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Section 2. The Auction 2.1. Auction Procedures and Settlement Procedures. (a) On each Auction Date, the provisions of the Auction Procedures will be followed by the Auction Agent for the purpose of determining the Applicable ARS Rate for the next Auction Period. Each periodic operation of such procedures is hereinafter referred to as an "Auction." (b) All of the provisions contained in the Auction Procedures and the Settlement Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were fully set forth herein. (c) Smith Barney agrees to act as, and assumes the obligations of and limitations and restrictions placed upon, a Broker-Dealer under the Indenture and as otherwise set forth in this Agreement. Smith Barney understands that other persons meeting the requirements specified in the definition of "Broker-Dealer" contained in Appendix A to the Indenture may enter into an agreement with the Auction Agent and participate as Broker-Dealers in Auctions. (d) Smith Barney and other Broker-Dealers may participate in Auctions for their own accounts. However, the Trustee may, by notice to Smith Barney and all other Broker- Dealers, prohibit all Broker-Dealers from submitting Bids in Auctions for their own accounts, provided that Broker-Dealers may continue to submit Hold Orders and Sell Orders. Neither the Auction Agent nor the Trustee shall have any duty or liability with respect to monitoring or enforcing the requirements of this subsection (d). 2.2 Preparation for Each Auction. (a) Not later than 9:30 a.m., New York City time, on each Auction Date for the ARS, the Auction Agent shall advise Smith Barney by telephone of the Minimum Rate, Maximum Rate and the "AA" Composite Commercial Paper Rate or the Index, as the case may be, used in determining such rates. (b) In the event the Auction Date for any Auction shall be changed after the Auction Agent has given notice of such Auction Date pursuant to clause (vii) of paragraph (a) of the Settlement Procedures, the Auction Agent, by such means as the Auction Agent deems practicable, shall give notice of such change to Smith Barney not later than the earlier of 9:15 a.m., New York City time, on the new Auction Date and 9:15 a.m., New York City time, on the old Auction Date. Thereafter, Smith Barney shall use its best efforts to promptly notify its customers who are Existing Holders of such change in the Auction Date. (c) The Auction Agent may request, from time to time, Smith Barney to provide it with a list of the respective customers Smith Barney believes are Existing Holders and the aggregate amount held by Smith Barney. Smith Barney shall promptly comply with any such LA1-69760 2 4