Exhibit 10.21


EXECUTION VERSION


 


COLLATERAL AGREEMENT


 


DATED AS OF

OCTOBER 20, 2006


 


MADE BY


 


UNIVERSAL COMPRESSION, INC.;


UNIVERSAL COMPRESSION HOLDINGS,
INC.;


UCI COMPRESSOR HOLDING, L.P.;


AND


UCI MLP LP LLC


 


IN FAVOR OF


 


WACHOVIA BANK, NATIONAL ASSOCIATION,

AS US ADMINISTRATIVE AGENT
















TABLE OF
CONTENTS


	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
  ARTICLE I Definitions

  	
   

  	
  1

  
	
  Section 1.01

  	
   

  	
  Definitions

  	
   

  	
  1

  
	
  Section 1.02

  	
   

  	
  Other Definitional Provisions

  	
   

  	
  4

  
	
  ARTICLE II Grant of Security Interest

  	
   

  	
  4

  
	
  Section 2.01

  	
   

  	
  Grant of Security Interest

  	
   

  	
  4

  
	
  Section 2.02

  	
   

  	
  Transfer of Pledged Securities

  	
   

  	
  5

  
	
  Section 2.03

  	
   

  	
  No Subrogation

  	
   

  	
  5

  
	
  Section 2.04

  	
   

  	
  Amendments, Etc. with respect to the Obligations

  	
   

  	
  6

  
	
  Section 2.05

  	
   

  	
  Waivers

  	
   

  	
  6

  
	
  Section 2.06

  	
   

  	
  Pledge Absolute and Unconditional

  	
   

  	
  7

  
	
  Section 2.07

  	
   

  	
  Reinstatement

  	
   

  	
  8

  
	
  ARTICLE III Representations and Warranties

  	
   

  	
  9

  
	
  Section 3.01

  	
   

  	
  Title; No Other Liens

  	
   

  	
  9

  
	
  Section 3.02

  	
   

  	
  Perfected First Priority Liens

  	
   

  	
  9

  
	
  Section 3.03

  	
   

  	
  Grantor Information

  	
   

  	
  9

  
	
  Section 3.04

  	
   

  	
  Pledged Securities

  	
   

  	
  9

  
	
  Section 3.05

  	
   

  	
  Instruments and Chattel Paper

  	
   

  	
  10

  
	
  Section 3.06

  	
   

  	
  Truth of Information; Accounts

  	
   

  	
  10

  
	
  Section 3.07

  	
   

  	
  Governmental Obligors

  	
   

  	
  10

  
	
  ARTICLE IV Covenants

  	
   

  	
  10

  
	
  Section 4.01

  	
   

  	
  Maintenance of Perfected Security Interest; Further
  Documentation

  	
   

  	
  10

  
	
  Section 4.02

  	
   

  	
  Changes in Locations, Name, Etc

  	
   

  	
  11

  
	
  Section 4.03

  	
   

  	
  Pledged Securities

  	
   

  	
  11

  
	
  Section 4.04

  	
   

  	
  Instruments and Tangible Chattel Paper

  	
   

  	
  12

  
	
  Section 4.05

  	
   

  	
  Article 8 of the UCC

  	
   

  	
  12

  
	
  ARTICLE V Remedial Provisions

  	
   

  	
  13

  
	
  Section 5.01

  	
   

  	
  UCC and Other Remedies

  	
   

  	
  13

  
	
  Section 5.02

  	
   

  	
  Collections on Accounts, Etc

  	
   

  	
  14

  
	
  Section 5.03

  	
   

  	
  Proceeds

  	
   

  	
  14

  
	
  Section 5.04

  	
   

  	
  Pledged Securities

  	
   

  	
  15

  
	
  Section 5.05

  	
   

  	
  Private Sales of Pledged Securities

  	
   

  	
  17

  
	
  Section 5.06

  	
   

  	
  Deficiency

  	
   

  	
  17

  
	
  Section 5.07

  	
   

  	
  Non-Judicial Enforcement

  	
   

  	
  17

  
	
  ARTICLE VI The US Administrative Agent

  	
   

  	
  17

  
	
  Section 6.01

  	
   

  	
  US Administrative Agent’s Appointment as
  Attorney-in-Fact, Etc

  	
   

  	
  17

  
	
  Section 6.02

  	
   

  	
  Duty of US Administrative Agent

  	
   

  	
  19

  
	
  Section 6.03

  	
   

  	
  Filing of Financing Statements

  	
   

  	
  19

  
	
  Section 6.04

  	
   

  	
  Authority of US Administrative Agent

  	
   

  	
  20

  
	
  ARTICLE VII Subordination of Indebtedness

  	
   

  	
  20

  
	
  Section 7.01

  	
   

  	
  Subordination of All Grantor Claims

  	
   

  	
  20

  
	
  Section 7.02

  	
   

  	
  Claims in Bankruptcy

  	
   

  	
  20

  
	
  Section 7.03

  	
   

  	
  Payments Held in Trust

  	
   

  	
  21

  
	
  Section 7.04

  	
   

  	
  Liens Subordinate

  	
   

  	
  21

  



 



 i
 









 


	
  Section 7.05

  	
   

  	
  Notation of Records

  	
   

  	
  21

  
	
  ARTICLE VIII Miscellaneous

  	
   

  	
  21

  
	
  Section 8.01

  	
   

  	
  Waiver

  	
   

  	
  21

  
	
  Section 8.02

  	
   

  	
  Notices

  	
   

  	
  22

  
	
  Section 8.03

  	
   

  	
  Amendments in Writing

  	
   

  	
  22

  
	
  Section 8.04

  	
   

  	
  Successors and Assigns

  	
   

  	
  22

  
	
  Section 8.05

  	
   

  	
  Survival; Revival; Reinstatement

  	
   

  	
  22

  
	
  Section 8.06

  	
   

  	
  Counterparts; Integration; Effectiveness; Conflicts

  	
   

  	
  23

  
	
  Section 8.07

  	
   

  	
  Severability

  	
   

  	
  23

  
	
  Section 8.08

  	
   

  	
  Governing Law; Submission to Jurisdiction

  	
   

  	
  23

  
	
  Section 8.09

  	
   

  	
  Headings

  	
   

  	
  24

  
	
  Section 8.10

  	
   

  	
  Acknowledgments

  	
   

  	
  24

  
	
  Section 8.11

  	
   

  	
  Additional Capital Stock

  	
   

  	
  25

  
	
  Section 8.12

  	
   

  	
  Releases

  	
   

  	
  25

  
	
  Section 8.13

  	
   

  	
  Acceptance

  	
   

  	
  26

  



 


 


 


 


 


 


ANNEXES:


I                                            Form of Supplement


 


SCHEDULES:


1                                          Notice Addresses of Grantors


2                                          Description of Pledged
Securities


3                                          Filings and Other Actions
Required to Perfect Security Interests


4                                          Location of Jurisdiction of
Organization and Chief Executive Office



 ii














This
COLLATERAL AGREEMENT, dated as of October 20, 2006, is made by UNIVERSAL
COMPRESSION, INC., a Texas corporation (“UCI”), UNIVERSAL COMPRESSION
HOLDINGS, INC., a Delaware corporation (“Holdings”, and together with
UCI, the “US Borrowers”),
UCI COMPRESSOR HOLDING, L.P., a Delaware limited partnership (“UCI
Compressor”) and UCI MLP LP LLC, a Delaware limited liability company
(collectively with the US Borrowers and UCI Compressor, the “Grantors”),
in favor of WACHOVIA BANK, NATIONAL ASSOCIATION, as administrative agent (in
such capacity, together with its successors in such capacity, the “US Administrative Agent”), for the lenders and
other financial institutions (the “Lenders”) from time to time party to
the Senior Secured Credit Agreement dated of even date herewith (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”), among UCI, Holdings, Universal
Compression Canada, Limited Partnership, a Nova Scotia limited partnership (“Universal
Canada”) and UC Canadian Partnership Holdings Company, a Nova Scotia unlimited
liability company (“UC Canadian Holdings”, and together with Universal
Canada, the “Canadian Borrowers”, and together with the US Borrowers,
the “Borrowers”), the US Administrative Agent, Wachovia Capital Finance
Corporation (Canada), as Canadian Administrative Agent, Deutsche Bank Trust
Company Americas, as Syndication Agent, Wachovia Capital Markets, LLC and
Deutsche Bank Securities Inc., as the Joint Lead Arrangers and Joint Lead Book
Runners, and each of the other Agents and Lenders party thereto.


R E C I T A L S


A.                                   The Borrowers have requested
that the Lenders provide certain loans to and extensions of credit on behalf of
the Borrowers.


B.                                     The Lenders have agreed to make
such loans and extensions of credit subject to the terms and conditions of the
Credit Agreement.


C.                                     It is a condition precedent and
a continuing covenant to the obligation of the Lenders to make their loans and
extensions of credit to the Borrowers under the Credit Agreement that the
Grantors shall have executed and delivered this Agreement to the US
Administrative Agent for the ratable benefit of the Lenders.


D.                                    NOW, THEREFORE, in consideration
of the premises herein and to induce the US Administrative Agent and the
Lenders to enter into the Credit Agreement and to induce the Lenders to make
their respective extensions of credit to the Borrowers thereunder, each Grantor
hereby agrees with the US Administrative Agent, for the ratable benefit of the
Lenders, as follows:


ARTICLE I
 Definitions


Section
1.01                                Definitions.


(a)                                  As used in this Agreement, each
term defined above shall have the meaning indicated above.  Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given
to them in the Credit Agreement, and the following terms which are defined in
the UCC on the date hereof are used herein as so 












defined:  Accounts, Chattel Paper, Documents,
Equipment, General Intangibles, Instruments, Inventory, Payment Intangibles and
Tangible Chattel Paper.


(b)                                 The following terms have the
following meanings:


“Account
Debtor” means any Person (other than any Grantor) obligated on an Account,
Chattel Paper, or General Intangible.


“Agreement”
means this Collateral Agreement, as the same may from time to time be amended,
supplemented or otherwise modified.


“Borrower
Obligations” means the collective reference to the payment and performance
when due of all indebtedness, liabilities, obligations and undertakings of the
Borrowers and their Restricted Subsidiaries (including, without limitation, all
Indebtedness) of every kind or description arising out of or outstanding under,
advanced or issued pursuant, or evidenced by, the Secured Documents, including,
without limitation, the unpaid principal of and interest on the Aggregate
Credit Exposure and all other obligations and liabilities of the Borrowers and
their Restricted Subsidiaries (including, without limitation, interest accruing
at the then applicable rate provided in the Credit Agreement after the maturity
of the Loans and LC Exposure and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization
or like proceeding, relating to the Borrowers, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) to the
Secured Creditors, whether direct or indirect, absolute or contingent, due or
to become due, or now existing or hereafter incurred, arising out of or
outstanding under, advanced or issued pursuant, or evidenced by, the Secured
Documents, whether on account of principal, interest, premium, reimbursement
obligations, payments in respect of an early termination date, fees,
indemnities, costs, expenses or otherwise (including, without limitation, all
reasonable costs, fees and disbursements that are required to be paid by the
Borrowers pursuant to the terms of the Credit Agreement).


“Borrowers”
has the meaning assigned to such term in the preamble hereto.


“Canadian
Borrowers” has the meaning assigned to such term in the preamble hereto.


“Collateral”
has the meaning assigned such term in Section 2.01.


“Credit
Agreement” has the meaning assigned to such term in the preamble hereto.


“Grantor”
has the meaning assigned to such term in the preamble hereto.


“Grantor Claims” has the meaning assigned to
such term in Section 7.01.


“Holdings”
has the meaning assigned to such term in the preamble hereto.


“Issuers”
means the collective reference to each issuer of Pledged Securities.


“Lenders”
has the meaning assigned to such term in the preamble hereto.



 2
 









“Pledged
Securities” means: (a) the certificated Capital Stock described or referred
to in Schedule 2 (as the same may be supplemented from time to time
pursuant to a Supplement in substantially the form of Annex I); and (b)
(i) the certificates or instruments, if any, representing such certificated Capital
Stock, (ii) all dividends (cash, certificated Capital Stock or otherwise),
cash, instruments, rights to subscribe, purchase or sell and all other rights
and Property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such securities and interests,
(iii) all replacements, additions to and substitutions for any of the Property
referred to in this definition, including, without limitation, claims against
third parties, (iv) the proceeds, interest, profits and other income of or on
any of the Property referred to in this definition, (v) all security
entitlements in respect of any of the foregoing, if any and (vi) all books and
records relating to any of the Property referred to in this definition.


“Proceeds”
means all “proceeds” as such term is defined in Section 9.102(65)  of the UCC and, in any event, shall
include, without limitation, all dividends or other income from the Pledged
Securities, collections thereon or distributions or payments with respect
thereto.


“Secured
Creditors” means the collective reference to the US Administrative Agent,
the Issuing Banks, the Lenders and the Lenders and Affiliates of Lenders that
are parties to Secured Hedging Agreements.


“Secured
Documents” means the collective reference to the Credit Agreement, the
other Loan Documents, each Secured Hedging Agreement and any other documents
made, delivered or given in connection with any of the foregoing.


“Secured
Hedging Agreement” means any Hedging Agreement between any Borrower or its Restricted
Subsidiary and any Lender or any Affiliate of any Lender while such Person (or,
in the case of an Affiliate of a Lender, the Person affiliated therewith) is a Lender,
including any Hedging Agreement between such Persons in existence prior to the
date hereof, but excluding any Hedging Agreement now existing or hereafter
arising in connection with the ABS Facility. 
For the avoidance of doubt, a Hedging Agreement ceases to be a Secured
Hedging Agreement if the Person that is the counterparty to the Borrower or its
Restricted Subsidiary under a Hedging Agreement ceases to be a Lender under the
Credit Agreement (or, in the case of an Affiliate of a Lender, the Person
affiliated therewith ceases to be a Lender under the Credit Agreement).


“Securities
Act” means the Securities Act of 1933, as amended.


“UC
Canadian Holdings” has the meaning assigned to such term in the preamble
hereto.


“UCC”
means the Uniform Commercial Code as from time to time in effect in the State
of Texas; provided, however, that, in the event that, by reason of mandatory
provisions of law, any of the attachment, perfection or priority of the Secured
Creditors’ security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of Texas,
the term “UCC” shall mean the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to such attachment,
perfection, the effect thereof or priority and for purposes of definitions
related to such provisions.


“UCI
Compressor” has the meaning assigned to such term in the preamble hereto.



 3
 









“Universal
Canada” has the meaning assigned to such term in the preamble hereto.


“US
Administrative Agent” has the meaning assigned to such term in the preamble
hereto.


“US
Borrowers” has the meaning assigned to such term in the preamble hereto.


Section
1.02                                Other
Definitional Provisions.


(a)                                  The words “hereof,” “herein,” “hereto”
and “hereunder” and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified.


(b)                                 The meanings given to terms
defined herein shall be equally applicable to both the singular and plural
forms of such terms.


(c)                                  Where the context requires,
terms relating to the Collateral or any part thereof, when used in relation to
a Grantor, refer to such Grantor’s Collateral or the relevant part thereof.


ARTICLE II
 Grant of
Security Interest


Section
2.01                                Grant
of Security Interest.  Each Grantor
hereby pledges, assigns and transfers to the US Administrative Agent, and
hereby grants to the US Administrative Agent, for the ratable benefit of the
Secured Creditors, a security interest in all of the following Property now
owned or at any time hereafter acquired by such Grantor or in which such
Grantor now has or at any time in the future may acquire any right, title or
interest (collectively, the “Collateral”), as collateral security for
the prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Borrower Obligations:


(1)                                  all Accounts;


(2)                                  all Chattel Paper;


(3)                                  all Documents;


(4)                                  all Equipment;


(5)                                  all General Intangibles;


(6)                                  all Instruments;


(7)                                  all Inventory;


(8)                                  all Pledged Securities;


(9)                                  all books and records pertaining
to the Collateral; and



 4
 









(10)                            to the extent not otherwise
included, all Proceeds and products of any and all of the foregoing and all
collateral security and guarantees given by any Person with respect to any of
the foregoing.


Each reference to Collateral or
to any relevant type or item of Property constituting Collateral shall be
deemed to exclude (i) tangible Property that is not located in the continental
United States (including its possessions), (ii) motor vehicles, forklifts and
trailers, (iii) voting equity interests in any Foreign Subsidiary required to
prevent the Collateral from including more than 65% of all voting equity
interests in such Foreign Subsidiary, (iv) any general intangibles or other
rights arising under any contract, instrument, license or other document if
(but only to the extent that) the grant of a security interest therein would
constitute a material violation of a valid and enforceable restriction in favor
of a third party, unless and until all required consents shall have been
obtained, (v) Property owned by or assigned to the ABS Subsidiaries and the Capital
Stock of such ABS Subsidiaries; provided that, upon the transfer of such
Property to a Grantor, such Property shall become Collateral, (vi) any Property
subject to a Lien permitted by Section 10.02(b), (c), (e) or (g) of the Credit
Agreement, so long as such Lien is in effect, and (vii) any Property owned
by a member of the UCLP Group.


Section
2.02                                Transfer
of Pledged Securities.  All
certificates or instruments representing or evidencing the Pledged Securities
shall be delivered to and held pursuant hereto by the US Administrative Agent
or a Person designated by the US Administrative Agent and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, and accompanied by any required
transfer tax stamps to effect the pledge of the Pledged Securities to the US
Administrative Agent.  Notwithstanding
the preceding sentence, at the US Administrative Agent’s discretion, all
Pledged Securities must be delivered or transferred in such manner as to permit
the US Administrative Agent to be a “protected purchaser” to the extent of its
security interest as provided in Section 8.303 of the UCC (if the US
Administrative Agent otherwise qualifies as a protected purchaser). During the
continuance of an Event of Default, the US Administrative Agent shall have the
right, at any time in its discretion and without notice, to transfer to or to
register in the name of the US Administrative Agent or any of its nominees any
or all of the Pledged Securities, subject only to the revocable rights
specified in Section 5.05.  In
addition, during the continuance of an Event of Default, the US Administrative
Agent shall have the right at any time to exchange certificates or instruments
representing or evidencing Pledged Securities for certificates or instruments
of smaller or larger denominations.


Section
2.03                                No
Subrogation.  Notwithstanding any
payment made by any Grantor hereunder or any set-off or application of funds of
any Grantor by any Secured Creditor, no Grantor shall be entitled to be
subrogated to any of the rights of any Secured Creditor against any Borrower or
any other Grantor or any collateral security or pledge or guarantee or right of
offset held by any Secured Creditor for the payment of the Borrower Obligations,
nor shall any Grantor seek or be entitled to seek any indemnity, exoneration,
participation, contribution or reimbursement from any Borrower or any other Grantor
in respect of payments made by such Grantor hereunder, until all amounts owing
to the Secured Creditors on account of the Borrower Obligations are irrevocably
and indefeasibly paid in full in cash, no Letter of Credit is outstanding
(except for Letters of Credit secured by cash collateral as permitted in
Section 2.01(b)(iii) of the Credit Agreement) and all of the Aggregate
Commitments are terminated.  If 



 5
 









any amount shall
be paid to any Grantor on account of such subrogation rights at any time when
all of the Borrower Obligations shall not have been irrevocably and
indefeasibly paid in full in cash, any Letter of Credit is outstanding (except
for Letters of Credit secured by cash collateral as permitted in Section
2.01(b)(iii) of the Credit Agreement) or any of the Aggregate Commitments are
in effect, such amount shall be held by such Grantor in trust for the Secured
Creditors, and shall, forthwith upon receipt by such Grantor, be turned over to
the US Administrative Agent in the exact form received by such Grantor (duly
indorsed by such Grantor to the US Administrative Agent, if required), to be
applied against the Borrower Obligations, whether matured or unmatured, in
accordance with Section 11.02(c) of the Credit Agreement.


Section
2.04                                Amendments,
Etc. with respect to the Obligations. 
Each Grantor shall remain obligated hereunder, and such Grantor’s
obligations hereunder shall not be released, discharged or otherwise affected,
notwithstanding that, without any reservation of rights against any Grantor and
without notice to, demand upon or further assent by any Grantor (which notice,
demand and assent requirements are hereby expressly waived by such Grantor), (a)
any demand for payment of any of the Borrower Obligations made by any Secured
Creditor may be rescinded by such Secured Creditor or otherwise and any of the Borrower
Obligations continued; (b) the Borrower Obligations, the liability of any other
Person upon or for any part thereof or any collateral security or pledge or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by, or any indulgence
or forbearance in respect thereof granted by, any Secured Creditor; (c) any
Secured Document may be amended, modified, supplemented or terminated, in whole
or in part, as the Secured Creditors may deem advisable from time to time; (d) any
collateral security, pledge, guarantee or right of offset at any time held by
any Secured Creditor for the payment of the Borrower Obligations may be sold,
exchanged, waived, surrendered or released; (e) any additional guarantors,
makers or endorsers of the Borrower Obligations may from time to time be
obligated on the Borrower Obligations or any additional security or collateral
for the payment and performance of the Borrower Obligations may from time to
time secure the Borrower Obligations; and (f) any other event shall occur which
constitutes a defense or release of sureties generally.  No Secured Creditor shall have any obligation
to protect, secure, perfect or insure any Lien at any time held by it as
security for the Borrower Obligations or for the pledge and security grants contained
in this ARTICLE II or any Property subject thereto.


Section
2.05                                Waivers.  Each Grantor hereby waives any and all notice
of the creation, renewal, extension or accrual of any of the Borrower Obligations
and notice of or proof of reliance by any Secured Creditor upon the pledge and
security grants contained in this ARTICLE II or acceptance of the pledge and
security grants contained in this ARTICLE II; the Borrower Obligations, and any
of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the pledge and
security grants contained in this ARTICLE II and no notice of creation of the Borrower
Obligations or any extension of credit already or hereafter contracted by or
extended to the Borrowers need be given to any Grantor; and all dealings
between any Borrower and any of the Grantors, on the one hand, and the Secured
Creditors, on the other hand, likewise shall be conclusively presumed to have
been had or consummated in reliance upon the pledge and security grants contained
in this ARTICLE II.  Each Grantor waives
diligence, presentment, 



 6
 









protest, demand
for payment and notice of default or nonpayment to or upon any Borrower or any
of the Grantors with respect to the Borrower Obligations.


Section
2.06                                Pledge
Absolute and Unconditional.


(a)                                  Except as provided in Section
8.12, each Grantor understands and agrees that the pledge and security
grants contained in this ARTICLE II is, and shall be construed as, a
continuing, completed, absolute and unconditional pledge and security grant,
and each Grantor hereby waives any defense of a surety or guarantor or Grantor or
any other obligor on any obligations arising in connection with or in respect
of any of the following and hereby agrees that its obligations hereunder shall
not be discharged or otherwise affected as a result of, any of the following:


(i)                                     the invalidity or
unenforceability of any Secured Document, any of the Borrower Obligations or
any other collateral security therefor or pledge or guarantee or right of
offset with respect thereto at any time or from time to time held by any
Secured Creditor;


(ii)                                  any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by any Borrower or any other Person against
any Secured Creditor;


(iii)                               the insolvency, bankruptcy
arrangement, reorganization, adjustment, composition, liquidation, disability,
dissolution or lack of power of any Borrower or any other Grantor or any other
Person at any time liable for the payment of all or part of the Borrower Obligations,
including any discharge of, or bar or stay against collecting, any Borrower Obligation
(or any part of them or interest therein) in or as a result of such proceeding;


(iv)                              any sale, lease, assignment,
exchange, conveyance or transfer of any or all of the assets of any Borrower or
any other Grantor, or any changes in the shareholders of any Borrower or the Grantor;


(v)                                 any change in the corporate
existence (including its constitution, laws, rules, regulations or power),
structure or ownership of any Grantor;


(vi)                              the fact that any Collateral or
Lien contemplated or intended to be given, created or granted as security for
the repayment of the Borrower Obligations shall not be properly perfected or
created, or shall prove to be unenforceable or subordinate to any other Lien,
it being recognized and agreed by each of the Grantors that it is not entering
into this Agreement in reliance on, or in contemplation of the benefits of, the
validity, enforceability, collectibility or value of any of the Collateral for
the Borrower Obligations;


(vii)                           the absence of any attempt to
collect the Borrower Obligations or any part of them from any Grantor;



 7
 









(viii)                        (A) any Secured Creditor’s
election, in any proceeding instituted under chapter 11 of the Bankruptcy Code,
of the application of Section 1111(b)(2) of the Bankruptcy Code; (B) any
borrowing or grant of a Lien by the Borrowers, as debtor-in-possession, or
extension of credit, under Section 364 of the Bankruptcy Code; (C) the
disallowance, under Section 502 of the Bankruptcy Code, of all or any portion
of any Secured Creditor’s claim (or claims) for repayment of the Borrower Obligations;
(D) any use of cash collateral under Section 363 of the Bankruptcy Code; (E)
any agreement or stipulation as to the provision of adequate protection in any
bankruptcy proceeding; (F) the avoidance of any Lien in favor of the Secured
Creditors or any of them for any reason; or (G) failure by any Secured Creditor
to file or enforce a claim against any Borrower or any Borrower’s estate in any
bankruptcy or insolvency case or proceeding; or


(ix)                                any other circumstance or act
whatsoever, including any action or omission of the type described in Section
2.04 (with or without notice to or knowledge of the Borrowers or such Grantor),
which constitutes, or might be construed to constitute, an equitable or legal
discharge of the Borrowers for the Borrower Obligations, or of such Grantor under
the pledge and security grants contained in this ARTICLE II, in bankruptcy or
in any other instance.


(b)                                 When making any demand hereunder
or otherwise pursuing its rights and remedies hereunder against any Grantor,
any Secured Creditor may, but shall be under no obligation to, join or make a
similar demand on or otherwise pursue or exhaust such rights and remedies as it
may have against any Borrower, any other Grantor or any other Person or against
any collateral security or pledge or guarantee for the Borrower Obligations or
any right of offset with respect thereto, and any failure by any Secured
Creditor to make any such demand, to pursue such other rights or remedies or to
collect any payments from any Borrower, any other Grantor or any other Person
or to realize upon any such collateral security or pledge or guarantee or to
exercise any such right of offset, or any release of any Borrower, any other Grantor
or any other Person or any such collateral security, guarantee or pledge or
right of offset, shall not relieve any Grantor of any obligation or liability
hereunder, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of any Secured Creditor
against any Grantor.  For the purposes
hereof “demand” shall include the commencement and continuance of any legal
proceedings.


Section 2.07                                Reinstatement.  The pledge and security grants contained in
this ARTICLE II shall continue to be effective, or be reinstated, as the case
may be, if at any time payment, or any part thereof, of any of the Borrower Obligations
is rescinded or must otherwise be restored or returned by any Secured Creditor
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
any Borrower or any Grantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, any
Borrower or any Grantor or any substantial part of its Property, or otherwise,
all as though such payments had not been made.



 8
 









ARTICLE III
 Representations
and Warranties


To
induce the US Administrative Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrowers thereunder and to induce the Lenders (and their
Affiliates) to enter into Hedging Agreements with the Borrowers and their Restricted
Subsidiaries, each Grantor hereby represents and warrants to the US
Administrative Agent and each Lender that:


Section 3.01                                Title; No Other Liens.  Except for Permitted Liens and the security
interest granted to the US Administrative Agent for the ratable benefit of the
Secured Creditors pursuant to this Agreement, such Grantor is the record and
beneficial owner of its respective items of the Collateral free and clear of
any and all Liens and has the power to transfer each item of the Collateral in
which a Lien is granted by it hereunder, free and clear of any Lien.  Except with respect to Liens permitted by
Section 10.02(b), (c), (e) or (g) of the Credit Agreement, no financing
statement or other public notice with respect to all or any part of the
Collateral is on file or of record in any public office, except such as have
been filed in favor of the US Administrative Agent, for the ratable benefit of
the Secured Creditors, pursuant to this Agreement or the Security Instruments
or as are filed to secure Liens permitted by Section 10.02 of the Credit
Agreement.


Section 3.02                                Perfected First Priority Liens.  The security interests granted pursuant to
this Agreement (a) upon the completion of the filings and the other actions
specified on Schedule 3 constitute valid perfected security interests in
all of the Collateral in favor of the US Administrative Agent, for the ratable
benefit of the Secured Creditors, as collateral security for the Borrower
Obligations, enforceable in accordance with the terms hereof against all
creditors of such Grantor and any Persons purporting to purchase any Collateral
from such Grantor and (b) are prior to all other Liens on the Collateral in
existence on the date hereof, except, in each case, for Liens expressly
permitted by the Credit Agreement.


Section 3.03                                Grantor Information.  On the date hereof, the correct legal name of
such Grantor, such Grantor’s jurisdiction of organization and organizational
number, and the location(s) of such Grantor’s chief executive office or sole
place of business are specified on Schedule 4.


Section 3.04                                Pledged Securities.  The Pledged Securities required to be pledged
hereunder and under the Credit Agreement by such Grantor are listed in Schedule
2.  The shares of Pledged Securities
pledged by such Grantor hereunder except for LP Units and Subordinated Units, constitute
all the issued and outstanding shares of all classes of the Capital Stock of
each Issuer owned by such Grantor that is a Domestic Subsidiary and 65% of all
the issued and outstanding shares of all classes of the Capital Stock of each
Issuer (except as otherwise noted on Schedule 2) that is a Foreign
Subsidiary.  All the shares of the
Pledged Securities have been duly and validly issued and are fully paid and
nonassessable, and such Grantor is the record and beneficial owner of, and has
good title to, the Pledged Securities pledged by it hereunder, free of any and
all Liens or options in favor of, or claims of, any other Person, except the
security interest created by this Agreement, and has the power to transfer the
Pledged Securities in which a Lien is granted by it hereunder, free and clear
of any other Lien.



 9
 









Section
3.05                                Instruments
and Chattel Paper.  Such Grantor has
delivered to the US Administrative Agent all Collateral constituting any
Instrument or Chattel Paper in excess of $1,000,000 that is required to be
delivered under Section 4.04.  No
Collateral constituting Chattel Paper or Instruments contains any statement
therein to the effect that such Collateral has been assigned to an identified
party other than the US Administrative Agent, and the grant of a security
interest in such Collateral in favor of the US Administrative Agent hereunder
does not violate the rights of any other Person as a secured party.


Section
3.06                                Truth
of Information; Accounts.  All
information with respect to the Collateral set forth in any schedule or
certificate at any time heretofore or hereafter furnished by such Grantor to
the US Administrative Agent is and will be true and correct in all material
respects as of the date furnished.  The
place where each Grantor keeps its records concerning the Accounts, Chattel
Paper and Payment Intangibles is 4444 Brittmoore Road, Houston, Texas 77041.


Section
3.07                                Governmental
Obligors.  None of the Account
Debtors on a material portion of such Grantor’s Accounts, Chattel Paper or
Payment Intangibles is a Governmental Authority.


ARTICLE IV
 Covenants


Each
Grantor covenants and agrees with the US Administrative Agent and the Lenders
that, from and after the date of this Agreement until the Borrower Obligations
under the Credit Agreement shall have been paid in full in cash, no Letter of
Credit shall be outstanding (except for Letters of Credit secured by cash
collateral as permitted in Section 2.01(b)(iii) of the Credit Agreement) and all
of the Aggregate Commitments shall have terminated:


Section 4.01                                Maintenance of Perfected Security Interest; Further
Documentation.  Except as set
forth in the Credit Agreement, including, without limitation, any merger,
consolidation, liquidation, sale, assignment, transfer or other disposition
permitted by Section 10.08 or 10.14 of the Credit Agreement, each Grantor
agrees that:


(a)                                  it shall maintain the security
interest created by this Agreement as a perfected security interest having at
least the priority described in Section 3.02 and shall defend such
security interest against the claims and demands of all Persons whomsoever;


(b)                                 it will furnish to the US
Administrative Agent and the Lenders from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the US Administrative Agent may reasonably
request, all in reasonable detail; and


(c)                                  at any time and from time to
time, upon the written request of the US Administrative Agent, and at the sole
expense of such Grantor, it will promptly and duly execute and deliver, and
have recorded, such further instruments and documents and take such further
actions as the US Administrative Agent may reasonably deem necessary for the
purpose of obtaining or preserving the full benefits of this Agreement and of
the rights and powers herein granted, including, without limitation, the
delivery of certificated securities  and
the filing of any 



 10
 









financing or
continuation statements under the UCC (or other similar domestic laws) in
effect in any jurisdiction with respect to the security interests created
hereby.


Section 4.02                                Changes in Locations, Name, Etc.  Such Grantor recognizes that financing
statements pertaining to the Collateral have been or may be filed where such
Grantor is organized.  Without limitation
of Section 9.03 of the Credit Agreement or any other covenant herein, such
Grantor will not cause or permit any change in its (a) corporate name, (b) its
identity or corporate structure or in the jurisdiction in which it is
incorporated or formed, (c) its jurisdiction of organization or its
organizational identification number in such jurisdiction of organization or (d)
its federal taxpayer identification number, unless, in each case, such Grantor
shall have first (i) notified the US Administrative Agent of such change prior
to the effective date of such change, and (ii) taken all action reasonably
requested by the US Administrative Agent for the purpose of maintaining the
perfection and priority of the US Administrative Agent’s security interests
under this Agreement.  In any notice
furnished pursuant to this Section 4.02, such Grantor will expressly
state in a conspicuous manner that the notice is required by this Agreement and
contains facts that may require additional filings of financing statements or
other notices for the purposes of continuing perfection of the US
Administrative Agent’s security interest in the Collateral.


Section 4.03                                Pledged Securities.  In the case of each Grantor, such Grantor
agrees that:


(a)                                  if such Grantor shall become
entitled to receive or shall receive any stock certificate (including, without
limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option or rights in
respect of the Pledged Securities of any Issuer, whether in addition to, in
substitution of, as a conversion of, or in exchange for, any shares of the
Pledged Securities, or otherwise in respect thereof, such Grantor shall accept
the same as the agent of the Secured Creditors, hold the same in trust for the
Secured Creditors, segregated from other Property of such Grantor, and deliver
the same forthwith to the US Administrative Agent in the exact form received,
duly indorsed by such Grantor to the US Administrative Agent, if required,
together with an undated stock power covering such certificate duly executed in
blank by such Grantor and with, if the US Administrative Agent so requests,
signature guaranteed, to be held by the US Administrative Agent, subject to the
terms hereof, as additional collateral security for the Borrower Obligations;
provided, that the foregoing shall apply to 65% of such shares or rights in the
case of an Issuer that is a Foreign Subsidiary;


(b)                                 without the prior written
consent of the US Administrative Agent, such Grantor will not (i) unless
otherwise expressly permitted hereby or under the other Loan Documents, vote to
enable, or take any other action to permit, any Issuer (other than UCLP) to
issue any Capital Stock of any nature or to issue any other securities
convertible into or granting the right to purchase or exchange for any Capital
Stock of any nature of any Issuer, (ii) sell, assign, transfer, exchange, or
otherwise dispose of, or grant any option with respect to, the Pledged
Securities or Proceeds thereof (except pursuant to a transaction expressly
permitted by the Credit Agreement), (iii) except as set forth in the Credit
Agreement, create, incur or permit to exist any Lien or option in favor of, or
any claim of any Person with respect to, any of the 



 11
 









Pledged
Securities or Proceeds thereof, or any interest therein, except for the
security interests created by this Agreement or (iv) enter into any agreement
or undertaking restricting the right or ability of such Grantor or the US
Administrative Agent to sell, assign or transfer any of the Pledged Securities
or Proceeds thereof;


(c)                                  in the case of each Grantor that
is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this
Agreement relating to the Pledged Securities issued by it and will comply with
such terms insofar as such terms are applicable to it, (ii) it will notify the US
Administrative Agent promptly in writing of the occurrence of any of the events
described in Section 4.03(a) with respect to the Pledged Securities
issued by it and (iii) the terms of Section 5.04(a) and Section 5.05
shall apply to it, mutatis
mutandis, with respect to all actions that may be required of it
pursuant to Section 5.04(d) or Section 5.05 with respect to the
Pledged Securities issued by it;


(d)                                 such Grantor shall furnish to
the US Administrative Agent such stock powers and other instruments as may be
reasonably required by the US Administrative Agent to assure the
transferability of the Pledged Securities when and as often as may be
reasonably requested by the US Administrative Agent; and


(e)                                  the Pledged Securities (except
for LP Units and Subordinated Units) will at all times constitute not less than
100% of the Capital Stock of the Issuer thereof owned by any Grantor (or in the
case of any Issuer that is a Foreign Subsidiary, not less than 65% of the Capital
Stock of such Issuer (except as otherwise noted on Schedule 2)).  Such Grantor will not permit any Issuer of
any of the Pledged Securities (other than UCLP) to issue any new shares of any
class of Capital Stock of such Issuer unless such shares are pledged pursuant
to this Agreement.


(f)                                    Notwithstanding any contrary
provision contained in this Agreement, with respect to Issuers that are Foreign
Subsidiaries, the Grantors are required to pledge 65% of the Capital Stock of
such Issuers (except as otherwise noted on Schedule 2) and to deliver
the applicable stock certificates and stock powers duly executed in blank for
such Capital Stock to the US Administrative Agent but shall not be required to
take any additional actions to perfect the security interest of the Secured
Creditors in such Pledged Securities.


Section
4.04                                Instruments
and Tangible Chattel Paper.  If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any Instrument or Tangible Chattel Paper having a value in
excess of $1,000,000, such Instrument or Tangible Chattel Paper shall be
immediately delivered to the US Administrative Agent, duly endorsed in a manner
satisfactory to the US Administrative Agent, to be held as Collateral pursuant
to this Agreement.


Section
4.05                                Article
8 of the UCC.  To the extent that any
Grantor has opted into Article 8 of the UCC, such Grantor may not opt out
of Article 8 of the UCC without the prior written consent of the US
Administrative Agent.



 12
 









ARTICLE V
 Remedial
Provisions


Section 5.01                                UCC and Other Remedies.


(a)                                  Upon the occurrence and during
the continuance of an Event of Default, the US Administrative Agent, on behalf
of the Secured Creditors, may exercise, in addition to all other rights and
remedies granted to them in this Agreement, the other Loan Documents and in any
other instrument or agreement securing, evidencing or relating to the Borrower
Obligations, all rights and remedies of a secured party under the UCC or any
other applicable law or otherwise available at law or equity.  Without limiting the generality of the
foregoing, the US Administrative Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon any Grantor or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give option or options to purchase, or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do
any of the foregoing), in one or more parcels at public or private sale or
sales, at any exchange, broker’s board or office of any Secured Creditor or
elsewhere upon such commercially reasonable terms and conditions as it may deem
advisable and at such commercially reasonable prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.  Any Secured Creditor shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in any Grantor,
which right or equity is hereby waived and released.  If applicable to any particular item of
Collateral, each Grantor further agrees, at the US Administrative Agent’s
request following an acceleration of the Indebtedness under Section 11.02(a) of
the Credit Agreement, to assemble the Collateral and make it available to the US
Administrative Agent at places which the US Administrative Agent shall
reasonably select, whether at such Grantor’s premises or elsewhere, unless
prohibited by agreements with unaffiliated third parties.  Any such sale or transfer by the US
Administrative Agent either to itself or to any other Person shall, to the
fullest extent permitted under applicable law, be absolutely free from any
claim of right by Grantor, including any equity or right of redemption, stay or
appraisal which Grantor has or may have under any rule of law, regulation or
statute now existing or hereafter adopted (and such Grantor hereby waives any
rights it may have in respect thereof). 
Upon any such sale or transfer, the US Administrative Agent shall have
the right to deliver, assign and transfer to the purchaser or transferee
thereof the Collateral so sold or transferred. 
The US Administrative Agent shall apply the net proceeds of any action
taken by it pursuant to this Section 5.01, after deducting all
reasonable costs and expenses of every kind incurred in connection therewith or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the US Administrative Agent and the
Secured Creditors hereunder, including, without limitation, reasonable
attorneys’ fees and disbursements, to the payment in whole or in part of the
Borrower Obligations, in accordance with the Credit Agreement, and only after
such application and after the payment by the US Administrative Agent of any
other amount required by any provision of law, including, without limitation,
Section 9.615 of the UCC, need the US Administrative Agent account for the
surplus, if any, to any Grantor.  To the
extent permitted by applicable law, each Grantor waives all 



 13
 









claims, damages
and demands it may acquire against the US Administrative Agent or any Secured
Creditor arising out of the exercise by them of any rights hereunder.  If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition.


(b)                                 In the event that the US
Administrative Agent elects not to sell the Collateral, the US Administrative
Agent retains its rights to dispose of or utilize the Collateral or any part or
parts thereof in any manner authorized or permitted by law or in equity, and to
apply the proceeds of the same towards payment of the Borrower
Obligations.  Each and every method of
disposition of the Collateral described in this Agreement shall constitute
disposition in a commercially reasonable manner.


(c)                                  The US Administrative Agent may
appoint any Person as agent to perform any act or acts necessary or incident to
any sale or transfer of the Collateral.


Section 5.02                                Collections
on Accounts, Etc.  The US
Administrative Agent hereby authorizes each Grantor to collect upon the
Collateral that is represented by Accounts, Instruments, Chattel Paper and
Payment Intangibles subject to the US Administrative Agent’s direction and
control, and the US Administrative Agent may curtail or terminate said
authority at any time after the occurrence and during the continuance of an
Event of Default.  Upon the request of
the US Administrative Agent at any time after the occurrence and during the
continuance of an Event of Default, each Grantor shall notify the Account
Debtors that the applicable Accounts, Chattel Paper and Payment Intangibles
have been assigned to the US Administrative Agent for the ratable benefit of
the Secured Creditors and that payments in respect thereof shall be made
directly to the US Administrative Agent. 
The US Administrative Agent may in its own name or in the name of others
communicate with the Account Debtors to verify with them to its satisfaction
the existence, amount and terms of any such Accounts, Chattel Paper or Payment
Intangibles.  Anything herein to the
contrary notwithstanding, each Grantor shall remain liable under each of its
Accounts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of
any agreement giving rise thereto.  Neither
the US Administrative Agent nor any Lender shall have any obligation or
liability under any Account (or any agreement giving rise thereto) by reason of
or arising out of this Agreement or the receipt by the US Administrative Agent
or any Lender of any payment relating thereto, nor shall the US Administrative
Agent or any Lender be obligated in any manner to perform any of the
obligations of any Grantor under or pursuant to any Account (or any agreement
giving rise thereto) to make any payment, to make any inquiry as to the nature
or the sufficiency of any payment received by it or as to the sufficiency of
any performance by any party thereunder, to present or file any claim, to take
any action to enforce any performance or to collect the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time
or times.


Section 5.03                                Proceeds.  If required by the US Administrative Agent at
any time after the occurrence and during the continuance of an Event of
Default, any payments of Collateral composed of Accounts, Instruments, Chattel
Paper and Payment Intangibles, when collected or received by each Grantor, and
any other cash or non-cash Proceeds received by each Grantor upon the sale or
other disposition of any Collateral, shall be forthwith (and, in any event, within
two Business Days) deposited by such Grantor in the exact form received, duly
indorsed 



 14
 









by such Grantor
to the US Administrative Agent if required, in a special collateral account
maintained by the US Administrative Agent, subject to withdrawal by the US
Administrative Agent for the ratable benefit of the Secured Parties only, as
hereinafter provided, and, until so turned over, shall be held by such Grantor
in trust for the US Administrative Agent for the ratable benefit of the Secured
Creditors, segregated from other funds of any such Grantor.  Each deposit of any such Proceeds shall be
accompanied by a report identifying in reasonable detail the nature and source
of the payments included in the deposit. 
All Proceeds (including, without limitation, Proceeds constituting
collections of Accounts, Chattel Paper, Instruments) while held by the US
Administrative Agent (or by any Grantor in trust for the US Administrative
Agent for the ratable benefit of the Secured Creditors) shall continue to be
collateral security for all of the Borrower Obligations and shall not
constitute payment thereof until applied as hereinafter provided.  At such intervals as may be agreed upon by
each Grantor and the US Administrative Agent, or, if an Event of Default shall
have occurred and be continuing, at any time at the US Administrative Agent’s
election, the US Administrative Agent shall apply all or any part of the funds
on deposit in said special collateral account on account of the Borrower
Obligations in such order as the US Administrative Agent may elect, and any
part of such funds which the US Administrative Agent elects not so to apply and
deems not required as collateral security for the Borrower Obligations shall be
paid over from time to time by the US Administrative Agent to each Grantor or
to whomsoever may be lawfully entitled to receive the same.


Section 5.04                                Pledged Securities.


(a)                                  Unless an Event of Default shall
have occurred and be continuing and the US Administrative Agent shall have
given notice to the relevant Grantor of the US Administrative Agent’s intent to
exercise its corresponding rights pursuant to Section 5.04(b), each
Grantor shall be permitted to receive all cash dividends paid in respect of the
Pledged Securities paid in the normal course of business of the relevant
Issuer, to the extent permitted in the Credit Agreement, and to exercise all
voting, consent and corporate rights with respect to the Pledged Securities;
provided, however, that no vote shall be cast, consent given or right exercised
or other action taken by such Grantor that would impair the Collateral or
result in any violation of any provision of the Credit Agreement, this
Agreement or any other Loan Document or, without the prior consent of the US
Administrative Agent, enable or permit any Issuer of Pledged Securities other
than UCLP to issue any Capital Stock or to issue any other securities
convertible into or granting the right to purchase or exchange for any Capital
Stock of any Issuer of Pledged Securities other than as permitted by the Credit
Agreement.


(b)                                 Upon the occurrence and during
the continuance of an Event of Default, upon notice by the US Administrative
Agent of its intent to exercise such rights to the relevant Grantor or
Grantors, (i) the US Administrative Agent shall have the right to receive any
and all cash dividends, payments, Property or other Proceeds paid in respect of
the Pledged Securities and make application thereof to the Borrower Obligations
in accordance with the Credit Agreement, and (ii) any or all of the Pledged
Securities shall be registered in the name of the US Administrative Agent or
its nominee, and (iii) the US Administrative Agent or its nominee may exercise
(A) all voting, consent, corporate and other rights pertaining to such Pledged
Securities at any meeting of shareholders (or other equivalent body) of the
relevant Issuer or Issuers or otherwise and (B) any and all rights of
conversion, exchange and subscription and any other rights, privileges or
options pertaining to such Pledged Securities as if it were the absolute owner 



 15
 









thereof
(including, without limitation, the right to exchange at its discretion any and
all of the Pledged Securities upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the organizational structure of
any Issuer, or upon the exercise by any Grantor or the US Administrative Agent
of any right, privilege or option pertaining to such Pledged Securities, and in
connection therewith, the right to deposit and deliver any and all of the
Pledged Securities with any committee, depositary, transfer agent, registrar or
other designated agency upon such terms and conditions as the US Administrative
Agent may determine), all without liability except to account for Property
actually received by it, but the US Administrative Agent shall have no duty to
any Grantor to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.


(c)                                  In order to permit the US
Administrative Agent to exercise the voting and other consensual rights that it
may be entitled to exercise pursuant hereto and to receive all dividends and
other distributions that it may be entitled to receive hereunder, (i) each
Grantor shall promptly execute and deliver (or cause to be executed and
delivered) to the US Administrative Agent all such proxies, dividend payment
orders and other instruments as the US Administrative Agent may from time to
time reasonably request and (ii) without limiting the effect of clause (i)
above, such Grantor hereby grants to the US Administrative Agent an irrevocable
proxy to vote all or any part of the Pledged Securities and to exercise all
other rights, powers, privileges and remedies to which a holder of the Pledged
Securities would be entitled (including giving or withholding written consents
of shareholders calling special meetings of shareholders and voting at such
meetings), which proxy shall be effective, automatically and without the
necessity of any action (including any transfer of any Pledged Securities on
the record books of the Issuer thereof) by any other Person (including the
Issuer of such Pledged Securities or any officer or agent thereof) upon the
occurrence and during the continuance of an Event of Default and which proxy
shall only terminate upon the payment in full in cash of the Borrower
Obligations under the Credit Agreement.


(d)                                 Each Grantor hereby authorizes
and instructs each Issuer of any Pledged Securities pledged by such Grantor
hereunder to (i) comply with any instruction received by it from the US
Administrative Agent in writing that (A) states that an Event of Default has
occurred and is continuing and (B) is otherwise in accordance with the terms of
this Agreement, without any other or further instructions from such Grantor,
and each Grantor agrees that each Issuer shall be fully protected in so
complying, and (ii) unless otherwise expressly permitted hereby, pay any
dividends or other payments with respect to the Pledged Securities directly to
the US Administrative Agent.


(e)                                  Upon the occurrence and during
the continuance of an Event of Default, if the Issuer of any Pledged Securities
is the subject of bankruptcy, insolvency, receivership, custodianship or other
proceedings under the supervision of any Governmental Authority, then all
rights of the Grantor in respect thereof to exercise the voting and other
consensual rights which such Grantor would otherwise be entitled to exercise
with respect to the Pledged Securities issued by such Issuer shall cease, and
all such rights shall thereupon become vested in the US Administrative Agent
who shall thereupon have the sole right to exercise such voting and other
consensual rights, but the US Administrative Agent shall have no duty to
exercise any such voting or other consensual rights and shall not be
responsible for any failure to do so or delay in so doing.



 16
 









Section
5.05                                Private
Sales of Pledged Securities.


(a)                                  Each Grantor recognizes that the
US Administrative Agent may be unable to effect a public sale of any or all the
Pledged Securities, by reason of certain prohibitions contained in the
Securities Act and applicable state securities laws or otherwise or may
determine that a public sale is impracticable or not commercially reasonable
and, accordingly, may resort to one or more private sales thereof to a
restricted group of purchasers which will be obliged to agree, among other
things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof.  Each Grantor acknowledges and agrees that any
such private sale may result in prices and other terms less favorable than if
such sale were a public sale and, notwithstanding such circumstances, agrees
that any such private sale shall be deemed to have been made in a commercially
reasonable manner.  The US Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged
Securities for the period of time necessary to permit the Issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such Issuer would agree to do so.


(b)                                 Each Grantor agrees to use its
best commercially reasonable efforts to do or cause to be done all such other
acts as may reasonably be necessary to make such sale or sales of all or any
portion of the Pledged Securities pursuant to this Section 5.05 valid
and binding and in compliance with any and all other applicable Governmental
Requirements.  Each Grantor further
agrees that a breach of any of the covenants contained in this Section 5.05
will cause irreparable injury to the Secured Creditors, that the Secured
Creditors have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 5.05
shall be specifically enforceable against such Grantor, and such Grantor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no Event of Default has
occurred or is continuing under the Credit Agreement.


Section
5.06                                Deficiency.  Each Grantor shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to pay its obligations and the fees and disbursements of any attorneys
employed by the US Administrative Agent or any Secured Creditor to collect such
deficiency.


Section
5.07                                Non-Judicial
Enforcement.  The US Administrative
Agent may enforce its rights hereunder without prior judicial process or
judicial hearing, and to the extent permitted by law, each Grantor expressly
waives any and all legal rights which might otherwise require the US
Administrative Agent to enforce its rights by judicial process.


ARTICLE VI
 The US
Administrative Agent


Section
6.01                                US
Administrative Agent’s Appointment as Attorney-in-Fact, Etc.


(a)                                  Anything in this Section
6.01(a) to the contrary notwithstanding, the US Administrative Agent agrees
that it will not exercise any rights under the power of attorney 



 17
 









provided for in
this Section 6.01(a) unless an Event of Default shall have occurred and
be continuing.  Each Grantor hereby
irrevocably constitutes and appoints the US Administrative Agent and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Grantor and in the name of such Grantor or in its own name,
for the purpose of carrying out the terms of this Agreement, to take any and
all reasonably appropriate action and to execute any and all documents and
instruments which may be reasonably necessary or desirable to accomplish the
purposes of this Agreement, and, without limiting the generality of the
foregoing, each Grantor hereby gives the US Administrative Agent the power and
right, on behalf of such Grantor, without notice to or assent by such Grantor,
to do any or all of the following:


(i)                                     unless being disputed under
Section 9.03(a) of the Credit Agreement, pay or discharge Taxes and Liens
levied or placed on or threatened against the Collateral, effect any repairs or
any insurance called for by the terms of this Agreement or any other Loan
Document and pay all or any part of the premiums therefor and the costs
thereof;


(ii)                                  execute, in connection with any
sale provided for in Section 5.01 or Section 5.05, any
endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral; and


(iii)                               (A) direct any party liable for
any payment under any of the Collateral to make payment of any and all moneys
due or to become due thereunder directly to the US Administrative Agent or as
the US Administrative Agent shall direct; (B) ask or demand for, collect, and
receive payment of and receipt for, any and all moneys, claims and other
amounts due or to become due at any time in respect of or arising out of any
Collateral; (C) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any check, draft, note, acceptance or
other instrument for the payment of moneys due with respect to any Collateral
and commence and prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the Collateral or any
portion thereof and to enforce any other right in respect of any Collateral;
(D) defend any suit, action or proceeding brought against such Grantor with
respect to any Collateral; (E) settle, compromise or adjust any such suit,
action or proceeding and, in connection therewith, give such discharges or
releases as the US Administrative Agent may deem appropriate; and (F)
generally, sell, transfer, pledge and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though the
US Administrative Agent were the absolute owner thereof for all purposes, and
do, at the US Administrative Agent’s option and such Grantor’s expense, at any
time, or from time to time, all acts and things which the US Administrative
Agent deems necessary to protect, preserve or realize upon the Collateral and
the US Administrative Agent’s and the Secured Creditors’ security interests
therein and to effect the intent of this Agreement, all as fully and
effectively as such Grantor might do.


(b)                                 If any Grantor fails to perform
or comply with any of its agreements contained herein within the applicable
grace periods, the US Administrative Agent, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.



 18
 









(c)                                  The reasonable expenses of the US
Administrative Agent incurred in connection with actions undertaken as provided
in this Section 6.01, together with interest thereon at a rate per annum
equal to the Post-Default Rate, but in no event to exceed the Highest Lawful
Rate, from the date of payment by the US Administrative Agent to the date
reimbursed by the relevant Grantor, shall be payable by such Grantor to the US
Administrative Agent on demand.


(d)                                 All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.


Section 6.02                                Duty of US Administrative Agent.  The US Administrative Agent’s sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section  9.207
of the UCC or otherwise, shall be to deal with it in the same manner as the US
Administrative Agent deals with similar Property for its own account and shall
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which comparable secured parties accord comparable
collateral.  To the fullest extent permitted
under applicable law, neither the US Administrative Agent, any Secured Creditor
nor any of their respective officers, directors, employees or agents shall be
liable for failure to demand, collect or realize upon any of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of any Grantor or any other Person
or to take any other action whatsoever with regard to the Collateral or any
part thereof.  The powers conferred on
the US Administrative Agent and the Secured Creditors hereunder are solely to
protect the US Administrative Agent’s and the Secured Creditors’ interests in
the Collateral and shall not impose any duty upon the US Administrative Agent
or any Secured Creditor to exercise any such powers.  The US Administrative Agent and the Secured
Creditors shall be accountable only for amounts that they actually receive as a
result of the exercise of such powers, and neither they nor any of their
officers, directors, employees or agents shall be responsible to any Grantor
for any act or failure to act hereunder, except for their own gross negligence
or willful misconduct.  To the fullest
extent permitted by applicable law, the US Administrative Agent shall be under
no duty whatsoever to make or give any presentment, notice of dishonor,
protest, demand for performance, notice of non-performance, notice of intent to
accelerate, notice of acceleration, or other notice or demand in connection
with any Collateral or the Borrower Obligations, or to take any steps necessary
to preserve any rights against any Grantor or other Person or ascertaining or
taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Collateral, whether or not it has or
is deemed to have knowledge of such matters. 
Each Grantor, to the extent permitted by applicable law, waives any
right of marshaling in respect of any and all Collateral, and waives any right
to require the US Administrative Agent or any Secured Creditor to proceed
against any Grantor or other Person, exhaust any Collateral or enforce any
other remedy which the US Administrative Agent or any Secured Creditor now has
or may hereafter have against each Grantor, any Grantor or other Person.


Section
6.03                                Filing
of Financing Statements.  Pursuant to
the UCC and any other applicable law, each Grantor authorizes the US
Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral 



 19
 









in such form and
in such offices as the US Administrative Agent reasonably determines
appropriate to perfect the security interests of the US Administrative Agent
under this Agreement.  A photographic or
other reproduction of this Agreement shall be sufficient as a financing
statement or other filing or recording document or instrument for filing or
recording in any jurisdiction.


Section
6.04                                Authority
of US Administrative Agent.  Each
Grantor acknowledges that the rights and responsibilities of the US
Administrative Agent under this Agreement with respect to any action taken by
the US Administrative Agent or the exercise or non-exercise by the US
Administrative Agent of any option, voting right, request, judgment or other
right or remedy provided for herein or resulting or arising out of this
Agreement shall, as between the US Administrative Agent and the Secured
Creditors, be governed by the Credit Agreement and by such other agreements
with respect thereto as may exist from time to time among them, but, as between
the US Administrative Agent and the Grantors, the US Administrative Agent shall
be conclusively presumed to be acting as agent for the Secured Creditors with
full and valid authority so to act or refrain from acting, and no Grantor shall
be under any obligation, or entitlement, to make any inquiry respecting such
authority.


ARTICLE VII
 Subordination
of Indebtedness


Section
7.01                                Subordination
of All Grantor Claims.  As used
herein, the term “Grantor Claims” shall
mean all debts and obligations of the Borrowers or any other Grantor to any
other Grantor, whether such debts and obligations now exist or are hereafter
incurred or arise, or whether the obligation of the debtor thereon be direct,
contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such debts or obligations be evidenced by note,
contract, open account, or otherwise, and irrespective of the Person or Persons
in whose favor such debts or obligations may, at their inception, have been, or
may hereafter be created, or the manner in which they have been or may
hereafter be acquired by.  Except for
payments permitted by the Credit Agreement, after and during the continuation
of an Event of Default, no Grantor shall receive or collect, directly or
indirectly, from any obligor in respect thereof any amount upon the Grantor
Claims.


Section
7.02                                Claims
in Bankruptcy.  In the event of
receivership, bankruptcy, reorganization, arrangement, debtor’s relief, or
other insolvency proceedings involving any Grantor, the US Administrative Agent
on behalf of the US Administrative Agent and the Secured Creditors shall have
the right to prove their claim in any proceeding, so as to establish their
rights hereunder and receive directly from the receiver, trustee or other court
custodian, dividends and payments which would otherwise be payable upon Grantor
Claims.  Each Grantor hereby assigns such
dividends and payments to the US Administrative Agent for the benefit of the US
Administrative Agent and the Secured Creditors for application against the
Borrower Obligations as provided under the Credit Agreement.  Should any Agent or Secured Creditor receive,
for application upon the Borrower Obligations, any such dividend or payment
which is otherwise payable to any Grantor, and which, as between such Grantors,
shall constitute a credit upon the Grantor Claims, then upon payment in full in
cash of the Borrower Obligations, the expiration of all Letters of Credit
outstanding under the Credit Agreement (except for Letters of Credit secured by
cash collateral as permitted in Section 2.01(b)(iii) of the Credit Agreement)
and the 



 20
 









termination of all
of the Aggregate Commitments, the intended recipient shall become subrogated to
the rights of the US Administrative Agent and the Secured Creditors to the
extent that such payments to the US Administrative Agent and the Lenders on the
Grantor Claims have contributed toward the liquidation of the Borrower
Obligations, and such subrogation shall be with respect to that proportion of
the Borrower Obligations which would have been unpaid if the US Administrative
Agent and the Secured Creditors had not received dividends or payments upon the
Grantor Claims.


Section
7.03                                Payments
Held in Trust.  In the event that
notwithstanding Section 7.01 and Section 7.02, any Grantor should
receive any funds, payments, claims or distributions which is prohibited by
such Sections, then it agrees: (a) to hold in trust for the US Administrative
Agent and the Secured Creditors an amount equal to the amount of all funds,
payments, claims or distributions so received, and (b) that it shall have
absolutely no dominion over the amount of such funds, payments, claims or
distributions except to pay them promptly to the US Administrative Agent, for
the benefit of the Secured Creditors; and each Grantor covenants promptly to
pay the same to the US Administrative Agent.


Section
7.04                                Liens
Subordinate.  Each Grantor agrees
that, until the Borrower Obligations are paid in full in cash, no Letter of Credit
shall be outstanding (except for Letters of Credit secured by cash collateral
as permitted in Section 2.01(b)(iii) of the Credit Agreement) and the
termination of all of the Aggregate Commitments, any Liens securing payment of
the Grantor Claims shall be and remain inferior and subordinate to any Liens
securing payment of the Borrower Obligations, regardless of whether such
encumbrances in favor of such Grantor, the US Administrative Agent or any
Secured Creditor presently exist or are hereafter created or attach.  Without the prior written consent of the US
Administrative Agent, no Grantor, during the period in which any of the
Borrower Obligations are outstanding or the Aggregate Commitments are in
effect, shall (a) exercise or enforce any creditor’s right it may have against
any debtor in respect of the Grantor Claims, or (b) foreclose, repossess,
sequester or otherwise take steps or institute any action or proceeding
(judicial or otherwise, including without limitation the commencement of or
joinder in any liquidation, bankruptcy, rearrangement, debtor’s relief or
insolvency proceeding) to enforce any Lien held by it.


Section
7.05                                Notation
of Records.  Upon the request of the US
Administrative Agent, all promissory notes and all accounts receivable ledgers
or other evidence of the Grantor Claims accepted by or held by any Grantor
shall contain a specific written notice thereon that the indebtedness evidenced
thereby is subordinated under the terms of this Agreement.


ARTICLE VIII
 Miscellaneous


Section
8.01                                Waiver.  No failure on the part of the US
Administrative Agent or any Secured Creditor to exercise and no delay in
exercising, and no course of dealing with respect to, any right, power,
privilege or remedy or any abandonment or discontinuance of steps to enforce
such right, power, privilege or remedy under this Agreement or any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power, privilege or remedy under this Agreement or any
other Loan Document preclude or be construed as a waiver of any other or
further exercise thereof or the exercise of any other right, power, privilege 



 21
 









or remedy.  The remedies provided herein are cumulative
and not exclusive of any remedies provided by law or equity


Section
8.02                                Notices.  All notices and other communications provided
for herein shall be given in the manner and subject to the terms of Section
13.02 of the Credit Agreement; provided that any such notice, request or demand
to or upon any Grantor shall be addressed to such Grantor at its notice address
set forth on Schedule 1.


Section
8.03                                Amendments
in Writing.  None of the terms or
provisions of this Agreement may be waived, amended, supplemented or otherwise
modified except in accordance with Section 13.04 of the Credit Agreement.


Section
8.04                                Successors
and Assigns.  The provisions of this
Agreement shall be binding upon the Grantors and their successors and permitted
assigns and shall inure to the benefit of the US Administrative Agent and the
Secured Creditors and their respective successors and permitted assigns;
provided that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the US
Administrative Agent and the Lenders unless otherwise permitted by the terms of
the Credit Agreement or this Agreement, and any such purported assignment,
transfer or delegation shall be null and void.


Section
8.05                                Survival;
Revival; Reinstatement.


(a)                                  All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document to which it is a party shall be
considered to have been relied upon by the US Administrative Agent, the other
Agents, the Issuing Bank and the Lenders and shall survive the execution and
delivery of this Agreement and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the US Administrative Agent, the
other Agents, the Issuing Bank or any Lender may have had notice or knowledge
of any Default or incorrect representation or warranty at the time any credit
is extended hereunder, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any fee or any other
amount payable under the Credit Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Aggregate Commitments have
not expired or terminated.


(b)                                 To the extent that any payments
on the Borrower Obligations or proceeds of any Collateral are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid to a trustee, debtor in possession, receiver or other Person under
any bankruptcy law, common law or equitable cause, then to such extent, the
Borrower Obligations so satisfied shall be revived and continue as if such
payment or proceeds had not been received and the US Administrative Agent’s and
the Secured Creditors’ Liens, security interests, rights, powers and remedies
under this Agreement and each other Loan Document shall continue in full force
and effect.  In such event, each Loan
Document shall be automatically reinstated and the Grantors shall take such
action as may be reasonably requested by the US Administrative Agent and the
Secured Creditors to effect such reinstatement.



 22
 









Section
8.06                                Counterparts;
Integration; Effectiveness; Conflicts.


(a)                                  This Agreement may be executed
in counterparts (and by different parties hereto on different counterparts),
each of which shall constitute an original, but all of which when taken
together shall constitute a single contract.


(b)                                 THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT AND
UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER AGREEMENTS AND
UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND
THEREOF.  THIS AGREEMENT AND THE LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.


(c)                                  This Agreement shall become effective
when it shall have been executed by the US Administrative Agent and when the US
Administrative Agent shall have received counterparts hereof which, when taken
together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties
hereto, the Lenders and their respective successors and assigns.  Delivery of an executed counterpart of a
signature page of this Agreement by telecopy shall be effective as delivery of
a manually executed counterpart of this Agreement.


(d)                                 In the event of a conflict
between the provisions hereof and the provisions of the Credit Agreement, the
provisions of the Credit Agreement shall control.


Section
8.07                                Severability.  Any provision of this Agreement or any other
Loan Document held to be invalid, illegal or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
invalidity, illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions hereof or thereof; and
the invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.


Section
8.08                                Governing
Law; Submission to Jurisdiction.


(a)                                  THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.


(b)                                 ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT IN
THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF TEXAS, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH OF THE PARTIES HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY
LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS.  EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH 



 23
 









RESPECTIVE
JURISDICTIONS.  THIS SUBMISSION TO
JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROM OBTAINING
JURISDICTION OVER ANOTHER PARTY IN ANY COURT OTHERWISE HAVING JURISDICTION.


(c)                                  EACH GRANTOR IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH GRANTOR AT ITS ADDRESS SET FORTH ON SCHEDULE
1 HERETO OR AS UPDATED FROM TIME TO TIME, SUCH SERVICE TO BECOME EFFECTIVE
THIRTY (30) DAYS AFTER SUCH MAILING.


(d)                                 NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER OR ANY HOLDER OF A NOTE TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE GRANTORS IN ANY OTHER
JURISDICTION.


(e)                                  EACH PARTY HEREBY (i)
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
ANY SECURITY INSTRUMENT AND FOR ANY COUNTERCLAIM THEREIN; (ii) IRREVOCABLY
WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OF THE
ADMINISTRATIVE AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT, THE SECURITY INSTRUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 8.08.


Section
8.09                                Headings.  Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of
this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.


Section
8.10                                Acknowledgments.  Each Grantor hereby acknowledges that:


(a)                                  it has been advised by counsel
in the negotiation, execution and delivery of this Agreement and the other Loan
Documents to which it is a party;


(b)                                 neither the US Administrative
Agent nor any Secured Creditor has any fiduciary relationship with or duty to
any Grantor arising out of or in connection with this Agreement or any of the
other Loan Documents, and the relationship between the Grantors, on 



 24
 









the one hand,
and the US Administrative Agent and Secured Creditors, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor;


(c)                                  no joint venture is created
hereby or by the other Loan Documents or otherwise exists by virtue of the
transactions contemplated hereby among the Secured Creditors or among the
Grantors and the Secured Creditors; and


(d)                                 Each of the parties hereto
specifically agrees that it has a duty to read this Agreement, the Security
Instruments and the other Loan Documents and agrees that it is charged with
notice and knowledge of the terms of this Agreement, the Security Instruments
and the other Loan Documents; that it has in fact read this Agreement, the
Security Instruments and the other Loan Documents and is fully informed and has
full notice and knowledge of the terms, conditions and effects thereof; that it
has been represented by independent legal counsel of its choice throughout the
negotiations preceding its execution of this Agreement and the Security
Instruments; and has received the advice of its attorney in entering into this
Agreement and the Security Instruments; and that it recognizes that certain of
the terms of this Agreement and the Security Instruments result in one party
assuming the liability inherent in some aspects of the transaction and
relieving the other party of its responsibility for such liability.  EACH PARTY
HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR
ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND THE SECURITY
INSTRUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH
PROVISION OR THAT THE PROVISION IS NOT “CONSPICUOUS.”


Section
8.11                                Additional
Capital Stock.  Each Grantor that is
required to pledge certificated Capital Stock of its Subsidiaries shall execute
and deliver a Supplement in the form of Annex I hereto, if such certificated
Capital Stock was not previously pledged.


Section
8.12                                Releases.


(a)                                  Full Release.  The grant of a security interest hereunder
and all of rights, powers and remedies in connection herewith shall remain in
full force and effect until the US Administrative Agent has (i) retransferred
and delivered all Collateral in its possession to the Grantors, and (ii)
executed a written release or termination statement and reassigned to the
Grantors without recourse or warranty any remaining Collateral and all rights
conveyed hereby.  Pursuant to the
satisfaction of the conditions set forth in Section 9.09(b) of the Credit
Agreement or upon the complete payment of the Borrower Obligations under the
Credit Agreement (except for Letters of Credit secured by cash collateral as
permitted in Section 2.01(b)(iii) of the Credit Agreement) and the compliance
by the Grantors with all covenants and agreements hereof and the termination of
the Aggregate Commitments, the US Administrative Agent, at the written request
and expense of the Borrowers, will promptly release, reassign and transfer the
Collateral to the Grantors and declare this Agreement to be of no further force
or effect.


(b)                                 Partial Release.  Notwithstanding anything contained herein to
the contrary, the Grantors are authorized to release any Collateral that is
sold, leased, assigned, exchanged, conveyed, transferred or otherwise disposed
of in compliance with Sections 10.08, 10.11 and 10.14 of the Credit Agreement
at which point the liens and security interests shall 



 25
 









terminate with
respect to such Collateral and this Agreement shall have no further force or
effect with respect to such released Collateral; provided that so long
as the lien in favor of the US Administrative Agent continues in the proceeds
of such sale, lease, assignment, exchange, conveyance, transfer or other disposal
of such Collateral, or to the extent such Collateral is sold, leased, assigned,
exchanged, conveyed, transferred or otherwise disposed of to any Borrower or
any Subsidiary Guarantor, such lien continues in such Collateral.


(c)                                  Retention in Satisfaction.  Except as may be expressly applicable
pursuant to Section 9.620 of
the UCC, no action taken or omission to act by the US Administrative Agent or
the Secured Creditors hereunder, including, without limitation, any exercise of
voting or consensual rights or any other action taken or inaction, shall be
deemed to constitute a retention of the Collateral in satisfaction of the
Borrower Obligations or otherwise to be in full satisfaction of the Borrower
Obligations, and the Borrower Obligations shall remain in full force and
effect, until the US Administrative Agent and the Secured Creditors shall have
applied payments (including, without limitation, collections from Collateral)
towards the Borrower Obligations in the full amount then outstanding or until such
subsequent time as is provided in Section 8.12(a).


Section
8.13                                Acceptance.  Each Grantor hereby expressly waives notice
of acceptance of this Agreement, acceptance on the part of the US
Administrative Agent and the Secured Creditors being conclusively presumed by
their request for this Agreement and delivery of the same to the US
Administrative Agent.


[SIGNATURE
PAGES TO FOLLOW]



 26














IN
WITNESS WHEREOF, each of the undersigned has caused this Collateral Agreement
to be duly executed and delivered as of the date first above written.


 


	
  GRANTORS:

  	
  UNIVERSAL
  COMPRESSION, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Michael Anderson

  
	
   

  	
  Name:

  	
  J. Michael Anderson

  
	
   

  	
  Title:

  	
  Senior Vice President and

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  UNIVERSAL COMPRESSION
  HOLDINGS,

  
	
   

  	
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Michael Anderson

  
	
   

  	
  Name:

  	
  J. Michael Anderson

  
	
   

  	
  Title:

  	
  Senior Vice President and

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  UCI COMPRESSOR HOLDING,
  L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  UCI
  LEASING HOLDING GP LLC,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Michael Anderson

  
	
   

  	
  Name:

  	
  J. Michael Anderson

  
	
   

  	
  Title:

  	
  Senior Vice President and

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  UCI
  MLP LP LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Pamela Jasinki

  
	
   

  	
  Name:

  	
  Pamela A. Jasinski

  
	
   

  	
  Title:

  	
  Manager

  



 


Signature Page –
Collateral Agreement












 


	
  Acknowledged and Agreed to
  as

  	
   

  	
   

  
	
  of the date
  hereof by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ADMINISTRATIVE AGENT:

  	
   

  	
  WACHOVIA
  BANK, NATIONAL 

  
	
   

  	
   

  	
  ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Todd Schanzlin

  
	
   

  	
  Name:

  	
  Todd Schanzlin

  
	
   

  	
  Title:

  	
  Vice President

  
				



 


 


Acknowledgment Page –
Collateral Agreement