Document:

Exhibit 10.7

EXECUTION VERSION

GUARANTY AGREEMENT

DATED AS
OF

October 20, 2006

MADE BY

UNIVERSAL COMPRESSION PARTNERS, L.P.,

UCLP OLP GP LLC,

AND

UCLP LEASING, L.P.,

AS GUARANTORS

AND

EACH OF THE OTHER GUARANTORS (AS DEFINED
HEREIN)

IN FAVOR OF

WACHOVIA
BANK, NATIONAL ASSOCIATION,

AS ADMINISTRATIVE AGENT

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I Definitions

  	
   

  	
  1

  
	
  Section 1.01

  	
  Definitions

  	
   

  	
  1

  
	
  Section 1.02

  	
  Rules of Interpretation

  	
   

  	
  3

  
	
  ARTICLE II Guarantee

  	
   

  	
  3

  
	
  Section 2.01

  	
  Guarantee

  	
   

  	
  3

  
	
  Section 2.02

  	
  Right of Contribution

  	
   

  	
  4

  
	
  Section 2.03

  	
  No Subrogation

  	
   

  	
  4

  
	
  Section 2.04

  	
  Amendments, Etc. with respect to the Borrower
  Obligations

  	
   

  	
  4

  
	
  Section 2.05

  	
  Waivers

  	
   

  	
  5

  
	
  Section 2.06

  	
  Guaranty Absolute and Unconditional

  	
   

  	
  5

  
	
  Section 2.07

  	
  Reinstatement

  	
   

  	
  7

  
	
  Section 2.08

  	
  Payments

  	
   

  	
  7

  
	
  ARTICLE III Representations and Warranties

  	
   

  	
  7

  
	
  Section 3.01

  	
  Representations in Credit Agreement

  	
   

  	
  7

  
	
  Section 3.02

  	
  Benefit to the Guarantor

  	
   

  	
  7

  
	
  Section 3.03

  	
  Solvency

  	
   

  	
  8

  
	
  ARTICLE IV Covenants 

  	
   

  	
  8

  
	
  Section 4.01

  	
  Covenants in Credit Agreement

  	
   

  	
  8

  
	
  ARTICLE V The Administrative Agent

  	
   

  	
  8

  
	
  Section 5.01

  	
  Authority of Administrative Agent

  	
   

  	
  8

  
	
  ARTICLE VI Subordination of Indebtedness

  	
   

  	
  8

  
	
  Section 6.01

  	
  Subordination of All Guarantor Claims

  	
   

  	
  8

  
	
  Section 6.02

  	
  Claims in Bankruptcy

  	
   

  	
  9

  
	
  Section 6.03

  	
  Payments Held in Trust

  	
   

  	
  9

  
	
  Section 6.04

  	
  Liens Subordinate

  	
   

  	
  9

  
	
  Section 6.05

  	
  Notation of Records

  	
   

  	
  10

  
	
  ARTICLE VII Miscellaneous

  	
   

  	
  10

  
	
  Section 7.01

  	
  Waiver

  	
   

  	
  10

  
	
  Section 7.02

  	
  Notices

  	
   

  	
  10

  
	
  Section 7.03

  	
  Amendments in Writing

  	
   

  	
  10

  
	
  Section 7.04

  	
  Successors and Assigns

  	
   

  	
  10

  
	
  Section 7.05

  	
  Survival; Revival; Reinstatement

  	
   

  	
  10

  
	
  Section 7.06

  	
  Counterparts; Integration; Effectiveness

  	
   

  	
  11

  
	
  Section 7.07

  	
  Severability

  	
   

  	
  11

  
	
  Section 7.08

  	
  Set-Off

  	
   

  	
  12

  
	
  Section 7.09

  	
  Governing Law; Submission to Jurisdiction

  	
   

  	
  12

  
	
  Section 7.10

  	
  Headings

  	
   

  	
  13

  
	
  Section 7.11

  	
  Acknowledgments

  	
   

  	
  13

  
	
  Section 7.12

  	
  Additional Guarantors

  	
   

  	
  14

  
	
  Section 7.13

  	
  Acceptance

  	
   

  	
  14

  
	
  Section 7.14

  	
  No General Partner’s Liability

  	
   

  	
  14

  

 

 i
 

 

 

	
  ANNEXES:

  	
   

  	
   

  	
   

  
	
  I

  	
  Form of Assumption Agreement

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULES:

  	
   

  	
   

  	
   

  
	
  1

  	
  Notice Addresses of Guarantors

  	
   

  	
   

  
					

 

 

 ii

This
GUARANTY AGREEMENT is dated as of October 20, 2006 made by UNIVERSAL
COMPRESSION PARTNERS, L.P., a Delaware limited partnership (“UCLP”) UCLP
OLP GP LLC, a Delaware limited liability company (“GP”) and UCLP
Leasing, L.P., a Delaware limited partnership (“UCLP Leasing”) and each
of the signatories hereto (each of the signatories hereto, together with UCLP,
GP and UCLP Leasing and the Guarantors that becomes a party hereto from time to
time after the date hereof, the “Guarantors”),
in favor of Wachovia Bank, National Association, as the administrative agent
(in such capacity, together with its successors in such capacity, the “Administrative
Agent”), for the banks and other financial institutions (the “Lenders”)
from time to time parties to the Credit Agreement dated October 20, 2006 (as
amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among UC Operating
Partnership, L.P., a Delaware limited partnership (the “Borrower”),
UCLP, the Lenders, the Administrative Agent, and the other Agents party
thereto.

R E C I T A L S

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

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

C.                                     It is a condition precedent to
the obligation of the Lenders to make their respective extensions of credit to
the Borrower under the Credit Agreement that the Guarantors shall have executed
and delivered this Agreement to the Administrative Agent for the ratable
benefit of the Lenders.

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

ARTICLE I
 Definitions

Section
1.01                                Definitions.

(a)                                  Unless otherwise defined herein,
terms defined in the Credit Agreement and used herein have the meanings given
to them in the Credit Agreement, and all uncapitalized terms which are defined
in the UCC on the date hereof are used herein as so defined.

(b)                                 The following terms have the
following meanings:

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

“Bankruptcy
Code” means Title 11, United States Code, as amended from time to time.

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

“Collateral
Agreement” means that certain Collateral Agreement, dated October 20, 2006
by UCLP, GP, UCLP Leasing and the Borrower, collectively, as Grantors in favor
of Wachovia Bank, National Association, as Administrative Agent for the
Lenders.

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

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

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

“Guarantor
Obligations” means with respect to any Guarantor, the collective reference
to (a) the Borrower Obligations and (b) the payment and performance when due of
all indebtedness, liabilities, obligations and undertakings of such Guarantor
of every kind or description, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred,
arising out of or outstanding under, advanced or issued pursuant, or evidenced
by, any Guaranteed Document to which such Guarantor is a party, in each case,
whether on account of 

principal, interest, guarantee
obligations, reimbursement obligations, payments in respect of an early
termination date, fees, indemnities, costs, expenses or otherwise (including,
without limitation, all reasonable fees and disbursements that are required to
be paid pursuant to the terms of any Guaranteed Document).

“Guarantors”
means the collective reference to each Guarantor.

“Obligations”
means:  (a) in the case of each Borrower,
the Borrower Obligations and (b) in the case of each Guarantor, its Guarantor
Obligations.

“Guarantor Claims” has the meaning assigned to
such term in Section 6.01.

Section
1.02                                Rules of Interpretation.  Section 1.04 of the Credit Agreement is
hereby incorporated herein by reference and shall apply to this Agreement, mutatis mutandis.

ARTICLE II
 Guarantee

Section
2.01                                Guarantee.

(a)                                  Each of the Guarantors hereby
jointly and severally, unconditionally and irrevocably, guarantees to the
Guaranteed Creditors and each of their respective permitted successors,
indorsees, transferees and assigns, the prompt and complete payment in cash and
performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.  This is a guarantee of payment and not collection
and the liability of each Guarantor is primary and not secondary.

(b)                                 Anything herein or in any other
Guaranteed Document to the contrary notwithstanding, the maximum liability of
each Guarantor hereunder and under the other Guaranteed Documents shall in no
event exceed the amount which can be guaranteed by such Guarantor under
applicable federal and state laws relating to the insolvency of debtors (after
giving effect to the right of contribution established in Section 2.02).

(c)                                  Each Guarantor agrees that the
Borrower Obligations may at any time and from time to time exceed the amount of
the liability of such Guarantor hereunder without impairing the guarantee
contained in this ARTICLE II or affecting the rights and remedies of any
Guaranteed Creditor hereunder.

(d)                                 Each Guarantor agrees that if
the maturity of the Borrower Obligations is accelerated by bankruptcy or
otherwise, such maturity shall also be deemed accelerated for the purpose of
this guarantee without demand or notice to such Guarantor.  The guarantee contained in this ARTICLE II
shall remain in full force and effect until all the Borrower Obligations shall
have been satisfied by payment in full in cash, no Letter of Credit shall be
outstanding (except for Letters of Credit secured by cash collateral as
permitted in Section 2.07(a)(iii) of the Credit Agreement) and all of the
Aggregate Commitments are terminated, notwithstanding that from time to time
during the term of the Credit Agreement, no Borrower Obligations may be
outstanding.

(e)                                  No payment made by any
Guarantor, any other guarantor or any other Person or received or collected by
any Guaranteed Creditor from any Guarantor, any other guarantor or any other
Person by virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Borrower Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of any Guarantor hereunder which shall,
notwithstanding any such payment (other than any payment made by such Guarantor
in respect of the Borrower Obligations or any payment received or collected
from such Guarantor in respect of the Borrower Obligations), remain liable for
the Borrower Obligations up to the maximum liability of such Guarantor
hereunder until the Borrower Obligations are paid in full in cash, no Letter of
Credit is outstanding (except for Letters of Credit secured by cash collateral
as permitted in Section 2.07(a)(iii) of the Credit Agreement) and all of the Aggregate
Commitments are terminated.

Section
2.02                                Right of Contribution.  Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of
any payment made hereunder, such Guarantor shall be entitled to seek and
receive contribution from and against any other Guarantor hereunder which has
not paid its proportionate share of such payment.  Each Guarantor’s right of contribution shall
be subject to the terms and conditions of Section 2.03.  The provisions of this Section 2.02 shall in
no respect limit the obligations and liabilities of any Guarantor to the
Guaranteed Creditors, and each Guarantor shall remain liable to the Guaranteed
Creditors for the full amount guaranteed by such Guarantor hereunder.

Section
2.03                                No Subrogation.  Notwithstanding any payment made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor by
any Guaranteed Creditor, no Guarantor shall be entitled to be subrogated to any
of the rights of any Guaranteed Creditor against the Borrower or any other
Guarantor or any collateral security or guarantee or right of offset held by
any Guaranteed Creditor for the payment of the Borrower Obligations, nor shall
any Guarantor seek or be entitled to seek any indemnity, exoneration,
participation, contribution or reimbursement from the Borrower or any other
Guarantor in respect of payments made by such Guarantor hereunder, until all
amounts owing to the Guaranteed Creditors on account of the Borrower
Obligations are irrevocably and indefeasibly paid in full in cash, no Letter of
Credit is outstanding (except for Letters of Credit secured by cash collateral
as permitted in Section 2.07(a)(iii) of the Credit Agreement) and all of the
Aggregate Commitments are terminated.  If
any amount shall be paid to any Guarantor on account of such subrogation rights
at any time when all of the Borrower Obligations shall not have been
irrevocably and indefeasibly paid in full in cash, any Letter of Credit is
outstanding (except for Letters of Credit secured by cash collateral as
permitted in Section 2.07(a)(iii) of the Credit Agreement) or any of the
Aggregate Commitments are in effect, such amount shall be held by such
Guarantor in trust for the Guaranteed Creditors, and shall, forthwith upon
receipt by such Guarantor, be turned over to the Administrative Agent in the
exact form received by such Guarantor (duly indorsed by such Guarantor to the
Administrative Agent, if required), to be applied against the Borrower
Obligations, whether matured or unmatured, in accordance with Section 10.02(c)
of the Credit Agreement.

Section
2.04                                Amendments, Etc. with respect to
the Borrower Obligations.  Each Guarantor shall remain obligated
hereunder, and such Guarantor’s obligations hereunder shall not be released,
discharged or otherwise affected, notwithstanding that, without any reservation

of rights
against any Guarantor and without notice to, demand upon or further assent by
any Guarantor (which notice, demand and assent requirements are hereby expressly
waived by such Guarantor), (a) any demand for payment of any of the Borrower
Obligations made by any Guaranteed Creditor may be rescinded by such Guaranteed
Creditor or otherwise and any of the Borrower Obligations continued; (b) the
Borrower Obligations, the liability of any other Person upon or for any part
thereof or any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by, or any indulgence or forbearance in respect thereof granted by,
any Guaranteed Creditor; (c) any Guaranteed Document may be amended, modified,
supplemented or terminated, in whole or in part, as the Guaranteed Creditors
may deem advisable from time to time; (d) any collateral security, guarantee or
right of offset at any time held by any Guaranteed Creditor for the payment of
the Borrower Obligations may be sold, exchanged, waived, surrendered or
released; (e) any additional guarantors, makers or endorsers of the Borrower
Obligations may from time to time be obligated on the Borrower Obligations or
any additional security or collateral for the payment and performance of the
Borrower Obligations may from time to time secure the Borrower Obligations; and
(f) any other event shall occur which constitutes a defense or release of
sureties generally.  No Guaranteed
Creditor shall have any obligation to protect, secure, perfect or insure any
Lien at any time held by it as security for the Borrower Obligations or for the
guarantee contained in this ARTICLE II or any Property subject thereto.

Section
2.05                                Waivers.  Each Guarantor hereby waives any and all
notice of the creation, renewal, extension or accrual of any of the Borrower
Obligations and notice of or proof of reliance by any Guaranteed Creditor upon
the guarantee contained in this ARTICLE II or acceptance of the guarantee
contained in this ARTICLE II; the Borrower Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred, or
renewed, extended, amended or waived, in reliance upon the guarantee contained
in this ARTICLE II and no notice of creation of the Borrower Obligations or any
extension of credit already or hereafter contracted by or extended to the
Borrower needs to be given to any Guarantor; and all dealings between the
Borrower and any of the Guarantors, on the one hand, and the Guaranteed
Creditors, on the other hand, likewise shall be conclusively presumed to have
been had or consummated in reliance upon the guarantee contained in this
ARTICLE II.  Each Guarantor waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Borrower or any of the Guarantors with respect to the
Borrower Obligations.

Section
2.06                                Guaranty Absolute and
Unconditional.

(a)                                  Each Guarantor understands and
agrees that the guarantee contained in this ARTICLE II is, and shall be
construed as, a continuing, completed, absolute and unconditional guarantee of
payment, and each Guarantor hereby waives any defense of a surety or guarantor
or any other obligor on any obligations arising in connection with or in
respect of any of the following and hereby agrees that its obligations
hereunder shall not be discharged or otherwise affected as a result of, any of
the following:

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

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

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

(iv)                              any sale, lease or transfer of
any or all of the assets of the Borrower or any other Guarantor, or any changes
in the shareholders of the Borrower or the Guarantor; provided that upon any
such sale, lease or transfer, such assets shall be released in accordance with
Section 8.12 of the Collateral Agreement.

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

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

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

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

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

(b)                                 When making any demand hereunder
or otherwise pursuing its rights and remedies hereunder against any Guarantor,
any Guaranteed Creditor may, but shall be under no 

obligation to,
join or make a similar demand on or otherwise pursue or exhaust such rights and
remedies as it may have against the Borrower, any other Guarantor or any other
Person or against any collateral security or guarantee for the Borrower
Obligations or any right of offset with respect thereto, and any failure by any
Guaranteed Creditor to make any such demand, to pursue such other rights or
remedies or to collect any payments from the Borrower, any other Guarantor or
any other Person or to realize upon any such collateral security or guarantee
or to exercise any such right of offset, or any release of the Borrower, any
other Guarantor or any other Person or any such collateral security, guarantee
or right of offset, shall not relieve any Guarantor of any obligation or
liability hereunder, and shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of any Guaranteed
Creditor against any Guarantor.  For the
purposes hereof “demand” shall include the commencement and continuance of any
legal proceedings.

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

Section
2.08                                Payments.  Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent, for the ratable benefit of
the Guaranteed Creditors, without set-off, deduction or counterclaim in
dollars, in immediately available funds, at its US Principal Office.

ARTICLE III
 Representations
and Warranties

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

Section
3.01                                Representations in Credit Agreement.  In the case of each Guarantor, the
representations and warranties set forth in Article VII of the Credit Agreement
as they relate to such Guarantor or to the Loan Documents to which such
Guarantor is a party are true and correct in all material respects, provided
that each reference in each such representation and warranty to each Borrower’s
knowledge, as applicable, shall, for the purposes of this Section 3.01, be
deemed to be a reference to such Guarantor’s knowledge.

Section
3.02                                Benefit
to the Guarantor.  Each Borrower is a member of an affiliated
group of companies that includes each Guarantor and each Borrower and the other
Guarantors are engaged in related businesses. 
Each Guarantor (other than UCLP) is a Restricted Subsidiary of UCLP and
its guaranty and surety obligations pursuant to this Agreement reasonably may
be 

expected to
benefit, directly or indirectly, it; and it has determined that this Agreement
is necessary and convenient to the conduct, promotion and attainment of the
business of such Guarantor and each Borrower.

Section
3.03                                Solvency.  Each Guarantor (a) is not insolvent as of the
date hereof and will not be rendered insolvent as a result of this Agreement
(after giving effect to Section 2.02), (b) is not engaged in business or a
transaction, or about to engage in a business or a transaction, for which any
Property remaining with it constitute unreasonably small capital, and (c) does
not intend to incur, or believe it will incur, Debt that will be beyond its
ability to pay as such Debt matures.

ARTICLE IV
 Covenants

Each
Guarantor covenants and agrees with the Administrative Agent and the Lenders
that, from and after the date of this Agreement until the Borrower Obligations
shall have been paid in full in cash, no Letter of Credit shall be outstanding
(except for Letters of Credit secured by cash collateral as permitted in
Section 2.07(a)(iii) of the Credit Agreement) and all of the Aggregate
Commitments shall have terminated:

Section
4.01                                Covenants
in Credit Agreement.  In the case of each Guarantor, such Guarantor
shall take, or shall refrain from taking, as the case may be, each action that
is necessary to be taken or not taken, as the case may be, so that no Default
is caused by the failure to take such action or to refrain from taking such
action by such Guarantor or any of its Restricted Subsidiaries.

ARTICLE V
 The
Administrative Agent

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

ARTICLE VI
 Subordination
of Indebtedness

Section
6.01                                Subordination of All Guarantor
Claims.  As used herein, the term “Guarantor
Claims” shall mean all debts and obligations of the Borrower or
any other Guarantor to any other Guarantor, whether such debts and obligations
now exist or are hereafter incurred or arise, or whether the obligation of the
debtor thereon be direct, contingent, primary, secondary, 

several, joint
and several, or otherwise, and irrespective of whether such debts or
obligations be evidenced by note, contract, open account, or otherwise, and
irrespective of the Person or Persons in whose favor such debts or obligations
may, at their inception, have been, or may hereafter be created, or the manner
in which they have been or may hereafter be acquired by.  After and during the continuation of an Event
of Default, no Guarantor shall receive or collect, directly or indirectly, from
any obligor in respect thereof any amount upon the Guarantor Claims.

Section
6.02                                Claims in Bankruptcy.  In the event of receivership, bankruptcy,
reorganization, arrangement, debtor’s relief, or other insolvency proceedings
involving any Guarantor, the Administrative Agent on behalf of the
Administrative Agent and the Guaranteed Creditors shall have the right to prove
their claim in any proceeding, so as to establish their rights hereunder and
receive directly from the receiver, trustee or other court custodian, dividends
and payments which would otherwise be payable upon Guarantor Claims.  Each Guarantor hereby assigns such dividends
and payments to the Administrative Agent for the benefit of the Administrative
Agent and the Guaranteed Creditors for application against the Borrower
Obligations as provided under Section 10.02(b) of the Credit Agreement.  Should any Agent or Guaranteed Creditor
receive, for application upon the Obligations, any such dividend or payment
which is otherwise payable to any Guarantor, and which, as between such
Guarantors, shall constitute a credit upon the Guarantor Claims, then upon
payment in full in cash of the Borrower Obligations, the expiration of all
Letters of Credit (except for Letters of Credit secured by cash collateral as
permitted in Section 2.07(a)(iii) of the Credit Agreement) and the termination
of all of the Aggregate Commitments, the intended recipient shall become
subrogated to the rights of the Administrative Agent and the Guaranteed
Creditors to the extent that such payments to the Administrative Agent and the
Lenders on the Guarantor Claims have contributed toward the liquidation of the
Obligations, and such subrogation shall be with respect to that proportion of
the Obligations which would have been unpaid if the Administrative Agent and
the Guaranteed Creditors had not received dividends or payments upon the
Guarantor Claims.

Section
6.03                                Payments Held in Trust.  In the event that notwithstanding Section
6.01 and Section 6.02, any Guarantor should receive any funds, payments, claims
or distributions which is prohibited by such Sections, then it agrees: (a) to
hold in trust for the Administrative Agent and the Guaranteed Creditors an
amount equal to the amount of all funds, payments, claims or distributions so
received, and (b) that it shall have absolutely no dominion over the amount of
such funds, payments, claims or distributions except to pay them promptly to
the Administrative Agent, for the benefit of the Guaranteed Creditors; and each
Guarantor covenants promptly to pay the same to the Administrative Agent.

Section
6.04                                Liens Subordinate.  Each Guarantor agrees that, until the
Borrower Obligations are paid in full in cash, the expiration of all Letters of
Credit (except for Letters of Credit secured by cash collateral as permitted in
Section 2.07(a)(iii) of the Credit Agreement) and the termination of all of the
Aggregate Commitments, any Liens securing payment of the Guarantor Claims shall
be and remain inferior and subordinate to any Liens securing payment of the
Obligations, regardless of whether such encumbrances in favor of such
Guarantor, the Administrative Agent or any Guaranteed Creditor presently exist
or are hereafter created or attach. 
Without the prior written consent of the Administrative Agent, no
Guarantor, during the period in which any of the Borrower Obligations are
outstanding or the Aggregate Commitments are in effect, shall (a) exercise or
enforce any creditor’s right it may have against any debtor in 

respect of the
Guarantor Claims, or (b) foreclose, repossess, sequester or otherwise take steps
or institute any action or proceeding (judicial or otherwise, including without
limitation the commencement of or joinder in any liquidation, bankruptcy,
rearrangement, debtor’s relief or insolvency proceeding) to enforce any Lien
held by it.

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

ARTICLE VII
 Miscellaneous

Section 7.01                                Waiver.  No failure on the part of the Administrative
Agent or any Guaranteed Creditor to exercise and no delay in exercising, and no
course of dealing with respect to, any right, power, privilege or remedy or any
abandonment or discontinuance of steps to enforce such right, power, privilege
or remedy under this Agreement or any other Loan Document shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power,
privilege or remedy under this Agreement or any other Loan Document preclude
or  be construed as a waiver of any other
or further exercise thereof or the exercise of any other right, power,
privilege or remedy.  The remedies
provided herein are cumulative and not exclusive of any remedies provided by
law or equity.

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

Section
7.03                                Amendments in Writing.  None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 12.02 of the Credit Agreement.

Section
7.04                                Successors and Assigns.  The provisions of this Agreement shall be
binding upon the Guarantors and their successors and assigns and shall inure to
the benefit of the Administrative Agent and the Guaranteed Creditors and their
respective successors and assigns; provided that except as set forth in Section
12.04 of the Credit Agreement, no Guarantor may assign, transfer or delegate
any of its rights or obligations under this Agreement without the prior written
consent of the Administrative Agent and the Lenders, and any such purported
assignment, transfer or delegation shall be null and void.

Section
7.05                                Survival; Revival; Reinstatement.

(a)                                  All covenants, agreements,
representations and warranties made by any Guarantor herein and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document to which it is a party shall be
considered to have been relied upon by the Administrative Agent, the other
Agents, the Issuing Bank and the Lenders and shall survive the execution and
delivery of this Agreement and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made 

by any such
other party or on its behalf and notwithstanding that the Administrative Agent,
the other Agents, the Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time
any credit is extended hereunder, and shall continue in full force and effect
as long as the principal of or any accrued interest on any Loan or any fee or
any other amount payable under the Credit Agreement is outstanding and unpaid
or any Letter of Credit is outstanding and so long as the Aggregate Commitments
have not expired or terminated.

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

Section
7.06                                Counterparts; Integration;
Effectiveness.

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

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

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

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

Section
7.08                                Set-Off.  If an Event of Default shall have occurred
and be continuing, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations (of whatsoever
kind, including, without limitations obligations under Hedging Agreements) at
any time owing by such Lender or Affiliate to or for the credit or the account
of any Guarantor against any of and all the obligations of the Guarantor owed
to such Lender now or hereafter existing under this Agreement or any other Loan
Document, irrespective of whether or not such Lender shall have made any demand
under this Agreement or any other Loan Document and although such obligations
may be unmatured.  The rights of each
Lender under this Section 7.08 are in addition to other rights and remedies
(including other rights of setoff) which such Lender or its Affiliates may
have.  Notwithstanding anything to the
contrary contained in this Agreement, the Lenders hereby agree that they shall
not set off any funds in any lock boxes whatsoever in connection with this
Agreement, except for such lock boxes which may be established in connection
with this Agreement.

Section
7.09                                Governing Law; Submission to
Jurisdiction.

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

(b)                                 ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT IN
THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF TEXAS, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH OF THE PARTIES HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY
LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. 
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.  THIS SUBMISSION TO JURISDICTION IS
NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER
ANOTHER PARTY IN ANY COURT OTHERWISE HAVING JURISDICTION.

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

(d)                                 NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER OR ANY HOLDER OF A NOTE TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE 

LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE GUARANTOR IN ANY OTHER
JURISDICTION.

(e)                                  EACH PARTY HEREBY (i)
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
ANY SECURITY INSTRUMENT AND FOR ANY COUNTERCLAIM THEREIN; (ii) IRREVOCABLY
WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OF THE
ADMINISTRATIVE AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT, THE SECURITY INSTRUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 7.10.

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

Section
7.11                                Acknowledgments.  Each Guarantor hereby acknowledges that:

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

(b)                                 neither the Administrative Agent
nor any Guaranteed Creditor has any fiduciary relationship with or duty to any
Guarantor arising out of or in connection with this Agreement or any of the
other Loan Documents, and the relationship between the Guarantors, on the one
hand, and the Administrative Agent and Guaranteed Creditors, on the other hand,
in connection herewith or therewith is solely that of debtor and creditor; and

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

(d)                                 Each of the parties hereto
specifically agrees that it has a duty to read this Agreement, the Security
Instruments and the other Loan Documents and agrees that it is charged with
notice and knowledge of the terms of this Agreement, the Security Instruments
and the other Loan Documents; that it has in fact read this Agreement, the
Security Instruments and the other Loan Documents and is fully informed and has
full notice and knowledge of the terms, conditions and effects thereof; that it
has been represented by independent legal counsel of its choice throughout the
negotiations preceding its execution of this Agreement and the Security
Instruments; and has received the advice of its attorney in entering into this
Agreement and the 

Security
Instruments; and that it recognizes that certain of the terms of this Agreement
and the Security Instruments result in one party assuming the liability
inherent in some aspects of the transaction and relieving the other party of
its responsibility for such liability.  EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL
NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS
AGREEMENT AND THE SECURITY INSTRUMENTS ON THE BASIS THAT THE PARTY HAD NO
NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
“CONSPICUOUS.”

Section
7.12                                Additional Guarantors.  Each Significant Domestic Subsidiary of UCLP
that is required to become a party to this Agreement pursuant to Section 8.07
of the Credit Agreement shall become an Guarantor for all purposes of this
Agreement upon execution and delivery by such Subsidiary of an Assumption
Agreement in the form of Annex I hereto and shall thereafter have the same
rights, benefits and obligations as an Guarantor party hereto on the date
hereof.

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

Section
7.14                                                        No General Partner’s Liability.  The Lenders agree that no claim arising
against either the Borrower, UCLP or any Guarantor under this Agreement shall
be asserted against the General Partner (in its individual capacity) and no
judgment, order or execution entered in any suit, action or proceeding, whether
legal or equitable, on this Agreement or any of the other Loan Documents shall
be obtained or enforced against the General Partner (in its individual
capacity) or its assets for the purpose of obtaining satisfaction and payment
of the Indebtedness or any claims arising under this Agreement or any other
Loan Document, any right to proceed against the General Partner individually or
its respective assets being hereby expressly waived by the Lenders.  Nothing in this Section 7.14, however, shall
be construed so as to prevent the Administrative Agent or any Lender from
commencing any action, suit or proceeding with respect to or causing legal
papers to be served upon the General Partner for the purpose of (i) obtaining
jurisdiction over the Borrower, UCLP or any other Guarantor or (ii) obtaining
judgment, order or execution against the General Partner arising out of any
fraud or intentional misrepresentation by the General Partner in connection
with the Loan Documents or of recovery of moneys received by the General
Partner in violation of the terms of this Agreement.

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

 

	
  BORROWER:

  	
  UC OPERATING PARTNERSHIP, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  UCLP OLP GP LLC,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel
  Schlanger

  
	
   

  	
  Name:

  	
  Daniel Schlanger

  
	
   

  	
  Title:

  	
  Senior Vice
  President and Chief

  
	
   

  	
   

  	
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  GUARANTORS:

  	
  UNIVERSAL
  COMPRESSION 

  
	
   

  	
  PARTNERS,
  L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  UCO
  GENERAL PARTNER, LP,

  
	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  UCO GP, LLC,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel
  Schlanger

  
	
   

  	
  Name:

  	
  Daniel Schlanger

  
	
   

  	
  Title:

  	
  Senior Vice
  President and Chief

  
	
   

  	
   

  	
  Financial
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  UCLP
  LEASING, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  UCLP LEASING GP LLC,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel Schlanger

  
	
   

  	
  Name:

  	
  Daniel Schlanger

  
	
   

  	
  Title:

  	
  Senior Vice
  President and Chief

  
	
   

  	
   

  	
  Financial Officer

  

 

Signature Page – Guaranty
Agreement

 

	
  

  	
  UCLP
  OLP GP LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel
  Schlanger

  
	
   

  	
  Name:

  	
  Daniel Schlanger

  
	
   

  	
  Title:

  	
  Senior Vice President
  and Chief

  
	
   

  	
   

  	
  Financial
  Officer

  

 

Signature Page – Guaranty
Agreement

 

	
  Acknowledged and Agreed to
  as

  	
   

  	
   

  
	
  of the date
  hereof by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ADMINISTRATIVE AGENT:

  	
  WACHOVIA
  BANK, NATIONAL

  
	
   

  	
  ASSOCATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Todd
  Schanzlin

  
	
   

  	
  Name:

  	
   

  	
  Todd Schanzlin

  
	
   

  	
  Title:

  	
  Vice President

  
				

 

Signature Page – Guaranty
AgreementExhibit
10.8

EXECUTION
VERSION

COLLATERAL AGREEMENT

DATED AS
OF

OCTOBER 20, 2006

MADE BY

UC OPERATING PARTNERSHIP, L.P.;

UCLP OLP GP LLC;

UNIVERSAL COMPRESSION PARTNERS, L.P.;

AND

UCLP LEASING, L.P.

IN FAVOR OF

WACHOVIA BANK, NATIONAL ASSOCIATION,

AS ADMINISTRATIVE AGENT

TABLE OF CONTENTS

 

	
  

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I Definitions

  	
   

  	
  1

  
	
  Section 1.01

  	
  Definitions

  	
   

  	
  1

  
	
  Section 1.02

  	
  Other Definitional Provisions

  	
   

  	
  3

  
	
  ARTICLE II Grant of Security Interest

  	
   

  	
  4

  
	
  Section 2.01

  	
  Grant of Security Interest

  	
   

  	
  4

  
	
  Section 2.02

  	
  Transfer of Pledged Securities

  	
   

  	
  5

  
	
  Section 2.03

  	
  No Subrogation

  	
   

  	
  5

  
	
  Section 2.04

  	
  Amendments, Etc. with respect to the Obligations

  	
   

  	
  5

  
	
  Section 2.05

  	
  Waivers

  	
   

  	
  6

  
	
  Section 2.06

  	
  Pledge Absolute and Unconditional

  	
   

  	
  6

  
	
  Section 2.07

  	
  Reinstatement

  	
   

  	
  8

  
	
  ARTICLE III Representations and Warranties

  	
   

  	
  8

  
	
  Section 3.01

  	
  Title; No Other Liens

  	
   

  	
  8

  
	
  Section 3.02

  	
  Perfected First Priority Liens

  	
   

  	
  9

  
	
  Section 3.03

  	
  Grantor Information

  	
   

  	
  9

  
	
  Section 3.04

  	
  Pledged Securities

  	
   

  	
  9

  
	
  Section 3.05

  	
  Instruments and Chattel Paper

  	
   

  	
  9

  
	
  Section 3.06

  	
  Truth of Information; Accounts

  	
   

  	
  9

  
	
  Section 3.07

  	
  Governmental Obligors

  	
   

  	
  9

  
	
  ARTICLE IV Covenants

  	
   

  	
  10

  
	
  Section 4.01

  	
  Maintenance of Perfected Security Interest; Further
  Documentation

  	
   

  	
  10

  
	
  Section 4.02

  	
  Changes in Locations, Name, Etc

  	
   

  	
  10

  
	
  Section 4.03

  	
  Pledged Securities

  	
   

  	
  11

  
	
  Section 4.04

  	
  Instruments and Tangible Chattel Paper

  	
   

  	
  12

  
	
  Section 4.05

  	
  Article 8 of the UCC

  	
   

  	
  12

  
	
  ARTICLE V Remedial Provisions

  	
   

  	
  12

  
	
  Section 5.01

  	
  UCC and Other Remedies

  	
   

  	
  12

  
	
  Section 5.02

  	
  Collections on Accounts, Etc

  	
   

  	
  13

  
	
  Section 5.03

  	
  Proceeds

  	
   

  	
  14

  
	
  Section 5.04

  	
  Pledged Securities

  	
   

  	
  15

  
	
  Section 5.05

  	
  Private Sales of Pledged Securities

  	
   

  	
  16

  
	
  Section 5.06

  	
  Deficiency

  	
   

  	
  17

  
	
  Section 5.07

  	
  Non-Judicial Enforcement

  	
   

  	
  17

  
	
  ARTICLE VI The Administrative Agent

  	
   

  	
  17

  
	
  Section 6.01

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

  	
   

  	
  17

  
	
  Section 6.02

  	
  Duty of Administrative Agent

  	
   

  	
  18

  
	
  Section 6.03

  	
  Filing of Financing Statements

  	
   

  	
  19

  
	
  Section 6.04

  	
  Authority of Administrative Agent

  	
   

  	
  19

  
	
  ARTICLE VII Subordination of Indebtedness

  	
   

  	
  19

  
	
  Section 7.01

  	
  Subordination of All Grantor Claims

  	
   

  	
  19

  
	
  Section 7.02

  	
  Claims in Bankruptcy

  	
   

  	
  20

  
	
  Section 7.03

  	
  Payments Held in Trust

  	
   

  	
  20

  
	
  Section 7.04

  	
  Liens Subordinate

  	
   

  	
  20

  

 

 i
 

 

 

	
  Section 7.05

  	
  Notation of Records

  	
   

  	
   

  
	
  ARTICLE VIII Miscellaneous

  	
   

  	
  21

  
	
  Section 8.01

  	
  Waiver

  	
   

  	
  21

  
	
  Section 8.02

  	
  Notices

  	
   

  	
  21

  
	
  Section 8.03

  	
  Amendments in Writing

  	
   

  	
  21

  
	
  Section 8.04

  	
  Successors and Assigns

  	
   

  	
  21

  
	
  Section 8.05

  	
  Survival; Revival; Reinstatement

  	
   

  	
  21

  
	
  Section 8.06

  	
  Counterparts; Integration; Effectiveness; Conflicts

  	
   

  	
  22

  
	
  Section 8.07

  	
  Severability

  	
   

  	
  23

  
	
  Section 8.08

  	
  Governing Law; Submission to Jurisdiction

  	
   

  	
  23

  
	
  Section 8.09

  	
  Headings

  	
   

  	
  24

  
	
  Section 8.10

  	
  Acknowledgments

  	
   

  	
  24

  
	
  Section 8.11

  	
  Additional Equity Interests

  	
   

  	
  25

  
	
  Section 8.12

  	
  Releases

  	
   

  	
  25

  
	
  Section 8.13

  	
  Acceptance

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  ANNEXES:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  I

  	
  Form of Supplement

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULES:

  	
   

  	
   

  	
   

  
	
  1

  	
  Notice Addresses of Grantors

  	
   

  	
   

  
	
  2

  	
  Description of Pledged Securities

  	
   

  	
   

  
	
  3

  	
  Filings and Other Actions Required to Perfect
  Security Interests

  	
   

  	
   

  
	
  4

  	
  Location of Jurisdiction of Organization and Chief
  Executive Office

  	
   

  	
   

  
					

es

 ii

This
COLLATERAL AGREEMENT, dated as of October 20, 2006, is made by UC OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership (“UCOP”), UCLP OLP GP
LLC, a Delaware limited liability company (“GP”), UNIVERSAL COMPRESSION
PARTNERS, L.P., a Delaware limited partnership (“UCLP”) and UCLP
LEASING, L.P., a Delaware limited partnership (collectively with UCOP, GP,
UCLP, the “Grantors”), in favor of
WACHOVIA BANK, NATIONAL ASSOCIATION, as administrative agent (in such capacity,
together with its successors in such capacity, the “Administrative
Agent”), for the lenders and other financial institutions (the “Lenders”)
from time to time party to the Senior Secured Credit Agreement dated of even
date herewith (as amended, supplemented or otherwise modified from time to
time, the “Credit Agreement”), among
UCOP, as Borrower, UCLP, as Guarantor, the Administrative Agent, Deutsche Bank
Trust Company Americas, as Syndication Agent, Wachovia Capital Markets, LLC and
Deutsche Bank Securities Inc., as the Joint Lead Arrangers and Joint Lead Book
Runners, and each of the other Agents and Lenders party thereto.

R E C I T A L S

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

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

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

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

ARTICLE I
 Definitions

Section 1.01                                Definitions.

(a)                                  As used in this Agreement, each
term defined above shall have the meaning indicated above.  Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given
to them in the Credit Agreement, and the following terms which are defined in
the UCC on the date hereof are used herein as so defined:  Accounts, Chattel Paper, Documents,
Equipment, General Intangibles, Instruments, Inventory, Payment Intangibles and
Tangible Chattel Paper.

(b)                                 The following terms have the
following meanings:

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

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

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

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

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

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

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

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

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

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

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

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

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

 2
 

security
entitlements in respect of any of the foregoing, if any and (vi) all books and
records relating to any of the Property referred to in this definition.

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

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

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

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

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

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

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

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

Section 1.02                                Other
Definitional Provisions.  

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

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

 3
 

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

ARTICLE II
 Grant of
Security Interest

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

(1)                                  all Accounts;

(2)                                  all Chattel Paper;

(3)                                  all Documents;

(4)                                  all Equipment;

(5)                                  all General Intangibles;

(6)                                  all Instruments;

(7)                                  all Inventory;

(8)                                  all Pledged Securities;

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

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

Each reference to Collateral or
to any relevant type or item of Property constituting Collateral shall be
deemed to exclude (i) tangible Property that is not located in the continental
United States (including its possessions), (ii) motor vehicles, forklifts and
trailers, (iii) voting equity interests in any Foreign Subsidiary required to
prevent the Collateral from including more than 65% of all voting equity
interests in such Foreign Subsidiary, (iv) any general intangibles or other
rights arising under any contract, instrument, license or other document if
(but only to the extent that) the grant of a security interest therein would
constitute a material violation of a valid and enforceable restriction in favor
of a third party, unless and until all required consents shall have been
obtained, (v) Property owned by or assigned to the ABS Subsidiaries and the
Equity Interests of such ABS Subsidiaries; provided that, upon the transfer of
such Property to a 

 4
 

Grantor, such Property shall
become Collateral and (vi) any Property subject to a Lien permitted by Section
9.02(b), (c) or (e) of the Credit Agreement, so long as such Lien is in effect.

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

Section
2.03                                No
Subrogation.  Notwithstanding any
payment made by any Grantor hereunder or any set-off or application of funds of
any Grantor by any Secured Creditor, no Grantor shall be entitled to be
subrogated to any of the rights of any Secured Creditor against the Borrower or
any other Grantor or any collateral security or pledge or guarantee or right of
offset held by any Secured Creditor for the payment of the Borrower
Obligations, nor shall any Grantor seek or be entitled to seek any indemnity,
exoneration, participation, contribution or reimbursement from the Borrower or
any other Grantor in respect of payments made by such Grantor hereunder, until
all amounts owing to the Secured Creditors on account of the Borrower
Obligations are irrevocably and indefeasibly paid in full in cash, no Letter of
Credit is outstanding (except for Letters of Credit secured by cash collateral
as permitted in Section 2.07(a)(iii) of the Credit Agreement) and all of the
Aggregate Commitments are terminated.  If
any amount shall be paid to any Grantor on account of such subrogation rights
at any time when all of the Borrower Obligations shall not have been
irrevocably and indefeasibly paid in full in cash, any Letter of Credit is
outstanding (except for Letters of Credit secured by cash collateral as
permitted in Section 2.07(a)(iii) of the Credit Agreement) or any of the
Aggregate Commitments are in effect, such amount shall be held by such Grantor
in trust for the Secured Creditors, and shall, forthwith upon receipt by such Grantor,
be turned over to the Administrative Agent in the exact form received by such
Grantor (duly indorsed by such Grantor to the Administrative Agent, if
required), to be applied against the Borrower Obligations, whether matured or
unmatured, in accordance with Section 10.02(c) of the Credit Agreement.

Section
2.04                                Amendments,
Etc. with respect to the Obligations. 
Each Grantor shall remain obligated hereunder, and such Grantor’s
obligations hereunder shall not be released, discharged or otherwise affected,
notwithstanding that, without any reservation of rights against any Grantor and
without notice to, demand upon or further assent by any Grantor (which notice,
demand and assent requirements are hereby expressly waived by such Grantor),
(a) any demand for payment of any of the Borrower Obligations made by any
Secured Creditor may be rescinded 

 5
 

by such Secured
Creditor or otherwise and any of the Borrower Obligations continued; (b) the
Borrower Obligations, the liability of any other Person upon or for any part
thereof or any collateral security or pledge or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by, or any indulgence or forbearance in respect thereof
granted by, any Secured Creditor; (c) any Secured Document may be amended,
modified, supplemented or terminated, in whole or in part, as the Secured
Creditors may deem advisable from time to time; (d) any collateral security,
pledge, guarantee or right of offset at any time held by any Secured Creditor
for the payment of the Borrower Obligations may be sold, exchanged, waived,
surrendered or released; (e) any additional guarantors, makers or endorsers of
the Borrower Obligations may from time to time be obligated on the Borrower
Obligations or any additional security or collateral for the payment and
performance of the Borrower Obligations may from time to time secure the
Borrower Obligations; and (f) any other event shall occur which constitutes a
defense or release of sureties generally. 
No Secured Creditor shall have any obligation to protect, secure,
perfect or insure any Lien at any time held by it as security for the Borrower
Obligations or for the pledge and security grants contained in this ARTICLE II
or any Property subject thereto.

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

Section
2.06                                Pledge
Absolute and Unconditional.  

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

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

 6
 

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

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

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

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

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

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

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

(ix)                                any other circumstance or act
whatsoever, including any action or omission of the type described in Section
2.04 (with or without notice to or knowledge of the Borrower or such
Grantor), which constitutes, or might be construed to constitute, an equitable
or legal discharge of the Borrower for the 

 7
 

Borrower
Obligations, or of such Grantor under the pledge and security grants contained
in this ARTICLE II, in bankruptcy or in any other instance.

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

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

ARTICLE III
 Representations
and Warranties

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

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

 8
 

Agreement or the Security
Instruments or as are filed to secure Liens permitted by Section 9.02 of the
Credit Agreement.

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

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

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

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

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

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

 9
 

ARTICLE IV
 Covenants

Each
Grantor covenants and agrees with the Administrative Agent and the Lenders
that, from and after the date of this Agreement until the Borrower Obligations
under the Credit Agreement shall have been paid in full in cash, no Letter of
Credit shall be outstanding (except for Letters of Credit secured by cash
collateral as permitted in Section 2.07(a)(iii) of the Credit Agreement) and
all of the Aggregate Commitments shall have terminated:

Section
4.01                                Maintenance of Perfected Security Interest; Further
Documentation.  Except as set
forth in the Credit Agreement, including, without limitation, any merger,
consolidation, liquidation, sale, assignment, transfer or other disposition
permitted by Section 9.06 or 9.11 of the Credit Agreement, each Grantor agrees
that:

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

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

(c)                                  at any time and from time to
time, upon the written request of the Administrative Agent, and at the sole
expense of such Grantor, it will promptly and duly execute and deliver, and
have recorded, such further instruments and documents and take such further
actions as the Administrative Agent may reasonably deem necessary for the
purpose of obtaining or preserving the full benefits of this Agreement and of
the rights and powers herein granted, including, without limitation, the
delivery of certificated securities  and
the filing of any financing or continuation statements under the UCC (or other
similar domestic laws) in effect in any jurisdiction with respect to the
security interests created hereby.

Section
4.02                                Changes in Locations, Name, Etc.  Such Grantor recognizes that financing
statements pertaining to the Collateral have been or may be filed where such
Grantor is organized.  Without limitation
of Section 8.03 of the Credit Agreement or any other covenant herein, such
Grantor will not cause or permit any change in its (a) corporate name, (b) its
identity or corporate structure or in the jurisdiction in which it is
incorporated or formed, (c) its jurisdiction of organization or its
organizational identification number in such jurisdiction of organization or
(d) its federal taxpayer identification number, unless, in each case, such
Grantor shall have first (i) notified the Administrative Agent of such change
prior to the effective date of such change, and (ii) taken all action
reasonably requested by the Administrative Agent for the purpose of maintaining
the perfection and priority of the Administrative Agent’s security interests
under this Agreement.  In any notice
furnished pursuant to this Section 4.02, such Grantor will expressly state in a
conspicuous manner that the notice is required by this Agreement and contains
facts that may require additional filings of financing statements or other
notices for the purposes of continuing perfection of the Administrative Agent’s
security interest in the Collateral.

 10

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

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

(b)                                 without the prior written
consent of the Administrative Agent, such Grantor will not (i) unless otherwise
expressly permitted hereby or under the other Loan Documents, vote to enable,
or take any other action to permit, any Issuer to issue any Equity Interests of
any nature or to issue any other securities convertible into or granting the
right to purchase or exchange for any Equity Interests of any nature of any
Issuer, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or
grant any option with respect to, the Pledged Securities or Proceeds thereof
(except pursuant to a transaction expressly permitted by the Credit Agreement),
(iii) except as set forth in the Credit Agreement, create, incur or permit to
exist any Lien or option in favor of, or any claim of any Person with respect
to, any of the Pledged Securities or Proceeds thereof, or any interest therein,
except for the security interests created by this Agreement or (iv) enter into
any agreement or undertaking restricting the right or ability of such Grantor
or the Administrative Agent to sell, assign or transfer any of the Pledged
Securities or Proceeds thereof;

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

(d)                                 such Grantor shall furnish to
the Administrative Agent such stock powers and other instruments as may be
reasonably required by the Administrative Agent to assure the transferability
of the Pledged Securities when and as often as may be reasonably requested by
the Administrative Agent; provided that a
requirement to cause an uncertificated Pledged Security to 

 11
 

be certificated
will not be required as long as the Administrative Agent has a first and prior
security interest in such uncertificated Pledged Security; and

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

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

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

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

ARTICLE V
 Remedial
Provisions

Section
5.01                                UCC and Other Remedies.  

(a)                                  Upon the occurrence and during
the continuance of an Event of Default, the Administrative Agent, on behalf of
the Secured Creditors, may exercise, in addition to all other rights and
remedies granted to them in this Agreement, the other Loan Documents and in any
other instrument or agreement securing, evidencing or relating to the Borrower
Obligations, all rights and remedies of a secured party under the UCC or any
other applicable law or otherwise available at law or equity.  Without limiting the generality of the foregoing,
the Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker’s board or office of any Secured Creditor or 

 12
 

elsewhere upon
such commercially reasonable terms and conditions as it may deem advisable and
at such commercially reasonable prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk.  Any Secured Creditor shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in any Grantor,
which right or equity is hereby waived and released.  If applicable to any particular item of
Collateral, each Grantor further agrees, at the Administrative Agent’s request
following an acceleration of the Indebtedness under Section 10.02(a) of the
Credit Agreement, to assemble the Collateral and make it available to the
Administrative Agent at places which the Administrative Agent shall reasonably
select, whether at such Grantor’s premises or elsewhere, unless prohibited by
agreements with unaffiliated third parties. 
Any such sale or transfer by the Administrative Agent either to itself
or to any other Person shall, to the fullest extent permitted under applicable
law, be absolutely free from any claim of right by Grantor, including any
equity or right of redemption, stay or appraisal which Grantor has or may have
under any rule of law, regulation or statute now existing or hereafter adopted
(and such Grantor hereby waives any rights it may have in respect
thereof).  Upon any such sale or
transfer, the Administrative Agent shall have the right to deliver, assign and
transfer to the purchaser or transferee thereof the Collateral so sold or
transferred.  The Administrative Agent
shall apply the net proceeds of any action taken by it pursuant to this Section
5.01, after deducting all reasonable costs and expenses of every kind
incurred in connection therewith or incidental to the care or safekeeping of
any of the Collateral or in any way relating to the Collateral or the rights of
the Administrative Agent and the Secured Creditors hereunder, including, without
limitation, reasonable attorneys’ fees and disbursements, to the payment in
whole or in part of the Borrower Obligations, in accordance with the Credit
Agreement, and only after such application and after the payment by the
Administrative Agent of any other amount required by any provision of law,
including, without limitation, Section 9.615 of the UCC, need the
Administrative Agent account for the surplus, if any, to any Grantor.  To the extent permitted by applicable law,
each Grantor waives all claims, damages and demands it may acquire against the
Administrative Agent or any Secured Creditor arising out of the exercise by
them of any rights hereunder.  If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least 10
days before such sale or other disposition.

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

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

Section
5.02                                Collections
on Accounts, Etc.  The Administrative
Agent hereby authorizes each Grantor to collect upon the Collateral that is
represented by Accounts, Instruments, Chattel Paper and Payment Intangibles
subject to the Administrative Agent’s direction and control, and the
Administrative Agent may curtail or terminate said authority at any time after
the occurrence and during the continuance of an Event of Default.  Upon the request of 

 13
 

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

Section
5.03                                Proceeds.  If required by the Administrative Agent at
any time after the occurrence and during the continuance of an Event of
Default, any payments of Collateral composed of Accounts, Instruments, Chattel
Paper and Payment Intangibles, when collected or received by each Grantor, and
any other cash or non-cash Proceeds received by each Grantor upon the sale or
other disposition of any Collateral, shall be forthwith (and, in any event,
within two Business Days) deposited by such Grantor in the exact form received,
duly indorsed by such Grantor to the Administrative Agent if required, in a
special collateral account maintained by the Administrative Agent, subject to
withdrawal by the Administrative Agent for the ratable benefit of the Secured
Parties only, as hereinafter provided, and, until so turned over, shall be held
by such Grantor in trust for the Administrative Agent for the ratable benefit
of the Secured Creditors, segregated from other funds of any such Grantor.  Each deposit of any such Proceeds shall be
accompanied by a report identifying in reasonable detail the nature and source
of the payments included in the deposit. 
All Proceeds (including, without limitation, Proceeds constituting
collections of Accounts, Chattel Paper, Instruments) while held by the
Administrative Agent (or by any Grantor in trust for the Administrative Agent
for the ratable benefit of the Secured Creditors) shall continue to be
collateral security for all of the Borrower Obligations and shall not
constitute payment thereof until applied as hereinafter provided.  At such intervals as may be agreed upon by
each Grantor and the Administrative Agent, or, if an Event of Default shall
have occurred and be continuing, at any time at the Administrative Agent’s
election, the Administrative Agent shall apply all or any part of the funds on
deposit in said special collateral account on account of the Borrower
Obligations in such order as the Administrative Agent may elect, and any part
of such funds which the Administrative Agent elects not so to apply and deems
not required as collateral security for the Borrower Obligations shall be paid
over from time to time by the Administrative Agent to each Grantor or to
whomsoever may be lawfully entitled to receive the same.

 14
 

Section
5.04                                Pledged Securities.

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

(b)                                 Upon the occurrence and during
the continuance of an Event of Default, upon notice by the Administrative Agent
of its intent to exercise such rights to the relevant Grantor or Grantors, (i)
the Administrative Agent shall have the right to receive any and all cash
dividends, payments, Property or other Proceeds paid in respect of the Pledged
Securities and make application thereof to the Borrower Obligations in accordance
with the Credit Agreement, and (ii) any or all of the Pledged Securities shall
be registered in the name of the Administrative Agent or its nominee, and (iii)
the Administrative Agent or its nominee may exercise (A) all voting, consent,
corporate and other rights pertaining to such Pledged Securities at any meeting
of shareholders (or other equivalent body) of the relevant Issuer or Issuers or
otherwise and (B) any and all rights of conversion, exchange and subscription
and any other rights, privileges or options pertaining to such Pledged
Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the organizational structure of any Issuer, or upon
the exercise by any Grantor or the Administrative Agent of any right, privilege
or option pertaining to such Pledged Securities, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Securities with any
committee, depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as the Administrative Agent may determine), all
without liability except to account for Property actually received by it, but
the Administrative Agent shall have no duty to any Grantor to exercise any such
right, privilege or option and shall not be responsible for any failure to do
so or delay in so doing.

(c)                                  In order to permit the
Administrative Agent to exercise the voting and other consensual rights that it
may be entitled to exercise pursuant hereto and to receive all dividends and
other distributions that it may be entitled to receive hereunder, (i) each
Grantor shall promptly execute and deliver (or cause to be executed and
delivered) to the Administrative Agent all such proxies, dividend payment
orders and other instruments as the Administrative Agent may from time to time
reasonably request and (ii) without limiting the effect of clause (i) above,
such Grantor hereby grants to the Administrative Agent an irrevocable proxy to
vote all or any part of the Pledged Securities and to exercise all other
rights, powers, privileges and remedies to which a holder of the Pledged Securities
would be entitled (including giving or 

 15
 

withholding
written consents of shareholders calling special meetings of shareholders and
voting at such meetings), which proxy shall be effective, automatically and
without the necessity of any action (including any transfer of any Pledged
Securities on the record books of the Issuer thereof) by any other Person
(including the Issuer of such Pledged Securities or any officer or agent
thereof) upon the occurrence and during the continuance of an Event of Default
and which proxy shall only terminate upon the payment in full in cash of the
Borrower Obligations under the Credit Agreement.

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

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

Section
5.05                                Private
Sales of Pledged Securities.  

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

(b)                                 Each Grantor agrees to use its
best commercially reasonable efforts to do or cause to be done all such other
acts as may reasonably be necessary to make such sale or sales 

 16
 

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

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

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

ARTICLE VI
 The
Administrative Agent

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

(a)                                  Anything in this Section
6.01(a) to the contrary notwithstanding, the Administrative Agent agrees
that it will not exercise any rights under the power of attorney provided for
in this Section 6.01(a) unless an Event of Default shall have occurred
and be continuing.  Each Grantor hereby
irrevocably constitutes and appoints the Administrative Agent and any officer
or agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of such Grantor and in the name of such Grantor or in its own name, for
the purpose of carrying out the terms of this Agreement, to take any and all
reasonably appropriate action and to execute any and all documents and
instruments which may be reasonably necessary or desirable to accomplish the
purposes of this Agreement, and, without limiting the generality of the
foregoing, each Grantor hereby gives the Administrative Agent the power and right,
on behalf of such Grantor, without notice to or assent by such Grantor, to do
any or all of the following:

(i)                                     unless being disputed under
Section 8.03(a) of the Credit Agreement, pay or discharge Taxes and Liens
levied or placed on or threatened against the Collateral, effect any repairs or
any insurance called for by the terms of this Agreement or any other Loan
Document and pay all or any part of the premiums therefor and the costs
thereof;

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

 17
 

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

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

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

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

Section
6.02                                Duty of Administrative Agent.  The Administrative Agent’s sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section  9.207
of the UCC or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar Property for its own account and shall
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which comparable secured parties accord comparable
collateral.  To the fullest extent
permitted under applicable law, neither the Administrative Agent, any Secured
Creditor nor any of their respective officers, directors, employees or agents
shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of any Grantor or any
other Person or to take any 

 18
 

other action
whatsoever with regard to the Collateral or any part thereof.  The powers conferred on the Administrative
Agent and the Secured Creditors hereunder are solely to protect the
Administrative Agent’s and the Secured Creditors’ interests in the Collateral
and shall not impose any duty upon the Administrative Agent or any Secured
Creditor to exercise any such powers. 
The Administrative Agent and the Secured Creditors shall be accountable
only for amounts that they actually receive as a result of the exercise of such
powers, and neither they nor any of their officers, directors, employees or
agents shall be responsible to any Grantor for any act or failure to act
hereunder, except for their own gross negligence or willful misconduct.  To the fullest extent permitted by applicable
law, the Administrative Agent shall be under no duty whatsoever to make or give
any presentment, notice of dishonor, protest, demand for performance, notice of
non-performance, notice of intent to accelerate, notice of acceleration, or
other notice or demand in connection with any Collateral or the Borrower
Obligations, or to take any steps necessary to preserve any rights against any
Grantor or other Person or ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Collateral, whether or not it has or is deemed to have knowledge of such
matters.  Each Grantor, to the extent
permitted by applicable law, waives any right of marshaling in respect of any
and all Collateral, and waives any right to require the Administrative Agent or
any Secured Creditor to proceed against any Grantor or other Person, exhaust
any Collateral or enforce any other remedy which the Administrative Agent or
any Secured Creditor now has or may hereafter have against each Grantor, any
Grantor or other Person.

Section
6.03                                Filing
of Financing Statements.  Pursuant to
the UCC and any other applicable law, each Grantor authorizes the
Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral in such form
and in such offices as the Administrative Agent reasonably determines
appropriate to perfect the security interests of the Administrative Agent under
this Agreement.  A photographic or other
reproduction of this Agreement shall be sufficient as a financing statement or
other filing or recording document or instrument for filing or recording in any
jurisdiction.

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

ARTICLE VII
 Subordination
of Indebtedness

Section
7.01                                Subordination
of All Grantor Claims.  As used
herein, the term “Grantor Claims” shall mean all debts and
obligations of the Borrower or any other Grantor to any other Grantor, whether
such debts and obligations now exist or are hereafter incurred or 

 19
 

arise, or whether
the obligation of the debtor thereon be direct, contingent, primary, secondary,
several, joint and several, or otherwise, and irrespective of whether such
debts or obligations be evidenced by note, contract, open account, or
otherwise, and irrespective of the Person or Persons in whose favor such debts
or obligations may, at their inception, have been, or may hereafter be created,
or the manner in which they have been or may hereafter be acquired by.  Except for payments permitted by the Credit
Agreement, after and during the continuation of an Event of Default, no Grantor
shall receive or collect, directly or indirectly, from any obligor in respect
thereof any amount upon the Grantor Claims.

Section
7.02                                Claims
in Bankruptcy.  In the event of
receivership, bankruptcy, reorganization, arrangement, debtor’s relief, or
other insolvency proceedings involving any Grantor, the Administrative Agent on
behalf of the Administrative Agent and the Secured Creditors shall have the
right to prove their claim in any proceeding, so as to establish their rights
hereunder and receive directly from the receiver, trustee or other court
custodian, dividends and payments which would otherwise be payable upon Grantor
Claims.  Each Grantor hereby assigns such
dividends and payments to the Administrative Agent for the benefit of the
Administrative Agent and the Secured Creditors for application against the
Borrower Obligations as provided under the Credit Agreement.  Should any Agent or Secured Creditor receive,
for application upon the Borrower Obligations, any such dividend or payment
which is otherwise payable to any Grantor, and which, as between such Grantors,
shall constitute a credit upon the Grantor Claims, then upon payment in full in
cash of the Borrower Obligations, the expiration of all Letters of Credit
outstanding under the Credit Agreement (except for Letters of Credit secured by
cash collateral as permitted in Section 2.07(a)(iii) of the Credit Agreement) and
the termination of all of the Aggregate Commitments, the intended recipient
shall become subrogated to the rights of the Administrative Agent and the
Secured Creditors to the extent that such payments to the Administrative Agent
and the Lenders on the Grantor Claims have contributed toward the liquidation
of the Borrower Obligations, and such subrogation shall be with respect to that
proportion of the Borrower Obligations which would have been unpaid if the
Administrative Agent and the Secured Creditors had not received dividends or
payments upon the Grantor Claims.

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

Section
7.04                                Liens
Subordinate.  Each Grantor agrees
that, until the Borrower Obligations are paid in full in cash, no Letter of
Credit shall be outstanding (except for Letters of Credit secured by cash
collateral as permitted in Section 2.07(a)(iii) of the Credit Agreement) and
the termination of all of the Aggregate Commitments, any Liens securing payment
of the Grantor Claims shall be and remain inferior and subordinate to any Liens
securing payment of the Borrower Obligations, regardless of whether such
encumbrances in favor of such Grantor, the Administrative Agent or any Secured
Creditor presently exist or are hereafter created or 

 20
 

attach.  Without the prior written consent of the
Administrative Agent, no Grantor, during the period in which any of the
Borrower Obligations are outstanding or the Aggregate Commitments are in
effect, shall (a) exercise or enforce any creditor’s right it may have against
any debtor in respect of the Grantor Claims, or (b) foreclose, repossess,
sequester or otherwise take steps or institute any action or proceeding
(judicial or otherwise, including without limitation the commencement of or
joinder in any liquidation, bankruptcy, rearrangement, debtor’s relief or
insolvency proceeding) to enforce any Lien held by it.

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

ARTICLE VIII
 Miscellaneous

Section
8.01                                Waiver.  No failure on the part of the Administrative
Agent or any Secured Creditor to exercise and no delay in exercising, and no
course of dealing with respect to, any right, power, privilege or remedy or any
abandonment or discontinuance of steps to enforce such right, power, privilege
or remedy under this Agreement or any other Loan Document shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power,
privilege or remedy under this Agreement or any other Loan Document preclude or
be construed as a waiver of any other or further exercise thereof or the
exercise of any other right, power, privilege or remedy.  The remedies provided herein are cumulative
and not exclusive of any remedies provided by law or equity

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

Section
8.03                                Amendments
in Writing.  None of the terms or
provisions of this Agreement may be waived, amended, supplemented or otherwise
modified except in accordance with Section 12.02 of the Credit Agreement.

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

Section
8.05                                Survival;
Revival; Reinstatement. 

(a)                                  All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document to which it is a party shall be 

 21
 

considered to
have been relied upon by the Administrative Agent, the other Agents, the
Issuing Bank and the Lenders and shall survive the execution and delivery of
this Agreement and the making of any Loans and issuance of any Letters of
Credit, regardless of any investigation made by any such other party or on its
behalf and notwithstanding that the Administrative Agent, the other Agents, the
Issuing Bank or any Lender may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect as long as the principal
of or any accrued interest on any Loan or any fee or any other amount payable
under the Credit Agreement is outstanding and unpaid or any Letter of Credit is
outstanding and so long as the Aggregate Commitments have not expired or
terminated.

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

Section
8.06                                Counterparts;
Integration; Effectiveness; Conflicts.  

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

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

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

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

 22
 

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

Section
8.08                                Governing
Law; Submission to Jurisdiction.

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

(b)                                 ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT IN
THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF TEXAS, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH OF THE PARTIES HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY
LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. 
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.  THIS SUBMISSION TO JURISDICTION IS
NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER
ANOTHER PARTY IN ANY COURT OTHERWISE HAVING JURISDICTION.

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

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

(e)                                  EACH PARTY HEREBY (i)
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
ANY SECURITY INSTRUMENT AND FOR ANY COUNTERCLAIM THEREIN; (ii) IRREVOCABLY
WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL

 23
 

DAMAGES, OR
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES THAT NO
PARTY HERETO NOR ANY REPRESENTATIVE OF THE ADMINISTRATIVE AGENT OR COUNSEL FOR
ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS, AND (iv) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT, THE SECURITY INSTRUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY
AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
CONTAINED IN THIS SECTION 8.08.

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

Section
8.10                                Acknowledgments.  Each Grantor hereby acknowledges that:

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

(b)                                 neither the Administrative Agent
nor any Secured Creditor has any fiduciary relationship with or duty to any
Grantor arising out of or in connection with this Agreement or any of the other
Loan Documents, and the relationship between the Grantors, on the one hand, and
the Administrative Agent and Secured Creditors, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor;

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

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

 24
 

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

Section
8.12                                Releases.

(a)                                  Full Release.  The grant of a security interest hereunder
and all of rights, powers and remedies in connection herewith shall remain in
full force and effect until the Administrative Agent has (i) retransferred and
delivered all Collateral in its possession to the Grantors, and (ii) executed a
written release or termination statement and reassigned to the Grantors without
recourse or warranty any remaining Collateral and all rights conveyed
hereby.  Pursuant to the satisfaction of
the conditions set forth in Section 8.07(b) of the Credit Agreement or upon the
complete payment of the Borrower Obligations under the Credit Agreement (except
for Letters of Credit secured by cash collateral as permitted in Section
2.07(a)(iii) of the Credit Agreement) and the compliance by the Grantors with
all covenants and agreements hereof and the termination of the Aggregate
Commitments, the Administrative Agent, at the written request and expense of the
Borrower, will promptly release, reassign and transfer the Collateral to the
Grantors and declare this Agreement to be of no further force or effect.

(b)                                 Partial Release.  Notwithstanding anything contained herein to
the contrary, the Grantors are authorized to release any Collateral that is
sold, leased, assigned, exchanged, conveyed, transferred or otherwise disposed
of in compliance with Sections 9.06, 9.08 and 9.11 of the Credit Agreement at
which point the liens and security interests shall terminate with respect to
such Collateral and this Agreement shall have no further force or effect with
respect to such released Collateral; provided that so long as the lien
in favor of the Administrative Agent continues in the proceeds of such sale,
lease, assignment, exchange, conveyance, transfer or other disposal of such
Collateral, or to the extent such Collateral is sold, leased, assigned,
exchanged, conveyed, transferred or otherwise disposed of to the Borrower or
any Subsidiary Guarantor, such lien continues in such Collateral.

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

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

[SIGNATURE PAGES TO
FOLLOW]

 25

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

 

	
  GRANTORS:

  	
  UC OPERATING PARTNERSHIP, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  UCLP OLP GP LLC,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel
  Schlanger

  
	
   

  	
  Name:

  	
  Daniel Schlanger

  
	
   

  	
  Title:

  	
  Senior Vice
  President and Chief

  
	
   

  	
   

  	
  Financial
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  UNIVERSAL
  COMPRESSION 

  
	
   

  	
  PARTNERS,
  L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  UCO GENERAL PARTNER,
  LP,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  UCO GP, LLC,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel
  Schlanger

  
	
   

  	
  Name:

  	
  Daniel Schlanger

  
	
   

  	
  Title:

  	
  Senior Vice
  President and Chief

  
	
   

  	
   

  	
  Financial
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  UCLP OLP GP LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel
  Schlanger

  
	
   

  	
  Name:

  	
  Daniel Schlanger

  
	
   

  	
  Title:

  	
  Senior Vice
  President and Chief

  
	
   

  	
   

  	
  Financial
  Officer

  

 

Signature Page –
Collateral Agreement

 

	
  

  	
  UCLP
  LEASING, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  UCLP LEASING GP LLC,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel
  Schlanger

  
	
   

  	
  Name:

  	
  Daniel Schlanger

  
	
   

  	
  Title:

  	
  Senior Vice
  President and Chief

  
	
   

  	
   

  	
  Financial
  Officer

  

 

Signature Page – Collateral
Agreement

 

	
  Acknowledged and Agreed to
  as

  	
   

  	
   

  
	
  of the date
  hereof by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ADMINISTRATIVE AGENT:

  	
  WACHOVIA
  BANK, NATIONAL 

  
	
   

  	
  ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Todd Schanzlin

  
	
   

  	
  Name:

  	
  Todd Schanzlin

  
	
   

  	
  Title:

  	
  Vice President

  
					

 

Acknowledgment Page –
Collateral Agreement

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