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Because the interest rate with respect to the IRS will be determined by subtracting the Applicable ARS Rate from a fixed amount, the interest rate with respect to the IRS will decrease as the Applicable ARS Rate increases, and increase as the Applicable ARS Rate decreases. In addition, no payments of interest will be payable on the IRS for any Auction Period in the event that the Applicable ARS Rate is 11.171% per annum. An increase in the amount of ARS which are not Fixed could result in a higher Applicable ARS Rate and, therefore, a lower interest rate with respect to the IRS. Under certain circumstances discussed above under "Auction and Inverse Rate Securities --Interest -- Applicable ARS Rate", the ARS could bear interest at the Maximum Rate or the Non-Payment Rate. In any such case, the interest rate with respect to the IRS could be significantly reduced, or be reduced to zero. The Applicable IRS Rate may also be decreased in the event the Auction Agent Fee or Broker-Dealer Fee is increased because such fees are components of the Service Charge Rate and of the Applicable ARS Rate which is subtracted from twice the Fixed Rate to determine the Applicable IRS Rate. In order to combine IRS and ARS to create Newly Fixed AIRS bearing interest at the Fixed Rate, a Beneficial Owner of IRS or ARS must also have purchased a like principal amount of ARS or IRS, as the case may be. See "APPENDIX G -- FIXING AND SEPARATING AIRS". There is no obligation to provide ARS to a Beneficial Owner of IRS who desires to combine such IRS with ARS nor to provide IRS to a Beneficial Owner of ARS who desires to combine ARS with IRS. A Beneficial Owner of the IRS may be able to acquire ARS that are not Fixed by bidding in an Auction held on the Business Day preceding the next Interest Payment Date, provided that the Existing Holders of such ARS do not submit Hold Orders covering all such ARS in the Auction. In such event, no ARS would be available for purchase at any rate bid by such Beneficial Owner of IRS in that Auction. See "APPENDIX G -- DESCRIPTION OF AUCTION". A Beneficial Owner of IRS may, however, at any time, cause a mandatory tender of ARS for purposes of Fixing IRS with ARS to the extent it cannot acquire ARS in an Auction. See "APPENDIX G -- FIXING AND SEPARATING AIRS". A Beneficial Owner of ARS might be able to purchase IRS in the secondary market; however, an active secondary market may or may not develop for such IRS. No assurance can be given that an active secondary market will exist for the IRS or, outside Auctions, for the ARS. Smith Barney Shearson Inc., as a Broker-Dealer, retains the right to make a secondary market in the ARS, although it has no obligation to do so. A Beneficial Owner of ARS and IRS may cause an equal principal amount of each to be Fixed at any time other than during a Closed Period. However, the resulting Newly Fixed AIRS will remain Newly Fixed AIRS until the next Interest Payment Date and the Beneficial Owner thereof will continue to be liable for the Service Charge for all Auction Periods, or portions thereof, until the next succeeding Interest Payment Date. Notwithstanding the foregoing, Newly Fixed AIRS will not be subject to an Auction. A Beneficial Owner of Newly Fixed AIRS or Regular Fixed AIRS may cause such bonds to be Separated into Regular ARS and Regular IRS only on an Interest Payment Date. Existing Beneficial Owners of ARS may be required to tender ARS to a Beneficial Owner of IRS before the completion of an Interest Period in the event such owner of IRS exercises its rights to require such a tender. See "APPENDIX G -- FIXING AND SEPARATING AIRS". Redemption of AIRS The AIRS may not be called for redemption except as provided herein. Notwithstanding any other provision in the Indenture: (i)no ARS shall be redeemed or delivered to the Trustee for cancellation on any 11