Document:

EXHIBIT 10.7

 

CONFORMED COPY

 

 

 

 

 

 

INSURANCE AND INDEMNITY
AGREEMENT

 

AMBAC ASSURANCE
CORPORATION

as Insurer

UCO COMPRESSION 2005 LLC

as Issuer

UNIVERSAL COMPRESSION,
INC.

as Contributor and Manager

UCO COMPRESSION 2002 LLC

as Old Lessee

WELLS FARGO BANK, NATIONAL
ASSOCIATION

as Indenture Trustee

 

________________________

 

UCO COMPRESSION 2005 LLC

Series 2005-1 Notes and Series 2005-2 Notes

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  PAGE

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.1

  	
  Defined Terms

  	
  1

  
	
  ARTICLE II

  	
  REPRESENTATIONS, WARRANTIES AND
  COVENANTS

  	
  3

  
	
  Section 2.1

  	
  Representations
  and Warranties of UCI and Old Lessee.

  	
  3

  
	
  Section 2.2

  	
  Affirmative
  Covenants of UCI

  	
  5

  
	
  Section 2.3

  	
  Negative
  Covenants of UCI

  	
  6

  
	
  Section 2.4

  	
  Representations
  and Warranties of the Insurer

  	
  7

  
	
  Section 2.5

  	
  Representations
  and Warranties of the Issuer

  	
  8

  
	
  Section 2.6

  	
  Affirmative
  Covenants of the Issuer

  	
  9

  
	
  Section 2.7

  	
  Negative
  Covenants of the Issuer

  	
  10

  
	
  Section 2.8

  	
  UCI’s
  Representations and Warranties on each Contribution Date and Substitution
  Date

  	
  11

  
	
  ARTICLE III

  	
  THE POLICY; REIMBURSEMENT

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 3.1

  	
  Issuance of the
  Policies

  	
  11

  
	
  Section 3.2

  	
  Payment of Fees
  and Premium

  	
  13

  
	
  Section 3.3

  	
  Reimbursement
  Obligation.

  	
  14

  
	
  Section 3.4

  	
  Indemnification

  	
  14

  
	
  Section 3.5

  	
  Payment
  Procedure

  	
  17

  
	
  Section 3.6

  	
  Subrogation

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  FURTHER AGREEMENTS

  	
  17

  
	
   

  	
   

  	
   

  
	
  Section 4.1

  	
  Effective Date;
  Term of this Insurance Agreement

  	
  17

  
	
  Section 4.2

  	
  Waiver,
  Amendment or Modification of Related Documents; Further Assurances and
  Corrective Instruments

  	
  18

  
	
  Section 4.3

  	
  Obligations Absolute

  	
  19

  
	
  Section 4.4

  	
  Assignments;
  Reinsurance; Third-Party Rights

  	
  20

  
	
  Section 4.5

  	
  Liability of the
  Insurer

  	
  21

  
	
  Section 4.6

  	
  Confidentiality

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  DEFAULTS AND REMEDIES

  	
  22

  
	
   

  	
   

  	
   

  
	
  Section 5.1

  	
  Defaults

  	
  22

  
	
  Section 5.2

  	
  Remedies; No
  Remedy Exclusive

  	
  22

  
	
  Section 5.3

  	
  Waivers

  	
  23

  

 

i

 

	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  MISCELLANEOUS

  	
  24

  
	
   

  	
   

  	
   

  
	
  Section 6.1

  	
  Amendments, Etc

  	
  24

  
	
  Section 6.2

  	
  Notices

  	
  24

  
	
  Section 6.3

  	
  Severability

  	
  24

  
	
  Section 6.4

  	
  Consent to
  Jurisdiction

  	
  24

  
	
  Section 6.5

  	
  Consent of the
  Insurer

  	
  25

  
	
  Section 6.6

  	
  Counterparts;
  Facsimile Signatures

  	
  25

  
	
  Section 6.7

  	
  Headings

  	
  25

  
	
  Section 6.8

  	
  Governing Law

  	
  25

  
	
  Section 6.9

  	
  Waiver of
  Immunity

  	
  26

  
	
  Section 6.10

  	
  Limited
  Liability

  	
  26

  
	
  Section 6.11

  	
  Entire Agreement

  	
  26

  
	
  Section 6.12

  	
  Indenture
  Trustee

  	
  26

  
	
  Section 6.13

  	
  Third-Party
  Beneficiary.

  	
  27

  
	
  Section 6.14

  	
  Successor and
  Assigns

  	
  27

  
	
  Section 6.15

  	
  No Proceedings

  	
  27

  

 

ii

 

INSURANCE AND INDEMNITY
AGREEMENT, dated as of October 28, 2005 (as amended, amended and restated,
supplemented or otherwise modified from time to time in accordance with the
terms hereof, this “Insurance Agreement”), by and among AMBAC ASSURANCE
CORPORATION, a stock insurance company organized and existing under the laws of
the State of Wisconsin (together with its successors and permitted assigns, the
“Insurer”), UCO COMPRESSION 2005 LLC, a limited liability company formed
under the laws of the State of Delaware (together with its successors and
permitted assigns, the “Issuer”), UNIVERSAL COMPRESSION, INC., a
corporation organized and existing under the laws of the State of Texas
(together with its successors and permitted assigns, “UCI” or the “Contributor”
or the “Manager”), UCO COMPRESSION 2002 LLC, a limited liability company
organized and existing under the laws of the State of Delaware (together with
its successors and permitted assigns, the “Old Lessee”), and WELLS FARGO
BANK, NATIONAL ASSOCIATION, a national banking association, as Indenture
Trustee (together with its successors and permitted assigns, the “Indenture
Trustee”).

PRELIMINARY STATEMENTS

A.            The Indenture, dated as of October 28, 2005, between the
Issuer and the Indenture Trustee (as amended, amended and restated,
supplemented or otherwise modified from time to time in accordance with its
terms, the “Indenture”), relating to the issuance of the Series 2005-1
Notes and the Series 2005-2 Notes.

B.            The parties hereto desire that the Insurer issue the
Policies (as defined below) to the Indenture Trustee for the benefit of the
Series 2005-1 Noteholders and the Series 2005-2 Noteholders and,
among other things, specify the conditions precedent thereto, the premium in
respect thereof and the indemnity, reimbursement, assignment, reporting and
other obligations of the parties hereto other than the Insurer in consideration
thereof.

NOW, THEREFORE, in
consideration of the premises and the mutual agreements herein contained, the
parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1             Defined Terms.

Capitalized terms used in
this Insurance Agreement but not defined herein shall have the meanings
assigned to such terms in the Policies and, to the extent not defined therein,
the meanings assigned to such terms in Appendix A to the Indenture, as
such Appendix A may be amended, amended and restated, supplemented or otherwise
modified from time to time with the written consent of the Insurer and in
accordance with the provisions of the Indenture.  The rules of usage set forth in such Appendix
A shall apply to this Insurance Agreement. 
In addition, the following terms shall have the following meanings:

“Contributor” has
the meaning specified in the preamble hereto.

 

 

“Default” means
any event or condition that, with the giving of notice or the passage of time
or both, would constitute an Event of Default.

“Event of Default”
has the meaning specified in Section 5.1.

“Indemnified Party”
has the meaning specified in Section 3.4.

“Indemnifying Party”
has the meaning specified in Section 3.4.

“Indenture” has
the meaning specified in the preliminary statements hereto.

“Indenture Trustee”
has the meaning specified in the preamble hereto.

“Information” has
the meaning specified in Section 2.1.

“Insurance Agreement”
has the meaning specified in the preamble hereto.

“Insurer” has the meaning
specified in the preamble hereto.

“Investment Company
Act” means the Investment Company Act of 1940, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.

“Issuer” has the
meaning specified in the preamble hereto.

“Late Payment Rate”
means, as to the Series 2005-1 Notes or the Series 2005-2 Notes, as applicable,
the lesser of (a) the greater of (i) the per annum rate of interest publicly
announced from time to time by Citibank, N.A. as its prime or base lending rate
(any change in such rate of interest to be effective on the date such change is
announced by Citibank, N.A.), plus 2% per annum and (ii) the then applicable
highest rate of interest on the Series 2005-1 Notes or Series 2005-2 Notes, as
applicable, and (b) the maximum rate permissible under applicable usury or
similar laws limiting interest rates. 
The Late Payment Rate shall be computed on the basis of the actual
number of days elapsed over a year of 360 days.

“Letter Agreement”
means that certain Insurer Letter Agreement, dated as of October 28, 2005, by
and among UCI, in its individual capacity and as Manager under the Management
Agreement, the Issuer, and the Insurer, as amended,
amended and restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof.

“Manager” has the
meaning specified in the preamble hereto.

“Offering Memorandum”
means the Offering Memorandum dated October 28, 2005 in respect of the Series
2005-1 Notes.

“Policy” means
either or both, as the context may require, of the Series 2005-1 Notes Policy
or the Series 2005-2 Notes Policy.

“Series 2005-1
Noteholder” has the meaning specified in the Series 2005-1
Supplement.

 

2

 

“Series 2005-2
Noteholder” has the meaning specified in the Series 2005-2
Supplement.

“Series 2005-1 Notes
Policy” means the financial guaranty insurance policy number AB0934BE,
issued by the Insurer with respect to the Series 2005-1 Notes on October 28, 2005,
substantially in the form of Exhibit A hereto, and each and every
endorsement thereto that is issued by the Insurer to the Indenture Trustee for
the benefit of the Series 2005-1 Noteholders.

“Series 2005-2 Notes
Policy” means the financial guaranty insurance policy number AB0935BE,
issued by the Insurer with respect to the Series 2005-2 Notes on October 28,
2005, substantially in the form of Exhibit B hereto, and each and every
endorsement thereto that is issued by the Insurer to the Indenture Trustee for
the benefit of the Series 2005-2 Noteholders.

“Series 2005-1
Supplement” means the Series Supplement for the Series 2005-1 Notes.

“Series 2005-2
Supplement” means the Series Supplement for the Series 2005-2 Notes.

“Supplemental Manager
Report” has the meaning specified in Section 2.2(d).

“Transactions”
means the transactions contemplated by the Related Documents.

“UCI” has the
meaning specified in the preamble hereto.

ARTICLE II

REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 2.1             Representations and Warranties
of UCI and Old Lessee.

Each of UCI and the Old
Lessee hereby makes, to and for the benefit of the Insurer, each of the
representations and warranties made by it, whether in its capacity as
Contributor, Manager or otherwise (in the case of UCI) or whether in its
capacity as Old Lessee or otherwise (in the case of Old Lessee), in each of the
Related Documents to which it is a party, including, but not limited to,
Sections 3.01 and 3.05 of the Contribution Agreement and Section 19 of the
Management Agreement, as applicable, in each case as in effect on the date
hereof or as amended with the consent of the Insurer, and such representations
and warranties, and any defined terms used therein or related thereto, are
hereby incorporated herein by this reference as if fully set forth herein.  In addition, UCI represents and warrants to
the Insurer as of the Closing Date as follows:

(a)           Offering.  The offer and sale of the Series 2005-1 Notes
and the Series 2005-2 Notes by the Issuer comply in all material respects with
all requirements of Applicable Law, including all registration requirements of
applicable securities laws.

(b)           Trust Indenture Act; Securities
Laws.  The Indenture is not required
to be qualified under the Trust Indenture Act of 1939, as amended.  The Issuer is not required to be registered
as an “investment company” under the Investment Company Act.  Neither the offer nor the sale of the Series
2005-1 Notes and the Series 2005-2 Notes by the Issuer will be in violation of
the Securities Act or any other federal or state securities law.  UCI will, or will cause

 

3

 

the Issuer to, satisfy
any of the information reporting requirements of the Exchange Act arising out
of the Transaction to which it or the Issuer is subject.

(c)           Accuracy of Information.  Neither the Related Documents nor any other
information relating to any Contributed Asset or any other Collateral, the
operations of UCI or the financial condition of UCI (as amended, amended and
restated, supplemented or superseded, collectively, the “Information”)
furnished to the Insurer by UCI contains any statement of a material fact which
was untrue or misleading in any material respect when made.  UCI has no knowledge of any circumstances
that could reasonably be expected to cause a Material Adverse Change.  Since the furnishing of the Information,
there has been no change nor any development or event involving a prospective
change known to UCI that would render any of the Related Documents untrue or
misleading in any material respect.  The
information on Schedule 2.1 supplements the financial information
provided to the Insurer on or prior to the Closing Date.

(d)           Power and Authority.  UCI has all requisite power and authority and
is duly authorized to enter into, execute and deliver this Insurance Agreement,
and is, and will continue to be, authorized to perform its obligations under
this Insurance Agreement.

(e)           Due Authorization.  The execution, delivery and performance of
this Insurance Agreement by UCI has been duly authorized by all necessary
action under the laws of its state of organization and do not require any
additional approvals, consents, or other action by or any notice to or filing
with, any Person, including any Governmental Authority, that have not been
obtained prior to the Closing Date.

(f)            Noncontravention.  The execution, delivery and performance of
this Insurance Agreement and the satisfaction of the terms and conditions of
this Insurance Agreement by UCI do not and will not: (a) contravene any
provision of its Organizational Documents; (b) contravene, conflict with or
violate any Applicable Law or regulation, or any order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority that
could result in a Material Adverse Change; or (c) violate or result in the
breach of, constitute (with or without notice or lapse of time or both) a
default under, or result in the acceleration of any obligation under, this
Insurance Agreement, any other Related Documents, any other indenture or other
loan or credit agreement, or other agreement or instrument to which UCI is a
party or by which UCI, or its property and assets may be bound or affected that
could result in a Material Adverse Change or result in a Lien on the Collateral
other than Permitted Encumbrances.  UCI
is not in violation or breach of or default under any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award or any
contract, agreement, lease, license, indenture or other instrument to which it
is a party that could result in a Material Adverse Change.

(g)           Valid and Binding Obligations.  This Insurance Agreement, when duly executed
and delivered by UCI, will be a legal, valid and binding obligation of UCI,
enforceable against UCI in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency or other similar laws of general
application affecting the enforcement of creditors’ rights or by general
principles of equity limiting the availability of equitable remedies.

 

4

 

(h)           Public Utility Holding Company Act.  Neither UCI nor any of its Subsidiaries is
subject to regulation as a “holding company,” an “affiliate” of a “holding
company,” or a “subsidiary company” of a “holding company,” within the meaning
of the Public Utility Holding Company Act of 1935, as amended.  Similarly, neither UCI nor any of its
Subsidiaries will be subject to regulation as a “holding company,” an
“affiliate” of a “holding company,” or a “subsidiary company” of a “holding
company,” within the meaning of the Public Utility Holding Company Act of 2005,
as amended.

(i)            Fraudulent Conveyance.  UCI is not selling or contributing the
Collateral under the Indenture with any intent to hinder, delay or defraud its
creditors.

(j)            Offering Memorandum.  Without limiting the foregoing
representations and warranties, the Offering Memorandum does not contain any
untrue statement of a material fact and does not omit to state a material fact
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading; provided, however,
that no representation is made with respect to the information in the Offering
Memorandum regarding the Insurer set forth under the caption “THE SERIES
ENHANCER” or the financial statements of the Insurer incorporated by reference
into the Offering Memorandum.

Section 2.2             Affirmative Covenants of UCI.

UCI hereby makes, to and
for the benefit of the Insurer, all of the covenants made by UCI, whether in
its capacity as Contributor, Manager or otherwise, in the Related Documents to
which it is a party, including, but not limited to, Sections 3.03, 3.04, 4.01
and 4.02 of the Contribution Agreement and Section 9 of the Management
Agreement.  Such covenants, and any
defined terms used therein or related thereto, are hereby incorporated herein
by this reference as if fully set forth herein, and may not be amended except
by an amendment complying with the terms of Section 4.2(a)
hereof.  In addition, UCI hereby agrees
that during the term of this Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:

(a)           Notice of Material Events.  UCI shall be obligated promptly to inform the
Insurer in writing of the occurrence of any of the following:

(i)            the submission of
any claim or the initiation of any legal process, litigation or administrative
or judicial investigation, or disciplinary proceeding by or against UCI that
would likely result in a Material Adverse Change or the promulgation of any
proceeding or any proposed or final ruling in connection with any such
litigation, investigation or proceeding which would be reasonably likely to
result in a Material Adverse Change;

(ii)           within five (5)
Business Days of the occurrence thereof, the occurrence of any Event of Default
hereunder;

(iii)          the commencement of
any proceedings by or against UCI under any applicable reorganization,
liquidation, rehabilitation, insolvency or other similar Applicable Law now or
hereafter in effect or of any Proceeding in which a receiver,

 

5

 

liquidator,
conservator, trustee or similar official shall have been, or may be, appointed
or requested for UCI or any of its assets; or

(iv)          the receipt of
written notice that (A) any license, permit, charter, registration or
approval necessary for the conduct of UCI’s business is to be, or may be,
suspended or revoked and such suspension or revocation would be reasonably
likely to result in a Material Adverse Change or (B) UCI is to cease and
desist any practice, procedure or policy employed by UCI in the conduct of its
business, and such cessation would be reasonably likely to result in a Material
Adverse Change.

(b)           Inspections.  UCI shall comply with its agreements and
covenants in the Letter Agreement and the Intercreditor Agreement, including
those with respect to rights of Inspection (as defined in the Letter Agreement)
granted to the Insurer.

(c)           Closing Documents.  UCI shall provide or cause to be provided to
the Insurer an executed original copy of each Related Document and a copy of
each other document executed in connection with the closing of the Transactions
within thirty (30) days of the Closing Date.

(d)           Supplemental Manager Report.  UCI shall provide or cause to be provided to
the Insurer, together with the financial statements required under Section 9.1
of the Management Agreement, a supplemental manager report (a “Supplemental
Manager Report”) substantially in the form of Exhibit C hereto
signed by a Responsible Officer of UCI stating that, to the best of such
Person’s knowledge, (i) the Manager and the Issuer are in compliance with all
material requirements of the Indenture, the Management Agreement and all
Related Documents, (ii) there are no on-going Events of Default (as defined in
the Indenture), Manager Defaults or Trigger Events, and (iii) the information
contained in such Supplemental Managers Report is true and accurate in all
material respects, and if such Responsible Officer is unable to make any of the
foregoing certifications, such Person shall provide a schedule to such
Supplemental Manager Report describing the exceptions to this Section 2.2(d)
listing, in detail, the nature of the condition or event, the period during
which it has existed and the action which the Manager or Issuer has taken, is
taking, or proposes to take with respect to such condition or event (including
all relevant financial and other information and amounts used in determining
whether such condition or event exists).

(e)           Other Information.  UCI shall provide to the Insurer such other
information (including non-financial information) in respect of the
Collateral, the Transactions and the Related Documents and such other financial
or operating information in respect of the Old Lessee, UCH, UCI or the Issuer,
in each case, which the Insurer may from time to time reasonably request.

Section 2.3             Negative Covenants of UCI.

UCI hereby agrees that
during the term of this Insurance Agreement, unless the Insurer shall otherwise
expressly consent in writing:

 

6

 

(a)           Impairment of Rights.  UCI shall not take any action, or fail to
take any action, if such action or failure to take action (x) is
reasonably likely to result in a Material Adverse Change or (y) is
reasonably likely to interfere with the enforcement of any rights of the
Insurer or the Indenture Trustee under or with respect to any of the Related
Documents.  UCI shall give the Insurer
written notice of any such action or failure to act promptly prior to the date
of consummation of such action or failure to act.  UCI shall furnish to the Insurer all
information requested by it that is reasonably necessary to determine compliance
with this paragraph.

(b)           Amendments, Etc.  UCI will not amend, modify or terminate any
Related Document or grant any waiver or consent from compliance with the
express terms thereof or request the consent of any Control Party, Series
Enhancer or Noteholder with respect to any action or inaction requiring the
consent of such Person (whether as Control Party, Series Enhancer, Noteholder
or as the Requisite Global Majority or a component thereof) under any Related
Document, unless the Insurer shall have received no less than five (5) Business
Days’ prior written notice thereof (or such shorter period as may be agreed to
by the Insurer in its sole discretion) and any such amendment, modification,
termination, waiver or consent shall be ineffective until the 10th Business Day
following such notice to the Insurer (unless the Insurer has agreed to any
shorter notice period).

(c)           Limitation on Mergers, Etc.  UCI agrees, for the benefit of the Insurer,
that it shall not cause or permit any event to occur that would result in a
Manager Default under Section 12.1(j) of the Management Agreement.  The agreements of UCI set forth in this Section
2.3(c) shall survive the resignation or removal of the Manager and the
termination of the Management Agreement.

Section 2.4             Representations and Warranties
of the Insurer.

The Insurer represents
and warrants to the Indenture Trustee (on behalf of the Series 2005-1
Noteholders and the Series 2005-2 Noteholders), the Issuer and UCI as follows:

(a)           Organization and Licensing.  The Insurer is a stock insurance corporation
duly organized, validly existing and in good standing under the laws of the
State of Wisconsin.

(b)           Corporate Power.  The Insurer has the corporate power and
authority to issue the Policies and execute and deliver this Insurance
Agreement and to perform all of its obligations hereunder and thereunder.

(c)           Authorization; Approvals.  All proceedings legally required for the
issuance of the Policies and the execution, delivery and performance of this
Insurance Agreement have been taken and all licenses, orders, consents or other
authorizations or approvals of the Insurer’s board of directors or stockholders
or any governmental boards or bodies legally required for the enforceability of
the Policies have been obtained or are not material to the enforceability of
the Policies.

(d)           Enforceability.  The Policies, when issued, will constitute,
and this Insurance Agreement constitutes, a legal, valid and binding obligation
of the Insurer, enforceable in accordance with its terms, subject to
insolvency, liquidation, rehabilitation, reorganization,

 

7

 

moratorium,
receivership and other similar laws affecting creditors’ rights generally and
by general principles of equity and subject to principles of public policy limiting
the right to enforce the indemnification provisions contained therein and
herein, insofar as such provisions relate to indemnification for liabilities
arising under federal securities laws.

(e)           No Conflict.  The execution by the Insurer of this Insurance
Agreement and the issuance of the Policies will not, and the satisfaction of
the terms hereof will not, conflict with or result in a breach of any of the
terms, conditions or provisions of the Certificate of Incorporation or By-Laws
of the Insurer, or any restriction contained in any contract, agreement or
instrument to which the Insurer is a party or by which it is bound or
constitute a default under any of the foregoing which would materially and
adversely affect its ability to perform its obligations under the Policies or
this Insurance Agreement.

Section 2.5             Representations and Warranties
of the Issuer.

The Issuer hereby makes,
to and for the benefit of the Insurer, each of the representations and
warranties made by the Issuer in the Related Documents to which it is a party
including, but not limited to, Article V of the Indenture and Section 3.02 of
the Contribution Agreement, in each case as amended from time to time in
accordance with the terms of such Related Documents, and such representations and
warranties, and any defined terms used therein or related thereto, are hereby
incorporated herein by this reference as if fully set forth herein.  In addition, the Issuer represents and
warrants to the Insurer as of the Closing Date as follows:

(a)           Power and Authority.  The Issuer has the requisite power and
authority and is duly authorized to execute and deliver this Insurance
Agreement, and is, and will continue to be, authorized to perform its
obligations under this Insurance Agreement.

(b)           Due Authorization.  The execution, delivery and performance of
this Insurance Agreement by the Issuer has been duly authorized by all
necessary company action under Delaware law and do not require any additional
approvals or consents, or other action by or any notice to or filing with any
Person, including any Governmental Authority, that have not been obtained prior
to the Closing Date.

(c)           Noncontravention.  The execution and delivery by the Issuer of
this Insurance Agreement and the satisfaction of the terms and conditions of
this Insurance Agreement by the Issuer do not and will not:

(i)            contravene,
conflict with or result in any breach or violation of any provision of the
Organizational Documents of the Issuer or any Applicable Law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award currently in
effect having applicability to either the Issuer or the Collateral, including
regulations issued by any administrative agency or other Governmental Authority
having supervisory powers over the Issuer or any agreement, document or other
instrument to which the Issuer is a party or to which the Issuer or the
Collateral is subject, bound or affected;

(ii)           constitute a
default by the Issuer under, result in the acceleration of any obligation under,
or breach any material provision of any loan agreement, mortgage,

 

8

 

indenture or other
agreement or instrument to which the Issuer either is a party or by which any
of its properties are or may be bound or affected; or

(iii)          result in or
require the creation of any Lien upon or in respect of any Collateral, except
as otherwise expressly contemplated by the Related Documents.

(d)           Valid and Binding Obligations.  This Insurance Agreement, when executed and delivered
in accordance with the applicable Related Documents, will be validly issued and
outstanding and entitled to the benefits of the Indenture and will constitute
the legal, valid and binding obligations of the Issuer, enforceable against the
Issuer in accordance with their respective terms, except as such enforceability
may be limited by insolvency, reorganization, moratorium or other similar laws
affecting creditors’ rights generally and general equitable principles.

(e)           Accuracy of Information.  The information or statements contained in
the Related Documents furnished to the Insurer by the Issuer, as amended,
supplemented or superseded on or prior to the date hereof, taken as a whole, do
not, if restated at and as of the date hereof, contain any statement of a
material fact or omit to state a material fact necessary to make such
information or statements misleading in any material respect.

(f)            Compliance with Securities Laws,
Etc.  The offer and sale of the
Series 2005-1 Notes and the Series 2005-2 Notes by the Issuer comply in all
material respects with all requirements of law, including all registration
requirements of applicable securities laws. 
Neither the offer nor the sale of the Series 2005-1 Notes and the Series
2005-2 Notes by the Issuer has been or will be in violation of the Securities
Act or any other federal or state securities laws.  The Indenture is not required to be
qualified under the Trust Indenture Act of 1939, as amended.  The Issuer is not required to be registered
as an “investment company” under the Investment Company Act.  The Issuer will satisfy any of the
information reporting requirements of the Exchange Act arising out of the
Transaction to which it is subject.

(g)           Fraudulent Conveyance.  The Issuer is not pledging the Collateral
under the Indenture with any intent to hinder, delay or defraud its creditors..

Section 2.6             Affirmative Covenants of the
Issuer.

The Issuer hereby makes,
to and for the benefit of the Insurer, all of the covenants of the Issuer set
forth in the Related Documents to which it is a party, including, but not
limited to, Article VI of the Indenture and Sections 3.02 and 3.03 of the
Contribution Agreement.  Such covenants
are hereby incorporated herein by this reference as if fully set forth herein,
and may not be amended except by an amendment complying with the terms of Section 4.2(a)
hereof.  In addition, the Issuer hereby
agrees that during the term of this Insurance Agreement, unless the Insurer
shall otherwise expressly consent in writing:

(a)           Compliance with Related Documents
and Applicable Laws.  The Issuer
shall comply with the terms and conditions of, and perform its obligations
under, the Related Documents to which it is a party and shall comply in all
material respects with any Applicable Law.

 

9

 

(b)           Inspections.  The Issuer shall comply with its agreements
and covenants in the Letter Agreement and the Intercreditor Agreement,
including those with respect to rights of Inspection (as defined in the Letter
Agreement) granted to the Insurer.

(c)           Maintenance of Licenses.  The Issuer shall maintain all licenses,
permits, charters and registrations which are material to the conduct of its
business.

(d)           Exemption from Securities Act
Registration.  The Issuer shall take
all actions necessary to exempt the sale of any Series of Notes to the Initial
Purchaser from registration under the Securities Act and under any applicable
securities laws of any state of the United States where such Series of Notes
may be offered or sold.  Pursuant to the
terms of the Note Purchase Agreement of each Series of Notes, the Issuer will
require the Initial Purchaser to comply with limitations on the resale of the
Series of Notes related thereto and will enforce such limitations thereunder.

(e)           Financial Statements.  The financial statements and books and
records of the Issuer will reflect the separate existence of the Issuer and UCI
and will present fairly the financial position of the Issuer.

(f)            Other Information.  The Issuer shall provide to the Insurer such
other information (including non-financial information) in respect of the
Transactions and the Related Documents and such other
financial or operating information in respect of the Issuer, in each case,
which the Insurer may from time to time reasonably request.

Section 2.7             Negative Covenants of the Issuer.

The Issuer hereby agrees
that during the term of this Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:

(a)           Impairment of Rights.  The Issuer shall not take any action, or fail
to take any action, if such action or failure to take action is reasonably
likely to result in a Material Adverse Change. 
The Issuer shall give the Insurer written notice of any such action or
failure to act promptly prior to the date of consummation of such action or
failure to act.  The Issuer shall furnish
to the Insurer all information requested by it that is reasonably necessary to
determine compliance with this paragraph.

(b)           Amendments, Etc.  The Issuer will not amend, modify or
terminate any Related Document or grant any waiver or consent from compliance
with the express terms thereof or request the consent of any Control Party,
Series Enhancer or Noteholder with respect to any action or inaction requiring the
consent of such Person (whether as Control Party, Series Enhancer, Noteholder
or as the Requisite Global Majority or a component thereof) under any Related
Document, unless the Insurer shall have received no less than five (5) Business
Days’ prior written notice thereof (or such shorter period as may be agreed to
by the Insurer in its sole discretion) and any such amendment, modification,
termination, waiver or consent shall be ineffective until the 10th Business Day
following such notice to the Insurer (unless the Insurer has agreed to any
shorter notice period).

 

10

 

Section 2.8                                      UCI’s Representations and Warranties on
each Contribution Date and Substitution Date.

UCI hereby makes on and
as of each Contribution Date and each Substitution Date occurring after the
Closing Date, to and for the benefit of the Insurer, each of the
representations and warranties made by UCI on such date pursuant to Section
3.01 of the Contribution Agreement, as in effect on the date hereof or as
amended in accordance with the Related Documents, and such representations and
warranties, and any defined terms used therein or related thereto, are hereby
incorporated herein by this reference as if fully set forth herein.

ARTICLE III

THE POLICY; REIMBURSEMENT

Section 3.1             Issuance of the Policies.

The Insurer agrees to
issue the Policies on the Closing Date subject to satisfaction of the
conditions precedent set forth below:

(a)           Payment of Initial Premium and
Expenses.  The applicable parties
shall have been paid their related fees and expenses payable in accordance with
Section 3.2;

(b)           Related Documents. The
conditions to consummation of the Transactions set forth in Article V of the
Series 2005-1 Supplement and Article V of the Series 2005-2 Supplement
shall have been satisfied;

(c)           Representations and Warranties;
Certificate.  The representations and
warranties of UCI and the Issuer set forth or incorporated by reference in this
Insurance Agreement shall be true and correct on and as of the Closing Date as
if made on the Closing Date, and the Insurer shall have received a certificate
of appropriate officers of UCI and the Issuer to that effect;

(d)           No Litigation, Etc.  No claim, suit, action or other Proceeding,
investigation or injunction, or final judgment relating thereto, shall be
pending with respect to any party or, to such party’s knowledge, threatened
before any Governmental Authority or arbitrator seeking to restrain or
prohibit, restraining or prohibiting or seeking to obtain or obtaining damages
or other relief in connection with any of the Related Documents or the
consummation of the Transactions;

(e)           Legality.  No Applicable Law shall have been enacted,
entered or deemed applicable by any Governmental Authority or court that would
make the Transactions illegal or otherwise prevent the consummation thereof;

(f)            No Event of Default.  No Default, Event of Default, Prospective
Trigger Event, or Trigger Event shall have occurred;

(g)           Satisfaction of Conditions of the
Note Purchase Agreements.  All
conditions in the Series 2005-1 Note Purchase Agreement (as defined in the
Series 2005-1

 

11

 

Supplement) relating to
the Initial Purchaser’s obligation to purchase the Series 2005-1 Notes, and all
of the conditions in the Series 2005-2 Note Purchase Agreement (as defined in
the Series 2005-2 Supplement) relating to the Initial Purchaser’s obligation to
acquire the Series 2005-2 Notes, shall have been fulfilled to the satisfaction
of the Insurer, with such satisfaction deemed to have occurred upon issuance of
the applicable Policy.  The Insurer shall
have received copies of each of the Related Documents and shall be entitled to
rely on each of the documents required to be delivered to the Initial Purchaser
pursuant to the Related Documents, including the items described in Section 8
of the Series 2005-1 Note Purchase Agreement (other than the opinion of counsel
to the Insurer) and the items described in Schedule I of the Series 2005-2 Note
Purchase Agreement (other than the opinion of counsel to the Insurer);

(h)           Issuance of Series 2005-1 Notes
Ratings.  The Insurer shall have
received confirmation that upon issuance of the Series 2005-1 Notes Policy each
of the Series 2005-1 Notes will be rated at least AAA by S&P and Aaa by
Moody’s, and that the risk secured by Series 2005-1 Notes Policy is rated no
lower than BBB by S&P and Baa3 by Moody’s;

(i)            Issuance of Series 2005-2 Notes
Ratings.  The Insurer shall have
received confirmation that upon issuance of the Series 2005-2 Notes Policy each
of the Series 2005-2 Notes will be rated at least AAA by S&P and Aaa by
Moody’s, and that the risk secured by the Series 2005-2 Notes Policy is rated
no lower than BBB by S&P and Baa3 by Moody’s;

(j)            Approvals, Etc.  The Insurer shall have received true and
correct copies of all approvals, licenses and consents, if any, required in
connection with the Transactions;

(k)           Interest Rate Swap Agreements.  The Issuer shall enter into one or more
Interest Rate Swap Agreements with respect to the Series 2005-1 Notes and the
Series 2005-2 Notes in compliance with Section 631 of the Indenture;

(l)            Premium Letter; Intercreditor
Agreement.  The Insurer, UCI and the
Issuer shall have executed the Premium Letter, and the Issuer, UCI, the
Indenture Trustee, the Bank Agent, the Intercreditor Collateral Agent and the
Additional UCI Lenders that from time to time become a party thereto shall have
executed the Intercreditor Agreement;

(m)          Certified Copies.  The Insurer shall have received (i) an
executed copy of each Related Document and (ii) a copy of the Senior Secured
Credit Agreement as of the Closing Date, in each case, certified by a
Responsible Officer of UCI as being a true, correct and complete copy of such
Related Document or Senior Secured Credit Agreement, as applicable, as then in
effect and that such document has not been amended, amended and restated,
supplemented or otherwise modified since the execution and delivery thereof;

(n)           Indenture Trustee Notice.  The Indenture Trustee shall have received and
acknowledged receipt of notice of the Transactions and of the matters
contemplated by this Insurance Agreement in form and substance satisfactory to
the Insurer;

(o)           Opinions.  The Insurer shall have received opinions of
counsel to the Issuer and UCI concerning the perfection of the Indenture
Trustee’s security interest in the Collateral and other matters under the laws
of the United States, and shall have received copies

 

12

 

of any opinions delivered
to the Rating Agencies, the Series 2005-1 Noteholders, the Series 2005-2
Noteholders, the Indenture Trustee or the Deal Agent, in each case, addressed
to, and in form and substance satisfactory to, the Insurer;

(p)           Termination of Existing
Securitization Transaction.  The
Insurer shall have received evidence, in form and substance reasonably
satisfactory to it, that the asset backed securitization, in connection with
which the Old Lessee and the Old Lessor acquired compressors under applicable
“bills of sale” or contribution agreements or transfer certificates, as the
case may be, has been terminated and is no longer in force and effect and the
notes and certificates issued in connection therewith are no longer outstanding
thereunder;

(q)           Additional Items.  The Insurer shall have received such other
documents, instruments, approvals or opinions in form and substance reasonably
satisfactory to the Insurer as shall be reasonably requested by the Insurer,
including evidence reasonably satisfactory to the Insurer that the conditions
precedent, if any, in the Related Documents have been satisfied in all respects
and not waived; and

(r)            Satisfactory Documentation.  The Insurer and its counsel shall have
determined that all documents, the Series 2005-1 Notes, the Series 2005-2 Notes
and opinions to be delivered in connection with the Series 2005-1 Notes and the
Series 2005-2 Notes conform to the terms of the Indenture and this Insurance
Agreement.

Section 3.2             Payment of Fees and Premium.

(a)           Legal and Accounting Fees.  UCI shall pay or cause to be paid on the
Closing Date all reasonable legal fees, auditors’ fees and disbursements
incurred by the Insurer in connection with the issuance of the Policies and the
other Related Documents through the Closing Date.  Additional reasonable fees of the Insurer’s
counsel or auditors payable in connection with the Related Documents incurred
after the Closing Date shall be paid by UCI as provided in Section 3.3
below.

(b)           Rating Agency Fees.  UCI shall promptly pay the initial fees of
the Rating Agencies with respect to the Series 2005-1 Notes, the Series 2005-2
Notes and the Transactions following receipt of a statement with respect
thereto, and shall pay or cause to be paid any subsequent fees of the Rating Agencies
with respect to, and directly allocable to, the Series 2005-1 Notes and the
Series 2005-2 Notes.  The Insurer shall
not be responsible for any fees or expenses of 
the Rating Agencies.  The fees for
any other rating agency shall be paid by the party requesting such other
agency’s rating.

(c)           Premium.  In consideration of the issuance by the
Insurer of the Policies, the Issuer shall pay or cause to be paid, and UCI
shall ultimately be obligated for the timely payment of, the Premiums to the
Insurer as set forth in the Premium Letter in accordance with and from the
funds specified by Section 302 of the Indenture, commencing on the day the
Policies are issued, until each Policy has terminated in accordance with its
terms.  The Premium paid under this Insurance
Agreement shall be nonrefundable without regard to whether any notice is
delivered to the Insurer requiring the Insurer to make any payment under the
Policies or any other circumstances relating to the Series 2005-1 Notes or the
Series 2005-2 Notes or

 

13

 

provision being made for
payment of the Series 2005-1 Notes or the Series 2005-2 Notes prior to
maturity.

Section 3.3             Reimbursement Obligation.

(a)           Subject to the limitations set forth
in the Letter Agreement, the Issuer agrees absolutely and unconditionally to
reimburse the Insurer for any amounts paid by the Insurer under the Policies,
plus the amount of any other due and payable and unpaid Reimbursement Amounts
(as defined in each Policy), which reimbursement shall be due and payable on
the date that any such amount is paid thereunder in an amount equal to the
amounts so paid and all amounts previously paid that remain unreimbursed,
together (without duplication) with interest on any and all amounts remaining
unreimbursed (to the extent permitted by Applicable Law, if in respect of any
unreimbursed amounts representing interest) from the date such amounts became
due until paid in full (after as well as before judgment), at a rate of
interest equal to the Late Payment Rate.

(b)           UCI and the Issuer agree to pay to
the Insurer, promptly, but in no event later than thirty (30) days after
receipt of an invoice therefor, as follows: any and all charges, fees, costs
and expenses that the Insurer may pay or incur, including reasonable attorneys’
and accountants’ fees and expenses, in connection with the Related Documents
(subject to any limitations contained in the Letter Agreement), including
without limitation (i) the enforcement, defense or preservation of any
rights in respect of any of the Related Documents, including defending,
monitoring or participating in any litigation or Proceeding (including any
insolvency proceeding in respect of any participant in the Transactions or any
Affiliate thereof) relating to any of the Related Documents, any party to any
of the Related Documents (in its capacity as such a party) or the Transactions,
including without limitation the costs and fees of inspections by the Insurer
or audits or field examinations by accountants and the ongoing administration
of the Transactions pursuant to the Related Documents, or (ii) any
amendment, modification, supplement, termination, waiver or consent or other
similar action with respect to, or related to, any Related Document, whether or
not executed or completed.

(c)           Each of the Issuer and UCI agrees to
pay to the Insurer, on demand, interest at the Late Payment Rate on any and all
amounts described in Sections 3.2, 3.3(b) and 3.4
after the date such amounts become due and payable until payment thereof in
full.

Section 3.4             Indemnification.

(a)           In addition to any and all of the
Insurer’s rights of reimbursement, indemnification, subrogation and assignment,
and to any other rights of the Insurer pursuant hereto or under law or in
equity, UCI agrees, on demand, to pay, and to protect, indemnify and save
harmless, the Insurer and its officers, directors, shareholders, employees,
agents and each Person, if any, who controls the Insurer within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange
Act from and against, any and all claims, losses, liabilities, (including
penalties), actions, suits, judgments, demands, damages, costs or expenses
(including reasonable fees and expenses of attorneys, consultants and auditors
and reasonable costs of investigations) of any nature arising out of or
relating to the Related Documents or the Transactions by reason of:

 

14

 

(i)            any statement,
omission or action in connection with the offering, issuance, sale or delivery
of any of the Series 2005-1 Notes or any of the Series 2005-2 Notes or any
other Series or Class issued under the Indenture;

(ii)           the negligence, bad
faith, willful misconduct, misfeasance, malfeasance or theft committed by any
director, officer, employee or agent of UCI in connection with the
Transactions;

(iii)          the violation by
UCI of any Applicable Law;

(iv)          the breach by UCI of
any representation, warranty or covenant under any of the Related Documents; or

(v)           the occurrence, in
respect of UCI’s duties as the Manager, under any of the Related Documents of
any Manager Default or UCI Event or any event which, with the giving of notice
or the lapse of time or both, would constitute a Manager Default or UCI Event.

(b)           In addition to any and all of the
Insurer’s rights of reimbursement, indemnification, subrogation and assignment,
and to any other rights of the Insurer pursuant hereto or under law or in
equity, the Issuer agrees, on demand, to pay, and to protect, indemnify and
save harmless, the Insurer and its officers, directors, shareholders,
employees, agents and each Person, if any, who controls the Insurer within the
meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act from and against, any and all claims, losses, liabilities
(including penalties), actions, suits, judgments, demands, damages, costs or
expenses (including reasonable fees and expenses of attorneys, consultants and
auditors and reasonable costs of investigations), of any nature arising out of
or relating to the Related Documents or the Transactions by reason of:

(i)            any statement,
omission or action in connection with the offering, issuance, sale or delivery
of any of the Series 2005-1 Notes or any of the Series 2005-2 Notes or any
other Series or Class issued under the Indenture;

(ii)           the negligence, bad
faith, willful misconduct, misfeasance, malfeasance or theft committed by any
director, officer, employee or agent of the Issuer in connection with the
Transactions;

(iii)          the violation by
the Issuer of any Applicable Law; or

(iv)          the breach by the
Issuer of any representation, warranty or covenant under any of the Related
Documents.

(c)           If any action or proceeding
(including any governmental investigation) shall be brought or asserted against
any Person (each, an “Indemnified Party”) in respect of which the
indemnity provided in Section 3.4(a) or (b) may be sought
from UCI or the Issuer, as applicable (the “Indemnifying Party”), each
such Indemnified Party shall promptly notify the Indemnifying Party in writing,
and the Indemnifying Party shall assume the defense thereof,

 

15

 

including the employment
of counsel satisfactory to the Indemnified Party and the payment of all expenses
and legal fees; provided that failure to notify the Indemnifying Party
shall not relieve it from any liability it may have to such Indemnified Party
except to the extent that it shall be actually prejudiced thereby.  The Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof at the expense of the Indemnified Party and may assume the defense of
any such action or claim in reasonable cooperation with, and with the
reasonable cooperation of, the Indemnifying Party; provided, however,
that the fees and expenses of separate counsel to the Indemnified Party in any
such proceeding shall be at the expense of the Indemnifying Party if
(i) the Indemnifying Party has agreed to pay such fees and expenses,
(ii) the Indemnifying Party shall have failed to assume the defense of
such action or proceeding or employ counsel reasonably satisfactory to the
Indemnified Party in any such action or proceeding within a reasonable time
after the commencement of such action or (iii) the named parties to any
such action or proceeding (including any impleaded parties) include both the
Indemnified Party and the Indemnifying Party, and the Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to
the Indemnifying Party (in which case, if the Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such action or proceeding on behalf of such
Indemnified Party, it being understood, however, that the Indemnifying Party
shall not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for the Indemnified Parties, which firm shall be
designated in writing by the Indemnified Party).  Unless it shall be in default of its
obligations hereunder, the Indemnifying Party shall not be liable for any
settlement of any such action or proceeding effected without its written
consent to the extent that any such settlement shall be prejudicial to the
Indemnifying Party, which consent shall not be unreasonably withheld or
delayed, but, if settled with its written consent, or if there is a final
judgment for the plaintiff in any such action or proceeding with respect to
which the Indemnifying Party shall have received notice in accordance with this
subsection (c), the Indemnifying Party agrees to indemnify and hold
the Indemnified Parties harmless from and against any loss or liability by
reason of such settlement or judgment.

(d)           To provide for just and equitable
contribution if the indemnification provided by the Indemnifying Party is
determined to be unavailable or insufficient to hold harmless any Indemnified
Party (other than due to application of this Section), each Indemnifying Party
shall contribute to the losses incurred by the Indemnified Party on the basis
of the relative fault of the Indemnifying Party, on the one hand, and the
Indemnified Party, on the other hand. 
The relative fault of each Indemnifying Party, on the one hand, and each
Indemnified Party, on the other, shall be determined by reference to, among
other things, whether the breach or alleged breach is within the control of,
the Indemnifying Party or the Indemnified Party, and the parties relative
intent, knowledge, access to information and opportunity to correct or prevent
such breach.  No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.

 

16

 

Section 3.5             Payment Procedure.

In the event of any
payment by the Insurer for which reimbursement is sought under Section 3.3,
the Issuer and UCI agree to accept the voucher or other evidence of payment as prima facie evidence of the propriety thereof and the
liability, if any, described in Section 3.3 therefor to the
Insurer.  All payments to be made to the
Insurer under this Insurance Agreement shall be made to the Insurer in lawful
currency of the United States of America in immediately available funds at the
notice address for the Insurer as specified in the Indenture by no later than
1:00 P.M. New York City time or as the Insurer shall otherwise direct by
written notice to the other parties hereto on the date when due in its sole
discretion.  In the event that the date
of any payment to the Insurer or the expiration of any time period hereunder
occurs on a day that is not a Business Day, then such payment or the expiration
of such time period shall be made or shall occur on the next succeeding
Business Day with the same force and effect as if such payment was made or time
period expired on the scheduled date of payment or expiration date.

Section 3.6             Subrogation.

(a)           The parties hereto acknowledge that,
to the extent of any payment made by the Insurer pursuant to the Policies, the
Insurer shall be fully subrogated to the extent of such payment and any
interest due thereon to the rights of (i) the Series 2005-1 Noteholders
to any moneys paid or payable in respect of the Series 2005-1 Notes and
(ii) the Series 2005-2 Noteholders to any moneys payable in respect of
the Series 2005-2 Notes, in each case, under the Related Documents or
otherwise, subject to Applicable Law. 
The parties hereto acknowledge and agree to such subrogation and further
agree to execute such instruments and to take such actions as, in the sole and
reasonable judgment of the Insurer, are necessary to evidence such subrogation
and to perfect the rights of the Insurer to receive any such moneys paid or
payable in respect of the Series 2005-1 Notes and the Series 2005-2 Notes under
the Related Documents or otherwise with respect to such subrogated payments.

ARTICLE IV

FURTHER AGREEMENTS

Section 4.1             Effective Date; Term of this
Insurance Agreement.

This Insurance Agreement
shall take effect on the Closing Date and shall remain in effect until the
later of (a) such time as the Insurer is no longer subject to a claim
under the Policies and the Policies shall have been surrendered to the Insurer
for cancellation and (b) such time as all amounts payable to the Insurer
hereunder and under the other Related Documents (including all amounts payable
by the Issuer or UCI hereunder or under the other Related Documents), and the
Series 2005-1 Notes and the Series 2005-2 Notes shall have been irrevocably
paid and redeemed in full and such Series 2005-1 Notes and Series 2005-2 Notes
shall have been cancelled; provided, however, that the provisions
of Sections 3.2, 3.3 and 3.4 shall survive any
termination of this Insurance Agreement.

 

17

 

Section 4.2             Waiver, Amendment or
Modification of Related Documents; Further Assurances and Corrective
Instruments.

(a)           None of UCI, the Old Lessee, the
Issuer or the Indenture Trustee shall, without the prior written consent of the
Insurer, grant, or consent or agree to, any waiver of rights under, or
amendment or other modification of, any of the Related Documents to which any
of them is a party to the extent such Related Document or any other Related
Document requires the consent of the Insurer (whether in its capacity as the
Control Party with respect to any Series or as a Series Enhancer with respect
to any Series or, if applicable, in its capacity as the Requisite Global
Majority or any requisite component thereof) to any such waiver, amendment or
modification thereunder and any such waiver, amendment or modification entered
into without obtaining the required prior written consent of the Insurer shall
be null and void and of no force or effect; provided, however,
this Section 4.2(a) shall not modify, amend or increase in any manner
whatsoever the consent rights of the Insurer from that expressly stated in such
Related Document.

(b)           Each of the parties hereto agrees
that it will, from time to time, execute, acknowledge and deliver, or cause to
be executed, acknowledged and delivered, such supplements hereto and such
further instruments as the Insurer may reasonably request and as may be
required in the Insurer’s reasonable judgment to effectuate the intent and
purpose of this Insurance Agreement and the other Related Documents.  Without limiting the foregoing, to the extent
such authorization shall be required by Applicable Law, each of the Universal
Affiliates which is a party to any of the Related Documents hereby authorizes
the Indenture Trustee and the Insurer (in its capacity as the Control Party
with respect to any Series or Class or as a Series Enhancer), at the expense of
the Issuer, in the event the Issuer has failed to do so upon request (provided
no such request shall be required if there shall exist any Insolvency
Proceeding, Trigger Event or Event of Default), to execute and file financing
statements covering the Collateral covered by any Assignment or owned by the
Issuer in such jurisdictions as may be required to confirm title thereto and
perfect and maintain the Lien thereon, including, without limitation, filings
required to maintain perfection pursuant to Article 9 of the Uniform Commercial
Code as in effect from time to time in such jurisdiction.  In addition, each of the parties hereto
agrees to cooperate with the Rating Agencies in connection with any review of
the Transactions conducted during normal business hours and in a manner that
does not unreasonably disrupt the business of UCI or the Issuer, that may be
undertaken by the Rating Agencies after the date hereof upon prior written
notice.

(c)           UCI shall not cause or permit the
Issuer to issue any notes or other evidences of indebtedness, or to otherwise
incur any indebtedness or interests therein, other than as expressly permitted
by the Indenture.

(d)           Each of UCI and the Indenture Trustee
shall promptly (but in no event more than two (2) Business Days after such
notice is delivered) provide the Insurer with copies of all notices of
termination, non-compliance or default, in each case delivered pursuant to any
Related Document in regard to the Collateral or any Series of Notes, and, at
least two (2) Business Days prior to execution thereof, copies of any proposed
amendments, modifications, waivers or supplements to such Related Document to
the extent notice to, or the consent of, the

 

18

 

Insurer, any Control
Party, any Series Enhancer or the Requisite Global Majority is required in
connection with any amendments, modifications, waivers or supplements thereto.

Section 4.3             Obligations Absolute.

(a)           The obligations of each of the Issuer
and UCI hereunder shall be absolute and unconditional and shall be paid or
performed strictly in accordance with this Insurance Agreement and the other
Related Documents under all circumstances irrespective of:

(i)            any lack of
validity or enforceability of, or any amendment or other modifications of, or
waiver with respect to, any of the Related Documents, the Series 2005-1 Notes
or the Series 2005-2 Notes;

(ii)           any exchange or release
of any other obligations hereunder;

(iii)          the existence of
any claim, setoff, defense, reduction, abatement or other right that a Person
that is a party to any of the Related Documents may have at any time against
the Insurer or any other Person;

(iv)          any document
presented in connection with the Policies proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;

(v)           any payment by the
Insurer under any Policy against presentation of a certificate or other
document that does not strictly comply with the terms of such Policy;

(vi)          any failure of any
of the Issuer or any Universal Affiliate to receive the proceeds from the sale
of (A) the Series 2005-1 Notes or (B) the Series 2005-2 Notes; and

(vii)         any other
circumstances, other than payment in full, that might otherwise constitute a
defense available to, or discharge of, such party in respect of any Related
Document.

(b)           Each of the Issuer and the Universal
Affiliates party hereto and any and all others who are now or may become liable
for all or any part of the obligations of such Person under this Insurance
Agreement agree to be bound by this Insurance Agreement and (i) to the
extent permitted by Applicable Law, waive and renounce any and all redemption
and exemption rights and the benefit of all valuation and appraisement
privileges against the indebtedness and obligations evidenced by any Related
Document or by any extension or renewal thereof; (ii) waive presentment
and demand for payment, notices of nonpayment and of dishonor, protest of
dishonor and notice of protest; (iii) waive all notices in connection with
the delivery and acceptance hereof and all other notices in connection with the
performance, default or enforcement of any payment hereunder, except as
required by the Related Documents; (iv) waive all rights of abatement,
diminution, postponement or deduction, all defenses, other than payment, and
all rights of setoff or recoupment arising out of any breach under any of the
Related

 

19

 

Documents, by any party
thereto or any beneficiary thereof, or out of any obligation at any time owing
to any of the Issuer or the Universal Affiliates; (v) agree that their
representations, warranties and agreements herein are an inducement to the
Insurer to issue the Policies and that their liabilities hereunder shall be
unconditional and without regard to any setoff, counterclaim or the liability
of any other Persons for the payment hereof; (vi) agree that any consent,
waiver or forbearance hereunder with respect to an event shall operate only for
such event and not for any subsequent event; (vii) consent to any and all
extensions of time that may be granted by the Insurer with respect to any
payment hereunder or other provisions hereof and to the release of any security
at any time given for any payment hereunder, or any part thereof, with or
without substitution, and to the release of any Person or entity liable for any
such payment; and (viii) consent to the addition of any and all other
makers, endorsers, guarantors and other obligors for any payment hereunder, and
to the acceptance of any and all other security for any payment hereunder, and
agree that the addition of any such obligors or security shall not affect the
liability of the parties hereto for any payment hereunder.

(c)           Nothing herein shall be construed as
prohibiting any party hereto from pursuing any rights or remedies it may have
against any Person in a separate legal proceeding.

Section 4.4             Assignments; Reinsurance; Third-Party
Rights.

(a)           This Insurance Agreement shall be a
continuing obligation of the parties hereto and shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.  None of the Universal
Affiliates party hereto or the Issuer may assign its rights under this
Insurance Agreement, or delegate any of its duties hereunder, without the prior
written consent of the Insurer; provided, however, that the Old
Lessee may assign its rights under this Insurance Agreement to UCI in
connection with the consummation of the merger of Old Lessee with and into UCI
pursuant to and in accordance with the terms and conditions set forth in the
Contribution Agreement).  Any assignments
made in violation of this Insurance Agreement shall be null and void.

(b)           The Insurer shall have the right to
give participations in its rights under this Insurance Agreement and to enter
into contracts of reinsurance with respect to the Policies upon such terms and
conditions as the Insurer may in its discretion determine; provided, however,
that no such participation or reinsurance agreement or arrangement shall
relieve the Insurer of any of its obligations hereunder or under the Policies,
and provided, further, that any reinsurer or participant will not
have any rights against UCH, UCI, the Series 2005-1 Noteholders, the
Series 2005-2 Noteholders or the Indenture Trustee and that UCH, UCI, the
Series 2005-1 Noteholders, the Series 2005-2 Noteholders and the Indenture
Trustee shall have no obligation to have any communication or relationship with
any reinsurer or participant in order to enforce the obligations of the Insurer
hereunder and under the Policies.

(c)           In addition, the Insurer shall be
entitled to assign or pledge to any bank, other lender or reinsurer providing
liquidity or credit with respect to the Transactions or the obligations of the
Insurer in connection therewith, any rights of the Insurer under the Related
Documents or with respect to any real or personal property or other interests
pledged to the Insurer or in which the Insurer has a security interest, in
connection with the Transaction, subject in each case to the Liens granted
pursuant to the Related Documents, provided, that no such bank

 

20

 

or other lender shall
thereby obtain any direct right against UCH, UCI, the Series 2005-1
Noteholders, the Series 2005-2 Noteholders or the Indenture Trustee, and
further provided, that no such
assignment or pledge shall give any assignee the right to exercise any
discretionary authority that the Related Documents provide shall be exercisable
by the Insurer or relieve the Insurer of any of its obligations hereunder or
under the Policies provided, however, that no such participation
or reinsurance agreement or arrangement shall relieve the Insurer of any of its
obligations hereunder or under the Policies.

(d)           Except as provided herein with
respect to participants and reinsurers, nothing in this Insurance Agreement
shall confer any right, remedy or claim, express or implied, upon any Person
not a party hereto, including, particularly, any Series 2005-1 Noteholder or
any Series 2005-2 Noteholder or any other Holder of Notes, other than the
rights of the Insurer against the Universal Affiliates and the Issuer and all
the terms, covenants, conditions, promises and agreements contained herein
shall be for the sole and exclusive benefit of the parties hereto and their
successors and permitted assigns. 
Neither the Indenture Trustee nor any Series 2005-1 Noteholder nor any
Series 2005-2 Noteholder shall have any right to payment from any Premiums paid
or payable hereunder or under the Indenture or from any amounts paid by the
Issuer or UCI pursuant to Sections 3.3 or 3.4.

Section 4.5             Liability of the Insurer.

Neither the Insurer nor
any of its officers, directors or employees shall be liable or responsible for:
(a) the use that may be made of the Policies by the Indenture Trustee or
the Issuer or for any acts or omissions of the Indenture Trustee or the Issuer
in connection therewith; or (b) the validity, sufficiency, accuracy or
genuineness of documents delivered to the Insurer in connection with any claim
under the Policies, or of any signatures thereon, even if such documents or
signatures should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged (unless the Insurer shall have actual
knowledge thereof).  In furtherance and
not in limitation of the foregoing, the Insurer may accept documents that
appear on their face to be in order, without responsibility for further
investigation.

Section 4.6             Confidentiality.

The Insurer agrees that
it will use its best reasonable efforts not to disclose, without the prior consent
of UCI (other than to its, or its Affiliates, accountants, auditors, counsel,
directors, employees, officers or other representatives, whether now existing
or any subsequent time), any information with respect to the projections
delivered pursuant to Section 2.2(h) of this Agreement, provided, that the Insurer may disclose any such information
(i) as has become generally available to the public, (ii) as may be
required or appropriate in any report, statement or testimony submitted to any
Governmental Authority having or claiming to have jurisdiction over the
Insurer, or any insurance regulator or rating agency, (iii) as may be
required or appropriate in response to any summons or subpoena or in connection
with any litigation or regulatory proceeding, (iv) in order to comply with
any law, order, regulation or ruling applicable to the Insurer, (v) to any
reinsurer or (vi) to any potential reinsurer.

 

21

 

ARTICLE V

DEFAULTS AND REMEDIES

Section 5.1             Defaults.

The occurrence of any of
the following events shall constitute an “Event of Default” hereunder:

(a)           Any representation or warranty made
by the Issuer or any of the Universal Affiliates hereunder or under the Related
Documents, or in any certificate furnished hereunder or under the Related
Documents, shall prove to be untrue or misleading in any material respect; provided,
however, that if the Issuer or any Universal Affiliate effectively cures
any such defect in any representation or warranty under any Related Document or
certificate or report furnished under any Related Document within the time
period specified in the related document as the cure period therefor, such
defect shall not in and of itself constitute an Event of Default;

(b)           (i) UCI or the Issuer shall fail to
pay or deposit when due any amount required to be paid or deposited by it
hereunder or under any other Related Document after giving effect to any
applicable time period, if any, specified in the Related Documents as the cure
period therefor, or (ii) a legislative body has enacted any Applicable Law that
declares or a court of competent jurisdiction shall find or rule that this
Insurance Agreement or any other Related Document is not valid and binding on
the Issuer, any Universal Affiliate party hereto or any other party hereto or
thereto;

(c)           The occurrence and continuance of an
Event of Default (under and as defined in the Indenture);

(d)           The occurrence and continuance of a
Manager Default;

(e)           The occurrence and continuance of a
UCI Event; or

(f)            Any failure on the part of the
Issuer or any Universal Affiliate duly to observe or perform in any material
respect any other of its covenants or agreements contained in this Insurance
Agreement or in any other Related Document that continues unremedied beyond any
cure period provided therein, or, in the case of this Insurance Agreement, for
a period of thirty (30) days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the Issuer
by the Insurer (with a copy to the Indenture Trustee) or by the Indenture
Trustee (with a copy to the Insurer).

Section 5.2             Remedies; No Remedy Exclusive.

(a)           Upon the occurrence of an Event of
Default hereunder, the Insurer may take whatever action at law or in equity as
may appear necessary or desirable in its judgment to collect the amounts, if
any, then due under this Insurance Agreement, the Contribution Agreement, the
Management Agreement, the Indenture, the Intercreditor Agreement or any other
Related Document or to enforce performance and observance of any obligation,
agreement 

 

22

 

or covenant of the Issuer
or any of the Universal Affiliates under this Insurance Agreement, the
Contribution Agreement, the Management Agreement, the Indenture, the
Intercreditor Agreement or any other Related Document, either in its own
capacity or in its capacity as Control Party with respect to any Series or
Class or a Series Enhancer.

(b)           Unless otherwise expressly provided,
no remedy herein conferred or reserved is intended to be exclusive of any other
available remedy, but each remedy shall be cumulative and shall be in addition
to other remedies given under this Insurance Agreement, the Contribution
Agreement, the Management Agreement, the Indenture, the Intercreditor Agreement
or any other Related Document, or existing at law or in equity.  No delay or omission to exercise any right or
power accruing under this Insurance Agreement, the Contribution Agreement, the
Management Agreement, the Indenture, the Intercreditor Agreement or any other
Related Document upon the happening of any event set forth in Section 5.1
shall impair any such right or power or shall be construed to be a waiver
thereof, but any such right and power may be exercised from time to time and as
often as may be deemed expedient.  In
order to entitle Insurer to exercise any remedy reserved to the Insurer in this
Article, it shall not be necessary to give any notice, other than such notice
as may be required by this Article, provided that to the extent notice
is required in respect of an Event of Default under the other Related Documents
and such notice shall have been given thereunder, no additional notice shall be
required hereunder.

(c)           Each party to this Insurance
Agreement hereby agrees that, in addition to any other rights or remedies
existing in its favor, it shall be entitled to specific performance and/or
injunctive relief in order to enforce any of its rights or any obligation owed
to it under the Related Documents.

Section 5.3             Waivers.

(a)           No failure by the Insurer to
exercise, and no delay by the Insurer in exercising, any right hereunder shall
operate as a waiver thereof.  The
exercise by the Insurer of any right hereunder shall not preclude the exercise
of any other right, and the remedies provided herein to the Insurer are
declared in every case to be cumulative and not exclusive of any remedies
provided by law or equity.

(b)           The Insurer shall have the right, to
be exercised in its complete discretion, to waive any Event of Default
hereunder, by a writing setting forth the terms, conditions and extent of such
waiver signed by the Insurer and delivered to the Issuer and the Indenture
Trustee.  Unless such writing expressly
provides to the contrary, any waiver so granted shall extend only to the
specific event or occurrence which gave rise to the Event of Default so waived
and not to any other similar event or occurrence which occurs subsequent to the
date of such waiver.

 

23

 

ARTICLE VI

MISCELLANEOUS

Section 6.1             Amendments, Etc.

This Insurance Agreement
may be amended, modified, supplemented or terminated only by written instrument
or written instruments signed by the Insurer, the Issuer, the Contributor and
the Indenture Trustee.  No consent of any
reinsurer or participant contracted with by the Insurer pursuant to Section 4.4(b)
shall be required for any amendment, modification, supplement or termination
hereof.  The Issuer agrees to provide a
copy of any amendment to this Insurance Agreement promptly to the Indenture
Trustee and the Rating Agencies.  No act
or course of dealing shall be deemed to constitute an amendment, modification,
supplement or termination hereof.

Section 6.2             Notices.

All demands, notices and
communications hereunder shall be in writing, personally delivered, or by
facsimile (with subsequent telephone confirmation of receipt thereof), or sent
by internationally recognized overnight courier service, (a) in the case of
UCI, at the following address: 4444 Brittmoore Road, Houston, Texas 77041, (b)
in the case of the Issuer, at the following address: 4444 Brittmoore Road,
Houston, Texas 77041, Attention: General Counsel, (c) in the case of each
Rating Agency, at its address as set forth in the Series 2005-1 Supplement and
the Series 2005-2 Supplement, as applicable, (d) in the case of the Insurer, at
the following address: Ambac Assurance Corporation, One State Street Plaza, New
York, New York 10004, Attention: Structured Finance Department — ABS, with a
copy to Ambac Assurance Corporation, One State Street Plaza, New York, New York
10004; Attention: Surveillance - ABS and (e) in the case of Indenture Trustee
at the following address: MAC N9311-161 Sixth Street and Marquette Avenue,
Minneapolis, Minnesota 55479, Attention: Corporate Trust Services-Asset-Backed
Administration.  Notice shall be
effective and deemed received (a) two days after being delivered to the courier
service, if sent by courier, (b) upon receipt of confirmation of transmission,
if sent by facsimile, or (c) when delivered, if delivered by hand.

Section 6.3             Severability.

In the event that any
provision of this Insurance Agreement shall be held invalid or unenforceable by
any court of competent jurisdiction, the parties hereto agree that such holding
shall not invalidate or render unenforceable any other provision hereof.  The parties hereto further agree that the
holding by any court of competent jurisdiction that any remedy pursued by any
party hereto is unavailable or unenforceable shall not affect in any way the
ability of such party to pursue any other remedy available to it.

Section 6.4             Consent to Jurisdiction.

ANY LEGAL SUIT, ACTION OR
PROCEEDING AGAINST ANY PARTY HERETO ARISING OUT OF OR RELATING TO THIS
INSURANCE AGREEMENT, OR ANY TRANSACTION CONTEMPLATED HEREBY, MAY BE INSTITUTED
IN ANY FEDERAL

 

24

 

OR STATE COURT IN
THE CITY OF NEW YORK, STATE OF NEW YORK, AND EACH OF THE PARTIES HERETO HEREBY
WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND, SOLELY FOR THE PURPOSES OF
ENFORCING THIS AGREEMENT, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.  EACH OF THE
PARTIES HERETO HEREBY CONSENTS TO SERVICE OF PROCESS BY REGISTERED MAIL,
FEDERAL EXPRESS OR SIMILAR COURIER SERVICE AT THE ADDRESS AT WHICH NOTICES ARE
TO BE GIVEN, IT BEING AGREED THAT SERVICE IN SUCH MANNER SHALL CONSTITUTE VALID
SERVICE UPON SUCH PARTY AND ITS SUCCESSORS AND ASSIGNS IN CONNECTION WITH ANY
SUIT, ACTION OR PROCEEDING; PROVIDED, HOWEVER, THAT NOTHING IN THIS SECTION 6.4 SHALL
AFFECT THE RIGHT OF ANY SUCH PARTY OR ITS SUCCESSORS AND ASSIGNS TO SERVICE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

Section 6.5             Consent of the Insurer.

In the event that the
consent of the Insurer is required under any of the Related Documents, the
determination whether to grant or withhold such consent shall be made by the
Insurer in writing and in its sole discretion without any implied duty towards
any other Person.

Section 6.6             Counterparts; Facsimile
Signatures.

This Insurance Agreement may be executed in any number
of counterparts, each of which when so delivered shall be deemed an original,
but all such counterparts shall constitute but one and the same
instrument.  Execution and delivery of
this Insurance Agreement by facsimile signature shall constitute execution and
delivery of this Insurance Agreement for all purposes hereof with the same
force and effect as execution and delivery of a manually signed copy hereof.

Section 6.7             Headings.

The captions or headings
in this Insurance Agreement are for convenience only and in no way define,
limit or describe the scope or intent of any provisions or sections of this
Insurance Agreement.

Section 6.8             Governing Law.

THIS AGREEMENT SHALL BE
CONSTRUED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAWS BUT
OTHERWISE WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW THAT
WOULD RESULT IN APPLICATION OF LAWS OTHER THAN NEW YORK, AND THE RIGHTS,
OBLIGATIONS AND REMEDIES OF THE PARTIES HERETO SHALL BE DETERMINED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.

 

25

 

Section 6.9             Waiver of Immunity.

To the extent that any
party hereto or any of its property is or becomes entitled at any time to any
immunity on the grounds of sovereignty or otherwise from any legal actions,
suits or proceedings, from set-off or counterclaim, from the jurisdiction or
judgment of any competent court, from service of process, from execution of a
judgment, from attachment prior to judgment, from attachment in aid of
execution, or from execution prior to judgment, or other legal process in any
jurisdiction, such party, for itself and its successors and assigns and its
property, does hereby irrevocably and unconditionally waive, and agrees not to
plead or claim, any such immunity with respect to its obligations, liabilities
or any other matter under or arising out of or in connection with this
Insurance Agreement, the other Related Documents or the subject matter hereof
or thereof, subject, in each case, to the provisions of the Related Documents
and mandatory requirements of Applicable Law.

Section 6.10           Limited Liability.

(a)           No recourse under any Related
Document shall be had against, and no personal liability shall attach to, any
officer, employee, director, affiliate or shareholder of any party hereto, as
such, by the enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute or otherwise in respect of any of the
Related Documents, the Series 2005-1 Notes, the Series 2005-2 Notes or the
Policies, it being expressly agreed and understood that each Related Document
is solely a corporate obligation of each party hereto, and that any and all
personal liability, either at common law or in equity, or by statute or constitution,
of every such officer, employee, director, affiliate or shareholder for
breaches of any party hereto of any obligations under any Related Document is
hereby expressly waived as a condition of and in consideration for the
execution and delivery of this Insurance Agreement; provided, however,
the foregoing is not intended to waive any liability to the extent it results
from any conduct found by a Governmental Authority to constitute fraud or a
violation of criminal law.

(b)           With respect to the obligations of
the Issuer under this Insurance Agreement, the parties hereto agree that
recourse against the Issuer for such obligations is limited to the assets of
the Issuer.

Section 6.11           Entire Agreement.

This Insurance Agreement,
the Premium Letter and the Policies set forth the entire agreement between the
parties with respect to the subject matter hereof and thereof, and supersede
and replace any agreement or understanding that may have existed between the
parties prior to the date hereof in respect of such subject matter.

Section 6.12           Indenture Trustee.

The Indenture Trustee
hereby acknowledges and agrees to perform all its obligations and duties
pursuant to the Related Documents to which it is a party.

 

26

 

Section 6.13           Third-Party Beneficiary.

Each of the parties
hereto agrees that the Insurer shall have all rights of an intended third-party
beneficiary in respect of each of the Related Documents, including the right to
enforce the respective obligations of the parties thereunder.

Section 6.14           Successor and Assigns.

This Insurance Agreement
and all obligations of each of the parties hereto shall be binding upon its
successors and assigns.  This Insurance
Agreement may not be assigned by UCI or the Issuer without the prior written
consent of the Insurer.

Section 6.15           No Proceedings.

Each of the parties
hereto agrees that it will not institute against the Issuer or Universal
Compression Member 2005 Corp. any involuntary proceeding or otherwise institute
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding or other proceeding under any federal or state bankruptcy or similar
law until the date which is one year and one day since the last day on which
any Series 2005-1 Note or Series 2005-2 Note shall have been outstanding.  Each of the parties hereto agrees that the
provisions of this Section 6.15 shall survive any termination of
this Insurance Agreement.

A
PERSON WHO FILES A CLAIM WITH INTENT TO DEFRAUD OR HELPS COMMIT A FRAUD AGAINST
AN INSURER IS GUILTY OF A CRIME.

 

27

IN WITNESS WHEREOF, the
parties hereto have executed this Insurance Agreement, all as of the day and
year first above mentioned.

 

	
   

  	
  AMBAC ASSURANCE
  CORPORATION,

  
	
   

  	
  as Insurer

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Harris C. Mehos

  
	
   

  	
  Name: 

  	
  Harris C. Mehos

  
	
   

  	
  Title:

  	
  First Vice President

  

 

 

 

 

Signature Page 1

Insurance and
Indemnity Agreement

 

	
   

  	
  UNIVERSAL COMPRESSION,
  INC.

  
	
   

  	
  as Contributor
  and Manager

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ J. Michael Anderson

  
	
   

  	
   

  	
  J. Michael Anderson

  
	
   

  	
   

  	
  Senior Vice President
  and

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  UCO COMPRESSION 2005
  LLC

  
	
   

  	
  as Issuer

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ J. Michael Anderson

  
	
   

  	
   

  	
  J. Michael Anderson

  
	
   

  	
   

  	
  Senior Vice President
  and

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  UCO COMPRESSION 2002 LLC

  
	
   

  	
  as Old Lessee

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ J. Michael Anderson

  
	
   

  	
   

  	
  J. Michael Anderson

  
	
   

  	
   

  	
  Senior Vice President
  and

  
	
   

  	
   

  	
  Chief Financial Officer

  
					

 

 

 

 

 

 

Signature Page 2

Insurance and
Indemnity Agreement

 

2

 

	
   

  	
  WELLS FARGO BANK,
  NATIONAL ASSOCIATION,

  
	
   

  	
  not in its
  individual capacity, but solely

  
	
   

  	
  as Indenture
  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Marianna C.
  Stershic

  
	
   

  	
   

  	
  Name: Marianna C.
  Stershic

  
	
   

  	
   

  	
  Title: Vice President

  

 

 

 

 

Signature Page 3

Insurance and Indemnity
Agreement

 

3

 

EXHIBIT A

AMBAC ASSURANCE CORPORATION

FINANCIAL GUARANTY INSURANCE POLICY

Policy No. 
AB0934BE

	
  Insured Party:

  	
   

  	
  Wells Fargo
  Bank, National Association, not in its individual capacity but solely in its
  capacity as Indenture Trustee (in such capacity, together with any successor
  Indenture Trustee appointed under and in accordance with the Indenture (as
  defined below), the “Indenture Trustee”) under the Indenture for the
  benefit of the Holders of the Series 2005-1 Notes issued pursuant to the
  Indenture.

  
	
   

  	
   

  	
   

  
	
  Insured
  Obligations:

  	
   

  	
  To the extent
  set forth herein, the aggregate interest on and the aggregate outstanding
  principal balance of all Series 2005-1 Notes owned by the Holders,
  which aggregate principal amount shall not exceed $200,000,000.

  
	
   

  	
   

  	
   

  
	
  Insured Amounts:

  	
   

  	
  (i) With respect to any Payment Date or the Draw Date (as defined
  below), the Interest Payment Deficiency Amount (as defined below) for such
  Payment Date or the Draw Date, as the case may be, (ii) with respect to the
  Draw Date (as defined below), the Series 2005-1 Note Principal Deficiency
  Amount (as defined below) and (iii) with respect to any Preference Payment
  Date (as defined below), the Preference Amounts (as defined below); provided,
  however, that the aggregate amount of all such Preference Amounts
  shall be subject to the limitations in such definition; provided, further,
  however, that in no event shall the amount payable by the Insurer (as
  defined below) under this Policy (as defined below) exceed the Maximum
  Insured Amount (as defined below).

  

 

In consideration
of the payment of the premium, AMBAC ASSURANCE CORPORATION, a Wisconsin
domiciled stock insurance corporation (together with any successor thereto, the
“Insurer”), hereby unconditionally and irrevocably guarantees, subject
only to (i) proper presentation of a Notice (as defined below) in accordance
with the terms of this Financial Guaranty Insurance Policy (together with each
and every endorsement, if any, hereto, this “Policy”) and (ii) the terms
of this Policy, to pay to the Insured Party, for the benefit of Holders of the
Insured Obligations, that portion of the Insured Amounts which shall become Due
for Payment (as defined below) but shall be unpaid by reason of Nonpayment (as
defined below).

1.                             Definitions.

Capitalized terms used in this Policy and not otherwise defined herein
shall have the meanings given to such terms in the Appendix A to the Indenture,
dated as of October 28, 2005 (as amended, restated, supplemented or otherwise modified
from time to time in accordance with its terms and the terms of this Policy,
the “Indenture”), between the Issuer and the Indenture

 

 

Trustee, as such
Appendix A to the Indenture and the Indenture may be amended, restated,
supplemented or otherwise modified from time to time in accordance with the
provisions of the Indenture with the prior written consent of the Insurer, and
the rules of usage set forth in such Appendix A shall apply to this Agreement, provided,
that to the extent such capitalized terms are not defined in Appendix A to the
Indenture, such terms shall have the meanings assigned to such terms in the
Insurance and Indemnity Agreement, dated as of October 28, 2005 (as amended,
restated, supplemented or otherwise modified from time to time in accordance
with its terms, the “Insurance Agreement”), among the Insurer, Issuer,
UCI and the Indenture Trustee.  For
purposes of this Policy, the following terms shall have the following meanings:

“Bankruptcy Code” shall mean The Bankruptcy Reform Act of 1978,
as heretofore and hereafter amended, and codified as 11 U.S.C. Section 101 et
seq.

“Draw Date” shall mean October 20, 2025.

“Due for Payment” shall mean, with respect to any Insured
Amount, such amount is due and payable pursuant to the terms of the Indenture.

“First Payment Date” shall mean the Payment Date occurring on
November 20, 2005.

“Holder” shall mean Wachovia Capital Markets, LLC, as initial
purchaser under the Note Purchase Agreement, and any other Person who is the
registered owner or beneficial owner of a Series 2005-1 Note (other than the
Issuer, a Universal Party and any of their Affiliates) and who, on the
applicable Payment Date or the Draw Date, as the case may be, is entitled under
the terms of such Series 2005-1 Note and the Indenture to payment thereunder.

“Indenture Trustee” shall have the meaning assigned to such term
in the preamble hereto.

“Insured Amounts” shall have the meaning assigned to such term
in the preamble hereto.

“Insured Obligations” shall have the meaning assigned to such
term in the preamble hereto.

“Insured Party” shall have the meaning assigned to such term in
the preamble hereto.

“Insured Payments” shall mean, at any date of determination, the
aggregate of amounts paid by the Insurer under the Policy in respect of Insured
Amounts on or before such date of determination.

“Insurer” shall have the meaning assigned to such term in the preamble
hereto.

“Interest Payment Deficiency Amount” shall mean, for any Payment
Date or the Draw Date, as applicable, the excess, if any, of (a) the sum
of the Series 2005-1 Note Interest Payments (as defined in the Series
Supplement in respect of the Series 2005-1 Notes, such Supplement, the “Series
2005-1 Supplement”) due on the Series 2005-1 Notes owned by Holders on such
Payment Date or the Draw Date, as the case may be, payable pursuant to Section
302 of the Series 2005-1 Supplement over (b) the sum of (x) the aggregate
of the amounts that have been paid, or are held by the Indenture Trustee for
payment, to the Holders, from the proceeds of

 

2

 

Collateral or
otherwise, on such Payment Date or the Draw Date, as the case may be, and
allocable to Series 2005-1 Note Interest Payments due on the Series 2005-1
Notes (without giving effect to the application of proceeds of any draws on
this Policy but after giving effect to the payment, in accordance with the
Related Documents, of all items with a higher priority), including, without
limitation, and without duplication, amounts on deposit in the Trust Account,
the Series 2005-1 Series Account (as defined in the Series 2005-1 Supplement),
the Reserve Account or any other Transaction Account and any other funds that
are available to pay such Series 2005-1 Note Interest Payments on such date
(including, without limitation, amounts to be distributed pursuant to Section
302 or 806 of the Indenture), and (y) the aggregate of the amounts paid by
the Insurer under this Policy on or before such Payment Date or the Draw Date,
as the case may be, that are allocable to Series 2005-1 Note Interest Payments
due on the Series 2005-1 Notes in respect of the interest period ending on such
Payment Date or the Draw Date, as the case may be; provided that any
payment of any Interest Payment Deficiency Amount shall be subject to the
limitations set forth in Section 9 hereof.

“Maximum Insured Amount” shall mean $200,000,000 in respect of
principal, plus the Series 2005-1 Note Interest Payments due and owing with
respect to the Series 2005-1 Notes.

“Nonpayment” shall mean, with respect to any Payment Date or the
Draw Date, any Insured Amount that is Due for Payment on such date but has not
been paid pursuant to the Indenture.

“Notice” shall mean the telephonic notice, promptly confirmed in
writing by facsimile substantially in the form of Exhibit A or B,
as applicable, to this Policy, the original of which is subsequently delivered
by registered or certified mail, from the Indenture Trustee, in the case of an
Insured Amount, specifying the Insured Amount that shall be due and payable on
the applicable Payment Date or Draw Date or, in the case of a Preference
Amount, specifying the Preference Amount that is due and payable and the date
for payment thereof, in each case by the Insurer under and in accordance with this
Policy.

“Order” shall have the meaning assigned to such term in Section
8 hereof.

“Policy” shall have the meaning assigned to such term in the preamble
hereto.

“Preference Amount” shall mean any payment with respect to any
Series 2005-1 Note Interest Payment or any Series 2005-1 Note Principal Balance
(as defined in the Series 2005-1 Supplement), in each case with respect to any
Series 2005-1 Note, which (i) has become Due for Payment, (ii) was
made to a Holder by or on behalf of the Issuer and (iii) has been deemed a
preferential transfer and recoverable, or theretofore recovered, from such
Holder pursuant to the Bankruptcy Code or other applicable law in accordance
with a final, nonappealable order of a court of competent jurisdiction; provided,
that any Preference Amount in respect of Series 2005-1 Note Interest Payments
shall be limited to the amount so calculated at the rate of interest paid with
respect to such Preference Amount on the principal amount on which such avoided
interest payment accrued; provided, further, in no event shall
the Insurer be obligated to make any payment in respect of any Preference
Amount to the extent that such payment, when added to all prior payments by the
Insurer under the Policy would exceed the Maximum Insured Amount.

 

3

 

“Preference Payment Date” shall have the meaning assigned to
such term in Section 8 hereof.

“Reimbursement Amount” shall mean, as to any Payment Date or the
Draw Date, the sum of (x) (i) all Insured Payments paid by the Insurer,
but for which the Insurer has not been reimbursed prior to such Payment Date or
the Draw Date, as the case may be, pursuant to Section 302 or 802 or 806 of the
Indenture, plus (ii) interest accrued on such Insured Payments not
previously repaid from and including the date of payment of such Insured
Payment by the Insurer until reimbursement thereof in full, calculated at the
Late Payment Rate from the date such Insured Payments were made by the Insurer,
and (y) without duplication (i) any amounts then due and owing to the
Insurer under the Insurance Agreement, as certified to the Indenture Trustee by
the Insurer plus (ii) interest on such amounts, from the due date
thereof until payment thereof in full, at the Late Payment Rate.

“Series 2005-1 Note Principal Deficiency Amount” shall mean, as
of the Draw Date, the excess, if any, of (i) the Aggregate Series 2005-1 Note
Principal Balance of all Series 2005-1 Notes owned by Holders after giving
effect to all payments of principal on the Series 2005-1 Notes pursuant to the
Related Documents over (ii) the sum, without duplication, of (x) the
aggregate of the amounts that have been paid, or are held by the Indenture
Trustee for payment, to the Holders, from the proceeds of the Collateral or
otherwise, on or before the Draw Date and allocable to principal (without
giving effect to the application of proceeds of any draws on this Policy but
after giving effect to the payment, in accordance with the Related Documents,
of all items with a higher priority), including, without limitation,
application of funds on deposit in the Trust Account, the Series 2005-1 Series
Account, the Reserve Account, the Purchase Account or any other Transaction
Account and any other funds that are available to pay such Aggregate Series
2005-1 Note Principal Balance of the Series 2005-1 Notes on such Draw Date
(including, without limitation, amounts to be distributed pursuant to Section
302 or 806 of the Indenture), and (y) the aggregate of amounts paid by the
Insurer under this Policy on or before the Draw Date in respect of or allocable
to principal; provided that any payment of any Series 2005-1 Note
Principal Deficiency Amount shall be subject to the limitations set forth in Section
9 hereof.

2.                             Payments
under this Policy.

(a)                                           Upon
the presentation by the Insured Party to the Insurer at the Insurer’s principal
office in respect of the applicable Payment Date or the Draw Date of a duly
executed Notice, the Insurer will make or cause to be made to the Insured
Party, on the guarantee set forth in the first paragraph of this Policy,
payment in an amount equal to the applicable Insured Amounts.

(b)                                           Amounts
payable in respect of any Insured Amounts due hereunder, unless otherwise
stated herein, will be distributed by the Insurer to the Indenture Trustee by
wire transfer of immediately available funds. 
Solely the Indenture Trustee on behalf of the Holders shall have the
right to make a claim for an Insured Payment under this Policy.

(c)                                           The
Insurer’s payment obligations under this Policy with respect to particular
Insured Amounts shall be discharged to the extent funds equal to such Insured
Amounts are paid by the Insurer in accordance with the Indenture Trustee’s
request, whether or

 

4

 

not such funds are properly applied by the Indenture
Trustee, the Holder or other recipient provided for in such request, as the
case may be.  Payments of Insured Amounts
shall be made only at the time set forth in this Policy, and no accelerated Insured
Payments shall be made except to the extent that the Insurer shall have
specified an earlier date for payment at its sole option.  This Policy does not insure against loss of
any prepayment or other acceleration payment that at any time may become due in
respect of any Insured Amount, other than at the sole option of the Insurer,
nor against any risk other than Nonpayment, including failure of the Indenture
Trustee to make any payment due the Holders of Insured Amounts.

3.                             Presentation
of Notice of Non-Payment and Demand.

(a)                                           Notwithstanding
any other provision of this Policy, the Insurer will pay any Insured Amounts
payable hereunder no later than 12:00 noon, New York City time, on the later of
(i)(x) in the case of the Interest Payment Deficiency Amount, the
applicable Payment Date or the Draw Date, as the case may be, on which such
Interest Payment Deficiency Amount is due and (y) in the case of the
Series 2005-1 Note Principal Deficiency Amount, the Draw Date, and (ii) the
third Business Day following actual receipt by the Insurer, at the Insurer’s
principal office in New York, New York on a Business Day, of a Notice; provided
that, if such Notice is received by the Insurer after 12:00 noon, New York City
time, on such Business Day, it will be deemed to be received before 12:00 noon
on the following Business Day.

(b)                                           If
any such Notice is not in proper form or is otherwise insufficient for the
purpose of making a claim under this Policy, it shall be deemed not to have
been received for purposes of this Policy, and the Insurer shall promptly so
advise the Indenture Trustee in writing and the Indenture Trustee may submit an
amended or corrected Notice.  If such an
amended or corrected Notice is in proper form and is otherwise sufficient for
the purpose of making a claim under this Policy, it shall be deemed to have
been timely received on the Business Day of such resubmission subject to the
proviso in paragraph (a) above.

4.                             Waiver.  To the
fullest extent permitted by applicable law, the Insurer hereby waives and
agrees not to assert any and all rights and defenses (including, but not
limited to, set-offs, counterclaims and fraud in the inducement or fact), to
the extent such rights and defenses may be available to the Insurer, so as to
avoid payment of any amount due in respect of this Policy in accordance with
the express provisions hereof, including, without limitation, any such rights
acquired by subrogation, assignment or otherwise.  For the avoidance of doubt, (a) the Insurer
undertakes not to impose any defense to payment, but reserves all rights to
assert any claim it may have against any Holder or any other Person and none of
the foregoing waivers shall prejudice any claim the Insurer may have, whether
directly or as subrogee, assignee or otherwise, subsequent to making such
payment and (b) the Insurer does not waive its right to seek payment of all
amounts to which it is entitled, including, without limitation, all Premiums, Reimbursement Amounts, and all
other amounts owed to the Insurer pursuant to Section 3.3 of the Insurance
Agreement or any other Related Document.

5.                             Subrogation.

(a)                                           Upon
any payment hereunder, in furtherance and not in limitation of the Insurer’s
equitable right of subrogation, its right of subrogation, its right of
assignment and its

 

5

 

other rights under the Insurance Agreement and any
other Related Document, the Insurer will, to the extent of such payment by the
Insurer hereunder, be subrogated to the rights of any Holder to receive any and
all amounts due in respect of the Insured Obligations (including the amount of
any Interest Payment Deficiency Amount and the amount of any Series 2005-1 Note
Principal Deficiency Amount, and any regular, default or overdue interest, or
other interest or analogous amounts thereon or in respect thereof) as to which
such Insured Payment was made.

(b)                                           As
of any Payment Date or the Draw Date, as applicable, to the extent the Insurer
has become subrogated to the rights of any Holder by virtue of any previous
payment under this Policy, recovery of such payment shall be effected in
accordance with the priority of distributions provided therefor in Section 302
of the Indenture.  In so doing, the
Insurer does not waive its rights to seek full payment of all Reimbursement
Amounts owed to it.

6.                             Communications.  All notices, presentations, transmissions,
deliveries and communications made by the Insured Party to the Insurer with
respect to this Policy shall specifically refer to the number of this Policy and
shall be made to the Insurer at:

	
   

  	
  Ambac Assurance
  Corporation

  
	
   

  	
  One State Street Plaza

  
	
   

  	
  New York, New York  10004

  
	
   

  	
  Attention:

  	
  Asset-Backed Securities
  Department Head

  
	
   

  	
   

  	
  General Counsel —
  URGENT

  
	
   

  	
  Phone:

  	
  (212) 208-2283

  
	
   

  	
  Fax:

  	
  The Insured Party shall
  contact the Office of General Counsel to Ambac at (212) 668-0340 to obtain
  the appropriate facsimile number for any notice, presentation transmission,
  delivery or communication

  

 

or to such other address, officer, telephone number or
facsimile number as the Insurer may designate to the Insured Party from time to
time.

7.                             Nature
of the Obligations.  Except as
expressly provided herein, the obligations of the Insurer under this Policy are
irrevocable, absolute and unconditional.

8.                             Termination.  This Policy and the obligations of the
Insurer hereunder shall terminate upon the earliest of:

(a)                                           the
payment by the Insurer to the Insured Party of the lesser of (x) all Insured
Amounts and (y) the Maximum Insured Amount;

(b)                                           the
date on which all of the Insured Obligations have been paid in full; and

(c)                                           five
(5) Business Days after the close of business on the Draw Date.

provided, however, that notwithstanding the occurrence
of any of the foregoing events, the Insurer shall pay any Preference Amount
when due to be paid pursuant to an Order referred to below, but in any event no
earlier than the fifth Business Day following actual receipt by the Insurer of
each of the following: (i) a certified copy of a final,

 

6

 

nonappealable order of a court or other body
exercising jurisdiction in an Insolvency Proceeding, not subject to any stay,
to the effect that a Holder is required to return such Preference Amount paid
during the term of this Policy because the payments of such amounts were
avoided as a preferential transfer or otherwise rescinded or required to be
restored by such Holder (the “Order”), (ii) an opinion of counsel in
form and substance satisfactory to the Insurer that the Order has been entered
and is final and not subject to appeal or to any stay, (iii) an assignment, in
form and substance satisfactory to the Insurer, duly executed and delivered by
such Holder and the Indenture Trustee, irrevocably assigning to the Insurer all
rights and claims of such Holder relating to or arising under the Indenture or
otherwise against the Collateral or otherwise with respect to such Preference
Amount, (iv) appropriate instruments in form and substance satisfactory to the
Insurer to effect the appointment of the Insurer as agent for such Holder and
the Indenture Trustee in any legal proceeding related to such Preference Amount
and (v) a Notice (in the form attached as Exhibit B) appropriately
completed and executed by the Indenture Trustee (the date on which the Insurer
shall have received each of the foregoing items being herein referred to as the
“Preference Payment Date”); provided, further, that if
such documents are received by the Insurer after 12:00 noon, New York City
time, on such Business Day, they will be deemed to be received on the following
Business Day.  Such payment shall be
disbursed to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order, and not to the Indenture Trustee or applicable
Holder directly, unless the Indenture Trustee or the relevant Holder has made a
payment of the Preference Amount to the court or such receiver, conservator,
debtor-in-possession or trustee-in-bankruptcy named in the Order, in which case
the Insurer will pay the Indenture Trustee to the extent of the payment of such
Preference Amount, subject to the delivery of (a) the items referred to in clauses
(i), (ii), (iii), (iv) and (v) above to the
Insurer and (b) evidence satisfactory to the Insurer that payment has been made
to such court or receiver, conservator, debtor-in-possession or
trustee-in-bankruptcy named in the Order; provided, further, that
the Insurer shall not be obligated to pay any Preference Amount in respect of
the Series 2005-1 Note Principal Balance prior to the Draw Date.

Notwithstanding the foregoing, in no event shall the
Insurer be obligated to make any payment in respect of any Preference Amount
(i) to the extent that such payment, when added to all prior payments of
Insured Amounts, would exceed the Maximum Insured Amount or (ii) prior to the
time the Insurer would have been required to make an Insured Payment pursuant
to Section 2 hereof.

9.                             Exclusions.  There shall be no acceleration payment due
under this Policy unless such acceleration is at the sole option of the
Insurer.  This Policy does not cover
(i) any Default Fee, premium, penalty or other additional fee or yield
payable as a result of any failure to pay any amounts when due on a Payment
Date or the Draw Date, as applicable, or assessed as a result of an Event of Default
or event of termination under the Indenture or any payment or distribution that
occurs earlier than any scheduled date for payment or distribution thereof,
(ii) any shortfalls in amounts owing or available for payment resulting
from, or attributable to, the liability (including interest and penalties in
respect of any such liability) of any Holder, the Issuer, the Indenture Trustee
or the Collateral for any tax, withholding or other governmental charge, if any
(including interest and penalties in respect of that liability), (iii) any
risk other than

 

7

 

Nonpayment, including the failure of the Indenture
Trustee to make any disbursements required under the Indenture to any Holder or
the Indenture Trustee to remit funds to any other party, (iv) any interest or
yield on any amount other than the Aggregate Series 2005-1 Note Principal
Balance (as defined in the Series Supplement for the Series 2005-1 Notes) or
(v) any Commitment Fees.

10.                           Miscellaneous.

(a)                                           This
Policy sets forth the full understanding of the Insurer, and except as
expressly provided herein, or as otherwise agreed in writing hereafter by the
Insurer and the Insured Party, may not be modified, altered or affected by any
other agreement or instrument, including any modification or amendment thereto,
and may not be canceled or revoked.

(b)                                           This
Policy shall be governed by, and construed in accordance with, the laws of the
State of New York.

(c)                                           THE
INSURANCE PROVIDED BY THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY
INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.

(d)                                           Any
notice hereunder or service of process on the Insurer may be made at the
address listed above for the Insurer or such other address as the Insurer shall
specify in writing to the Indenture Trustee.

(e)                                           The
Premium of this Policy is not refundable for any reason.  The Premium will be payable on this Policy on
each Payment Date and the Draw Date as provided in the Insurance Agreement,
beginning with the First Payment Date.

 

8

IN WITNESS
WHEREOF, the Insurer has caused this Policy to be executed and attested this
28th day of October, 2005.

	
   

  	
  AMBAC ASSURANCE
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

 

EXHIBIT
A

TO
THE FINANCIAL GUARANTY INSURANCE POLICY

Policy No. AB0934BE

NOTICE OF NONPAYMENT AND DEMAND

FOR PAYMENT OF INSURED AMOUNTS

(OTHER THAN PREFERENCE AMOUNT)

 

Date:  [               ]

 

Ambac Assurance
Corporation

One State Street Plaza

New York, New York  10004

	
  Attention:

  	
  Asset-Backed Securities Department Head

  
	
   

  	
  General Counsel — URGENT

  

 

Reference is made
to Financial Guaranty Insurance Policy No. AB0934BE (the “Policy”)
issued by Ambac Assurance Corporation (“Ambac”).  Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the Policy,
unless the context otherwise requires.

The undersigned
hereby certifies as follows:

1.                             It
is the Indenture Trustee under the Indenture, is the Insured Party under the
Policy and is acting for the benefit of the Holders.

2.                             The
relevant Payment Date or the Draw Date is [date].

3.                             [There
is an Interest Payment Deficiency Amount of $            
with respect to such Payment Date, which amount is an Insured Amount which is
Due for Payment.]  [Such date is the Draw
Date under the Policy and the Series 2005-1 Note Principal Deficiency Amount is
$               
and the Interest Payment Deficiency Amount is $               ,
the total of which is the Insured Amount that is Due for Payment.]

4.                             The
Indenture Trustee has not heretofore made a demand for the Insured Amount in
respect of such Payment Date or the Draw Date, as applicable.

5.                             The Indenture
Trustee hereby requests the payment of the Insured Amount that is Due for
Payment be made by Ambac under the Policy and directs that payment under the
Policy be made to the following account by bank wire transfer of federal or
other immediately available funds in accordance with the terms of the Policy
to:                             .(1)

(1)           The account number of the Series
2005-1 Series Account held by the Indenture Trustee.

 

A-1

 

6.                             The
Indenture Trustee hereby certifies and agrees that, following receipt of the
Insured Payment from Ambac, it shall (a) hold such amounts in trust for the
Holders and apply the same directly to the distribution of payments when due in
respect of the Series 2005-1 Notes in accordance with the Indenture, (b) not
apply such funds for any other purpose, and (c) maintain an accurate record of
such payments with respect to the Series 2005-1 Notes and the corresponding
claim on the Policy and proceeds thereof.

7.                             The
Indenture Trustee hereby assigns to Ambac all rights, and confirms that the
Holders have assigned all rights, under the Insured Obligations in respect of
which payment is being requested to Ambac.

A PERSON WHO FILES A CLAIM WITH INTENT TO DEFRAUD OR
HELPS COMMIT A FRAUD AGAINST AN INSURER IS GUILTY OF A CRIME.

	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
  (Officer)

  

 

 

A-2

 

EXHIBIT
B

TO
THE FINANCIAL GUARANTY INSURANCE POLICY

Policy No. AB0934BE

NOTICE
OF NONPAYMENT AND DEMAND

FOR PAYMENT OF PREFERENCE AMOUNT

Date:  [                ]

Ambac Assurance
Corporation

One State Street Plaza

New York, New York  10004

	
  Attention:

  	
  Asset-Backed Securities Department Head

  
	
   

  	
  General Counsel — URGENT

  

 

Reference is made
to Financial Guaranty Insurance Policy No. AB0934BE (the “Policy”)
issued by Ambac Assurance Corporation (“Ambac”).  Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the Policy,
unless the context otherwise requires.

The undersigned
hereby certifies as follows:

1.                             It
is the Indenture Trustee under the Indenture, is the Insured Party under the
Policy and is acting for the Holders.

2.                             A
payment previously made in respect of the Series 2005-1 Notes pursuant to the
Indenture has become a Preference Amount, as indicated by the attached Order,
which Payment was previously distributed to [name of applicable Holder] (the “Applicable
Noteholder”).

3.                             The
attached opinion of counsel concludes that the Order has been entered and is
not subject to appeal or to any stay.

4.                             The
Applicable Noteholder has certified that the Order has been entered and is not
subject to appeal or to any stay.

5.                             The
amount of the Preference Amount is $______, and consists of interest in the
amount of $                     
paid on                    ,
200[     ] [,and principal in the amount of $            
paid on              ,
200[    ]].

6.                             The
Indenture Trustee has not heretofore made a demand for such Preference Amount.

7.                             The
Indenture Trustee hereby requests the payment of the Insured Payment be made by
Ambac under the Policy and directs that payment under the Policy be made to the

 

B-1

 

following account
by bank wire transfer of federal or other immediately available funds in
accordance with the terms of the Policy to:                 .(2)

(2)                                  The account of the relevant receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order,
unless the Holder or Indenture Trustee has already paid such Preference Amount
to such party, in which case, the account of the payor.

8.                             The
Indenture Trustee hereby agrees that if such Insured Payment is made to it,
following receipt of such Insured Payment from Ambac, it shall (a) hold such
amounts in trust and apply the same directly to the Applicable Holder for
payment of the Preference Amount, (b) not apply such funds for any other
purpose, and (c) maintain an accurate record of such payments with respect to
the Series 2005-1 Notes and the corresponding claim on the Policy and proceeds
thereof.

9.                             The
Indenture Trustee hereby assigns to Ambac all rights, and confirms that the
Applicable Noteholder has assigned all rights, under the Insured Obligations in
respect of which payment is being requested to Ambac.

A PERSON WHO FILES A CLAIM WITH INTENT TO DEFRAUD OR
HELPS COMMIT A FRAUD AGAINST AN INSURER IS GUILTY OF A CRIME.

	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
  (Officer)

  

 

 

B-2

EXHIBIT B

AMBAC
ASSURANCE CORPORATION

FINANCIAL GUARANTY INSURANCE POLICY

Policy No. 
AB0935BE

	
  Insured Party:

  	
   

  	
  Wells Fargo
  Bank, National Association, not in its individual capacity but solely in its
  capacity as Indenture Trustee (in such capacity, together with any successor
  Indenture Trustee appointed under and in accordance with the Indenture (as
  defined below), the “Indenture Trustee”) under the Indenture for the
  benefit of the Holders of the Series 2005-2 Notes issued pursuant to the
  Indenture.

  
	
   

  	
   

  	
   

  
	
  Insured
  Obligations:

  	
   

  	
  To the extent
  set forth herein, the aggregate interest on and the aggregate outstanding
  principal balance of all Series 2005-2 Notes owned by the Holders, which
  aggregate principal amount shall not exceed $25,000,000.

  
	
   

  	
   

  	
   

  
	
  Insured Amounts:

  	
   

  	
  (i) With respect to any Payment Date or the Draw Date (as defined below),
  the Interest Payment Deficiency Amount (as defined below) for such Payment
  Date or the Draw Date, as the case may be, (ii) with respect to the Draw Date
  (as defined below), the Series 2005-2 Note Principal Deficiency Amount (as
  defined below) and (iii) with respect to any Preference Payment Date (as
  defined below), the Preference Amounts (as defined below); provided, however,
  that the aggregate amount of all such Preference Amounts shall be subject to
  the limitations in such definition; provided, further, however,
  that in no event shall the amount payable by the Insurer (as defined below)
  under this Policy (as defined below) exceed the Maximum Insured Amount (as
  defined below).

  

 

In consideration
of the payment of the premium, AMBAC ASSURANCE CORPORATION, a Wisconsin
domiciled stock insurance corporation (together with any successor thereto, the
“Insurer”), hereby unconditionally and irrevocably guarantees, subject
only to (i) proper presentation of a Notice (as defined below) in accordance
with the terms of this Financial Guaranty Insurance Policy (together with each
and every endorsement, if any, hereto, this “Policy”) and (ii) the terms
of this Policy, to pay to the Insured Party, for the benefit of Holders of the
Insured Obligations, that portion of the Insured Amounts which shall become Due
for Payment (as defined below) but shall be unpaid by reason of Nonpayment (as
defined below).

1.                             Definitions.

                Capitalized terms used in this
Policy and not otherwise defined herein shall have the meanings given to such
terms in the Appendix A to the Indenture, dated as of October 28, 2005 (as
amended, restated, supplemented or otherwise modified from time to time in
accordance with its terms and the terms of this Policy, the “Indenture”),
between the Issuer and the Indenture

 

 

Trustee, as such
Appendix A to the Indenture and the Indenture may be amended, restated,
supplemented or otherwise modified from time to time in accordance with the
provisions of the Indenture with the prior written consent of the Insurer, and
the rules of usage set forth in such Appendix A shall apply to this Agreement, provided,
that to the extent such capitalized terms are not defined in Appendix A to the
Indenture, such terms shall have the meanings assigned to such terms in the
Insurance and Indemnity Agreement, dated as of October 28, 2005 (as amended,
restated, supplemented or otherwise modified from time to time in accordance
with its terms, the “Insurance Agreement”), among the Insurer, Issuer,
UCI and the Indenture Trustee.  For purposes
of this Policy, the following terms shall have the following meanings:

“Bankruptcy Code” shall mean The Bankruptcy Reform Act of 1978,
as heretofore and hereafter amended, and codified as 11 U.S.C. Section 101 et
seq.

“Draw Date” shall mean the 20th anniversary of the
Commitment Termination Date with respect to the Series 2005-2 Notes.

“Due for Payment” shall mean, with respect to any Insured
Amount, such amount is due and payable pursuant to the terms of the Indenture.

“First Payment Date” shall mean the Payment Date occurring on
November 20, 2005.

“Holder” shall mean Variable Funding Capital Corporation, and
any other Person who is the registered owner or beneficial owner of a Series
2005-2 Note (other than the Issuer, a Universal Party and any of their
Affiliates) and who, on the applicable Payment Date or the Draw Date, as the
case may be, is entitled under the terms of such Series 2005-2 Note and the
Indenture to payment thereunder.

“Indenture Trustee” shall have the meaning assigned to such term
in the preamble hereto.

“Insured Amounts” shall have the meaning assigned to such term
in the preamble hereto.

“Insured Obligations” shall have the meaning assigned to such
term in the preamble hereto.

“Insured Party” shall have the meaning assigned to such term in
the preamble hereto.

“Insured Payments” shall mean, at any date of determination, the
aggregate of amounts paid by the Insurer under the Policy in respect of Insured
Amounts on or before such date of determination.

“Insurer” shall have the meaning assigned to such term in the preamble
hereto.

“Interest Payment Deficiency Amount” shall mean, for any Payment
Date or the Draw Date, as applicable, the excess, if any, of (a) the sum
of the Series 2005-2 Note Interest Payments (as defined in the Series Supplement
in respect of the Series 2005-2 Notes, such Supplement, the “Series 2005-2
Supplement”) due on the Series 2005-2 Notes owned by Holders on such
Payment Date or the Draw Date, as the case may be, payable pursuant to Section
302 of the Series 2005-2 Supplement over (b) the sum of (x) the aggregate
of the amounts that have been

 

2

 

paid, or are held
by the Indenture Trustee for payment, to the Holders, from the proceeds of
Collateral or otherwise, on such Payment Date or the Draw Date, as the case may
be, and allocable to Series 2005-2 Note Interest Payments due on the Series
2005-2 Notes (without giving effect to the application of proceeds of any draws
on this Policy but after giving effect to the payment, in accordance with the
Related Documents, of all items with a higher priority), including, without
limitation, and without duplication, amounts on deposit in the Trust Account,
the Series 2005-2 Series Account (as defined in the Series 2005-2 Supplement),
the Reserve Account or any other Transaction Account and any other funds that
are available to pay such Series 2005-2 Note Interest Payments on such date
(including, without limitation, amounts to be distributed pursuant to Section
302 or 806 of the Indenture), and (y) the aggregate of the amounts paid by
the Insurer under this Policy on or before such Payment Date or the Draw Date,
as the case may be, that are allocable to Series 2005-2 Note Interest Payments
due on the Series 2005-2 Notes in respect of the interest period ending on such
Payment Date or the Draw Date, as the case may be; provided that any
payment of any Interest Payment Deficiency Amount shall be subject to the
limitations set forth in Section 9 hereof.

“Maximum Insured Amount” shall mean $25,000,000 in respect of
principal, plus the Series 2005-2 Note Interest Payments due and owing with
respect to the Series 2005-2 Notes.

“Nonpayment” shall mean, with respect to any Payment Date or the
Draw Date, any Insured Amount that is Due for Payment on such date but has not
been paid pursuant to the Indenture.

“Notice” shall mean the telephonic notice, promptly confirmed in
writing by facsimile substantially in the form of Exhibit A or B,
as applicable, to this Policy, the original of which is subsequently delivered
by registered or certified mail, from the Indenture Trustee, in the case of an
Insured Amount, specifying the Insured Amount that shall be due and payable on
the applicable Payment Date or Draw Date or, in the case of a Preference Amount,
specifying the Preference Amount that is due and payable and the date for
payment thereof, in each case by the Insurer under and in accordance with this
Policy.

“Order” shall have the meaning assigned to such term in Section
8 hereof.

“Policy” shall have the meaning assigned to such term in the preamble
hereto.

“Preference Amount” shall mean any payment with respect to any
Series 2005-2 Note Interest Payment or any Series 2005-2 Note Principal Balance
(as defined in the Series 2005-2 Supplement), in each case with respect to any
Series 2005-2 Note, which (i) has become Due for Payment, (ii) was
made to a Holder by or on behalf of the Issuer and (iii) has been deemed a
preferential transfer and recoverable, or theretofore recovered, from such
Holder pursuant to the Bankruptcy Code or other applicable law in accordance
with a final, nonappealable order of a court of competent jurisdiction; provided,
that any Preference Amount in respect of Series 2005-2 Note Interest Payments
shall be limited to the amount so calculated at the rate of interest paid with
respect to such Preference Amount on the principal amount on which such avoided
interest payment accrued; provided, further, in no event shall
the Insurer be obligated to make any payment in respect of any Preference
Amount to the extent that such payment, when added to all prior payments by the
Insurer under the Policy would exceed the Maximum Insured Amount.

 

3

 

“Preference Payment Date” shall have the meaning assigned to
such term in Section 8 hereof.

“Reimbursement Amount” shall mean, as to any Payment Date or the
Draw Date, the sum of (x) (i) all Insured Payments paid by the Insurer,
but for which the Insurer has not been reimbursed prior to such Payment Date or
the Draw Date, as the case may be, pursuant to Section 302 or 802 or 806 of the
Indenture, plus (ii) interest accrued on such Insured Payments not
previously repaid from and including the date of payment of such Insured
Payment by the Insurer until reimbursement thereof in full, calculated at the
Late Payment Rate from the date such Insured Payments were made by the Insurer,
and (y) without duplication (i) any amounts then due and owing to the
Insurer under the Insurance Agreement, as certified to the Indenture Trustee by
the Insurer plus (ii) interest on such amounts, from the due date
thereof until payment thereof in full, at the Late Payment Rate.

“Series 2005-2 Note Principal Deficiency Amount” shall mean, as
of the Draw Date, the excess, if any, of (i) the Aggregate Series 2005-2 Note
Principal Balance of all Series 2005-2 Notes owned by Holders after giving
effect to all payments of principal on the Series 2005-2 Notes pursuant to the
Related Documents over (ii) the sum, without duplication, of (x) the
aggregate of the amounts that have been paid, or are held by the Indenture
Trustee for payment, to the Holders, from the proceeds of the Collateral or
otherwise, on or before the Draw Date and allocable to principal (without
giving effect to the application of proceeds of any draws on this Policy but
after giving effect to the payment, in accordance with the Related Documents,
of all items with a higher priority), including, without limitation,
application of funds on deposit in the Trust Account, the Series 2005-2 Series
Account, the Reserve Account, the Purchase Account or any other Transaction
Account and any other funds that are available to pay such Aggregate Series
2005-2 Note Principal Balance of the Series 2005-2 Notes on such Draw Date (including,
without limitation, amounts to be distributed pursuant to Section 302 or 806 of
the Indenture), and (y) the aggregate of amounts paid by the Insurer under
this Policy on or before the Draw Date in respect of or allocable to principal;
provided that any payment of any Series 2005-2 Note Principal Deficiency
Amount shall be subject to the limitations set forth in Section 9
hereof.

2.                             Payments
under this Policy.

(a)                                           Upon
the presentation by the Insured Party to the Insurer at the Insurer’s principal
office in respect of the applicable Payment Date or the Draw Date of a duly
executed Notice, the Insurer will make or cause to be made to the Insured
Party, on the guarantee set forth in the first paragraph of this Policy,
payment in an amount equal to the applicable Insured Amounts.

(b)                                           Amounts
payable in respect of any Insured Amounts due hereunder, unless otherwise
stated herein, will be distributed by the Insurer to the Indenture Trustee by
wire transfer of immediately available funds. 
Solely the Indenture Trustee on behalf of the Holders shall have the
right to make a claim for an Insured Payment under this Policy.

(c)                                           The
Insurer’s payment obligations under this Policy with respect to particular
Insured Amounts shall be discharged to the extent funds equal to such Insured
Amounts are paid by the Insurer in accordance with the Indenture Trustee’s
request, whether or

 

4

 

not such funds are properly applied by the Indenture
Trustee, the Holder or other recipient provided for in such request, as the
case may be.  Payments of Insured Amounts
shall be made only at the time set forth in this Policy, and no accelerated
Insured Payments shall be made except to the extent that the Insurer shall have
specified an earlier date for payment at its sole option.  This Policy does not insure against loss of
any prepayment or other acceleration payment that at any time may become due in
respect of any Insured Amount, other than at the sole option of the Insurer,
nor against any risk other than Nonpayment, including failure of the Indenture
Trustee to make any payment due the Holders of Insured Amounts.

3.                             Presentation
of Notice of Non-Payment and Demand.

(a)                                           Notwithstanding
any other provision of this Policy, the Insurer will pay any Insured Amounts
payable hereunder no later than 12:00 noon, New York City time, on the later of
(i)(x) in the case of the Interest Payment Deficiency Amount, the
applicable Payment Date or the Draw Date, as the case may be, on which such
Interest Payment Deficiency Amount is due and (y) in the case of the
Series 2005-2 Note Principal Deficiency Amount, the Draw Date, and (ii) the
third Business Day following actual receipt by the Insurer, at the Insurer’s
principal office in New York, New York on a Business Day, of a Notice; provided
that, if such Notice is received by the Insurer after 12:00 noon, New York City
time, on such Business Day, it will be deemed to be received before 12:00 noon
on the following Business Day.

(b)                                           If
any such Notice is not in proper form or is otherwise insufficient for the
purpose of making a claim under this Policy, it shall be deemed not to have
been received for purposes of this Policy, and the Insurer shall promptly so
advise the Indenture Trustee in writing and the Indenture Trustee may submit an
amended or corrected Notice.  If such an
amended or corrected Notice is in proper form and is otherwise sufficient for
the purpose of making a claim under this Policy, it shall be deemed to have
been timely received on the Business Day of such resubmission subject to the
proviso in paragraph (a) above.

4.                             Waiver.  To the
fullest extent permitted by applicable law, the Insurer hereby waives and
agrees not to assert any and all rights and defenses (including, but not
limited to, set-offs, counterclaims and fraud in the inducement or fact), to
the extent such rights and defenses may be available to the Insurer, so as to
avoid payment of any amount due in respect of this Policy in accordance with
the express provisions hereof, including, without limitation, any such rights
acquired by subrogation, assignment or otherwise.  For the avoidance of doubt, (a) the Insurer
undertakes not to impose any defense to payment, but reserves all rights to
assert any claim it may have against any Holder or any other Person and none of
the foregoing waivers shall prejudice any claim the Insurer may have, whether
directly or as subrogee, assignee or otherwise, subsequent to making such
payment and (b) the Insurer does not waive its right to seek payment of all
amounts to which it is entitled, including, without limitation, all Premiums, Reimbursement Amounts, and all
other amounts owed to the Insurer pursuant to Section 3.3 of the Insurance
Agreement or any other Related Document.

5.                             Subrogation.

(a)                                           Upon
any payment hereunder, in furtherance and not in limitation of the Insurer’s
equitable right of subrogation, its right of subrogation, its right of
assignment and its

 

5

 

other rights under the Insurance Agreement and any
other Related Document, the Insurer will, to the extent of such payment by the
Insurer hereunder, be subrogated to the rights of any Holder to receive any and
all amounts due in respect of the Insured Obligations (including the amount of
any Interest Payment Deficiency Amount and the amount of any Series 2005-2 Note
Principal Deficiency Amount, and any regular, default or overdue interest, or
other interest or analogous amounts thereon or in respect thereof) as to which
such Insured Payment was made.

(b)                                           As
of any Payment Date or the Draw Date, as applicable, to the extent the Insurer
has become subrogated to the rights of any Holder by virtue of any previous
payment under this Policy, recovery of such payment shall be effected in
accordance with the priority of distributions provided therefor in Section 302
of the Indenture.  In so doing, the
Insurer does not waive its rights to seek full payment of all Reimbursement
Amounts owed to it.

6.                             Communications.  All notices, presentations, transmissions,
deliveries and communications made by the Insured Party to the Insurer with
respect to this Policy shall specifically refer to the number of this Policy
and shall be made to the Insurer at:

	
   

  	
  Ambac Assurance
  Corporation

  
	
   

  	
  One State Street Plaza

  
	
   

  	
  New York, New York  10004

  
	
   

  	
  Attention:

  	
  Asset-Backed Securities
  Department Head

  
	
   

  	
   

  	
  General Counsel —
  URGENT

  
	
   

  	
  Phone:

  	
  (212) 208-2283

  
	
   

  	
  Fax:

  	
  The Insured Party shall
  contact the Office of General Counsel to Ambac at (212) 668-0340 to obtain
  the appropriate facsimile number for any notice, presentation transmission,
  delivery or communication

  

 

or to such other address, officer, telephone number or
facsimile number as the Insurer may designate to the Insured Party from time to
time.

7.                             Nature
of the Obligations.  Except as
expressly provided herein, the obligations of the Insurer under this Policy are
irrevocable, absolute and unconditional.

8.                             Termination.  This Policy and the obligations of the
Insurer hereunder shall terminate upon the earliest of:

(a)                                           the
payment by the Insurer to the Insured Party of the lesser of (x) all Insured
Amounts and (y) the Maximum Insured Amount;

(b)                                           the
date on which all of the Insured Obligations have been paid in full; and

(c)                                           five
(5) Business Days after the close of business on the Draw Date.

provided, however, that notwithstanding the occurrence
of any of the foregoing events, the Insurer shall pay any Preference Amount
when due to be paid pursuant to an Order referred to below, but in any event no
earlier than the fifth Business Day following actual receipt by the Insurer of
each of the following: (i) a certified copy of a final,

 

6

 

nonappealable order of a court or other body
exercising jurisdiction in an Insolvency Proceeding, not subject to any stay,
to the effect that a Holder is required to return such Preference Amount paid
during the term of this Policy because the payments of such amounts were
avoided as a preferential transfer or otherwise rescinded or required to be
restored by such Holder (the “Order”), (ii) an opinion of counsel in
form and substance satisfactory to the Insurer that the Order has been entered
and is final and not subject to appeal or to any stay, (iii) an assignment, in
form and substance satisfactory to the Insurer, duly executed and delivered by
such Holder and the Indenture Trustee, irrevocably assigning to the Insurer all
rights and claims of such Holder relating to or arising under the Indenture or
otherwise against the Collateral or otherwise with respect to such Preference
Amount, (iv) appropriate instruments in form and substance satisfactory to the
Insurer to effect the appointment of the Insurer as agent for such Holder and
the Indenture Trustee in any legal proceeding related to such Preference Amount
and (v) a Notice (in the form attached as Exhibit B) appropriately
completed and executed by the Indenture Trustee (the date on which the Insurer
shall have received each of the foregoing items being herein referred to as the
“Preference Payment Date”); provided, further, that if
such documents are received by the Insurer after 12:00 noon, New York City
time, on such Business Day, they will be deemed to be received on the following
Business Day.  Such payment shall be
disbursed to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order, and not to the Indenture Trustee or applicable
Holder directly, unless the Indenture Trustee or the relevant Holder has made a
payment of the Preference Amount to the court or such receiver, conservator,
debtor-in-possession or trustee-in-bankruptcy named in the Order, in which case
the Insurer will pay the Indenture Trustee to the extent of the payment of such
Preference Amount, subject to the delivery of (a) the items referred to in clauses
(i), (ii), (iii), (iv) and (v) above to the
Insurer and (b) evidence satisfactory to the Insurer that payment has been made
to such court or receiver, conservator, debtor-in-possession or
trustee-in-bankruptcy named in the Order; provided, further, that
the Insurer shall not be obligated to pay any Preference Amount in respect of
the Series 2005-2 Note Principal Balance prior to the Draw Date.

Notwithstanding the foregoing, in no event shall the
Insurer be obligated to make any payment in respect of any Preference Amount
(i) to the extent that such payment, when added to all prior payments of
Insured Amounts, would exceed the Maximum Insured Amount or (ii) prior to the
time the Insurer would have been required to make an Insured Payment pursuant
to Section 2 hereof.

9.                             Exclusions.  There shall be no acceleration payment due
under this Policy unless such acceleration is at the sole option of the
Insurer.  This Policy does not cover
(i) any Default Fee, premium, penalty or other additional fee or yield
payable as a result of any failure to pay any amounts when due on a Payment
Date or the Draw Date, as applicable, or assessed as a result of an Event of
Default or event of termination under the Indenture or any payment or
distribution that occurs earlier than any scheduled date for payment or
distribution thereof, (ii) any shortfalls in amounts owing or available
for payment resulting from, or attributable to, the liability (including
interest and penalties in respect of any such liability) of any Holder, the Issuer,
the Indenture Trustee or the Collateral for any tax, withholding or other
governmental charge, if any (including interest and penalties in respect of
that liability), (iii) any risk other than

 

7

 

Nonpayment, including the failure of the Indenture
Trustee to make any disbursements required under the Indenture to any Holder or
the Indenture Trustee to remit funds to any other party, (iv) any interest or
yield on any amount other than the Aggregate Series 2005-2 Note Principal
Balance (as defined in the Series Supplement for the Series 2005-2 Notes) or
(v) any Commitment Fees.

10.                           Miscellaneous.

(a)                                           This
Policy sets forth the full understanding of the Insurer, and except as
expressly provided herein, or as otherwise agreed in writing hereafter by the
Insurer and the Insured Party, may not be modified, altered or affected by any
other agreement or instrument, including any modification or amendment thereto,
and may not be canceled or revoked.

(b)                                           This
Policy shall be governed by, and construed in accordance with, the laws of the
State of New York.

(c)                                           THE
INSURANCE PROVIDED BY THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY
INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.

(d)                                           Any
notice hereunder or service of process on the Insurer may be made at the
address listed above for the Insurer or such other address as the Insurer shall
specify in writing to the Indenture Trustee.

(e)                                           The
Premium of this Policy is not refundable for any reason.  The Premium will be payable on this Policy on
each Payment Date and the Draw Date as provided in the Insurance Agreement,
beginning with the First Payment Date.

 

8

IN WITNESS
WHEREOF, the Insurer has caused this Policy to be executed and attested this
28th day of October, 2005.

	
   

  	
  AMBAC ASSURANCE
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

 

 

EXHIBIT
A

TO
THE FINANCIAL GUARANTY INSURANCE POLICY

Policy No. AB0935BE

NOTICE OF NONPAYMENT AND DEMAND

FOR PAYMENT OF INSURED AMOUNTS

(OTHER THAN PREFERENCE AMOUNT)

 

Date:  [              ]

Ambac Assurance
Corporation

One State Street Plaza

New York, New York  10004

	
  Attention:

  	
  Asset-Backed Securities Department Head

  
	
   

  	
  General Counsel — URGENT

  

 

Reference is made
to Financial Guaranty Insurance Policy No. AB0935BE (the “Policy”)
issued by Ambac Assurance Corporation (“Ambac”).  Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the Policy,
unless the context otherwise requires.

The undersigned
hereby certifies as follows:

1.                             It
is the Indenture Trustee under the Indenture, is the Insured Party under the
Policy and is acting for the benefit of the Holders.

2.                             The
relevant Payment Date or the Draw Date is [date].

3.                             [There
is an Interest Payment Deficiency Amount of $           
with respect to such Payment Date, which amount is an Insured Amount which is
Due for Payment.]  [Such date is the Draw
Date under the Policy and the Series 2005-2 Note Principal Deficiency Amount is
$              
and the Interest Payment Deficiency Amount is $              ,
the total of which is the Insured Amount that is Due for Payment.]

4.                             The
Indenture Trustee has not heretofore made a demand for the Insured Amount in
respect of such Payment Date or the Draw Date, as applicable.

5.                             The Indenture
Trustee hereby requests the payment of the Insured Amount that is Due for
Payment be made by Ambac under the Policy and directs that payment under the
Policy be made to the following account by bank wire transfer of federal or
other immediately available funds in accordance with the terms of the Policy
to:                         .(3)

(3)           The account number of the Series
2005-2 Series Account held by the Indenture Trustee.

6.                             The
Indenture Trustee hereby certifies and agrees that, following receipt of the
Insured Payment from Ambac, it shall (a) hold such amounts in trust for the
Holders and apply the same directly to the distribution of payments when due in
respect of the Series 2005-2 Notes

 

A-1

 

in accordance with the Indenture, (b) not apply such
funds for any other purpose, and (c) maintain an accurate record of such
payments with respect to the Series 2005-2 Notes and the corresponding claim on
the Policy and proceeds thereof.

7.                             The
Indenture Trustee hereby assigns to Ambac all rights, and confirms that the
Holders have assigned all rights, under the Insured Obligations in respect of
which payment is being requested to Ambac.

A PERSON WHO FILES A CLAIM WITH INTENT TO DEFRAUD OR
HELPS COMMIT A FRAUD AGAINST AN INSURER IS GUILTY OF A CRIME.

	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
  (Officer)

  

 

A-2

 

EXHIBIT
B

TO
THE FINANCIAL GUARANTY INSURANCE POLICY

Policy No. AB0935BE

NOTICE
OF NONPAYMENT AND DEMAND

FOR PAYMENT OF PREFERENCE AMOUNT

Date:  [               ]

Ambac Assurance
Corporation

One State Street Plaza

New York, New York  10004

	
  Attention:

  	
  Asset-Backed Securities Department Head

  
	
   

  	
  General Counsel — URGENT

  

 

Reference is made to
Financial Guaranty Insurance Policy No. AB0935BE (the “Policy”)
issued by Ambac Assurance Corporation (“Ambac”).  Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the Policy,
unless the context otherwise requires.

The undersigned hereby
certifies as follows:

1.                             It
is the Indenture Trustee under the Indenture, is the Insured Party under the
Policy and is acting for the Holders.

2.                             A
payment previously made in respect of the Series 2005-2 Notes pursuant to the
Indenture has become a Preference Amount, as indicated by the attached Order,
which Payment was previously distributed to [name of applicable Holder] (the “Applicable
Noteholder”).

3.                             The
attached opinion of counsel concludes that the Order has been entered and is
not subject to appeal or to any stay.

4.                             The
Applicable Noteholder has certified that the Order has been entered and is not
subject to appeal or to any stay.

5.                             The
amount of the Preference Amount is $          ,
and consists of interest in the amount of $                  
paid on             ,
200[    ] [,and principal in the amount of $         
paid on             ,
200[    ]].

6.                             The
Indenture Trustee has not heretofore made a demand for such Preference Amount.

7.                             The Indenture
Trustee hereby requests the payment of the Insured Payment be made by Ambac
under the Policy and directs that payment under the Policy be made to

 

B-1

 

the following
account by bank wire transfer of federal or other immediately available funds
in accordance with the terms of the Policy to:         .(4)

(4)           The account of the relevant receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order,
unless the Holder or Indenture Trustee has already paid such Preference Amount
to such party, in which case, the account of the payor.

 

8.                             The
Indenture Trustee hereby agrees that if such Insured Payment is made to it,
following receipt of such Insured Payment from Ambac, it shall (a) hold such
amounts in trust and apply the same directly to the Applicable Holder for
payment of the Preference Amount, (b) not apply such funds for any other
purpose, and (c) maintain an accurate record of such payments with respect to
the Series 2005-2 Notes and the corresponding claim on the Policy and proceeds
thereof.

9.                             The
Indenture Trustee hereby assigns to Ambac all rights, and confirms that the
Applicable Noteholder has assigned all rights, under the Insured Obligations in
respect of which payment is being requested to Ambac.

A PERSON WHO FILES A CLAIM WITH INTENT TO DEFRAUD OR
HELPS COMMIT A FRAUD AGAINST AN INSURER IS GUILTY OF A CRIME.

	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
  (Officer)

  

 

B-2

 

EXHIBIT C

UCO Compression 2005 LLC

Supplemental Manager Report

As Of _______________________

 

Collection
Period Ended

Determination
Date

Payment
Date

 

	
   

  	
   

  	
  ABS Units

  	
   

  	
  Remaining

  Fleet Units 

  	
   

  
	
  Fleet Information

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Utilization (under 100
  hp)

  	
   

  	
  -

  	
  %

  	
  -

  	
  %

  
	
  Utilization (100-299
  h/p)

  	
   

  	
  -

  	
  %

  	
  -

  	
  %

  
	
  Utilization (300-599
  h/p)

  	
   

  	
  -

  	
  %

  	
  -

  	
  %

  
	
  Utilization (600-1000
  h/p)

  	
   

  	
  -

  	
  %

  	
  -

  	
  %

  
	
  Utilization (over 1000
  h/p)

  	
   

  	
  -

  	
  %

  	
  -

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Revenue per Rented H/P
  (under 100 hp)

  	
   

  	
  -

  	
  %

  	
  -

  	
  %

  
	
  Revenue per Rented H/P
  (100-299 h/p)

  	
   

  	
  -

  	
  %

  	
  -

  	
  %

  
	
  Revenue per Rented H/P
  (300-599 h/p)

  	
   

  	
  -

  	
  %

  	
  -

  	
  %

  
	
  Revenue per Rented H/P
  (600-1000 h/p)

  	
   

  	
  -

  	
  %

  	
  -

  	
  %

  
	
  Revenue per Rented H/P
  (over 1000 h/p)

  	
   

  	
  -

  	
  %

  	
  -

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total H/P (unit size
  under 100 hp)

  	
   

  	
  -

  	
   

  	
  -

  	
   

  
	
  Total H/P (unit size
  100-299 h/p)

  	
   

  	
  -

  	
   

  	
  -

  	
   

  
	
  Total H/P (unit size
  300-599 h/p)

  	
   

  	
  -

  	
   

  	
  -

  	
   

  
	
  Total H/P (unit size
  600-1000 h/p)

  	
   

  	
  -

  	
   

  	
  -

  	
   

  
	
  Total H/P (unit size
  over 1000 h/p)

  	
   

  	
  -

  	
   

  	
  -

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  % Aggregate Depreciated
  Value of Owner Compressors under 100 h/p

  	
   

  	
  -

  	
  %

  	
   

  	
   

  
	
  % Aggregate Depreciated
  Value of Owner Compressors 100-299 h/p

  	
   

  	
  -

  	
  %

  	
   

  	
   

  
	
  % Aggregate Depreciated
  Value of Owner Compressors 300-599 h/p

  	
   

  	
  -

  	
  %

  	
   

  	
   

  
	
  % Aggregate Depreciated
  Value of Owner Compressors 600-1000 h/p

  	
   

  	
  -

  	
  %

  	
   

  	
   

  
	
  % Aggregate Depreciated
  Value of Owner Compressors 1000 h/p

  	
   

  	
  -

  	
  %

  	
   

  	
   

  

 

1

 

UCO Compression 2005 LLC

Supplemental Manager Report

As Of                               

 

 

	
  Manager Revenue Comparison

  	
   

  	
   

  	
   

  
	
  ABS average Rental Rates

  	
   

  	
  $

  	
  -

  	
   

  
	
  Remaining Fleet average Rental Rates

  	
   

  	
  $

  	
  -

  	
   

  
	
  Difference

  	
   

  	
  —

  	
  %

  
	
  Compliance

  	
   

  	
  Yes / No

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Manager Utilization Comparison

  	
   

  	
   

  	
   

  
	
  Manager’s average Utilization Rates

  	
   

  	
  —

  	
  %

  
	
  Remaining Fleet average Utilization Rates

  	
   

  	
  —

  	
  %

  
	
  Difference

  	
   

  	
  —

  	
  %

  
	
  Compliance

  	
   

  	
  Yes / No

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Net Revenue Event (Yes/No)

  	
   

  	
  Yes / No

  	
   

  
	
  Three Month Average Collected Net Revenue

  	
   

  	
  $

  	
  -

  	
   

  
	
  Three Month Average Outstanding Amount

  	
   

  	
  $

  	
  -

  	
   

  
	
  Three Month Weighted Average Hedge Rate * Three
  Month Average Outstanding Amount

  	
   

  	
  —

  	
  %

  
	
  Preceeding Collection Period Net Revenue minus Manager
  Advances & Ineligable Revenue

  	
   

  	
  $

  	
  -

  	
   

  
	
  Preceeding Collection Period Average Hedge Rate

  	
   

  	
  —

  	
  %

  
	
  Preceeding Collection Period Average Amounts
  Outstanding

  	
   

  	
  $

  	
  -

  	
   

  
	
  Second Preceeding Collection Period Net Revenue
  minus Manager Advances & Ineligable Revenue

  	
   

  	
  $

  	
  -

  	
   

  
	
  Second Preceeding Collection Period Average Hedge
  Rate

  	
   

  	
  —

  	
  %

  
	
  Second Preceeding Collection Period Average Amounts
  Outstanding

  	
   

  	
  $

  	
  -

  	
   

  
	
  Third Preceeding Collection Period Net Revenue minus
  Manager Advances & Ineligable Revenue

  	
   

  	
  $

  	
  -

  	
   

  
	
  Third Preceeding Collection Period Average Hedge
  Rate

  	
   

  	
  —

  	
  %

  
	
  Third Preceeding Collection Period Average Amounts
  Outstanding

  	
   

  	
  $

  	
  -

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Undercollateralization Event
  (Yes/No)

  	
   

  	
  Yes / No

  	
   

  
	
  Aggregate Outstanding Amount

  	
   

  	
  $

  	
  -

  	
   

  
	
  Debt Limit

  	
   

  	
  $

  	
  -

  	
   

  
	
  Excess Aged Equipment

  	
   

  	
  #REF!

  	
   

  
	
  Excess 99hp Amount

  	
   

  	
  #REF!

  	
   

  
	
  Excess 299hp Amount

  	
   

  	
  #REF!

  	
   

  
	
  Excess 599hp Amount

  	
   

  	
  #REF!

  	
   

  
	
  Excess 999hp Amount

  	
   

  	
  #REF!

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Purchase Option Event (Yes/No)

  	
   

  	
  Yes / No

  	
   

  
	
  Aggregate Depreciated Value

  	
   

  	
  $

  	
  -

  	
   

  
	
  Depreciated Value of Compressors subject to a Purchase
  Option

  	
   

  	
  $

  	
  -

  	
   

  
	
  Percentage of Total

  	
   

  	
  —

  	
  %

  

 

 

	
  Customer Concentration Event (Yes / No)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Top Five Customers

  	
   

  	
  INDIVIDUAL

  	
   

  	
  AGGREGATE

  	
   

  
	
  Top Two Customers

  	
   

  	
  —

  	
  %

  	
  —

  	
  %

  
	
  Top Customer

  	
   

  	
  —

  	
  %

  	
  —

  	
  %

  
	
   

  	
   

  	
  —

  	
  %

  	
  —

  	
  %

  
	
   

  	
   

  	
  —

  	
  %

  	
  —

  	
  %

  
	
   

  	
   

  	
  —

  	
  %

  	
  —

  	
  %

  

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ABS Accounts Receivable Aging
  and Charge off

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $ Amount

  	
   

  	
  % of
  Total

  	
   

  
	
  Current (0-29)

  	
   

  	
  $

  	
  -

  	
   

  	
  —

  	
  %

  
	
  30-59

  	
   

  	
  $

  	
  -

  	
   

  	
  —

  	
  %

  
	
  60-89

  	
   

  	
  $

  	
  -

  	
   

  	
  —

  	
  %

  
	
  90-119

  	
   

  	
  $

  	
  -

  	
   

  	
  —

  	
  %

  
	
  120+

  	
   

  	
  $

  	
  -

  	
   

  	
  —

  	
  %

  
	
  Total A/R for Collection Period

  	
   

  	
  -

  	
   

  	
  —

  	
  %

  
	
  Advance Deposits

  	
   

  	
  $

  	
  -

  	
   

  	
   

  	
   

  
	
  Total Net A/R at Period End

  	
   

  	
  -

  	
   

  	
   

  	
   

  
	
  Total Revenue Last 12 Months

  	
   

  	
  $

  	
  -

  	
   

  	
   

  	
   

  
	
  Current Aged Equipment Ratio

  	
   

  	
  —

  	
  %

  	
   

  	
   

  
	
  Proceeding Aged Equipment Ratio

  	
   

  	
  —

  	
  %

  	
   

  	
   

  

 

2

 

 

	
  Second Proceeding Aged Equipment Ratio

  	
   

  	
  —

  	
  %

  	
   

  	
   

  
	
  Three Month Aging Ratio

  	
   

  	
  —

  	
  %

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current Month Gross Charge Offs

  	
   

  	
  $

  	
  -

  	
   

  	
   

  	
   

  
	
  Current Month Recoveries

  	
   

  	
  $

  	
  -

  	
   

  	
  —

  	
  %

  
	
  Current Month Net Charge Offs

  	
   

  	
  $

  	
  -

  	
   

  	
   

  	
   

  
	
  Year to Date Gross Charge Offs

  	
   

  	
  $

  	
  -

  	
   

  	
   

  	
   

  
	
  Year to Date Recoveries

  	
   

  	
  $

  	
  -

  	
   

  	
  —

  	
  %

  
	
  Year to Date Net Charge Offs

  	
   

  	
  $

  	
  -

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Run Time Credit Ratio (In
  compliance - less than 5%?)

  	
   

  	
  Yes / No

  	
   

  	
   

  	
   

  
	
  Run time credit ratio

  	
   

  	
  —

  	
  %

  	
   

  	
   

  
	
  Aggregate rental credits issued by the Manager
  during three preceeding calandar months

  	
   

  	
  $

  	
  -

  	
   

  	
   

  	
   

  
	
  Rentals billed by the Manager during three preceeding
  calandar months

  	
   

  	
  $

  	
  -

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Aggregate Depreciated Value of
  Ineligible Compressors

  	
   

  	
  $

  	
  -

  	
   

  	
   

  	
   

  

 

 

The
undersigned Responsible Officer of the Manager hereby certifies that, to the
best of his knowledge, (i) the Manager and the Issuer are in compliance with
all material requirements of the Indenture, the Management Agreement and all
Related Documents, (ii) there are no on-going Events of Default, Manager
Defaults or Trigger Events, and (iii) the information contained in this
Supplemental Managers’ Report is true and accurate in all material respects.

 

UNIVERSAL COMPRESSION, INC.

 

	
  By:

  	
   

  
	
   

  	
   

  
	
  Name: 

  	
  Lee Sumrall

  
	
  Title: 

  	
  Vice President - Financial
  Services

  

 

3

 

SCHEDULE
2.1

None

Schedule 2.1Exhibit 10.8

 

CONFORMED
COPY

 

 

 

 

INTERCREDITOR
AND COLLATERAL AGENCY AGREEMENT

 

dated
as of October 28, 2005

 

among

 

UNIVERSAL
COMPRESSION, INC.,

in
its individual capacity and as the initial Manager

 

UCO
COMPRESSION 2005 LLC,

as Issuer

 

WELLS
FARGO BANK 

NATIONAL ASSOCIATION,

as
Indenture Trustee

 

WACHOVIA
BANK, NATIONAL ASSOCIATION,

as
Bank Agent

 

THE
VARIOUS FINANCIAL INSTITUTIONS that may from time to time

become
parties hereto as UCI Lenders

 

and

 

JPMorgan
Chase Bank, N.A.,

in
its individual capacity and as Intercreditor Collateral Agent

 

 

 

 

 

TABLE OF CONTENTS

	
  Section 1.

  	
  Rules of Usage.

  	
  1

  
	
  Section 2.

  	
  Securitization Collections

  	
  8

  
	
  Section 3.

  	
  Acknowledgments Regarding
  Securitization Collateral

  	
  8

  
	
  Section 4.

  	
  Acknowledgment Regarding
  Non-Securitization Collateral

  	
  9

  
	
  Section 5.

  	
  Intercreditor Collateral
  Agent.

  	
  9

  
	
  Section 6.

  	
  Establishment of Accounts;
  Deposit of Collections.

  	
  11

  
	
  Section 7.

  	
  Allocation of Collections;
  Disbursements of Collections.

  	
  12

  
	
  Section 8.

  	
  Monitoring of Allocation Process; Effect of a Securitization
  Default; Effect of a Bank Default.

  	
  16

  
	
  Section 9. 

  	
  Compensation and Indemnity of Intercreditor Collateral
  Agent; Waiver of Right of Set-off.

  	
  17

  
	
  Section 10.

  	
  Resignation by or Removal of Intercreditor
  Collateral Agent.

  	
  19

  
	
  Section 11.

  	
  No Implied Waivers, Etc

  	
  19

  
	
  Section 12.

  	
  Amendments

  	
  19

  
	
  Section 13.

  	
  Benefit of Agreement;
  Joinder.

  	
  20

  
	
  Section 14.

  	
  Severability

  	
  20

  
	
  Section 15.

  	
  Counterparts

  	
  20

  
	
  Section 16.

  	
  Notices

  	
  20

  
	
  Section 17.

  	
  Headings

  	
  21

  
	
  Section 18.

  	
  Governing Law

  	
  21

  
	
  Section 19.

  	
  No Petition

  	
  21

  
	
  Section 20.

  	
  Insolvency

  	
  21

  
	
  Section 21.

  	
  Termination

  	
  21

  
	
  Section 22.

  	
  Entire Agreement

  	
  21

  

 

 

INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT

 

This INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT dated as of October 28,
2005 (as amended, supplemented, amended and restated or otherwise modified from
time to time in accordance with the provisions hereof, this “Agreement”) is among:

(i)            Universal
Compression, Inc., a Texas corporation, in its individual capacity (in such
capacity, together with its successors and permitted assigns, “UCI”), and as the initial Manager
under the Management Agreement (in such capacity, the “Manager”);

(ii)           UCO Compression 2005
LLC, a Delaware limited liability company (together with its successors and
permitted assigns, “UCO 2005”);

(iii)          Wells Fargo Bank,
National Association, as indenture trustee under the hereinafter defined
Securitization Indenture for the benefit of the Noteholders and the other
Persons set forth therein (in such capacity, together with its successors and
permitted assigns, the “Indenture Trustee”);

(iv)          Wachovia Bank,
National Association, as administrative agent on behalf of the Bank Lenders as
hereinafter defined (in such capacity, together with its successors and
permitted assigns, the “Bank Agent”);

(v)           JPMorgan Chase Bank,
N.A., in its individual capacity and as collateral agent for the Securitization
Secured Parties (as defined herein), the UCI Lenders (as defined herein) and UCI
(in such capacity, together with its successors and permitted assigns, the “Intercreditor Collateral Agent”);
and

(vi)          The Additional UCI
Lenders that from time to time become a party hereto in accordance with Section 13 hereof.

RECITALS

(1)           WHEREAS, UCI, in its
individual capacity and as Manager, will receive from time to time Collections
relating to the Domestic Contract Compression Business of (a) UCI and its
subsidiaries and (b) UCO 2005; and

(2)           WHEREAS, the parties
hereto desire to execute and deliver this Agreement to set forth certain
agreements among them with respect to such Collections as provided below.

NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto hereby agree as follows:

Section 1.               Rules of Usage;
Definitions.

(a)           The following
rules of usage shall apply to this Agreement (and each appendix, schedule,
exhibit and annex to the foregoing) unless otherwise required by the context or
unless otherwise defined therein.

(i)            The defined
terms in this Agreement shall include the plural as well as the singular, and
the use of any gender herein shall be deemed to include any other gender.

 

1

 

(ii)           Accounting
terms not otherwise defined herein have the meanings assigned to them in
accordance with generally accepted accounting principles as in effect on the
date of this Agreement.

(iii)          Except as
otherwise expressly provided, any definition defined herein shall be equally
applicable to the singular and plural forms of the terms defined.

(iv)          Except as
otherwise expressly provided, references in this Agreement to articles,
sections, paragraphs, clauses, annexes, appendices, schedules or exhibits are
references to articles, sections, paragraphs, clauses, annexes, appendices,
schedules or exhibits in or to this Agreement.

(v)           References to
any Person shall include such Person, its successors and permitted assigns and
transferees.

(vi)          Except as
otherwise expressly provided, reference to any agreement means such agreement
as amended, restated, modified, extended or supplemented from time to time in
accordance with the applicable provisions thereof.

(vii)         Except as
otherwise expressly provided, references to any law includes any amendment or
modification to such law and any rules or regulations issued thereunder or any
law enacted in substitution or replacement thereof, or restatement thereof.

(viii)        When used in
this Agreement, words such as “hereunder,” “hereto,” “hereof” and “herein” and
other words of like import shall, unless the context clearly indicates to the
contrary, refer to the whole of this Agreement (including any other document to
the extent incorporated or referred to herein (whether or not actually attached
hereto)) and not to any particular article, section, subsection, paragraph or
clause hereof.

(ix)           References to “including”
means including without limiting the generality of any description preceding
such term and for purposes hereof the rule of ejusdem
generis shall not be applicable to limit a general statement, followed
by or referable to any enumeration of specific matters, to matters similar to
those specifically mentioned.

(x)            All terms used
in the UCC and not specifically defined in this Agreement are used therein as
defined in the UCC; provided, however, that references in this Agreement to any
section of the UCC shall mean, on or after the effective date of the adoption
of any revision to the UCC in the applicable jurisdiction, such revised or
successor section thereto.

(xi)           Except as
otherwise expressly provided, in the computation of a period of time from a
specified date to a later specified date, the word “from” means “from and
including” and the words “to” and “until” each mean “to but excluding”.

(b)           Definitions.  The following terms (whether or not underscored)
when used in this Agreement, including its preamble and recitals, shall, except
where the content otherwise requires, have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):

 

2

 

“Additional UCI Lenders” means any Person
that is a UCI Lender other than a Bank Lender and executes and delivers a “Supplemental Agreement” substantially
in the form of Exhibit “B” attached
hereto pursuant to and in accordance with the terms of Section 13 hereof.

“Agreement” has the meaning specified in
the preamble hereto.

“Allocated Collections” means all or any
portion of the Collections as of any date of determination that have been
allocated pursuant to the provisions of Sections 7
and 8 of this Agreement.

“Allocation Accounting Firm” has the
meaning specified in Section 7(a)(ii)
hereof.

“Ambac” means Ambac Assurance
Corporation, a stock insurance corporation organized and existing under the
laws of the state of Wisconsin, together with its successors and permitted
assigns.

“Bank Agent” has the meaning specified
in clause (iv) of the preamble hereto.

“Bank Collateral” means any collateral
in which the Bank Agent has been granted a security interest by UCI, UCH, and
certain of their subsidiaries to secure the obligations under the Bank Credit
Agreement.

“Bank Collateral Agreement” means collectively
that certain (a) Collateral Agreement, dated as of January 14, 2005,
by UCI and UCH in favor of the Bank Agent, as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with its
terms, (b) Pledge and Security Agreement, dated as of January 14,
2005, by certain of the subsidiaries of UCI in favor of the Bank Agent, as such
agreement may be amended, supplemented or otherwise modified from time to time
in accordance with its terms, and (c) any other Security Instrument (as defined
in the Bank Credit Agreement) from time to time outstanding.

“Bank Credit Agreement” means that certain
Senior Secured Credit Agreement, dated as of January 14, 2005, among UCI,
UCH, UC Canadian Partnership Holdings Company, the Bank Agent, Congress
Financial Corporation (Canada), and the Bank Lenders, as such agreement may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with its terms.

“Bank Default” means an Event of Default
(as defined in the Bank Credit Agreement) that has occurred and is continuing
under the Bank Credit Agreement.

“Bank Documents” means the Bank Credit
Agreement, the Bank Collateral Agreement, the Secured Hedging Agreements and
each other agreement, document or instrument executed in connection with the
Bank Credit Agreement or the Bank Collateral Agreement.

“Bank Lenders” means the lenders from
time to time party to the Bank Credit Agreement and the counterparties to the Secured
Hedging Agreements.

 

3

 

“Bankruptcy Code” means the
Title 11 of the United States Code, 11 U.S.C. §§ 101 et seq., as
amended from time to time.

“Business Day” means any day other than
a Saturday, Sunday or any other day on which banking institutions in New York,
New York, Minneapolis, Minnesota or Houston, Texas are authorized or obligated
by law, executive order or governmental decree to be closed.

“Collateral” means the Securitization
Collateral and the Non-Securitization Collateral.

“Collection Parties” means the
Securitization Secured Parties and the UCI Lenders.

“Collections” means cash, checks and
other instruments or any other method of payment and all other amounts
whatsoever owned by, owing to or paid to (a) UCI or its subsidiaries, (b) UCI
in its capacity as Manager, or (c) UCO 2005, in each case from time to
time.

“Compressor” means a natural gas or coal
methane compressor equipment unit, together with any tangible components
thereof, all related appliances, parts, accessories, appurtenances, accessions,
additions, improvements, replacements thereto, all other equipment or
components of any nature from time to time incorporated or installed therein
and all substitutions for any of the foregoing.

“Disputed Allocations” has the meaning
specified in Section 7(c)
hereof.

“Domestic Contract Compression Business”
means (i) with respect to UCI, the natural gas compression contract
business of UCI and its subsidiaries in the United States of America and (ii) with
respect to UCO 2005, the natural gas compression contract business of UCO 2005
in the United States of America.

“Enhancement Agreement” is defined in
Appendix A to the Securitization Indenture.

“Indenture Trustee” has the meaning
specified in clause (iii) of the preamble hereto.

“Intercreditor Collateral Agent” has the
meaning specified in clause (v) of the preamble hereto.

“Interest Rate Hedge Provider” means any
counterparty to a cap, collar or other hedging instrument permitted to be
entered into pursuant to the Securitization Indenture.

“Letter Agreement” means either or both
as the context may require of (a) that certain letter agreement, dated October 28,
2005, between UCI, in its individual capacity and as Manager, Ambac and the
other parties thereto, and (b) that certain letter agreement, dated October 28,
2005, between UCI, in its individual capacity and as Manager, Wachovia Capital
Markets, LLC, as Deal Agent, and the other parties thereto, 

 

4

 

as each may be amended, supplemented or otherwise modified from time to
time in accordance with the provisions thereof.

“Lien” means any security interest, lien
(statutory or other), charge, pledge, equity, mortgage, hypothecation,
assignment for security or encumbrance of any kind or nature whatsoever.

“Lockbox Account” means the lockbox
account number 972641, and the related separate bank deposit account, account
number 636283392 maintained in the name of the Intercreditor Collateral Agent
for the benefit of the Collection Parties and UCI with the Intercreditor
Collateral Agent.  The remittance address
to be used for payments and deposits to the Lockbox Account is Universal
Compression, Inc., P.O. Box 972641, Dallas, Texas 75397-2641.

“Lockbox Agreements” has the meaning
specified in Section 22
hereof.

“Management Agreement” means that
certain Management Agreement, dated as of October 28, 2005 by and between the
Manager and UCO 2005, as such agreement may be amended, modified or
supplemented from time to time.

“Manager” has the meaning specified in clause
(i) of the preamble hereto.

“Misallocation” has the meaning
specified in Section 7(b)(iii)
hereof.

“Non-Securitization Collateral” means
(i) all Compressors and other assets received by UCI or the Manager that do not
constitute Securitization Collateral and (ii) all Non-Securitization
Collections.

“Non-Securitization Collections” means
all Collections received by UCI and/or the Manager that do not constitute
Securitization Collections.

“Noteholder” means a Person in whose
name a Note is registered in accordance with the terms of the Securitization
Indenture.

“Notes” means any of the promissory
notes executed by UCO 2005 and authenticated by or on behalf of the Indenture
Trustee pursuant to and issued under the Securitization Indenture.

“Person” means any natural person,
corporation, limited liability company, trust, joint venture, association,
company, partnership, limited partnership or other entity.

“Related Documents” is defined in
Appendix A to the Securitization Indenture.

“Repetitive Wire Instructions” means a
notice substantially in the form of Exhibit
“A” attached hereto.

“Requisite Global Majority” is defined
in Appendix A to the Securitization Indenture.

“Returned Items” has the meaning
specified in Section 9(b)(ii)
hereof.

 

5

 

“Secured Hedging Agreements” has the
meaning assigned in the Bank Collateral Agreement.

“Securitization Account” has the meaning
specified in Section 7(b)(ii)
hereof, which account shall initially be the Trust Account.

“Securitization Accountants” has the
meaning specified in Section 7(a)(ii)
hereof.

“Securitization Collateral” means,
collectively, all right, title and interest of UCO 2005 in the property and
rights subject to the security interest granted by UCO 2005 under the
Securitization Indenture (including, without limitation, the Securitization Compressors
and the User Contracts).

“Securitization Collections” has the
meaning specified in Section 2
hereof.

“Securitization Compressors” means, as
of any date of determination, all Compressors owned by UCO 2005 as of such date.

“Securitization Default” means a Manager
Default (as defined in Appendix A to the Securitization Indenture), an Event of
Default (as defined in Appendix A to the Securitization Indenture) or a UCI
Event (as defined in Appendix A to the Securitization Indenture).

“Securitization Documents” means the
Securitization Indenture, the Enhancement Agreements, the Management Agreement,
each other Related Document (as defined in Appendix A to the Securitization
Indenture), the Letter Agreement and each other agreement, document or
instrument executed in connection with the Securitization Indenture.

“Securitization Indenture” means that
certain Indenture, dated as of October 28, 2005 between UCO 2005 and the
Indenture Trustee, as such agreement may be amended, supplemented or otherwise
modified from time to time in accordance with its terms.

“Securitization Obligations” means,
collectively, (a) any and all sums owing (i) to the Noteholders under
the Securitization Indenture, (ii) to any Series Enhancer, including under
any Enhancement Agreement, (iii) to the Indenture Trustee under the
Securitization Indenture or any other Securitization Document and (iv) to
the Interest Rate Hedge Providers and (b) without duplication of amounts
described in clause (a), all other obligations, direct or contingent,
joint, several or independent of UCO 2005, or any other obligor under the
Securitization Documents now or hereafter existing, due or to become due,
including any interest accruing subsequent to the filing of a petition in
bankruptcy, whether or not such interest is an allowed claim under applicable
law.

“Securitization Secured Parties” means,
collectively, the Indenture Trustee, UCO 2005, each Series Enhancer, each
Interest Rate Hedge Provider and the Noteholders.

“Series Enhancer” is defined in Appendix
A to the Securitization Indenture.

 

6

 

“Trust Account” is defined in Appendix A to
the Securitization Indenture.

“UCC” means the Uniform Commercial Code
(or any successor statute) of the State of New York as in effect from time to
time or of any other state or jurisdiction the laws of which are required by
Section 9-301 thereof to be applied in connection with the issue of perfection
of security interests.

“UCH” means Universal Compression
Holdings, Inc.

“UCI” has the meaning specified in
clause (i) of the preamble hereto.

“UCI Account” means account no. 636283384
maintained with the Intercreditor Collateral Agent on behalf of and in the name
of UCI.

“UCI Accountants” has the meaning
specified in Section 7(a)(ii).

“UCI Lender Documents” means the credit
agreements, reimbursement agreements, Secured Hedging Agreements, lease
agreements, indentures, including, without limitation, the Bank Documents, that
UCI has entered into, or may enter into in the future, with various UCI
Lenders, pursuant to which UCI has granted or may in the future grant to any or
all such UCI Lenders, a security interest in and Liens on any
Non-Securitization Collateral.

“UCI Lenders” means the various lenders,
lessors and/or owners, including, without limitation, the Bank Agent, the Bank
Lenders and each Additional UCI Lender, with which UCI has entered into, or may
enter into in the future, any UCI Lender Document.

“UCI Obligations” means any and all sums
owing under the UCI Lender Documents and all other obligations, direct or contingent,
joint, several or independent of UCI or any other obligor under the UCI Lender
Documents now or hereafter existing, due or to become due, including any
interest accruing subsequent to the filing of a petition in bankruptcy, whether
or not such interest is an allowed claim under applicable law.

“UCO 2005” has the meaning specified in clause
(ii) of the preamble hereto.

“Unallocated Collections” has the
meaning specified in Section 7(a)(ii)
hereof.

 “User”
means any Person (other than UCO 2005) that contracts or subcontracts for the
service of any Securitization Compressor.

“User Contract” means any contract with
respect to the service of one or more Securitization Compressors entered into between
the UCO 2005 (or UCI acting on behalf of UCO 2005), as obligor, and a User, as
obligee.

 

7

 

Section 2.               Securitization
Collections.  The
following shall constitute the “Securitization
Collections”:

(a)           all Collections
in respect of UCO 2005’s Domestic Contract Compression Business, including,
without limitation, any and all contract payments under User Contracts of the
Securitization Compressors;

(b)           all Collections
in respect of the sale, transfer or disposition of any Securitization
Collateral and all Collections in respect of any casualty or other event of
loss affecting any Securitization Collateral; and

(c)           all proceeds
and products of any and all of the foregoing.

Section 3.               Acknowledgments
Regarding Securitization Collateral.  Each UCI Lender party hereto hereby
acknowledges and agrees that, until all Securitization Obligations shall have
been paid in full in cash:

(a)           In the event
that any Liens on or security interest in all or any portion of the
Securitization Collateral at any time exists in favor of any UCI Lenders, each
such UCI Lender will, immediately upon the request of the Indenture Trustee,
release or otherwise terminate such security interest in and Lien upon such
Securitization Collateral and such UCI Lender will immediately deliver such
release documents as the Indenture Trustee may require in connection therewith.

(b)           Without
limiting the agreements contained in paragraph (a) above, all
security interests in or Liens on the Securitization Collateral now or at any
time hereafter granted by UCO 2005 to the Indenture Trustee or, pursuant to the
Securitization Documents, secure the Securitization Obligations and shall be
prior, paramount, and superior to any and all Liens and security interests, if
any, on or in such Securitization Collateral heretofore, now or at any time
hereafter granted by UCI to any UCI Lender, either pursuant to the UCI Lender
Documents or otherwise (and, as such, any interest of any UCI Lender in the
Securitization Collections and the Securitization Collateral shall be at all times
subordinated to the interest of the Indenture Trustee therein), regardless of
the date of execution of any such Lien documents or the order of filing of any
of them for record in any public office. 
The Lien priorities provided in this Section 3(b) shall not be altered or otherwise
affected by any amendment, modification, supplement, extension, renewal,
restatement or refinancing of either the Securitization Obligations or the
Securitization Documents, on the one hand, or the UCI Obligations or the UCI
Lender Documents, on the other hand, nor by any action or inaction which the
Indenture Trustee, or any other beneficiary under the Securitization Indenture
may take or fail to take in respect of the Securitization Collections and the
Securitization Collateral.

(c)           Each UCI Lender
hereby fully, unconditionally and irrevocably disclaims, waives, relinquishes
and releases any right, title or interest (including any Lien) it may have, now
or in the future, to the Securitization Collateral, including, without limitation,
to (i) foreclose or otherwise realize upon, or attempt to foreclose or
otherwise realize upon any of the Securitization Collateral, including, without
limitation, the Securitization Collections, or assert any claims or interests
therein, or (ii) seek to obtain possession of or issue or cause to be
issued any levies, garnishments, attachments, or other legal process of any
kind or nature against any of the Securitization Collateral, including, without
limitation, the Securitization Collections, or (iii) contact any Users or
other Persons that are account debtors or obligees with respect to any 

 

8

 

Securitization
Collateral, to the extent such contact relates to any User Contract or other
Securitization Collateral.

Section 4.               Acknowledgment
Regarding Non-Securitization Collateral.  The Indenture Trustee hereby acknowledges and
agrees that, so long as any UCI Obligations are outstanding:

(a)           In the event
that any Liens on or security interest in all or any portion of the
Non-Securitization Collateral at any time exists in favor of the Indenture
Trustee, the Indenture Trustee will, immediately upon the request of UCI or the
Bank Agent, release or otherwise terminate such security interest in and Lien
upon such Non-Securitization Collateral and the Indenture Trustee will
immediately deliver such release documents as UCI or the Bank Agent may require
in connection therewith.

(b)           Without
limiting the agreements contained in paragraph (a) above, all
security interests in or Liens on the Non-Securitization Collateral now or at
any time hereafter granted by UCI to any UCI Lender pursuant to the UCI Lender
Documents, secure the UCI Obligations and shall be prior, paramount, and
superior to any and all Liens and security interests, if any, on or in such
Non-Securitization Collateral heretofore, now or at any time hereafter granted
to the Indenture Trustee, either pursuant to the Securitization Documents or
otherwise (and, as such, any interest of the Indenture Trustee in the
Non-Securitization Collections and the Non-Securitization Collateral shall be
at all times subordinated to the interest of any such UCI Lender), regardless
of the date of execution of any such Lien documents or the order of filing of
any of them for record in any public office. 
The Lien priorities provided in this Section 4(b) shall not be altered or otherwise
affected by any amendment, modification, supplement, extension, renewal,
restatement or refinancing of either the UCI Obligations or the UCI Lender
Documents, on the one hand, or the Securitization Obligations or the
Securitization Documents, on the other hand, nor by any action or inaction
which the UCI Lenders may take or fail to take in respect of the
Non-Securitization Collateral.

(c)           The Indenture
Trustee hereby fully, unconditionally and irrevocably disclaims, waives,
relinquishes and releases any right, title or interest (including any Liens) it
may have, now or in the future, to the Non-Securitization Collateral,
including, without limitation, to (i) foreclose or otherwise realize upon,
or attempt to foreclose or otherwise realize upon any of the Non-Securitization
Collateral, or assert any claims or interests therein, or (ii) seek to
obtain possession of or issue or cause to be issued any levies, garnishments,
attachments, or other legal process of any kind or nature against any of the
Non-Securitization Collateral, or (iii) contact any parties who are
account debtors or obligees with respect to Non-Securitization Compressors to
the extent such contact relates to the Non-Securitization Collateral.

Section 5.               Intercreditor
Collateral Agent.

(a)           Appointment.  Each of the Collection Parties and UCI hereby
designates the Intercreditor Collateral Agent to act, and the Intercreditor
Collateral Agent hereby accepts such designation to act, as specified herein
and as such Collection Party’s nominee and agent under the UCI Lender Documents
and under the Securitization Documents, as the case may be, and, in the case of
UCI, to act as UCI’s nominee and agent under the UCI Lender Documents, the
Securitization Documents and otherwise for UCI in its own capacity, to hold for
such Collection Party’s and UCI’s respective benefit, as its interest may
appear, all Collections from the Collateral that may from time to time be in
the possession or control of the Intercreditor Collateral Agent in the Lockbox
Account.  Without prejudice to the rights
of the Collection Parties to enforce the Securitization Documents and the UCI
Lender Documents, as applicable, 

 

9

 

each
of the Collection Parties and UCI hereby irrevocably authorizes the
Intercreditor Collateral Agent to take such action, to exercise such powers and
remedies and to perform such duties hereunder as are specifically provided or
delegated to or required of the Intercreditor Collateral Agent by the terms
hereof and such other powers as are reasonably incidental thereto.  The Intercreditor Collateral Agent may perform
any of its duties hereunder by or through its agents or employees.

(b)           Duties of
Intercreditor Collateral Agent.

(i)            The
Intercreditor Collateral Agent shall not be deemed to have any knowledge
(imputed or otherwise) of:  (A) any
of the terms or conditions of the UCI Lender Documents, the Securitization
Documents or any documents referred to therein or relating to any financing
arrangement between or among any of the Collection Parties and/or UCI, or any
other party, or any breach thereof, or (B) any occurrence or existence of
a default thereunder.  The Intercreditor
Collateral Agent has no obligation to inform any Person of any breach under any
such UCI Lender Document or Securitization Document or take any action in
connection with any of the foregoing, except such actions as are specified in this
Agreement.

(ii)           The
Intercreditor Collateral Agent is not responsible for the enforceability or
validity of any security interest in the Collateral and the Lockbox Account.

(iii)          The
Intercreditor Collateral Agent shall have no duties or responsibilities to the
Collection Parties or UCI except those expressly set forth or described herein
and the duty to exercise “ordinary care” with respect to the Collections in its
possession or under its control and as required by applicable law.  With respect to the immediately preceding
sentence, the Intercreditor Collateral Agent shall be deemed to have exercised “ordinary
care” if its action or failure to act is in conformity with general banking
usages or is otherwise in accordance with commercially reasonable practices of
the banking industry.  Except as set
forth above with respect to the Intercreditor Collateral Agent’s duties with
respect to the Collections in its possession or under its control, neither the
Intercreditor Collateral Agent nor any of its officers, directors, employees or
agents shall be liable to the Collection Parties or UCI for any action taken or
omitted by it as such hereunder, or in connection herewith, unless caused by
its or their gross negligence or willful misconduct.

(iv)          The duties of
the Intercreditor Collateral Agent as agent of the Collection Parties and UCI
shall be mechanical and administrative in nature.  The Intercreditor Collateral Agent shall not
have, by reason of this Agreement or any Securitization Document or UCI Lender
Document, a fiduciary relationship in respect of any Collection Parties or UCI
and nothing herein expressed or implied, is intended to or shall be so
construed as to impose upon the Intercreditor Collateral Agent any obligations
in respect of any Securitization Document or UCI Lender Document except as
expressly set forth herein.  The
Intercreditor Collateral Agent shall not be liable for consequential,
incidental or special damages even if it has been advised of the possibility of
same.  The Intercreditor Collateral Agent
shall not be liable for failure to perform its obligations when the failure
arises out of causes beyond its control, including, without limitation, an act
of a governmental or regulatory authority, an act of God, accident, equipment
failure, labor disputes or system failure, provided it has exercised
commercially reasonable diligence with respect thereto.

 

10

 

(c)           Reliance of the
Intercreditor Collateral Agent.  The Intercreditor Collateral Agent shall be
entitled to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, statement, certificate, telex, teletype or
telecopier message, cablegram, radiogram, order or other document or telephone
message that the Intercreditor Collateral Agent reasonably believes in good
faith to be signed, sent or made by any apparently authorized person or entity,
with respect to all matters pertaining to the Collateral (including, without
limitation, the Collections) and the Lockbox Account and its duties
hereunder.  Neither any Collection Party
nor UCI shall have any right of action whatsoever against the Intercreditor
Collateral Agent as a result of the Intercreditor Collateral Agent acting or
refraining from acting based upon instructions given to the Intercreditor
Collateral Agent pursuant to and consistent with this Agreement to so act or
refrain from acting, provided that such action or refraining from acting is in
accordance with this Agreement.  Unless
expressly provided herein, the Intercreditor Collateral Agent shall have a
reasonable opportunity to act after the receipt of any notice or instruction as
described herein.

Section 6.               Establishment
of Accounts; Deposit of Collections.

(a)           UCI shall cause
the Lockbox Account to be maintained with the Intercreditor Collateral Agent.  The Lockbox Account shall at all times be
held in the name of, and under the exclusive dominion and control of, the
Intercreditor Collateral Agent for the benefit of the Collection Parties and UCI,
at the expense of UCI.  UCI in its
individual capacity agrees that the Lockbox Account shall be under the
exclusive dominion and control of the Intercreditor Collateral Agent and that
it shall not, and shall have no right to, make withdrawals therefrom, give any
instructions with respect thereto, or have access thereto, except with respect
to Non-Securitization Collections constituting Non-Securitization Collateral to
the extent provided in Section 7(b)(i)
hereof and with respect to Securitization Collections constituting
Securitization Collateral pursuant to Section
7(b)(ii) hereof.  The
Collection Parties hereby agree that the Lockbox Account shall be under the
exclusive dominion and control of the Intercreditor Collateral Agent and the
Collection Parties shall not, and shall have no right to, make withdrawals
therefrom, give any instructions with respect thereto, or have access
thereto.  Each of UCI and the
Intercreditor Collateral Agent agrees that it shall not transfer any funds from
the Lockbox Account to the Securitization Account or the UCI Account or to any
other account unless such transfer is in accordance with Section 7 or Section 8 hereof.

(b)           Without
limiting the effectiveness of the security interests or Liens granted under the
Securitization Indenture or any other Securitization Document, UCO 2005, hereby
assigns, conveys, mortgages and hypothecates to the Intercreditor Collateral
Agent, for the benefit of the Indenture Trustee, and hereby pledges and grants
to the Intercreditor Collateral Agent, for the benefit of the Indenture
Trustee, a security interest in and a continuing Lien on, all of UCO 2005’s
right, title and interest, whether now owned or existing or hereafter created
or acquired in, to and under the Lockbox Account, including, without limitation,
any and all deposits, monies, securities or other property (including any
investment property) from time to time in or constituting the Lockbox Account,
including any Collections in respect of any Securitization Collateral, as
security for its obligations under this Agreement and the Securitization
Documents.

(c)           UCI, in its own
capacity, as Manager under the Securitization Documents and as manager and/or
collection agent from time to time for various third parties, in each such
capacity, hereby assigns, conveys, mortgages and hypothecates to the
Intercreditor Collateral Agent, for the benefit of the UCI Lenders and the
Securitization Secured Parties (and the successors and assigns of any of them),
and hereby pledges and grants to the Intercreditor Collateral Agent, for the
benefit of the UCI Lenders and the Securitization Secured Parties (and for the
benefit of the successors and assigns of any of them), as their interests may
appear, a security interest in and a 

 

11

 

continuing
Lien on, all of UCI’s right, title and interest, whether now owned or existing
or hereafter created or acquired in, to and under Lockbox Account, including,
without limitation, any and all deposits, monies, securities or other property
(including any investment property) from time to time in or constituting the
Lockbox Account, including any Collections from the Domestic Contract
Compression Business in respect of any Securitization Collateral and
Non-Securitization Collateral, as security for its obligations under this
Agreement, the Securitization Documents and the UCI Lender Documents.

(d)           The parties
hereto each agree and acknowledge that (i) the security interests and
Liens granted pursuant to this Section 6
constitute “control” under and for purposes of Section 9-104(a)(1) of the UCC
for the benefit of the various parties named herein, (ii) JPMorgan Chase
Bank, N.A., in its individual capacity and as the Intercreditor Collateral
Agent, will, for purposes of Section 9-104(a)(2) and Sections 8-106 and
8-501 of the UCC, for the benefit of the Indenture Trustee, comply with
instructions originated by the Indenture Trustee (as directed by the Requisite
Global Majority) directing the disposition of the funds in the Lockbox Account
that are properly allocable to the Securitization Collateral pursuant to Section 7 and 8 hereof without further notice by or
to any party and (iii) the Intercreditor Collateral Agent’s jurisdiction
for purposes of Article 9-304 of the UCC is New York.  Notwithstanding the foregoing, the
Intercreditor Collateral Agent and each of the Collection Parties agree that UCI
shall have the right to allocate Collections in the Lockbox Account to the
extent provided in Section 7(a)(i),
7(a)(ii), 7(c) or 8(a) hereof and disburse any Non-Securitization
Collections to the extent so permitted in accordance with Section 7(b)(i) hereof.

(e)           UCI shall (i) cause
all Collections with respect to the Domestic Contract Compression Business,
including, without limitation, all contract payments made by Users, account
debtors, obligees or sub-obligees of Securitization Compressors and by account
debtors, obligees or sub-obligees of any Non-Securitization Compressors, all
casualty proceeds from Securitization Compressors and Non-Securitization
Compressors, all other payments from the Domestic Contract Compression Business
in respect of the Securitization Collateral and Non-Securitization Compressors paid
by account debtors, and other obligors in respect thereof, to be deposited
directly in, or credited directly to, the Lockbox Account and (ii) notify
all persons and entities obligated to UCI, or making payments to UCI for the
benefit of any other Person, in respect of the Domestic Contract Compression
Business to make all such payments directly into the Lockbox Account.

Section 7.               Allocation of
Collections; Disbursements of Collections.

(a)           Allocations.

(i)            On each
Business Day, UCI shall allocate all Collections then on deposit in or
constituting the Lockbox Account between Securitization Collections and
Non-Securitization Collections and provide written notice thereof (which notice
may be made by facsimile or electronic mail) to the Indenture Trustee and the
Bank Agent prior to the close of business on the day on which such allocations
are made.  UCI will do monthly
reallocations of Collections related to Securitization Compressors transferred
in or out of the Securitization Collateral during such period.

(ii)           In the event
the Bank Agent at any time or for any reason questions any Allocated
Collection, UCI agrees to promptly cooperate and direct the UCI Accountants (as
defined below) to work with the Bank Agent and its representatives to explain
such Allocated Collection and provide such other information regarding same as
reasonably 

 

12

 

requested
from time to time by the Bank Agent.  The
Indenture Trustee (at the direction of the Requisite Global Majority or as
otherwise provided in the Letter Agreement) may appoint an independent accounting
firm (the “Securitization Accountants”)
to examine, at such times and in such manner as set forth in the second
sentence of Section 1 of the Letter Agreement, the books and records of UCI
that would constitute the basis for properly allocating any Collections then on
deposit in the Lockbox Account that have theretofore not been allocated
(collectively, the “Unallocated
Collections”), including, without limitation, all User Contracts
and related invoices in respect thereof, and such Securitization Accountants
shall cooperate with UCI’s in-house accountants (the “UCI Accountants”) (and UCI hereby
agrees that it shall direct the UCI Accountants to cooperate with the
Securitization Accountants so appointed by the Indenture Trustee) to determine
the allocation of such Unallocated Collections and the Bank Agent shall have
the right to have its representatives present during all such calls and
meetings and UCI shall cause the Bank Agent to be contemporaneously copied on
all written information regarding the determination of such allocations in each
case; provided, however, that if the UCI Accountants and the
Securitization Accountants are not able to agree on the allocation of such
Unallocated Collections within five (5) Business Days, then UCI (with the
written approval of the Bank Agent, which approval shall not be unreasonably
withheld or delayed) and the Indenture Trustee (at the direction of the Requisite
Global Majority), within one (1) Business Day after such five (5) Business Day
period expires, shall select another nationally recognized accounting firm (the
“Allocation Accounting Firm”)
which is reasonably acceptable to UCI and the Indenture Trustee to determine
the proper allocation of such Unallocated Collections.  The determination of such Allocation Accounting
Firm shall be final and binding upon UCI, the Bank Agent, the other UCI Lenders,
the Indenture Trustee and the Requisite Global Majority, and UCI shall promptly
provide notice of such appointment to the Bank Agent.  UCI agrees that it shall make the Bank Agent
privy to all communications involving the Allocation Accounting Firm relating
to the proper allocation of such Unallocated Collections and the Bank Agent
shall be entitled to communicate with UCI and the Allocation Accounting Firm
regarding the same.  UCI shall allocate
all Unallocated Collections (a) as mutually agreed by the UCI Accountants
and the Securitization Accountants or (b) as determined by the Allocation
Accounting Firm pursuant to this Section 7(a)(ii),
as applicable, and in each case provide written notice thereof (which notice
may be made by facsimile or electronic mail) to the Indenture Trustee and the
Bank Agent prior to the close of business on the day on which such allocations
are made.  All fees, costs and expenses
of the Securitization Accountants and the Allocation Accounting Firm under this
Section 7(a)(ii) shall
be paid in accordance with the Letter Agreement.

(iii)          In the event
that UCI is replaced as Manager, then allocations of Collections pursuant to Section 7(a)(i) or 7(a)(ii) above shall be made in good
faith based upon the information provided by the then current Manager.

(iv)          Notwithstanding
anything contained herein to the contrary, each of the parties hereto agrees
that the provisions of Sections 3
and 4 above constitute a “subordination
agreement” for purposes of Section 510(a) of the Bankruptcy Code.

(v)           Each party
hereto agrees that it will abide by allocations of Collections held in the
Lockbox Account made in accordance with this Section 7(a).

 

13

 

(b)           Disbursements.

(i)            So long as the
Intercreditor Collateral Agent has not received notice pursuant to Section 8(b) or 8(c) to the effect that
a Securitization Default or Bank Default, respectively, has occurred (and had a
commercially reasonable opportunity to act thereon) on any Business Day, after UCI
makes any allocation of Collections pursuant to Sections 7(a)(i), 7(a)(ii), 7(c) or 8(a) hereof, UCI may
use electronic banking methods acceptable to the Intercreditor Collateral Agent
and consistent with past practice to direct the Intercreditor Collateral Agent
to transfer collected funds from the Lockbox Account to the UCI Account in an
amount in the aggregate equal to the Allocated Collections constituting
Non-Securitization Collections, prior to the close of business on such day;
provided, however, (i) if such electronic banking methods are not
available due to force majeure, such transfer shall be made as promptly as
practicable after such electronic banking methods resume and (ii) to the
extent UCI is obligated by Applicable Law to obtain evidence of approvals to
make such transfers and it is not practicable to obtain such evidence or
approvals on such Business Day, such transfer shall be made by noon Central
Time on the next Business Day.  After the
occurrence of a Securitization Default or a Bank Default, Allocated Collections
constituting Non-Securitization Collections shall be disbursed in accordance
with Section 8(c)
hereof.

(ii)           So long as the
Intercreditor Collateral Agent has not received notice pursuant to Section 8(b) or 8(c) to the effect that a
Securitization Default or a Bank Default, respectively, has occurred (and has
had a commercially reasonable opportunity to act thereon), on the same Business
Day as UCI makes any allocation of Collections pursuant to Section 7(a)(i), 7(a)(ii), 7(c) or 8(a)
hereof, prior to the close of business on such day, UCI will use electronic
banking methods acceptable to the Intercreditor Collateral Agent and consistent
with past practice to direct the Intercreditor Collateral Agent to transfer
funds from the Lockbox Account to the Trust Account or the account specified by
the Indenture Trustee (at the direction of the Requisite Global Majority) in
the then current Repetitive Wire Instructions delivered to the Intercreditor
Collateral Agent (such account, or any other account that may be specified by
the Indenture Trustee in a subsequent delivery of Repetitive Wire Instructions,
the “Securitization Account”)
in an amount equal to the Allocated Collections constituting Securitization
Collections.  After the occurrence of a
Securitization Default or a Bank Default, Allocated Collections constituting
Securitization Collections shall be disbursed in accordance with Section 8(b) hereof.

(iii)          In the event
that an allocation of Collections under Section 7(a)
or disbursement of Allocated Collections pursuant to Section 7(b) is made to (A) the
UCI Account in excess of the Non-Securitization Collections or (B) the
Securitization Account in excess of the Securitization Collections (any such
event in clauses (A) and (B) above, a “Misallocation”), then UCI shall
immediately notify the Indenture Trustee and the Bank Agent thereof, and (x) in
the case of a Misallocation described in clause (A) above, UCI and the UCI
Lenders and (y) in the case of a Misallocation described in clause (B)
above, the Indenture Trustee, shall, upon receipt of such written notice from UCI
to the effect of the foregoing, hold such amount for the benefit of the Intercreditor
Collateral Agent and the Securitization Secured Parties or the UCI Lenders, as
applicable, and remit and payover any and all such amounts received to the
Intercreditor Collateral Agent for proper allocation in accordance with the
provisions of Section 7(a)
above or Section 7(c)
or 8(a) below (as
applicable), to the extent that such amounts are still held by such
Person.  In the event that any
Misallocation occurs, UCI covenants and agrees to 

 

14

 

deposit
into the Lockbox Account an amount in cash equal to such Misallocation (net of
any portion thereof that has been paid over by the UCI Lenders or the Indenture
Trustee pursuant to the preceding sentence) for proper allocation and
disbursement in accordance with the provisions hereof within three (3) Business
Days after the earlier of the date on which UCI shall have knowledge thereof
and the date on which UCI receives notice from any other Person (including
pursuant to the procedures described in Section 7(c)
hereof) of such Misallocation.

(c)           Disputed
Allocations.

(i)            In the event
that the Indenture Trustee (acting at the direction of the Requisite Global
Majority) disputes the allocation of any Allocated Collections in good faith
(any such disputed allocation of Collections, collectively, the “Disputed Allocations”), then in such
event the Indenture Trustee (at the direction of the Requisite Global Majority
or as otherwise provided in the Letter Agreement) may appoint the
Securitization Accountants to examine, at such times and in such manner as set
forth in the second sentence of Section 1 of the Letter Agreement, the books
and records of UCI which constitute the basis for properly allocating such
Disputed Allocations, including, without limitation, all User Contracts and
related invoices in respect thereof, and such Securitization Accountants shall
cooperate with the UCI Accountants (and UCI hereby agrees that it shall direct
the UCI Accountants to cooperate with the Securitization Accountants so
appointed by the Indenture Trustee) to determine the allocation of such
Disputed Allocations and the Bank Agent shall have the right to have its
representatives present during all such calls and meetings and UCI shall cause
the Bank Agent to be contemporaneously copied on all written information
regarding the determination of such Disputed Allocations in each case; provided,
however, that if the UCI Accountants and the Securitization Accountants
are not able to agree on the allocation of such Disputed Allocations within
five (5) Business Days, then UCI (with the written approval of the Bank Agent,
which approval shall not be unreasonably withheld or delayed) and the Indenture
Trustee (at the direction of the Requisite Global Majority), within one (1)
Business Day after such five (5) Business Day period expires, shall appoint the
Allocation Accounting Firm to determine the proper allocation of such Disputed
Allocations.  The determination of such
Allocation Accounting Firm shall be final and binding upon UCI, the Bank Agent,
the Other UCI Lenders, the Indenture Trustee and the Requisite Global Majority.  UCI shall allocate all Disputed Allocations
(i) as mutually agreed by the UCI Accountants and the Securitization
Accountants or (ii) as determined by the Allocation Accounting Firm
pursuant to this Section 7(c),
as applicable, and in each case provide written notice thereof (which notice
may be made by facsimile or electronic mail) to the Indenture Trustee and the
Bank Agent prior to the close of business on the day on which such allocations
are made.  All fees, costs and expenses
of the Securitization Accountants and the Allocation Accounting Firm under this
Section 7(c) shall be
paid in accordance with the Letter Agreement.

(ii)           In the event
the Bank Agent at any time or for any reason questions any Allocated
Collection, UCI agrees to promptly cooperate and direct the UCI Accountants to
work with the Bank Agent and its representatives to explain such Allocated
Collection and provide such other information regarding same as reasonably
requested from time to time by the Bank Agent.

 

15

 

Section 8.               Monitoring of
Allocation Process; Effect of a Securitization Default; Effect of a Bank
Default.

(a)           Monitoring of
Allocation Process.  The
Indenture Trustee (acting at the direction of the Requisite Global Majority or
as otherwise provided in the Letter Agreement) may appoint the Securitization
Accountants to examine, at such times and in such manner as set forth in the
second sentence of Section 1 of the Letter Agreement, the books and records of UCI
that would constitute the basis for properly allocating the Collections,
including, without limitation, any User Contracts, contracts, agreements and
invoices in respect thereof, and such Securitization Accountants shall
(i) cooperate with the UCI Accountants (and UCI hereby agrees that it
shall direct the UCI Accountants to cooperate with the Securitization
Accountants so appointed by the Indenture Trustee) to determine the allocation
of all Collections from time to time on deposit in the Lockbox Account and
(ii) have access to such books and records that would constitute the basis
for properly allocating the Collections, including, without limitation, any User
Contracts, contracts, agreements and invoices in respect thereof, and any other
resources of UCI reasonably necessary to monitor the allocation process on a
day-to-day basis with respect to all current or future allocations of
Collections received by or in the Lockbox Account as set forth in this
Agreement; provided, however, that if the UCI Accountants and the
Securitization Accountants are not able to agree on the allocation of any such
Collections, then UCI (with the written approval of the Bank Agent, which
approval shall not be unreasonably withheld or delayed) and the Indenture
Trustee (at the direction of the Requisite Global Majority) shall appoint the
Allocation Accounting Firm to determine the proper allocation of all such
Collections and all future Collection from such date.  The Indenture Trustee shall have no duty to
monitor the allocation process pursuant to Section 7
or 8 hereof, and shall take
action only upon the receipt of direction from the Requisite Global Majority.  Upon and after the exercise by the Indenture
Trustee’s rights under this Section 8(a),
UCI shall allocate all Collections then on deposit in the Lockbox Account and
all future Collections received by or deposited in the Lockbox Account (x) as
mutually agreed by the UCI Accountants and the Securitization Accountants or
(y) as determined by the Allocation Accounting Firm pursuant to this Section 8(a), and in each case
provide written notice thereof (which notice may be made by facsimile or
electronic mail) to the Indenture Trustee and the Bank Agent prior to the close
of business on the day on which such allocations are made.  All fees, costs and expenses of the
Securitization Accountants and the Allocation Accounting Firm under this Section 8(a) shall be paid in
accordance with the Letter Agreement.

(b)           Effect of a
Securitization Default. 
After the occurrence of a Securitization Default the Indenture Trustee
shall notify the Intercreditor Collateral Agent to such effect and after the
Intercreditor Collateral Agent has received such notice and has had a commercially
reasonable opportunity to act thereon, then, subject to the other provisions of
this Agreement and to the terms of the Securitization Documents, (i) the
Intercreditor Collateral Agent shall take such steps as may be instructed in
writing by the Indenture Trustee (as directed by the Requisite Global Majority)
to receive, hold and distribute all or any portion of the Securitization
Collateral (including, without limitation, any Securitization Collections) and
proceeds thereof and to comply with its other obligations set forth in this
Agreement, and (ii)  the Indenture Trustee (at the direction of the Requisite
Global Majority) may take such steps as it is entitled to take under the
Securitization Documents with respect to enforcement of any Securitization
Document and collection and realization of the Securitization Collateral (or
any portion thereof) and the proceeds thereof. 
In permitting the Indenture Trustee to distribute Securitization
Collateral from the Lockbox Account pursuant to this Section 8(b), the Intercreditor
Collateral Agent may rely conclusively on the notice provided by the Indenture
Trustee to the effect that a Securitization 

 

16

 

Default
has occurred without conducting any independent investigation thereof and
notwithstanding any assertion or evidence to the contrary.

(c)           Effect of a
Bank Default.  After the
occurrence of a Bank Default the Bank Agent shall notify the Intercreditor
Collateral Agent to such effect and after the Intercreditor Collateral Agent
has received such notice and has had a commercially reasonable opportunity to
act thereon, then, subject to the other provisions of this Agreement and to the
terms of the Bank Documents, (i) the Intercreditor Collateral Agent shall
take such steps as may be instructed in writing by the Bank Agent to receive,
hold and distribute all or any portion of the Bank Collateral and proceeds
thereof and to comply with its other obligations set forth in this Agreement, and
(ii)  the Bank Agent may take such steps as it is entitled to take under
the Bank Documents with respect to enforcement of any Bank Document and
collection and realization of the Bank Collateral (or any portion thereof) and
the proceeds thereof.  In permitting the
Indenture Trustee to distribute Non-Securitization Collateral from the Lockbox
Account pursuant to this Section 8(c),
the Intercreditor Collateral Agent may rely conclusively on the notice provided
by the Bank Agent to the effect that a Bank Default has occurred without
conducting any independent investigation thereof and notwithstanding any
assertion or evidence to the contrary.

(d)           Conflicting
Instruction. 
Notwithstanding the foregoing, the Intercreditor Collateral Agent shall
have no duty or responsibility to exercise any discretion with respect to
determining the nature of, receiving, holding and/or distributing all or any
portion of the Collateral or any other collateral or funds held by the
Intercreditor Collateral Agent pursuant to the terms of this Agreement.  Without limiting the generality of the
foregoing, the parties hereby agree that the Intercreditor Collateral Agent
shall be obligated to disburse funds from the Lockbox Account only in
accordance with instructions from UCI or the Manager given pursuant to Section 7(a), 7(b) or 7(c), instructions
from the Indenture Trustee given pursuant to Section 8(b) or 8(d) or instructions from the Bank Agent
given pursuant to Section 8(c) or 8(d).  In the event the Intercreditor Collateral
Agent receives conflicting notices or instructions or in the event it is unable
in good faith to determine what action it should take, or is unsure as to the
application, intent, interpretation or meaning of any provision therein or
hereof, the Intercreditor Collateral Agent may give notice (in such form as
shall be appropriate under the circumstances) to UCI, the Bank Agent and the
Indenture Trustee, requesting written instructions as to the course of action
to be adopted, and, to the extent the Intercreditor Collateral Agent acts in
good faith in accordance with any such appropriate instruction received from UCI,
the Bank Agent and the Indenture Trustee (as directed by the Requisite Global
Majority), the Intercreditor Collateral Agent shall not be liable on account of
such action or inaction to any Person. 
Except with respect to any instructions received from the Indenture
Trustee (as directed by the Requisite Global Majority) directing the
disposition of the funds on the Lockbox Account that are properly allocated to
the Securitization Collateral, if the Intercreditor Collateral Agent shall not
have received appropriate instructions within ten (10) days of such notice (or
within such shorter period of time as reasonably may be specified in such
notice or may be necessary under the circumstances), it may, but shall be under
no duty to, take or refrain from taking such action which is consistent, in its
view, with this Agreement, and the Intercreditor Collateral Agent shall have no
liability to any Person for any such action or inaction.

Section 9.               Compensation and
Indemnity of Intercreditor Collateral Agent; Waiver of Right of Set-off.

(a)           UCI shall be
liable to pay to the Intercreditor Collateral Agent from time to time
reasonable compensation for its services. 
UCI shall be liable to reimburse the Intercreditor Collateral Agent upon
request for all reasonable disbursements, expenses and advances incurred 

 

17

 

or
made by it.  Such expenses shall include
the reasonable compensation, disbursements and expenses of the Intercreditor
Collateral Agent’s agents and counsel and, subject to the limitations set forth
in Section 4 of the
Letter Agreement, all fees, costs and expenses of any Securitization
Accountants and/or Allocation Accounting Firm engaged pursuant to the terms
hereof.  UCI shall indemnify the
Intercreditor Collateral Agent for, and hold it harmless against, any claim,
demand, expense (including but not limited to reasonable attorney’s fees and
expenses), loss or liability incurred by it without gross negligence or bad
faith on its part, arising out of or in connection with the performance of its
rights or duties hereunder, the Lockbox Account and the services provided in
conjunction therewith.  The Intercreditor
Collateral Agent shall notify UCI promptly of any claim asserted against the
Intercreditor Collateral Agent for which it may seek indemnity.  However, failure by the Intercreditor
Collateral Agent to notify UCI shall not relieve UCI of its obligations
hereunder.  Upon the Intercreditor
Collateral Agent’s request, UCI shall defend the claim and the Intercreditor
Collateral Agent shall provide reasonable cooperation at UCI’s expense in the
defense.  The Intercreditor Collateral
Agent may have separate counsel and UCI shall be liable to pay the reasonable
fees and expenses of such counsel.  UCI
need not pay for any settlement made without its written consent, which consent
shall not be unreasonably withheld or delayed. 
UCI need not reimburse any expense or indemnify against any loss or
liability to the extent incurred by the Intercreditor Collateral Agent through
the Intercreditor Collateral Agent’s gross negligence or bad faith.  Any amount due under this Section 9(a) that remains unpaid
for thirty (30) days after notice thereof shall bear interest at the federal
funds rate from the date of notice to the date of payment.

(b)           (i)            Except as provided below, the Intercreditor Collateral
Agent and JPMorgan Chase Bank N.A., in its individual capacity, each hereby
subordinates all Liens, encumbrances, claims and rights of setoff it may have,
now or in the future, against the Lockbox Account or any Collateral or
Collections (including checks or other items evidencing the same held therein)
or any other property in such Lockbox Account to the prior payment in full in
cash of all Securitization Obligations and UCI Obligations and agree that the
Liens and security interests securing such Securitization Obligations and UCI
Obligations are superior to any such Liens, encumbrances, claims and rights of
setoff which the Intercreditor Collateral Agent or JPMorgan Chase Bank N.A., in
its individual capacity, might have or obtain in the Lockbox Account or any
Collateral or Collections or any other property in such Lockbox Account.

(ii)           Notwithstanding
the foregoing, the Intercreditor Collateral Agent and JPMorgan Chase Bank N.A.,
in its individual capacity, may debit the Lockbox Account from time to time,
for (a) checks and other items, including, without limitation, any
automated clearinghouse transactions, which are returned for any reason (“Returned Items”),
(b) necessary account adjustments, and (c) overdrafts; provided,
however, no such offset shall be made unless the Intercreditor
Collateral Agent advises UCI of the amount thereof in accordance with the
Intercreditor Collateral Agent’s current practice.

(iii)          In
the event that  any charges or fees are then due from UCI or any other
party hereto to the Intercreditor Collateral Agent under this Agreement or
related to any Returned Items, the Lockbox Account or the services provided
hereunder, UCI agrees to pay such amounts to the Intercreditor Collateral Agent
within thirty (30) days of UCI’s receipt by the Intercreditor Collateral Agent
of a written invoice therefor.  In the
event that UCI fails to pay the amounts described in the preceding sentence
within the time period set forth above, then the Intercreditor Collateral Agent
shall have the right to debit the Lockbox Account for such amounts which
obligation of UCI shall not be relieved by any such offset or debit by the
Intercreditor Collateral Agent (and, upon payment by UCI 

 

18

 

of such amounts to the Intercreditor Collateral Agent, the
Intercreditor Collateral Agent shall deposit such amounts into the Lockbox
Account).

(iv)          In
the event there are insufficient funds in the Lockbox Account to reimburse the
Intercreditor Collateral Agent for the amount of any Returned Items or unpaid
charges or fees for which the Intercreditor Collateral Agent is entitled to
debit the Lockbox Account in accordance with clause (ii) or (iii)
above, then UCI shall (x) reimburse the Intercreditor Collateral Agent
immediately upon demand and (y) to the extent Collections in respect of
Returned Items have been disbursed to any Collection Party in accordance with
the terms of this Agreement, may debit an amount equal to such disbursement
from future allocations to such Collection Party.

Section 10.             Resignation by or Removal of Intercreditor
Collateral Agent.

(a)           The
Intercreditor Collateral Agent may resign from the performance of all its
functions and duties hereunder at any time by giving at least sixty (60) days’
prior written notice to each of UCI, the Indenture Trustee and each UCI Lender
then party thereto.  UCI (with the consent
of the Requisite Global Majority which consent shall not be unreasonably
withheld) may, at any time, for or without cause, remove the Intercreditor
Collateral Agent by giving at least twenty (20) days prior written notice to
the Intercreditor Collateral Agent, the Indenture Trustee and each UCI Lender
then party thereto.

(b)           Upon the
effectiveness of any such notice of resignation or removal given pursuant to Section 10(a) above, UCI shall
appoint a successor Intercreditor Collateral Agent hereunder (with the consent
and approval of the Requisite Global Majority (such consent and approval not to
be unreasonably withheld)) which shall be an incorporated bank or trust company
and which shall execute counterparts hereof or such other instrument reasonably
satisfactory to evidence acceptance of the duties and obligations of the
Intercreditor Collateral Agent hereunder.

(c)           If a successor
Intercreditor Collateral Agent shall not have been so appointed within the
applicable notice period, the Requisite Global Majority shall then appoint a
successor Intercreditor Collateral Agent which shall be a bank or trust company
with a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition and which shall execute
counterparts hereof or such other instrument reasonably satisfactory to
evidence acceptance of the duties and obligations of the Intercreditor
Collateral Agent hereunder and which shall serve as Intercreditor Collateral
Agent hereunder or thereunder until such time, if any, as UCI appoints a
successor Intercreditor Collateral Agent as provided above.

(d)           After the
resignation or removal of any Intercreditor Collateral Agent pursuant to this Section 10, the provisions of Section 5 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was the
Intercreditor Collateral Agent hereunder, and Section 9(a) above shall continue to inure to its
benefit.

Section 11.             No Implied
Waivers, Etc.  Except as
expressly provided herein, nothing in this Agreement shall be deemed to
constitute a waiver of or shall otherwise affect any of the interests, rights
or remedies which either the UCI Lenders or the Indenture Trustee may have
under the UCI Lender Documents or the Securitization Documents, respectively,
or under applicable law.

Section 12.             Amendments.  No term or provision of this Agreement may be
amended, modified, waived, discharged or terminated orally and any such term or
provision may only be amended, 

 

19

 

modified, waived, discharged
or terminated by an instrument in writing signed by the Indenture Trustee (at
the direction of the Requisite Global Majority), UCI, the Bank Agent and the
Intercreditor Collateral Agent; provided, however, that no such
instrument or agreement shall amend, modify or waive any provision of this
Agreement relating to the allocation of Collections hereunder or otherwise
affect the rights of any Collection Party or UCI to receive distributions
and/or payments of Collections allocated hereunder or under any other Related
Documents, without the written consent of such Collection Party or UCI, as the
case may be, then party to this Agreement (in addition to the other Parties
required to consent thereto).

Section 13.             Benefit of
Agreement; Joinder.

(a)           This Agreement
is intended solely for the benefit of the Collection Parties and UCI and their
respective successors and assigns and no other Person shall have any right,
power, benefit, privilege, priority or interest under or through this
Agreement.  Each party hereto agrees
that, if the Indenture Trustee shall fail to act as directed by the Requisite
Global Majority at any time at which it is so required hereunder or under any
Related Documents, then the Requisite Global Majority shall be entitled to
directly enforce the provisions of this Agreement or take any such action
directly in its own capacity or on behalf of the Indenture Trustee.

(b)           Additional UCI
Lenders not initially party to this Agreement shall be entitled to participate
in this Agreement, as it may from time to time be amended or supplemented, by
executing a “Supplemental Agreement”, substantially in the form of Exhibit ”B” hereto, accepting the
terms of this Agreement, as amended and supplemented to the date of such
execution.  Upon execution and delivery
of such “Supplemental Agreement”, such party shall become a UCI Lender
hereunder with the same force and effect as if originally named as a UCI Lender
herein.  Such participation shall require
the written approval of UCI and the Intercreditor Collateral Agent but shall
not require the further authorization or approval of any of the other parties
hereto, provided that the participation in this Agreement by such additional
party does not conflict with the UCI Lender Documents or the Securitization
Documents, and provided further that UCI shall have given five (5) days’ prior
written notice of the participation in this Agreement by such additional party
to the Indenture Trustee and each Series Enhancer.  UCI shall promptly furnish each of the
Indenture Trustee, each Series Enhancer and the Intercreditor Collateral Agent
then party to this Agreement with a copy of the executed Supplemental Agreement
with such additional party.  The rights
and obligations of each party hereunder shall remain in full force and effect
notwithstanding the addition of any new UCI Lender as a party to this
Agreement.

Section 14.             Severability.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction the substantive laws of which
are held to be applicable hereto shall not invalidate the remaining provisions
hereof, and any such prohibition or unenforceability in any such jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.

Section 15.             Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute a single agreement.

Section 16.             Notices.  All notices and other communications provided
to any party hereto under this Agreement shall be in writing or by facsimile
and addressed, delivered or transmitted to such party at its address or
facsimile number set forth on the signature pages hereof or at such other
address or facsimile number as may be designated by such party from time to
time in a notice complying as to delivery with the terms of this section to the
other parties.  Any notice, if mailed or
sent by courier or hand delivery, shall be deemed given when received; any notice,
if transmitted by facsimile, shall be deemed given when such notice is
transmitted and receipt is confirmed by telephone or electronic means.

 

20

 

Section 17.             Headings.  The various headings of this Agreement are
inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provisions hereof.

Section 18.             Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, including
without limitation, Section 5-1401 of the New York General Obligations Law,
except that matters relating solely to the operations of the Lockbox Account
and the payment of checks and other items governed by Articles 3 and 4 of the Uniform
Commercial Code shall be governed by and construed in accordance with the laws
of the State of Texas.

Section 19.             No Petition.  (a) 
Each of the UCI Lenders hereby covenants and agrees that (i) prior
to the date which is one year and one day after the payment in full of all
Securitization Obligations, it will not institute against or join any other
Person in instituting against UCO 2005 or any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States, including, without limitation, the
Bankruptcy Code, or any state of the United States, (ii) it will not seek
to challenge or contest, in any proceeding, suit or action of any nature
whatsoever or otherwise, any transfer, disposition, contribution to capital or “true
sale” of any Securitization Collateral or other assets pursuant to any of the
Securitization Documents and (iii) it will not seek, through any
proceeding, suit or action of any nature whatsoever or otherwise, the
consolidation, financial or otherwise, of UCO 2005 with any other Person.

(b)           The provisions
of this Section 19
shall be continuing and shall survive any termination of this Agreement.

Section 20.             Insolvency.  This Agreement shall be applicable both before
and after the filing of any petition by or against UCI under the Bankruptcy
Code and all converted or succeeding cases in respect thereof, and all
references herein to UCI shall be deemed to apply to a trustee for UCI, as the
case may be, and UCI, as debtor-in-possession. The relative rights of the UCI
Lenders and the Indenture Trustee in or to any allocation of or distributions
or disbursements from or in respect of any Non-Securitization Collections or
proceeds of Non-Securitization Collections, or Securitization Collections or
proceeds of Securitization Collections, respectively, shall continue after the
filing thereof on the same basis as prior to the date of the petition,
notwithstanding any court order approving the financing of or use of cash collateral
by UCI as debtor-in-possession or by any trustee appointed in its case.

Section 21.             Termination.  This Agreement shall terminate upon the
indefeasible payment in full in cash of all Securitization Obligations and the
satisfaction and discharge of the Securitization Indenture.

Section 22.             Entire
Agreement.  The
provisions of the Intercreditor Collateral Agent’s commercial account agreement
or other treasury management agreement and related service terms governing the
relationship between UCI and the Intercreditor Collateral Agent with respect to
the Lockbox Account and any other applicable account (collectively, the “Lockbox
Agreements”) are incorporated by reference to the extent not inconsistent
with this Agreement.  In the event of
conflict among the provisions of this Agreement and the Lockbox Agreements, the
provisions of this Agreement shall control. 
This Intercreditor Agreement, the Letter Agreement and the other Related
Documents constitute the entire understanding among the parties hereto with
respect to the subject matter hereof and thereof and supersede any prior
agreements, written or oral, with respect thereto.

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21

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.

 

	
   

  	
  UNIVERSAL
  COMPRESSION, INC.,

  
	
   

  	
  in
  its individual capacity and as Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  J. Michael Anderson

  
	
   

  	
   

  	
  J.
  Michael Anderson, Senior Vice President and 

  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  4444
  Brittmoore Road

  
	
   

  	
   

  	
  Houston,
  TX 77041

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile
  No.:  713-466-6720

  
	
   

  	
  Telephone
  No.:  713-335-7295

  
	
   

  	
   

  	
   

  
	
   

  	
  Attn.:
  J. Michael Anderson

  
				

 

 

UCO
COMPRESSION 2005 LLC

By:          /s/ J. Michael
Anderson                                        
                J. Michael Anderson, Senior
Vice President and

                Chief Financial      Officer

 

Address:                4444 Brittmoore Road
                                Houston,
TX 77041

 

Facsimile No.:       713-466-6720

Telephone No.:     713-335-7295

Attn.:  J. Michael Anderson

 

 

WELLS
FARGO BANK, NATIONAL ASSOCIATION,

as Indenture Trustee

By:          /s/ Marianna C.
Stershic                                       

Name:     Marianna C. Stershic

Title:       Vice President

Address:                                               MAC N9311-161

                                                                                                Sixth Street
and Marquette Avenue

                                                                                                Minneapolis, MN
55479

 

 

Facsimile No.:       612-667-3464

Telephone No.:     612-667-8058

Attn.:      Corporate Trust Services — Asset-Backed 
                Administration

 

 

WACHOVIA
BANK, NATIONAL ASSOCIATION,

as Bank Agent

By:          /s/ David E.
Humphreys                                       

Name:     David E. Humphreys

Title:       Director

Address:                                               Structured
Asset Finance

                                                                                                301 S. College
St., Mailcode:  NC0610

                                                                                                Charlotte,
North Carolina 28288-0610

 

 

Facsimile No.:       704-374-8778

Telephone No.:     704-383-0575

Attn.:      [Senior Vice President, Risk Management]

 

 

JPMORGAN
CHASE BANK, N.A.,

as Intercreditor Collateral Agent

By:          /s/ Dianne L.
Russell                                            

Name:     Dianne L. Russell

Title:       Vice President

Address:                600 Travis Street, Floor 20
                                Houston,
Texas 77002-3009

 

Facsimile No.:       713-216-7794

Telephone No.:     713-216-6603

Attn.:      Dianne L. Russell

 

 

Exhibit “A”

FORM OF

REPETITIVE WIRE INSTRUCTIONS

 

To:          Intercreditor Collateral Agent

Reference is hereby made to that certain Intercreditor And Collateral
Agency Agreement, dated as of October 28, 2005 (as amended, supplemented
or otherwise modified from time to time in accordance with its terms, the “Intercreditor Agreement”), among
Universal Compression, Inc., in its individual capacity and as the initial
Manager, UCO Compression 2005 LLC, Wells Fargo Bank, National Association, as
Indenture Trustee, Wachovia Bank, National Association, as the Bank Agent, JPMorgan
Chase Bank, N.A., in its individual capacity and as the Intercreditor
Collateral Agent and the Additional UCI Lenders from time to time party
thereto.  Capitalized terms used herein
and not otherwise defined herein shall have the meanings assigned to such terms
in the Intercreditor Agreement.

The undersigned, as Indenture Trustee, hereby notifies you that
following account constitutes the “Securitization Account” for purposes of the
Intercreditor Agreement, and all amounts required to be transferred pursuant to
the Intercreditor Agreement to the Securitization Account shall be transferred
electronically to such account in accordance therewith and at such times as
required thereunder:

Bank Name: (1)

ABA No.:

Account Number:

Account Name:

Reference [For further credit to]:

 

 

 

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OF PAGE INTENTIONALLY LEFT BLANK -

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(1) N.B. Insert account information for Trust Account.

 

1

 

You may rely on this notice and the account information for the
Securitization Account set forth herein unless and until you receive a
subsequent Repetitive Wire Instruction from the Indenture Trustee (in which
case the instructions set forth herein shall be automatically terminated and
you shall rely on the instructions set forth in such subsequent Repetitive Wire
Instruction).

 

 

	
   

  	
  WELLS FARGO BANK,

  
	
   

  	
  NATIONAL ASSOCIATION,

  
	
   

  	
  as Indenture Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

 

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Exhibit “B”

FORM OF

SUPPLEMENTAL AGREEMENT

This Supplemental Agreement, dated as of [___],
20[__] (as amended, supplemented or
otherwise modified from time to time, this “Supplemental
Agreement”), is by and among [_________________________]
(the “New UCI Lender”), Universal
Compression, Inc., in its individual capacity and as initial Manager under the
Management Agreement (as defined below) (“UCI”), and JPMorgan
Chase Bank, N.A., in its capacity as Intercreditor Collateral Agent (the “Intercreditor Collateral Agent”)
under the Intercreditor Agreement (as defined below).  Capitalized terms used in this Supplemental
Agreement but not defined herein shall have the meanings assigned to such terms
in the Intercreditor and Collateral Agency Agreement, dated as of October 28,
2005 (as amended, supplemented or otherwise modified from time to time in accordance
with its terms, the “Intercreditor Agreement”),
among UCI, UCO Compression 2005 LLC, a Delaware limited liability company,
Wells Fargo Bank, National Association, as Indenture Trustee, Wachovia Bank, National
Association, as the Bank Agent, the Intercreditor Collateral Agent and the
Additional UCI Lenders from time to time party thereto.

Accordingly, UCI, the Intercreditor Collateral Agent and the New UCI
Lender agree as follows:

Section
1.               The New UCI Lender hereby
acknowledges that it has received and reviewed a copy of the Intercreditor
Agreement as in effect on the date hereof and agrees:

(a)           that by its
execution and delivery hereof, it has joined the Intercreditor Agreement as a UCI
Lender party thereto with the same force and effect as if originally signatory
thereof and named therein as a UCI Lender;

(b)           to be bound by
all covenants, agreements and acknowledgments attributable to a UCI Lender in
the Intercreditor Agreement; and

(c)           to perform all
obligations required of it by the Intercreditor Agreement.

Each
reference to a “UCI Lender” in the Intercreditor Agreement shall be deemed to
include the New UCI Lender.  The
Intercreditor Agreement is hereby incorporated herein by reference.

Section
2.               The New UCI Lender
represents and warrants to UCI and the Intercreditor Collateral Agent that this
Supplemental Agreement has been duly authorized, executed and delivered by it
and constitutes its legal, valid and binding obligation, enforceable against it
in accordance with its terms.

Section
3.               This Supplemental
Agreement may be executed in counterparts, each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract.  This Supplemental Agreement
shall become effective when the Intercreditor Collateral Agent shall have
received counterparts of this Supplemental Agreement that, when taken together,
bear the signatures of the New UCI Lender, UCI and the Intercreditor Collateral
Agent.  Delivery of an executed signature
page to this Supplemental Agreement by facsimile transmission shall be as
effective as delivery of a manually executed counterpart of this Supplemental
Agreement.

Section
4.               Except as expressly
supplemented hereby, the Intercreditor Agreement shall remain in full force and
effect.

 

1

 

Section
5.               In case any one or more of the provisions
contained in this Supplemental Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and in the Intercreditor Agreement shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision hereof in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction).  The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

Section
6.               All communications and
notices hereunder shall be in writing and given as provided in Section 16 of
the Intercreditor Agreement.  All
communications and notices hereunder to the New UCI Lender shall be given to it
at the address set forth under its signature below.

Section
7.               The New UCI Lender agrees
to reimburse the Intercreditor Collateral Agent for its out-of-pocket expenses
in connection with this Supplemental Agreement, including the fees,
disbursements and other charges of counsel for the Intercreditor Collateral
Agent.

Section
8.               THIS SUPPLEMENTAL
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTION
5-1401 OF THE NEW YORK GENERAL OBLIGATION LAW.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -

SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, each of the undersigned has caused this
Supplemental Agreement to be duly executed and delivered by its proper and duly
authorized officer as of this _____ day of ____________, _____.

	
   

  	
  [NEW UCI LENDER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  

 

UNIVERSAL COMPRESSION, INC.

 

 

	
  By:

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  

 

 

JPMorgan Chase Bank, N.A., as
Intercreditor Collateral Agent

 

 

	
  By:

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  

 

 

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