Document:

Exhibit 4.3

 

EXECUTION COPY

 

REGISTRATION RIGHTS
AGREEMENT

 

by and between

 

LATTICE
SEMICONDUCTOR CORPORATION

as Issuer

 

and

 

GOLDMAN, SACHS & CO.

as Initial Purchaser

 

Dated as of June 20,
2003

 

THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of
June 20, 2003 by and among Lattice Semiconductor Corporation, a Delaware
corporation (the “Company”), and Goldman, Sachs & Co., (the “Initial Purchaser”) pursuant to the
Purchase Agreement, dated June 17, 2003 (the “Purchase Agreement”), between
the Company and the Initial Purchaser. 
In order to induce the Initial Purchaser to enter into the Purchase
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement.  The execution of
this Agreement is a condition to the closing under the Purchase Agreement.

The Company agrees with the Initial Purchaser, (i) for its benefit
as Initial Purchaser and (ii) for the benefit of the beneficial owners
(including the Initial Purchaser) from time to time of the Notes (as defined
herein) and the beneficial owners from time to time of the Underlying Common
Stock (as defined herein) issued upon conversion of the Notes (each of the
foregoing a “Holder” and together the “Holders”), as follows:

SECTION 1.   Definitions.  Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement.  As used in this Agreement,
the following terms shall have the following meanings:

“Affiliate”
means with respect to any specified person, an “affiliate,” as defined in
Rule 144, of such person.

“Amendment
Effectiveness Deadline Date” has the meaning set forth in
Section 2(d) hereof.

“Applicable
Conversion Price” as of any date of determination means the
Conversion Price in effect as of such date of determination or, if no Notes are
then outstanding, the Conversion Price that would be in effect were Notes then
outstanding.

“Business
Day” means each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to close.

“Common
Stock” means the shares of common stock, par value $0.01 per share,
of the Company and any other shares of common stock as may constitute “Common
Stock” for purposes of the Indenture, including the Underlying Common Stock.

“Conversion
Price” has the meaning assigned such term in the Indenture.

“Damages
Accrual Period” has the meaning set forth in Section 2(e)
hereof.

“Damages
Payment Date” means each January 1 and July 1, if
liquidated damages are payable on such date pursuant to Section 2(e) hereof.

“Deferral
Notice” has the meaning set forth in Section 3(i) hereof.

 

 

 

“Deferral
Period” has the meaning set forth in Section 3(i) hereof.

“Effectiveness
Deadline Date” has the meaning set forth in Section 2(a)
hereof.

“Effectiveness
Period” means the period commencing on the date hereof and ending on
the date that all Registrable Securities have ceased to be Registrable
Securities.

“Event”
has the meaning set forth in Section 2(e) hereof.

“Event
Date” has the meaning set forth in Section 2(e) hereof.

“Event
Termination Date” has the meaning set forth in Section 2(e)
hereof.

“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.

“Filing
Deadline Date” has the meaning set forth in Section 2(a)
hereof.

“Holder”
has the meaning set forth in the second paragraph of this Agreement.

“Indenture”
means the Indenture, dated as of June 20, 2003, between the Company and
the Trustee pursuant to which the Notes are being issued.

“Initial
Purchaser” has the meaning set forth in the preamble hereof.

“Initial
Shelf Registration Statement” has the meaning set forth in
Section 2(a) hereof.

“Issue
Date” means the first date of original issuance of the Notes.

“Liquidated
Damages Amount” has the meaning set forth in Section 2(e)
hereof.

“Losses”
has the meaning set forth in Section 6 hereof.

“Material
Event” has the meaning set forth in Section 3(i) hereof.

“Notes”
means the Zero Coupon Convertible Subordinated Notes due July 1, 2010 of
the Company to be purchased pursuant to the Purchase Agreement.

“Notice
and Questionnaire” means a written notice delivered to the Company
containing substantially the information called for by the Selling
Securityholder Notice and Questionnaire attached as Appendix A to the
Offering Circular of the Company dated June 17, 2003 relating to the
Notes.

“Notice
Holder” means, on any date, any Holder that has delivered a Notice
and Questionnaire to the Company on or prior to such date.

 

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“Purchase
Agreement” has the meaning set forth in the preamble hereof.

“Prospectus”
means the prospectus included in any Registration Statement (including, without
limitation, a prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any amendment or prospectus supplement, including
post-effective amendments, and all materials incorporated by reference or
explicitly deemed to be incorporated by reference in such Prospectus.

“Record
Holder” means (i) with respect to any Damages Payment Date
relating to any Notes as to which any such Liquidated Damages Amount has
accrued, the holder of record of such Note on the date that is fifteen (15)
days prior to such Damages Payment Date and (ii) with respect to any
Damages Payment Date relating to the Underlying Common Stock as to which any
such Liquidated Damages Amount has accrued, the registered holder of such
Underlying Common Stock on the date that is fifteen (15) days prior to such
Damages Payment Date.

“Registrable
Securities” means the Notes until such Notes have been converted
into or exchanged for the Underlying Common Stock and, at all times subsequent
to any such conversion or exchange the Underlying Common Stock and any
securities into or for which such Underlying Common Stock has been converted or
exchanged, and any security issued with respect thereto upon any stock
dividend, split or similar event until, in the case of any such security,
(A) the earliest of (i) its effective registration under the
Securities Act and resale in accordance with the Registration Statement
covering it, (ii) expiration of the holding period that would be
applicable thereto, under Rule 144(k), (iii) its sale to the public
pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A)
under the Securities Act or (iv) the date it is no longer outstanding, and
(B) as a result of the event or circumstance described in any of the
foregoing clauses (i) through (iii), the legend with respect to transfer
restrictions required under the Indenture are removed or removable in
accordance with the terms of the Indenture or such legend, as the case may be.

“Registration
Expenses” has the meaning set forth in Section 5 hereof.

“Registration
Statement” means any registration statement of the Company that
covers any of the Registrable Securities pursuant to the provisions of this
Agreement including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all materials incorporated by reference or explicitly deemed to be incorporated
by reference in such registration statement.

“Restricted
Securities” means “restricted securities” as defined in
Rule 144.

“Rule 144”
means Rule 144 under the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted by the SEC.

“Rule 144A”
means Rule 144A under the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted by the SEC.

 

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“SEC”
means the Securities and Exchange Commission.

“Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated by the SEC thereunder.

“Shelf
Registration Statement” has the meaning set forth in
Section 2(a) hereof.

“Special
Counsel” means Davis Polk & Wardwell or such other successor
counsel as shall be specified by the Holders of a majority of the Registrable
Securities, but which may, with the written consent of the Initial Purchaser (which
shall not be unreasonably withheld), be another nationally recognized law firm
experienced in securities law matters designated by the Company, the reasonable
fees and expenses of which will be paid by the Company pursuant to
Section 5 hereof.

“Subsequent
Shelf Registration Statement” has the meaning set forth in
Section 2(b) hereof.

“TIA”
means the Trust Indenture Act of 1939, as amended.

“Trustee”
means U.S. Bank National Association, the trustee under the Indenture.

“Underlying
Common Stock” means the Common Stock into which the Notes are
convertible or issued upon any such conversion.

SECTION 2.   Shelf
Registration.  (a) The
Company shall use its best efforts to prepare and file or cause to be prepared
and filed with the SEC, as soon as practicable but in any event by the date
(the “Filing
Deadline Date”) ninety (90) days after the Issue Date, a
Registration Statement for an offering to be made on a delayed or continuous
basis pursuant to Rule 415 of the Securities Act (a “Shelf Registration Statement”)
registering the resale from time to time by Holders thereof of all of the
Registrable Securities (the “Initial Shelf Registration Statement”).  The Initial Shelf Registration Statement
shall be on Form S-3 or another appropriate form permitting registration
of such Registrable Securities for resale by such Holders in accordance with
the methods of distribution elected by the Holders and set forth in the Initial
Shelf Registration Statement.  The
Company shall use its reasonable efforts to cause the Initial Shelf
Registration Statement to be declared effective under the Securities Act as
promptly as is practicable but in any event by the date (the “Effectiveness
Deadline Date”) that is one hundred eighty (180) days after the
Issue Date, and to keep the Initial Shelf Registration Statement (or any
Subsequent Shelf Registration Statement) continuously effective under the
Securities Act until the expiration of the Effectiveness Period.  At the time the Initial Shelf Registration
Statement is declared effective, each Holder that became a Notice Holder on or
prior to the date ten (10) Business Days prior to such time of effectiveness
shall be named as a selling securityholder in the Initial Shelf Registration
Statement and the related Prospectus in such a manner as to permit such Holder
to deliver such Prospectus to purchasers of Registrable Securities in
accordance with applicable law.  None of
the Company’s security holders (other than the Holders of Registrable Securities)
shall have the right to include any of the Company’s securities in the Shelf
Registration Statement.

 

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(b)           If
the Initial Shelf Registration Statement or any Subsequent Shelf Registration
Statement ceases to be effective for any reason at any time during the
Effectiveness Period (other than because all Registrable Securities registered
thereunder shall have been resold pursuant thereto or shall have otherwise
ceased to be Registrable Securities), the Company shall use its reasonable
efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within thirty (30) days of such
cessation of effectiveness amend the Shelf Registration Statement in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Shelf Registration Statement
covering all of the securities that as of the date of such filing are
Registrable Securities (a “Subsequent Shelf Registration Statement”).  If a Subsequent Shelf Registration Statement
is filed, the Company shall use its reasonable efforts to cause the Subsequent
Shelf Registration Statement to become effective as promptly as is practicable
after such filing and to keep such Subsequent Shelf Registration Statement
continuously effective until the end of the Effectiveness Period.

(c)           The
Company shall supplement and amend the Shelf Registration Statement if required
by the rules, regulations or instructions applicable to the registration form
used by the Company for such Shelf Registration Statement, if required by the
Securities Act or as reasonably requested by the Initial Purchaser or by the
Trustee on behalf of the Holders of the Registrable Securities covered by such
Shelf Registration Statement.

(d)           Each
Holder of Registrable Securities agrees that if such Holder wishes to sell
Registrable Securities pursuant to a Shelf Registration Statement and related
Prospectus, it will do so only in accordance with this Section 2(d) and
Section 3(i).  Each Holder of
Registrable Securities wishing to sell Registrable Securities pursuant to a
Shelf Registration Statement and related Prospectus agrees to deliver a Notice
and Questionnaire to the Company at least three (3) Business Days prior to any
intended distribution of Registrable Securities under the Shelf Registration
Statement.  From and after the date the
Initial Shelf Registration Statement is declared effective, the Company shall,
as promptly as practicable after the date a Notice and Questionnaire is delivered,
and in any event on or before the later of (x) five (5) Business Days
after such date, (y) five (5) Business Days after the date the Initial
Shelf Registration Statement is declared effective and (z) five (5)
Business Days after the expiration of any Deferral Period in effect when the
Notice and Questionnaire is delivered or put into effect within five (5)
Business Days of such delivery date, (i) if required by applicable law,
file with the SEC a post-effective amendment to the Shelf Registration Statement
or prepare and, if required by applicable law, file a supplement to the related
Prospectus or a supplement or amendment to any document incorporated therein by
reference or file any other required document (including an additional Shelf
Registration Statement) so that the Holder delivering such Notice and
Questionnaire is named as a selling securityholder in the Shelf Registration
Statement and the related Prospectus in such a manner as to permit such Holder
to deliver such Prospectus to purchasers of the Registrable Securities in
accordance with applicable law and, if the Company shall file a post-effective
amendment to the Shelf Registration Statement or an additional Shelf
Registration Statement, use its reasonable efforts to cause such post-effective
amendment or additional Shelf Registration Statement, as the case may be, to be
declared effective under the Securities Act as promptly as is practicable, but
in any event by the date (the “Amendment Effectiveness Deadline Date”)
that is forty-five (45) days after the date such post-

 

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effective amendment or additional Shelf Registration
Statement, as the case may be, is required by this clause to be filed;
(ii) provide such Holder copies of any documents filed pursuant to
Section 2(d)(i); and (iii) notify such Holder as promptly as
practicable after the effectiveness under the Securities Act of any
post-effective amendment or additional Shelf Registration Statement, as the
case may be, filed pursuant to Section 2(d)(i); provided, that if such
Notice and Questionnaire is delivered during a Deferral Period, the Company
shall so inform the Holder delivering such Notice and Questionnaire and shall
take the actions set forth in clauses (i), (ii) and (iii) above upon
expiration of the Deferral Period in accordance with Section 3(i).  Notwithstanding anything contained herein to
the contrary, (i) the Company shall be under no obligation to name any
Holder that is not a Notice Holder as a selling securityholder in any
Registration Statement or related Prospectus and (ii) the Amendment
Effectiveness Deadline Date shall be extended by up to ten (10) Business Days
from the expiration of a Deferral Period (and the Company shall incur no
obligation to pay Liquidated Damages during such extension) if such Deferral
Period shall be in effect on the Amendment Effectiveness Deadline Date.

(e)           The
parties hereto agree that the Holders of Registrable Securities will suffer
damages, and that it would not be feasible to ascertain the extent of such
damages with precision, if (i) the Initial Shelf Registration Statement
has not been filed on or prior to the Filing Deadline Date, (ii) the
Initial Shelf Registration Statement has not been declared effective under the
Securities Act on or prior to the Effectiveness Deadline Date, (iii) the
Company has failed to perform its obligations set forth in Section 2(d)
within the time period required therein, (iv) the aggregate duration of
Deferral Periods in any period exceeds the number of days permitted in respect
of such period pursuant to Section 3(i) hereof or (v) the number of
Deferral Periods in any period exceeds the number permitted in respect of such
period pursuant to Section 3(i) hereof (each of the events of a type
described in any of the foregoing clauses (i) through (v) are individually
referred to herein as an “Event,” and the Filing Deadline Date in the
case of clause (i), the Effectiveness Deadline Date in the case of
clause (ii), the date by which the Company is required to perform its
obligations set forth in Section 2(d) in the case of clause (iii),
the date on which the aggregate duration of Deferral Periods in any period
exceeds the number of days permitted by Section 3(i) hereof in the case of
clause (iv), and the date of the commencement of a Deferral Period that
causes the limit on the number of Deferral Periods in any period under
Section 3(i) hereof to be exceeded in the case of clause (v), being
referred to herein as an “Event Date”).  Events shall be deemed to continue until the “Event
Termination Date,” which shall be the following dates with respect
to the respective types of Events:  the
date the Initial Shelf Registration Statement is filed in the case of an Event
of the type described in clause (i), the date the Initial Shelf
Registration Statement is declared effective under the Securities Act in the
case of an Event of the type described in clause (ii), the date the
Company performs its obligations set forth in Section 2(d) in the case of
an Event of the type described in clause (iii) (including, without
limitation, the date the relevant post-effective amendment to the Shelf
Registration Statement or additional Shelf Registration Statement, as the case
may be, is declared effective under the Securities Act), termination of the
Deferral Period that caused the limit on the aggregate duration of Deferral
Periods in a period set forth in Section 3(i) to be exceeded in the case
of the commencement of an Event of the type described in clause (iv), and
termination of the Deferral Period the commencement of which caused the number
of Deferral

 

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Periods in a period permitted by Section 3(i) to
be exceeded in the case of an Event of the type described in clause (v).

Accordingly, commencing on (and including) any Event
Date and ending on (but excluding) the next date on which there are no Events
that have occurred and are continuing (a “Damages Accrual Period”), the Company
agrees to pay, as liquidated damages and not as a penalty, an amount (the “Liquidated
Damages Amount”), payable on the Damages Payment Dates to Record
Holders of Registrable Securities accruing, for each portion of such Damages
Accrual Period beginning on and including a Damages Payment Date (or, in
respect of the first time that the Liquidated Damages Amount is to be paid to
Holders on a Damages Payment Date as a result of the occurrence of any
particular Event, from the Event Date) and ending on but excluding the first to
occur of (A) the date of the end of the Damages Accrual Period or (B) the next
Damages Payment Date, at a rate per annum equal to one-half of one percent
(0.5%) of the aggregate principal amount of such Notes or, in the case of Notes
that have been converted into or exchanged for Underlying Common Stock, the
Applicable Conversion Price of such shares of Underlying Common Stock, as the
case may be, in each case determined as of the Business Day immediately
preceding the next Damages Payment Date; provided, that in the case of a Damages
Accrual Period that is in effect solely as a result of an Event of the type
described in clause (iii) of the immediately preceding paragraph, such
Liquidated Damages Amount shall be paid only to the Holders that have delivered
Notice and Questionnaires that caused the Company to incur the obligations set
forth in Section 2(d) the non-performance of which is the basis of such
Event. 
Notwithstanding the foregoing, no Liquidated Damages Amounts
shall accrue as to any Registrable Security from and after the earlier of (x)
the date such security is no longer a Registrable Security and (y) expiration
of the Effectiveness Period.  The rate
of accrual of the Liquidated Damages Amount with respect to any period shall
not exceed the rate provided for in this paragraph notwithstanding the
occurrence of multiple concurrent Events. 
Following the cure of all Events requiring the payment by the Company of
Liquidated Damages Amounts to the Holders of Registrable Securities pursuant to
this Section, the accrual of Liquidated Damages Amounts will cease (without in
any way limiting the effect of any subsequent Event requiring the payment of
Liquidated Damages Amount by the Company).

The Trustee shall be entitled, on behalf of Holders of Notes or
Underlying Common Stock, to seek any available remedy for the enforcement of
this Agreement, including for the payment of any Liquidated Damages
Amount.  Notwithstanding the foregoing,
the parties agree that the sole damages payable for a violation of the terms of
this Agreement with respect to which liquidated damages are expressly provided
shall be such liquidated damages. 
Nothing shall preclude a Notice Holder or Holder of Registrable
Securities from pursuing or obtaining specific performance or other equitable
relief with respect to this Agreement.

All of the Company’s obligations set forth in this Section 2(e)
that are outstanding with respect to any Registrable Security at the time such
security ceases to be a Registrable Security shall survive until such time as
all such obligations with respect to such security have been satisfied in full
(notwithstanding termination of this Agreement pursuant to Section 8(k)).

 

7

 

The parties hereto agree that the liquidated damages provided for in
this Section 2(e) constitute a reasonable estimate of the damages that may
be incurred by Holders of Registrable Securities by reason of the failure of
the Shelf Registration Statement to be filed or declared effective or available
for effecting resales of Registrable Securities in accordance with the
provisions hereof.

SECTION 3.   Registration
Procedures.  In connection
with the registration obligations of the Company under Section 2 hereof,
the Company shall:

(a)           Prepare
and file with the SEC a Registration Statement or Registration Statements on
any appropriate form under the Securities Act available for the sale of the
Registrable Securities by the Holders thereof in accordance with the intended
method or methods of distribution thereof, and use its reasonable efforts to
cause each such Registration Statement to become effective and remain effective
as provided herein; provided, that before filing any
Registration Statement or Prospectus or any amendments or supplements thereto
with the SEC, furnish to the Initial Purchaser and the Special Counsel copies
of all such documents proposed to be filed and use its best efforts to reflect
in each such document when so filed with the SEC such comments as the Special
Counsel reasonably shall propose within five (5) Business Days of the delivery
of such copies to the Initial Purchaser and the Special Counsel.

(b)           Prepare
and file with the SEC such amendments and post-effective amendments to each
Registration Statement as may be necessary to keep such Registration Statement
continuously effective for the applicable period specified in
Section 2(a); cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Securities
Act; and use its best efforts to comply with the provisions of the Securities
Act applicable to it with respect to the disposition of all securities covered
by such Registration Statement during the Effectiveness Period in accordance
with the intended methods of disposition by the sellers thereof set forth in
such Registration Statement as so amended or such Prospectus as so
supplemented.

(c)           As
promptly as practicable give notice to the Notice Holders, the Initial
Purchaser and the Special Counsel (i) when any Prospectus, Prospectus
supplement, Registration Statement or post-effective amendment to a
Registration Statement has been filed with the SEC and, with respect to a
Registration Statement or any post-effective amendment, when the same has been
declared effective, (ii) of any request, following the effectiveness of
the Initial Shelf Registration Statement under the Securities Act, by the SEC
or any other federal or state governmental authority for amendments or supplements
to any Registration Statement or related Prospectus or for additional
information, (iii) of the issuance by the SEC or any other federal or
state governmental authority of any stop order suspending the effectiveness of
any Registration Statement or the initiation or threatening of any proceedings
for that purpose, (iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose,
(v) of the occurrence of (but not the nature of or details concerning) a
Material Event and (vi) of the determination by the Company that a
post-effective amendment to a Registration

 

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Statement will be filed with the SEC, which notice
may, at the discretion of the Company (or as required pursuant to
Section 3 (i)), state that it constitutes a Deferral Notice, in which
event the provisions of Section 3(i) shall apply.

(d)           Use
reasonable efforts to obtain the prompt withdrawal of any order suspending the
effectiveness of a Registration Statement or the lifting of any suspension of
the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction in which they have been qualified for
sale, and provide prompt notice to each Notice Holder and the Initial Purchaser
of the withdrawal of any such order.

(e)           If
reasonably requested by the Initial Purchaser or any Notice Holder, as promptly
as practicable incorporate in a Prospectus supplement or post-effective
amendment to a Registration Statement such information as the Initial
Purchaser, the Special Counsel or such Notice Holder shall, on the basis of a
written opinion of nationally-recognized counsel experienced in such matters,
determine to be required to be included therein by applicable law and make any
required filings of such Prospectus supplement or such post-effective
amendment.

(f)            As
promptly as practicable furnish to each Notice Holder, the Special Counsel and
the Initial Purchaser, without charge, at least one (1) conformed copy of the
Registration Statement and any amendment thereto, including financial
statements but excluding schedules, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits (unless requested in writing
to the Company by such Notice Holder, Special Counsel, counsel or Initial
Purchaser).

(g)           During
the Effectiveness Period, deliver to each Notice Holder, the Special Counsel
and the Initial Purchaser, in connection with any sale of Registrable
Securities pursuant to a Registration Statement, without charge, as many copies
of the Prospectus or Prospectuses relating to such Registrable Securities
(including each preliminary prospectus) and any amendment or supplement thereto
as such Notice Holder may reasonably request; and the Company hereby consents
(except during such periods that a Deferral Notice is outstanding and has not
been revoked) to the use of such Prospectus or each amendment or supplement
thereto by each Notice Holder, in connection with any offering and sale of the
Registrable Securities covered by such Prospectus or any amendment or
supplement thereto in the manner set forth therein.

(h)           Prior
to any public offering of the Registrable Securities pursuant to the Shelf
Registration Statement, register or qualify or cooperate with the Notice
Holders in connection with the registration or qualification (or exemption from
such registration or qualification) of such Registrable Securities for offer
and sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any Notice Holder reasonably requests in writing (which
request may be included in the Notice and Questionnaire); prior to any public
offering of the Registrable Securities pursuant to the Shelf Registration
Statement, keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period in connection with such
Notice Holder’s offer and sale of Registrable Securities pursuant to such
registration or qualification (or exemption therefrom) and do any and all other
acts or things reasonably necessary or advisable to enable the disposition in such
jurisdictions of such Registrable Securities in the manner set forth in the
relevant Registration Statement and the related Prospectus; provided,
that the Company will not

 

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be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Agreement or (ii) take any
action that would subject it to general service of process in suits or to
taxation in any such jurisdiction where it is not then so subject.

(i)            Upon
(A) the issuance by the SEC of a stop order suspending the effectiveness
of the Shelf Registration Statement or notice to the Company of the initiation
of proceedings with respect to the Shelf Registration Statement under
Section 8(d) or 8(e) of the Securities Act, (B) the occurrence of any
event or the existence of any fact (a “Material Event”) as a result of which any
Registration Statement shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, or any Prospectus shall contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or
(C) the occurrence or existence of any pending corporate development that,
in the reasonable discretion of the Company, makes it appropriate to suspend
the availability of the Shelf Registration Statement and the related Prospectus
(a “Pending Development”), the
Company shall (i) in the case of clause (B) above, subject to the
next sentence, as promptly as practicable prepare and file, if necessary
pursuant to applicable law, a post-effective amendment to such Registration
Statement or a supplement to the related Prospectus or any document
incorporated therein by reference or file any other required document that
would be incorporated by reference into such Registration Statement and
Prospectus so that such Registration Statement does not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
such Prospectus does not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder, and, in the case of a
post-effective amendment to a Registration Statement, subject to the next
sentence, use its reasonable efforts to cause it to be declared effective as
promptly as is practicable, and (ii) give notice to the Notice Holders and
the Special Counsel that the availability of the Shelf Registration Statement
is suspended (a “Deferral Notice”) and, upon receipt of any Deferral Notice,
each Notice Holder agrees not to sell any Registrable Securities pursuant to
the Registration Statement until such Notice Holder’s receipt of copies of the
supplemented or amended Prospectus provided for in clause (i) above, or until
it is advised in writing by the Company that the Prospectus may be used, and
has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such Prospectus.  The Company will use all reasonable efforts
to ensure that the use of the Prospectus may be resumed (x) in the case of
clause (A) above, as promptly as is practicable, (y) in the case of
clause (B) or (C) above, as soon as, in the sole judgment of the Company,
public disclosure of such Material Event or Pending Development would not be
prejudicial to or contrary to the interests of the Company or, if necessary to
avoid unreasonable burden or expense, as soon as practicable thereafter and
(z) in the case of clause (C) above, as soon as, in the discretion of
the Company, such suspension is no longer appropriate.  The Company shall be entitled to exercise
its right under this Section 3(i) to suspend the availability of the Shelf
Registration Statement or any Prospectus, without incurring or accruing any
obligation to pay liquidated damages pursuant to Section 2(e), no

 

10

 

more than one (1) time in any three month period or
four (4) times in any twelve month period, and any such period during which the
availability of the Registration Statement and any Prospectus is suspended (the
“Deferral
Period”) shall, without incurring any obligation to pay liquidated
damages pursuant to Section 2(e), not exceed 30 days; provided, that in the case
of a Material Event or Pending Development relating to an acquisition or a
probable acquisition or financing, recapitalization, business combination or
other similar transaction, the Company may, without incurring any obligation to
pay liquidated damages pursuant to Section 2(e), deliver to Notice Holders
a second notice to the effect set forth above, which shall have the effect of
extending the Deferral Period by up to an additional 30 days, or such shorter
period of time as is specified in such second notice, provided, that the aggregate
duration of any Deferral Periods shall not, without incurring any obligation to
pay liquidated damages pursuant to Section 2(e), exceed 30 days in any
three month period (or 60 days in any three month period in the event of a
Material Event or a Pending Development pursuant to which the Company has
delivered a second notice as required above) or 90 days in any twelve (12)
month period.

(j)            If
requested in writing in connection with a disposition of Registrable Securities
pursuant to a Registration Statement, make reasonably available for inspection
during normal business hours by a representative for the Notice Holders of such
Registrable Securities, and any broker-dealers, attorneys and accountants
retained by such Notice Holders, all relevant financial and other records and
pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the appropriate officers, directors and employees of
the Company and its subsidiaries to make reasonably available for inspection
during normal business hours on reasonable notice all relevant information
reasonably requested by such representative for the Notice Holders, Managing
Underwriter, or any such broker-dealers, attorneys or accountants in connection
with such disposition, in each case as is customary for similar “due
diligence” examinations; provided,
however, that such persons shall
first agree in writing with the Company that any information that is reasonably
and in good faith designated by the Company as confidential at the time of
delivery of such information shall be kept confidential by such persons and
shall be used solely for the purposes of exercising rights under this
Agreement, unless (i) disclosure of such information is required by court
or administrative order or is necessary to respond to inquiries of regulatory
authorities, (ii) disclosure of such information is required by law
(including any disclosure requirements pursuant to federal securities laws in
connection with the filing of any Registration Statement or the use of any
Prospectus referred to in this Agreement), (iii) such information becomes
generally available to the public other than as a result of a disclosure or
failure to safeguard by any such person or (iv) such information becomes available
to any such person from a source other than the Company and such source is not
bound by a confidentiality agreement, and provided,
that the foregoing inspection and information gathering shall, to the greatest
extent possible, be coordinated on behalf of all the Notice Holders and the
other parties entitled thereto by the counsel referred to in Section 5 and
provided  further, that the Company shall not be
required to disclose any information subject to the attorney-client or attorney
work product privilege if and to the extent such disclosure would constitute a
waiver of such privilege.

(k)           Use
all reasonable efforts to comply with all applicable rules and regulations of
the SEC and make generally available to its securityholders earning statements
(which need not be

 

11

 

audited) satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder (or any
similar rule promulgated under the Securities Act) no later than 45 days after
the end of any 3-month period (or 90 days after the end of any 12-month period
if such period is a fiscal year) commencing on the first day of the first
fiscal quarter of the Company commencing after the effective date of a
Registration Statement, which statements shall cover said periods.

(l)            Except
with respect to Registrable Securities held in book-entry form, cooperate with
each Notice Holder to facilitate the timely preparation and delivery of
certificates representing Registrable Securities sold or to be sold pursuant to
a Registration Statement, which certificates shall not bear any restrictive
legends, and cause such Registrable Securities to be in such denominations as
are permitted by the Indenture and registered in such names as such Notice
Holder may request in writing at least two (2) Business Days prior to any sale
of such Registrable Securities.

(m)          Provide
a CUSIP number for all Registrable Securities covered by each Registration
Statement not later than the effective date of such Registration Statement and
provide the Trustee and the transfer agent for the Common Stock with printed
certificates for the Registrable Securities that are in a form eligible for
deposit with The Depository Trust Company.

(n)           Cooperate
and assist in any filings required to be made with the National Association of
Securities Dealers, Inc.

(o)           Upon
(i) the filing of the Initial Registration Statement and (ii) the
effectiveness of the Initial Registration Statement, announce the same, in each
case by release to Business Wire.

SECTION 4.   Holder’s
Obligations.  Each Holder
agrees, by acquisition of the Registrable Securities, that no Holder of
Registrable Securities shall be entitled to sell any of such Registrable
Securities pursuant to a Registration Statement or to receive a Prospectus
relating thereto, unless such Holder has furnished the Company with a Notice
and Questionnaire as required pursuant to Section 2(d) hereof (including
the information required to be included in such Notice and Questionnaire) and
the information set forth in the next sentence.  Each Notice Holder agrees promptly to furnish to the Company all
information required to be disclosed in order to make the information
previously furnished to the Company by such Notice Holder not misleading and
any other information regarding such Notice Holder and the distribution of such
Registrable Securities as the Company may from time to time reasonably
request.  Any sale of any Registrable
Securities by any Holder shall constitute a representation and warranty by such
Holder that the information relating to such Holder and its plan of
distribution is as set forth in the Prospectus delivered by such Holder in
connection with such disposition, that such Prospectus does not as of the time
of such sale contain any untrue statement of a material fact relating to or
provided by such Holder or its plan of distribution and that such Prospectus
does not as of the time of such sale omit to state any material fact relating
to or provided by such Holder or its plan of distribution necessary to make the
statements in such Prospectus, in the light of the circumstances under which
they were made, not misleading.

SECTION 5.   Registration
Expenses.  The Company shall
bear all fees and expenses incurred in connection with the performance by the
Company of its obligations under Sections 2 and

 

12

 

3 of this Agreement whether or not any of the
Registration Statements are declared effective.  Such fees and expenses shall include, without limitation,
(i) all registration and filing fees (including, without limitation, fees
and expenses (x) with respect to filings required to be made with the
National Association of Securities Dealers, Inc. and (y) of compliance
with federal and state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of the Special Counsel in
connection with Blue Sky qualifications of the Registrable Securities under the
laws of such jurisdictions as the Notice Holders of a majority of the
Registrable Securities being sold pursuant to a Registration Statement may
designate), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities in a form eligible
for deposit with The Depository Trust Company), (iii) duplication expenses
relating to copies of any Registration Statement or Prospectus delivered to any
Holders hereunder, (iv) fees and disbursements of counsel for the Company
and the Special Counsel in connection with the Shelf Registration Statement
(provided that the Company shall not be liable for the fees and expenses of
more than one separate firm for all parties participating in any transaction
hereunder), (v) reasonable fees and disbursements of the Trustee and its
counsel and of the registrar and transfer agent for the Common Stock and
(vi) Securities Act liability insurance obtained by the Company in its
sole discretion.  In addition, the
Company shall pay the internal expenses of the Company (including, without
limitation, all salaries and expenses of officers and employees performing
legal or accounting duties), the expense of any annual audit, the fees and
expenses incurred in connection with the listing by the Company of the
Registrable Securities on any securities exchange or automated quotation system
on which similar securities of the Company are then listed and the fees and
expenses of any person, including special experts, retained by the
Company.  Notwithstanding the provisions
of this Section 5, each Holder shall pay all commissions and transfer
taxes and other fees and expenses incurred by such Holder (other than those
expenses specifically provided for above in this Section 5), if any, relating
to the sale or disposition of such Holder’s Registrable Securities pursuant to
the Shelf Registration Statement.

SECTION 6.   Indemnification.

(a)           Indemnification
by the Company.  The Company
shall indemnify and hold harmless each Notice Holder and each person, if any,
who controls any Notice Holder (within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act) from and against any
losses, liabilities, claims, damages and expenses (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) (collectively, “Losses”),
arising out of or based upon any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement or Prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or
arising out of or based upon any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, provided, however, that the Company shall
not be liable in any such case to the extent that any such Losses arise out of
or are based upon an untrue statement or alleged untrue statement contained in
or omission or alleged omission from any of such documents in reliance upon and
conformity with any of the information relating to the Holders furnished to the
Company in writing by a Holder expressly for use therein; provided further, that the
indemnification contained in this paragraph shall not inure to the benefit of
any Holder of

 

13

 

Registrable Securities (or to the benefit of any
person controlling such Holder) on account of any such Losses arising out of or
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any preliminary prospectus provided in each case the
Company has performed its obligations under Section 3(a) hereof if either
(A) (i) having previously been furnished by or on behalf of the Company
with one or more copies of the Prospectus, such Holder failed to send or
deliver a copy of the Prospectus with or prior to the delivery of written
confirmation of the sale by such Holder to the person asserting the claim from
which such Losses arise and (ii) the Prospectus would have corrected such
untrue statement or alleged untrue statement or such omission or alleged
omission, or (B) (x) such untrue statement or alleged untrue statement,
omission or alleged omission is corrected in an amendment or supplement to the
Prospectus and (y) having previously been furnished by or on behalf of the
Company with one or more copies of the Prospectus as so amended or
supplemented, such Holder thereafter fails to deliver such Prospectus as so
amended or supplemented, with or prior to the delivery of written confirmation
of the sale of a Registrable Security to the person asserting the claim from
which such Losses arise.

(b)           Indemnification
by Holders of Registrable Securities.  Each Holder agrees severally and not jointly to indemnify and
hold harmless the Company and its respective directors and officers, and each
person, if any, who controls the Company (within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act)
or any other Holder, from and against all Losses arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement or Prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, to
the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with information furnished to the Company by such Holder
expressly for use in such Registration Statement or Prospectus or amendment or
supplement thereto.  In no event shall
the liability of any selling Holder of Registrable Securities hereunder be
greater in amount than the dollar amount of the proceeds received by such
Holder upon the sale of the Registrable Securities pursuant to the Registration
Statement giving rise to such indemnification obligation.

(c)           Conduct of
Indemnification Proceedings. 
In case any proceeding (including any governmental investigation) shall
be instituted involving any person in respect of which indemnity may be sought
pursuant to either of the two preceding paragraphs, such person (the “indemnified
party”) shall promptly notify the person against whom such indemnity
may be sought (the “indemnifying party”) in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding
and shall pay the reasonable fees and disbursements of such counsel related to
such proceeding.  In any such proceeding,
any indemnified party shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party and the indemnified party shall
have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties) include both
the indemnifying party and the indemnified party and representation of both
parties by the same

 

14

 

counsel would be inappropriate due to actual or
potential differing interests between them. 
It is understood that the indemnifying party shall not, in respect of
the legal expenses of any indemnified party in connection with any proceeding
or related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all indemnified parties, and that all such fees and expenses shall be
reimbursed as they are incurred.  Such
separate firm shall be designated in writing by, in the case of parties
indemnified pursuant to Section 6(a), the Holders of a majority (with
Holders of Notes deemed to be the Holders, for purposes of determining such
majority, of the number of shares of Underlying Common Stock into which such
Notes are or would be convertible or exchangeable as of the date on which such
designation is made) of the Registrable Securities covered by the Registration
Statement held by Holders that are indemnified parties pursuant to
Section 6(a) and, in the case of parties indemnified pursuant to
Section 6(b), the Company.  The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment. 
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.

(d)           Contribution.  To the extent that the indemnification
provided for in this Section 6 is unavailable to an indemnified party
under Section 6(a) or 6(b) hereof in respect of any Losses or is
insufficient to hold such indemnified party harmless, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such Losses (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party or parties on the one hand
and the indemnified party or parties on the other hand or (ii) if the
allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of
the indemnifying party or parties on the one hand and of the indemnified party
or parties on the other hand in connection with the statements or omissions
that resulted in such Losses, as well as any other relevant equitable
considerations.  Benefits received by
the Company shall be deemed to be equal to the total net proceeds from the
initial placement pursuant to the Purchase Agreement (before deducting
expenses) of the Registrable Securities to which such Losses relate.  Benefits received by any Holder shall be deemed
to be equal to the value of receiving Registrable Securities that are
registered under the Securities Act. 
The relative fault of the Holders on the one hand and the Company on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Holders or by the Company, and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.  The Holders’ respective
obligations to contribute pursuant to this paragraph are several in proportion
to the respective number of Registrable Securities they have sold pursuant to a
Registration Statement, and not joint.

 

15

 

The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro  rata
allocation or by any other method or allocation that does not take into account
the equitable considerations referred to in the immediately preceding
paragraph.  The amount paid or payable
by an indemnified party as a result of the Losses referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim.  Notwithstanding this
Section 6(d), an indemnifying party that is a selling Holder of
Registrable Securities shall not be required to contribute any amount in excess
of the amount by which the total price at which the Registrable Securities sold
by such indemnifying party and distributed to the public were offered to the
public exceeds the amount of any damages that such indemnifying party has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. 
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.

(e)           The
indemnity, contribution and expense reimbursement obligations of the parties
hereunder shall be in addition to any liability any indemnified party may
otherwise have hereunder, under the Purchase Agreement or otherwise.

(f)            The
indemnity and contribution provisions contained in this Section 6 shall
remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf
of any Holder or any person controlling any Holder, or the Company, or the
Company’s officers or directors or any person controlling the Company and
(iii) the sale of any Registrable Securities by any Holder.

SECTION 7.   Information
Requirements.  (a) The
Company covenants that, if at any time before the end of the Effectiveness
Period the Company is not subject to the reporting requirements of the Exchange
Act, it will cooperate with any Holder of Registrable Securities and take such
further reasonable action as any Holder of Registrable Securities may
reasonably request in writing (including, without limitation, making such reasonable
representations as any such Holder may reasonably request), all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 and Rule 144A under the Securities
Act and customarily taken in connection with sales pursuant to such
exemptions.  Notwithstanding the
foregoing, nothing in this Section 7 shall be deemed to require the
Company to register any of its securities (other than the Common Stock) under
any section of the Exchange Act.

(b)           The
Company shall file the reports required to be filed by it under the Exchange
Act and shall comply with all other requirements set forth in the instructions
to Form S–3 in order to allow the Company to be eligible to file
registration statements on Form S–3.  Upon the written request of any Holder of Registrable Securities,
the Company shall deliver to such Holder a written statement as to whether it
has complied with such filing requirements, unless such a statement has

 

16

 

been included in the Company’s most recent report
filed pursuant to Section 13 or Section 15(d) of Exchange Act.

SECTION 8.   Miscellaneous.

(a)           No
Conflicting Agreements.  The
Company is not, as of the date hereof, a party to, nor shall it, on or after
the date of this Agreement, enter into, any agreement with respect to its
securities that conflicts with the rights granted to the Holders of Registrable
Securities in this Agreement.  The
Company represents and warrants that the rights granted to the Holders of
Registrable Securities hereunder do not in any way conflict with the rights
granted to the holders of the Company’s securities under any other agreements.

(b)           Amendments
and Waivers.  The provisions
of this Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the Company has obtained the
written consent of Holders of a majority of the then outstanding Underlying
Common Stock constituting Registrable Securities (with Holders of Notes deemed
to be the Holders, for purposes of this Section, of the number of outstanding
shares of Underlying Common Stock into which such Notes are or would be
convertible or exchangeable as of the date on which such consent is
requested).  Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders of Registrable Securities may be given by Holders of at
least a majority of the Registrable Securities being sold by such Holders
pursuant to such Registration Statement; provided, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.  Each Holder of Registrable Securities outstanding at the time of
any such amendment, modification, supplement, waiver or consent or thereafter
shall be bound by any such amendment, modification, supplement, waiver or
consent effected pursuant to this Section 8(b), whether or not any notice,
writing or marking indicating such amendment, modification, supplement, waiver
or consent appears on the Registrable Securities or is delivered to such Holder.

(c)           Notices.  All notices and other communications
provided for or permitted hereunder shall be made in writing by hand delivery,
by telecopier, by courier guaranteeing overnight delivery or by first-class
mail, return receipt requested, and shall be deemed given (i) when made,
if made by hand delivery, (ii) upon confirmation, if made by telecopier,
(iii) one (1) Business Day after being deposited with such courier, if
made by overnight courier or (iv) on the date indicated on the notice of
receipt, if made by first-class mail, to the parties as follows:

(w)                               if to a Holder of Registrable Securities,
at the most current address given by such Holder to the Company in a Notice and
Questionnaire or any amendment thereto;

 

17

 

(x)                                   if to the Company, to:

Lattice Semiconductor
Corporation

5555 N.E. Moore Ct.

Hillsboro, OR 97124-6421

Attention: General
Counsel

Telecopy No.: (503)
268-8077

and

Wilson Sonsini Goodrich
& Rosati

650 Page Mill Road

Palo Alto, CA 94304-1050

Attention: John Fore,
Esq.

Telecopy No.: (650)
493-6811

(y)                                 if to the Initial Purchaser, to:

Goldman, Sachs & Co.

85 Broad Street

New York, New York 10004

Attention:  Don Hansen

Telecopy No.:  (212) 357-5055

and

Davis
Polk & Wardwell

1600 El Camino
Real

Menlo Park, CA
94025

Attention: Bruce
Dallas, Esq.

Telecopy No.  (650) 752-2111

or to such other address as such person may have
furnished to the other persons identified in this Section 8(c) in writing
in accordance herewith.

(d)           Approval of
Holders.  Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities
Act) (other than the Initial Purchaser or subsequent Holders of Registrable
Securities if the Initial Purchaser or such subsequent Holders are deemed to be
such affiliates solely by reason of their holdings of such Registrable
Securities) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.

(e)           Successors
and Assigns.  Any person who
purchases any Registrable Securities from the Initial Purchaser shall be
deemed, for purposes of this Agreement, to be an assignee of the Initial

 

18

 

Purchaser. 
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties and shall inure to the benefit of
and be binding upon each Holder of any Registrable Securities.

(f)            Counterparts.  This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be original and all of which taken
together shall constitute one and the same agreement.

(g)           Headings.  The headings in this Agreement
are for convenience of reference only and shall not limit or otherwise affect
the meaning hereof.

(h)           Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES THEREOF.

(i)            Severability.  If any term provision, covenant or
restriction of this Agreement is held to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall
in no way be affected, impaired or invalidated thereby, and the parties hereto
shall use their best efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction, it being intended that all of the rights
and privileges of the parties shall be enforceable to the fullest extent
permitted by law.

(j)            Entire
Agreement.  This Agreement is
intended by the parties as a final expression of their agreement and is
intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and the registration rights granted by the Company with respect to the
Registrable Securities.  Except as
provided in the Purchase Agreement, there are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the Registrable Securities.  This
Agreement supersedes all prior agreements and undertakings among the parties
with respect to such registration rights. 
No party hereto shall have any rights, duties or obligations other than
those specifically set forth in this Agreement.  In no event will such methods of distribution take the form of an
underwritten offering of the Registrable Securities without the prior agreement
of the Company.

(k)           Termination.  This Agreement and the
obligations of the parties hereunder shall terminate upon the end of the
Effectiveness Period, except for any liabilities or obligations under
Section 4, 5 or 6 hereof and the obligations to make payments of and
provide for liquidated damages under Section 2(e) hereof to the extent
such damages accrue prior to the end of the Effectiveness Period, each of which
shall remain in effect in accordance with its terms.

 

19

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

 

	
   

  	
   

  	
   

  	
   

  	
  LATTICE SEMICONDUCTOR
  CORPORATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Stephen A.
  Skaggs

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Stephen A. Skaggs

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  Senior Vice President,
  Chief Financial

  Officer and Secretary

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Confirmed and accepted
  as of

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  the date first above
  written:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GOLDMAN, SACHS &
  CO.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Goldman, Sachs
  & Co.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
       (Goldman, Sachs & Co.)QuickLinks
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Exhibit 4.2  

        The issue of the Guaranty of this Note was approved by the Ministry of Finance and Public Credit of Mexico on November 13, 2001 pursuant to Official
Communication No. 305-I.2.1-1780 and has been given Registration No. 57-2000-FPG. 

        UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, 55 WATER STREET, NEW YORK, NEW YORK 10004, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE OR ANY PORTION HEREOF IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CEDE & CO. (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF CEDE & CO.), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OTHER THAN DTC OR A NOMINEE THEREOF IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 

        THIS
NOTE IS A U.S. GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE REFERRED TO HEREINAFTER. THIS NOTE MAY NOT BE EXCHANGED, IN WHOLE OR IN PART, FOR A NOTE REGISTERED IN THE NAME OF
ANY PERSON OTHER THAN DTC OR A NOMINEE THEREOF EXCEPT IN THE LIMITED CIRCUMSTANCES SET FORTH IN SECTION 3.05(a) OF THE INDENTURE. 

 
 
 

PEMEX PROJECT FUNDING MASTER TRUST
  
  MEDIUM-TERM NOTES, SERIES A
  
  Due from 1 Year to 30 Years from Date of Issue    
    

      
 Unconditionally Guaranteed by
  PETROLEOS MEXICANOS
  (A Decentralized Public Entity of the

Federal Government of the United Mexican States)  

  
 

    U.S. $750,000,000
  
  8.00% Notes due 2011    
    

REGISTERED

NO. R-[    •    ] 

        The
following summary of terms is subject to the information set forth on the reverse hereof and Schedule I hereto. 

	PRINCIPAL AMOUNT:	 	U.S. $[            ]
	

SPECIFIED CURRENCY:	
 	

U.S. dollars ("U.S. $" or "$")
	

STATED MATURITY:	
 	

November 15, 2011
	

ISSUE DATE:	
 	

[            ], 2003
	

CUSIP NO.:	
 	

706451 AF 8
	

INTEREST PAYMENT DATES:	
 	

May 15 and November 15 of each year, commencing November 15, 2003
	

PRINCIPAL PAYING AGENT AND TRANSFER AGENT:	
 	

Deutsche Bank Trust Company Americas, New York
	

PAYING AGENTS AND TRANSFER AGENTS:	
 	

Deutsche Bank AG, London Branch Deutsche Bank Luxembourg S.A.

        Pemex
Project Funding Master Trust (herein called "Pemex Project Funding Master Trust" or the "Issuer," which terms include any successor entity under the Indenture hereinafter referred
to), a statutory trust organized under the laws of the State of Delaware, for value received, hereby promises, in accordance with and subject to the provisions set forth on the face and reverse
hereof, to pay to Cede & Co. or registered assigns, the principal amount set forth above at the Stated Maturity specified above or on such earlier date as the same may become payable in
accordance with the terms hereof the principal amount specified above in the Specified Currency specified above or such other redemption amount as may be specified herein, and to pay in arrears on the
dates specified herein interest on such principal amount at the rate or rates specified herein, and accruing from the date specified herein, until the principal amount hereof is paid or made available
for payment. 

F-2

 

        Unless
defined herein, capitalized terms used herein shall have the meanings assigned to them on the reverse hereof and in the indenture dated as of July 31, 2000 (the
"Indenture"), among the Issuer,
Petróleos Mexicanos, as Guarantor, and Deutsche Bank Trust Company Americas (formerly Bankers Trust Company), as Trustee (the "Trustee", which expression shall include any successor
trustee under the Indenture). 

        Reference
is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at
this place. 

        Unless
the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose. 

        IN
WITNESS WHEREOF, the Issuer has caused this Note to be duly executed. 

Dated:

	 	 	PEMEX PROJECT FUNDING
	 	 	 	MASTER TRUST
	 	 	by	THE BANK OF NEW YORK

not in its individual capacity,

but solely as Managing Trustee
	

 	
 	

By:	

 Name:

Title:

 
 

CERTIFICATE OF AUTHENTICATION    
    

        This is one of the series of Securities designated herein issued under the within-mentioned Indenture. 

	

Dated:	
 	
DEUTSCHE BANK TRUST COMPANY

AMERICAS
 as Trustee
	

 	
 	

By:	

 
	 	 	 	
 Authorized Signatory

F-3

  

 
 

REVERSE OF NOTE    
    

        1.     This
Note is one of a duly authorized Series of Securities of Pemex Project Funding Master Trust (the "Issuer") designated as its 8.00% Notes due 2011 (the "Notes"),
issued and to be issued in accordance with an indenture, dated as of July 31, 2000 (herein called the "Indenture"), among the Issuer, Petróleos Mexicanos, as Guarantor (the
"Guarantor"), and Deutsche Bank Trust Company Americas (formerly Bankers Trust Company), as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), copies
of which Indenture are on file and available for inspection at the corporate trust office of the Trustee in the Borough of Manhattan, The City of New York and, so long as the Notes are listed on the
Luxembourg Stock Exchange and such Exchange shall so require, at the office of the Paying Agent in Luxembourg. Reference is hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Issuer and the holders of the Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered. The Notes were
originally issued pursuant to an exchange offer made to all holders of the Issuer's 8.00% Notes due 2011 (the "Old Notes" and, together with the Notes, the "2011 Notes"). The 2011 Notes are limited to
an aggregate initial principal amount of U.S. $750,000,000, subject to further increase as provided in Paragraph 10 below. Capitalized terms not otherwise defined herein or on the face of this
Note shall have the meanings assigned to them in the Indenture. 

        The
Notes are direct, unsecured and unsubordinated Public External Indebtedness (as defined in Paragraph 8 below) of the Issuer for money borrowed and will rank  pari passu with each other and with all
other present and future unsecured and unsubordinated Public External Indebtedness for money borrowed of the
Issuer. The Notes are not obligations of, or guaranteed by, the United Mexican States ("Mexico"). 

        Each
of the Notes will have the benefit of the unconditional guaranty endorsed hereon (the "Guaranty") as to punctual payment when due of all amounts of principal of and interest
(including Additional Amounts) and premium (if any) on the Notes, and any other amounts payable by the Issuer under the Notes or the Indenture. The Guarantor's payment obligations under the Guaranty
and the Indenture will have the benefit of an unconditional guaranty as to payment of principal and interest (including Additional Amounts) jointly and severally from each of
Pemex-Exploración y Producción, Pemex-Refinación and Pemex-Gas y Petroquímica Básica (each, a "Subsidiary
Guarantor" and together, the "Subsidiary Guarantors"), pursuant to a Guaranty Agreement, dated July 29, 1996 (the "Subsidiary Guaranty"), among the Guarantor and the Subsidiary Guarantors. The
Guarantor has designated its Guaranty of each of the Notes and the Indenture as obligations of the Guarantor
entitled to the benefits of the Subsidiary Guaranty, pursuant to certificates of designation, dated November 14, 2001 and November 26, 2001 (the "Certificates of Designation"). 

        The
Notes are denominated in U.S. dollars or in the Specified Currency specified on the face hereof. Payments on the Notes will be made in the Specified Currency specified on the face
hereof. The Notes are issuable only in fully registered form, without interest coupons. Notes are issuable in authorized denominations of U.S. $10,000 and integral multiples thereof. 

        2.(a) This
Note will bear interest from May 15, 2003 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the
interest rate per annum specified on the face hereof, until the principal hereof has been paid or duly made available for payment. The interest on this Note shall be payable in arrears on each
Interest Payment Date specified on the face hereof, and shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Any payment on this Note due on any
day which is not a Business Day in The City of New York or the place of payment need not be made on such day, but may be made on the next succeeding Business Day with the same force and effect as if
made on the due date, and no interest shall accrue for the period from and after such due date. "Business Day", as used herein with respect to any particular 

R-1

 

location,
means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in such location are authorized or obligated by law to close in such location. 

        (b)   The
interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will be paid to the person in whose name this Note (or one or more
predecessor Notes) is registered at the close of business on the 15th day (whether or not a Business Day) (the "Regular Record Date") next preceding such Interest Payment Date;  provided that interest
payable at Stated Maturity will be payable to the person to whom principal shall be payable; and  provided, further, that if this Note is a Global Security,
any payment of interest on this Note shall be
made to the applicable Depositary or its nominee, as the registered owner hereof. Unless otherwise specified on the face hereof, the first payment of interest on any Note originally issued between a
Regular Record Date and an Interest Payment Date will be made on the Interest Payment Date following the next succeeding Regular Record Date to the registered owner on such next succeeding Regular
Record Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the holder on such Regular Record Date and may either be paid to the person in whose
name this Note (or one or more predecessor Notes) is registered at the close of business on a special record date for the payment of such defaulted interest to be fixed by the Trustee, notice whereof
shall be given to holders of Notes not less than 10 days prior to such special record date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange. 

        (c)   Payment
of principal (and premium, if any) and any interest due with respect to the Notes at Stated Maturity will be made in immediately available funds upon surrender
of such Notes at the corporate trust office of the Trustee in the Borough of Manhattan, The City of New York, or at the specified office of any other Paying Agent,  provided that the Note is presented to
the Paying Agent in time for the Paying Agent to make such payments in such funds in accordance with its normal
procedures. Payments of principal (and premium, if any) and any interest in respect of this Note to be made other than at Stated Maturity or upon redemption will be made by check mailed on or before
the due date for such payments to the address of the persons entitled thereto as they appear in the Security Register; provided that (i) the
applicable Depositary, as holder of the Global Securities, shall be entitled to receive payments of interest by wire transfer of immediately available funds and (ii) a holder of U.S.
$10,000,000 in aggregate principal or face amount of Notes having the same Interest Payment Date shall be entitled to receive payments of interest by wire transfer to an account maintained by such
holder at a bank located in the United States as may have been appropriately designated by such person to the Paying Agent in writing no later than the relevant Regular Record Date. Unless such
designation is revoked, any such designation made by such holder with respect to such Note shall remain in effect with respect to any further payments with respect to such Note payable to such holder. 

        3.(a) The
Issuer shall maintain in the Borough of Manhattan, The City of New York, an office or agency where Notes may be surrendered for registration of transfer or
exchange. The Issuer has initially appointed the corporate trust office of the Trustee as its agent in the Borough of Manhattan, The City of New York, for such purpose and has agreed to cause to be
kept at such office a register in which, subject to such reasonable regulations as it may prescribe, the Issuer will provide for the registration of Notes and of transfers of Notes. The Issuer
reserves the right to vary or terminate the appointment of the Trustee as security registrar or of any Transfer Agent or to appoint additional or other registrars or Transfer Agents or to approve any
change in the office through which any security registrar or any Transfer Agent acts, provided that there will at all times be a security registrar in the Borough of Manhattan, The City of New York
and, so long as the Notes are listed on the Luxembourg Stock Exchange and such Exchange shall so require, a Transfer Agent in Luxembourg. 

        (b)   The
transfer or exchange of a Note is registrable on the aforementioned register upon surrender of such Note at the corporate trust office of the Trustee or any Transfer
Agent duly endorsed 

R-2

 

by,
or accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Trustee duly executed by the holder thereof or his attorney duly authorized in writing. Upon such
surrender of a Note for registration of transfer, the Issuer shall execute one or more new Notes of any authorized denominations and of a like form, tenor and terms and a like aggregate principal
amount, the Guarantor shall execute the Guaranty endorsed thereon, and the Trustee shall authenticate and deliver in the name of the designated transferee or transferees, such new Notes, dated the
date of authentication thereof. At the option of the holder upon request confirmed in writing, Notes may be exchanged for Notes of any authorized denominations and of a like form, tenor and terms and
a like aggregate principal amount upon surrender of the Notes to be exchanged at the office of any Transfer Agent or at the corporate trust office of the Trustee. Whenever any Notes are so surrendered
for exchange, the Issuer shall execute the Notes which the holder making the exchange is entitled to receive, the Guarantor shall execute the Guaranty endorsed thereon, and the Trustee shall
authenticate and deliver such Notes. 

        (c)   Any
registration of transfer or exchange will be effected upon the Transfer Agent or the Trustee, as the case may be, being satisfied with the documents of title and
identity of the person making the request and subject to such reasonable regulations as the Issuer may from time to time agree with any Transfer Agents and the Trustee. 

        (d)   In
the event of a redemption of Notes in part (if permitted by the provisions hereof), the Issuer shall not be required (i) to register the transfer of or
exchange any Note during a period beginning at the opening of business 15 days before, and continuing until, the date on which notice is given identifying the Notes to be redeemed, or
(ii) to register the transfer of or exchange any Note, or portion thereof, called for redemption. 

        (e)   All
Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same
benefits, as the Notes surrendered upon such registration of transfer or exchange. No service charge shall be made for any registration of transfer or exchange, but the Issuer may require payment of a
sum sufficient to cover any stamp tax or other governmental charge payable in connection therewith, other than an exchange in connection with a partial redemption of a Note not involving any
registration of a transfer. 

        Prior
to due presentment of this Note for registration of transfer, the Issuer, the Guarantor, each Subsidiary Guarantor, the Trustee and any agent of the Issuer, the Guarantor, any
Subsidiary Guarantor or the Trustee may treat the person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the
Guarantor, any Subsidiary Guarantor, the Trustee nor any such agent shall be affected by any notice to the contrary. 

        4.     The
Issuer shall pay to the Trustee at its principal office in the Borough of Manhattan, The City of New York, on or prior to 11:00 a.m., New York City time, on
each Interest Payment Date, any redemption date and at the Stated Maturity of the Notes, in such amounts sufficient (with any amounts then held by the Trustee and available for the purpose) to pay the
interest on, the redemption price of and accrued interest (if the redemption date is not an Interest Payment Date) on, and the principal of, the Notes due and payable on such Interest Payment Date,
redemption date or Stated Maturity, as the case may be. The Trustee shall apply the amounts so paid to it to the payment of such interest, redemption price and principal in accordance with the terms
of the Notes. Any monies paid by the Issuer to the Trustee for the payment of the principal, premium (if any) or interest on any Notes and remaining unclaimed at the end of two years after such
principal (or premium, if any) or interest shall have become due and payable (whether at the Stated Maturity, upon call for redemption or otherwise) shall then be repaid to the Issuer upon its written
request, and upon such repayment all liability of the Trustee with respect thereto shall cease, without, however, limiting in any way any obligation the Issuer may have to pay the principal of (and
premium, if any) and interest on each Note as the same shall 

R-3

 

become
due. Notwithstanding the foregoing, the right to receive any payment of principal of or interest on the Notes will become void at the end of five years after the due date thereof. 

        5.(a) The
Issuer will pay all stamp and other duties, if any, which may be imposed by the United States or any political subdivision thereof or taxing authority of or in the
foregoing with respect to the Indenture or the issuance of this Note. Except as otherwise provided herein, the Issuer shall not be required to make any payment with respect to any tax, assessment or
other governmental charge imposed by any government or any political subdivision or taxing authority thereof or therein. 

        (b)   The
Issuer, or, in the case of a payment by the Guarantor or a Subsidiary Guarantor, such Guarantor or Subsidiary Guarantor, will pay to the holder of this Note such
additional amounts ("Additional Amounts") as may be necessary in order that every net payment made by the Issuer, the Guarantor or a Subsidiary Guarantor on this Note after deduction or withholding
for or on account of any present or future tax, assessment or other governmental charge imposed upon or as a result of such payment by Mexico or any political subdivision or taxing authority thereof
or therein ("Mexican Withholding Taxes"), will not be less than the amount then due and payable on this Note. The foregoing obligation to pay Additional Amounts, however, will not apply to
(i) any Mexican Withholding Taxes that would not have been imposed or levied on the holder of this Note but for the existence of any present or former connection between such holder and Mexico
or any political subdivision or territory or possession thereof or area subject to its jurisdiction, including, without limitation, such holder (A) being or having been a citizen or resident
thereof, (B) maintaining or having maintained an office, permanent establishment, fixed base or branch therein, or (C) being or having been present or engaged in trade or business
therein, except for a connection solely arising from the mere ownership of, or receipt of payment under, this Note; (ii) except as otherwise provided, any estate, inheritance, gift, sales,
transfer or personal property or similar tax, assessment or other governmental charge; (iii) any Mexican Withholding Taxes that are imposed or levied by reason of the failure by such holder to
comply with any certification, identification, information, documentation, declaration or other reporting requirement that is required or imposed by a statute, treaty, regulation, general rule or
administrative practice as a precondition to exemption from, or reduction in the rate of, the imposition, withholding or deduction of any Mexican Withholding Taxes;  provided that at least 60 days
prior to (A) the first payment date with respect to which the Issuer, the Guarantor or a Subsidiary
Guarantor shall apply this clause (iii) and, (B) in the event of a change in such certification, identification, information, documentation, declaration or other reporting requirement,
the first payment date subsequent to such change, the Issuer, the Guarantor or a Subsidiary Guarantor, as the case may be, shall have notified the Trustee in writing that the holders of Notes will be
required to provide such certification, identification, information or documentation, declaration or other reporting; (iv) any Mexican Withholding Taxes imposed at a rate in excess of 4.9% in
the event that such holder has failed to provide on a timely basis, at the reasonable request of the Issuer, information or documentation (not described in clause (iii) above) concerning such
holder's eligibility for benefits under an income tax treaty to which Mexico is a party that is necessary to determine the appropriate rate of deduction or withholding of Mexican taxes under any such
treaty; (v) any Mexican Withholding Taxes that would not have been so imposed but for the presentation by such holder of this Note for payment on a date more than 15 days after the date
on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later; or (vi) any payment on this Note to any holder who is a fiduciary
or partnership or other than the sole beneficial owner of any such payment, to the extent that a beneficiary or settlor with respect to such fiduciary, a member of such a partnership or the beneficial
owner of such payment would not have been entitled to the Additional Amounts had such beneficiary, settlor, member or beneficial owner been the holder of this Note. All references in this Note or in
the Indenture to principal, premium, if any, and interest in respect of Notes shall, unless the context otherwise requires, be deemed to mean and include all Additional Amounts, if any, payable in
respect thereof as set forth in this paragraph (b). 

R-4

 

        (c)   Notwithstanding
the foregoing, the limitations on the Issuer's, the Guarantor's and the Subsidiary Guarantors' obligation to pay Additional Amounts set forth in clauses
(iii) and (iv) above shall not apply if the provision of the certification, identification, information, documentation, declaration or other evidence described in such clauses
(iii) and (iv) would be materially more onerous, in form, in procedure or in the substance of information disclosed, to a holder or beneficial owner of this Note (taking into account any
relevant differences between United States and Mexican law, regulation or administrative practice) than comparable information or other applicable reporting requirements imposed or provided for under
United States federal income tax law (including the United States-Mexico Income Tax Treaty), regulation (including proposed regulations) and administrative practice. In addition, the limitations on
the Issuer's, the Guarantor's and the Subsidiary Guarantors' obligation to pay Additional Amounts set forth in clauses (iii) and (iv) above shall not apply if Rule 3.25.15
published in the Official Gazette of the Federation on May 30, 2002, or a substantially similar successor of such rule is in effect, unless (A) the provision of the certification,
identification, information, documentation, declaration or other evidence described in clauses (iii) and (iv) is expressly required by statute, regulation, general rules or
administrative practice in order to apply Rule 3.25.15 (or a substantially similar successor of such rule), the Issuer, the Guarantor or the applicable Subsidiary Guarantor cannot obtain such
certification, identification, information, documentation, declaration or evidence, or satisfy any other reporting requirements, on its own through reasonable diligence and the Issuer, the Guarantor
or the applicable Subsidiary Guarantor otherwise would meet the requirements for application of Rule 3.25.15 (or such successor of such rule) or (B) in the case of a holder or beneficial
owner of a Note that is a pension fund or other tax-exempt organization, such holder or beneficial owner would be subject to Mexican Withholding Taxes at a rate less than that provided by
Rule 3.25.15 if the information, documentation or other evidence required under clause (iv) above were provided. In addition, clause (iii) above shall not be construed to require
that a non-Mexican pension or retirement fund, a non-Mexican tax-exempt organization or a non-Mexican financial institution or any other holder or
beneficial owner of this Note register with the Ministry of Finance and Public Credit of Mexico for the purpose of establishing eligibility for an exemption from or reduction of Mexican Withholding
Taxes. 

        (d)   The
Issuer, the Guarantor or a Subsidiary Guarantor, as the case may be, will, upon written request, provide the Trustee, the holders and the Paying Agents with a duly
certified or authenticated copy of an original receipt of the payment of Mexican Withholding Taxes which such Issuer, Guarantor of Subsidiary Guarantor has withheld or deducted in respect of any
payments made under or with respect to the Notes, the Guaranty or the Subsidiary Guaranty, as the case may be. Any reference herein or in the Indenture to principal, interest, Redemption Price or any
other amount payable under or with respect to the Notes will be deemed also to refer to any Additional Amounts which may be payable under the undertakings referred to herein. 

        (e)   In
the event that Additional Amounts actually paid with respect to this Note are based on rates of deduction or withholding of Mexican Withholding Taxes in excess of the
appropriate rate applicable to the holder of this Note, and, as a result thereof, such holder is entitled to make a claim for a refund or credit of such excess, then such holder shall, by accepting
this Note, be deemed to have assigned and transferred all right, title and interest to any such claim for a refund or credit of such excess to the Issuer, the Guarantor or the applicable Subsidiary
Guarantor, as the case may be. However, by making such assignment, the holder makes no representation or warranty that the Issuer, the Guarantor or the applicable Subsidiary Guarantor, as the case may
be, will be entitled to receive such claim for a refund or credit and incurs no other obligation with respect thereto. 

        6.     (a)
This Note may not be redeemed prior to the Stated Maturity, except as specified in paragraph (b) below. 

        (b)   The
Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time, together, if applicable, with interest accrued to but excluding the date
fixed for redemption, at par, on 

R-5

 

giving
not less than 30 nor more than 60 days' notice to the holders of the Notes (which notice shall be irrevocable), if (i) the Issuer or the Guarantor certifies to the Trustee
immediately prior to the giving of such notice that it has or will become obligated to pay Additional Amounts in excess of the Additional Amounts that it would be obligated to pay if payments
(including payments of interest) on the Notes (or payments under the Guaranties with respect to interest on the Notes) were subject to a tax at a rate of 10%, as a result of any change in, amendment
to, or lapse of, the laws, regulations or rulings of Mexico or any political subdivision or any taxing authority thereof or therein affecting taxation, or any change in, or amendment to, an official
interpretation or application of such laws, regulations or rulings, which change or amendment becomes effective on or after the date of issuance of the Notes and (ii) prior to the publication
of any notice of redemption, the Issuer or the Guarantor shall deliver to the Trustee an Officer's Certificate stating that the obligation referred to in (i) above cannot be avoided by the
Issuer or the Guarantor, as the case may be, taking reasonable measures available to it, and the Trustee shall be entitled to accept such certificate as sufficient evidence of the satisfaction of the
condition precedent set out in (i) above in which event it shall be conclusive and binding on the holders of the Notes; provided that no such
notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer or the Guarantor, as the case may be, would be obligated but for such redemption to pay
such Additional Amounts were a payment in respect of the Notes then due and, at the time such notice is given, such obligation to pay such Additional Amounts remains in effect. 

        (c)   The
Issuer, the Guarantor or any Subsidiary Guarantor may at any time purchase Notes at any price in the open market or otherwise. Notes so purchased by the Issuer, the
Guarantor or any Subsidiary Guarantor may be held, resold (subject to compliance with applicable securities and tax laws) or surrendered to the Trustee for cancellation. 

        7.     This
Note is not repayable prior to the Stated Maturity at the option of the holder, except as set forth in Paragraph 8. 

        8.     If
any of the following events (each, an "Event of Default") occurs and is continuing, the Trustee, if so requested in writing by holders of at least 20% in principal
amount of the 2011 Notes then outstanding, voting as a single series, shall give notice to the Issuer that the Notes are, and they shall immediately become, due and payable at their principal amount
together with accrued interest: 

        (a)   Non-Payment: default is made in payment of principal of or any interest on any of the Notes when due and such
failure continues, in the case of non-payment of principal for seven days, and of interest for fourteen days after the due date; or 

        (b)   Breach of Other Obligations: the Issuer or the Guarantor defaults in performance or observance of or compliance with any
of its other obligations set out in the Notes or the Guaranties or (insofar as it concerns the Notes or the Guaranties) the Indenture which default is incapable of remedy or, if capable of remedy, is
not remedied within 30 days after notice of such default shall have been given to the Issuer, the Guarantor and the Subsidiary Guarantors by the Trustee; or 

        (c)   Cross-Default: default by the Issuer, the Guarantor or any of the Guarantor's Material Subsidiaries (as defined below) or
the Subsidiary Guarantors or any of them or any of their respective Material Subsidiaries in the payment of the principal of, or interest on, any Public External Indebtedness (as defined below) of, or
guaranteed by, the Issuer, the Guarantor or any of the Guarantor's Material Subsidiaries or the Subsidiary Guarantors or any of them or any of their respective Material Subsidiaries, in an aggregate
principal amount exceeding U.S. $40,000,000 or its equivalent, when and as the same shall become due and payable, if such default shall continue for more than the period of grace, if any, originally
applicable thereto; or 

        (d)   Enforcement Proceedings: a distress or execution or other legal process is levied or enforced or sued out upon or against
any substantial part of the property, assets or revenues of the Issuer, the 

R-6

 

Guarantor
or any of the Guarantor's Material Subsidiaries or the Subsidiary Guarantors or any of them or any of their respective Material Subsidiaries and is not discharged or stayed within
60 days of having been so levied, enforced or sued out; or 

        (e)   Security Enforced: an encumbrancer takes possession or a receiver, manager or other similar officer is appointed of the
whole or any substantial part of the undertaking, property, assets or revenues of the Issuer, the Guarantor or any of the Guarantor's Material Subsidiaries or the Subsidiary Guarantors or any of them
or any of their respective Material Subsidiaries; or 

        (f)    Insolvency: the Issuer, the Guarantor or any of the Guarantor's Material Subsidiaries or the Subsidiary Guarantors or any
of them or any of their respective Material Subsidiaries becomes insolvent or is generally unable to pay its debts as they mature or applies for or consents to or suffers the appointment of an
administrator, liquidator, síndico, conciliador, interventor or receiver of the Issuer, the Guarantor or any of the Guarantor's Material
Subsidiaries or the Subsidiary Guarantors or any of them or any of their respective Material Subsidiaries or the whole or any substantial part of the undertaking, property, assets or revenues of the
Issuer, the Guarantor or any of the Guarantor's Material Subsidiaries or the Subsidiary Guarantors or any of them or any of their respective Material Subsidiaries or takes any proceeding under any law
for a readjustment or deferment of its obligations or any part of them for bankruptcy, reorganization, concurso mercantil, dissolution or liquidation or
makes or enters into a general assignment or an arrangement or composition with or for the benefit of its creditors or stops or threatens to cease to carry on its business or any substantial part of
its business; or 

        (g)   Winding-up: an order is made or an effective resolution passed for winding up the Issuer, the Guarantor or
any of the Guarantor's Material Subsidiaries or the Subsidiary Guarantors or any of them or any of their respective Material Subsidiaries; or 

        (h)   Moratorium: a general moratorium is agreed or declared in respect of any External Indebtedness (as defined below) of the
Issuer, the Guarantor or any of the Guarantor's Material Subsidiaries or the Subsidiary Guarantors or any of them or any of their respective Material Subsidiaries; or 

        (i)    Authorization and Consents: any action, condition or thing (including the obtaining or effecting of any necessary
consent, approval, authorization, exemption, filing, license, order, recording or registration) at any time required to be taken, fulfilled or done in order (i) to enable the Issuer lawfully to
enter into, exercise its rights and perform and comply with its obligations under the Notes or the Indenture, (ii) to enable the Guarantor lawfully to enter into, exercise its rights and
perform and comply with its obligations under the Guaranties relating to the Notes, the Indenture or the Subsidiary Guaranty Agreement in relation to the Notes and the related Guaranties,
(iii) to enable any of the Subsidiary Guarantors lawfully to enter into, perform and comply with its obligations under the Subsidiary Guaranty Agreement in relation to the Notes, the related
Guaranties or the Indenture and (iv) to ensure that those obligations are legally binding and enforceable, is not taken, fulfilled or done within 30 days of its being so required; or 

        (j)    Illegality: it is or becomes unlawful for (i) the Issuer to perform or comply with one or more of its obligations
under any of the Notes or the Indenture, (ii) the Guarantor to perform or comply with any of its obligations under the Indenture, the Guaranties or the Subsidiary Guaranty Agreement with
respect to the Notes, the related Guaranties or the Indenture, or (iii) the Subsidiary Guarantors or any of them to perform or comply with one or more of its obligations under the Subsidiary
Guaranty Agreement with respect to the Notes, the related Guaranties or the Indenture; or 

        (k)   Control: the Guarantor ceases to be a decentralized public entity of the Government or the Government otherwise ceases to
control the Guarantor or any Subsidiary Guarantor; or the Issuer, the Guarantor or any of the Subsidiary Guarantors is dissolved, disestablished or suspends its respective 

R-7

 

operations,
and such dissolution, disestablishment or suspension of operations is material in relation to the business of the Issuer, the Guarantor and the Subsidiary Guarantors taken as a whole; or
the Guarantor and the Subsidiary Guarantors cease to be the entities which have the exclusive right and authority to conduct on behalf of Mexico the activities of exploration, exploitation, refining,
transportation, storage, distribution and first-hand sale of crude oil and exploration, exploitation, production and first-hand sale of natural gas, as well as the
transportation and storage inextricably linked with such exploitation and production; or the Issuer ceases to be controlled by the Guarantor; or 

        (l)    Disposals:

	(i)
	the
Guarantor ceases to carry on all or a substantial part of its business, or sells, transfers or otherwise disposes (whether voluntarily or involuntarily) of all or
substantially all of its assets (whether by one transaction or a series of transactions whether related or not) other than (A) solely in connection with the implementation of the  Ley Orgánica de Petróleos
Mexicanos y Organismos Subsidiarios or (B) to a Subsidiary Guarantor; or

	(ii)
	any
Subsidiary Guarantor ceases to carry on all or a substantial part of its business, or sells, transfers or otherwise disposes (whether voluntarily or involuntarily)
of all or substantially all of its assets (whether by one transaction or a series of transactions whether related or not) and such cessation, sale, transfer or other disposal is material in relation
to the business of the Guarantor and the Subsidiary Guarantors taken as a whole; or 

        (m)  Analogous Events: any event occurs which under the laws of Mexico has an analogous effect to any of the events referred
to in paragraphs (d) to (g) above; or 

        (n)   Guaranties: the Guaranties or the Subsidiary Guaranty Agreement is not (or is claimed by the Guarantor or any of the
Subsidiary Guarantors not to be) in full force and effect. 

        "External
Indebtedness" means Indebtedness which is payable, or at the option of its holder may be paid, (i) in a currency or by reference to a currency other than the currency of
Mexico, (ii) to a person
resident or having its head office or its principal place of business outside Mexico and (iii) outside the territory of Mexico. 

        "Guarantee"
means any obligation of a person to pay the Indebtedness of another person, including without limitation: 

	(i)
	an
obligation to pay or purchase such Indebtedness; or

	(ii)
	an
obligation to lend money or to purchase or subscribe for shares or other securities or to purchase assets or services in order to provide funds for the payment of
such Indebtedness; or

	(iii)
	any
other agreement to be responsible for such Indebtedness. 

        "Indebtedness"
means any obligation (whether present or future, actual or contingent) for the payment or repayment of money which has been borrowed or raised (including money raised by
acceptances and leasing). 

        "Public
External Indebtedness" means any External Indebtedness which is in the form of, or represented by, notes, bonds or other securities which are for the time being quoted, listed or
ordinarily dealt in on any stock exchange. 

        "Subsidiary"
means, in relation to any person, any other person (whether or not now existing) which is controlled directly or indirectly by, or more than 50 percent of whose
issued equity share capital (or equivalent) is then held or beneficially owned by, the first person and/or any one or more of the first person's Subsidiaries, and "control" means the power to appoint
the majority of the members of the governing body or management of, or otherwise to control the affairs and policies of, that person. 

R-8

 

        "Material
Subsidiaries" means, at any time, each of the Subsidiary Guarantors and any Subsidiary of the Guarantor or any of the Subsidiary Guarantors having, as of the end of the most
recent fiscal
quarter of the Guarantor, total assets greater than 12% of the total assets of the Guarantor, the Subsidiary Guarantors and their Subsidiaries on a consolidated basis. 

        After
any such acceleration has been made, but before a judgment or decree for the payment of money due based on acceleration has been obtained by the Trustee, the holders of a majority
in aggregate principal amount of the 2011 Notes then outstanding, voting as a single series, may rescind and annul such acceleration in writing if all Events of Default, other than the
non-payment of the principal of the Notes that have become due solely by such declaration of acceleration, have been cured or waived as provided in the Indenture. 

        9.     The
Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the
Guarantor and the rights of the holders of the Notes to be affected under the Indenture at any time by the Issuer, the Guarantor and the Trustee with the consent of the holders of not less than a
majority in principal amount of the 2011 Notes, voting as a single series. The Indenture also contains provisions permitting the holders of specified percentages in principal amount of the 2011 Notes
at the time Outstanding, on behalf of the holders of all Notes, to waive compliance by the Issuer or the Guarantor with certain provisions of the Indenture and certain past defaults under the
Indenture or the Notes and their consequences. Any such consent or waiver by the holder of this Note shall be conclusive and binding upon such holder and upon all future holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. 

        10.   The
Issuer may from time to time without the consent of any holder of Notes create and issue additional notes having the same terms and conditions as Notes previously
issued (or the same except the first payment of interest or the issue price), which additional notes may be consolidated to form a single series with the outstanding Notes. 

        11.   No
reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligations of the Issuer or the Guarantor, which are
absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency, herein prescribed. 

        12.   The
Bank of New York is executing this Note not in its individual capacity but solely as Managing Trustee of the Issuer and in no event shall the The Bank of New York
have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer or the Guarantor hereunder, as to which recourse shall be had solely to the assets of
the Issuer or the Guarantor, and under no circumstances shall The Bank of New York be personally liable for the payment of any indebtedness due under the Note. The Note does not represent interests in
or obligations of The Bank of New York. 

        13. THIS NOTE SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.

*** 

R-9

 
 
 

GUARANTY    
    

        1.     The
Guarantor hereby unconditionally and irrevocably guarantees the punctual payment when due, whether at Stated Maturity, upon redemption or early repayment, upon
acceleration or otherwise, of all payments of principal of and interest (including Additional Amounts) on the Notes, and any other amounts payable by the Issuer under the Notes or the Indenture (the
"Obligations"). If the Issuer shall fail to pay punctually any Obligation, the Guarantor shall forthwith pay such Obligation when and as the same shall be due and payable to the person entitled
thereto in the manner specified in the Notes or the Indenture. All payments hereunder shall be made in currency specified in the Notes in same day funds (or such other funds as may, at the time of
payment, be customary for the settlement in New York City of international banking transactions in the such currency) as if such payment were made by the Issuer in accordance with the terms of the
Notes and the Indenture. 

        2.     The
obligations of the Guarantor set forth herein shall constitute a guaranty of payment and not of collection, and shall be absolute and unconditional. This Guaranty
shall be continuing and remain in full force and effect and be binding upon the Guarantor and its successors and assigns and inure to the benefit of the holders of the Notes and the Trustee (each, a
"Beneficiary", and collectively, the "Beneficiaries") until all Obligations of the Issuer have been discharged in full. The Guarantor hereby waives, to the extent permitted by applicable law, all
claims of waiver, exchange, release, surrender, alteration or compromise and all set-offs, counterclaims and recoupments which it may have or assert against the Beneficiaries. The
Guarantor hereby waives promptness, diligence, presentment, demand for payment, notice of acceptance of this Guaranty, protest of any kind whatsoever, any requirement that a Beneficiary exhaust any
right or take any action against the Issuer or any other person or entity or any property or collateral, as well as any right to require a proceeding first against the Issuer or the Issuer's property
or the exercise by a holder of the Notes of its rights upon the occurrence and continuation of an Event of Default. 

        3.     This
Guaranty shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Guaranty is endorsed shall have been
executed by the Trustee under the Indenture by the manual signature of one of its authorized signatories. 

        4.     The
obligations of the Guarantor to the Beneficiaries pursuant to this Guaranty and the Indenture, and the rights of the Guarantor with respect thereto, are expressly set
forth in the Indenture and reference is hereby made to the Indenture for the precise terms of this Guaranty, which are incorporated herein by reference and made a part hereof. 

        5.     Capitalized
terms used herein and not otherwise defined herein have the meanings specified in the Indenture. 

        THIS GUARANTY SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA, EXCEPT THAT ALL MATTERS
RELATING TO THE AUTHORIZATION AND EXECUTION BY THE GUARANTOR OF THIS GUARANTY SHALL BE GOVERNED BY THE LAWS OF MEXICO.

        IN
WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed. 

Dated:
August [    •    ], 2003 

	 	 	PETROLEOS MEXICANOS
	

 	
 	

By:	

 Name:

Title:

R-10

 
 

ABBREVIATIONS    
    

        The
following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or
regulations: 

	

TEN COM -	
 	

as tenants

in common	
 	

UNIF GIFT

MIN ACT -                Custodian               

                          (Cust)
                         (Minor)
	

TEN ENT -	
 	

as tenants by

the entireties	
 	

                     Under Uniform Gifts

                     to Minors
	

JT TEN -	
 	

as joint tenants with

right of survivorship and

not as tenants in common	
 	

 State

Additional
abbreviations may also be used though not in the above list. 

FOR
VALUE RECEIVED the undersigned hereby sell(s),

assign(s) and transfer(s) unto 

PLEASE
INSERT SOCIAL SECURITY OR OTHER

IDENTIFYING NUMBER OF ASSIGNEE 

Please
print or typewrite name and address

including postal zip code of assignee 

the
within note and all rights thereunder,

hereby irrevocably constituting and appointing 

                                        
                                          
                                      
attorney to transfer said note on the books of Pemex Project Funding Master Trust, with full power of substitution in the premises. 

Dated:                                       
                   

NOTICE:
The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular, without alteration or enlargement or any change whatever. 

QuickLinks

PEMEX PROJECT FUNDING MASTER TRUST MEDIUM-TERM NOTES, SERIES A Due from 1 Year to 30 Years from Date of Issue

U.S. $750,000,000 8.00% Notes due 2011

CERTIFICATE OF AUTHENTICATION

REVERSE OF NOTE

GUARANTY

ABBREVIATIONS

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