the Parent as currently conducted.

      (b) The Parent and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities which are
material to the operation of the business of the Parent (collectively, the
"Parent Permits"). The Parent and its subsidiaries are in compliance in all
material respects with the terms of the Parent Permits.

      (c) Except as disclosed in Section 3.9(c) of the Parent Disclosure Letter,
the Parent has no knowledge of any pending regulatory action of any sort against
the Parent by any regulatory agency or any other duly authorized governmental
authority in any jurisdiction which could have a Material Adverse Effect on the
Parent. Except as set forth on Section 3.9(c) of the Parent Disclosure Letter,
the Parent has not knowingly committed or permitted to exist any violation of
the rules and regulations of any regulatory agency or any other duly authorized
governmental authority.

                                       21
<PAGE>
      3.10 LITIGATION. Except as disclosed in Section 3.10 of the Parent
Disclosure Letter, there is no action, suit, proceeding, claim, arbitration or
investigation pending, or as to which the Parent has received any notice of
assertion nor, to Parent's knowledge, is there a threatened action, suit,
proceeding, claim, arbitration or investigation against the Parent which
reasonably would be likely to be material to the Parent, or which in any manner
challenges or seeks to prevent, enjoin, alter or delay any of the transactions
contemplated by this Agreement.

      3.11 EMPLOYMENT MATTERS. To the Parent's knowledge, the Parent (i) is in
compliance in all material respects with all applicable foreign, federal, state
and local laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours; (ii) has
withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to employees; (iii) is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing; and (iv) is not liable for any material payment to any trust or
other fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for employees (other than routine payments to be made in the normal
course of business and consistent with past practice). There are no pending,
threatened or reasonably anticipated claims or actions against the Parent under
any worker's compensation policy or long-term disability policy. To the Parent's
knowledge, no Parent employee has violated any employment contract,
nondisclosure agreement or noncompetition agreement by which such employee is
bound due to such employee being employed by the Parent and disclosing to the
Parent or using trade secrets or proprietary information of any other person or
entity.

      3.12 ENVIRONMENTAL MATTERS.

            The Parent has materially complied and is in material compliance
with all Federal, State and Local material environmental, health and safety
requirements.

      3.13 LABOR MATTERS. No work stoppage or labor strike against the Parent is
pending, threatened or reasonably anticipated. The Parent does not have
knowledge of any activities or proceedings of any labor union to organize any
Parent employees. There are no actions, suits, claims, labor disputes or
grievances pending, or, to the knowledge of the Parent, threatened or reasonably
anticipated relating to any labor, safety or discrimination matters involving
any Parent employee, including, without limitation, charges of unfair labor
practices or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in any material liability to the
Parent. The Parent has not engaged in any unfair labor practices within the
meaning of the National Labor Relations Act. The Parent is not presently, nor
has it been in the past, a party to, or bound by, any collective bargaining
agreement or union contract with respect to Parent employees and no collective
bargaining agreement is being negotiated by the Parent. The Parent is and has
been in compliance in all material respects with all applicable laws regarding
employment practices, terms and conditions of employment, and wages and hours
(including, without limitation, the Federal Worker Adjustment Restraining
Notification Act, 29 U.S.C. Section 2101 et seq. ("WARN") or any similar state
or local law).

                                       22
<PAGE>
      3.14 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth in Section
3.14 and Section 3.2(b) of the Parent Disclosure Letter, the Parent is neither a
party to nor is bound by:

      (a) any employment or consulting agreement, contract or commitment with
any officer or director level employee or member of Parent's Board of Directors,
other than those that are terminable by the Parent on no more than thirty days
notice without liability or financial obligation;

      (b) any agreement or plan, including, without limitation, any stock option
plan, stock appreciation right plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;

      (c) any agreement of indemnification or guaranty not entered into in the
ordinary course of business other than indemnification agreements between the
Parent and any of its officers or directors;

      (d) any agreement, contract or commitment containing any covenant limiting
the freedom of the Parent to engage in any line of business or compete with any
person or granting any exclusive distribution rights;

      (e) any agreement, contract or commitment currently in force relating to
the disposition or acquisition of assets not in the ordinary course of business
or any ownership interest in any corporation, partnership, joint venture or
other business enterprise; or

      (f) any material joint marketing or development agreement.

      Neither the Parent, nor to the Parent's Knowledge any other party to a
Parent Contract (as defined below), has breached, violated or defaulted under,
or received notice that it has breached violated or defaulted under, any of the
material terms or conditions of any of the agreements, contracts or commitments
to which the Parent is a party or by which it is bound of the type described in
clauses (a) through (f) above (any such agreement, contract or commitment, a
"Parent Contract") in such a manner as would permit any other party to cancel or
terminate any such Parent Contract, or would permit any other party to seek
damages, which would be reasonably likely to be material to the Parent.

      3.15 NO CHANGE OF CONTROL PAYMENTS OR PROVISIONS. The Parent is not a
party or subject to any agreement, contract or other obligation which would
require the making of any payment, other than payments as contemplated by this
Agreement, to any employee of the Parent or to any other Person as a result of
the consummation of the transactions contemplated herein.

      3.16 BOARD APPROVAL. The Board of Directors of the Parent has, as of the
date of this Agreement, determined (i) that the Merger is fair to, and in the
best interests of the Parent and its stockholders, and (ii) to recommend that
the stockholders of the Parent approve the reverse stock split described in
Section 3.2 of this Agreement.

                                       23
<PAGE>
      3.17 OVER THE COUNTER BULLETIN BOARD LISTING. Parent's Common Stock is
listed on the NASDAQ Over the Counter Bulletin Board, and is in compliance with
the listing requirements thereof.

      3.18 INFORMATION. All written information provided to the Company by or on
behalf of the Parent or any of its representatives (including, without
limitation, each representation and warranty of the Parent set forth in this
Agreement) is, and the Parent covenants that any such information provided
hereafter shall be, true and correct in all material respects and does not, or
shall not, omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that no representation or warranty is made by
the Parent as to any financial forecasts or projections previously furnished to
the Company by the Parent.

      3.19 AUTHORIZATION OF PARENT COMMON STOCK. The issuance of shares of
Parent Common Stock at the Closing will have been duly authorized by all
necessary corporate action prior to the Effective Date and, when issued as
contemplated by this Agreement, all such shares of Parent Common Stock will be
validly issued, fully paid and non-assessable.

      3.20 BROKERS OR FINDERS. Neither the Parent nor any of its representatives
have incurred any obligation or liability, contingent or otherwise, for
brokerage or finders' fees transactions contemplated by this Agreement for which
the Company will or could be liable or responsible.

                                   ARTICLE IV
                              ADDITIONAL AGREEMENTS

      4.1 PUBLIC DISCLOSURE. The Parent and the Company will consult with each
other before issuing any press release or otherwise making any public statement
with respect to the Merger, this Agreement or an Acquisition Proposal and will
not issue any such press release or make any such public statement without the
prior consent of the other party, except as may be required by law or any
listing agreement with a national securities exchange or the NASDAQ Over the
Counter Bulletin Board.

      4.2 LEGAL REQUIREMENTS. Each of the Parent, the Merger Sub and the Company
will use its respective reasonable commercial efforts to take all actions
necessary or desirable to comply promptly with all legal requirements which may
be imposed on them with respect to the consummation of the transactions
contemplated by this Agreement (including furnishing all information required in
connection with approvals by or filings with any Governmental Entity,) and will
promptly cooperate with and furnish information to any party hereto necessary in
connection with any such filings with or investigations by any Governmental
Entity, and any other such requirements imposed upon any of them or their
respective subsidiaries in connection with the consummation of the transactions
contemplated by this Agreement. The Parent will use its commercially reasonable
efforts to take such steps as may be necessary to comply with the securities and
blue sky laws of all jurisdictions which are applicable to the issuance of
Parent Common Stock pursuant hereto. The Company will use its commercially
reasonable efforts to assist the Parent as may be necessary to comply with the
securities and blue sky laws of all

                                       24
<PAGE>
jurisdictions which are applicable in connection with the issuance of Parent
Common Stock pursuant hereto.

      4.3 THIRD PARTY CONSENTS. As soon as practicable following the date
hereof, the Parent and the Company will each use its commercially reasonable
efforts to obtain all material consents, waivers and approvals under any of its
or its subsidiaries' agreements, contracts, licenses or leases required to be
obtained in connection with the consummation of the transactions contemplated
hereby.

      4.4 NOTIFICATION OF CERTAIN MATTERS. The Parent and the Merger Sub will
give prompt notice to the Company, and the Company will give prompt notice to
the Parent, of the occurrence, or failure to occur, of any event, which
occurrence or failure to occur would be reasonably likely to cause (a) any
representation or warranty contained in this Agreement and made by it to be
untrue or inaccurate in any material respect at any time from the date of this
Agreement to the Effective Time such that the conditions set forth in Section
5.2 or 5.3, as the case may be, would not be satisfied as a result thereof or
(b) any material failure of the Parent and the Merger Sub or the Company, as the
case may be, or of any officer, director, employee or agent thereof, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement. Notwithstanding the above, the delivery of
any notice pursuant to this Section will not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.

      4.5 REASONABLY COMMERCIAL EFFORTS AND FURTHER ASSURANCES. Subject to the
respective rights and obligations of the Parent and the Company under this
Agreement, each of the parties to this Agreement will use its reasonably
commercial efforts to effectuate the Merger and the other transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
closing under this Agreement; provided that neither the Parent nor the Company
nor any subsidiary or affiliate thereof will be required to agree to any
divestiture by itself or any of its affiliates of shares of capital stock or of
any business, assets or property, or the imposition of any material limitation
on the ability of any of them to conduct their businesses or to own or exercise
control of such assets, properties and stock. Subject to the foregoing, each
party hereto, at the reasonable request of another party hereto, will execute
and deliver such other instruments and do and perform such other acts and things
as may be necessary or desirable for effecting completely the consummation of
the transactions contemplated hereby.

      4.6 INDEMNIFICATION AND INSURANCE.

      (a) The Company and the shareholders of the Company hereby jointly and
severally covenant and agree that, from and after the Effective Time, the Bylaws
and Certificate of Incorporation of the Parent will honor, and the Parent will
honor and will cause the Surviving Corporation to honor, the provisions with
respect to indemnification set forth in the Bylaws and Certificate of
Incorporation of the Parent immediately prior to the Effective Time, which
provisions will not be amended, repealed or otherwise modified for a period of
six (6) years after the Effective Time in any manner that would adversely affect
the rights thereunder of individuals who at the Effective Time were directors,
officers, employees or agents of the Parent, unless such modification is
required by law.

                                       25
<PAGE>
      (b) The Parent will honor and fulfill, and will cause the Surviving
Corporation to honor and fulfill, the obligations of the Company pursuant to
indemnification agreements with the Parent's directors and officers existing at
or before the Effective Time.

      The Company and the shareholders of the Company hereby jointly and
severally covenant and agree that, for a period of six (6) years after the
Effective Time, the Parent will or will cause the Surviving Corporation to
maintain in effect, if available, directors' and officers' liability insurance
covering those persons who are currently covered by the Parent's directors' and
officers' liability insurance policy (a copy of which has been made available to
the Company) on terms comparable to those now applicable to directors and
officers of the Parent; provided, however, that in no event will the Parent, the
Company or the Surviving Corporation be required to expend in excess of 150% of
the annual premium currently paid by the Parent for such coverage; and provided
further, that if the premium for such coverage exceeds such amount, the Parent
or the Surviving Corporation will purchase a policy with the greatest coverage
available for such 150% of the annual premium.

      4.7 BOARD OF DIRECTORS AND CERTAIN OFFICERS OF PARENT AND SURVIVING
CORPORATION.

      The directors of the Company immediately prior to the Effective Time shall
be the initial directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation.

      Except as otherwise agreed, the officers of the Company in office
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation, to serve in accordance with the By-laws of the Surviving
Corporation until their respective successors are duly elected or appointed and
qualified.

      Prior to the Effective Time, the officers and directors of the Parent
shall have tendered their respective resignations, which such resignations shall
be expressly conditional upon the consummation of the Merger and shall take
effect automatically as of the Effective Time, without any further act of the
Surviving Corporation.

      The Definitive Proxy Statement shall include a proposal for the election
of a slate of directors of the Parent to be designated by the Company and, if
elected, such directors shall hold office in accordance with the Certificate of
Incorporation and By-laws of the Parent with the term of office of such
directors to commence immediately upon the consummation of the Merger.

      4.8 CURRENT REPORT OF FORM 8-K. Within five (5) days after the
consummation of the Merger, the directors and executive officers of the Parent
immediately after the Effective Time shall cause the Parent to file with the SEC
a Current Report of Form 8-K describing the transactions contemplated by this
Agreement, together with a copy of this Agreement and any other information and
exhibits that may be required by applicable law.

      4.9 USE OF "K2" NAME. The officers and directors of Parent immediately
after the Effective Time shall take all action necessary to change the name of
the Parent, as of the Effective Time, to a name other than "K2 Digital, Inc."
and to a name that does not include the

                                       26
<PAGE>
phrase "K2". Within 60 days after the Effective Time, the Parent and the
Surviving Corporation shall cease all use of the names "K2 Digital, Inc." and
"K2".

      4.10 CONDUCT OF BUSINESS PENDING THE MERGER.

      Except as otherwise contemplated by this Agreement, after the date hereof
and prior to the Closing Date or earlier termination of this Agreement, unless
the other party shall otherwise agree in writing, each of the Company and the
Parent shall, and shall cause its subsidiaries, to:

      (a) conduct its business in the ordinary and usual course of business and
consistent with past practice, except as contemplated by this Agreement;

      (b) not (i) amend or propose to amend its charter or by-laws, (ii) except
as contemplated by this Agreement, split, combine or reclassify its outstanding
capital stock or (iii) declare, set aside or pay any dividend or distribution
payable in cash, stock, property or otherwise;

      (c) not make any loans, advances or capital contributions to, or
investment in, any other person or entity;

      (d) not adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its subsidiaries (other than in connection with the
Merger);

      (e) not take any action, engage in any transaction or enter into any
agreement which would cause any of the representations or warranties of such
party set forth in this Agreement to be untrue as of the Effective Time; and

      (f) not agree, in writing or otherwise, to take any of the foregoing
actions.

      4.11 CONTROL OF THE PARENT'S OPERATIONS.

      Nothing contained in this Agreement shall give to the Company, directly or
indirectly, rights to control or direct the Parent's operations prior to the
Effective Time. Prior to the Effective Time, the Parent shall exercise,
consistent with the terms and conditions of this Agreement, complete control and
supervision of its operations.

      4.12 COOPERATION REGARDING PROXY STATEMENT. The Company agrees to provide
promptly to the Parent such information concerning its business and financial
statements and affairs as, in the reasonable judgement of the Parent or its
counsel, may be required or appropriate for inclusion in the Definitive Proxy
Statement or in any amendments or supplements thereto, and to cause its counsel
and accountants to cooperate with the Parent's counsel and accountants in the
preparation of the same. The Company hereby agrees that such information shall
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained therein not misleading. The Company will promptly advise the Parent
and the Parent will promptly advise the Company, in writing, if at any time
prior to the Effective Time either the Company or the Parent shall obtain
knowledge of any facts that might make it necessary or appropriate to amend or
supplement the Definitive Proxy Statement in order to make the statements
contained or incorporated by reference therein not misleading or to comply with
applicable law.

                                       27
<PAGE>
      4.13 DELIVERY OF COMPANY FINANCIALS. The Company agrees to provide to the
Parent no later than January 31, 2002 a true and correct copy of the Company
Financials described in Section 2.5 of this Agreement, including, without
limitation, the Company Balance Sheet as of September 30, 2001, together with
the income statement related thereto.

      4.14 DELIVERY OF ACCREDITED INVESTOR CERTIFICATIONS. The Company agrees to
provide, or cause to be provided, to the Parent no later than the fifteenth day
after the date of this Agreement a true and correct copy of a certification of
each of the Shareholders in the form of Exhibit C attached hereto as to the
status of such Shareholder as an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Securities Act.

                                    ARTICLE V
                            CONDITIONS TO THE MERGER

      5.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:

      (a) NO ORDER. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.

      (b) STOCK SPLIT. Any amendment to the Certificate of Incorporation of the
Parent required to give effect to the 3 for 1 reverse stock split of the
authorized capital stock of the Parent shall have been duly filed, and effective
with, the Secretary of State of the State of Delaware.

      (c) PARENT STOCKHOLDER APPROVAL. To the extent required by applicable law
and by the requisite vote required by applicable law, the stockholders of the
Parent shall have duly approved the transactions contemplated by this Agreement.

      5.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of
the Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:

      (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Parent and the Merger Sub contained in this Agreement shall have been true
and correct in all material respects as of the date of this Agreement. In
addition, the representations and warranties of the Parent and the Merger Sub
contained in this Agreement shall be true and correct in all material respects
on and as of the Effective Time except for changes contemplated by this
Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such particular date), with the same force and effect as if made on and as of
the Effective Time, except in such cases (other than the representations in
Sections 3.2 and 3.3) where the failure to be so true and correct would not

                                       28
<PAGE>
have a Material Adverse Effect on Parent. The Company shall have received a
certificate with respect to the foregoing signed on behalf of the Parent by the
Chief Operating Officer of the Parent.

      (b) AGREEMENTS AND COVENANTS. The Parent and the Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and the Company shall have received a certificate to such
effect signed on behalf of the Parent by the Chief Operating Officer of the
Parent.

      (c) APPROVAL OF STOCKHOLDERS; PROXY STATEMENT. The Parent shall (i) cause
a meeting of its stockholders to be duly called and held as soon as practicable
for the purpose of voting on this Agreement (the "Stockholders Meeting"), (ii)
recommend approval and adoption of the reverse stock split described in Section
3.2 of this Agreement to its stockholders and (iii) use its best efforts to
obtain the necessary approval and adoption of such stock split by its
stockholders.

      In connection with such stockholders' meeting, the Parent shall file a
preliminary proxy statement with the SEC and shall use its best efforts to
receive and respond to the comments of the SEC and to cause a final proxy
statement (the "Definitive Proxy Statement") to be mailed to its stockholders,
all at the earliest practicable time. The Parent shall notify the Company
promptly of the receipt of the comments of the SEC, and of any request by the
SEC for amendments or supplements to the preliminary and Definitive Proxy
Statements or for additional information.

      If at any time prior to the meeting of stockholders referred to in this
Section 5.2(c) any event relating to the Parent or the Company should be
discovered which should be set forth in an amendment of, or a supplement to, the
Definitive Proxy Statement, the Parent shall promptly so inform the Company,
shall furnish all necessary information to the Parent relating to such event,
shall use its best efforts to take any necessary action as promptly as
practicable to permit an appropriate amendment or supplement to be transmitted
to the Parent's stockholders and shall transmit such amendment or supplement as
promptly as practicable.

      (d) OPINION OF COUNSEL FOR PARENT AND SUB. The Company shall have received
from Brown Raysman Millstein Felder & Steiner LLP , counsel for Parent, an
opinion, dated as of the date of the Merger, substantially in the form of
Exhibit D attached hereto.

      5.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE PARENT AND THE MERGER
SUB. The obligations of the Parent and the Merger Sub to consummate and effect
the Merger shall be subject to the satisfaction at or prior to the Effective
Time of each of the following conditions, any of which may be waived, in
writing, exclusively by the Parent:

      (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company contained in this Agreement shall have been true and correct in all
material respects as of the date of this Agreement. In addition, the
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects on and as of the Effective Time
except for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such particular date), with the
same force and effect as if made on

                                       29
<PAGE>
and as of the Effective Time. Parent shall have received a certificate with
respect to the foregoing signed on behalf of the Company by the Chief Executive
Officer of the Company.

      (b) AGREEMENTS AND COVENANTS. The Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time, and the Parent shall have received a certificate to such effect signed on
behalf of the Company by the Chief Executive Officer of the Company.

      (c) OPINION OF COUNSEL FOR THE COMPANY. Parent shall have received from
Messrs. Sokolow, Dunaud, Mercadier & Carreras LLP, counsel for the Company and
Sub, an opinion dated the Merger Time, in form and substance satisfactory to
Parent, to the effect that:

            (i) The Company is a corporation duly organized, validly existing
      and in good standing under the law of the State of California, and has the
      corporate power to enter into this Agreement, consummate the Merger and
      carry out the other transactions contemplated hereby;

            (ii) This Agreement has been duly authorized, executed and delivered
      by The Company and, assuming due authorization, execution, delivery and
      performance by the Parent and Sub, constitutes a valid and binding
      obligation of the Company, enforceable in accordance with its terms,
      subject to the Remedies Exceptions and except as the enforceability of the
      indemnification and contribution provisions may be limited under
      applicable securities laws;

            (iii) All corporate action by the Company required in order to
      effect the transactions contemplated hereby has been taken;

            (iv) Except as provided in this Agreement, no order, authorization,
      consent or approval of, or registration, declaration or filing with any
      governmental authority is required in connection with the consummation by
      the Company of the merger or by the Company of the other transactions
      contemplated by this Agreement;

            (v) The execution, delivery and performance of this Agreement by the
      Company and the consummation of the transactions contemplated hereby will
      not constitute a breach or violation of or default under the Certificate
      of Incorporation or By-Laws of the Company;

            (vi) Upon the filing of the Certificate of Merger and Articles of
      Merger with, and the certification of such filing by, the Delaware
      Secretary of State and the California Secretary of State, respectively,
      the Merger shall have been duly consummated in accordance with the
      California Law and the Delaware Law;

            (vii) Assuming the accuracy of the representations and warranties of
      the shareholders of the Company contained in this Agreement, the issuance
      of the Parent Common Stock to the shareholders of the Company as
      contemplated by this Agreement will be exempt from the registration
      requirements of the Securities Act of 1933, as amended.

                                       30
<PAGE>
      (d) COMPANY FINANCING. The Company shall have consummated a bridge
financing yielding net proceeds to the Company of not less than $500,000 or such
lesser amount as the Parent may consent to in writing and shall have entered
into a binding commitment, as evidenced by a legally-binding letter of intent or
similar agreement, for additional funding of at least $3,000,000 to be
consummated within 90 days of the date of Closing.

                                   ARTICLE VI
                        TERMINATION, AMENDMENT AND WAIVER

      6.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after approval of the
transactions contemplated hereby by the stockholders of the Parent:

      (a) by mutual written consent duly authorized by the Boards of Directors
of the Parent and the Company;

      (b) by either the Company or the Parent if the Merger shall not have been
consummated by April 30, 2002.

      (c) by either the Company or the Parent if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action (an "Order"),
in any case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree or ruling is final and
nonappealable;

      (d) by either the Company or the Parent if the required approvals of the
stockholders of the Company or the stockholders of the Parent contemplated by
this Agreement shall not have been obtained by reason of the failure to obtain
the required vote upon a vote taken at a meeting of stockholders duly convened
therefor or at any adjournment thereof (provided that the right to terminate
this Agreement under this Section 6.1(d) shall not be available to any party
where the failure to obtain stockholder approval of such party shall have been
caused by the action or failure to act of such party in breach of this
Agreement);

      (e) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of the Parent set forth in this Agreement, or
if any representation or warranty of the Parent shall have become untrue, in
either case such that the conditions set forth in Section 5.2(a) or Section
5.2(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue, provided that if such
inaccuracy in the Parent's representations and warranties or breach by the
Parent is curable prior to April 30, 2002 by the Parent through the exercise of
its commercially reasonable efforts, then the Company may not terminate this
Agreement under this Section 6.1(e) provided the Parent continues to exercise
such commercially reasonable efforts to cure such breach; or

      (f) by the Parent, upon a breach of any representation, warranty, covenant
or agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company shall have become untrue, in either
case such that the conditions set forth in Section 5.3(a) or Section 5.3(b)
would not be satisfied as of the time of such breach or as

                                       31
<PAGE>
of the time such representation or warranty shall have become untrue, provided
that if such inaccuracy in the Company's representations and warranties or
breach by the Company is curable prior to April 30, 2002 by the Company through
the exercise of its commercially reasonable efforts, then the Parent may not
terminate this Agreement under this Section 6.1(f) provided the Company
continues to exercise such commercially reasonable efforts to cure such breach.

      (g) by the Company if, at any time prior to the Effective Time the
Parent's Over the Counter Bulletin Board listing of its Common Stock is
terminated.

      6.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of this
Agreement under Section 6.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 6.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 6.2, Section 6.3 and Article 7 (miscellaneous), each of which
shall survive the termination of this Agreement, and (ii) nothing herein shall
relieve any party from liability for any breach of this Agreement.

      6.3 FEES AND EXPENSES. All fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses whether or not the Merger is consummated;
provided, however, that the Company shall pay up to $75,000.00 of the fees and
expenses ($10,000 of which has been paid to date), including attorneys' and
accountants' fees, filing fees, printing costs, transfer agent fees and other
expenses, incurred by the Parent in relation to the negotiation and finalization
of the transactions contemplated by this Agreement, including, without
limitation, the preparation, printing and filing of the Definitive Proxy
Statement with the SEC and NASDAQ (including any preliminary materials related
thereto) and any amendments or supplements thereto.

                                   ARTICLE VII
                               GENERAL PROVISIONS

      7.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):

      (a) if to the Parent or the Merger Sub, to:

                               K2 Digital, Inc.
                               30 Broad Street, 16th Floor
                               New York, NY 10004
                               Telephone: (212) 301-8848
                               Fax: (212) 301-8801
                               Attention: Gary W. Brown, Chief Operating Officer

                                       32
<PAGE>
          with a copy to:

                               Brown Raysman Millstein Felder & Steiner LLP
                               900 Third Avenue
                               New York, NY 10022
                               Telephone: (212) 895-2000
                               Fax: (212) 895-2900
                               Attention: David Warburg, Esq.

      (b) if to the Company, to:

                               First Step Distribution Network, Inc.
                               2325 Mount Olympus Drive
                               Los Angeles, CA 90046
                               Telephone: (310) 994-2813
                               Fax:
                               Attention: John McCracken

          with copy to:
                               Sokolow, Dunaud, Mercadier & Carreras LLP
                               770 Lexington Avenue 6th Fl.
                               New York, NY 10021
                               Telephone: (212) 935-6000
                               Fax: (212) 750-1222
                               Attention: Thomas G. Amon

      7.2 INTERPRETATION. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." 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. When reference is made herein to "the business
of" an entity, such reference shall be deemed to include the business of all
direct and indirect subsidiaries of such entity. Reference to the subsidiaries
of an entity shall be "deemed to include" all direct and indirect subsidiaries
of such entity. References herein to "Sections" are references to Sections
hereof unless otherwise stated herein.

      7.3 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 party, it being understood that all parties need not sign
the same counterpart.

      7.4 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Disclosure Letter
and the Parent Disclosure Letter (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; and (b) are not intended to confer upon
any other person any rights or remedies hereunder.

                                       33
<PAGE>
      7.5 SEVERABILITY. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.

      7.6 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. 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, this being in
addition to any other remedy to which they are entitled at law or in equity.

      7.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof;
provided that issues involving the corporate governance of any of the parties
hereto shall be governed by their respective jurisdictions of incorporation.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
the State of New York and the federal district courts sitting in the State of
New York, in connection with any matter based upon or arising out of this
Agreement or the matters contemplated herein, agrees that process may be served
upon them in any manner authorized by the laws of the State of New York for such
persons and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction and such process.

      7.8 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.

      7.9 ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.

      7.10 DEFINITION OF "KNOWLEDGE". Wherever used in this Agreement, the term
"Knowledge" shall mean the actual knowledge of: (a) in the case of the Company,
its (i) Chief Executive Officer; and (b) in the case of the Parent and the
Merger Sub, the Parent's President.

                                       34
<PAGE>
      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.

                                        K2 DIGITAL, INC.

                                   By:
                                        -------------------------------------
                                        Name:  Gary W. Brown
                                        Title: Chief Operating Officer

                                        FIRST STEP ACQUISITION CORP.

                                   By:
                                        -------------------------------------
                                        Name:
                                        Title:

                                        FIRST STEP DISTRIBUTION NETWORK, INC.

                                   By:
                                        -------------------------------------
                                        Name:
                                        Title:

                                        SHAREHOLDERS OF FIRST STEP
                                        DISTRIBUTION NETWORK, INC.

                                        -------------------------------------
                                        John P. McCracken

                                        -------------------------------------
                                        Robert Millet

                                       35
<PAGE>
                                        Klein Charitable Annuity Trust

                                        By:
                                           ----------------------------------
                                        Name:
                                        Title:

                                        Menlo Grandchildren 1993 Partnership

                                        By:
                                           ----------------------------------
                                        Name:
                                        Title:

                                        -------------------------------------
                                        Gary Hall

                                        -------------------------------------
                                        Scott Wegner

                                        The Klein Living Trust

                                        By:
                                           ----------------------------------
                                        Name:  Leslie Klein
                                        Title: Trustee

                                        By:
                                           ----------------------------------
                                        Name:  Erika Klein
                                        Title: Trustee

                                       36

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00033-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00033-of-00352.parquet"}]]