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EXHIBIT 10.9    
  

INSURANCE AND INDEMNITY AGREEMENT

Dated as of December 31, 2002  

 AMBAC ASSURANCE CORPORATION

as Insurer  

 BRL UNIVERSAL COMPRESSION FUNDING I 2002, L.P.

as Issuer  

 UNIVERSAL COMPRESSION, INC.

as Contributor and Manager  

 UCO COMPRESSION 2002 LLC

as Head Lessee  

 WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION

as Indenture Trustee  

 BRL Universal Compression Funding I 2002, L.P.

Series 2002-1 Notes and Certificates  

	ARTICLE I        DEFINITIONS	 	1
	 	

Section 1.1	
 	

Defined Terms	
 	

1
	

ARTICLE II        REPRESENTATIONS, WARRANTIES AND COVENANTS	
 	

3
	 	

Section 2.1	
 	

Representations and Warranties of Universal.	
 	

3
	 	

Section 2.2	
 	

Affirmative Covenants of Universal	
 	

4
	 	

Section 2.3	
 	

Negative Covenants of Universal	
 	

6
	 	

Section 2.4	
 	

Representations and Warranties of the Insurer	
 	

7
	 	

Section 2.5	
 	

Representations and Warranties of the Issuer	
 	

7
	 	

Section 2.6	
 	

Affirmative Covenants of the Issuer	
 	

9
	 	

Section 2.7	
 	

Negative Covenants of the Issuer	
 	

11
	 	

Section 2.8	
 	

Representations and Warranties of the Head Lessee	
 	

11
	 	

Section 2.9	
 	

Affirmative Covenants of the Head Lessee	
 	

13
	 	

Section 2.10	
 	

Negative Covenants of the Head Lessee	
 	

14
	

ARTICLE III        THE POLICY; REIMBURSEMENT	
 	

15
	 	

Section 3.1	
 	

Issuance of the Policies	
 	

15
	 	

Section 3.2	
 	

Payment of Fees and Premium	
 	

17
	 	

Section 3.3	
 	

Reimbursement Obligation.	
 	

17
	 	

Section 3.4	
 	

Indemnification	
 	

18
	 	

Section 3.5	
 	

Payment Procedure	
 	

20
	 	

Section 3.6	
 	

Subrogation	
 	

20
	 	

Section 3.7	
 	

Reserved	
 	

20
	

ARTICLE IV        FURTHER AGREEMENTS	
 	

20
	 	

Section 4.1	
 	

Effective Date; Term of this Insurance Agreement	
 	

20
	 	

Section 4.2	
 	

Further Assurances and Corrective Instruments	
 	

20
	 	

Section 4.3	
 	

Obligations Absolute	
 	

21
	 	

Section 4.4	
 	

Assignments; Reinsurance; Third-Party Rights	
 	

22
	 	

Section 4.5	
 	

Liability of the Insurer	
 	

23
	 	

Section 4.6	
 	

Confidentiality	
 	

23
	

ARTICLE V        DEFAULTS AND REMEDIES	
 	

23
	 	

Section 5.1	
 	

Defaults	
 	

23
	 	

Section 5.2	
 	

Remedies; No Remedy Exclusive	
 	

24
	 	

Section 5.3	
 	

Waivers	
 	

25
	

ARTICLE VI        MISCELLANEOUS	
 	

25
	 	

Section 6.1	
 	

Amendments, Etc	
 	

25
	 	

Section 6.2	
 	

Notices	
 	

25
	 	

Section 6.3	
 	

Severability	
 	

25
	
 	
 	

 	
 	

 

 

	 	

Section 6.4	
 	

Consent to Jurisdiction	
 	

26
	 	

Section 6.5	
 	

Consent of the Insurer	
 	

26
	 	

Section 6.6	
 	

Counterparts	
 	

26
	 	

Section 6.7	
 	

Headings	
 	

26
	 	

Section 6.8	
 	

Governing Law	
 	

26
	 	

Section 6.9	
 	

Waiver of Immunity	
 	

26
	 	

Section 6.10	
 	

Limited Liability	
 	

27
	 	

Section 6.11	
 	

Entire Agreement; Facsimile Signatures	
 	

27
	 	

Section 6.12	
 	

Indenture Trustee	
 	

27
	 	

Section 6.13	
 	

Third-Party Beneficiary.	
 	

27
	 	

Section 6.14	
 	

Successor and Assigns	
 	

27
	 	

Section 6.15	
 	

No Proceedings	
 	

27

2

        INSURANCE AND INDEMNITY AGREEMENT, dated as of December 31, 2002 (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof, this
"Insurance Agreement"), by and among AMBAC ASSURANCE CORPORATION, a stock insurance company organized and existing under the laws of the State of
Wisconsin (together with its successors and permitted assigns, the "Insurer"), BRL UNIVERSAL COMPRESSION FUNDING I 2002, L.P., a limited partnership
formed under the laws of the State of Delaware (together with its successors and permitted assigns, the "Issuer"), Universal COMPRESSION, INC., a
corporation organized and existing under the laws of the State of Texas (together with its successors and permitted assigns, "Universal" or the
"Contributor" or the "Manager"), UCO COMPRESSION 2002 LLC, a limited liability company formed under the
laws of the State of Delaware (together with its successors and permitted assigns, the "Head Lessee"), and WELLS FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association, as Indenture Trustee (together with its successors and permitted assigns, the "Indenture Trustee"). 

 
 

PRELIMINARY STATEMENTS    
  

        A.    The
Indenture, dated as of December 31, 2002, between the Issuer and the Indenture Trustee (as amended, supplemented or otherwise modified from time to time in accordance
with its terms, the "Indenture"), relating to the issuance of the Series 2002-1 Notes. 

        B.    The
Amended and Restated Agreement of Limited Partnership of the Issuer, dated as of December 31, 2002, among BRL Universal Compression Management 2002, Inc., as General
Partner, and the partners designated therein as Limited Partners (the "Limited Partnership Agreement"), relating to the issuance of the Certificates. 

        C.    The
parties hereto desire that the Insurer issue the Policies (as defined below) to the Indenture Trustee for the benefit of the Series 2002-1 Noteholders and the
Certificateholders and to, among other things, specify the conditions precedent thereto, the premium in respect thereof and the indemnity, reimbursement, assignment, reporting and other obligations of
the parties hereto other than the Insurer in consideration thereof. 

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

 
 

ARTICLE I
  
    DEFINITIONS    
  

        Section 1.1    Defined Terms.    

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

        "Approvals" has the meaning specified in Section 2.5(a). 

        "Certificate Amount" means collectively the Preferred Return Deficiency Amount and the Certificate Principal Deficiency Amount due on any
Payment Date or the Draw Date, as applicable. 

        "Certificate Policy" means the financial guaranty insurance policy number AB0638BE issued by the Insurer with respect to the Certificates
on December 31, 2002, substantially in the form of Exhibit B hereto. 

        "Consolidated Subsidiary" means any Subsidiary of Universal whose accounts are consolidated with those of Universal in Universal's
consolidated financial statements on a basis consistently maintained during any accounting period. 

 

        "Contributor" has the meaning specified in the preamble hereto. 

        "Event of Default" has the meaning specified in Section 5.1. 

        "Indemnified Party" has the meaning specified in Section 3.4. 

        "Indemnifying Party" has the meaning specified in Section 3.4. 

        "Indenture" has the meaning specified in the preliminary statements hereto. 

        "Indenture Trustee" has the meaning specified in the preamble hereto. 

        "Information" has the meaning specified in Section 2.1. 

        "Initial Certificateholder" means, with respect to the Certificates, each of VFCC and Wachovia Investors, Inc. 

        "Initial Purchaser" means, with respect to the Series 2002-1 Notes, VFCC. 

        "Insurance Agreement" has the meaning specified in the preamble hereto. 

        "Insured Party" means the Indenture Trustee as insured party under each Policy. 

        "Insurer" has the meaning specified in the preamble hereto. 

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

        "Issuer" has the meaning specified in the preamble hereto. 

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

        "Letter Agreement" means, individually or collectively, as the context may require, (i) that certain Insurer Letter Agreement,
dated as of December 31, 2002, by and among Universal, in its individual capacity and as Manager under the Management Agreement, the Issuer, the Head Lessee, the Deal Agent, and the Insurer and
(ii) that certain Deal Agent Letter Agreement, dated as of December 31, 2002, by and among Universal, in its individual capacity and as Manager under the Management Agreement, the Issuer, the
Head Lessee, the Insurer and the Deal Agent, in each case, as amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. 

        "Limited Partnership Agreement" has the meaning specified in the preliminary statements hereto. 

        "Manager" has the meaning specified in the preamble hereto. 

        "Material Adverse Change" means any set of circumstances or events (a) which is or could reasonably be expected to be material and
adverse to the business, financial condition, operations or properties of any Person or (b) which has had or could reasonably be expected to have a material and adverse effect on the ability of
any Person to perform its respective obligations under the Related Documents, or a material and adverse effect on enforceability or validity of any Related Document or (c) which has had or
could reasonably be expected to have a material and adverse effect on the rights and remedies of the Series 2002-1 Noteholders, the Certificateholders, the Series Enhancer or the Indenture Trustee. 

        "Merger" has the meaning specified in Section 3.3(c). 

2

 

        "Notes Policy" means the financial guaranty insurance policy number AB0637BE issued by the Insurer with respect to the Series 2002-1 Notes
on December 31, 2002, substantially in the form of Exhibit A hereto. 

        "Policy" means either or both, as the context may require, of the Notes Policy or the Certificate Policy. 

        "Series 2002-1 Note Amount" means collectively the Series 2002-1 Note Interest Payment and Series 2002-1 Note Principal Balance due on any
Payment Date or the Draw Date, as applicable. 

        "Significant Subsidiary" means any consolidated Subsidiary of Universal whose consolidated assets are more than 10% of the consolidated
assets of Universal and its consolidated Subsidiaries at the date of the most recent balance sheet furnished to the Insurer pursuant to the terms of this Insurance Agreement. 

        "Subsidiary" means any corporation, partnership or joint venture in which Universal owns, directly or indirectly, more than 50% of the
securities or interests having voting power. 

        "Transactions" means the transactions contemplated by the Related Documents. 

        "Universal" has the meaning specified in the preamble hereto. 

 
 

ARTICLE II
  
    REPRESENTATIONS, WARRANTIES AND COVENANTS    
  

        Section 2.1    Representations and Warranties of Universal.    

        Universal
hereby makes to and for the benefit of the Insurer each of the representations and warranties made by Universal, whether in its capacity as Contributor, Manager or otherwise,
in each of the Related Documents to which it is a party, including, but not limited to, Section 3.01 of the Contribution Agreement and Section 19 of the Management Agreement. Such
representations and
warranties are incorporated herein by this reference as if fully set forth herein. In addition, Universal represents and warrants to the Insurer as of the Closing Date as follows: 

        (a)  The
offer and sale of the Series 2002-1 Notes by the Issuer comply in all material respects with all requirements of applicable law, including all registration
requirements of applicable securities laws. 

        (b)  The
Indenture is not required to be qualified under the Trust Indenture Act of 1939, as amended. The Issuer is not required to be registered as an "investment company"
under the Investment Company Act. Neither the offer nor the sale of the Series 2002-1 Notes by the Issuer will be in violation of the Securities Act or any other federal or state securities law.
Universal will, or will cause the Issuer to, satisfy any of the information reporting requirements of the Exchange Act arising out of the Transaction to which it or the Issuer is subject. 

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

3

 

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

        (e)  This
Insurance Agreement is, and each Related Document to which Universal is a party, when duly executed and delivered, will be, legal, valid and binding obligations of
Universal, enforceable against Universal in accordance with their respective terms, except as enforceability may be limited by
bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors' rights or by general principles of equity limiting the availability of equitable remedies. 

        Section 2.2    Affirmative Covenants of Universal.    

        Universal
hereby makes, to and for the benefit of the Insurer, all of the covenants made by Universal, whether in its capacity as Contributor, Manager or otherwise, in the Related
Documents to which it is a party, including, but not limited to, Section 4.01 of the Contribution Agreement, and Section 9 of the Management Agreement. Such covenants are hereby
incorporated herein by this reference as if fully set forth herein, and may not be amended except by an amendment complying with the terms of the last sentence of Section 6.1. In addition,
Universal hereby agrees that during the term of this Insurance Agreement, unless the Insurer shall otherwise expressly consent in writing: 

        (a)    Compliance with Agreements and Applicable Laws.    Universal shall comply with the terms and conditions of and
perform its obligations under the Related Documents to which it is a party and shall comply in all material respects with any Applicable Law where non-compliance with such Applicable Law would cause a
Material Adverse Change with respect to Universal. 

        (b)    Existence.    Except as permitted below, Universal will keep in full effect its existence, rights and
franchises as a corporation organized under the laws of the State of Texas, and will obtain and preserve its Organizational Documents and shall maintain all licenses, permits, charters and
registrations which are material to the conduct of its business, and maintain its qualification in each jurisdiction in which such qualification is necessary to protect the validity and enforceability
of this Insurance Agreement, the Series 2002-1 Notes, the Certificates and each of the other Related Documents. The principal place of business and chief executive office of Universal is at 4444
Brittmoore Road, Houston, Texas 77041. Universal shall not establish a new chief executive office or jurisdiction of organization outside the United States of America. Universal is formed under the
laws of the State of Texas and no other location. Universal shall not change its name, establish a new location for its chief executive office or its jurisdiction of organization, or change its form
of organization, unless (i) Universal shall provide the Insurer not less than sixty (60) days' prior written notice of its intention so to do, clearly describing such new location or
jurisdiction and providing such other information in connection therewith as the Insurer may reasonably request, and (ii) not less than fifteen (15) days' prior to the effective date of
such change or relocation, Universal shall have taken, at its own cost, all action necessary so that such change of location does not impair the security interest of the Insurer, the Noteholders and
Indenture 

4

 

Trustee in the Collateral, or the perfection of the sale or contribution of the Compressors to the Head Lessee or the Head Lessor, as the case may be, and shall have delivered to the Indenture
Trustee copies of all filings required in connection therewith together with an Opinion of Counsel, satisfactory to the Insurer, to the effect that such change of location or jurisdiction does not
impair either the perfection or priority of the Indenture Trustee's security interest in any Collateral. 

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

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

        (ii)  within
two (2) Business Days of the occurrence thereof, the occurrence of any Event of Default; or 

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

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

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

        (f)    Reserved.    

        (g)    Financial Reporting.    Universal shall provide or cause to be provided to the Insurer the following: 

        (i)    Annual and Quarterly Financial Statements; Other Reporting.    The financial statements required pursuant to
Section 629 of the Indenture and Section 9.1 of the Management Agreement, as and when required pursuant to such section, any other reporting or financial information required to be
provided to the Insurer pursuant to the terms of the Related Documents, as and when required pursuant to such terms and, with respect to any Affiliates of Universal retained by Universal, the
financial statements required to be provided by Universal pursuant to Section 629 of the Indenture and Section 9.1 of the Management Agreement, as and when required pursuant to such
sections. 

        (ii)    Compliance Certificate.    Together with the financial statements required under Section 629 of the
Indenture and Section 9.1 of the Management Agreement, a compliance certificate signed by Universal's principal financial officer stating that to the best of such Person's knowledge,
(i) Universal is in compliance with its obligations hereunder and under the other Related Documents, and (ii) no Event of Default or Trigger Event exists hereunder or under any other
indebtedness of Universal for borrowed money whether on or off balance sheet, and no event exists which but for the lapse of time or the giving of notice, or both, would constitute an Event of
Default, and if any such event exists, stating the nature and 

5

 

status thereof (including all relevant financial and other information and amounts used in determining whether such Event of Default exists). 

        (iii)    S.E.C. Filings.    Promptly after the filing thereof, copies of all registration statements and annual,
quarterly or other regular reports which Universal or any Significant Subsidiary files with the Securities and Exchange Commission. 

        (iv)    Shareholders Statements and Reports.    Promptly after the furnishing thereof to the shareholders of Universal
or UCH, as the case may be, copies of all financial statements and reports so furnished. 

        (h)    Financial Projections.    At least annually, and simultaneously with delivery of its audited financial
statements, three (3) years' projected financial information prepared by Universal in the ordinary course of business and delivered by Universal to its lenders under the Senior Secured Credit
Agreement or any of its other lenders or creditors, including revisions of previously delivered information, in each case concurrently with delivery thereof to such other lenders. Such projections
shall include balance sheets, income statements and cash flows by business segment. 

        (i)    Public Debt Ratings.    Promptly, but in any event within five (5) Business Days after the date of any
change in UCH's public debt ratings, Universal shall deliver to the Insurer a written confirmation of Universal's public debt ratings after giving effect to such change. 

        (j)    Reserved.    

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

        Section 2.3    Negative Covenants of Universal.    

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

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

        (b)    Amendments, Etc.    Universal shall not modify, amend or waive, or consent to any modification or amendment of,
any of the terms, provisions or conditions of the Related Documents to which it is a party without the prior written consent of the Insurer thereto to the extent that the Insurer is the Control Party
or the Series Enhancer and such consent is required pursuant to the terms of the applicable Related Document. 

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

6

 

        Section 2.4    Representations and Warranties of the Insurer.    

        The
Insurer represents and warrants to the Indenture Trustee (on behalf of the Series 2002-1 Noteholders and the Certificateholders), the Issuer and Universal as follows: 

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

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

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

        (d)    Enforceability.    The Policies, when issued, will constitute, and this Insurance Agreement constitutes, a
legal, valid and binding obligation of the Insurer, enforceable in accordance with its terms, subject to insolvency, liquidation, rehabilitation, reorganization, moratorium, receivership and other
similar laws affecting creditors' rights generally and by general principles of equity and subject to principles of public policy limiting the right to enforce the indemnification provisions contained
therein and herein, insofar as such provisions relate to indemnification for liabilities arising under federal securities laws. 

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

        Section 2.5    Representations and Warranties of the Issuer.    

        The
Issuer hereby makes, to and for the benefit of the Insurer, each of the representations and warranties made by the Issuer in the Related Documents to which it is a party including,
but not limited to, Article V of the Indenture and the Sale Agreement. Such representations and warranties are incorporated herein by this reference as if fully set forth herein, and may not be
amended except by an amendment complying with the terms of Section 6.1. In addition, the Issuer represents and warrants to the Insurer as of the
Closing Date as follows: 

        (a)    Due Organization and Qualification.    Issuer is a Delaware limited partnership duly formed and validly
existing and is duly qualified to do business in each jurisdiction where the nature of its business requires it to qualify, except where the failure to do so would not have a material adverse effect
upon the Issuer, the Collateral or the ability of the Issuer to perform its obligations under the Related Documents to which it is a party. The General Partner is a Delaware corporation duly formed,
validly existing and in good standing and is qualified to do business in each jurisdiction where the nature of its business requires it to qualify, except where the failure to do so would not have a
material adverse effect upon the General Partner or the ability of the General Partner to perform its obligations under the Related Documents to which it is a party. Each of the Issuer and the General
Partner is in compliance with, and has obtained all necessary licenses, permits, charters, registrations and approvals
(together, "Approvals") required under applicable law necessary for the conduct of its business as currently conducted and as 

7

 

described in its Organizational Documents, and for the performance of its obligations under the Related Documents, in each jurisdiction where the failure to be so qualified, licensed or approved,
could reasonably be expected to render any Related Document to which it is a party unenforceable in any respect or to have a material adverse effect upon the Transactions or such Person's ability to
perform its obligations under and comply with the terms of this Insurance Agreement and any other Related Document to which it is party. 

        (b)    Power and Authority.    Issuer has the partnership power and authority and is duly authorized to execute and
deliver this Insurance Agreement and the other Related Documents to which it is a party, and is, and will continue to be, authorized to perform its obligations under this Insurance Agreement and under
the other Related Documents to which it is a party and to consummate the Transactions. 

        (c)    Due Authorization.    The execution, delivery and performance of the Related Documents by the Issuer has been
duly authorized by all necessary company action under Delaware law and do not require any additional approvals or consents, or other action by or any notice to or filing with any Person, including any
Governmental Authority, which have not previously been obtained. 

        (d)    Noncontravention.    The execution and delivery by the Issuer of the Related Documents to which it is a party,
the consummation of the Transactions and the satisfaction of the terms and conditions of the Related Documents do not and will not: 

        (i)    conflict
with or result in any breach or violation of any provision of the Organizational Documents of the Issuer or any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award currently in effect having applicability to either the Issuer or any of its properties, including regulations issued by any administrative agency or other
Governmental Authority having supervisory powers over the Issuer; 

        (ii)  constitute
a default by the Issuer under, result in the acceleration of any obligation under, or breach any material provision of any loan agreement, mortgage,
indenture or other agreement or instrument to which the Issuer either is a party or by which any of its properties are or may be bound or affected; or 

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

        (e)    Legal Proceedings.    There is no action, proceeding or investigation by or before any court, governmental or
administrative agency or arbitrator against or affecting the Issuer, any properties or rights of the Issuer or the Collateral pending or, to the Issuer's knowledge, threatened. 

        (f)    Valid and Binding Obligations.    The Related Documents, the Certificates, and the Series 2002-1 Notes, when
executed, authenticated and delivered in accordance with the applicable Related Documents, will be validly issued and outstanding and entitled to the benefits of the Indenture and will constitute the
legal, valid and binding obligations of the Issuer, enforceable against the Issuer in accordance with their respective terms, except as such enforceability may be limited by insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights generally and general equitable principles. 

        (g)    Compliance with Law, Etc.    No practice, procedure or policy employed, or proposed to be employed, by the
Issuer in the conduct of its business violates any law, regulation, judgment, agreement, order or decree applicable to the Issuer, that, if enforced, is reasonably likely to result in a Material
Adverse Change with respect to the Issuer. 

        (h)    Accuracy of Information.    The information or statements contained in the Related Documents furnished to the
Insurer by the Issuer, as amended, supplemented or superseded on or 

8

 

prior to the date hereof, taken as a whole, do not, if restated at and as of the date hereof, contain any statement of a material fact or omit to state a material fact necessary to make such
information or statements misleading in any material respect. 

        (i)    Compliance with Securities Laws.    The offer and sale of the Series 2002-1 Notes and the Certificates by the
Issuer comply in all material respects with all requirements of law, including all registration requirements of applicable securities laws. Neither the offer nor the sale of the Series 2002-1 Notes or
the Certificates by the Issuer has been or will be in violation of the Securities Act or any other federal or state securities laws. The Indenture is not required to be qualified under the Trust
Indenture Act of 1939, as amended. The Issuer is not required to be registered as an "investment company" under the Investment Company Act. The Issuer will satisfy any of the information reporting
requirements of the Exchange Act arising out of the Transaction to which it is subject. 

        (j)    Solvency; Fraudulent Conveyance.    The Issuer is solvent and will not be rendered insolvent by the
Transactions and, after giving effect to the Transactions, the Issuer will not be left with an unreasonably small amount of capital with which to engage in its business, and the Issuer does not intend
to incur, nor believes that it has incurred, debts beyond its ability to pay as they mature. The Issuer does not contemplate the commencement of insolvency, liquidation or consolidation proceedings or
the appointment of a receiver, liquidator, conservator, trustee or similar official with respect to it or any of its assets. The Issuer is not pledging the Collateral under the Indenture with any
intent to hinder, delay or defraud its creditors. 

        (k)    Only Place of Business.    The chief executive office and principal place of business of the Issuer is located
at 2911 Turtlecreek Boulevard, Suite 1240, Dallas, Texas 75219. 

        Section 2.6    Affirmative Covenants of the Issuer.    

        The
Issuer hereby makes, to and for the benefit of the Insurer, all of the covenants of the Issuer set forth in the Related Documents to which it is a party, including, but not limited
to, Article VI of the Indenture. Such covenants are incorporated herein by this reference, and may not be amended except by an amendment complying with the terms of  Section 6.1. In addition, the
Issuer hereby agrees that during the term of this Insurance Agreement, unless the Insurer shall otherwise expressly
consent in writing: 

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

        (b)    Existence.    The Issuer will (i) keep in full effect its existence, rights and franchises as a limited
partnership organized under the laws of the State of Delaware, (ii) conduct its business in accordance with the terms of its Organizational Documents, (iii) maintain all licenses,
permits, charters and registrations, which are material to the conduct of its business, in accordance with the terms of its Organizational Documents and (iv) obtain and preserve its
qualification in each jurisdiction in which such qualification is necessary to protect the validity and enforceability of this Insurance Agreement, the Series 2002-1 Notes and the Certificates. 

9

  

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

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

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

        (ii)  the
occurrence of an Event of Default in respect of the Issuer; 

        (iii)  the
commencement of any proceedings by or against the Issuer under any applicable reorganization, liquidation, rehabilitation, insolvency or other similar law now or
hereafter in effect or of any proceeding in which a receiver, liquidator, conservator, trustee or similar official shall have been, or may be, appointed or requested for the Issuer or any of its
assets; or 

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

        (e)    Reserved.    

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

        (g)    Exemption from Securities Act Registration.    The Issuer shall take all actions necessary to exempt the sale
of the Series 2002-1 Notes and the Certificates to the Initial Purchaser and the Initial Certificateholder, as applicable, from registration under the Securities Act and under any applicable
securities laws of any state of the United States where Series 2002-1 Notes or Certificates may be offered or sold. Pursuant to the terms of the Series 2002-1 Note Purchase Agreement,
the Issuer will require the Initial Purchaser and the Initial Certificateholder to comply with limitations on the resale of Series 2002-1 Notes or Certificates, as applicable, and will enforce
such limitations thereunder. 

        (h)    Financial Reporting.    The Issuer shall provide or cause to be provided to the Insurer, as soon as practicable
and in any event within 120 days after the end of each fiscal year of the Issuer, annual balance sheets of the Issuer as at the end of such fiscal year and the notes thereto, and the related
statements of income and cash flows and the respective notes thereto for such fiscal year certified by the principal financial officer of the Issuer. 

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

        (j)    Other Information.    The Issuer shall provide to the Insurer such other information (including non-financial
information) in respect of the Transactions and the Related Documents 

10

 

and such other financial or operating information in respect of the Issuer, in each case, which the Insurer may from time to time reasonably request, provided that such information is available from
the books and records of the Issuer and can be generated by Universal's then existing data processing system. 

        (k)    Operation of the Issuer.    The Issuer shall comply with the provisions of its organizational documents,
including those that restrict its activities and impose requirements intended to preserve its separateness from other entities. 

        Section 2.7    Negative Covenants of the Issuer.    

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

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

        (b)    Amendments, Etc.    The Issuer shall not modify, amend or waive, or consent to any modification, amendment or
waiver of, any of the terms, provisions or conditions of the Related Documents to which it is a party without the consent of the Insurer thereto to the extent that the Insurer is the Control Party or
the Series Enhancer and such consent is required pursuant to the applicable Related Document. The Issuer shall not modify, amend or waive, or consent to any modification or amendment of, any of
the provisions of its organizational documents without the consent of the Insurer. 

        (c)    Limitation on Mergers, Etc.    The Issuer shall not consolidate with or merge with or into any Person,
liquidate or dissolve or transfer all or substantially all of its assets to any Person. 

        (d)    Certificates.    The Issuer shall not amend, modify or waive any of the terms and conditions governing the
Certificates. 

        (e)    Certain Other Limitations.    The Issuer shall not be named as an insured on the insurance policy covering the
property of Universal, or enter into an agreement with the holder of such policy whereby in the event of a loss in connection with such property not owned by the Issuer, proceeds are paid to the
Issuer. 

        Section 2.8    Representations and Warranties of the Head Lessee.    

        The
Head Lessee hereby makes, to and for the benefit of the Insurer, each of the representations and warranties made by the Head Lessee in the Related Documents to which it is a party
including, but not limited to, Section 4 of the Head Lessee Security Agreement. Such representations and warranties are incorporated herein by this reference as if fully set forth herein, and
may not be amended except by an amendment complying with the terms of Section 6.1. In addition, the Head Lessee represents and warrants to the
Insurer as of the Closing Date as follows: 

        (a)    Due Organization and Qualification.    The Head Lessee is a Delaware limited liability company duly formed and
validly existing and is duly qualified to do business in each jurisdiction where the nature of its business requires it to qualify, except where the failure to do so could not result in a Material
Adverse Change upon the Head Lessee, the Collateral or the ability of the Head Lessee to perform its obligations under the Related Documents to which it is a party. The Head Lessee is in compliance
with, and has obtained all necessary licenses, permits, charters, 

11

 

registrations and approvals required under applicable law necessary for the conduct of its business as currently conducted and as described in its Organizational Documents, and for the performance of
its obligations under the Related Documents, in each jurisdiction where the failure to be so qualified, licensed or approved, could reasonably be expected to render any Related Document to which it is
a party unenforceable in any respect or to result in a Material Adverse Change upon the Transactions or such Person's ability to perform its obligations under and comply with the terms of this
Insurance Agreement and any other Related Document to which it is party. 

        (b)    Power and Authority.    Head Lessee has the limited liability company power and authority and is duly
authorized to execute and deliver this Insurance Agreement and the other Related Documents to which it is a party, and is, and will continue to be, authorized to perform its obligations under this
Insurance Agreement and under the other Related Documents to which it is a party and to consummate the Transactions. 

        (c)    Due Authorization.    The execution, delivery and performance of the Related Documents by the Head Lessee has
been duly authorized by all necessary company action under Delaware law and do not require any additional approvals or consents, or other action by or any notice to or filing with any Person,
including any Governmental Authority, which have not previously been obtained. 

        (d)    Noncontravention.    The execution and delivery by the Head Lessee of the Related Documents to which it is a
party, the consummation of the Transactions and the satisfaction of the terms and conditions of the Related Documents do not and will not: 

        (i)    conflict
with or result in any breach or violation of any provision of the Organizational Documents of the Head Lessee or any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award currently in effect having applicability to either the Head Lessee or any of its properties, including regulations issued by any administrative
agency or other Governmental Authority having supervisory powers over the Head Lessee; 

        (ii)  constitute
a default by the Head Lessee under, result in the acceleration of any obligation under, or breach any material provision of any loan agreement, mortgage,
indenture or other agreement or instrument to which the Head Lessee either is a party or by which any of its properties are or may be bound or affected; or 

        (iii)  result
in or require the creation of any lien upon or in respect of any assets of the Head Lessee, except as otherwise expressly contemplated by the Related Documents. 

        (e)    Legal Proceedings.    There is no action, proceeding or investigation by or before any court, governmental or
administrative agency or arbitrator against or affecting the Head Lessee, any properties or rights of the Head Lessee or the Collateral pending or, to the Head Lessee's knowledge, threatened. 

        (f)    Compliance with Law, Etc.    No practice, procedure or policy employed, or proposed to be employed, by the Head
Lessee in the conduct of its business violates any law, regulation, judgment, agreement, order or decree applicable to the Head Lessee, that, if enforced, is reasonably likely to result in a Material
Adverse Change with respect to the Head Lessee. 

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

12

 

        (h)    Solvency; Fraudulent Conveyance.    The Head Lessee is solvent and will not be rendered insolvent by the
Transactions and, after giving effect to the Transactions, the Head Lessee will not be left with an unreasonably small amount of capital with which to engage in its business, and the Head Lessee does
not intend to incur, nor believes that it has incurred, debts beyond its ability to pay as they mature. The Head Lessee does not contemplate the commencement of insolvency, liquidation or
consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official with respect to it or any of its assets. The Head Lessee is not pledging the Collateral
under the Head Lessee Security Agreement with any intent to hinder, delay or defraud its creditors. 

        (i)    Only Place of Business.    The chief executive office and principal place of business of the Head Lessee is
located at 4444 Brittmoore Road, Houston Texas 77041. 

        Section 2.9    Affirmative Covenants of the Head Lessee.    

        The
Head Lessee hereby makes, to and for the benefit of the Insurer, all of the covenants of the Head Lessee set forth in the Related Documents to which it is a party, including, but not
limited to, Section 5
of the Head Lessee Security Agreement. Such covenants are incorporated herein by this reference, and may not be amended except by an amendment complying with the terms of  Section 6.1. In addition,
the Head Lessee hereby agrees that during the term of this Insurance Agreement, unless the Insurer shall otherwise
expressly consent in writing: 

        (a)    Compliance with Agreements and Laws.    The Head Lessee shall comply with the terms and conditions of and
perform its obligations under the Related Documents to which it is a party and shall comply in all material respects with any applicable law. 

        (b)    Existence.    The Head Lessee will (i) keep in full effect its existence, rights and franchises as a
limited liability company organized under the laws of the State of Delaware, (ii) conduct its business in accordance with the terms of its Organizational Documents, (iii) maintain all
licenses, permits, charters and registrations, which are material to the conduct of its business, in accordance with the terms of its Organizational Documents and (iv) obtain and preserve its
qualification in each jurisdiction in which such qualification is necessary to protect the validity and enforceability of its obligations under the Head Lessee Security Agreement. 

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

        (d)    Notice of Material Events.    The Head Lessee shall be obligated promptly to inform the Insurer in writing of
the occurrence of any of the following: 

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

        (ii)  the
occurrence of an Event of Default or Trigger Event in respect of the Head Lessee; 

        (iii)  the
commencement of any proceedings by or against the Head Lessee under any applicable reorganization, liquidation, rehabilitation, insolvency or other similar law now
or hereafter in effect or of any proceeding in which a receiver, liquidator, conservator, trustee or similar official shall have been, or may be, appointed or requested for the Head Lessee or any of
its assets; or 

13

 

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

        (e)    Reserved.    

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

        (g)    Financial Reporting.    The Head Lessee shall provide or cause to be provided to the Insurer, as soon as
practicable and in any event within 120 days after the end of each fiscal year of the Head Lessee, annual balance sheets of the Head Lessee as at the end of such fiscal year and the notes thereto, and
the related statements of income and cash flows and the respective notes thereto for such fiscal year certified by the principal financial officer of the Head Lessee. 

        (h)    Financial Statements.    The financial statements and books and records of the Head Lessee will reflect the
separate existence of the Head Lessee and Universal and will present fairly the financial position of the Head Lessee. 

        (i)    Other Information.    The Head Lessee shall provide to the Insurer such other information (including
non-financial information) in respect of the Transactions and the Related Documents and such other financial or operating information in respect of the Head Lessee, in each case, which the Insurer may
from time to time reasonably request, provided that such information is available from the books and records of the Head Lessee and can be generated by Universal's then existing data processing
system. 

        (j)    Operation of the Head Lessee.    The Head Lessee shall comply with the provisions of its organizational
documents, including those that restrict its activities and impose requirements intended to preserve its separateness from other entities. 

        Section 2.10    Negative Covenants of the Head Lessee.    

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

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

        (b)    Amendments, Etc.    The Head Lessee shall not modify, amend or waive, or consent to any modification, amendment
or waiver of, any of the terms, provisions or conditions of the Related Documents to which it is a party without the consent of the Insurer thereto to the extent that the Insurer is the Control Party
or the Series Enhancer and such consent is required pursuant to the applicable Related Document. The Head Lessee shall not modify, amend or waive, or consent to any modification or amendment
of, any provision of its organizational documents without the consent of the Insurer. 

14

 

        (c)    Limitation on Mergers, Etc.    The Head Lessee shall not consolidate with or merge with or into any Person,
liquidate or dissolve or transfer all or substantially all of its assets to any Person until payment in full of all Head Lessee Secured Obligations. 

        (d)    Certain Other Limitations.    The Head Lessee shall not be named as an insured on the insurance policy covering
the property of Universal, or enter into an agreement with the holder of such policy whereby in the event of a loss in connection with such property not owned by the Head Lessee, proceeds are paid to
the Head Lessee. 

ARTICLE III  

 THE POLICY; REIMBURSEMENT  

        Section 3.1    Issuance of the Policies.    

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

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

        (b)    Related Documents.    The conditions to consummation of the Transactions set forth in Article V of the
Series 2002-1 Supplement shall have been satisfied. 

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

        (d)    No Litigation, Etc.    No suit, action or other Proceeding, investigation or injunction, or final judgment
relating thereto, shall be pending with respect to any party or, to such party's knowledge, threatened before any court, governmental or administrative agency or arbitrator in which it is sought to
restrain or prohibit or to obtain damages or other relief in connection with any of the Related Documents or the consummation of the Transactions; 

        (e)    Legality.    No statute, rule, regulation or order shall have been enacted, entered or deemed applicable by any
government or governmental or administrative agency or court that would make the Transactions illegal or otherwise prevent the consummation thereof; 

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

        (g)    Satisfaction of Conditions of the Series 2002-1 Note Purchase Agreement.    All conditions in the
Series 2002-1 Note Purchase Agreement relating to the Initial Purchaser's obligation to purchase the Series 2002-1 Notes, and all of the conditions relating to the Initial
Certificateholders' obligation to acquire the Certificates, shall have been fulfilled to the satisfaction of the Insurer, with such satisfaction deemed to have occurred upon issuance of the applicable
Policy. The Insurer shall have received copies of each of the Related Documents and shall be entitled to rely on each of the documents required to be delivered to the Initial Purchaser and the Initial
Certificateholders pursuant to the Related Documents, including the items described in Schedule I of the Series 2002-1 Note Purchase Agreement (other than the opinion of counsel to the
Insurer); 

        (h)    Issuance of Series 2002-1 Notes Ratings.    The Insurer shall have received confirmation that upon
issuance of the Notes Policy each of the Series 2002-1 Notes will be rated at least AAA by S&P and Aaa by Moody's, and that the risk secured by Notes Policy is rated no lower than BBB by S&P
and Baa3 by Moody's; 

15

 

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

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

        (k)    Interest Rate Hedge Agreements.    The Issuer shall have entered into one or more Interest Rate Hedge
Agreements with respect to the Series 2002-1 Notes and the Certificates, with the terms and conditions of each such Interest Rate Hedge Agreement satisfactory in form and substance to the
Insurer; 

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

        (m)    Certified Copies.    The Insurer shall have received (i) an executed copy of each Related Document and
(ii) a copy of the Senior Secured Revolving Credit Agreement as of such date certified by a Responsible Officer of Universal; 

        (n)    Indenture Trustee Notice.    The Indenture Trustee shall have received and acknowledged receipt of notice of
the Transactions and of the matters contemplated by this Insurance Agreement in form and substance satisfactory to the Insurer, including limitation on waivers, amendments or modifications to the Head
Lease without the prior written consent of the Insurer; 

        (o)    Opinions.    The Insurer shall have received opinions of counsel to the Issuer and Universal concerning the
perfection of the Indenture Trustee's security interest in the Collateral and other matters under the laws of the United States, and shall have received copies of any opinions delivered to the Rating
Agencies, the Series 2002-1 Noteholders, the Certificateholders, the Indenture Trustee or the Deal Agent, in each case addressed to, and in form and substance satisfactory to, the Insurer; 

        (p)    Certificates of Issuer.    The Insurer shall have received a copy of the terms and conditions governing
Certificates of the Issuer, satisfactory in form and substance to the Insurer; 

        (q)    Termination of Existing Securitization Transaction.    The Insurer shall have received evidence, in form and
substance reasonably satisfactory to it, that the asset backed securitization, in connection with which the Old Lessee and the Old Lessor acquired compressors under the Old Lessee and Old Lessor Bills
of Sale or the Contribution Agreement, as the case may be, has been terminated and is no longer in force and effect and the notes issued in connection therewith are no longer outstanding thereunder; 

        (r)    Additional Items.    The Insurer shall have received such other documents, instruments, approvals or opinions
in form and substance reasonably satisfactory to the Insurer as shall be reasonably requested by the Insurer, including evidence reasonably satisfactory to the Insurer that the conditions precedent,
if any, in the Related Documents have been satisfied; and 

        (s)    Satisfactory Documentation.    The Insurer and its counsel shall have determined that all documents, the
Series 2002-1 Notes, the Certificates and opinions to be delivered in connection with the Series 2002-1 Notes conform to the terms of the Indenture and this Insurance Agreement. 

16

 

        Section 3.2    Payment of Fees and Premium.    

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

        (b)    Rating Agency Fees.    Universal shall promptly pay the initial fees of the Rating Agencies with respect to the
Series 2002-1 Notes, the Certificates and the transactions contemplated hereby following receipt of a statement with respect thereto, and shall pay or cause to be paid any subsequent fees of
the Rating Agencies with respect to, and directly allocable to, the Series 2002-1 Notes and the Certificates. The Insurer shall not be responsible for any fees or expenses of the Rating
Agencies. The fees for any other rating agency shall be paid by the party requesting such other agency's rating. 

        (c)    Premium.    In consideration of the issuance by the Insurer of the Policies, the Issuer shall pay or cause to
be paid, and Universal shall ultimately be obligated for the timely payment of the Premiums to the Insurer as set forth in the Premium Letter in accordance with and from the funds specified by Section
302 of the Indenture, commencing on the day the Policies are issued, until each Policy has terminated in accordance with its terms. The Premium paid under the Indenture shall be nonrefundable without
regard to whether any notice is delivered to the Insurer requiring the Insurer to make any payment under the Policies or any other circumstances relating to the Series 2002-1 Notes or the
Certificates or provision being made for payment of the Series 2002-1 Notes prior to maturity. 

        Section 3.3    Reimbursement Obligation.    

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

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

17

 

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

        Section 3.4    Indemnification.    

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

        (i)    any
statement, omission or action in connection with the offering, issuance, sale or delivery of any of the Series 2002-1 Notes or any of the Certificates; 

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

        (iii)  the
violation by Universal of any domestic or foreign law, rule or regulation, or any judgment, order or decree applicable to them; 

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

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

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

        (i)    any
statement, omission or action in connection with the offering, issuance, sale or delivery of any of the Series 2002-1 Notes or any of the Certificates; 

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

        (iii)  the
violation by the Issuer of any domestic or foreign law, rule or regulation, or any judgment, order or decree applicable to them; or 

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

18

 

        (c)  If
any action or proceeding (including any governmental investigation) shall be brought or asserted against any Person (each, an "Indemnified
Party") in respect of which the indemnity provided in Section 3.4(a) or  (b) may be sought from Universal or the Issuer (the
"Indemnifying Party") each such Indemnified Party
shall promptly notify the Indemnifying Party in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel satisfactory to the Indemnified Party and the
payment of all expenses and legal fees; provided that failure to notify the Indemnifying Party shall not relieve it from any liability it may have to
such Indemnified Party except to the extent that it shall be actually prejudiced thereby. The Indemnified Party shall have the right to employ separate counsel in any such action and to participate in
the defense thereof at the expense of the Indemnified Party and may assume the defense of any such action or claim in reasonable cooperation with, and with the reasonable cooperation of, the
Indemnifying Party; provided, however, that the fees and expenses of separate counsel to the Indemnified Party in any such proceeding shall be at the
expense of the Indemnifying Party if (i) the Indemnifying Party has agreed to pay such fees and expenses, (ii) the Indemnifying Party shall have failed to assume the defense of such
action or proceeding or employ counsel reasonably satisfactory to the Indemnified Party in any such action or proceeding within a reasonable time after the commencement of such action or
(iii) the named parties to any such action or proceeding (including any impleaded parties) include both the Indemnified Party and the Indemnifying Party, and the Indemnified Party shall have
been advised by counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the Indemnifying Party (in which case, if the
Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to
assume the defense of such action or proceeding on behalf of such Indemnified Party, it being understood, however, that the Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys at any time for the Indemnified Parties, which firm shall be designated in writing by the Indemnified Party). Unless it shall be in
default of its obligations hereunder, the Indemnifying Party shall not be liable for any settlement of any such action or proceeding effected without its written consent to the extent that any such
settlement shall be prejudicial to the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed, but, if settled with its written consent, or if there is a final judgment for the plaintiff in any such action or proceeding with respect to
which the Indemnifying Party shall have received notice in accordance with this subsection (c), the Indemnifying Party agrees to indemnify and
hold the Indemnified Parties harmless from and against any loss or liability by reason of such settlement or judgment. 

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

19

 

        Section 3.5    Payment Procedure.    

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

        Section 3.6    Subrogation.    

        (a)  The
parties hereto acknowledge that, to the extent of any payment made by the Insurer pursuant to the Policies, the Insurer shall be fully subrogated to the extent of
such payment and any interest due thereon to the rights of (i) the Series 2002-1 Noteholders to any moneys paid or payable in respect of the Series 2002-1 Notes and (ii) the
Certificateholders to any moneys payable in respect of the Certificates, under the Related Documents or otherwise subject to applicable law. The parties hereto agree to such subrogation and further
agree to execute such instruments and to take such actions as, in
the sole and reasonable judgment of the Insurer, are necessary to evidence such subrogation and to perfect the rights of the Insurer to receive any such moneys paid or payable in respect of the
Series 2002-1 Notes and the Certificates under the Related Documents or otherwise. 

        Section 3.7    Reserved.    

ARTICLE IV  

 FURTHER AGREEMENTS  

        Section 4.1    Effective Date; Term of this Insurance Agreement.    

        This
Insurance Agreement shall take effect on the Closing Date and shall remain in effect until the later of (a) such time as the Insurer is no longer subject to a claim under the
Policies and the Policies shall have been surrendered to the Insurer for cancellation and (b) such time as all amounts payable to the Insurer by the Issuer, the Head Lessee or Universal hereunder or
under the Related Documents, the Series 2002-1 Notes and the Certificates shall have been irrevocably paid and redeemed in full and such Series 2002-1 Notes and the Certificates shall
have been cancelled; provided, however, that the provisions of Sections 3.2, 3.3 and  3.4 shall survive
any termination of this Insurance Agreement. 

        Section 4.2    Further Assurances and Corrective Instruments.    

        (a)  Neither
Universal, the Issuer nor the Indenture Trustee shall grant any waiver of rights under any of the Related Documents to which any of them is a party which
requires the consent of Ambac, the Control Party or the Series Enhancer to waive any rights thereunder without the prior written consent of the Insurer and any such waiver without obtaining the
required prior written consent of the Insurer shall be null and void and of no force or effect. 

20

  

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

        (c)  Universal
shall not cause or permit the Issuer to issue any notes or other evidences of indebtedness, or to otherwise incur any indebtedness, other than the indebtedness
represented by the Series 2002-1 Notes or the Certificates or trade or other accounts payable in the ordinary course of business and not more than 90 days past due. 

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

        Section
4.3    Obligations Absolute.    

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

        (i)    any
lack of validity or enforceability of, or any amendment or other modifications of, or waiver with respect to, any of the Related Documents, the Series 2002-1 Notes
or the Certificates; 

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

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

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

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

        (vi)  any
failure of the Universal Parties to receive the proceeds from the sale of (A) the Series 2002-1 Notes or (B) the Certificates; and 

21

 

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

        (b)  The
Universal Parties and any and all others who are now or may become liable for all or any part of the obligations of the Universal Parties under this Insurance
Agreement agree to be bound by this Insurance Agreement and (i) to the extent permitted by law, waive and renounce any and all redemption and exemption rights and the benefit of all valuation and
appraisement privileges against the indebtedness and obligations evidenced by any Related Document or by any extension or renewal thereof; (ii) waive presentment and demand for payment, notices of
nonpayment and of dishonor, protest of dishonor and notice of protest; (iii) waive all notices in connection with the delivery and acceptance hereof and all other notices in connection with the
performance, default or enforcement of any payment hereunder, except as required by the Related Documents; (iv) waive all rights of
abatement, diminution, postponement or deduction, all defenses, other than payment, and all rights of setoff or recoupment arising out of any breach under any of the Related Documents, by any party
thereto or any beneficiary thereof, or out of any obligation at any time owing to any of the Universal Parties; (v) agree that their liabilities hereunder shall be unconditional and without regard to
any setoff, counterclaim or the liability of any other Persons for the payment hereof; (vi) agree that any consent, waiver or forbearance hereunder with respect to an event shall operate only for such
event and not for any subsequent event; (vii) consent to any and all extensions of time that may be granted by the Insurer with respect to any payment hereunder or other provisions hereof and to the
release of any security at any time given for any payment hereunder, or any part thereof, with or without substitution, and to the release of any Person or entity liable for any such payment; and
(viii) consent to the addition of any and all other makers, endorsers, guarantors and other obligors for any payment hereunder, and to the acceptance of any and all other security for any payment
hereunder, and agree that the addition of any such obligors or security shall not affect the liability of the parties hereto for any payment hereunder. 

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

        Section
4.4    Assignments; Reinsurance; Third-Party Rights.    

        (a)  This
Insurance Agreement shall be a continuing obligation of the parties hereto and shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. None of the Universal Parties or the Issuer may assign its rights under this Insurance Agreement, or delegate any of its duties hereunder, without the
prior written consent of the Insurer. Any assignments made in violation of this Insurance Agreement shall be null and void. 

        (b)  The
Insurer shall have the right to give participations in its rights under this Insurance Agreement and to enter into contracts of reinsurance with respect to the
Policies upon such terms and conditions as the Insurer may in its discretion determine; provided, however, that no such participation or reinsurance
agreement or arrangement shall relieve the Insurer of any of its obligations hereunder or under the Policies, and provided, further, that any reinsurer
or participant will not have any rights against the Universal Parties, the Series 2002-1 Noteholders, the Certificateholders or the Indenture Trustee and that the Universal Parties, the
Series 2002-1 Noteholders, the Certificateholders and the Indenture Trustee shall have no obligation to have any communication or relationship with any reinsurer or participant in order to
enforce the obligations of the Insurer hereunder and under the Policies. 

        (c)  In
addition, the Insurer shall be entitled to assign or pledge to any bank, other lender or reinsurer providing liquidity or credit with respect to the Transactions or
the obligations of the Insurer in connection therewith, any rights of the Insurer under the Related Documents or with respect to any real or personal property or other interests pledged to the Insurer
or in which the 

22

 

Insurer has a security interest, in connection with the Transaction, subject in each case to the Liens granted pursuant to the Related Documents, provided,
that no such bank or other lender shall thereby obtain any direct right against the Universal Parties, the Series 2002-1 Noteholders, the Certificateholders or the
Indenture Trustee, and further provided, that no such assignment or pledge shall give any assignee the right to exercise any discretionary authority
that the Related Documents provide shall be exercisable by the Insurer or relieve the Insurer of any of its obligations hereunder or under the Policies provided,
however, that no such participation or reinsurance agreement or arrangement shall relieve the Insurer of any of its obligations hereunder or under the Policies. 

        (d)  Except
as provided herein with respect to participants and reinsurers, nothing in this Insurance Agreement shall confer any right, remedy or claim, express or implied,
upon any Person not a party hereto, including, particularly, any Series 2002-1 Noteholder or any Certificateholder, other than the rights of the Insurer against the Universal Parties and all
the terms, covenants, conditions, promises and agreements contained herein shall be for the sole and exclusive benefit of the parties hereto and their successors and permitted assigns. Neither the
Indenture Trustee nor any Series 2002-1 Noteholder nor any Certificateholder shall have any right to payment from any Premiums paid or payable hereunder or under the Indenture or from any
amounts paid by the Issuer or Universal pursuant to Sections 3.3 or 3.4. 

        Section
4.5    Liability of the Insurer.    

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

        Section
4.6    Confidentiality.    

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

 
 

ARTICLE V    
    
    DEFAULTS AND REMEDIES    
  

        Section
5.1    Defaults.    

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

        (a)  Any
representation or warranty made by any of the Universal Parties hereunder or under the Related Documents, or in any certificate furnished hereunder or under the
Related Documents, shall prove to be untrue or misleading in any material respect; provided, however, that 

23

 

if such Universal Party effectively cures any such defect in any representation or warranty under any Related Document or certificate or report furnished under any Related Document, within the time
period specified in the related document as the cure period therefor, such defect shall not in and of itself constitute an Event of Default; 

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

        (c)  The
occurrence and continuance of an event of default under and as defined in the Indenture and any other Related Document; 

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

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

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

        Section
5.2    Remedies; No Remedy Exclusive.    

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

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

        (c)  Each
party to this Insurance Agreement hereby agrees that, in addition to any other rights or remedies existing in its favor, it shall be entitled to specific
performance and/or injunctive 

24

 

relief in order to enforce any of its rights or any obligation owed to it under the Related Documents. 

        Section
5.3    Waivers.    

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

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

 
 

ARTICLE VI    
    
    MISCELLANEOUS    
  

        Section
6.1    Amendments, Etc.    

        This
Insurance Agreement may be amended, modified, supplemented or terminated only by written instrument or written instruments signed by the parties hereto. No consent of any reinsurer
or participant contracted with by the Insurer pursuant to Section 4.4(b) shall be required for any amendment, modification, supplement or
termination hereof. The Issuer agrees to provide a copy of any amendment to this Insurance Agreement promptly to the Indenture Trustee and the Rating Agencies. No act or course of dealing shall be
deemed to constitute an amendment, modification, supplement or termination hereof. The other Related Documents may be amended, modified or supplemented only with the prior written consent of the
Insurer, to the extent that the Insurer is the Control Party or the Series Enhancer and such consent is required pursuant to the terms of the applicable Related Document, and any amendment,
modification or supplement without such consent shall be null and void and of no force and effect. 

        Section
6.2    Notices.    

        All
demands, notices and communications hereunder shall be in writing, personally delivered, or by facsimile (with subsequent telephone confirmation of receipt thereof), or sent by
internationally recognized overnight courier service, (a) in the case of Universal, at the following address: 4444 Brittmoore Road, Houston, Texas 77041, (b) in the case of
the Issuer, at the following address:
2911 Turtle Creek Blvd., Suite 1240, Dallas, Texas 75215, Attention: General Counsel, (c) in the case of each Rating Agency, at its address as set forth in the
Series 2002-1 Supplement, (d) in the case of the Insurer, at the following address: Ambac Assurance Corporation One State Street Plaza, New York, New York 10004, Attention:
Structured Finance Department—ABS, and (e) in the case of Indenture Trustee at the following address: MAC N9311-161 Sixth Street and Marquette Avenue, Minneapolis,
Minnesota 554079, Attention: Corporate Trust Services-Asset-Backed Administration. Notice shall be effective and deemed received (a) two days after being delivered to the courier
service, if sent by courier, (b) upon receipt of confirmation of transmission, if sent by facsimile, or (c) when delivered, if delivered by hand. 

        Section
6.3    Severability.    

        In
the event that any provision of this Insurance Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, the parties hereto agree that such holding
shall not invalidate or 

25

 

render unenforceable any other provision hereof. The parties hereto further agree that the holding by any court of competent jurisdiction that any remedy pursued by any party hereto is unavailable or
unenforceable shall not affect in any way the ability of such party to pursue any other remedy available to it. 

        Section
6.4    Consent to Jurisdiction.    

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

        Section
6.5    Consent of the Insurer.    

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

        Section
6.6    Counterparts.    

        This
Insurance Agreement may be executed in any number of counterparts, each of which when so delivered shall be deemed an original, but all such counterparts shall constitute but one
and the same instrument. Each such agreement shall become effective upon the execution of a counterpart hereof or thereof by each of the parties hereto. 

        Section
6.7    Headings.    

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

        Section
6.8    Governing Law.    

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

        Section
6.9    Waiver of Immunity.    

        To
the extent that any party hereto or any of its property is or becomes entitled at any time to any immunity on the grounds of sovereignty or otherwise from any legal actions, suits or
proceedings, from 

26

 

set-off or counterclaim, from the jurisdiction or judgment of any competent court, from service of process, from execution of a judgment, from attachment prior to judgment, from attachment in aid of
execution, or from execution prior to judgment, or other legal process in any jurisdiction, such party, for itself and its successors and assigns and its property, does hereby irrevocably and
unconditionally waive, and agrees not to plead or claim, any such immunity with respect to its obligations, liabilities or any other matter under or arising out of or in connection with this Insurance
Agreement, the other Related Documents or the subject matter hereof or thereof, subject, in each case, to the provisions of the Related Documents and mandatory requirements of applicable law. 

        Section
6.10    Limited Liability.    

        No
recourse under any Related Document shall be had against, and no personal liability shall attach to, any officer, employee, director, affiliate or shareholder of any party hereto, as
such, by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise in respect of any of the Related Documents, the Series 2002-1 Notes, the
Certificates or the Policies, it being expressly agreed and understood that each Related Document is solely a corporate obligation of each party hereto, and that any and all personal liability, either
at common law or in equity, or by statute or constitution, of every such officer, employee, director, affiliate or shareholder for breaches of any party hereto of any obligations under any Related
Document is hereby expressly waived as a condition of and in consideration for the execution and delivery of this Insurance Agreement. 

        Section
6.11    Entire Agreement; Facsimile Signatures.    

        This
Insurance Agreement, the Premium Letter and the Policies set forth the entire agreement between the parties with respect to the subject matter hereof and thereof, and supersede and
replace any agreement or understanding that may have existed between the parties prior to the date hereof in respect of such subject matter. Execution and delivery of this Insurance Agreement by
facsimile signature shall constitute execution and delivery of this Insurance Agreement for all purposes hereof with the same force and effect as execution and delivery of a manually signed copy
hereof. 

        Section
6.12    Indenture Trustee.    

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

        Section
6.13    Third-Party Beneficiary.    

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

        Section
6.14    Successor and Assigns.    

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

        Section
6.15    No Proceedings.    

        Each
of the parties hereto agrees that it will not institute against the Issuer, the Head Lessee, the General Partner or Universal Compression Member 2002 Corp. any involuntary
proceeding or otherwise institute any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceeding under any federal or state bankruptcy or similar law until the
date which is one year and one day since the last day on which any Series 2002-1 Note or Certificate shall have been outstanding. 

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

27

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

	 	 	AMBAC ASSURANCE CORPORATION,

as Insurer
	

 	
 	

By:	

/s/  HARRIS C. HARRIS      

	 	 	 	Name:	 
	 	 	 	Title:	 
	

 	
 	

BRL UNIVERSAL COMPRESSION FUNDING I 2002, L.P.,

as Issuer
	

 	
 	

By:	

BRL Universal Compression

Management 2002, Inc., its general partner
	

 	
 	

By:	

/s/  DANIEL D.BOECKMAN      

	 	 	 	Name:	 
	 	 	 	Title:	 
	

 	
 	

UCO COMPRESSION 2002 LLC,

as Head Lessee
	

 	
 	

By:	

/s/  RICHARD W. FITZGERALD      

	 	 	 	Name:	Richard W. FitzGerald
	 	 	 	Title:	Sr. Vice President
	

 	
 	

UNIVERSAL COMPRESSION, INC.

as Contributor and Manager
	

 	
 	

By:	

/s/  RICHARD W. FITZGERALD      

	 	 	 	Name:	Richard W. FitzGerald
	 	 	 	Title:	Sr. Vice President
	

 	
 	

WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,

not in its individual capacity, but solely as Indenture Trustee
	

 	
 	

By:	

/s/  EDNA BARBER      

	 	 	 	Name:	Edna Barber
	 	 	 	Title:	Assistant Vice President

QuickLinks

EXHIBIT 10.9

PRELIMINARY STATEMENTS

ARTICLE I DEFINITIONS

ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS

ARTICLE V DEFAULTS AND REMEDIES

ARTICLE VI MISCELLANEOUSQuickLinks
 -- Click here to rapidly navigate through this document

 
 

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 May 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. 

        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). 

F-2

 

        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. 

R-1

 

	2.	 	(a)	This Note will bear interest from November 15, 2002 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the interest rate per annum equal to the Interest Rate
specified on the face hereof, until the principal hereof has been paid or duly made available for payment. Until such time as an offer to exchange the Old Notes has been consummated, the interest rate borne by this Note shall be increased by
one-quarter of one percent (0.25%) per annum to December 2, 2002 and thereafter by one-half of one percent (0.50%) per annum. 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 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, unless otherwise specified on the face hereof, 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.
	
 	
 	

 	

 

R-2

 

	

 	
 	

(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 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.
	
 	
 	

 	

 

R-3

 

	

 	
 	

(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 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.
	
 	
 	

 	

 

R-4

 

	

 	
 	

(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 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-5

 

	

 	
 	

(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.
	
 	
 	

 	

 

R-6

 

	

 	
 	

(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 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.
	
 	
 	

 	

 

R-7

 

	

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 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
	
 	
 	

 	

 

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(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 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 

R-9

 

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.
	

 	
 	

 	

"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.
	
 	
 	

 	

 

R-10

 

	

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.

***

 
 

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 

R-11

 

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:

	 	 	PETROLEOS MEXICANOS
	

 	
 	
By:	

 
	 	 	 	
 Associate Managing Director of Finance

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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

EXHIBIT 4.2

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

CERTIFICATE OF AUTHENTICATION

REVERSE OF NOTE

GUARANTY

ABBREVIATIONS

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