10-K

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2003
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                    to

Commission file nos.:
001-15843
333-48279

Universal Compression Holdings, Inc.
Universal Compression, Inc.
(Exact name of Registrants as Specified in Their Charters)

Delaware Texas (States or Other Jurisdictions of Incorporation or Organization) 4444 Brittmoore Road, Houston, Texas (Address of Principal Executive Offices)	13-3989167 4-1282680 (I.R.S. Employer Identification Nos.) 77041-8004 (Zip Code)
(713) 335-7000 (Registrants' telephone number, including area code)

Securities of Universal Compression Holdings, Inc. Registered Pursuant to Section 12(b) of the Act:
Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $.01 par value	New York Stock Exchange, Inc
Securities of Universal Compression Holdings, Inc. Registered Pursuant to Section 12(g) of the Act:
Title of Each Class
None
Securities of Universal Compression, Inc. Registered Pursuant to Section 12(b) of the Act:
Title of Each Class	Name of Each Exchange on Which Registered
None	N/A
Securities of Universal Compression, Inc. Registered Pursuant to Section 12(g) of the Act:
Title of Each Class
None

UNIVERSAL COMPRESSION, INC. MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM 10-K WITH THE REDUCED DISCLOSURE FORMAT.

Indicate by check mark whether each of the registrants (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of each of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrants are accelerated filers (as defined in Rule 12b-2 of the Exchange Act).

Yes ý    No o    (Universal Compression Holdings, Inc.)
Yes o    No ý    (Universal Compression, Inc.)

The aggregate market value of the Common Stock of Universal Compression Holdings, Inc. held by non-affiliates as of the last business day of the registrant's most recently completed second fiscal quarter (September 30, 2002) was approximately $270 million. For purposes of the above statements only, all directors, executive officers and 10% stockholders are assumed to be affiliates. This calculation does not reflect a determination that such persons are affiliates for any other purpose.

The number of shares of the Common Stock of Universal Compression Holdings, Inc. outstanding as of June 2, 2003: 30,860,554 shares. All 4,910 outstanding shares of common stock of Universal Compression, Inc., par value $10.00 per share, are owned by Universal Compression Holdings, Inc.

Documents Incorporated by Reference

Portions of Universal Compression Holdings, Inc.'s Proxy Statement for the Annual Meeting of Stockholders to be held on July 18, 2003 are incorporated by reference into Part III, as indicated herein.

The Index to Exhibits is on page 44.

Table of Contents

Part I
Item 1.	Business
Item 2.	Properties
Item 3.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
Part II
Item 5.	Market for the Registrants' Common Equity and Related Stockholder Matters
Item 6.	Selected Financial Data
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A	Quantitative and Qualitative Disclosures About Market Risk
Item 8.	Financial Statements and Supplementary Data
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Part III
Item 10.	Directors and Executive Officers of the Company
Item 11.	Executive Compensation
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.	Certain Relationships and Related Transactions
Item 14.	Controls and Procedures
Item 15.	Principal Accountant Fees and Services
Part IV
Item 16.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K
	Signatures
	Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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PART I

        The terms "our," "Company," "we," and "us" when used in this report refer to Universal Compression Holdings, Inc. and its subsidiaries, including Universal Compression, Inc., as a combined entity, including its predecessors, except where it is made clear that such term means only the parent company. The term "Universal" refers to Universal Compression, Inc. and its subsidiaries.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

        This report contains "forward-looking statements" intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained in this report are forward-looking statements, including, without limitation, statements regarding future financial position, business strategy, proposed acquisitions, budgets, litigation, projected costs and plans and objectives of management for future operations. You can identify many of these statements by looking for words such as "believes," "expects," "will," "intends," "projects," "anticipates," "estimates," "continues" or similar words or the negative thereof.

        Such forward-looking statements in this report include, without limitation:

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our business growth strategy and projected costs;



•

our future financial position;



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the sufficiency of available cash flows to fund continuing operations;



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the expected amount of our capital expenditures;



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anticipated cost savings, future revenues, gross profits and other financial measures related to our business and our primary business segments;



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the future value of our equipment; and



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plans and objectives of our management for our future operations.

        Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this report. The risks related to our business described under "Risk Factors" and elsewhere in this report could cause our actual results to differ from those described in, or otherwise projected or implied by, the forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, no assurance can be given that these expectations will prove to be correct. Important factors that could cause our actual results to differ materially from the expectations reflected in these forward-looking statements include, among other things:

•

conditions in the oil and gas industry, including a sustained decrease in the level of supply or demand for natural gas and the impact of the price of natural gas;



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competition among the various providers of natural gas compression services;



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changes in political or economic conditions in key operating markets, including international markets;



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changes in safety and environmental regulations pertaining to the production and transportation of natural gas;



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acts of war or terrorism or governmental or military responses thereto;



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introduction of competing technologies by other companies;



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our ability to retain and grow our customer base;



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our level of indebtedness and ability to fund our business;



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our ability to recoup our investment by re-leasing our compressors after typically short initial lease terms;



•

currency exchange rate fluctuations;

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•

employment workforce factors, including loss of key employees; and



•

liability claims related to the use of our products and services.

        All forward looking statements included in this report are based on information available to us on the date of this report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained throughout this report.

ITEM 1. Business

General

        We are the second largest natural gas compression services company in the world in terms of compressor fleet horsepower, with a fleet as of March 31, 2003 of approximately 7,400 compressor units comprising approximately 2.3 million horsepower. We provide a full range of contract compression services, sales, operations, maintenance and fabrication services and products to the natural gas industry, both domestically and internationally. These services and products are essential to the natural gas industry as gas must be compressed to be delivered from the wellhead to end-users.

        We operate in four primary business segments: domestic contract compression, international contract compression, fabrication and aftermarket services. Our core business, contract compression, involves the leasing of compression equipment to customers. In most cases, maintenance is provided under the terms of the lease. By outsourcing their compression needs, we believe our contract compression customers generally are able to increase their revenues by producing a higher volume of natural gas through decreased compressor downtime. In addition, outsourcing allows our customers to reduce their operating and maintenance costs and capital investments and more efficiently meet their changing compression needs.

        In addition to contract compression, we provide a broad range of compression services and products to customers who own their compression equipment or lease their equipment from our competitors. Our equipment fabrication business involves the design, engineering and assembly of natural gas and air compressors for sale to third parties in addition to those that we use in our contract compression fleet. Our ability to fabricate compressors ranging in size from under 100 horsepower to over 5,000 horsepower enables us to provide compressors that are used in all facets of natural gas production, transmission and distribution. Our aftermarket services business sells parts and components, and provides maintenance and operations services to customers who own their compression equipment or lease their equipment from our competitors. Our ability to provide a full range of compression services and products broadens our customer relationships and helps us identify potential new customers and cross-selling opportunities for existing customers. As the compression needs of our customers increase due to the growing demand for natural gas throughout the world, we believe our geographic scope and broad range of compression services and products will enable us to participate in that growth.

        Financial information about our industry segments is provided in Note 11 in the notes to the Company's financial statements at the end of this report.

        We are a Delaware corporation and a holding company that conducts operations through our wholly-owned subsidiary, Universal, a Texas corporation incorporated in 1954. We were formed on December 12, 1997 for the purpose of acquiring Universal's predecessor, Tidewater Compression Service, Inc. ("TCS") from Tidewater, Inc. Upon completion of the acquisition on February 20, 1998, TCS became our wholly-owned subsidiary and changed its name to Universal Compression, Inc. Through this subsidiary, our gas compression service operations date back to 1954. We completed an initial public offering of shares of our common stock in June 2000.

        Since our initial public offering, we have completed several acquisitions, which have contributed significantly to our growth. Our most significant acquisition was that of Weatherford Global Compression Services, L.P. and certain related entities ("Weatherford Global"), former subsidiaries of Weatherford International Ltd. ("Weatherford"), in February 2001. This added approximately 950,000 horsepower, more than doubling our size at that time.

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        Our principal corporate office is located at 4444 Brittmoore Road, Houston, Texas 77041.

        We maintain a website at www.universalcompression.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are available, without charge, on our website, www.universalcompression.com/invest/SECfrX.html, as soon as reasonably practicable after they are filed electronically with the Securities and Exchange Commission. Paper copies are also available, without charge, from Universal Compression Holdings, Inc., 4444 Brittmoore Road, Houston, Texas 77041, Attention: Investor Relations.

        The following table illustrates our key financial and operating statistics during the last three fiscal years:

		Year Ended March 31,
		2003			2002			2001
		(Dollars in thousands)
Domestic horsepower (end of period)			1,957,015			1,890,935			1,631,138
International horsepower (end of period)			368,437			345,093			254,450
	Total horsepower (end of period)		2,325,452			2,236,028			1,885,588
Average horsepower utilization rate			83.3	%		88.8	%		87.6	%
Revenues		$	625,218		$	679,989		$	232,466
Percentage of revenues from:
	Contract compression		53.1	%		48.2	%		64.2	%
	Fabrication		26.0	%		31.1	%		26.6	%
	Aftermarket services		20.9	%		20.7	%		9.2	%
Net income		$	33,518		$	49,408		$	(4,391	)
EBITDA, as adjusted (a)		$	201,150		$	207,315		$	88,787

(a)

EBITDA, as adjusted, is defined and reconciled to net income on page 17 of this report.

        The natural gas compression industry has grown rapidly over the past decade, driven by the steady increase in demand for natural gas and the aging of producing natural gas fields. In addition, the contract compression segment of the industry has grown rapidly over that same period of time, due to the attractiveness of outsourcing compression needs. Demand for compression services and products is principally tied to consumption of natural gas rather than exploration or drilling activities. As a result, we have historically been less affected by oil and gas price volatility than companies operating in other sectors of the oilfield services industry. We operate our standardized compressor fleet in the primary onshore and offshore natural gas producing regions of the United States. In addition, we operate in select international markets, with current operations in Argentina, Canada, Mexico, Colombia, Thailand, Australia, Venezuela, Peru and Brazil. For the year ended March 31, 2003, approximately 28% of our revenues was attributable to international operations.

        Our financial performance is generally less affected by the short-term market cycles and oil and gas price volatility than the financial performance of companies operating in other sectors of the oilfield services industry because:

•

compression is necessary in order for gas to be delivered from the wellhead to end-users;



•

our operations are tied primarily to natural gas consumption, which is generally less cyclical in nature than exploration activities;



•

outsourcing of compression equipment is often economically advantageous for natural gas production, gathering and transportation companies;



•

we have a broad customer base; and



•

we operate in diverse geographic regions.

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        Adding to this stability is the fact that, while compressors often must be specifically engineered or reconfigured to meet the unique demands of our customers, the fundamental technology of compression equipment has not experienced significant technological change.

Competitive Strengths

        We believe that we have the following key competitive strengths:

•

Comprehensive range of services and products. We provide a complete range of compression services and products to meet the changing compression needs of our customers in the diverse geographic markets that we serve, whether they outsource or own their compression equipment. For those customers who outsource, we believe our contract compression services and products generally allow our customers to achieve higher run-times than they would achieve with owned equipment, resulting in increased production and revenues for our customers. In addition, outsourcing allows our customers flexibility with regard to their changing compression needs while limiting their capital requirements. We continually expand, upgrade and reconfigure our contract compression fleet and provide our operations and maintenance personnel with extensive training. We are able to fabricate compression units ranging in size from under 100 horsepower to over 5,000 horsepower that meet the varying needs of our customers. Additionally, we sell parts and components and provide maintenance and operations services to customers who own their compression equipment or lease their equipment from our competitors. This broad range of compression services and products allows us to expand our customer base and gives us the opportunity to cross-sell our services and products.



•

Ability to serve all gas compression markets. Historically, we have been principally involved in providing compression services and products related to field compression, which involves compression either at the wellhead or as part of a gathering system. We made two acquisitions in 2001 that enhanced our field compression capability and extended our capabilities into the pipeline compression segment of the market, which generally is characterized by the fabrication of larger horsepower units for sale to third parties and the subsequent sales of aftermarket services for those units. We believe that our ability to access both the field compression and pipeline compression markets gives us a competitive advantage over other compression companies that typically serve only one of these markets.



•

Size and geographic scope. We operate in the primary onshore and offshore natural gas producing regions of the United States and select international markets. As the second largest provider of natural gas compression services, we have sufficient fleet size, personnel, logistical capabilities, geographic scope, fabrication capabilities and range of compression service and product offerings to meet the full service needs of our customers in the domestic and international markets we serve on a timely and cost-effective basis. Our size, geographic scope and customer base provide us with improved fleet utilization opportunities. By increasing our fleet utilization, we are able to improve our operating leverage and increase returns. As a result, we believe we have relatively lower operating costs and higher margins than most companies with smaller fleets due to economies of scale. We have fabrication operations located in Houston and Schulenburg, Texas, and Calgary, Alberta, Canada.



•

Standardized compressor platforms. We have standardized our fleet of contract compressors with three primary compressor platforms, which can be specialized to meet customer needs. Standardization enables us to develop extensive expertise in operating and maintaining our compressors, efficiently resizing and reconfiguring our compressors and reducing our operating costs by minimizing inventory costs. Natural gas compressors are long-lived assets with an expected economic life of 25 to 40 years. Our preventive maintenance program is designed to maximize the efficient operation of our fleet and to maintain their economic useful life.



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Experienced management team. Our management team has extensive experience in the compression services business. We believe our management team has successfully demonstrated its ability to maintain our quality standards and commitment to customer service. Our management team has a substantial financial interest in our continued success through direct stock ownership, and participation in our incentive stock option and bonus programs which are linked to our performance.

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Business Strategy

        Our business strategy is to meet the evolving needs of our customers by providing consistent and dependable services and products, and to take advantage of our size and broad geographic scope to expand our customer base. The key elements of our business strategy are described below:

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Provide a complete range of quality compression services and products. We plan to leverage our field compression capabilities to provide services and products to customers in all segments of the natural gas compression market, including field and pipeline compression, fabrication and aftermarket services.



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Seek opportunities for preferred relationships. We intend to continue to enter into strategic alliances, preferred vendor and similar long-term relationships to provide this full range of services and products to our customers.



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Seek opportunities in select international markets. We plan to capitalize on the international compression market by expanding our existing operations in Latin America, Canada and Asia Pacific and offering our services in other key markets. We believe that our experience in international markets and our reputation for providing reliable contract compression services and fabricating high quality, specifically engineered compressors provides us with a solid foundation from which to further expand our business internationally.



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Expand and leverage our fabrication and aftermarket services business. We have significant fabrication and aftermarket services operations and we intend to expand these segments of our business. In addition to providing additional sources of revenues, these segments also provide us with an opportunity to cross-sell our contract compression services and products.



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Continue to expand beyond field compression. In addition to our field compression services, we have expanded our large horsepower compression capabilities in gathering, pipeline, processing, storage and offshore markets. We believe the pipeline compression market has significant growth potential for our services as well as potential customers for contract compression.



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Maintain financial flexibility. We intend to maintain ample financial flexibility to be able to take advantage of opportunities as we identify them. Historically, during periods of growth, we have utilized our cash flow from operations as well as borrowings under available debt facilities to fund capital expenditures and acquisitions. This spending has allowed us to significantly grow our business and the amount of cash we generate while maintaining our debt at levels we believe are appropriate for our stable business. During the last fiscal year, we have been able to significantly reduce our capital expenditures and intend to utilize a substantial portion of our resulting cash balance to repay debt. Furthermore, we continue to focus on reducing our operating costs and managing our working capital. We believe our financial flexibility positions us to take advantage of future growth opportunities without incurring debt beyond appropriate levels.

Industry

Natural Gas Compression Overview

        Natural gas compression is a mechanical process whereby a volume of gas at an existing pressure is compressed to a desired higher pressure. We offer both slow and high speed reciprocating compressors driven either by internal combustion engines or electric motors. We also offer rotary screw compressors for applications involving low pressure natural gas. Most natural gas compression applications involve compressing gas for its delivery from one point to another. Low pressure or aging natural gas wells require compression for delivery of produced gas into higher pressured gas gathering or pipeline systems. Compression at the wellhead is required because, over the life of an oil or gas well, natural reservoir pressure typically declines as reserves are produced. As the natural reservoir pressure of the well declines below the line pressure of the gas gathering or pipeline system used to transport the gas to market, gas no longer naturally flows into the pipeline. It is at this time that compression equipment is applied in both field and gathering systems to boost the well's pressure levels and allow gas to be brought to market. Compression is also used to reinject natural gas down producing oil wells to help lift

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liquids to the surface, known as gas lift operations. In secondary oil recovery operations, compression is used to inject natural gas into wells to maintain reservoir pressure. Compression is also used in gas storage projects to inject gas into underground reservoirs during off-peak seasons for withdrawal later during periods of high demand. Compressors may also be used in combination with oil and gas production equipment to process and refine oil and gas into more marketable energy sources. In addition, compression services are used for compressing feedstocks in refineries and petrochemical plants, and for refrigeration applications in natural gas processing plants.

        Typically, compression is required several times during the natural gas production cycle: at the wellhead, at the gathering lines, into and out of gas processing facilities, into and out of storage facilities and through the pipeline. Natural gas compression that is used to transport produced gas from the wellhead through the gathering system is considered "field compression." Natural gas compression that is used during the transportation of gas from the gathering systems to storage or the end-user is considered "pipeline compression." During the production phase, compression is used to boost the pressure of natural gas from the wellhead so that natural gas can flow into the gathering system or pipeline for transmission to end-users. Typically, these applications require portable, low to mid-range horsepower compression equipment located at or near the wellhead. The continually dropping pressure levels in natural gas fields require constant modification and variation of on-site compression equipment.

        Compression equipment is also used to increase the efficiency of a low capacity gas field by providing a central compression point from which the gas can be produced and injected into a pipeline for transmission to facilities for further processing. In an effort to reduce costs for wellhead operators, operators of gathering systems tend to keep the pressure of the gathering systems low. As a result, more pressure is often needed to force the gas from the low pressure gathering systems into the higher pressure pipelines. Similarly, as gas is transported through a pipeline, compressor units are applied all along the pipeline to allow the natural gas to continue to flow through the pipeline to its destination. These applications generally require larger horsepower compression equipment (600 horsepower and higher).

        Gas producers, transporters and processors have historically owned and maintained most of the compression equipment used in their operations. However, in recent years, there has been a growing trend toward outsourcing compression equipment. Changing well and pipeline pressures and conditions over the life of a well often require producers to reconfigure their compressor units to optimize the well production or pipeline efficiency.

        Outsourcing contract compression equipment offers customers:

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the ability to efficiently meet their changing compression needs over time while limiting their capital investments in compression equipment;



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access to the compression service provider's specialized personnel and technical skills, including engineers, field service and maintenance employees, which generally leads to improved run-times and production rates; and



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overall reduction in their compression costs through the elimination of a spare parts inventory and other expenditures associated with owning and maintaining compressor units.

        Customers that elect to outsource compression equipment may also choose full maintenance or contract compression for such equipment. Full maintenance calls for the contract compression service provider to be responsible for the scheduled preventative maintenance, repair and general up-keep of the equipment, while the customer usually remains responsible for installing and handling the day-to-day operation of the equipment. Contract compression requires the contract compression service provider to maintain and operate and, in many cases, to install the equipment. Often, the contract compression service provider will inspect the equipment daily, provide consumables such as oil and antifreeze and, if necessary, be present at the site for several hours each day.

Natural Gas Industry Conditions

        A significant factor in the growth of the gas compression services market is the increasing demand and consumption of natural gas, both domestically and internationally. In the United States, natural gas is the second

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leading fuel in terms of total consumption. In recent years, natural gas has increased its market share of total domestic energy consumption. Domestic consumption of natural gas increased significantly from 1990 to 2000, before declining in 2001 and 2002 due to an economic slowdown. Industry sources forecast increased consumption of natural gas in the United States in 2003 and for the remainder of the decade.

        Domestic field compression horsepower is estimated to be 17 million, up from 10 million in 1993. Additionally, the estimated amount of compression outsourced has grown over that same period, from approximately 2 million horsepower in 1993 to in excess of 5 million horsepower in 2002. We believe the domestic gas compression market will continue to grow due to the following factors:

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higher natural gas consumption;



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the aging of producing natural gas fields in the United States, which will require more compression to continue producing the same volume of natural gas; and



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increased outsourcing by companies with compression needs in order to reduce operating costs, improve production and efficiency and reallocate capital to their core business activities.

        The international gas compression services market currently is substantially smaller than the domestic market. However, we estimate significant growth opportunities in international demand for compression services and products due to the following factors:

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higher natural gas consumption;



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implementation of international environmental and conservation laws preventing the practice of flaring natural gas and recognition of natural gas as a clean air fuel;



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a desire by a number of oil exporting nations to replace oil with natural gas as a fuel source in local markets to allow greater export of oil;



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increasing development of pipeline infrastructure, particularly in Latin America and Canada necessary to transport natural gas to local markets;



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growing demand for electrical power generation, for which the fuel of choice tends to be natural gas; and



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privatization of state-owned energy producers, resulting in increased outsourcing due to the focus on reducing capital expenditures and enhancing cash flow and profitability.

        In contrast to the domestic compression market, the international compression market is comprised primarily of large horsepower compressors that are maintained and operated by compression service providers. A significant portion of this market involves comprehensive installation projects, which include the design, fabrication, delivery, installation, operation and maintenance of compressors and related gas treatment equipment by the contract compression service provider. In these projects, the customer's only responsibility is to provide fuel gas within specifications. As a result of the full service nature of these projects and that these compressors generally remain on-site for three to seven years, we are able to achieve higher revenues and margins on these projects.

Operations

Contract Compressor Fleet

        We have standardized our contract compressor fleet around three primary gas compressor platforms, which can be specialized to meet customers needs, based on smaller horsepower applications (less than 150 horsepower), mid-range applications (150-600 horsepower) and larger horsepower applications (over 600 horsepower). These three compressor platforms represent over 90% of our horsepower. In recent years there has been substantial growth in customer demand in the over 600 horsepower category and as a result we have increased the average horsepower of our fleet and have increased our fabrication of upper range units (generally over 600 horsepower). For the year ended March 31, 2003, the average horsepower utilization rate for our fleet was approximately 83.3%, which reflects average horsepower utilization based upon our total average fleet horsepower. For the quarter ended March 31, 2003, this average rate was approximately 83.5%.

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        As of March 31, 2003, our fleet consisted of 7,422 compressors, with an average of 313 horsepower per unit, as reflected in the following table:

		Total Horsepower As of March 31,		% of Horsepower As of March 31,				Number of Units As of March 31,
Horsepower Range
		2003	2002	2003		2002		2003	2002
0-99		194,160	196,024	8.3		8.8		2,633	2,652
100-299		458,021	462,751	19.7		20.7		2,640	2,688
300-599		359,953	349,250	15.5		15.6		941	917
600-999		404,159	380,251	17.4		17.0		551	517
1,000 and over		909,159	847,752	39.1		37.9		657	619
	Total	2,325,452	2,236,028	100	%	100	%	7,422	7,393

        Our standardized fleet:

•

enables us to minimize our fleet maintenance capital requirements;



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enables us to minimize inventory costs;



•

facilitates low-cost compressor resizing; and



•

allows us to develop technical proficiency in our maintenance and overhaul operations, which enables us to achieve high run-time rates while maintaining low operating costs.

Domestic Operations

        As of March 31, 2003, we operated the second largest domestic fleet of compressors in terms of horsepower with approximately 6,900 units comprising approximately 2.0 million horsepower. We operate sales and service locations in the primary onshore and offshore natural gas producing regions of the United States. For the year ended March 31, 2003, approximately 80.0% of our contract compression revenue and 42.5% of our total revenue was generated from domestic contract compression operations.

        We believe that our fabrication and aftermarket services businesses provide us with opportunities to cross-sell our contract compression services.

        We have standard contracts for rates and terms on the compressors in our fleet. We also enter into master service agreements whereby we generally provide full maintenance. Through negotiations, these rates and contracts may be modified. Optional items such as oil, antifreeze, freight, insurance and other items may be either itemized or included in the basic monthly contract compression rate. Initial contract compression terms are usually six months, with some projects committed for as long as five years. At the end of the initial term, contract compression services can continue at the option of the lessee on a month-to-month basis or the compressor may be returned or replaced with a different compressor.

International Operations

        We operate internationally in Argentina, Canada, Mexico, Colombia, Thailand, Australia, Venezuela, Peru, Brazil and Indonesia. As of March 31, 2003, we had approximately 520 units comprising approximately 368,000 horsepower, in the aggregate, in these markets. We intend to continue to expand our presence in these markets and pursue opportunities in other strategic international areas. For the year ended March 31, 2003, 28.1% of our total revenue was generated from international operations, of which approximately 37.8% represents contract compression revenue.

        International compression service projects usually generate higher gross profit margins than domestic projects. Our international operations are focused on large horsepower compressor markets and frequently involve longer-term and more comprehensive service projects than our domestic projects. International projects generally require us to provide complete engineering and design. International service agreements differ significantly from domestic service agreements as individual contracts are negotiated for each project. We believe

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our extensive engineering and design capabilities and reputation for high quality fabrication give us a competitive advantage in these markets.

        Risks associated with our foreign operations are described herein under "Risk Factors."

Contract Compression

        We provide comprehensive contract compression services, which includes rental, operation and maintenance services for our domestic and international fleet. When providing full contract compression service, we work closely with a customer's field service personnel so that the compressor can be adjusted to efficiently match changing characteristics of the gas produced. We provide maintenance services on substantially all of our fleet units. Maintenance services include the scheduled preventive maintenance, repair and general up-keep of compressor equipment. As a complement to our maintenance business, we offer supplies and services such as antifreeze, lubricants, and prepaid freight to the job site. We also may offer installation services, which for our typical lower, mid-range and smaller horsepower units involves significantly less engineering and cost than the comprehensive service concept prevalent in the international markets. We also routinely repackage or reconfigure some of our existing fleet to adapt to our customers' needs.

        We generally operate the large horsepower compressors and include the operations fee as part of the contract compression rate. Large horsepower units are more complex and, by operating the equipment ourselves, we reduce maintenance and overhaul expenses. Generally, we train our customers' personnel in fundamental compressor operations of smaller horsepower units so that they may operate them.

        We currently maintain approximately 19 field service locations throughout the United States at which we can service and overhaul our compression equipment.

        Our field compression equipment is maintained in accordance with daily, weekly, monthly and annual maintenance schedules. These maintenance procedures are updated as technology changes and as our operations group develops new techniques and procedures. In addition, because our field technicians provide maintenance on substantially all of our contract compression equipment, they are familiar with the condition of our equipment and can readily identify potential problems. In our experience, these procedures maximize equipment life and unit availability and minimize avoidable downtime. Generally, each of our units undergoes a major overhaul once every six to eight years. A major overhaul involves the rebuilding of the unit in order to materially extend its useful life or to enhance the unit's ability to fulfill broader or different contract compression applications.

Fabrication

        As a complement to our contract compression service operations, we design, engineer, fabricate and sell natural gas and air compressors for engineering and construction firms, as well as for exploration and production companies, both domestically and internationally. We also fabricate compressors for our own fleet. Our primary fabrication facilities are located in Houston and Schulenberg, Texas, and Calgary, Alberta, Canada.

        Generally, compressors to be sold to third parties are assembled according to each customer's specifications and sold on a turnkey basis, although we also sell prepackaged compressors. We purchase components for these compressor units from third party suppliers. We also act as a distributor for Ariel gas compressors and as an original equipment manufacturer for Atlas Copco air compressors. Some of the compressors manufactured by these entities are used by us in our fabrication services. For the year ended March 31, 2003, approximately 26.0% or $162.7 million of our total revenues were generated from fabrication operations.

        We do not incur material research and development expenditures, as research and development activities are not a significant aspect of our business. All research and development costs are expensed as incurred.

Aftermarket Services

        Our aftermarket services business sells parts and components, and provides maintenance to customers who own their compression equipment or lease their equipment from our competitors.

10

        Our inventory of parts is available either on an over-the-counter basis through our 19 service locations in the United States and 8 in Canada, on a bid basis for larger orders, or as part of our compressor maintenance service. Our maintenance services are available on an individual call basis, on a contract basis (which may cover a particular unit, an entire compression project or all of the customer's compression projects) or as part of our comprehensive operation and maintenance service. We also provide offshore maintenance and service. In addition, we provide overhaul and reconfiguration services for customer-owned compression equipment, either on-site or in our overhaul shops.

Customers

        Our current customer base consists of over 1,000 domestic and international companies engaged in all aspects of the oil and gas industry, including major integrated oil and gas companies, international state-owned oil and gas companies, large and small independent producers, natural gas processors, gatherers and pipelines. We have entered into strategic alliances with some of our customers. These alliances are essentially preferred vendor arrangements and give us preferential consideration for the compression needs of these customers. In exchange, we provide these customers with enhanced product availability, product support and favorable pricing.

        In the fiscal year ended March 31, 2003, no single customer accounted for as much as 10% of our total revenues. Our top 20 customers accounted for approximately 22% of our contract compression revenues in fiscal year 2003.

Suppliers

        Our principal suppliers include Caterpillar and Waukesha for engines, Air Xchangers for coolers, and Ariel and Gemini for compressors. We also purchase a significant number of Cooper compressors in Canada for sale to customers. Although we rely primarily on these suppliers, we believe alternative sources are generally available. We have not experienced any material supply problems to date, and we believe our relations with our suppliers are good.

        In December 1999, Weatherford Global sold the assets and properties of its Gemini compressor business in Corpus Christi, Texas to GE Packaged Power, L.P., or GEPP. Under the terms of that sale, Weatherford Global agreed to purchase from GEPP $38.0 million of compressor components over five years and $3.0 million of parts over three years, and GEPP agreed to provide compressors to Weatherford Global during that time period at negotiated prices. We assumed this obligation in connection with our acquisition of Weatherford Global in February 2001. As of March 31, 2003, approximately $25 million of components and approximately $11 million of parts have been purchased from GEPP. We have not satisfied in full our purchase commitment in respect of components for the 2002 contract year under this agreement with GEPP. The unsatisfied portion of this commitment is approximately $5 million. GEPP could assert its right to enforce this obligation. However, GEPP has not indicated any interest to seek to enforce this part of the purchase obligation at this time. The parties have undertaken to renegotiate this agreement.

Backlog

        As of March 31, 2003, we had a compressor unit fabrication backlog for sale to third parties of approximately $55.7 million, compared to $80.0 million as of March 31, 2002. As of May 12, 2003, our backlog increased to approximately $75 million. A majority of the backlog is expected to be completed within a 180-day period.

Insurance

        We believe that our insurance coverage is customary for the industry and adequate for our business. As is customary in the natural gas service operations industry, we review our safety equipment and procedures and carry insurance against some, but not all, risks of our business.

        Losses and liabilities not covered by insurance would reduce our revenues and increase our costs. The natural gas service operations business can be hazardous, involving unforeseen circumstances such as uncontrollable flows of gas or well fluids, fires and explosions or environmental damage. To address the hazards

11

inherent in our business, we maintain insurance coverage that includes physical damage coverage (excluding a significant portion of the contract compression equipment owned by us), third party general liability insurance, employer's liability, including well control, environmental and pollution and other coverage, although coverage for environmental and pollution-related losses is subject to significant limitations. In addition, many of our service contracts shift certain risks to our customers. We self-insure contract compression equipment owned by us, unless otherwise required by contract or financing covenants.

Competition

        The natural gas contract compression, fabrication and aftermarket services businesses are highly competitive. We face competition from large national and multinational companies with greater financial resources and, on a regional basis, from numerous smaller companies.

        Our main competitors in the contract compression business, based on horsepower, are Hanover Compressor Company, Compressor Systems, Inc. and J-W Operating Company. In addition, Weatherford and its subsidiaries may continue to compete with us as they are not contractually restricted from doing so. In our fabrication activities, we currently compete primarily with Hanover Compressor Company, Compressor Systems, Inc. and Enerflex Systems, Ltd. Our aftermarket services business faces competition from manufacturers including Cooper Energy Services, Dresser-Rand and Hanover Compressor Company, from distributors of Caterpillar and Waukesha engines, from a number of smaller companies and, in Canada, from Enerflex Systems, Ltd.

        We believe that we compete effectively on the basis of customer service, including the availability of our personnel in remote locations, price, technical expertise, parts service system, flexibility in meeting customer needs and quality and reliability of our compressors and related services.

Environmental and Other Regulations

        We are subject to stringent and complex foreign, federal, state and local laws and regulations governing the discharge of materials into the environment or otherwise relating to protection of human health and safety and the environment. Compliance with these laws and regulations may affect the costs of our operations. Moreover, failure to comply with these environmental laws and regulations may result in the assessment of administrative, civil, and criminal penalties, imposition of remedial obligations, and the issuance of injunctions delaying or prohibiting operations. We believe that our operations are in substantial compliance with applicable environmental requirements. As part of the regular evaluation of our operations, we update the environmental condition of our existing and acquired properties as necessary. We further believe that the phasing in of more stringent emission controls and other known regulatory requirements at the rate currently contemplated by environmental laws and regulations will not have a material adverse effect on our business, financial condition or results of operations.

        Primary federal environmental laws that our operations are subject to include the Clean Air Act and regulations thereunder, which regulate air emissions, the Clean Water Act, and regulations thereunder, which regulate the discharge of pollutants in industrial wastewater and storm water runoff, and the Resource Conservation and Recovery Act, referred to as "RCRA," and regulations, thereunder, which regulate the management and disposal of solid and hazardous waste. In addition, we are also subject to regulation under the federal Comprehensive Environmental Response, Compensation, and Liability Act, and regulations thereunder, known more commonly as "Superfund," which regulates the release of hazardous substances in the environment. Analogous state laws and regulations may also apply.

        The Clean Air Act and related regulations establish limits on the levels of various substances which may be emitted to the atmosphere during the operation of our fleet of natural gas compressors. These substances are regulated in permits, which are applied for and obtained through the various regulatory agencies, either state or federal depending on the level of emissions. While our standard contract typically provides that the customer will assume the permitting responsibilities and environmental risks related to compressor operations, we have in some cases obtained air permits as the owner and operator of the compressors. Under most of our contract compression service agreements, our customers must indemnify us for certain losses or liabilities we may suffer as a result of the failure of the leased compressors to comply with applicable environmental laws, including permit

12

conditions. Proposed federal regulations, if promulgated in their current form, are expected to impose or increase obligations of operators to reduce air emissions of nitrogen oxides and other pollutants from internal combustion engines in transmission service. Any new regulations requiring the installation of more sophisticated emission control equipment on such smaller portable sources potentially could have a material adverse impact on us. However, we believe that in most cases, these obligations would be allocated to our clients under the above-referenced contracts. In any event, we expect that such requirements would not have any more significant effect on our operations or financial condition than on any similarly situated company providing contract compression services.

        The Clean Water Act and related regulations prohibit the discharge of industrial wastewater without a permit and establish limits on the levels of pollutants contained in these discharges. In addition, the Clean Water Act, regulates storm water discharges associated with industrial activities depending on a facility's primary standard industrial classification. Many of our facilities have applied for and obtained industrial wastewater discharge permits as well as sought coverage under local wastewater ordinances. In addition, many of our facilities have filed notices of intent for coverage under statewide storm water general permits and developed and implemented storm water pollution prevention plans. In connection with our regular evaluation of our ongoing operations, we are updating the storm water discharge permitting at certain of our facilities.

        The RCRA and related regulations, regulate the management and disposal of solid and hazardous waste. These laws and the regulations govern the generation, storage, treatment, transfer and disposal of wastes that we generate. These wastes include, but are not limited to, used oil, antifreeze, filters, sludges, paint, solvents, and sandblast materials. The Environmental Protection Agency and various state agencies have limited the approved methods of disposal for these types of wastes.

        Under the Comprehensive Environmental Response, Compensation, and Liability Act, referred to as "CERCLA," and comparable state laws and regulations, strict and joint and several liability can be imposed without regard to fault or the legality of the original conduct on certain classes of persons that contributed to the release of a hazardous substance into the environment. These persons include the owner and operator of a contaminated site where a hazardous substance release occurred and any company that transported, disposed of, or arranged for the transport or disposal of hazardous substances released at the site. Under CERCLA, such persons may be liable for the costs of remediating the hazardous substances that have been released into the environment and for damages to natural resources. In addition, where contamination may be present it is not uncommon for the neighboring land owners and other third parties to file claims for personal injury, property damage and recovery of response costs.

        We currently own or lease, and have in the past owned or leased, a number of properties that have been used, some for many years and some by third parties over whom we have no control, in support of natural gas compression services or other industrial operations. As with any owner or operator of property, we may be subject to remediation costs and liability under CERCLA, RCRA or other environmental laws for hazardous waste, asbestos or any other toxic or hazardous substance that may exist on or under any of our properties, including waste disposed or groundwater contaminated by prior owners or operators. We have performed in the past, are currently performing, and may perform in the future, certain remediation activities governed by environmental laws. The cost of this remediation has not been material to date and we currently do not expect it to be material in the future. We are currently undertaking groundwater monitoring at certain of our facilities, which may further define remedial obligations. Certain of our acquired properties may also warrant groundwater monitoring and other remedial activities. We believe that former owners and operators of many of these properties may be wholly or partly responsible under environmental laws and contractual agreements to pay for or perform remediation, or to indemnify us for our remedial costs. These other entities may fail to fulfill their legal or contractual obligations, which could result in imposing response obligations and material costs to us.

        Any new regulations requiring the installation of more sophisticated emission control equipment on such smaller portable sources potentially could have a material adverse impact on us. However, we believe that in most cases, these obligations would be allocated to our clients under the above-referenced contracts. In any event, we expect that such requirements would not have any more significant effect on our operations or financial condition than on any similarly situated company providing contract compression services.

13

        Stricter standards in environmental legislation or regulations that may affect us may be imposed in the future, such as proposals to make hazardous wastes subject to more stringent and costly handling, disposal and remediation requirements. Accordingly, new environmental laws or regulations or amendments to existing environmental laws or regulations (including, but not limited to, regulations concerning ambient air quality standards, waste water and storm water discharges, and global climate changes) could require us to undertake significant capital expenditures and could otherwise have a material adverse effect on our business, results of operations and financial condition.

        Our international operations are potentially subject to similar governmental controls and restrictions relating to the environment. We believe that we are in substantial compliance with any such foreign requirements pertaining to the environment.

        Since 1992, there have been various proposals to impose taxes with respect to the energy industry, none of which have been enacted and all of which have received significant scrutiny from various industry lobbyists. At the present time, given the uncertainties regarding the proposed taxes, including the uncertainties regarding the terms which the proposed taxes might ultimately contain and the industries and persons who may ultimately be the subject of such taxes, it is not possible to determine whether any such tax will have a material adverse effect on us.

Employees and Labor Relations

        As of March 31, 2003, we had approximately 2,280 employees worldwide. We believe our relationship with our employees is good. Approximately 130 of our employees in Canada are covered by a collective bargaining agreement.

ITEM 2. Properties

        The following table describes our material facilities owned or leased as of March 31, 2003, none of which are pledged as collateral:

Location	Square Feet	Acreage	Status	Uses
Houston, Texas	244,000	30.0	Owned	Corporate headquarters, fabrication, contract compression and aftermarket services
Calgary, Alberta, Canada	105,760	9.2	Owned	Fabrication, contract compression and aftermarket services
Tulsa, Oklahoma	100,000	10.1	Owned	Fabrication, contract compression and aftermarket services
Yukon, Oklahoma	72,000	14.7	Owned	Contract compression and aftermarket services
Houma, Louisiana	60,000	91.0	Owned	Aftermarket services
Belle Chase, Louisiana	35,000	4.0	Owned	Contract compression and aftermarket services
Schulenberg, Texas	23,000	13.3	Owned	Fabrication, contract compression and aftermarket services
Broussard, Louisiana	24,700	10.0	Leased	Contract compression and aftermarket services

        On April 28, 2003, we announced the transfer of substantially all of our fabrication activities based in Tulsa, Oklahoma to our existing facility in Houston, Texas.

ITEM 3. Legal Proceedings

        From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. We do not believe we are party to any legal proceedings which, if determined adversely to us, individually or in the aggregate, would have a material adverse effect on our results of operations or financial position.

ITEM 4. Submission of Matters to a Vote of Security Holders

        There were no matters submitted to a vote of security holders during the fourth quarter of fiscal 2003.

14

PART II

ITEM 5. Market for Registrants' Common Equity and Related Stockholder Matters

        Our common stock is traded on the New York Stock Exchange under the symbol "UCO." The following table sets forth the range of high and low sale prices for our common stock for the periods indicated.

		Price Range
		High		Low
Quarter Ended:
	June 30, 2001	$	37.95	$	25.75
	September 30, 2001		31.15		22.23
	December 31, 2001		30.15		18.80
	March 31, 2002		29.37		16.75
	June 30, 2002	$	27.00	$	19.50
	September 30, 2002		24.85		15.12
	December 31, 2002		20.89		14.60
	March 31, 2003		19.70		15.36
	Through June 6, 2003		22.40		16.83

        On June 6, 2003, the closing price of our common stock was $21.74 per share. As of June 6, 2003, there were approximately 558 holders of record of our common stock.

        We have never declared or paid any cash dividends to our stockholders and do not plan to pay any cash dividends in the foreseeable future. We currently intend to retain our earnings for use in the operation and expansion of our business.

15

ITEM 6. Selected Financial Data

SELECTED HISTORICAL FINANCIAL DATA
UNIVERSAL COMPRESSION HOLDINGS, INC.

        The following selected historical consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes included elsewhere in this report. The selected historical financial and operating data for each of the five years in the period ended March 31, 2003 have been derived from the respective audited financial statements. The consolidated financial statements and report thereon, for the years ended March 31, 2003 and 2002 are included elsewhere in this report.

		Year Ended March 31,
		2003			2002			2001			2000			1999
		(In thousands, except per share data)
Statement of Operations Data:
Revenues		$	625,218		$	679,989		$	232,466		$	136,295		$	129,498
Gross profit(1)			267,968			268,346			109,407			69,000			61,887
Selling, general and administrative expenses			67,944			60,890			21,092			16,797			16,863
Depreciation and amortization			63,706			48,600			33,491			26,006			19,314
Interest expense, net			36,421			23,017			23,220			34,327			29,313
Operating lease expense			46,071			55,401			14,443			—			—
Income tax expense (benefit)			20,975			30,931			3,645			(1,994	)		(1,031	)
Income (loss) before extraordinary items			33,518			49,408			5,112			(5,982	)		(2,361	)
Net income (loss)			33,518			49,408			(4,391	)		(5,982	)		(2,361	)
Earnings (loss) per share
	Basic		1.09			1.65			(0.30	)		(2.44	)		(0.96	)
	Diluted		1.08			1.63			(0.29	)		(2.44	)		(0.96	)
Weighted average common stock outstanding
	Basic		30,665			30,008			14,760			2,448			2,451
	Diluted		30,928			30,250			15,079			2,448			2,451
Other Financial Data:
EBITDA, as adjusted(2)		$	201,150		$	207,315		$	88,787		$	55,561		$	48,475
Capital expenditures:
	Expansion	$	(67,289	)	$	(137,790	)	$	(55,384	)	$	(45,617	)	$	(57,691	)
	Overhauls		(29,198	)		(27,000	)		(9,901	)		(9,920	)		(7,626	)
	Other		(24,264	)		(23,229	)		(2,721	)		(4,465	)		(2,764	)
Cash flows provided by (used in):
	Operating activities	$	187,070		$	133,078		$	89,476		$	47,144		$	22,793
	Investing activities		(107,704	)		(160,256	)		(3,318	)		(61,103	)		(62,996	)
	Financing activities		(13,849	)		21,075			(75,282	)		12,435			40,748

	As of March 31,
	2003		2002		2001		2000		1999
	(In thousands)
Balance Sheet Data:
Working capital(3)	$	158,405	$	139,923	$	97,763	$	7,209	$	23,742
Total assets		1,953,887		1,277,165		1,176,256		469,942		437,991
Total debt(4)(5)		945,155		226,762		215,107		377,485		344,677
Stockholders' equity		744,451		700,344		652,574		74,677		80,774

16

        The following table reconciles our EBITDA, as adjusted, to net income or (loss):

		Year Ended March 31,
		2003			2002			2001			2000			1999
		(In thousands)
EBITDA, as adjusted		$	201,150		$	207,315		$	88,787		$	55,561		$	48,475
	Depreciation and amortization		(63,706	)		(48,600	)		(33,491	)		(26,006	)		(19,314	)
	Operating lease expense		(46,071	)		(55,401	)		(14,443	)		—			—
	Interest expense, net		(36,421	)		(23,017	)		(23,220	)		(34,327	)		(29,313	)
	Management fees		—			—			—			(3,200	)		(3,200	)
	Foreign currency gain (loss)		(459	)		42			(177	)		(4	)		(40	)
	Non-recurring charges		—			—			(8,699	)		—			—
	Income taxes		(20,975	)		(30,931	)		(3,645	)		1,994			1,031
	Extraordinary loss, net		—			—			(9,503	)		—			—
Net income (loss)		$	33,518		$	49,408		$	(4,391	)	$	(5,982	)	$	(2,361	)

(1)

Gross profit is defined as total revenue less direct costs.

(2)

EBITDA, as adjusted, is defined as net income plus income taxes, interest expense, operating lease expense, management fees, depreciation and amortization, foreign currency gains or losses, excluding non-recurring items and extraordinary gains or losses. Beginning with the quarter ended September 30, 2002, the Company changed its definition of EBITDA, as adjusted, to exclude foreign currency gains or losses. All periods prior to September 30, 2002 have been recalculated from amounts previously disclosed by the Company to be consistent with this new definition of EBITDA, as adjusted. EBITDA, as adjusted, represents a measure upon which management assesses financial performance and financial covenants in our current financing arrangements are tied to similar measures. The financial covenants in our current financing arrangements permit us to exclude non-recurring and extraordinary gains and losses from our calculation of EBITDA, as adjusted. EBITDA, as adjusted, is not a measure of financial performance under generally accepted accounting principles ("GAAP") and should not be considered an alternative to operating income or net income as an indicator of our operating performance or to net cash provided by operating activities as a measure of our liquidity. Additionally, the EBITDA, as adjusted, computation used herein may not be comparable to other similarly titled measures of other companies. We believe that EBITDA, as adjusted, is a useful measure that is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry.

(3)

Working capital is defined as current assets minus current liabilities.

(4)

Includes capital lease obligations.

(5)

Excludes $708.5 million and $527.5 million outstanding under our operating lease facilities as of March 31, 2002 and 2001, respectively. See Note 4 to the consolidated financial statements for a discussion related to the operating lease facilities.

17

SELECTED HISTORICAL FINANCIAL DATA
UNIVERSAL COMPRESSION, INC.

        The following selected historical consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated audited financial statements and related notes included elsewhere in this report. The selected historical financial and operating data for each of the five years in the period ended March 31, 2003 have been derived from the respective audited financial statements. The consolidated audited financial statements and report thereon, for the years ended March 31, 2003 and 2002 are included elsewhere in this report.

		Year Ended March 31,
		2003			2002			2001			2000			1999
		(In thousands)
Statement of Operations Data:
Revenues		$	625,218		$	679,989		$	232,466		$	136,295		$	129,498
Gross profit(1)			267,968			268,346			109,407			69,000			61,887
Selling, general and administrative expenses			67,944			60,890			21,092			16,797			16,862
Depreciation and amortization			63,706			48,600			33,485			26,000			19,308
Interest expense, net			36,421			23,017			22,622			30,916			26,251
Operating lease expense			46,071			55,401			14,443			—			—
Income tax expense (benefit)			20,975			30,931			3,871			(696	)		(166	)
Income (loss) before extraordinary items			33,518			49,408			5,490			(3,863	)		(489	)
Net income (loss)			33,518			49,408			(1,142	)		(3,863	)		(489	)
Other Financial Data:
EBITDA, as adjusted(2)		$	201,150		$	207,315		$	88,787		$	55,561		$	48,476
Capital expenditures:
	Expansion	$	(67,289	)	$	(137,790	)	$	(55,384	)	$	(45,617	)	$	(57,691	)
	Overhauls		(29,198	)		(27,000	)		(9,901	)		(9,920	)		(7,626	)
	Other		(24,264	)		(23,229	)		(2,721	)		(4,465	)		(2,764	)
Cash flows provided by (used in):
	Operating activities	$	186,152		$	131,837		$	92,881		$	47,029		$	24,042
	Investing activities		(107,704	)		(160,256	)		(3,318	)		(61,103	)		(62,996	)
	Financing activities		(12,931	)		22,316			(78,687	)		12,550			39,499

	As of March 31,
	2003		2002		2001		2000		1999
	(In thousands)
Balance Sheet Data:
Working capital(3)	$	158,059	$	139,544	$	97,382	$	5,869	$	22,288
Total assets		1,953,506		1,276,781		1,171,534		466,345		436,487
Total debt(4)(5)		945,155		226,762		215,107		345,832		316,348
Stockholder's equity		739,503		695,396		647,624		101,445		105,308

18

        The following table reconciles Universal's EBITDA, as adjusted, to net income or (loss):

		Year Ended March 31,
		2003			2002			2001			2000			1999
		(In thousands)
EBITDA, as adjusted		$	201,150		$	207,315		$	88,787		$	55,561		$	48,476
	Depreciation and amortization		(63,706	)		(48,600	)		(33,485	)		(26,000	)		(19,308	)
	Operating lease expense		(46,071	)		(55,401	)		(14,443	)		—			—
	Interest expense, net		(36,421	)		(23,017	)		(22,622	)		(30,916	)		(26,251	)
	Management fees		—			—			—			(3,200	)		(3,200	)
	Foreign currency gain (loss)		(459	)		42			(177	)		(4	)		(40	)
	Non-recurring charges		—			—			(8,699	)		—			—
	Income taxes		(20,975	)		(30,931	)		(3,871	)		696			(166	)
	Extraordinary loss, net		—			—			(6,632	)		—			—
Net income (loss)		$	33,518		$	49,408		$	(1,142	)	$	(3,863	)	$	(489	)

(1)

Gross profit is defined as total revenue less direct costs.

(2)

EBITDA, as adjusted, is defined as net income plus income taxes, interest expense, operating lease expense, management fees, depreciation and amortization, foreign currency gains or losses, excluding non-recurring items and extraordinary gains or losses. Beginning with the quarter ended September 30, 2002, Universal changed its definition of EBITDA, as adjusted, to exclude foreign currency gains or losses. All periods prior to September 30, 2002 have been recalculated from amounts previously disclosed by Universal to be consistent with this new definition of EBITDA, as adjusted. EBITDA, as adjusted, represents a measure upon which management assesses financial performance and financial covenants in our current financing arrangements are tied to similar measures. The financial covenants in Universal's current financing arrangements permit it to exclude non-recurring and extraordinary gains and losses from its calculation of EBITDA, as adjusted. EBITDA, as adjusted, is not a measure of financial performance under GAAP and should not be considered an alternative to operating income or net income as an indicator of Universal's operating performance or to net cash provided by operating activities as a measure of its liquidity. Additionally, the EBITDA, as adjusted, computation used herein may not be comparable to other similarly titled measures of other companies. Universal believes that EBITDA, as adjusted, is a useful measure that is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in its industry.

(3)

Working capital is defined as current assets minus current liabilities.

(4)

Includes capital lease obligations.

(5)

Excludes $708.5 million and $527.5 million outstanding under Universal's operating lease facilities as of March 31, 2002 and 2001, respectively. See Note 4 to the consolidated financial statements for a discussion related to the operating lease facilities.

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ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

UNIVERSAL COMPRESSION HOLDINGS, INC.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our financial statements, and the notes thereto, and the other financial information appearing elsewhere in this report. The following discussion includes forward-looking statements that involve certain risks and uncertainties. See "Part I. Disclosure Regarding Forward-Looking Statements" and "Risk Factors."

General

        Since Holdings' initial public offering in 2000, we have completed several acquisitions. Our completed acquisitions include Gas Compression Services, Inc. ("GCSI") in September 2000, Weatherford Global Compression Services, L.P. and certain related entities ("Weatherford Global") (in exchange for 13,750,000 shares of our stock) and ISS Compression ("IEW") in February 2001, Compressor System International, Inc. ("CSII") in April 2001, KCI, Inc. ("KCI") and Louisiana Compressor Maintenance ("LCM") in July 2001, and Technical Compression Service, Inc. ("TCSI") in October 2001. GCSI added approximately 138,000 horsepower to our fleet and provided us with an increased customer base, additional market segments and additional fabrication capabilities. Weatherford Global added approximately 950,000 horsepower, which expanded both our domestic and international presence and more than doubled our size at the time. IEW added approximately 26,000 horsepower to our fleet, as well as important offshore Gulf of Mexico service capabilities. CSII added approximately 34,000 horsepower in the aggregate to our fleet in Mexico and Argentina. KCI added approximately 125,000 horsepower to our domestic fleet as well as significant fabrication expertise and capabilities, and expertise in the pipeline compression and related natural gas markets. LCM added to our ability to be a supplier of maintenance, repair, and overhaul and upgrade services to natural gas pipeline and related markets. TCSI added to our compression parts and service capabilities for the natural gas producing industry as well as the refinery and petrochemical industries.

        We are a holding company and, as such, derive all of our operating income from our operating subsidiary, Universal. We do not have any significant assets other than the stock of our operating subsidiaries. Consequently, we are dependent on the earnings and cash flow of our subsidiaries to meet our obligations. Our subsidiaries are separate legal entities that are not legally obligated to make funds available to us, and in some cases may be contractually restricted from doing so.

Critical Accounting Policies and Estimates

        Our discussion and analysis of our financial condition and results of operation is based upon our consolidated financial statements. We prepare these financial statements in conformity with GAAP. As such, we are required to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We base our estimates on historical experience, available information and various other assumptions we believe to be reasonable under the circumstances. On an on-going basis, we evaluate our estimates; however, actual results may differ from these estimates under different assumptions or conditions. The accounting policies we believe require management's most difficult, subjective or complex judgments and are the most critical to our reporting of results of operations and financial position are as follows:

Allowances and Reserves

        Our customers are evaluated for credit worthiness prior to the extension of credit. We maintain an allowance for bad debts based on specific customer collection issues and historical experience. On an ongoing basis, we conduct an evaluation of the financial strength of our customers based on payment history and make adjustments to the allowance as necessary. Since most of our customers are in the energy industry, their ability to pay balances due could be affected by dramatic changes in the price and demand for their products.

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        We record a reserve against our inventory balance for estimated obsolescence. This reserve is based on specific identification and historical experience.

Depreciation

        Property, plant and equipment are carried at cost. Depreciation for financial reporting purposes is computed on the straight-line basis using estimated useful lives. For compression equipment, depreciation begins with the first compression service using a 20% salvage value. The estimated useful lives prior to January 1, 2003 for compression equipment was 15 years and for other properties and equipment from 2 to 25 years.

        The Company evaluated the estimated useful life used for book depreciation purposes for its compressor fleet with the assistance of an independent equipment valuation firm. This equipment study evaluated the compressor units based upon equipment type, key components and industry experience of the actual useful life in the field. The study was finalized in the fourth quarter of fiscal year 2003. Based upon the findings of the study, the estimated useful lives of the majority of the existing compressor units were extended to 25 years from 15 years. In addition, a portion of the units remained at 15 years or less and a portion of the units were extended to 30 years.

Revenue Recognition

        We recognize revenue for all our business segments using the following criteria: (a) persuasive evidence of an exchange arrangement exists, (b) delivery has occurred or services have been rendered, (c) the buyer's price is fixed or determinable and (d) collectibility is reasonably assured. Revenue from contract compression is recorded when earned over the period of the contract, which generally ranges from one month to several years. Fabrication revenue is recognized using the completed contract method, specifically when all terms of the contract have been completed and title to the product has been transferred. Aftermarket services revenue is recorded as products are delivered and services are rendered.

Business Combinations and Goodwill

        Goodwill and intangible assets acquired in connection with business combinations represent the excess of consideration over the fair value of tangible net assets acquired. Certain assumptions and estimates are employed in determining the fair value of assets acquired and liabilities assumed, as well as in determining the allocation of goodwill to the appropriate reporting unit.

        In accordance with Statement of Financial Accounting Standard ("SFAS") No. 142, "Goodwill and Other Intangible Assets," we no longer amortize goodwill. We perform an impairment test for goodwill assets annually, or earlier if indicators of potential impairment exist. Our goodwill impairment test involves a comparison of the fair value of each of our reporting units with their carrying value. The fair value is determined using discounted cash flows and other market-related valuation models. Certain estimates and judgments are required in the application of the fair value models. During the fourth quarter of fiscal year 2003, we performed an impairment analysis in accordance with SFAS No. 142 and determined that no impairment had occurred; however, if for any reason the fair value of our goodwill or that of any of our reporting units declines below the carrying value in the future, we may incur charges for the impairment.

Long-Lived Assets

        Long-lived assets, which include property, plant and equipment, definite-lived intangibles and other assets comprise a significant amount of our total assets. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets to be held and used by us are reviewed to determine whether any events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. For long-lived assets to be held and used, we base our evaluation on impairment indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate the carrying amount of the asset may not be recoverable, we determine whether an impairment has occurred through the use of undiscounted cash flows analysis of the asset

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at the lowest level for which identifiable cash flows exist. If an impairment has occurred, we recognize a loss for the difference between the carrying amount and the estimated fair value of the asset. The fair value of the asset is measured using quoted market prices or, in the absence of quoted market prices, is based on an estimate of discounted cash flows.

Self-Insurance

        We are self-insured up to certain levels for general liability, vehicle liability, group medical and for workers' compensation claims for certain of our employees. We record self-insurance accruals based on claims filed and an estimate for significant claims incurred but not reported. We regularly review estimates of reported and unreported claims and provide for losses through insurance reserves. Although we believe adequate reserves have been provided for expected liabilities arising from our self-insured obligations, it is reasonably possible our estimates of these liabilities will change over the near term as circumstances develop.

Income Taxes

        We account for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. In estimating future tax consequences, all expected future events are considered other than enactments of changes in the tax law or rates.

        We provide contract compression services to a global market. As such, we are subject to taxation not only in the United States but also in numerous foreign jurisdictions. Having to consider these different jurisdictions complicates the estimate of future taxable income, which in turn determines the realizability of its deferred tax assets. Numerous judgments and assumptions are inherent in the determination of future taxable income, including assumptions on future operating conditions and asset utilization. The judgments and assumptions used to determine future taxable income are consistent with those used for other financial statement purposes.

        Additionally, we must consider any prudent and feasible tax planning strategies that would minimize the amount of deferred tax liabilities recognized or the amount of any valuation allowance recognized against deferred tax assets. The principal tax planning strategy available to us relates to the permanent reinvestment of the earnings of foreign subsidiaries. The assumptions related to the permanent reinvestment of the foreign earnings are analyzed and reviewed annually for changes in our international and domestic business outlook.

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Financial Results of Operations

Fiscal Year Ended March 31, 2003 Compared to Fiscal Year Ended March 31, 2002

        The following table summarizes revenues, gross profits, expenses and the respective percentages for each of our business segments:

		Year Ended March 31,
		2003			2002
		(Dollars in thousands)
Revenues:
Domestic contract compression		$	265,465		$	267,550
	% of revenue		42.5	%		39.3	%
International contract compression		$	66,505		$	60,185
	% of revenue		10.6	%		8.9	%
Fabrication		$	162,678		$	211,265
	% of revenue		26.0	%		31.1	%
Aftermarket services		$	130,570		$	140,989
	% of revenue		20.9	%		20.7	%
Gross profit:
Domestic contract compression		$	169,868		$	169,892
International contract compression			53,769			43,411
Fabrication			16,075			24,347
Aftermarket services			28,256			30,696
Expenses:
Depreciation and amortization			(63,706	)		(48,600	)
Selling, general and administrative			(67,944	)		(60,890	)
Operating lease expense			(46,071	)		(55,401	)
Interest expense, net			(36,421	)		(23,017	)
Income taxes			(20,975	)		(30,931	)
Net income		$	33,518		$	49,408

        Revenues.    Total revenues for the fiscal year ended March 31, 2003 decreased $54.8 million, or 8.1%, to $625.2 million, compared to $680.0 million for the fiscal year ended March 31, 2002 largely as a result of declines in fabrication and aftermarket services. Domestic contract compression revenue decreased by $2.1 million, or 1%, to $265.5 million during the fiscal year ended March 31, 2003 from $267.6 million during the fiscal year ended March 31, 2002. International contract compression revenues increased by $6.3 million, or 10.5%, to $66.5 million during the fiscal year ended March 31, 2003 from $60.2 million during the fiscal year ended March 31, 2002. The decrease in domestic contract compression revenue was a result of lower horsepower utilization in a period of reduced energy industry activity that resulted in a reduced demand for contract compression services. The increase in international contract compression revenue resulted from new contract settlements negotiated with our customers in Argentina in the first quarter of fiscal year 2003 and expansion of our business in the Latin America and Asia Pacific regions.

        Domestic average contracted horsepower for the fiscal year ended March 31, 2003 decreased slightly to approximately 1,602,000 horsepower from approximately 1,603,000 horsepower for the fiscal year ended March 31, 2002 primarily due to the general decline in energy industry activity in the United States. International average contracted horsepower for the fiscal year ended March 31, 2003 increased by 2.6% to approximately 311,000 horsepower from approximately 303,000 horsepower for the fiscal year ended March 31, 2002, primarily through expansion of the international contract compression fleet. The combined average horsepower utilization rate for the fiscal year ended March 31, 2003 was approximately 83.3%, down from 88.8% in the fiscal year ended March 31, 2002. As of March 31, 2003, we had approximately 2.3 million available horsepower with an average horsepower utilization rate for the quarter then ended of 83.5% and for the same period one year earlier of approximately 86.8%.

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        Fabrication revenue decreased to $162.7 million from $211.3 million, a decrease of 23% due to lower demand for customer-owned compressors in a period of reduced energy industry activity. Backlog of fabrication projects at the fiscal year ended March 31, 2003 was approximately $55.7 million, compared with a backlog of $80.0 million at March 31, 2002. From December 31, 2002 to March 31, 2003, backlog decreased $0.6 million. The backlog as of May 12, 2003 was approximately $75 million.

        Aftermarket services revenue decreased to $130.6 million during the fiscal year ended March 31, 2003 from $141.0 million during the fiscal year ended March 31, 2002, a decrease of 7.4%. The decrease resulted from reduced repair and maintenance activity from our North American customer base in a period of reduced energy industry activity.

        Gross Profit.    Gross profit (defined as total revenue less direct costs) for the fiscal year ended March 31, 2003 decreased $0.4 million to $268.0 million from gross profit of $268.3 million for the fiscal year ended March 31, 2002 reflecting declines in fabrication and aftermarket services that were partially offset by an increase in international contract compression. Fabrication gross profit for the fiscal year ended March 31, 2003 decreased $8.3 million, or 34.0%, to $16.1 million compared to a gross profit of $24.3 million for the fiscal year ended March 31, 2002. Fabrication gross profits decreased primarily due to lower demand during the fiscal year. Aftermarket services gross profit for the fiscal year ended March 31, 2003 decreased $2.4 million or 7.9%, to $28.3 million compared to a gross profit of $30.7 million for the fiscal year ended March 31, 2002. Aftermarket services gross profit decreased primarily due to the overall slowdown in energy industry activity.

        Selling, General and Administrative Expenses.    Selling, general and administrative expenses increased by $7.1 million to $67.9 million for the fiscal year ended March 31, 2003, compared to $60.9 million for the fiscal year ended March 31, 2002. Selling, general and administrative expenses represented 10.9% of revenue for the fiscal year ended March 31, 2003 compared to 9.0% of revenue for the fiscal year ended March 31, 2002. The increase was primarily due to a greater presence in international markets, which carries higher administration costs and severance costs related to staff reductions.

        EBITDA, as adjusted, for the fiscal year ended March 31, 2003 decreased 3.0% to $201.2 million from $207.3 million for the fiscal year ended March 31, 2002, primarily due to increases in the selling, general and administrative costs. EBITDA, as adjusted, is defined and reconciled to net income in Item 6 of this report, "Selected Financial Data," under the caption "Selected Historical Financial Data—Universal Compression Holdings, Inc."

        Depreciation and Amortization.    Depreciation and amortization increased by $15.1 million to $63.7 million during the fiscal year ended March 31, 2003, compared to $48.6 million during the fiscal year ended March 31, 2002. Depreciation expense increased due to a full twelve months of depreciation of fiscal 2002 capital additions and capitalized overhauls. In addition, depreciation expense increased due to the three months of depreciation of gas compressor units that were not previously recorded on our balance sheet until December 31, 2002, when the lessors under the operating lease facilities became fully consolidated entities. Depreciation expense related to these assets began January 1, 2003 and increased depreciation expense for the fiscal year ended March 31, 2003 by approximately $5.6 million.

        In fiscal 2003, we evaluated the estimated useful lives used for book depreciation purposes for our compressor fleet with the assistance of an independent equipment valuation firm. This equipment study evaluated the compressor units based upon equipment type, key components and industry experience of the actual useful life in the field. The study was finalized in the fourth quarter of fiscal year 2003. Based upon the findings of the study, the estimated useful lives of the majority of the existing compressor units were extended to 25 years from 15 years. In addition, a portion of the units remained at the previous 15 years or less and a portion of the units were extended to 30 years. The change in useful lives was effective January 1, 2003. The impact from extending the estimated useful lives of the equipment that was recorded on our balance sheet on December 31, 2002 (excluding the gas compression equipment related to the operating lease facilities) reduced depreciation expense by approximately $3.0 million for the year ended March 31, 2003.

        The combined impact as a result of the consolidation of the compressor equipment in the operating lease facilities and the extension of the estimated useful lives was an increase to depreciation expense of approximately

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$2.6 million, a decrease to net income of $1.6 million and a decrease to earnings per diluted share of $.05 for the year ended March 31, 2003.

        Operating Lease Expense.    Operating lease expense decreased to $46.1 million during the fiscal year ended March 31, 2003 compared to $55.4 million during the fiscal year ended March 31, 2002. Operating lease expense related to the operating lease facilities has been recognized as interest expense subsequent to the consolidation of the lease facilities on December 31, 2002. As a result, we recognized no operating lease expense for the quarter ended March 31, 2003.

        Interest Expense, Net.    Interest expense, net, increased $13.4 million to $36.4 million for the fiscal year ended March 31, 2003 from $23.0 million for the fiscal year ended March 31, 2002 primarily due to the consolidation of the operating lease facilities as of December 31, 2002 which resulted in the classification of operating lease expense subsequent to December 31, 2002 as interest expense.

        Net Income.    Net income decreased $15.9 million to $33.5 million for the fiscal year ended March 31, 2003 compared to a net income of $49.4 million for the fiscal year ended March 31, 2002 for the reasons noted above.

Fiscal Year Ended March 31, 2002 Compared to Fiscal Year Ended March 31, 2001

        The following table summarizes revenues, cost of sales, gross profits and the respective percentages for each of our business segments:

		Year Ended March 31,
		2002			2001
		(Dollars in thousands)
Revenues:
Domestic contract compression		$	267,550		$	126,686
	% of revenue		39.3	%		54.5	%
International contract compression		$	60,185		$	22,549
	% of revenue		8.9	%		9.7	%
Fabrication		$	211,265		$	61,779
	% of revenue		31.1	%		26.6	%
Aftermarket services		$	140,989		$	21,452
	% of revenue		20.7	%		9.2	%
Gross profit:
Domestic contract compression		$	169,892		$	80,465
International contract compression			43,411			16,425
Fabrication			24,347			9,041
Aftermarket services			30,696			3,476
Expenses:
Depreciation and amortization			(48,600	)		(33,491	)
Selling, general and administrative			(60,890	)		(21,092	)
Operating lease expense			(55,401	)		(14,443	)
Interest expense, net			(23,017	)		(23,220	)
Income taxes			(30,931	)		(3,645	)
Net income (loss)			49,408			(4,391	)

        Revenues.    Total revenues for the fiscal year ended March 31, 2002 increased $447.5 million, or 192.5%, to $680 million, compared to $232.5 million for the fiscal year ended March 31, 2001. Contract compression revenues increased by $178.5 million, or 119.6%, to $327.7 million during the fiscal year ended March 31, 2002 from $149.2 million during the fiscal year ended March 31, 2001. Domestic contract compression revenues increased by $140.9 million, or 111.2%, to $267.6 million during the fiscal year ended March 31, 2002 from $126.7 million during the fiscal year ended March 31, 2001. International contract compression revenues increased by $37.7 million, or 167.5%, to $60.2 million during the fiscal year ended March 31, 2002 from $22.5 million during the fiscal year ended March 31, 2001. The increase in domestic contract compression

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revenues primarily resulted from expansion of our contract compression fleet through the impact of a full year of operations from the Weatherford Global acquisition, the KCI acquisition and internal growth. The increase in international contract compression revenue resulted from expansion of our international contract compression fleet primarily through the CSII acquisition and the impact of a full year of operations from the Weatherford Global acquisition.

        Domestic average rented horsepower for the fiscal year ended March 31, 2002 increased by 107% to approximately 1,603,000 horsepower from approximately 776,000 horsepower for the fiscal year ended March 31, 2001, primarily due to the KCI acquisition and a full year of operations from the Weatherford Global and GCSI acquisitions. In addition, international average rented horsepower for the fiscal year ended March 31, 2002 increased by 240% to approximately 303,000 horsepower from approximately 89,000 horsepower for the fiscal year ended March 31, 2001, primarily through our acquisitions and expansion of our international contract compression fleet and high utilization rates. Our combined average horsepower utilization rate for the fiscal year ended March 31, 2002 was approximately 88.8%, up from 87.6% in the fiscal year ended March 31, 2001. As of March 31, 2002, we had approximately 2.2 million available horsepower with an average horsepower utilization rate for the quarter then ended of 86.8% and for the same period one year earlier of 88.8%.

        Revenue from fabrication increased to $211.3 million from $61.8 million, an increase of 242%. The increase in fabrication revenue, consisting mostly of equipment fabrication, was due primarily to our acquisition of KCI and the impact of a full year of operations from the Weatherford Global acquisition combined with internal growth. Backlog of fabrication projects at the fiscal year ended March 31, 2002 was approximately $80.0 million, compared with a backlog of $34.2 million at March 31, 2001. From December 31, 2001 to March 31, 2002, our backlog decreased $21.0 million.

        Revenue from aftermarket services increased to $141.0 million during the fiscal year ended March 31, 2002 from $21.5 million during the fiscal year ended March 31, 2001, an increase of 556%. The increase was due primarily to the impact of a full year of operations from the Weatherford Global acquisition, and resulted in the aftermarket services segment becoming a more significant part of our business. In addition, the LCM and TCSI acquisitions increased revenues approximately $23 million in the aggregate.

        Gross profit.    Gross profit (defined as total revenue less direct costs) for the fiscal year ended March 31, 2002 increased $158.9 million, or 145.3%, to $268.3 million from gross profit of $109.4 million for the fiscal year ended March 31, 2001. Contract compression gross profit for the fiscal year ended March 31, 2002 increased $116.4 million, or 120%, to $213.3 million compared to gross profit of $96.9 million for the fiscal year ended March 31, 2001. Contract compression gross profit increased primarily as the result of our contract compression revenue growth and operating cost improvements realized by the integration of our contract compression business. Fabrication gross profit for the fiscal year ended March 31, 2002 increased $15.3 million, or 169%, to $24.3 million compared to a gross profit of $9.0 million for the fiscal year ended March 31, 2001. Fabrication gross profits increased primarily due to the impact of a full year of operations from Weatherford Global, a partial year of operations from KCI and synergies from the integration of these operations. Aftermarket services gross profit for the fiscal year ended March 31, 2002 increased $27.2 million or 783%, to $30.7 million compared to a gross profit of $3.5 million for the fiscal year ended March 31, 2001. Aftermarket services gross profit increased primarily due to the impact of a full year of operations from Weatherford Global and the acquisitions of TCSI and LCM.

        Selling, General and Administrative Expenses.    Selling, general and administrative expenses increased by $39.8 million to $60.9 million for the fiscal year ended March 31, 2002, compared to $21.1 million for the fiscal year ended March 31, 2001. Selling, general and administrative expenses represented 9.0% of revenue for the fiscal year ended March 31, 2002 compared to 9.1% of revenue for the fiscal year ended March 31, 2001.

        EBITDA, as adjusted, for the fiscal year ended March 31, 2002 increased 133.5% to $207.3 million from $88.8 million for the fiscal year ended March 31, 2001, primarily due to increases in total fleet horsepower and utilization of the compression contract compression fleet, gross profit contribution from fabrication and sales, and operating cost improvements realized by contract compression operations. EBITDA, as adjusted, is defined

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and reconciled to net income in Item 6 of this report, "Selected Financial Data," under the caption "Selected Historical Financial Data—Universal Compression Holdings, Inc."

        Non-recurring Charges.    During the fiscal year ended March 31, 2001, we incurred non-recurring charges of $8.7 million related to the early termination of a management agreement and a consulting agreement and other related fees in connection with our initial public offering and concurrent financing transactions as well as costs related to facilities and workforce reductions associated with our Weatherford Global acquisition.

        Depreciation and Amortization.    Depreciation and amortization increased by $15.1 million to $48.6 million during the fiscal year ended March 31, 2002, compared to $33.5 million during the fiscal year ended March 31, 2001. The increase was primarily due to capital additions of $188 million, which primarily resulted from expansion of our contract compression fleet, through our fabrication operations and the purchase of approximately $60 million and $13 million of contract compression equipment from the acquisitions of KCI and CSII, respectively. The increase in depreciation and amortization was partially offset by the net sales and leasebacks of compressor equipment, with a book value of approximately $142.1 million, between April and October 2001 under our operating lease facilities.

        Operating Lease Expense.    Operating lease expense increased to $55.4 million during the fiscal year ended March 31, 2002 resulting from the increase in compression equipment leased under our operating lease facilities. The outstanding balance under the operating lease facilities at March 31, 2002 was $708.5 million.

        Interest Expense, Net.    Interest expense, net, remained fairly constant at $23.0 million for the fiscal year ended March 31, 2002 from $23.2 million for the fiscal year ended March 31, 2001, primarily as a result of the repayment of the $1.2 million revenue bonds, offset partially by increased accretion of Universal's 9⁷/8% senior discount notes.

        Extraordinary Loss.    During the fiscal year ended March 31, 2001, we incurred extraordinary losses of $15.2 million ($9.5 million net of income tax) related to debt restructurings that occurred concurrently with our initial public offering and the Weatherford Global acquisition.

        Net Income (Loss).    We had net income of $49.4 million for the fiscal year ended March 31, 2002 compared to a net loss of $4.4 million (including extraordinary loss of $9.5 million net of income taxes) for the fiscal year ended March 31, 2001, for the reasons noted above.

Effects of Inflation

        In recent years, inflation has been modest and has not had a material impact upon the results of our operations.

Liquidity and Capital Resources

        Our cash and cash equivalents balance at March 31, 2003 was $71.7 million, compared to $6.2 million at March 31, 2002. Our principal sources of cash were operating activities which provided $187.1 million and sales of property, plant and equipment which provided $14.6 million. Principal uses of cash during the fiscal year ended 2003 were capital expenditures of $120.8 million, repayments of debt of approximately $8.6 million and debt issuance costs of $5.0 million.

        Working capital, net of cash, was $86.7 million at March 31, 2003 and decreased from $133.7 million at March 31, 2002 primarily due to our continual focus on cash management and on the acceleration of collections of accounts receivable.

        Capital expenditures for the fiscal year ended March 31, 2003 were $120.8 million consisting of $67.3 million for growth projects, $29.2 million for compressor overhauls, $10.4 million for a new office facility and $13.9 million for vehicles and information technology equipment.

        On December 31, 2002, we purchased all of the equity in the lessor under our seven-year term senior secured notes operating lease facility (the "high-yield operating lease facility"). Due to this equity investment, the lessor

27

became our fully consolidated entity as of December 31, 2002 and the debt related to the high-yield lease facility has been included in our consolidated balance sheet as of December 31, 2002. As of March 31, 2003, the aggregate principal amounts outstanding under the high-yield operating lease facility were $450 million of 8⁷/8% senior secured notes due February 15, 2008 and $82.2 million under a term loan due February 15, 2008.

        Also on December 31, 2002, and concurrently with the obtaining of credit ratings by Standard & Poor's and Moody's Investors Service on our $200 million asset backed securitization operating lease facility (the "ABS operating lease facility), the equity of the lessor under this facility was reduced. As a result of the reduction, the lessor became our fully consolidated entity as of December 31, 2002 and the debt related to the ABS operating lease facility was included in our consolidated balance sheet as of December 31, 2002. As of March 31, 2003, the aggregate principal amount outstanding under the ABS operating lease facility was $175 million.

        As a result of the changes in the high-yield and ABS operating lease facilities and consistent with the purchase accounting rules set forth in SFAS No. 141, "Business Combinations," we recorded in our consolidated balance sheet approximately $614.8 million of contract compression equipment, approximately $707.2 million in long-term debt and a noncurrent liability of approximately $15.2 million related to interest rate swaps pertaining to the ABS operating lease facility. Additionally, upon consolidation of the lessors of these operating lease facilities, the previously recorded deferred gain of $107.6 million was eliminated.

        Due to the changes in the high yield and ABS operating lease facilities discussed above, which resulted in the related party's debt being included in the consolidated balance sheet, the future minimum lease payments under the operating lease facilities were eliminated.

        We hold interest rate swaps to manage our exposure to fluctuations in interest rates related to the $200 million ABS operating lease facility. At March 31, 2003, the fair market value of these interest rate swaps was a liability of approximately $15.4 million, which was recorded as a noncurrent liability. The interest rate swaps terminate in February 2013. The weighted average fixed rate of these swaps is 5.5%.

        On May 14, 2003, Universal commenced a tender offer to purchase any and all of the outstanding $229.8 million aggregate principal amount of its 9⁷/8% senior discount notes due 2008 at a price equal to 104.938% of the principal amount, plus a premium of 0.412% for notes tendered prior to the early expiration date for the tender offer, which was May 20, 2003. Of the $229.8 million aggregate principal amount of 9⁷/8% senior discount notes outstanding, $169.2 million principal amount was tendered prior to the early expiration date.

        On May 27, 2003, Universal completed a private offering of $175.0 million aggregate principal amount of 7¹/4% senior notes due 2010. Universal used the net proceeds of the new senior notes offering, together with cash on hand, to pay the purchase price, including the premium, plus accrued and unpaid interest, for the 9⁷/8% senior discount notes purchased pursuant to the tender offer.

        On May 27, 2003, pursuant to the terms of the indenture governing the 9⁷/8% senior discount notes, Universal called for redemption the remaining $60.6 million principal amount of 9⁷/8% senior discount notes outstanding. The redemption price will be equal to 104.938% of the principal amount of the 9⁷/8% senior discount notes, plus accrued and unpaid interest to, but not including, the redemption date. The closing of the redemption is scheduled for June 26, 2003 and will be funded with available cash and additional borrowings under Universal's revolving credit facility. As a result of the tender offer and the redemption, Universal expects to retire all of the outstanding 9⁷/8% senior discount notes.

        As of June 2, 2003, after giving effect to the closing of the Redemption expected to occur on June 26, 2003, and to the covenants in our financing instruments, we expect to have unused credit availability under our existing financial instruments of approximately $96 million.

        Our ability to repatriate cash may be limited from time to time by certain statutory banking restrictions that can be imposed by various international regulatory agencies.

        We believe that funds generated from our operations, together with our existing cash and the additional capacity available under our revolving credit facility and the ABS operating lease facility, are sufficient to finance

28

our current operations, planned capital expenditures and internal growth for fiscal year 2004. If we were to make significant additional acquisitions for cash, we might need to obtain additional debt or equity financing.

Recent Accounting Pronouncements

        In August 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 provides new guidance on the recognition of impairment losses on long-lived assets to be held and used or to be disposed of and also broadens the definition of what constitutes a discontinued operation and how the results of a discontinued operation are to be measured and presented. SFAS No. 144 supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and Accounting Principle Board Opinion No. 30, while retaining many of the requirements of these two statements. Under SFAS No. 144, assets held for sale that are a component of an entity will be included in discontinued operations if the operations and cash flows will be or have been eliminated from the ongoing operations of the entity and the entity will not have any significant continuing involvement in the operations prospectively. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. SFAS No. 144 does not materially change the methods used by us to measure impairment losses on long-lived assets, but may result in additional future dispositions being reported as discontinued operations. We adopted SFAS No. 144 on April 1, 2002. Based on our review of SFAS No. 144, no impairment existed as of March 31, 2003.

        In April 2002, FASB issued SFAS No. 145 "Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS 145 requires, among other things, gains or losses of extinguishments of debt to be classified as income (loss) from continuing operations rather than as an extraordinary item, unless such extinguishment is determined to be extraordinary pursuant to Accounting Principles Board Opinion No. 30 ("Opinion 30"), "Reporting the Results of Operations—Reporting the Effects of a Disposal of a Segment of a Business and Extraordinary, Unusual, and Infrequently Occurring Transactions." Any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in Opinion 30 for classification as an extraordinary item must be reclassified. This Statement rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers," and an amendment to SFAS No. 4, SFAS No. 64, "Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements." This Statement also amends SFAS No. 13, "Accounting for Leases," to eliminate inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. In addition, this Statement amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. Provisions of SFAS No. 145 related to the rescission of SFAS No. 4 are effective for the Company on April 1, 2003 and provisions affecting SFAS No. 13 are effective for transactions occurring after May 15, 2002. The Company did not early adopt the provisions for SFAS 145 for the year ended March 31, 2003. Had the Company early adopted SFAS 145 in fiscal year 2003, the extinguishment of debt recorded in fiscal year 2001 would be reclassified to a separate component of income before income taxes.

        In July 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities." This Statement requires the recognition of costs associated with the exit or disposal activities when incurred rather than at the date of a commitment to an exit or disposal plan. This Statement replaces Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)," which required the recognition of costs at the date of a commitment to an exit or disposal plan. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002. The Company will record any costs associated with exit or disposal activities in accordance with this new guidance when applicable.

        In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires that upon issuance of a guarantee, a guarantor must recognize a liability for the fair value of the obligation assumed under the guarantee. FIN 45 also requires additional disclosures about guarantees in the interim and annual financial statements. The provisions of FIN 45 related to initial recognition and measurement

29

of guarantee agreements were effective for any guarantees issued or modified after December 31, 2002. The adoption of these recognition and measurement provisions did not have any impact on our consolidated financial position or results of operations.

        In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure, an Amendment of SFAS No. 123, Accounting for Stock-Based Compensation." SFAS 148, which is effective for years ending after December 15, 2002, provides alternative methods for a voluntary change to the fair value based method of accounting for stock-based employee compensation and requires prominent disclosure about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company will continue to account for its stock based compensation according to the provisions of APB Opinion No. 25.

        In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities," which is an interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial Statements." The interpretation states that certain variable interest entities may be required to be consolidated into the results of operations and financial position of the entity that is the primary beneficiary. The change may be made prospectively with a cumulative-effect adjustment in the period first applied or by restating previously issued financial statements. The interpretation becomes effective July 1, 2003. The Company does not believe the new interpretation will have any impact on its consolidated statement of operations, cash flows, or financial position.

        On April 30, 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." This statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. This statement is effective for contracts entered into or modified after June 20, 2003, for hedging relationships designated after June 30, 2003, and to certain preexisting contracts. We will adopt SFAS No. 149 on a prospective basis at its effective date on July 1, 2003. We are currently evaluating the impact that SFAS No. 149 will have on our financial statements.

        In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This statement is effective for financial instruments entered into or modified after May 31, 2003, except for mandatorily redeemable financial instruments. Mandatorily redeemable financial instruments are subject to the provisions of this statement beginning on January 1, 2004. We are currently evaluating the impact that SFAS No. 150 will have on our financial statements.

Seasonal Fluctuations

        Our results of operations have not historically reflected any material seasonal tendencies.

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RISK FACTORS

As described in "Part I. Disclosure Regarding Forward-Looking Statements," this report contains forward-looking statements regarding us, our business and our industry. The risk factors described below, among others, could cause our actual results to differ materially from the expectations reflected in the forward-looking statements. If any of the following risks actually occur, our business, financial condition and operating results could be materially adversely affected. Additional risks not currently known to us or which we currently consider immaterial may also adversely affect us.

Our international operations subject us to risks that are difficult to predict.

        For the year ended March 31, 2003, we derived approximately 28% of our revenues from international operations. We intend to continue to expand our business in Latin America, and Asia Pacific and, ultimately, other international markets. This may make it more difficult for us to manage our business. Reasons for this include, but are not limited to, the following:

•

political and economic instability in foreign markets;



•

foreign governments' restrictive trade policies;



•

inconsistent product regulation or sudden policy changes by foreign agencies or governments;



•

the burden of complying with multiple and potentially conflicting laws;



•

the imposition of duties, taxes or government royalties;



•

foreign exchange rate risks;



•

difficulty in collecting international accounts receivable;



•

potentially longer payment cycles;



•

increased costs in maintaining international manufacturing and marketing efforts;



•

the introduction of non-tariff barriers and higher duty rates;



•

difficulties in enforcement of contractual obligations;



•

restrictions on repatriation of earnings or expropriation of property; and



•

the geographic, time zone, language and cultural differences between personnel in different areas of the world.

Any of these factors could materially adversely affect our business, financial condition or results of operations.

We are exposed to exchange rate fluctuations.

        Our reporting currency is the U.S. dollar. Historically, our foreign operations, including assets, liabilities, revenues and expenses, have been denominated in various currencies other than the U.S. dollar, and we expect that our foreign operations will continue to be so denominated. As a result, the U.S. dollar value of our foreign operations has varied, and will continue to vary, with exchange rate fluctuations. In this respect, historically we have been primarily exposed to fluctuations in the exchange rate of the Argentine peso, Brazilian real, Thai baht, Mexican peso, Australian dollar and Canadian dollar against the U.S. dollar.

        A decrease in the value of any of these currencies relative to the U.S. dollar could reduce our profits from foreign operations and the value of the net assets of our foreign operations when reported in U.S. dollars in our financial statements. This could have a material adverse effect on our business, financial condition or results of operations as reported in U.S. dollars.

        In addition, fluctuations in exchange rates relative to currencies in which the earnings are generated may make it more difficult to perform period-to-period comparisons of our reported results of operations. For purposes of accounting, the assets and liabilities of our foreign operations, where the local currency is the

31

functional currency, are translated using period-end exchange rates, and the revenues and expenses of our foreign operations are translated using average exchange rates during each period.

        Although we attempt to match costs and revenues in local currencies, we anticipate that there may be instances in which costs and revenues will not be matched with respect to currency denomination. As a result, to the extent we continue our expansion on a global basis, we expect that increasing portions of our revenues, costs, assets and liabilities will be subject to fluctuations in foreign currency valuations. We may experience economic loss and a negative impact on earnings or net assets solely as a result of foreign currency exchange rate fluctuations. Further, the markets in which we operate could restrict the removal or conversion of the local or foreign currency, resulting in our inability to hedge against these risks.

Weatherford's voting power may give it the ability to control the outcome of matters submitted to a vote of our stockholders.

        Currently, Weatherford International Ltd. ("Weatherford") owns 13,750,000 shares, or approximately 45%, of our outstanding common stock. In addition to its voting power, Weatherford and its affiliates are entitled to designate three persons to serve on our board of directors for so long as they own at least 20% of our outstanding common stock. If Weatherford's ownership falls below 20%, Weatherford may designate only two directors. If Weatherford's ownership falls below 10%, it will no longer have the right to designate directors to our board.

        This significant stock ownership and board representation gives Weatherford the ability to exercise substantial influence over our ownership, policies, management and affairs and significant control over actions requiring approval of our stockholders. Weatherford's interests could conflict with our other stockholders. See "Item 13. Certain Relationships and Related Transactions" for further information regarding our relationship with Weatherford.

Sale of a substantial number of shares of our common stock could depress our stock price.

        Sales of a substantial number of shares of our common stock in the public market could adversely affect the market price of our common stock, particularly as our common stock is thinly traded. The shares owned by Weatherford are subject to registration rights and may be resold at any time. The sale of a substantial number of shares within a short period of time could cause our stock price to decrease, making it more difficult for us to raise funds through future offerings of our common stock and to acquire businesses using our stock as consideration.

We are dependent on particular suppliers and are vulnerable to product shortages and price increases.

        As a consequence of having a highly standardized contract compression fleet, some of the components used in our products are obtained from a single source or a limited group of suppliers. Our reliance on these suppliers involves several risks, including price increases, inferior component quality and a potential inability to obtain an adequate supply of required components in a timely manner. The partial or complete loss of certain of these sources could have at least a temporary material adverse effect on our results of operations and could damage our customer relationships. Further, a significant increase in the price of one or more of these components could have a material adverse effect on our results of operations.

Our ability to manage our business effectively will be weakened if we lose key personnel.

        We depend on the continuing efforts of our executive officers and senior management. The departure of any of our key personnel could have a material adverse effect on our business, operating results and financial condition. We do not maintain key man life insurance coverage with respect to our executive officers or key management personnel. We are not aware of the upcoming retirement of any of our executive officers or senior management personnel. In addition, we believe that our success depends on our ability to attract and retain additional qualified employees. If we fail to recruit other skilled personnel, we could be unable to compete effectively.

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We may not be successful in implementing our business strategy, which may adversely affect our ability to finance our future growth.

        Our ability to implement our business strategy successfully depends upon a number of factors including competition, availability of working capital and general economic conditions. Significant elements of our business strategy include growth of our market share and broader participation in the international market for compression services. We cannot assure you that we will succeed in implementing our strategy or be able to obtain financing for this strategy on acceptable terms. The indenture governing our senior notes, our revolving credit facility and our lease facilities substantially limit our ability to incur additional debt to finance our growth strategy. See "Business—Growth Strategy."

We do not insure against all potential losses and could be seriously harmed by unexpected liabilities.

        Natural gas service operations are subject to inherent risks such as equipment defects, malfunction and failures, and natural disasters that can result in uncontrollable flows of gas or well fluids, fires and explosions. These risks could expose us to substantial liability for personal injury, death, property damage, pollution and other environmental damages. Although we have obtained insurance against many of these risks, there can be no assurance that our insurance will be adequate to cover our liabilities. Further, insurance covering the risks we face or in the amounts we desire may not be available in the future or, if available, the premiums may not be commercially justifiable. If we were to incur substantial liability and the damages were not covered by insurance or were in excess of policy limits, or if we were to incur liability at a time when we are not able to obtain liability insurance, our business, results of operations and financial condition could be materially adversely affected.

We intend to continue to make substantial capital investments to implement our business strategy, which may reduce funds available for other operations.

        We anticipate that we will continue to make substantial capital investments to expand and maintain our contract compression fleet. For the year ended March 31, 2003, we invested approximately $121 million in capital investments, excluding acquisitions. We expect to spend between $90 and $110 million on capital expenditures, excluding acquisitions, during fiscal year 2004, approximately $30 million of which would be used for maintenance capital expenditures. Historically, we have financed these investments through internally generated funds, debt offerings, our revolving credit facility and our lease facilities. These significant capital investments require cash that we could otherwise apply to other business needs. However, if we do not incur these expenditures while our competitors make substantial fleet investments, our market share may decline and our business may be adversely affected. In addition, if we are unable to generate sufficient cash internally or obtain alternative sources of capital to fund our proposed capital expenditures, it could materially adversely affect our results of operations, financial condition and growth.

We are subject to substantial environmental regulation, and changes in these regulations could increase our costs or liabilities.

        We are subject to stringent and complex foreign, federal, state and local laws and regulatory standards, including laws and regulations regarding the discharge of materials into the environment, emission controls and other environmental protection and occupational health and safety concerns. See "Business—Environmental and Other Regulations." Environmental laws and regulations may, in certain circumstances, impose strict liability for environmental contamination, rendering us liable for remediation costs, natural resource damages and other damages as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior owners or operators or other third parties. In addition, where contamination may be present, it is not uncommon for neighboring land owners and other third parties to file claims for personal injury, property damage and recovery of response costs. Remediation costs and other damages arising as a result of environmental laws and regulations, and costs associated with new information, changes in existing environmental laws and regulations or the adoption of new environmental laws and regulations could be substantial and could have a material adverse effect on our business, financial condition or results of operations. Moreover, failure to comply with these environmental laws and regulations may result in the imposition of administrative, civil and criminal penalties.

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        We routinely deal with natural gas, oil and other petroleum products. As a result of our fabrication and aftermarket services operations, we generate, manage and dispose of or recycle hazardous wastes and substances such as solvents, thinner, waste paint, waste oil, washdown wastes and sandblast material. Although it is our policy to use generally accepted operating and disposal practices in accordance with applicable environmental laws and regulations, hydrocarbons or other hazardous substances or wastes may have been disposed or released on, under or from properties owned, leased or operated by us or on or under other locations where such substances or wastes have been taken for disposal. These properties may be subject to investigatory, remediation and monitoring requirements under foreign, federal, state and local environmental laws and regulations.

        We believe that our operations are in substantial compliance with applicable environmental laws and regulations. Nevertheless, the modification or interpretation of existing environmental laws or regulations, the more vigorous enforcement of existing environmental laws or regulations, or the adoption of new environmental laws or regulations may also negatively impact oil and natural gas exploration and production companies, which in turn could have a material adverse effect on us and other similarly situated service companies.

We face significant competition that may cause us to lose market share and harm our financial performance.

        The contract compression, fabrication and aftermarket services businesses are highly competitive. Some of our competitors also offer a wide range of compressors for sale or lease, and there are low barriers to entry for individual projects. In addition, we compete with several large national and multinational companies, most of which have greater financial and other resources than we do. If our competitors substantially increase the resources they devote to the development and marketing of competitive products and services, we may not be able to compete effectively.

Most of our domestic compressor leases have short initial terms, and we may not recoup the costs of our investment if we are unable to subsequently re-lease the compressors.

        In most cases, the initial terms of our contract compression leases with customers are short, with the most common initial term being six months and continuing on a month-to-month basis thereafter. The initial terms of our leases are generally too short to enable us to recoup the average cost of acquiring or fabricating compressors for contract compression customers under prevailing contract compression and lease rates. As a result, we assume substantial risk of not recovering our entire investment in the equipment we acquire or fabricate for contract compression customers. Although we historically have been successful in subsequently re-leasing our compressors, we may not be able to continue to do so and a substantial number of our contract compression customers could terminate their leases at approximately the same time. If such an event were to occur, even if we are successful in re-leasing our compressors as we have been in the past, we may not be able to obtain favorable contract compression rates. This would have an adverse effect on our revenues and cash flow.

We depend on strong demand for natural gas and a prolonged, substantial reduction in this demand could adversely affect the demand for our services and products.

        Gas contract compression operations are significantly dependent upon the demand for natural gas. Demand may be affected by, among other factors, natural gas prices, weather, demand for energy and availability of alternative energy sources. Any prolonged, substantial reduction in the demand for natural gas would, in all likelihood, depress the level of production, exploration and development activity and result in a decline in the demand for our contract compression services and products. Similarly, a decrease in capital spending by our customers could result in reduced demand for our fabrication and aftermarket services businesses. These events could materially adversely affect our business, results of operations or financial condition.

Future terrorist attacks or responses thereto could adversely affect us.

        The impact that future events arising as a result of the terrorist attacks on the United States on September 11, 2001, or any terrorist attacks that may occur in the future, including military or police activities in the United States, Iraq or other foreign countries, future terrorist activities or threats of such activities, political

34

unrest and instability, riots and protests, could have on the United States economy, the global economy, global financial markets and our business cannot currently be determined with any accuracy.

We are highly leveraged, a significant portion of our cash flow must be used to service our obligations and we are vulnerable to interest rate increases.

        We have now and will continue to have a significant amount of debt. As of March 31, 2003, we had approximately $945.2 million in outstanding obligations, of which approximately $175 million was outstanding under our ABS lease facility, approximately $532.2 million was outstanding under our BRL lease facility and $229.75 million was outstanding under our 9⁷/8% senior discount notes. This amount excludes approximately $6.2 million of letters of credit issued under our $125 million senior secured revolving credit facility, which we refer to as our revolving credit facility.

        Our high level of debt could have important consequences to you, including the following:

•

require us to use a substantial portion of our cash flow from operations to pay our debt and lease payments, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, operations, expansion of our fleet and other business activities;



•

make it more difficult for us to satisfy our obligations under our senior notes;



•

increase our vulnerability to general adverse economic and industry conditions;



•

limit, along with financial and other restrictive covenants in our debt instruments, our ability to borrow additional funds or dispose of assets;



•

restrict us from making strategic acquisitions or exploiting business opportunities;



•

limit our ability to make capital expenditures to maintain our facilities and compressor fleet in good working order and repair;



•

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and



•

place us at a competitive disadvantage compared to our competitors that have less debt.

        Approximately $82.2 million of our outstanding debt bears interest at floating rates. Changes in economic conditions could result in higher interest rates, thereby increasing our interest expense and reducing our funds available to make payments of interest and principal on the notes and for capital investment, operations or other purposes. Our significant leverage increases our vulnerability to general adverse economic and industry conditions.

We will require a significant amount of cash to service our debt. Our ability to generate cash depends on many factors beyond our control.

        Our ability to make payments on our debt and to fund planned capital expenditures will depend on our ability to generate cash in the future. This is subject to general economic, financial, competitive, legislative, regulatory and other factors that may be beyond our control.

        We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our credit facilities or otherwise in an amount sufficient to enable us to pay our debt or to fund our other liquidity needs. We may need to refinance all or a portion of our debt on or before maturity. We cannot assure you that we will be able to refinance any of our debt, including our credit facilities, lease facilities, or the senior notes, on commercially reasonable terms or at all.

In addition to our current indebtedness, we may incur substantially more debt. This could further exacerbate the risks associated with our substantial debt.

        We may be able to incur substantial additional debt in the future. If new debt is added to our current debt levels, the substantial risks described above would intensify.

35

Our credit facilities and lease facilities impose restrictions on us that may affect our ability to successfully operate our business.

        Our credit facilities and lease facilities include certain covenants that, among other things, restrict our ability to:

•

borrow money;



•

create liens, other than a lien securing the revolving credit facility, the BRL lease facility or the ABS lease facility;



•

sell or transfer any of our material property;



•

merge into or consolidate with any third party or sell or dispose of all or substantially all of our assets; and



•

make capital expenditures.

        We and our subsidiaries are also required by our credit facilities to maintain debt coverage ratios, interest coverage ratios and a specified tangible net worth. All of these covenants may restrict our ability to expand or to pursue our business strategies. Our ability to comply with these and other provisions of the indentures and the credit facilities may be affected by changes in our operating and financial performance, changes in business conditions or results of operation, adverse regulatory developments or other events beyond our control. The breach of any of these covenants could result in a default under our debt, which could cause those obligations to become due and payable. If any of our indebtedness were to be accelerated, there can be no assurance that we would be able to repay it.

Any failure to meet our debt obligations could harm our business, financial condition and results of operations.

        If our cash flow and capital resources are insufficient to fund our debt obligations, we may be forced to sell assets, seek additional equity or debt capital, or restructure our debt. Our cash flow and capital resources may be insufficient for payment of interest on and principal of our debt in the future and any alternative measures may be unsuccessful or may not permit us to meet scheduled debt service obligations, which could cause us to default on our obligations and impair our liquidity.

The market price of our common stock is volatile.

        Historically, the market price of common stock of companies engaged in the natural gas industry has been highly volatile. Similarly, the market price of our common stock has varied significantly since our initial public offering in May 2000. In particular, changes in natural gas prices or in the demand for natural gas could affect the price of our common stock.

We are a holding company and rely on our subsidiaries for operating income.

        We are a holding company and, as such, derive all of our operating income from our operating subsidiary, Universal, and its subsidiaries. We do not have any significant assets other than the stock of our operating subsidiary. Consequently, we are dependent on the earnings and cash flow of our subsidiaries to meet our obligations. Our subsidiaries are separate legal entities that are not legally obligated to make funds available to us, and in some cases may be contractually restricted from doing so. We cannot assure you that our subsidiaries will be able to, or be permitted to, pay to us amounts necessary to meet our obligations.

A third party could be prevented from acquiring control of us because of the anti-takeover provisions in our charter and bylaws.

        There are provisions in our restated certificate of incorporation and bylaws that may make it more difficult for a third party to acquire control of us, even if a change in control would result in the purchase of your shares at a premium to the market price or would otherwise be beneficial to you. For example, our restated certificate of incorporation authorizes our board of directors to issue preferred stock without stockholder approval. If our board of directors elects to issue preferred stock, it could be more difficult for a third party to acquire us. In

36

addition, provisions of our restated certificate of incorporation, such as a staggered board of directors and limitations on the removal of directors, no stockholder action by written consent and limitations on stockholder proposals at meetings of stockholders, could make it more difficult for a third party to acquire control of us. Delaware corporation law may also discourage takeover attempts that have not been approved by our board of directors.

We do not expect to pay dividends.

        We have never paid cash dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future. In addition, the ability of Universal to pay dividends is restricted by the revolving credit facility, the lease facilities, the indentures governing our senior notes and other financing arrangements.

You should not place undue reliance on forward-looking statements, as our actual results may differ materially from those anticipated in our forward-looking statements.

        This report contains forward-looking statements about our operations, economic performance and financial condition. These statements are based on a number of assumptions and estimates, which are inherently subject to significant uncertainties and contingencies, many of which are beyond our control, and reflect future business decisions, which are subject to change. Some of these assumptions inevitably will not materialize, and unanticipated events will occur which will affect our results of operations. See "Part I. Disclosure Regarding Forward-Looking Statements".

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

UNIVERSAL COMPRESSION, INC.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with Universal's financial statements, and the notes thereto, and the other financial information appearing elsewhere in this report. The following discussion includes forward-looking statements that involve certain risks and uncertainties. See "Part I. Disclosure Regarding Forward-Looking Statements" and "Risk Factors."

Financial Results of Operations.

Fiscal Year Ended March 31, 2003 Compared to Fiscal Year Ended March 31, 2002

        The following table summarizes revenues, gross profits, expenses and the respective percentages for each of Universal's business segments:

		Year Ended March 31,
		2003			2002
		(Dollars in thousands)
Revenues:
Domestic contract compression		$	265,465		$	267,550
	% of revenue		42.5	%		39.3	%
International contract compression		$	66,505		$	60,185
	% of revenue		10.6	%		8.9	%
Fabrication		$	162,678		$	211,265
	% of revenue		26.0	%		31.1	%
Aftermarket services		$	130,570		$	140,989
	% of revenue		20.9	%		20.7	%
Gross profit:
Domestic contract compression		$	169,868		$	169,892
International contract compression			53,769			43,411
Fabrication			16,075			24,347
Aftermarket services			28,256			30,696
Expenses:
Depreciation and amortization			(63,706	)		(48,600	)
Selling, general and administrative			(67,944	)		(60,890	)
Operating lease expense			(46,071	)		(55,401	)
Interest expense, net			(36,421	)		(23,017	)
Income taxes			(20,975	)		(30,931	)
Net income		$	33,518		$	49,408

        Revenues.    Total revenues for the fiscal year ended March 31, 2003 decreased $54.8 million, or 8.1%, to $625.2 million, compared to $680.0 million for the fiscal year ended March 31, 2002 largely as a result of declines in fabrication and aftermarket services. Domestic contract compression revenue decreased by $2.1 million, or 1%, to $265.5 million during the fiscal year ended March 31, 2003 from $267.6 million during the fiscal year ended March 31, 2002. International contract compression revenue increased by $6.3 million, or 10.5%, to $66.5 million during the fiscal year ended March 31, 2003 from $60.2 million during the fiscal year ended March 31, 2002. The decrease in domestic contract compression revenue was a result of lower horsepower utilization in a period of reduced energy industry activity that resulted in a reduced demand for contract compression services. The increase in international contract compression revenue resulted from new contract settlements negotiated with Universal's Argentina customers in the first quarter of fiscal year 2003 and expansion of its business in the Latin America and Asia Pacific regions.

        Domestic average contracted horsepower for the fiscal year ended March 31, 2003 decreased slightly to approximately 1,602,000 horsepower from approximately 1,603,000 horsepower for the fiscal year ended

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March 31, 2002 primarily due to the general decline in energy industry activity in the United States. International average contracted horsepower for the fiscal year ended March 31, 2003 increased by 2.6% to approximately 311,000 horsepower from approximately 303,000 horsepower for the fiscal year ended March 31, 2002, primarily through expansion of the international contract compression fleet. The combined average horsepower utilization rate for the fiscal year ended March 31, 2003 was approximately 83.3%, down from 88.8% in the fiscal year ended March 31, 2002. As of March 31, 2003, Universal had approximately 2.3 million available horsepower with an average horsepower utilization rate for the quarter then ended of 83.5% and for the same period one year earlier of approximately 86.8%.

        Fabrication revenue decreased to $162.7 million from $211.3 million, a decrease of 23% due to lower demand for customer-owned compressors in a period of reduced energy industry activity. Backlog of fabrication projects at the fiscal year ended March 31, 2003 was approximately $55.7 million, compared with a backlog of $80.0 million at March 31, 2002. From December 31, 2002 to March 31, 2003, backlog decreased $0.6 million. The backlog as of May 12, 2003 was approximately $75 million.

        Aftermarket services revenue decreased to $130.6 million during the fiscal year ended March 31, 2003 from $141.0 million during the fiscal year ended March 31, 2002, a decrease of 7.4%. The decrease resulted from reduced repair and maintenance activity from Universal's North American customer base in a period of reduced energy industry activity.

        Gross Profit.    Gross profit (defined as total revenue less direct costs) for the fiscal year ended March 31, 2003 decreased $0.4 million, or 0.1%, to $268.0 million from gross profit of $268.3 million for the fiscal year ended March 31, 2002 reflecting declines in fabrication and aftermarket services that were partially offset by an increase in international contract compression. Fabrication gross profit for the fiscal year ended March 31, 2003 decreased $8.3 million, or 34.0%, to $16.1 million compared to a gross profit of $24.3 million for the fiscal year ended March 31, 2002. Fabrication gross profits decreased primarily due to lower demand during the fiscal year. Aftermarket services gross profit for the fiscal year ended March 31, 2003 decreased $2.4 million or 7.9%, to $28.3 million compared to a gross profit of $30.7 million for the fiscal year ended March 31, 2002. Aftermarket services gross profit decreased primarily due to the overall slowdown in energy industry activity.

        Selling, General and Administrative Expenses.    Selling, general and administrative expenses increased by $7.1 million to $67.9 million for the fiscal year ended March 31, 2003, compared to $60.9 million for the fiscal year ended March 31, 2002. Selling, general and administrative expenses represented 10.9% of revenue for the fiscal year ended March 31, 2003 compared to 9.0% of revenue for the fiscal year ended March 31, 2002. The increase was primarily due to a greater presence in international markets, which carries higher administration costs and severance costs related to staff reductions.

        EBITDA, as adjusted, for the fiscal year ended March 31, 2003 decreased 3.0% to $201.2 million from $207.3 million for the fiscal year ended March 31, 2002, primarily due to increases in the selling, general and administrative costs. EBITDA, as adjusted, is defined and reconciled to net income in Item 6 of this report, "Selected Financial Data," under the caption "Selected Historical Financial Data—Universal Compression, Inc."

        Depreciation and Amortization.    Depreciation and amortization increased by $15.1 million to $63.7 million during the fiscal year ended March 31, 2003, compared to $48.6 million during the fiscal year ended March 31, 2002. Depreciation expense increased due to a full twelve months of depreciation of fiscal 2002 capital additions and capitalized overhauls. In addition, depreciation expense increased due to the three months of depreciation of gas compressor units that were not previously recorded on Universal's balance sheet until December 31, 2002, when the lessors under the operating lease facilities became fully consolidated entities. Depreciation expense related to these assets began January 1, 2003 and increased depreciation expense for the fiscal year ended March 31, 2003 by approximately $5.6 million.

        In fiscal 2003, Universal evaluated the estimated useful lives used for book depreciation purposes for its compressor fleet with the assistance of an independent equipment valuation firm. This equipment study evaluated the compressor units based upon equipment type, key components and industry experience of the actual useful life in the field. The study was finalized in the fourth quarter of fiscal year 2003. Based upon the findings of the study, the estimated useful lives of the majority of the existing compressor units were extended to

39

25 years from 15 years. In addition, a portion of the units remained at the previous 15 years or less and a portion of the units were extended to 30 years. The change in useful lives was effective January 1, 2003. The impact from extending the estimated useful lives of the equipment that was recorded on Universal's balance sheet on December 31, 2002 (excluding the gas compression equipment related to the operating lease facilities) reduced depreciation expense by approximately $3.0 million for the year ended March 31, 2003.

        The combined impact as a result of the consolidation of the compressor equipment in the operating lease facilities and the extension of the estimated useful lives was an increase to depreciation expense of approximately $2.6 million and a decrease to net income of $1.6 million for the year ended March 31, 2003.

        Operating Lease Expense.    Operating lease expense decreased to $46.1 million during the fiscal year ended March 31, 2003 compared to $55.4 million during the fiscal year ended March 31, 2002. Operating lease expense related to the operating lease facilities has been recognized as interest expense subsequent to the consolidation of the lease facilities on December 31, 2002. As a result, Universal recognized no operating lease expense for the quarter ended March 31, 2003.

        Interest Expense, Net.    Interest expense, net, increased $13.4 million to $36.4 million for the fiscal year ended March 31, 2003 from $23.0 million for the fiscal year ended March 31, 2002 primarily due to the consolidation of the operating lease facilities as of December 31, 2002 which resulted in the classification of operating lease expense subsequent to December 31, 2002 as interest expense.

        Net Income.    Net income decreased $15.9 million to $33.5 million for the fiscal year ended March 31, 2003 compared to a net income of $49.4 million for the fiscal year ended March 31, 2002 for the reasons noted above.

Fiscal Year Ended March 31, 2002 Compared to Fiscal Year Ended March 31, 2001

        The following table summarizes revenues, gross margins, expenses and the respective percentages for each of Universal's business segments:

		Year Ended March 31,
		2002			2001
		(Dollars in thousands)
Revenues:
Domestic contract compression		$	267,550		$	126,686
	% of revenue		39.3	%		54.5	%
International contract compression		$	60,185		$	22,549
	% of revenue		8.9	%		9.7	%
Fabrication		$	211,265		$	61,779
	% of revenue		31.1	%		26.6	%
Aftermarket services		$	140,989		$	21,452
	% of revenue		20.7	%		9.2	%
Gross profit:
Domestic contract compression		$	169,892		$	80,465
International contract compression			43,411			16,425
Fabrication			24,347			9,041
Aftermarket services			30,696			3,476
Expenses:
Depreciation and amortization			(48,600	)		(33,485	)
Selling, general and administrative			(60,890	)		(21,092	)
Operating lease expense			(55,401	)		(14,443	)
Interest expense, net			(23,017	)		(22,622	)
Income taxes			(30,931	)		(3,871	)
Net income		$	49,408		$	(1,142	)

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        Revenues.    Total revenue for the fiscal year ended March 31, 2002 increased $447.5 million, or 192.5%, to $680.0 million, compared to $232.5 million for the fiscal year ended March 31, 2001. Contract compression revenue increased by $178.5 million, or 119.6%, to $327.7 million during the fiscal year ended March 31, 2002 from $149.2 million during the fiscal year ended March 31, 2001. Domestic contract compression revenues increased by $140.9 million, or 111.2%, to $267.6 million during the fiscal year ended March 31, 2002 from $126.7 million during the fiscal year ended March 31, 2001. International contract compression revenues increased by $37.7 million, or 167.5%, to $60.2 million during the fiscal year ended March 31, 2002 from $22.5 million during the fiscal year ended March 31, 2001. The increase in domestic contract compression revenue primarily resulted from expansion of the contract compression fleet through the impact of a full year of operations from the Weatherford Global acquisition, the KCI acquisition and internal growth. The increase in international contract compression revenue resulted from expansion of Universal's international contract compression fleet primarily through the CSII acquisition and the impact of a full year of operations from the Weatherford Global acquisition.

        Domestic average rented horsepower for the fiscal year ended March 31, 2002 increased by 107% to approximately 1,603,000 horsepower from approximately 776,000 horsepower for the fiscal year ended March 31, 2001 primarily due to the KCI acquisition and a full year of operations from the Weatherford Global and GCSI acquisitions. In addition, international average rented horsepower for the fiscal year ended March 31, 2002 increased by 240% to approximately 303,000 horsepower from approximately 89,000 horsepower for the fiscal year ended March 31, 2001, primarily through acquisitions and expansion of the international contract compression fleet and high utilization rates. Combined average horsepower utilization rate for the fiscal year ended March 31, 2002 was approximately 88.8%, up from 87.6% in the fiscal year ended March 31, 2001. As of March 31, 2002, Universal had approximately 2.2 million available horsepower with an average horsepower utilization rate for the quarter then ended of 86.8% and for the same period one year earlier of approximately 88.8%.

        Revenue from fabrication increased to $211.3 million from $61.8 million, an increase of 242%. The increase in fabrication revenue, consisting mostly of equipment fabrication, was due primarily to the acquisition of KCI and the impact of a full year of operations from the Weatherford Global acquisition combined with internal growth. Backlog of fabrication projects at the fiscal year ended March 31, 2002 was approximately $80.0 million, compared with a backlog of $34.2 million at March 31, 2001.

        Revenue from aftermarket services increased to $141.0 million during the fiscal year ended March 31, 2002 from $21.5 million during the fiscal year ended March 31, 2001, an increase of 556%. The increase was due primarily to the impact of full year of operations from the Weatherford Global acquisition and resulted in the aftermarket services segment becoming a more significant part of Universal's business. In addition, the LCM and TCSI acquisitions increased revenues approximately $23 million in the aggregate.

        Gross profit.    Gross profit (defined as total revenue less direct costs) for the fiscal year ended March 31, 2002 increased $158.9 million, or 145.3%, to $268.3 million from gross profit of $109.4 million for the fiscal year ended March 31, 2001. Contract compression gross profit for the fiscal year ended March 31, 2002 increased $116.4 million, or 120%, to $213.3 million compared to gross profit of $96.9 million for the fiscal year ended March 31, 2001. Contract compression gross profit increased primarily as the result of Contract compression revenue growth and operating cost improvements realized by the integration of the contract compression businesses. Fabrication gross profit for the fiscal year ended March 31, 2002 increased $15.3 million, or 169%, to $24.3 million compared to a gross profit of $9.0 million for the fiscal year ended March 31, 2001. Fabrication gross profits increased primarily due to the impact of a full year of operations from Weatherford Global, a partial year of operations from KCI and synergies from the integration of these operations. Aftermarket services gross profit for the fiscal year ended March 31, 2002 increased $27.2 million or 783%, to $30.7 million compared to a gross profit of $3.5 million for the fiscal year ended March 31, 2001. Aftermarket services gross profit increased primarily due to the impact of a full year of operations from Weatherford Global and the acquisitions of TCSI and LCM.

        Selling, General and Administrative Expenses.    Selling, general and administrative expenses increased by $39.8 million to $60.9 million for the fiscal year ended March 31, 2002 compared to $21.1 million for the fiscal

41

year ended March 31, 2001. Selling, general and administrative expenses represented 9.0% of revenue for the fiscal year ended March 31, 2002 compared to 9.1% of revenue for the fiscal year ended March 31, 2001.

        EBITDA, as adjusted, for the fiscal year ended March 31, 2002 increased 133.5% to $207.3 million from $88.8 million for the fiscal year ended March 31, 2001, primarily due to increases in total fleet horsepower and utilization of the compression contract compression fleet, gross profit contribution from fabrication and sales, and operating cost improvements realized by contract compression operations. EBITDA, as adjusted, is defined and reconciled to net income in Item 6 of this report, "Selected Financial Data," under the caption "Selected Historical Financial Data—Universal Compression, Inc."

        Non-recurring Charges.    During the fiscal year ended March 31, 2001, Universal incurred non-recurring charges of $8.7 million related to the early termination of a management agreement and a consulting agreement and other related fees in connection with Universal Compression Holdings' initial public offering and concurrent financing transactions as well as costs related to facilities and workforce reductions associated with the Weatherford Global acquisition.

        Depreciation and Amortization.    Depreciation and amortization increased by $15.1 million to $48.6 million during the fiscal year ended March 31, 2002, compared to $33.5 million during the fiscal year ended March 31, 2001. The increase was primarily due to capital additions of $188 million, which primarily resulted from expansion of the contract compression fleet, through Universal's fabrication operations and the purchase of approximately $60 million and $13 million of contract compression equipment from the acquisitions of KCI and CSII, respectively. The increase in depreciation and amortization was partially offset by the net sales and leasebacks of compressor equipment, with a book value of approximately $142.1 million, between April and October 2001 under Universal's operating lease facilities.

        Operating Lease Expense.    Operating lease expense increased to $55.4 million during the fiscal year ended March 31, 2002 resulting from the increase in compression equipment leased under the operating lease facilities. The outstanding balance under the operating lease facilities at March 31, 2002 was $708.5 million.

        Interest Expense, Net.    Interest expense, net, remained fairly constant at $23.0 million for the fiscal year ended March 31, 2002 from $22.6 million for the fiscal year ended March 31, 2001, primarily as a result of the repayment of the $1.2 million revenue bonds, offset partially by increased accretion of Universal's 9⁷/8% senior discount notes.

        Extraordinary Loss.    During the fiscal year ended March 31, 2001, Universal incurred extraordinary losses of $10.6 million ($6.6 million net of income tax) related to debt restructurings that occurred concurrently with Universal Compression Holdings' initial public offering and the Weatherford Global acquisition.

        Net Income (Loss).    Universal had a net income of $49.4 million for the fiscal year ended March 31, 2002 compared to a net loss of $1.1 million for the fiscal year ended March 31, 2001 for the reasons noted above.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

        We are exposed to some market risk due to the floating or variable interest rates under our financing arrangements. A portion of the interest and lease payments under our financing arrangements are based on a floating rate (a base rate or LIBOR, at our option, in the case of our revolving credit facility, and LIBOR, in the case of our operating lease facilities) plus a variable amount based on our operating results. The one-month LIBOR rate at June 6, 2003 was 1.25%. A 1.0% increase in interest rates would result in an approximate $822,000 annual increase in our interest expense. As of March 31, 2003, approximately $82.2 million of our outstanding indebtedness and other obligations outstanding bears interest at floating rates.

        We hold interest rate swaps to manage our exposure to fluctuations in interest rates related to the $200 million ABS operating lease facility. At March 31, 2003, the fair market value of these interest rate swaps was a liability of approximately $15.4 million, which was recorded as a noncurrent liability. The interest rate swaps terminate in February 2013. The weighted average fixed rate of these swaps is 5.5%.

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        To minimize any significant foreign currency credit risk, we generally contractually require that payment by our customers be made in U.S. dollars. If payment is not made in U.S. dollars, we generally utilize the exchange rate into U.S. dollars on the payment date or balance payments in local currency against local expenses.

ITEM 8. Financial Statements and Supplementary Data

        The consolidated statements of the Company and Universal included in this Report beginning on page F-1 are incorporated herein by reference.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        None.

PART III

ITEM 10. Directors and Executive Officers of the Company

        The information to be included in our definitive proxy statement for our 2003 Annual Meeting of Stockholders under the caption "Election of Directors" is incorporated by reference herein.

ITEM 11. Executive Compensation

        The information included or to be included under the captions "Executive Compensation" in our definitive proxy statement for our 2003 Annual Meeting of Stockholders is incorporated by reference herein.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

        The information included or to be included under the captions "Security Ownership of Certain Beneficial Owners and Management" and "Equity Compensation Plan Information" in our definitive proxy statement for our 2003 Annual Meeting of Stockholders is incorporated by reference herein.

ITEM 13. Certain Relationships and Related Transactions

        The information included or to be included under the caption "Certain Relationships and Related Transactions" in our definitive proxy statement for our 2003 Annual Meeting of Stockholders is incorporated by reference herein.

ITEM 14. Controls and Procedures

        Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. No significant changes were made in our internal controls or procedures or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

ITEM 15. Principal Accountant Fees and Services

        Not applicable.

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PART IV

ITEM 16. Exhibits, Financial Statement Schedules and Reports On Form 8-K

(a)

The following documents are filed as part of this Report:

        1.     Financial Statements—The financial statements of the Company and Universal listed in the accompanying Index to Consolidated Financial Statements on page F-1 are filed as part of this annual report and such Index to Consolidated Financial Statements is incorporated herein by reference.

        2.     Financial Statement Schedules—Schedule II Valuation and Qualifying Accounts is included on Page E-1. All other schedules have been omitted as the required information is not present in amounts sufficient to require submission of the schedule or because the information required is included in the consolidated financial statements or notes thereto.

(b)

Reports on Form 8-K

On January 30, 2003, the Company filed a Current Report on Form 8-K reporting the issuance of a press release announcing earnings for the quarter ended December 31, 2002.

(c)

Exhibits

EXHIBIT INDEX

Exhibit No.	Description
2.1	Agreement and Plan of Merger dated October 23, 2000, by and among Universal Compression Holdings, Inc., Universal Compression, Inc., Weatherford International, Inc., WEUS Holding, Inc. and Enterra Compression Company (incorporated by reference to Exhibit 10.1 of Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on October 26, 2000).
3.1	Restated Certificate of Incorporation of Universal Compression Holdings, Inc. (incorporated by reference to Exhibit 3.1 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).
3.2	Restated Bylaws of Universal Compression Holdings, Inc. (incorporated by reference to Exhibit 3.2 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).
	97/8% Senior Discount Notes due 2008
4.1	Indenture, dated February 20, 1998, between Universal Compression, Inc. (as successor to TW Acquisition Corporation) and the United States Trust Company of New York, as Trustee, with respect to the 97/8% Senior Discount Notes due 2008 (incorporated by reference to Exhibit 4.3 of Universal Compression, Inc.'s Registration Statement on Form S-4 filed with the SEC on March 19, 1998 (File No. 333-48279)).
4.2	First Supplemental Indenture, dated May 9, 2000, between Universal Compression, Inc. and United States Trust Company of New York, as Trustee, with respect to the 97/8% Senior Discount Notes due 2008 (incorporated by reference to Exhibit 4.7 of Amendment No. 2, filed with the SEC on May 22, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).
4.3	Second Supplemental Indenture, dated May 30, 2000, by and among Universal Compression, Inc., Universal Compression Holdings, Inc. and United States Trust Company of New York, as Trustee, with respect to the 97/8% Senior Discount Notes due 2008 (incorporated by reference to Exhibit 4.3 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).

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4.4	Third Supplemental Indenture, dated October 15, 2000, by and among Universal Compression, Inc., Gas Compression Finance Corporation, G.C.S. Distributing L.L.C., Gas Compression Realty L.L.C. and United States Trust Company of New York, as Trustee, with respect to the 97/8% Senior Discount Notes due 2008 (incorporated by reference to Exhibit 4.4 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).
4.5	Specimen of Universal Compression, Inc.'s (as successor to TW Acquisition Corporation) 97/8% Senior Discount Notes due 2008 (incorporated by reference to Exhibit 4.2 of Universal Compression, Inc.'s Registration Statement on Form S-4 filed with the SEC on March 19, 1998 (File No. 333-48279)).
4.6*	Notice of Redemption of Universal Compression, Inc.'s 97/8% Senior Discount Notes due 2008, dated May 27, 2003.
	87/8% Senior Secured Notes due 2008
4.7	Indenture, dated February 9, 2001, among BRL Universal Equipment 2001 A, L.P. and BRL Universal Equipment Corp., as Issuers, and The Bank of New York, as Indenture Trustee, with respect to the 87/8% Senior Secured Notes due 2008 (incorporated by reference to Exhibit 10.4 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000).
4.8	First Supplemental Indenture, dated September 11, 2001, among BRL Universal Equipment 2001 A, L.P. and BRL Universal Equipment Corp., as Issuers, and The Bank of New York, as Indenture Trustee, with respect to the 87/8% Senior Secured Notes due 2008 (incorporated by reference to Exhibit 4.1 of Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on October 24, 2001).
	ABS Operating Lease Facility
4.9	Indenture, dated December 31, 2002, between BRL Universal Compression Funding I 2002, L.P., as Issuer, and Wells Fargo Bank Minnesota, National Association, as Indenture Trustee, with respect to the ABS operating lease facility (incorporated by reference to Exhibit 4.1 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
4.10	Series 2002-1 Supplement, dated December 31, 2002, to Indenture, dated December 31, 2002, between BRL Universal Compression Funding I 2002, L.P. and Wells Fargo Bank Minnesota, National Association, as Indenture Trustee, with respect to the ABS operating lease facility (incorporated by reference to Exhibit 4.2 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
	71/4% Senior Notes due 2010
4.11*	Indenture, dated May 27, 2003, by and between Universal Compression, Inc., as Issuer, and The Bank of New York, as Trustee.
4.12*	Specimen of Universal Compression, Inc.'s 71/4% Senior Notes due 2010 (included as Exhibit 1 to Exhibit 4.11 hereof and incorporated herein by reference).
	Senior Secured Notes Operating Lease Facility
10.1	Equipment Lease Agreement, dated February 9, 2001, between BRL Universal Equipment 2001 A, L.P., as Lessor, and Universal Compression, Inc., as Lessee, with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.2 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-4 filed with the SEC on March 20, 2001 (File No. 333-57302)).
10.2	First Amendment to Equipment Lease Agreement, dated October 15, 2001, between BRL Universal Equipment 2001 A, L.P., as Lessor, and Universal Compression, Inc., as Lessee, with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.1 of Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on October 24, 2001).

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10.3	Second Amendment to Equipment Lease Agreement, dated November 20, 2002, between BRL Universal Equipment 2001 A, L.P., as Lessor, and Universal Compression, Inc., as Lessee, with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.2 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
10.4	First Amended and Restated Participation Agreement, dated October 15, 2001, among Universal Compression, Inc., as Lessee; Universal Compression Holdings, Inc., as Guarantor; BRL Universal Compression Equipment 2001 A, L.P., as Lessor; the financial institutions listed on the signature pages as Tranche B Lenders; The Bank of New York, not in its individual capacity but as Indenture Trustee, Paying Agent, Transfer Agent and Registrar for the Tranche A Noteholders; BRL Universal Equipment Management, Inc., as Lessor General Partner; Bankers Trust Company, as Administrative Agent and Collateral Agent for the Tranche B Lenders and Indenture Trustee on behalf of the Tranche A Noteholders; Deutsche Banc Alex. Brown Inc., as Arranger; The Bank of Nova Scotia, as Syndicate Agent for Tranche B Lenders; Bank One, N.A., as Documentation Agent for Tranche B Lenders; and First Union National Bank, as Managing Agent; with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.2 of Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on October 24, 2001).
10.5	Participation Agreement Supplement No. 1, dated October 23, 2001, among Universal Compression, Inc., as Lessee, Universal Compression Holdings, Inc., as Guarantor, BRL Universal Equipment 2001 A, L.P., as Lessor, and The Bank of New York, not in its individual capacity but as Indenture Trustee for the Tranche A Noteholders, with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.3 of Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on October 24, 2001).
10.6	First Amendment to First Amended and Restated Participation Agreement, dated November 20, 2002, among Universal Compression, Inc., BRL Universal Equipment 2001 A, L.P. and Deutsche Bank Trust Company Americas, with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.1 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
10.7	Tranche B Loan Agreement, dated February 9, 2001, among BRL Universal Equipment 2001 A, L.P., as Borrower, Bankers Trust Company, as Administrative Agent and Collateral Agent, and the Tranche B Lenders, with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.4 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-4 filed with the SEC on March 20, 2001 (File No. 333-57302)).
10.8	First Amendment to Tranche B Loan Agreement, dated October 15, 2001, among BRL Universal Equipment 2001 A, L.P. and Bankers Trust Company, as Administrative Agent for Tranche B Lenders and as Collateral Agent, with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.4 of Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on October 24, 2001).
10.9	Engagement and Indemnity Letter, dated February 9, 2001 among Universal Compression, Inc., Universal Compression Holdings, Inc., Deutsche Banc Alex. Brown Inc., First Union Securities, Inc., Goldman Sachs & Co., Banc One Capital Markets, Inc., Scotia Capital (USA), Inc., BRL Universal Equipment 2001 A, L.P., and BRL Universal Equipment Corp., with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.12 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000).

46

	ABS Lease Facility
10.10	Master Equipment Lease Agreement, dated December 31, 2002, between BRL Universal Compression Funding I 2002, L.P., as Head Lessor, and UCO Compression 2002 LLC, as Head Lessee, with respect to the ABS operating lease facility (incorporated by reference to Exhibit 10.3 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
10.11	Guaranty, dated December 31, 2002, made by Universal Compression Holdings, Inc. for the benefit of UCO Compression 2002 LLC, BRL Universal Compression Funding I 2002, L.P. and Wells Fargo Bank Minnesota, N.A., with respect to the ABS operating lease facility (incorporated by reference to Exhibit 10.4 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
10.12	Management Agreement, dated December 31, 2002, among Universal Compression, Inc., UCO Compression 2002 LLC and BRL Universal Compression Funding I 2002, L.P., with respect to the ABS operating lease facility (incorporated by reference to Exhibit 10.5 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
10.13	Back-up Management Agreement, dated December 31, 2002, among Caterpillar Inc., UCO Compression 2002 LLC, BRL Universal Compression Funding I 2002, L.P. and Universal Compression, Inc., with respect to the ABS operating lease facility (incorporated by reference to Exhibit 10.6 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
10.14	Head Lessee Security Agreement, dated December 31, 2002, between UCO Compression 2002 LLC, as Grantor and BRL Universal Compression Funding I 2002, L.P., as Secured Party, with respect to the ABS operating lease facility (incorporated by reference to Exhibit 10.7 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
10.15	Intercreditor and Collateral Agency Agreement, dated December 31, 2002, among Universal Compression, Inc., UCO Compression 2002 LLC and BRL Universal Compression Funding I 2002, L.P., Wells Fargo Bank Minnesota, National Association, Wachovia Bank, National Association and Bank One, N.A., with respect to the ABS operating lease facility (incorporated by reference to Exhibit 10.8 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
10.16	Insurance and Indemnity Agreement, dated December 31, 2002, by and among Ambac Assurance Corporation, BRL Universal Compression Funding I 2002, L.P., Universal Compression, Inc., UCO Compression 2002 LLC and Wells Fargo Bank Minnesota, N.A., with respect to the ABS operating lease facility (incorporated by reference to Exhibit 10.9 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
	Bank Agreements
10.17	Senior Secured Revolving Credit Agreement, dated February 9, 2001, among Universal Compression, Inc., as Borrower, First Union National Bank, as Administrative Agent, Bank One, N.A., as Syndication Agent, and the lenders signatory thereto (incorporated by reference to Exhibit 10.6 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-4 filed with the SEC on March 20, 2001 (File No. 333-57302)).
10.18	First Amendment and Supplement to Senior Secured Revolving Credit Agreement, dated October 15, 2001, among Universal Compression, Inc., as Borrower, First Union National Bank, as Administrative Agent, Bank One, N.A., as Syndication Agent, and the lenders signatory thereto (incorporated by reference to Exhibit 10.13 of Universal Compression Holdings, Inc.'s Annual Report on Form 10-K for the fiscal year ended March 31, 2002).

47

10.19	Second Amendment and Supplement to Senior Secured Revolving Credit Agreement, dated September 30, 2002, among Universal Compression, Inc., as Borrower, Wachovia Bank, National Association, formerly First Union National Bank, as Administrative Agent, Bank One, N.A., as Syndication Agent, and the lenders signatory thereto (incorporated by reference to Exhibit 10.3 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002).
10.20	Guaranty and Collateral Agreement made by Universal Compression Holdings, Inc. and Universal Compression, Inc. and in favor of First Union National Bank, as Administrative Agent, dated February 9, 2001 (incorporated by reference to Exhibit 10.8tfo Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000).
10.21	Security Agreement (Pledge and Assignment), dated February 9, 2001, between Universal Compression International, Inc. and First Union National Bank, as Administrative Agent (incorporated by reference to Exhibit 10.9 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000).
	Executive Compensation Plans and Arrangements
10.22†	Universal Compression Holdings, Inc. Incentive Stock Option Plan (incorporated by reference to Exhibit 10 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the period ended September 30, 1998).
10.23†	Amendment Number One to Incentive Stock Option Plan, dated April 20, 2000 (incorporated by reference to Exhibit 10.3 of Amendment No. 2, filed with the SEC on May 22, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).
10.24†	Amendment Number Two to Incentive Stock Option Plan, dated May 15, 2000 (incorporated by reference to Exhibit 10.4 of Amendment No. 2, filed with the SEC on May 22, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).
10.25†	Amendment Number Three to Incentive Stock Option Plan, dated November 27, 2000 (incorporated by reference to Exhibit 4.7 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 filed with the SEC on February 9, 2001 (File No. 333-55260)).
10.26†	Amendment Number Four to Incentive Stock Option Plan, dated August 15, 2002 (incorporated by reference to Exhibit 4.8 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 filed with the SEC on September 12, 2002 (File No. 333-99473)).
10.27†	Form of Stock Option Agreement under the Incentive Stock Option Plan for outside directors of Universal Compression Holdings, Inc.'s Board of Directors (incorporated by reference to Exhibit 10.30 of Universal Compression Holdings, Inc.'s Annual Report on Form 10-K for the fiscal year ended March 31, 2002).
10.28*†	Form of Stock Option Agreement under the Incentive Stock Option Plan for employees.
10.29†	Universal Compression Holdings, Inc. Restricted Stock Plan for Executive Officers (incorporated by reference to Exhibit 4.2 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 filed with the SEC on August 17, 2001 (File No. 333-67784)).
10.30†	Form of Restricted Stock Agreement under the Restricted Stock Plan for Executive Officers (incorporated by reference to Exhibit 10.8 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001).
10.31†	Universal Compression Holdings, Inc. Directors' Stock Plan (incorporated by reference to Exhibit 4.3 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 filed with the SEC on August 17, 2001 (File No. 333-67784)).
10.32†	Universal Compression, Inc. Employees' Supplemental Savings Plan (incorporated by reference to Exhibit 10.42 of Universal Compression Holdings, Inc.'s Annual Report on Form 10-K for the year ended March 31, 2001).
10.33†	Amendment Number One to Employees' Supplemental Savings Plan, dated January 1, 2002 (incorporated by reference to Exhibit 10.53 of Universal Compression Holdings, Inc.'s Annual Report on Form 10-K for the year ended March 31, 2002).

48

10.34†	Amendment Number Two to Employees' Supplemental Savings Plan, dated August 15, 2002 (incorporated by reference to Exhibit 4.13 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 filed with the SEC on September 12, 2002 (File No. 333-99473)).
10.35*†	Amendment Number Three to Employees' Supplemental Savings Plan, dated September 1, 2002.
10.36†	Universal Compression Holdings, Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.1 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 filed with the SEC on August 17, 2001 (File No. 333-67784)).
10.37†	Amendment Number One to Employee Stock Purchase Plan, dated December 20, 2001 (incorporated by reference to Exhibit 10.56 of Universal Compression Holdings, Inc.'s Annual Report on Form 10-K for the year ended March 31, 2002).
10.38†	Form of Indemnification Agreement for executive officers and directors of Universal Compression Holdings, Inc. (incorporated by reference to Exhibit 10.27 of Amendment No. 1, filed with the SEC on May 3, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).
10.39†	Form of Change of Control Agreement for executive officers of Universal Compression Holdings, Inc. (incorporated by reference to Exhibit 10.4 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002).
10.40†	Letter dated March 15, 2001, with respect to certain retirement benefits to be provided to Stephen A. Snider (incorporated by reference to Exhibit 10.43 of Universal Compression Holdings, Inc.'s Annual Report on Form 10-K for the year ended March 31, 2001).
10.41*†	Involuntary Termination Agreement, dated October 25, 2001, by and between Universal Compression, Inc. and Richard Leong.
	Registration Rights Agreements
10.42	Registration Rights Agreement, dated February 9, 2001, by and between Universal Compression Holdings, Inc. and WEUS Holding, Inc. (incorporation by reference to Exhibit 4.3 to Universal Compression Holdings, Inc.'s Quarterly Report of Form 10-Q for the quarter ended December 31, 2000).
10.43*	Registration Rights Agreement, dated May 27, 2003, by and among Universal Compression, Inc. and the parties listed as signatories thereto, with respect to Universal Compression, Inc.'s 71/4% Senior Notes due 2010.
10.44	Registration Rights Agreement, dated February 20, 1998 by and among Universal Compression Holdings, Inc., Castle Harlan Partners III, L.P. and each other party listed as signatory thereto (incorporated by reference to Exhibit 10.14 to Universal Compression Holdings, Inc.'s Registration Statement on Form S-4 dated March 19, 1998 (File No. 333-48283)).
10.45	Form of Instruments of Accession to Registration Rights Agreement for each of Richard W. FitzGerald and Valerie L. Banner (incorporated by reference to Exhibit 4.10 to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).
10.46	Instrument of Accession to Registration Rights Agreement, dated April 28, 2000, for Energy Spectrum Partners LP (incorporated by reference to Exhibit 10.19 to Amendment No. 2 dated May 22, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).
21.1*	List of Subsidiaries.
23.1*	Consent of Deloitte & Touche LLP.
24.1*	Powers of attorney (set forth on the signature page hereof).
99.1*	Certifications of the Chief Executive Officer and Chief Financial Officer of Universal Compression Holdings, Inc. Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2*	Certifications of the Chief Executive Officer and Chief Financial Officer of Universal Compression, Inc. Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*

Filed herewith.

†

Management Contract or Compensatory Plan or Arrangement.

49

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

			Page
Universal Compression Holdings, Inc.
	Independent Auditors' Report		F-2
	Consolidated Financial Statements:
		Consolidated Balance Sheets	F-3
		Consolidated Statements of Operations	F-4
		Consolidated Statements of Stockholders' Equity	F-5
		Consolidated Statements of Cash Flows	F-6
		Notes to Consolidated Financial Statements	F-7
Universal Compression, Inc.
	Independent Auditors' Report		F-29
	Consolidated Financial Statements:
		Consolidated Balance Sheets	F-30
		Consolidated Statements of Operations	F-31
		Consolidated Statements of Stockholder's Equity	F-32
		Consolidated Statements of Cash Flows	F-33
		Notes to Consolidated Financial Statements	F-34
Schedule II—Valuation and Qualifying Accounts			E-1

F-1

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
Universal Compression Holdings, Inc.

        We have audited the accompanying consolidated balance sheets of Universal Compression Holdings, Inc. and subsidiaries (the "Company") as of March 31, 2003 and 2002, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended March 31, 2003. Our audits also included the financial statement schedule listed in the Index at E-1, which represents Schedule II to the consolidated financial statements of the Company. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial schedule based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2003, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

        As discussed in Note 1 to the consolidated financial statements, in the year ended March 31, 2002 the Company changed its method of accounting and reporting for goodwill to conform to the Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets."

/s/ DELOITTE & TOUCHE LLP

Houston, Texas
May 23, 2003

F-2

UNIVERSAL COMPRESSION HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)

			March 31, 2003			March 31, 2002
ASSETS
Current assets:
	Cash and cash equivalents		$	71,693		$	6,176
	Accounts receivable, net of allowance for bad debts of $8,146 and $7,470 as of March 31, 2003 and 2002, respectively			77,565			111,829
	Current portion of notes receivable			2,722			3,010
	Inventories, net of reserve for obsolescence of $10,468 and $10,537 as of March 31, 2003 and 2002, respectively			91,332			102,748
	Current deferred tax asset			10,890			8,360
	Other			7,258			19,283
		Total current assets		261,460			251,406
Contract compression equipment				1,316,214			618,975
Other property				106,496			84,254
Accumulated depreciation and amortization				(145,916	)		(86,647	)
		Net property, plant and equipment		1,276,794			616,582
Goodwill				387,711			380,559
Notes receivable				2,555			3,222
Other non-current assets				25,367			25,396
		Total assets	$	1,953,887		$	1,277,165
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable, trade		$	43,210		$	42,961
	Accrued liabilities			55,523			64,721
	Current portion of long-term debt and capital lease obligation			4,322			3,801
		Total current liabilities		103,055			111,483
Capital lease obligations				3,180			3,634
Long-term debt				937,653			219,327
Non-current deferred tax liability				148,795			127,317
Derivative financial instrument used for hedging purposes				15,404			—
Deferred gain				—			114,261
Other liabilities				1,349			799
		Total liabilities		1,209,436			576,821
Commitments and contingencies (Note 10)
Stockholders' equity:
	Common stock, $.01 par value, 200,000 and 200,000 shares authorized, 30,732 and 30,644 shares issued, 30,731 and 30,602 shares outstanding as of March 31, 2003 and 2002, respectively			308			306
	Treasury stock, 1 and 42 shares at cost outstanding as of March 31, 2003 and 2002, respectively			(17	)		(934	)
	Additional paid-in capital			724,491			723,831
	Deferred compensation			(2,009	)		(2,446	)
	Other comprehensive income (loss)			(48,944	)		(57,517	)
	Retained earnings			70,622			37,104
		Total stockholders' equity		744,451			700,344
		Total liabilities and stockholders' equity	$	1,953,887		$	1,277,165

See accompanying notes to consolidated financial statements.

F-3

UNIVERSAL COMPRESSION HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

			For the Year Ended March 31,
			2003			2002			2001
Revenues:
	Domestic contract compression		$	265,465		$	267,550		$	126,686
	International contract compression			66,505			60,185			22,549
	Fabrication			162,678			211,265			61,779
	Aftermarket services			130,570			140,989			21,452
		Total revenues		625,218			679,989			232,466
Costs and expenses:
	Domestic contract compression—direct costs			95,597			97,658			46,221
	International contract compression—direct costs			12,736			16,774			6,124
	Fabrication—direct costs			146,603			186,918			52,738
	Aftermarket services—direct costs			102,314			110,293			17,976
	Depreciation and amortization			63,706			48,600			33,491
	Selling, general and administrative			67,944			60,890			21,092
	Operating lease expense			46,071			55,401			14,443
	Interest expense, net			36,421			23,017			23,220
	Foreign currency (gain)/loss			459			(42	)		177
	Other (income)/expense, net			(1,126	)		141			(472	)
	Other non-recurring charges			—			—			8,699
		Total costs and expenses		570,725			599,650			223,709
Income before income taxes and extraordinary items				54,493			80,339			8,757
Income tax expense				20,975			30,931			3,645
		Income before extraordinary items		33,518			49,408			5,112
		Extraordinary loss, net of $5,701 income tax benefit		—			—			(9,503	)
		Net income (loss)	$	33,518		$	49,408		$	(4,391	)
Weighted average common and common equivalent shares outstanding:
		Basic		30,665			30,008			14,760
		Diluted		30,928			30,250			15,079
Earnings per share—basic:
		Income before extraordinary items	$	1.09		$	1.65		$	0.35
		Extraordinary loss		—			—			(0.65	)
		Net income (loss)	$	1.09		$	1.65		$	(0.30	)
Earnings per share—diluted:
		Income before extraordinary items	$	1.08		$	1.63		$	0.34
		Extraordinary loss		—			—			(0.63	)
		Net income (loss)	$	1.08		$	1.63		$	(0.29	)

See accompanying notes to consolidated financial statements.

F-4

UNIVERSAL COMPRESSION HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended March 31, 2001, 2002 and 2003
(In thousands, except for share data)

	Common Stock Shares		Common Stock Amount		Preferred Stock Shares		Preferred Stock Amount			Class A Non Voting Shares		Additional Paid in Capital			Retained Earnings (Deficit)			Treasury Stock			Deferred Compensation			Other Comprehensive Income (Loss)			Total
Balance, April 1, 2000	2,448,201		$	3	1,318,896		$	13		3,210		$	82,697		$	(7,913	)	$	(123	)		—			—		$	74,677
Stock issued for acquisitions	15,279,869			152	160,010			1					429,508															429,661
Option exercises	65,649			1									917															918
Shares issued in connection with initial public offering	7,431,752			74									150,801															150,875
Conversion of preferred and Class A non voting stock	3,249,695			55	(1,478,869	)		(14	)	(2,026	)		(41	)														—
Purchases of treasury stock	(30	)			(37	)				(1,184	)		—						(11	)								(11	)
Net loss																(4,391	)											(4,391	)
Foreign currency translation adjustment																									845			845
Comprehensive loss																												(3,546	)
Balance, March 31, 2001	28,475,136		$	285	—			—		—		$	663,882		$	(12,304	)	$	(134	)		—		$	845		$	652,574
Common stock issuance	1,333,333			13									36,118															36,131
Stock issued for acquisition	694,927			7									19,993															20,000
Treasury stock redeemed, at $27 per share	(28,379	)																	(800	)								(800	)
Option exercises	109,419			1									1,099															1,100
Shares issued in employee benefit plans	17,606												1,006															1,006
Share issuances costs													(1,122	)														(1,122	)
Restricted stock transactions													2,855									(2,855	)					—
Amortization of deferred compensation																						409						409
Net income																49,408												49,408
Foreign currency translation adjustment																									(58,362	)		(58,362	)
Comprehensive loss																												(8,954	)
Balance, March 31, 2002	30,602,042		$	306	—			—		—		$	723,831		$	37,104		$	(934	)	$	(2,446	)	$	(57,517	)	$	700,344
Common stock issuance	10,000												181															181
Treasury stock redeemed, at $21 per share																			(1,000	)								(1,000	)
Option exercises	22,841			1									(52	)					246									195
Shares issued in employee benefit plan	96,495			1									832						1,497									2,330
Restricted stock transactions													(301	)					174			127						—
Amortization of deferred compensation																						310						310
Interest rate swap loss																									(566	)		(566	)
Net income																33,518												33,518
Foreign currency translation adjustment																									9,139			9,139
Comprehensive income																												42,091
Balance, March 31, 2003	30,731,378		$	308	—			—		—		$	724,491		$	70,622		$	(17	)	$	(2,009	)	$	(48,944	)	$	744,451
See accompanying notes to consolidated financial statements.

F-5

UNIVERSAL COMPRESSION HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

				For the Year Ended March 31,
				2003			2002			2001
Cash flows from operating activities:
	Net income (loss)			$	33,518		$	49,408		$	(4,391	)
	Adjustments to reconcile net income (loss) to cash provided by operating activities, net of effect of acquisitions:
	Depreciation and amortization				63,706			48,600			33,491
	(Gain) loss on asset sales				(741	)		(286	)		119
	Amortization of debt issuance costs				3,670			3,006			1,472
	Amortization of deferred compensation				310			409			—
	Accretion of discount notes				18,660			20,073			19,105
		Increase (decrease) in deferred taxes			18,058			20,827			108,161
		(Increase) decrease in other assets			12,913			21,225			(14,626	)
		(Increase) decrease in receivables			37,105			(10,404	)		(26,239	)
		(Increase) decrease in inventories			11,871			40,048			(19,272	)
		Increase (decrease) in accounts payable			(2,004	)		(44,947	)		23,591
		Increase (decrease) in accrued liabilities			(9,996	)		(14,881	)		(32,780	)
		Other			—			—			845
			Net cash provided by operating activities		187,070			133,078			89,476
Cash flows from investing activities:
	Additions to property, plant and equipment				(120,751	)		(188,019	)		(68,006	)
	Acquisition of Weatherford Global				—			—			(409,423	)
	Other acquisitions, net of cash received				(1,536	)		(160,021	)		(55,338	)
	Proceeds from sale of property, plant and equipment				14,583			187,784			529,449
			Net cash used in investing activities		(107,704	)		(160,256	)		(3,318	)
Cash flows from financing activities:
	Principal repayments of long-term debt				(5,818	)		(7,401	)		(106,863	)
	Net repayment under revolving line of credit				—			—			(97,408	)
	Net proceeds (repayment) on sale-leaseback of vehicles				(2,800	)		(2,878	)		(1,484	)
	Net proceeds (repayment) of financing lease				—			—			(10,580	)
	Common stock issuance				1,098			36,285			151,790
	Purchase of treasury stock				—			(800	)		(11	)
	Debt issuance costs				(5,009	)		(4,131	)		(10,726	)
	Operating lease facilities				(1,320	)		—			—
			Net cash provided by (used in) financing activities		(13,849	)		21,075			(75,282	)
Net increase (decrease) in cash and cash equivalents					65,517			(6,103	)		10,876
Cash and cash equivalents at beginning of period					6,176			12,279			1,403
Cash and cash equivalents at end of period				$	71,693		$	6,176		$	12,279
Supplemental disclosure of cash flow information:
	Cash paid for interest			$	14,553		$	4,073		$	4,115
	Cash paid for operating leases			$	47,171		$	54,301		$	7,798
	Cash paid for income taxes			$	2,572		$	1,346		$	1,543
Supplemental schedule of non-cash investing and financing activities:
	Stock issued for acquisition			$	—		$	20,000		$	429,661

See accompanying notes to consolidated financial statements.

F-6

UNIVERSAL COMPRESSION HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Organization

        Universal Compression Holdings, Inc. (the "Company") was formed on December 12, 1997 for the purpose of acquiring Tidewater Compression Service, Inc. ("TCS") from Tidewater Inc. Upon completion of the acquisition on February 20, 1998, TCS became the Company's wholly-owned subsidiary and changed its name to Universal Compression, Inc. ("Universal"). Through this subsidiary, the Company's gas compression service operations date back to 1954. During the quarter ended June 30, 2000, we completed an initial public offering of 7,275,000 shares of our common stock, par value $0.01 per share.

        Since our initial public offering in 2000, we have completed several acquisitions. Our completed acquisitions include Gas Compression Services, Inc. ("GCSI") in September 2000, Weatherford Global Compression Services, L.P. and certain related entities ("Weatherford Global") (in exchange for 13,750,000 shares of our stock) and ISS Compression ("IEW") in February 2001, Compressor System International, Inc. ("CSII") in April 2001, KCI, Inc. ("KCI") and Louisiana Compressor Maintenance ("LCM") in July 2001, and Technical Compression Service, Inc. ("TCSI") in October 2001. GCSI added approximately 138,000 horsepower to our fleet and provided us with an increased customer base, additional market segments and additional fabrication capabilities. Weatherford Global added approximately 950,000 horsepower, which expanded both our domestic and international presence and more than doubled our size at the time. IEW added approximately 26,000 horsepower to our fleet, as well as important offshore Gulf of Mexico service capabilities. CSII added approximately 34,000 horsepower in the aggregate to our fleet in Mexico and Argentina. KCI added approximately 125,000 horsepower to our domestic fleet as well as significant fabrication expertise and capabilities, and expertise in the pipeline compression and related natural gas markets. LCM added to our ability to be a supplier of maintenance, repair, and overhaul and upgrade services to natural gas pipeline and related markets. TCSI added to our compression parts and service capabilities for the natural gas producing industry as well as the refinery and petrochemical industries.

        Universal Compression Holdings, Inc. is a holding company, which conducts its operations through its wholly-owned subsidiary, Universal. Accordingly, the Company is dependent upon the distribution of earnings from Universal, whether in the form of dividends, advances or payments on account of intercompany obligations, to service its debt obligations.

Nature of Operations

        The Company is the second largest natural gas compression services company in the world in terms of compressor fleet horsepower, with a fleet as of March 31, 2003 of approximately 7,400 compressor units comprising approximately 2.3 million horsepower. The Company provides a full range of contract compression services, sales, operations, maintenance and fabrication services and products to the natural gas industry, both domestically and internationally. These services and products are essential to the natural gas industry, as gas must be compressed to be delivered from the wellhead to end-users.

Principles of Consolidation

        The accompanying consolidated financial statements include the Company and its wholly owned subsidiary, Universal. All significant intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

        Certain reclassifications have been made to the prior year amounts to conform to the current year presentation.

F-7

Use of Estimates

        In preparing the Company's financial statements, management makes estimates and assumptions that affect the amounts reported in the financial statements and related disclosures. Actual results may differ from these estimates.

Cash and Cash Equivalents

        The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash flows are computed using the indirect method.

Revenue Recognition

        Revenue is recognized by the Company's four reportable business segments using the following criteria: (a) persuasive evidence of an exchange arrangement exists, (b) delivery has occurred or services have been rendered, (c) the buyer's price is fixed or determinable and (d) collectibility is reasonably assured.

        Revenue from contract compression services is recorded when earned over the period of service and maintenance contracts which generally range from one month to several years. Aftermarket services revenue is recorded as products are delivered or services are performed for the customer.

        Fabrication revenue is recognized using the completed-contract method which recognizes revenue upon completion of the contract. This method is used because the typical contract is completed within two to three months.

Concentration of Credit Risk

        Trade accounts receivable are due from companies of varying size engaged principally in oil and gas activities in the United States and in international locations including Canada, Latin America and Asia Pacific. The Company reviews the financial condition of customers prior to extending credit and periodically updates customer credit information. Payment terms are on a short-term basis and in accordance with industry standards. No single customer accounts for 10% or more of the Company's revenues. For the years ended March 31, 2003, 2002 and 2001, the Company wrote off bad debts, net of recoveries totaling $3.7 million, $0.09 million, and $0.08 million respectively.

Inventories

        Inventories are recorded at the lower of average cost or market (net realizable value). Some items of compression equipment are acquired and placed in inventories for subsequent sale or compression services to others. Acquisitions of these assets are considered operating activities in the statement of cash flows.

Properties and Equipment

        Property, plant and equipment are carried at cost. Depreciation for financial reporting purposes is computed on the straight-line basis using estimated useful lives. For compression equipment, depreciation begins with the first compression service using a 20% salvage value. The Company evaluated the estimated useful lives used for book depreciation purposes for its compressor fleet with the assistance of an independent equipment valuation firm. This equipment study evaluated the compressor units based upon equipment type, key components and industry experience of the actual useful life in the field. The study was finalized in the fourth quarter of fiscal year 2003, based upon the findings of the study, the estimated useful lives of the majority of the existing compressor units were extended to 25 years from 15 years. In addition, a portion of the units remained at 15 years or less and

F-8

a portion of the units were extended to 30 years. The change in useful lives was effective January 1, 2003. Had the Company depreciated all compression equipment recorded and consolidated in the Company's balance sheet as of December 31, 2002 using depreciable lives of 15 years instead of the extended estimated depreciable lives, depreciation expense would have been approximately $5.6 million higher and would have decreased net income by approximately $3.4 million and decreased earnings per diluted share by approximately $.11 for the fiscal year ended March 31, 2003. The estimated useful lives as of March 31, 2003 were as follows:

Buildings	20-35 years
Compression equipment	15-30 years
Other properties and equipment	2-25 years

        Maintenance and repairs are charged to expenses as incurred. Overhauls and major improvements that increase the value or extend the life of contract compressor units are capitalized and depreciated over the estimated period of 6.5 years. Depreciation expense for the years ended March 31, 2003, 2002 and 2001 was $62.1 million, $48.3 million and $29.9 million, respectively.

        Properties and equipment are reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable based upon undiscounted cash flows. Any impairment losses are measured based upon the excess of the carrying value over the fair value. The Company has not recognized any impairment losses for any of the periods presented.

Goodwill

        Goodwill represents the purchase price of an acquired entity in excess of the fair market value assigned to its assets and liabilities. Through March 31, 2001 goodwill was amortized on a straight-line basis over 40 years. Effective April 1, 2001 we discontinued amortization of goodwill with our adoption of Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 addresses accounting and reporting for intangible assets acquired individually or with a group of other assets (but not those acquired in a business combination) at acquisition. It also addresses financial accounting and reporting for goodwill and other intangible assets subsequent to their acquisition.

        The following table sets forth adjusted net income and basic and diluted earnings per share as if SFAS No. 142 had been effective and the Company adopted it on April 1, 2000 (in thousands):

		For the Year Ended March 31,
		2003		2002		2001
Reported net income (loss)		$	33,518	$	49,408	$	(4,391	)
	Add back: Goodwill amortization		—		—		2,085
Adjusted net income (loss)		$	33,518	$	49,408	$	(2,306	)
Reported earnings (loss) per share-basic		$	1.09	$	1.65	$	(.30	)
	Add back: Goodwill amortization		—		—		.14
Adjusted earnings (loss) per share-basic		$	1.09	$	1.65	$	(.16	)
Reported earnings (loss) per share-diluted		$	1.08	$	1.63	$	(.29	)
	Add back: Goodwill amortization		—		—		.14
Adjusted earnings (loss) per share-diluted		$	1.08	$	1.63	$	(.15	)

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Other Non-Current Assets

        Included in other non-current assets are debt issuance costs, net of accumulated amortization, totaling approximately $22.3 million and $19.6 million at March 31, 2003 and 2002, respectively. Such costs are amortized over the period of the respective debt agreements on a straight-line method which approximates the effective interest method.

Stock-Based Compensation

        Under SFAS No. 123, "Accounting for Stock-Based Compensation," the Company elected to measure compensation cost using the intrinsic value-based method as prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." As such, the Company is required to make pro forma disclosures of net income and earnings per share as if the fair value based method of accounting defined by SFAS No. 123 had been applied.

        The following table summarizes results as if we had recorded compensation expense under the provisions of SFAS No. 123 for the 2003, 2002 and 2001 option grants:

		Year Ended March 31,
		2003		2002		2001
		(In thousands, except per share amounts)
Compensation expense, net of tax		$	5,843	$	5,643	$	2,241
Net Income (loss):
	As reported	$	33,518	$	49,408	$	(4,391	)
	Pro forma	$	27,675	$	43,765	$	(6,632	)
Basic earnings per share:
	As reported	$	1.09	$	1.65	$	(0.30	)
	Pro forma	$	0.90	$	1.46	$	(0.45	)
Diluted earnings per share:
	As reported	$	1.08	$	1.63	$	(0.29	)
	Pro forma	$	0.89	$	1.45	$	(0.44	)

Income Taxes

        The Company accounts for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. In estimating future tax consequences, all expected future events are considered other than enactments of changes in the tax law or rates.

        The Company provides contract compression services to a global market. As such, the Company is subject to taxation not only in the United States but also in numerous foreign jurisdictions. Having to consider these different jurisdictions complicates the estimate of future taxable income, which in turn determines the realizability of its deferred tax assets. Numerous judgments and assumptions are inherent in the determination of future taxable income, including assumptions on future operating conditions and asset utilization. The judgments and assumptions used to determine future taxable income are consistent with those used for other financial statement purposes.

        Additionally, we must consider any prudent and feasible tax planning strategies that would minimize the amount of deferred tax liabilities recognized or the amount of any valuation allowance recognized against

F-10

deferred tax assets. The principal tax planning strategy available to the Company relates to the permanent reinvestment of the earnings of foreign subsidiaries. The assumptions related to the permanent reinvestment of the foreign earnings are analyzed and reviewed annually for changes in our international and domestic business outlook.

Foreign Currency Translation

        The majority of the Company's foreign subsidiaries have designated the local currency as their functional currency and, as such, gains and losses resulting from financial statement translation of foreign operations are included as a separate component of other comprehensive income (loss) within stockholders' equity. Gains and losses from balances that are receivable or payable in currency other than functional currency are included in the consolidated statements of operations.

        For those foreign subsidiaries that have designated the United States Dollar as the functional currency, gains and losses resulting from financial statement translation of foreign operations are included in the consolidated statements of operations as incurred.

        Currency transaction gains and losses are reflected in the Company's consolidated statements of operations during the period incurred.

Fair Value of Financial Instruments

        The Company's financial instruments consist of trade receivables and payables (which have carrying values that approximate fair value) and long-term debt. The fair value of the Company's revolving credit facility (see Note 4) is representative of its carrying value based upon variable rate terms. The fair value of the senior discount notes was approximately $241.2 million and $253.7 million, as compared to a carrying amount of $229.8 million and $215.9 million at March 31, 2003 and 2002, respectively. The fair value of the senior notes was approximately $479.3 million as compared to a carrying amount of $450.0 million at March 31, 2003. The carrying amounts of $82.2 million for the term loan and $175 million for the notes under the ABS operating lease facility approximate the fair values. The estimated fair value amounts have been determined by the Company using appropriate valuation methodologies and information available to management as of March 31, 2003 based on the quoted market price from brokers of these notes.

Hedging and Use of Derivative Instruments

        The Company utilizes interest rate swaps to minimize interest rate exposure on the $200 million asset-backed securitization operating lease facility. The swaps are not used for trading or speculative purposes. The fair value of the interest rate swap was a loss of $15.4 million as of March 31, 2003.

        In accordance with SFAS 133, "Accounting for Derivative Instruments and Hedging Activities", we record these interest rate swaps on the balance sheet as either assets or liabilities measured at their fair value. These instruments qualify for hedge accounting as they reduce the interest rate risk of the underlying hedged item and are designated as a cash flow hedge at inception. These swaps result in financial impacts that are inversely correlated to those of the items being hedged. To qualify for hedge accounting treatment, companies must formally document, designate and assess the effectiveness of the transactions. All of the interest rate instruments utilized are placed with a large creditworthy financial institution. If the necessary correlation ceases to exist or if physical delivery of the hedged item becomes improbable, we would discontinue hedge accounting and apply mark-to-market accounting. Amounts paid or received from interest rate swaps are charged or credited to interest expense and matched with the cash flows and interest expense of the debt being hedged, resulting in an adjustment to the effective interest rate.

F-11

Environmental Liabilities

        The costs to remediate and monitor environmental matters are accrued when such liabilities are considered probable and a reasonable estimate of such costs is determinable.

Net Income Per Share

        Basic and diluted net income loss per share are calculated in accordance with SFAS No. 128, Earnings per Share.

        The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per share amounts):

		For the Year Ended March 31,
		2003		2002		2001
Basic earnings per share
Income before extraordinary items		$	33,518	$	49,408	$	5,112
Extraordinary loss, net of income tax benefit			—		—		(9,503	)
Net income (loss)		$	33,518	$	49,408	$	(4,391	)
Weighted average common stock outstanding			30,665		30,008		14,760
Basic net income (loss) per share:
	Before extraordinary loss	$	1.09	$	1.65	$	0.35
	Extraordinary loss, net of income tax benefit		—		—		(0.65	)
Basic net income (loss) per share		$	1.09	$	1.65	$	(0.30	)
Diluted earnings per share
Income before extraordinary items		$	33,518	$	49,408	$	5,112
Extraordinary loss, net of income tax benefit			—		—		(9,503	)
Net income (loss)		$	33,518	$	49,408	$	(4,391	)
Weighted average common stock outstanding			30,665		30,008		14,760
Dilutive effect of stock options outstanding			263		242		319
Weighted average diluted shares of common stock outstanding			30,928		30,250		15,079
Net income (loss) per share—diluted:
	Before extraordinary loss	$	1.08	$	1.63	$	0.34
	Extraordinary loss, net of income tax benefit		—		—		(0.63	)
Net income (loss) per share—diluted		$	1.08	$	1.63	$	(0.29	)

New Accounting Pronouncements

        In August 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 provides new guidance on the recognition of impairment losses on long-lived assets to be held and used or to be disposed of and also broadens the definition of what constitutes a discontinued operation and how the results of a discontinued operation are to be measured and presented. SFAS No. 144 supersedes SFAS No. 121

F-12

"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and Accounting Principle Board Opinion No. 30, while retaining many of the requirements of those two statements. Under SFAS No. 144, assets held for sale that are a component of an entity will be included in discontinued operations if the operations and cash flows will be or have been eliminated from the ongoing operations of the entity and the entity will not have any significant continuing involvement in the operations prospectively. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. SFAS No. 144 does not materially change the methods used by the Company to measure impairment losses on long-lived assets, but may result in additional future dispositions being reported as discontinued operations. SFAS No. 144 was effective for the Company on April 1, 2002. Based on the Company's review of SFAS No. 144, no impairment existed as of March 31, 2003.

        In April 2002, FASB issued SFAS No. 145 "Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS 145 requires, among other things, gains or losses of extinguishments of debt to be classified as income (loss) from continuing operations rather than as an extraordinary item, unless such extinguishment is determined to be extraordinary pursuant to Accounting Principles Board Opinion No. 30 ("Opinion 30"), "Reporting the Results of Operations—Reporting the Effects of a Disposal of a Segment of a Business and Extraordinary, Unusual, and Infrequently Occurring Transactions." Any gain or loss on extinguishment of debt that was classified, as an extraordinary item in prior periods presented that does not meet the criteria in Opinion 30 for classification as an extraordinary item must be reclassified. This Statement rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers," and an amendment to SFAS No. 4, SFAS No. 64, "Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements." This Statement also amends SFAS No. 13, "Accounting for Leases," to eliminate inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. In addition, this Statement amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. Provisions of SFAS No. 145 related to the rescission of SFAS No. 4 are effective for the Company on April 1, 2003 and provisions affecting SFAS No. 13 are effective for transactions occurring after May 15, 2002. The Company did not early adopt the provisions for SFAS 145 for the year ended March 31, 2003. Had the Company early adopted SFAS 145 in fiscal year 2003, the extinguishment of debt recorded in fiscal year 2001 would be reclassified to a separate component of income before income taxes.

        In July 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities." This Statement requires the recognition of costs associated with the exit or disposal activities when incurred rather than at the date of a commitment to an exit or disposal plan. This Statement replaces Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)", which required the recognition of costs at the date of a commitment to an exit or disposal plan. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002. The Company will record any costs associated with exit or disposal activities in accordance with this new guidance when applicable.

        In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires that upon issuance of a guarantee, a guarantor must recognize a liability for the fair value of the obligation assumed under the guarantee. FIN 45 also requires additional disclosures about guarantees in the interim and annual financial statements. The provisions of FIN 45 related to initial recognition and measurement of guarantee agreements were effective for any guarantees issued or modified after December 31, 2002. The adoption of these recognition and measurement provisions did not have any impact on our consolidated financial position or results of operations.

F-13

        In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure, an Amendment of SFAS No. 123, Accounting for Stock-Based Compensation." SFAS 148, which is effective for years ending after December 15, 2002, provides alternative methods for a voluntary change to the fair value based method of accounting for stock-based employee compensation and requires prominent disclosure about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company will continue to account for its stock-based compensation according to the provisions of APB Opinion No. 25.

        In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities," which is an interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial Statements." The interpretation states that certain variable interest entities may be required to be consolidated into the results of operations and financial position of the entity that is the primary beneficiary. The change may be made prospectively with a cumulative-effect adjustment in the period first applied or by restating previously issued financial statements. The interpretation becomes effective July 1, 2003. The Company does not believe the new interpretation will have any impact on its consolidated statement of operations, cash flows, or financial position.

        On April 30, 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." This statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. This statement is effective for contracts entered into or modified after June 20, 2003, for hedging relationships designated after June 30, 2003, and to certain preexisting contracts. We will adopt SFAS No. 149 on a prospective basis at its effective date on July 1, 2003. We are currently evaluating the impact that SFAS No. 149 will have on our financial statements.

        In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This statement is effective for financial instruments entered into or modified after May 31, 2003, except for mandatorily redeemable financial instruments. Mandatorily redeemable financial instruments are subject to the provisions of this statement beginning on January 1, 2004. We are currently evaluating the impact that SFAS No. 150 will have on our financial statements.

2. Goodwill

        The Company's acquisitions described in footnote 1 were accounted for as purchases and accordingly, the results of operations of the acquired businesses are included in the accompanying financial statements from the dates of acquisition. Goodwill has been recognized for the amount of the excess of the purchase price over the fair value of the net assets acquired and is accounted for in accordance with SFAS 142.

F-14

        The changes in the carrying amount of goodwill from March 31, 2002 to March 31, 2003, are as follows (in thousands):

	Domestic Contract Compression			International Contract Compression		Aftermarket Services		Fabrication		Total
Balance as of March 31, 2002	$	266,097		$	40,390	$	45,234	$	28,838	$	380,559
Acquisitions							768				768
Purchase adjustments and other		(4,345	)		7,976		321		204		4,156
Impact of foreign currency translation		—			2,228		—		—		2,228
Balance as of March 31, 2003	$	261,752		$	50,594	$	46,323	$	29,042	$	387,711

        During the fourth quarter of fiscal year 2003, we performed an impairment analysis on our goodwill in accordance with SFAS No. 142 and determined that no impairment had occurred.

3. Inventories, Net

        Inventories, net consisted of the following (in thousands):

		For the Year Ended March 31,
		2003			2002
Raw materials		$	73,827		$	78,265
Work-in-progress			22,516			23,985
Finished goods			5,457			11,035
	Total inventories		101,800			113,285
Reserve			(10,468	)		(10,537	)
	Inventories, net	$	91,332		$	102,748

F-15

4. Long-Term Debt

        The Company's debt at March 31 consisted of the following (in thousands):

		As of March 31,
		2003		2002
Senior discount notes, bearing interest of 97/8% per annum, due 2008, net of discount of $0 and $18,835 at March 31, 2003 and 2002, respectively, unsecured.		$	229,750	$	215,915
Senior notes due February 2008, bearing interest at 87/8% per annum, payable semiannually on February 15 and August 15			450,000		—
Term loan of $82.2 million due February 2008, currently bearing interest at a variable rate of LIBOR, (1.25% at March 31, 2003) plus 3.25% due quarterly			82,181		—
Notes under the ABS operating lease facility are due January 2023, bearing interest at a variable rate of LIBOR, which is effectively fixed through the use of interest rate swaps at a weighted average rate of 5.5%, plus 1.27% due monthly.			175,000		—
Other			3,806		3,773
	Total debt		940,737		219,688
Less current maturities			3,084		361
	Total long-term debt	$	937,653	$	219,327

        On February 20, 1998, Universal issued $242.5 million of its 9⁷/8% senior discount notes due February 15, 2008 in a private placement. The 9⁷/8% senior discount notes were offered at a substantial discount from their principal amount. Universal subsequently exchanged the notes for publicly tradable notes pursuant to a registered exchange offer under the Securities Act. As of March 31, 2003, approximately $229.8 million aggregate principal amount of 9⁷/8% senior discount notes was outstanding. See Footnote 15, "Subsequent Events," for a discussion of the tender offer and redemption of these 9⁷/8% senior discount notes.

        In connection with the Weatherford Global acquisition, on February 9, 2001, the Company raised $427 million under a seven-year term senior secured notes operating lease facility (the "high-yield operating lease facility") funded primarily through an offering of $350 million of 8⁷/8% senior secured notes due 2008 by an unaffiliated special operating entity that is the lessor under the operating lease plus approximately $64 million in borrowings under a term loan and approximately $13 million in proceeds from an equity investment in the lessor. On October 23, 2001, the Company increased the high-yield operating lease facility by $122 million, which was funded through the unaffiliated entity's offering of an additional $100 million of 8⁷/8% senior secured notes due 2008, together with an $18.3 million increase in its borrowings under an existing term loan and an additional $3.7 million equity investment in the entity that is the lessor under the operating lease. The net proceeds from the sale of equipment under the addition to the high-yield operating lease facility were used to repay all of the outstanding indebtedness under the revolving credit facility, with the remaining proceeds used to repay a portion of the obligations under the asset-backed securitization operating lease facility discussed below and for general corporate purposes.

        Also, in February 2001, the Company entered into a $125 million secured revolving credit facility and a $200 million asset-backed securitization operating lease facility (the "ABS operating lease facility"). The proceeds received in February 2001 from the high-yield operating lease facility and the ABS operating lease facility were used to restructure previous operating lease obligations and refinance certain existing indebtedness of the Company and Weatherford Global.

F-16

        The senior secured credit agreement ("Credit Agreement") provides for up to $125 million under the revolving credit facility, which includes a sub-limit for letters of credit. The revolver bears interest at Universal's option of a base rate or LIBOR plus, in each case, a variable amount depending on its operating results.

        The Credit Agreement contains certain financial covenants and limitations on, among other things, acquisitions, sales, indebtedness and liens. The Credit Agreement also limits the payment of cash dividends related to Universal paying up to $1 million to the Company in any given fiscal year. In addition, Universal has substantial dividend payment restrictions under the indenture related to the senior discount notes. Universal was in compliance with all such covenants and limitations at March 31, 2003 and 2002. As defined by the Credit Agreement, any "change of control" would result in an "Event of Default" and all amounts outstanding under the Credit Agreement would become due and payable. All principal amounts and accrued interest would become due without further notice.

        On December 31, 2002, the Company purchased all of the equity in the lessor under the high-yield operating lease facility for $16.7 million, plus accrued and unpaid preferred return on the equity. As a result of this equity investment by the Company in the lessor, the lessor became a fully consolidated entity of the Company as of December 31, 2002.

        Also on December 31, 2002, the Company completed the process of having a nationally recognized insurance company provide to the holder of notes associated with the ABS operating lease facility a policy guaranteeing the payment of the principal and interest on the notes and obtaining a credit rating on the notes by Standard & Poor's and Moody's Investors Service. With the policy, the rating agencies rated the underlying notes "AAA" and "Aaa," respectively, resulting in a lower interest rate for the notes. Concurrently with the credit rating process, the equity in the lessor was reduced and the Company no longer considers the remaining outstanding equity of the lessor as comparable to that expected for a substantive business involved in similar leasing transactions with similar risks and rewards. Therefore, the lessor became a fully consolidated entity of the Company as of December 31, 2002. Further, concurrently with the credit rating process, the outstanding debt under the ABS operating lease facility was increased from $159.5 million to $175 million at December 31, 2002.

        As a result of the changes in the high-yield and ABS operating lease facilities discussed in this Note 4 and consistent with the purchase accounting rules set forth in SFAS No. 141, "Business Combinations," the Company recorded in its consolidated balance sheet approximately $614.8 million of contract compression equipment, approximately $707.2 million in long-term debt and a noncurrent liability of approximately $15.2 million related to interest rate swaps pertaining to the ABS operating lease facility (see Note 8 for discussion of interest rate swaps). Additionally, upon consolidation of the lessors of these operating lease facilities, the deferred gain previously recorded was eliminated.

        The Company guaranteed certain of the obligations under the operating lease facilities. The high-yield operating lease facility is collateralized by a first priority security interest in all of the assets owned by the lessor under that facility.    The ABS operating lease facility is collateralized by a first priority security interest in all of the assets owned by the lessor and lessee under that facility. The assets owned by the lessee, a wholly owned subsidiary of the Company, were transferred to the lessee from the Company. As discussed above, the assets related to the high-yield and ABS operating lease facilities are included in the consolidated balance sheet.

        The results of operations through December 31, 2002 includes operating lease expense since prior to this date, the lessors under the operating leases were unaffiliated entities of the Company.

F-17

        Maturities of long-term debt as of March 31, 2003 are as follows (in thousands):

2004		$	3,084
2005			16,190
2006			16,213
2007			16,236
2008			778,192
Thereafter			110,822
	Total	$	940,737

5. Capital Leases

        Properties and equipment at March 31, 2003 and 2002 include the following amounts for capitalized leases (in thousands):

	For the Year Ended March 31,
	2003			2002
Compression equipment	$	3,546		$	11,809
Furniture and fixtures		2,556			—
Less accumulated depreciation		(534	)		(1,844	)
Net assets under capital leases	$	5,568		$	9,965

        Future minimum lease payments under non-cancelable capital leases as of March 31, 2003 are as follows (in thousands):

2004		$	1,539
2005			2,363
2006			654
2007			110
2008			274
Thereafter			—
	Total minimum lease payments	$	4,940
Less imputed interest costs			(522	)
	Present value of net minimum lease payments	$	4,418

F-18

6. Income Taxes

        Income tax expense (benefit) for the years ended March 31, 2003, 2002 and 2001 consisted of the following (in thousands):

			2003		2002			2001
Current:
	Foreign		$	4,142	$	6,664		$	1,771
Deferred:
	Federal			13,624		25,157			2,215
	State			1,551		272			305
	Foreign			1,658		(1,162	)		(646	)
		Total	$	20,975	$	30,931		$	3,645

        A reconciliation of the provision (benefit) for income taxes and the amount computed by applying the federal statutory income tax rate to income before taxes and extraordinary item for the years ended March 31, 2003, 2002 and 2001 is as follows (in thousands):

		2003		2002		2001
Income tax expense (benefit) at statutory rate		$	19,071	$	28,119	$	3,065
State taxes			1,008		177		217
Foreign taxes			149		2,491		(28	)
Non-deductible expenses and other			747		144		391
	Total	$	20,975	$	30,931	$	3,645

        The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at March 31 are (in thousands):

			2003			2002
Deferred tax assets:
	Net operating loss carryforwards		$	117,341		$	96,817
	Accrued reserves			1,647			2,730
	Inventory reserves and unicap			—			3,642
	Foreign tax credit			1,779			1,779
	Other			3,277			11,388
		Total		124,044			116,356
Valuation allowance				(1,779	)		(1,779	)
		Total		122,265			114,577
Deferred tax liabilities:
	Depreciation differences on properties and equipment			(254,830	)		(222,653	)
	Other			(5,340	)		(10,881	)
		Total		(260,170	)		(233,534	)
		Net deferred tax liability	$	(137,905	)	$	(118,957	)

        A valuation allowance was established at March 31, 2000 against the Company's deferred tax assets related to foreign tax credits. The Company believes that it is probable that all other deferred tax assets will be realized

F-19

on future tax returns, primarily from the generation of future taxable income through both profitable operations and future reversals of existing taxable temporary differences.

        At March 31, 2003, the Company had net operating loss ("NOL") carryforwards of approximately $335.3 million available to offset future taxable income. Annual utilization of the carryforwards could be limited by Section 382 of the Internal Revenue Code of 1986, as amended. If not utilized, the NOL carryforwards will expire as follows (in thousands):

2007		$	629
2008			1,849
2009			1,943
2010			953
2011			—
2018			4,872
2019			37,863
2020			62,218
2021			63,971
2022			85,394
2023			75,567
	Total	$	335,259

7. Stockholders' Equity

Initial Public Offering

        During the quarter ended June 30, 2000, the Company completed an initial public offering of 7,275,000 shares of its common stock (which includes 275,000 shares of common stock issued pursuant to an overallotment option granted to the underwriters), which provided the Company with net proceeds (after deducting underwriting discounts and commissions) of approximately $149.2 million. Concurrently with the initial public offering, the Company implemented a recapitalization pursuant to which all existing classes of the Company's stock including the preferred stock were converted into common stock.

Mergers & Acquisitions

        The Company completed the merger of GSCI into Universal on September 15, 2000. In the merger, the GCSI shareholders received approximately $12 million in cash, 1,400,726 shares of the Company's common stock and the Company assumed or refinanced approximately $63 million of indebtedness of GCSI. In connection with the merger, the Company entered into an escrow agreement with the selling shareholders of GCSI pursuant to which certain of the shares issued to the shareholders was held in escrow to indemnify the Company against certain losses it may incur. On October 17, 2001 and on August 28, 2002, escrow shares of the Company's common stock of 28,379 and 48,473, respectively, were released to the Company to satisfy certain indemnified matters. There are no further shares in escrow.

        On February 9, 2001, the Company completed its acquisition of Weatherford Global, a supplier of natural gas compression equipment and services and a division of Weatherford International Ltd. Under the terms of the agreement, a subsidiary of Weatherford International Ltd. was merged into Universal in exchange for 13.75 million restricted shares of the Company's common stock, which represented approximately 48% of the outstanding shares of the combined company.

F-20

        On July 11, 2001, the Company acquired KCI, a Tulsa, Oklahoma based fabricator of large horsepower compressors for approximately $25.8 million in cash and 694,927 shares of the Company's common stock. In addition, the Company incurred costs and assumed other liabilities related to the transaction of approximately $6 million. Concurrently with the acquisition, the Company repaid substantially all of KCI's approximately $51 million of indebtedness.

Stock Options

        In order to motivate and retain key employees, the Company established an incentive stock option plan. The incentive stock plan became effective on February 20, 1998, and on that date certain key employees were granted stock options. The options are exercisable over a ten-year period. Upon the closing of the Company's initial public offering in May 2000, all outstanding options were accelerated and became fully vested. All other options generally vest over the following time period:

Year 1	331/3	%
Year 2	331/3	%
Year 3	331/3	%

        The Company has elected to follow Accounting Principles Board ("APB") No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for its stock-based compensation and to provide the disclosures required under SFAS No. 123, Accounting for Stock Based Compensation and SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment of SFAS No. 123."

        APB No. 25 requires no recognition of compensation expense for the stock-based compensation arrangements provided by the Company, namely option grants where the exercise price is equal to the market value at the date of grant. However, APB No. 25 requires recognition of compensation expense for variable award plans over the vesting periods of such plans, based upon the then-current market values of the underlying stock. In contrast, SFAS No. 123 requires recognition of compensation expense for grants of stock, stock options, and other equity instruments, over the vesting periods of such grants, based on the estimated grant-date fair values of those grants.

        Under the stock option plan, options to purchase common stock may be granted until 2011. Options generally are granted at fair market value at the date of grant, are exercisable in installments beginning one year from the date of grant, and expire 10 years after the date of grant.

F-21

        As of March 31, 2003, 2,910,366 stock options were outstanding under the plan. Transactions are summarized as follows:

		Stock Options		Weighted-Average Exercise Price
Options outstanding, March 31, 2001		1,311,544		$	21.63
	Granted	1,545,500			25.66
	Exercised	(109,419	)		10.04
	Forfeited	(13,379	)		19.00
Options outstanding, March 31, 2002		2,734,246		$	24.52
	Granted	659,750			17.12
	Exercised	(22,841	)		7.03
	Forfeited	(460,789	)		26.93
Options outstanding, March 31, 2003		2,910,366		$	22.66
Shares exercisable at March 31, 2001		439,537		$	15.02
Shares exercisable at March 31, 2002		570,280		$	17.94
Shares exercisable at March 31, 2003		1,310,676		$	22.81

        Exercise prices for options outstanding as of March 31, 2003 ranged from $6.73 to $37.95. The following table provides certain information with respect to stock options outstanding at March 31, 2003:

Range of Exercise Prices		Stock Options Outstanding	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
	Under $7.00	220,778	$	6.73	4.7
	$7.01-$19.00	576,250		16.84	9.9
	$19.01-$22.00	1,196,516		21.32	8.1
	Over $22.01	916,822		31.89	7.7
		2,910,366	$	22.66	8.1

        The following table provides certain information with respect to stock options exercisable at March 31, 2003:

Range of Exercise Prices		Stock Options Exercisable	Weighted Average Exercise Price
	Under $7.00	220,778	$	6.73
	$7.01-$19.00	—		—
	$19.01-$22.00	611,276		21.50
	Over $22.01	478,622		31.90
		1,310,676	$	22.81

        In electing to continue to follow APB No. 25 for expense recognition purposes, the Company is obligated to provide the expanded disclosures required under SFAS No. 123 for stock-based compensation granted in 1998 and thereafter, including, if materially different from reported results disclosure of pro forma net income and

F-22

earnings per share had compensation expense relating to 2001, 2002, and 2003 grants been measured under the fair value recognition provisions of SFAS No. 123.

        The weighted-average fair values at date of grant for options granted during 2003, 2002 and 2001 were $9.78, $10.41 and $9.94, respectively, and were estimated using the Black-Scholes option valuation model with the following weighted-average assumptions:

	2003		2002		2001
Expected life in years	8		3		3
Interest rate	3.50	%	4.95	%	4.33	%
Volatility	48.85	%	54.00	%	53.21	%
Dividend yield	0.00	%	0.00	%	0.00	%

        The following table summarizes results as if we had recorded compensation expense under the provisions of SFAS No. 123 for the 2003, 2002 and 2001 option grants:

		Year Ended March 31,
		2003		2002		2001
		(In thousands except per share amounts)
Compensation expense, net of tax		$	5,843	$	5,643	$	2,241
Net Income (loss):
	As reported	$	33,518	$	49,408	$	(4,391	)
	Pro forma	$	27,675	$	43,765	$	(6,632	)
Basic earnings per share:
	As reported	$	1.09	$	1.65	$	(0.30	)
	Pro forma	$	0.90	$	1.46	$	(0.45	)
Diluted earnings per share:
	As reported	$	1.08	$	1.63	$	(0.29	)
	Pro forma	$	0.89	$	1.45	$	(0.44	)

8. Accounting for Interest Rate Swaps

        In accordance with SFAS No. 133, all derivative instruments must be recognized in the balance sheet at fair value, and changes in such fair values are recognized in earnings unless specific hedging criteria are met. Changes in the values of derivatives that meet these hedging criteria will ultimately offset related earnings effects of the hedged item pending recognition in earnings.

        As of March 31, 2003, the Company had interest rate swaps to convert variable interest payments related to the $175 million under the ABS operating lease facility to fixed interest payments. These swaps terminate in February 2013 and have a weighted average fixed rate of 5.5% and total notional amount of $175 million. As of December 31, 2002, the lessor related to the operating lease facility became a consolidated entity and the swaps were included in the Company's consolidated financial statements. In accordance with SFAS No. 133, the Company recorded a $15.4 million noncurrent liability related to the derivative instrument. Consistent with accounting rules discussed in SFAS No. 141, "Business Combinations," the offsetting amount was recorded as an increase to the value of property, plant and equipment.

        The swaps, which the Company has designated as cash flow hedging instruments, meet the specific hedge criteria and any changes in their fair values subsequent to March 31, 2003 will be recognized in other comprehensive income or loss. Because the terms of the hedged item and the swaps substantially coincide, the

F-23

hedge is expected to exactly offset changes in expected cash flows due to fluctuations in the variable rate and therefore, the Company currently does not expect any ineffectiveness.

        The counterparty to the Company's interest rate swap agreements is a major international financial institution. The Company continually monitors the credit quality of this financial institution and does not expect non-performance by it.

9. Employee Benefits

        The Company has a defined contribution 401(k) plan covering substantially all employees. The Company makes matching contributions under this plan equal to 50% of each participant's contribution of up to 6% of the participant's compensation. In September 2001, the Company amended its 401(k) plan for all domestic employees. The amended plan allows the Company to make matching contributions in the form of Company stock, instead of cash. For the fiscal year ended 2002, the Company cash and stock contributions to the plan were approximately $0.5 and $0.8 million, respectively. For the fiscal year ended 2003, the Company stock contributions to the plan were approximately $1.6 million.

        The Employee Stock Purchase Plan ("ESPP") is intended to encourage employees to participate in the Company's growth by providing them the opportunity to acquire a proprietary interest in the Company's long-term performance and success through the purchase of shares of common stock at a price possibly less than fair market value. In 2001, the Company's stockholders approved the ESPP, under which 250,000 shares of the Company's common stock could be purchased by employees. An employee is eligible to participate after completing 90 days of employment. Each quarter, an eligible employee may elect to withhold up to 10% of his or her salary to purchase shares of the Company's common stock at a price equal to 85 to 100% of the fair market value of the stock as of the first day of the quarter or the last day of the quarter, whichever is lower. The ESPP will terminate on the date that all shares of common stock authorized for sale under the ESPP have been purchased, except as otherwise extended by authorizing additional shares under the ESPP. At March 31, 2003, 170,153 shares remained available for purchase under the ESPP. During 2003 and 2002, $0.8 million and $0.2 million were charged to expense relating to the ESPP.

        The Company utilizes grants of restricted stock as long-term compensation for its executive officers. The Company's restricted stock plan provides for the award of up to 200,000 shares of the Company's common stock to certain officers and key employees. Unearned compensation was charged for the market value of the restricted shares as these shares were issued in accordance with the restricted stock plan. The unearned compensation is shown as a reduction on stockholders' equity in the accompanying consolidated balance sheets and is being amortized ratably over the restricted period of five years. During fiscal years ending March 31, 2003 and 2002, $0.3 million and $0.4, respectively, were charged to expense relating to the restricted stock. The weighted average share price during 2003 was $17.00 compared to $28.55 in 2002. Generally, common stock subject to restricted stock grants will vest 0% upon the first anniversary of the grant and 25% on each anniversary thereafter through the fifth anniversary.

        The Employees' Supplemental Savings Plan, (the "ESSP") provides executive officers the opportunity to defer up to 25% of their compensation that cannot be deferred under the existing 401(k) plan due to IRS limitations. Participants can also defer up to 100% of their bonuses. The Company matches 50% of the first 6% of compensation, excluding any bonus deferred. The vesting periods are generally the same as the 401(k) plan. Prior to September 1, 2002, the Company's matching contributions were in the form of cash. Since September 1, 2002, the Company's matching contributions related to the Employees' Supplemental Savings Plan have been in the form of common stock. During 2003 and 2002, amounts charged to expense relating to the ESSP were insignificant.

F-24

10. Commitments and Contingencies

        In the ordinary course of business, the Company is involved in various pending or threatened legal actions. In the opinion of management, the amount of ultimate liability, if any, with respect to these actions will not have a materially adverse effect on the Company's financial position, operating results or cash flows.

        In December 1999, Weatherford Global sold the assets and properties of its Gemini compressor business in Corpus Christi, Texas to GE Packaged Power, L.P., or GEPP. Under the terms of that sale, Weatherford Global agreed to purchase from GEPP $38.0 million of compressor components over five years and $3.0 million of parts over three years, and GEPP agreed to provide compressors to Weatherford Global during that time period at negotiated prices. We assumed this obligation in connection with our acquisition of Weatherford Global in February 2001. As of March 31, 2003, approximately $25 million of components and approximately $11 million of parts have been purchased from GEPP. We have not satisfied in full our purchase commitment in respect of components for the 2002 contract year under this agreement with GEPP. The unsatisfied portion of this commitment is approximately $5 million. GEPP could assert its right to enforce this obligation. However, GEPP has not indicated any interest to seek to enforce this part of the purchase obligation at this time. The parties have undertaken to renegotiate this agreement.

        The Company has no other commitments or contingent liabilities, which, in the judgment of management, would result in losses that would materially affect the Company's consolidated financial position or operating results.

11. Industry Segments and Geographic Information

        The Company has four principal business segments: Domestic Contract Compression, International Contract Compression, Fabrication and Aftermarket Services. The two contract compression segments provide natural gas compression rental and maintenance services to meet specific customer requirements. The international contract compression segment represents all of our international rental and maintenance operations (including Canada). The fabrication segment provides services related to the design, engineering and assembly of natural gas and air compressors for sale to third parties in addition to those that the Company uses in its contract compression fleet. The aftermarket services segment sells parts and components, and provides maintenance to customers who own compression equipment, customers who utilize equipment in our contract compression fleet and customers who lease equipment from our competitors. Fabrication and aftermarket services revenues presented in the table below include only sales to third parties.

        The Company's reportable segments are strategic business units that offer different products and services. They are managed separately since each business requires different marketing strategies due to customer specifications. We evaluate the performance of its reportable segments based on gross profit. Gross profit is defined as total revenue less direct costs. We have no material sales between segments, and accordingly, there are no inter-segment revenues to be reported.

F-25

        The following table presents revenues, gross profit and total assets by industry segment for the fiscal years ended March 31, 2003, 2002 and 2001 (in thousands):

		Fiscal Years Ended
		2003		2002		2001
Revenues:
Domestic contract compression		$	265,465	$	267,550	$	126,686
International contract compression			66,505		60,185		22,549
Fabrication			162,678		211,265		61,779
Aftermarket services			130,570		140,989		21,452
	Total	$	625,218	$	679,989	$	232,466
Gross Profit:
Domestic contract compression		$	169,868	$	169,892	$	80,465
International contract compression			53,769		43,411		16,425
Fabrication			16,075		24,347		9,041
Aftermarket services			28,256		30,696		3,476
	Total	$	267,968	$	268,346	$	109,407
Identifiable Assets:
Domestic contract compression		$	1,497,231	$	808,583	$	775,781
International contract compression			209,141		206,610		178,718
Fabrication			103,468		115,877		88,170
Aftermarket services			144,047		146,095		133,587
	Total	$	1,953,887	$	1,277,165	$	1,176,256

        No one customer accounted for more than 10% of net sales for any of the periods presented.

F-26

Geographic Area

        The following table illustrates revenues, gross profit and total assets by geographic locations for the fiscal years ended March 31, 2003, 2002 and 2001 (in thousands):

			Fiscal Years Ended
			2003		2002		2001
Revenues:
	United States		$	449,480	$	524,475	$	196,957
	Canada			74,293		91,615		9,495
	Latin America			62,937		55,909		23,826
	Asia Pacific			38,508		7,990		2,188
		Total	$	625,218	$	679,989	$	232,466
Gross Profit:
	United States		$	198,869	$	212,309	$	93,818
	Canada			15,219		17,150		12,547
	Latin America			41,770		32,480		1,437
	Asia Pacific			12,110		6,407		1,605
		Total	$	267,968	$	268,346	$	109,407
Identifiable Assets:
	United States		$	1,703,001	$	1,058,332	$	915,200
	Canada			90,076		85,335		89,578
	Latin America			121,872		102,499		142,449
	Asia Pacific			38,938		30,999		29,029
		Total	$	1,953,887	$	1,277,165	$	1,176,256

12. Selected Quarterly Financial Data (Unaudited)

        Summarized quarterly financial data for the fiscal years ended March 31, 2003 and 2002 is as follows (in thousands, except per share data):

		March 31		December 31		September 30		June 30
2003:
	Revenue	$	154,589	$	164,584	$	154,582	$	151,464
	Gross profit		68,682		66,751		64,816		67,718
	Net income		6,923		8,583		7,659		10,351
	Earnings per common share—basic	$	0.23	$	0.28	$	0.25	$	0.34
	Earnings per common share—diluted	$	0.22	$	0.28	$	0.25	$	0.33
2002:
	Revenue	$	187,941	$	177,379	$	174,308	$	140,361
	Gross profit		69,440		71,255		68,129		59,521
	Net income		12,319		13,751		12,793		10,545
	Earnings per common share—basic	$	0.40	$	0.45	$	0.42	$	0.37
	Earnings per common share—diluted	$	0.40	$	0.45	$	0.42	$	0.37

F-27

13. Extraordinary Losses

        During the year ended March 31, 2001, the Company incurred extraordinary losses of $15.2 million ($9.5 million net of tax) related to its debt restructuring that occurred concurrently with the Company's initial public offering.

14. Other Non-Recurring Charges

        During the year ended March 31, 2001, the Company recorded restructuring charges of $8.7 million ($5.1 million net of tax, or earnings per share of $0.34). The primary components of this charge were costs associated with the early termination of a management agreement in the amount of $6.5 million, a consulting agreement in the amount of $0.3 million, estimated severance for Universal employees terminated or identified as transitional in connection with the Weatherford Global merger in the amount of $0.8 million, fees associated with closing of Universal locations in connection with the Weatherford Global merger in the amount of $0.9 million and other related fees in connection with the Company's initial public offering and concurrent financing transactions in the amount of $0.2 million.

15. Subsequent Events

Tender Offer, Redemption and Senior Notes Financing

        On May 14, 2003, Universal commenced a tender offer to purchase any and all of the outstanding $229.8 million aggregate principal amount of its 9⁷/8% senior discount notes due 2008 at a price equal to 104.938% of the principal amount, plus a premium of 0.412% for notes tendered prior to the early expiration date for the tender offer, which was May 20, 2003. Of the $229.8 million aggregate principal amount of 9⁷/8% senior discount notes outstanding, $169.2 million principal amount was tendered prior to the early expiration date.

        On May 27, 2003, Universal completed a private offering of $175.0 million aggregate principal amount of 7¹/4% senior notes due 2010. Universal used the net proceeds of the new senior notes offering, together with cash on hand, to pay the purchase price, including the premium, plus accrued and unpaid interest, for the 9⁷/8% senior discount notes purchased pursuant to the tender offer.

        On May 27, 2003, pursuant to the terms of the indenture governing the 9⁷/8% senior discount notes, Universal called for redemption the remaining $60.6 million principal amount of 9⁷/8% senior discount notes outstanding. The redemption price will be equal to 104.938% of the principal amount of the 9⁷/8% senior discount notes, plus accrued and unpaid interest to, but not including, the redemption date. The closing of the redemption is scheduled for June 26, 2003 and will be funded with available cash and additional borrowings under Universal's revolving credit facility. As a result of the tender offer and the redemption, Universal expects to retire all of the outstanding 9⁷/8% senior discount notes.

Transfer of Tulsa Fabrication Activities to Houston

        On April 28, 2003, we announced the transfer of substantially all of our fabrication activities based in Tulsa, Oklahoma to our existing facility in Houston, Texas. Total consolidation-related costs are expected to be approximately $2 million ($1.2 million after-tax), incurred over the six-month period ending September 30, 2003.

F-28

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
Universal Compression, Inc.

        We have audited the accompanying consolidated balance sheets of Universal Compression, Inc. and subsidiaries (the "Company") as of March 31, 2003 and 2002, and the related consolidated statements of operations, stockholder's equity and cash flows for each of the three years in the period ended March 31, 2003. Our audits also included the financial statement schedule listed in the Index at E-1, which represents Schedule II to the consolidated financial statements of the Company. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial schedule based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2003, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

        As discussed in Note 1 to the consolidated financial statements, in the year ended March 31, 2002 the Company changed its method of accounting and reporting for goodwill to conform to the Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets."

/s/ DELOITTE & TOUCHE LLP

Houston, Texas
May 23, 2003

F-29

UNIVERSAL COMPRESSION, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)

			March 31, 2003			March 31, 2002
ASSETS
Current assets:
	Cash and cash equivalents		$	71,693		$	6,176
	Accounts receivable, net of allowance for bad debts of $8,146 and $7,470 as of March 31, 2003 and 2002, respectively			77,565			111,829
	Current portion of notes receivable			2,722			3,010
	Inventories, net of reserve for obsolescence of $10,468 and $10,537 as of March 31, 2003 and 2002, respectively			91,332			102,748
	Current deferred tax asset			10,890			8,360
	Other			7,108			19,130
		Total current assets		261,310			251,253
Contract compression equipment				1,316,214			618,975
Other property				106,496			84,254
Accumulated depreciation and amortization				(145,916	)		(86,647	)
		Net property, plant and equipment		1,276,794			616,582
Goodwill				387,480			380,328
Notes receivable				2,555			3,222
Other non-current assets				25,367			25,396
		Total assets	$	1,953,506		$	1,276,781
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
	Accounts payable, trade		$	43,210		$	42,961
	Accrued liabilities			55,719			64,947
	Current portion of long-term debt and capital lease obligation			4,322			3,801
		Total current liabilities		103,251			111,709
Capital lease obligations				3,180			3,634
Long-term debt				937,653			219,327
Non-current deferred tax liability				153,166			131,655
Derivative financial instrument used for hedging purposes				15,404			—
Deferred gain				—			114,261
Other liabilities				1,349			799
		Total liabilities		1,214,003			581,385
Commitments and contingencies (Note 9)
Stockholder's equity:
	Common stock, $10 par value, 5.0 shares authorized, 4.9 issued and outstanding as of March 31, 2003 and 2002			49			49
	Additional paid-in capital			710,349			708,333
	Other comprehensive income (loss)			(48,944	)		(57,517	)
	Retained earnings			78,049			44,531
		Total stockholder's equity		739,503			695,396
		Total liabilities and stockholder's equity	$	1,953,506		$	1,276,781

See accompanying notes to consolidated financial statements.

F-30

UNIVERSAL COMPRESSION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)

			For the Year Ended March 31,
			2003			2002			2001
Revenues:
	Domestic contract compression		$	265,465		$	267,550		$	126,686
	International contract compression			66,505			60,185			22,549
	Fabrication			162,678			211,265			61,779
	Aftermarket services			130,570			140,989			21,452
		Total revenues		625,218			679,989			232,466
Costs and expenses:
	Domestic contract compression—direct costs			95,597			97,658			46,221
	International contract compression—direct costs			12,736			16,774			6,124
	Fabrication—direct costs			146,603			186,918			52,738
	Aftermarket services—direct costs			102,314			110,293			17,976
	Depreciation and amortization			63,706			48,600			33,485
	Selling, general and administrative			67,944			60,890			21,092
	Operating lease expense			46,071			55,401			14,443
	Interest expense, net			36,421			23,017			22,622
	Foreign currency (gain)/loss			459			(42	)		177
	Other (income)/expense, net			(1,126	)		141			(472	)
	Other non-recurring charges			—			—			8,699
		Total costs and expenses		570,725			599,650			223,105
Income before income taxes and extraordinary items				54,493			80,339			9,361
Income tax expense				20,975			30,931			3,871
		Income before extraordinary items		33,518			49,408			5,490
		Extraordinary loss, net of $3,979 income tax benefit		—			—			(6,632	)
		Net income (loss)	$	33,518		$	49,408		$	(1,142	)

See accompanying notes to consolidated financial statements.

F-31

UNIVERSAL COMPRESSION, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
For the years ended March 31, 2003, 2002 and 2001
(In thousands)

		Common Stock		Additional Paid in Capital		Retained Earnings (Deficit)			Other Comprehensive Income (loss)			Total
Balance, March 31, 2000		$	49	$	105,131	$	(3,735	)		—		$	101,445
	Investment in subsidiary by parent		—		116,815		—			—			116,815
	Acquisitions		—		429,661		—			—			429,661
	Net loss		—		—		(1,142	)		—			(1,142	)
	Foreign currency translation adjustment		—		—		—		$	845			845
	Comprehensive loss												(297	)
Balance, March 31, 2001		$	49	$	651,607	$	(4,877	)	$	845		$	647,624
	Investment in subsidiary by parent		—		36,726		—			—			36,726
	Acquisitions		—		20,000		—			—			20,000
	Net income		—		—		49,408			—			49,408
	Foreign currency translation adjustment		—		—		—			(58,362	)		(58,362	)
	Comprehensive loss												(8,954	)
Balance, March 31, 2002		$	49	$	708,333	$	44,531		$	(57,517	)	$	695,396
	Investment in subsidiary by parent		—		2,016		—			—			2,016
	Net income		—		—		33,518			—			33,518
	Foreign currency translation adjustment		—		—		—			9,139			9,139
	Interest rate swap loss									(566	)		(566	)
	Comprehensive income												42,091
Balance, March 31, 2003		$	49	$	710,349	$	78,049		$	(48,944	)	$	739,503

See accompanying notes to consolidated financial statements.

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UNIVERSAL COMPRESSION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

				For the Year Ended March 31,
				2003			2002			2001
Cash flows from operating activities:
	Net income (loss)			$	33,518		$	49,408		$	(1,142	)
	Adjustments to reconcile net income (loss) to cash provided by operating activities, net of effect of acquisitions:
	Depreciation and amortization				63,706			48,600			33,485
	(Gain) loss on asset sales				(741	)		(286	)		119
	Amortization of debt issuance costs				3,670			3,006			1,458
	Accretion of discount notes				18,660			20,073			18,521
		Increase (decrease) in deferred taxes			18,058			20,827			109,883
		(Increase) decrease in other assets			12,913			21,225			(14,525	)
		(Increase) decrease in receivables			37,105			(10,404	)		(26,239	)
		(Increase) decrease in inventories			11,871			40,048			(19,272	)
		Increase (decrease) in accounts payable			(2,004	)		(44,947	)		23,591
		Increase (decrease) in accrued liabilities			(10,604	)		(15,713	)		(32,555	)
		Increase (decrease) in payable to parent			—			—			(1,288	)
		Other			—			—			845
			Net cash provided by operating activities		186,152			131,837			92,881
Cash flows from investing activities:
	Additions to property, plant and equipment				(120,751	)		(188,019	)		(68,006	)
	Acquisition of Weatherford Global				—			—			(409,423	)
	Other acquisitions, net of cash received				(1,536	)		(160,021	)		(55,338	)
	Proceeds from sale of property, plant and equipment				14,583			187,784			529,449
			Net cash used in investing activities		(107,704	)		(160,256	)		(3,318	)
Cash flows from financing activities:
	Principal repayments of long-term debt				(5,818	)		(7,401	)		(74,626	)
	Net repayment under revolving line of credit				—			—			(97,408	)
	Net proceeds (repayment) on sale-leaseback of vehicles				(2,800	)		(2,878	)		(1,484	)
	Net proceeds (repayment) of financing lease				—			—			(10,580	)
	Investment in subsidiary to parent				2,016			36,726			116,815
	Debt issuance costs				(5,009	)		(4,131	)		(11,404	)
	Operating lease facilities				(1,320	)		—			—
			Net cash provided by (used in) financing activities		(12,931	)		22,316			(78,687	)
Net increase (decrease) in cash and cash equivalents					65,517			(6,103	)		10,876
Cash and cash equivalents at beginning of period					6,176			12,279			1,403
Cash and cash equivalents at end of period				$	71,693		$	6,176		$	12,279
Supplemental disclosure of cash flow information:
	Cash paid for interest			$	14,553		$	4,073		$	4,115
	Cash paid for operating leases			$	41,171		$	54,301		$	7,798
	Cash paid for income taxes			$	2,572		$	1,346		$	1,543

See accompanying notes to consolidated financial statements.

F-33

UNIVERSAL COMPRESSION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Organization

        Universal Compression, Inc. was formed on December 12, 1997 for the purpose of acquiring Tidewater Compression Service, Inc. ("TCS") from Tidewater Inc. Upon completion of the acquisition on February 20, 1998, TCS changed its name to Universal Compression, Inc. ("Universal"). Universal is a wholly owned subsidiary of Universal Compression Holdings, Inc. ("Holdings").

        Since Holdings' initial public offering in 2000, Universal has completed several acquisitions. Universal's completed acquisitions include Gas Compression Services, Inc. ("GCSI") in September 2000, Weatherford Global Compression Services, L.P. and certain related entities ("Weatherford Global") and ISS Compression ("IEW") in February 2001, Compressor System International, Inc. ("CSII") in April 2001, KCI, Inc. ("KCI") and Louisiana Compressor Maintenance ("LCM") in July 2001, and Technical Compression Service, Inc. ("TCSI") in October 2001. GCSI added approximately 138,000 horsepower to Universal's fleet and provided it with an increased customer base, additional market segments and additional fabrication capabilities. Weatherford Global added approximately 950,000 horsepower, which expanded both Universal's domestic and international presence and more than doubled Universal's size at the time. IEW added approximately 26,000 horsepower to Universal's fleet, as well as important offshore Gulf of Mexico service capabilities. CSII added approximately 34,000 horsepower in the aggregate to Universal's fleet in Mexico and Argentina. KCI added approximately 125,000 horsepower to Universal's domestic fleet as well as significant fabrication expertise and capabilities, and expertise in the pipeline compression and related natural gas markets. LCM added to Universal's ability to be a supplier of maintenance, repair, and overhaul and upgrade services to natural gas pipeline and related markets. TCSI added to Universal's compression parts and service capabilities for the natural gas producing industry as well as the refinery and petrochemical industries.

Nature of Operations

        Universal is the second largest natural gas compression services company in the world in terms of compressor fleet horsepower, with a fleet as of March 31, 2003 of approximately 7,400 compressor units comprising approximately 2.3 million horsepower. Universal provides a full range of contract compression services, sales, operations, maintenance and fabrication services and products to the natural gas industry, both domestically and internationally. These services and products are essential to the natural gas industry, as gas must be compressed to be delivered from the wellhead to end-users.

Principles of Consolidation

        The accompanying consolidated financial statements include Universal and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

        Certain reclassifications have been made to the prior year amounts to conform to the current year presentation.

Use of Estimates

        In preparing Universal's financial statements, management makes estimates and assumptions that affect the amounts reported in the financial statements and related disclosures. Actual results may differ from these estimates.

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Cash and Cash Equivalents

        Universal considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash flows are computed using the indirect method.

Revenue Recognition

        Revenue is recognized by Universal's four reportable business segments using the following criteria: (a) persuasive evidence of an exchange arrangement exists, (b) delivery has occurred or services have been rendered, (c) the buyer's price is fixed or determinable and (d) collectibility is reasonably assured.

        Revenue from contract compression services is recorded when earned over the period of service and maintenance contracts which generally range from one month to several years. Aftermarket services revenue is recorded as products are delivered or services are performed for the customer.

        Fabrication revenue is recognized using the completed-contract method which recognizes revenue upon completion of the contract. This method is used because the typical contract is completed within two to three months.

Concentration of Credit Risk

        Trade accounts receivable are due from companies of varying size engaged principally in oil and gas activities in the United States and in international locations including Canada, Latin America and Asia Pacific. Universal reviews the financial condition of customers prior to extending credit and periodically updates customer credit information. Payment terms are on a short-term basis and in accordance with industry standards. No single customer accounts for 10% or more of Universal's revenues. For the years ended March 31, 2003, 2002 and 2001, Universal wrote off bad debts, net of recoveries totaling $3.7 million, $0.09 million, and $0.08 million respectively.

Inventories

        Inventories are recorded at the lower of average cost or market (net realizable value). Some items of compression equipment are acquired and placed in inventories for subsequent sale or compression services to others. Acquisitions of these assets are considered operating activities in the statement of cash flows.

Properties and Equipment

        Property, plant and equipment are carried at cost. Depreciation for financial reporting purposes is computed on the straight-line basis using estimated useful lives. For compression equipment, depreciation begins with the first compression service using a 20% salvage value. Universal evaluated the estimated useful lives used for book depreciation purposes for its compressor fleet with the assistance of an independent equipment valuation firm. This equipment study evaluated the compressor units based upon equipment type, key components and industry experience of the actual useful life in the field. The study was finalized in the fourth quarter of fiscal year 2003, based upon the findings of the study, the estimated useful lives of the majority of the existing compressor units were extended to 25 years from 15 years. In addition, a portion of the units remained at 15 years or less and a portion of the units were extended to 30 years. The change in useful lives was effective January 1, 2003. Had Universal depreciated all compression equipment recorded and consolidated in its balance sheet as of December 31, 2002 using depreciable lives of 15 years instead of the extended estimated depreciable lives, depreciation expense would have been approximately $5.6 million higher and would have decreased net income

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by approximately $3.4 million for the fiscal year ended March 31, 2003. The estimated useful lives as of March 31, 2003 were as follows:

Buildings	20-35 years
Compression equipment	15-30 years
Other properties and equipment	2-25 years

        Maintenance and repairs are charged to expenses as incurred. Overhauls and major improvements that increase the value or extend the life of contract compressor units are capitalized and depreciated over the estimated period of 6.5 years. Depreciation expense for the years ended March 31, 2003, 2002 and 2001 was $62.1 million, $48.3 million and $29.9 million, respectively.

        Properties and equipment are reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable based upon undiscounted cash flows. Any impairment losses are measured based upon the excess of the carrying value over the fair value. Universal has not recognized any impairment losses for any of the periods presented.

Goodwill

        Goodwill represents the purchase price of an acquired entity in excess of the fair market value assigned to its assets and liabilities. Through March 31, 2001 goodwill was amortized on a straight-line basis over 40 years. Effective April 1, 2001 Universal discontinued amortization of goodwill with Universal's adoption of Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 addresses accounting and reporting for intangible assets acquired individually or with a group of other assets (but not those acquired in a business combination) at acquisition. It also addresses financial accounting and reporting for goodwill and other intangible assets subsequent to their acquisition.

        The following table sets forth adjusted net income as if SFAS No. 142 had been effective and Universal adopted it on April 1, 2000 (in thousands):

		For the Year Ended March 31,
		2003		2002		2001
Reported net income (loss)		$	33,518	$	49,408	$	(1,142	)
	Add back: Goodwill amortization		—		—		2,085
Adjusted net income (loss)		$	33,518	$	49,408	$	943

Other Non-Current Assets

        Included in other non-current assets are debt issuance costs, net of accumulated amortization, totaling approximately $22.3 million and $19.6 million at March 31, 2003 and 2002, respectively. Such costs are amortized over the period of the respective debt agreements on a straight-line method which approximates the effective interest method.

Income Taxes

        Universal accounts for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in Universal's financial statements or tax returns. In estimating future tax consequences, all expected future events are considered other than enactments of changes in the tax law or rates.

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        Universal provides contract compression services to a global market. As such, Universal is subject to taxation not only in the United States but also in numerous foreign jurisdictions. Having to consider these different jurisdictions complicates the estimate of future taxable income, which in turn determines the realizability of its deferred tax assets. Numerous judgments and assumptions are inherent in the determination of future taxable income, including assumptions on future operating conditions and asset utilization. The judgments and assumptions used to determine future taxable income are consistent with those used for other financial statement purposes.

        Additionally, Universal must consider any prudent and feasible tax planning strategies that would minimize the amount of deferred tax liabilities recognized or the amount of any valuation allowance recognized against deferred tax assets. The principal tax planning strategy available to Universal relates to the permanent reinvestment of the earnings of foreign subsidiaries. The assumptions related to the permanent reinvestment of the foreign earnings are analyzed and reviewed annually for changes in Univeral's international and domestic business outlook.

Foreign Currency Translation

        The majority of Universal's foreign subsidiaries have designated the local currency as their functional currency and, as such, gains and losses resulting from financial statement translation of foreign operations are included as a separate component of accumulated other comprehensive loss within stockholder's equity. Gains and losses from balances that are receivable or payable in currency other than functional currency are included in the consolidated statements of operations.

        For those foreign subsidiaries that have designated the United States Dollar as the functional currency, gains and losses resulting from financial statement translation of foreign operations are included in the consolidated statements of operations as incurred.

        Currency transaction gains and losses are reflected in Universal's consolidated statements of operations during the period incurred.

Fair Value of Financial Instruments

        Universal's financial instruments consist of trade receivables and payables (which have carrying values that approximate fair value) and long-term debt. The fair value of Universal's revolving credit facility (see Note 4) is representative of its carrying value based upon variable rate terms. The fair value of the senior discount notes was approximately $241.2 million and $253.7 million, as compared to a carrying amount of $229.8 million and $215.9 million at March 31, 2003 and 2002, respectively. The fair value of the senior notes was approximately $479.3 million as compared to a carrying amount of $450.0 million at March 31, 2003. The carrying amounts of $82.2 million for the term loan and $175 million for the notes under the ABS operating lease facility approximate the fair values. The estimated fair value amounts have been determined by Universal using appropriate valuation methodologies and information available to management as of March 31, 2003 based on the quoted market price from brokers of these notes.

Hedging and Use of Derivative Instruments

        Universal utilizes interest rate swaps to minimize interest rate exposure on the $200 million asset-backed securitization operating lease facility. The swaps are not used for trading or speculative purposes. The fair value of the interest rate swap was a loss of $15.4 million as of March 31, 2003.

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        In accordance with SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," Universal records these interest rate swaps on the balance sheet as either assets or liabilities measured at their fair value. These instruments qualify for hedge accounting as they reduce the interest rate risk of the underlying hedged item and are designated as a cash flow hedge at inception. These swaps result in financial impacts that are inversely correlated to those of the items being hedged. To qualify for hedge accounting treatment, companies must formally document, designate and assess the effectiveness of the transactions. All of the interest rate instruments utilized are placed with a large creditworthy financial institution. If the necessary correlation ceases to exist or if physical delivery of the hedged item becomes improbable, Universal would discontinue hedge accounting and apply mark-to-market accounting. Amounts paid or received from interest rate swaps are charged or credited to interest expense and matched with the cash flows and interest expense of the debt being hedged, resulting in an adjustment to the effective interest rate.

Environmental Liabilities

        The costs to remediate and monitor environmental matters are accrued when such liabilities are considered probable and a reasonable estimate of such costs is determinable.

New Accounting Pronouncements

        In August 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 provides new guidance on the recognition of impairment losses on long-lived assets to be held and used or to be disposed of and also broadens the definition of what constitutes a discontinued operation and how the results of a discontinued operation are to be measured and presented. SFAS No. 144 supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and Accounting Principle Board Opinion No. 30, while retaining many of the requirements of those two statements. Under SFAS No. 144, assets held for sale that are a component of an entity will be included in discontinued operations if the operations and cash flows will be or have been eliminated from the ongoing operations of the entity and the entity will not have any significant continuing involvement in the operations prospectively. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. SFAS No. 144 does not materially change the methods used by Universal to measure impairment losses on long-lived assets, but may result in additional future dispositions being reported as discontinued operations. SFAS No. 144 was effective for Universal on April 1, 2002. Based on Universal's review of SFAS No. 144, no impairment existed as of March 31, 2003.

        In April 2002, FASB issued SFAS No. 145 "Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS 145 requires, among other things, gains or losses of extinguishments of debt to be classified as income (loss) from continuing operations rather than as an extraordinary item, unless such extinguishment is determined to be extraordinary pursuant to Accounting Principles Board Opinion No. 30 ("Opinion 30"), "Reporting the Results of Operations—Reporting the Effects of a Disposal of a Segment of a Business and Extraordinary, Unusual, and Infrequently Occurring Transactions." Any gain or loss on extinguishment of debt that was classified, as an extraordinary item in prior periods presented that does not meet the criteria in Opinion 30 for classification as an extraordinary item must be reclassified. This Statement rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers," and an amendment to SFAS No. 4, SFAS No. 64, "Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements." This Statement also amends SFAS No. 13, "Accounting for Leases," to eliminate inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. In addition, this Statement amends other existing authoritative

F-38

pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. Provisions of SFAS No. 145 related to the rescission of SFAS No. 4 are effective for Universal on April 1, 2003 and provisions affecting SFAS No. 13 are effective for transactions occurring after May 15, 2002. Universal did not early adopt the provisions for SFAS 145 for the year ended March 31, 2003. Had Universal early adopted SFAS 145 in fiscal year 2003, the extinguishment of debt recorded in fiscal year 2001 would be reclassified to a separate component of income before income taxes.

        In July 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities." This Statement requires the recognition of costs associated with the exit or disposal activities when incurred rather than at the date of a commitment to an exit or disposal plan. This Statement replaces Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)", which required the recognition of costs at the date of a commitment to an exit or disposal plan. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002. Universal will record any costs associated with exit or disposal activities in accordance with this new guidance when applicable.

        In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires that upon issuance of a guarantee, a guarantor must recognize a liability for the fair value of the obligation assumed under the guarantee. FIN 45 also requires additional disclosures about guarantees in the interim and annual financial statements. The provisions of FIN 45 related to initial recognition and measurement of guarantee agreements were effective for any guarantees issued or modified after December 31, 2002. The adoption of these recognition and measurement provisions did not have any impact on Universal's consolidated financial position or results of operations.

        In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities," which is an interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial Statements." The interpretation states that certain variable interest entities may be required to be consolidated into the results of operations and financial position of the entity that is the primary beneficiary. The change may be made prospectively with a cumulative-effect adjustment in the period first applied or by restating previously issued financial statements. The interpretation becomes effective July 1, 2003. Universal does not believe the new interpretation will have any impact on its consolidated statement of operations, cash flows, or financial position.

        On April 30, 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." This statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. This statement is effective for contracts entered into or modified after June 20, 2003, for hedging relationships designated after June 30, 2003, and to certain preexisting contracts. Universal will adopt SFAS No. 149 on a prospective basis at its effective date on July 1, 2003. Universal is currently evaluating the impact that SFAS No. 149 will have on its financial statements.

        In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This statement is effective for financial instruments entered into or modified after May 31, 2003, except for mandatorily redeemable financial instruments. Mandatorily redeemable financial instruments are subject to the provisions of this statement beginning on January 1, 2004. Universal is currently evaluating the impact that SFAS No. 150 will have on its financial statements.

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2. Goodwill

        Universal's acquisitions described in footnote 1 were accounted for as purchases and accordingly, the results of operations of the acquired businesses are included in the accompanying financial statements from the dates of acquisition. Goodwill has been recognized for the amount of the excess of the purchase price over the fair value of the net assets acquired and is accounted for in accordance with SFAS 142.

        The changes in the carrying amount of goodwill from March 31, 2002 to March 31, 2003, are as follows (in thousands):

	Domestic Contract Compression			International Contract Compression		Aftermarket Services		Fabrication		Total
Balance as of March 31, 2002	$	265,866		$	40,390	$	45,234	$	28,838	$	380,328
Acquisitions							768				768
Purchase adjustments and other		(4,345	)		7,976		321		204		4,156
Impact of foreign currency translation		—			2,228		—		—		2,228
Balance as of March 31, 2003	$	261,521		$	50,594	$	46,323	$	29,042	$	387,480

        During the fourth quarter of fiscal year 2003, Universal performed an impairment analysis on goodwill in accordance with SFAS No. 142 and determined that no impairment had occurred.

3. Inventories, Net

        Inventories, net consisted of the following (in thousands):

		For the Year Ended March 31,
		2003			2002
Raw materials		$	73,827		$	78,265
Work-in-progress			22,516			23,985
Finished goods			5,457			11,035
	Total inventories		101,800			113,285
Reserve			(10,468	)		(10,537	)
	Inventories, net	$	91,332		$	102,748

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4. Long-Term Debt

        Universal's debt at March 31 consisted of the following (in thousands):

		As of March 31,
		2003		2002
Senior discount notes, bearing interest of 97/8% per annum, due 2008, net of discount of $0 and $18,835 at March 31, 2003 and 2002, respectively, unsecured.		$	229,750	$	215,915
Senior notes due February 2008, bearing interest at 87/8% per annum, payable semiannually on February 15 and August 15			450,000		—
Term loan of $82.2 million due February 2008, currently bearing interest at a variable rate of LIBOR, (1.25% at March 31, 2003) plus 3.25% due quarterly			82,181		—
Notes under the ABS operating lease facility are due January 2023, bearing interest at a variable rate of LIBOR, which is effectively fixed through the use of interest rate swaps at a weighted average rate of 5.5%, plus 1.27% due monthly.			175,000		—
Other			3,806		3,773
	Total debt		940,737		219,688
Less current maturities			3,084		361
	Total long-term debt	$	937,653	$	219,327

        On February 20, 1998, Universal issued $242.5 million of its 9⁷/8% senior discount notes due February 15, 2008 in a private placement. The 9⁷/8% senior discount notes were offered at a substantial discount from their principal amount. Universal subsequently exchanged the notes for publicly tradable notes pursuant to a registered exchange offer under the Securities Act. As of March 31, 2003, approximately $229.8 million aggregate principal amount of 9⁷/8% senior discount notes was outstanding. See Footnote 14, "Subsequent Events," for a discussion of the tender offer and redemption of these 9⁷/8% senior discount notes.

        In connection with the Weatherford Global acquisition, on February 9, 2001, Universal raised $427 million under a seven-year term senior secured notes operating lease facility (the "high-yield operating lease facility") funded primarily through an offering of $350 million of 8⁷/8% senior secured notes due 2008 by an unaffiliated special operating entity that is the lessor under the operating lease plus approximately $64 million in borrowings under a term loan and approximately $13 million in proceeds from an equity investment in the lessor. On October 23, 2001, Universal increased the high-yield operating lease facility by $122 million, which was funded through the unaffiliated entity's offering of an additional $100 million of 8⁷/8% senior secured notes due 2008, together with an $18.3 million increase in its borrowings under an existing term loan and an additional $3.7 million equity investment in the entity that is the lessor under the operating lease. The net proceeds from the sale of equipment under the addition to the high-yield operating lease facility were used to repay all of the outstanding indebtedness under the revolving credit facility, with the remaining proceeds used to repay a portion of the obligations under the asset-backed securitization operating lease facility discussed below and for general corporate purposes.

        Also, in February 2001, Universal entered into a $125 million secured revolving credit facility and a $200 million asset-backed securitization operating lease facility (the "ABS operating lease facility"). The proceeds received in February 2001 from the high-yield operating lease facility and the ABS operating lease facility were used to restructure previous operating lease obligations and refinance certain existing indebtedness of Universal and Weatherford Global.

F-41

        Universal's senior secured credit agreement ("Credit Agreement") provides for up to $125 million under the revolving credit facility, which includes a sub-limit for letters of credit. The revolver bears interest at Universal's option of a base rate or LIBOR plus, in each case, a variable amount depending on its operating results.

        The Credit Agreement contains certain financial covenants and limitations on, among other things, acquisitions, sales, indebtedness and liens. The Credit Agreement also limits the payment of cash dividends related to Universal paying up to $1 million to Holdings in any given fiscal year. In addition, Universal has substantial dividend payment restrictions under the indenture related to the senior discount notes. Universal was in compliance with all such covenants and limitations at March 31, 2003 and 2002. As defined by the Credit Agreement, any "change of control" would result in an "Event of Default" and all amounts outstanding under the Credit Agreement would become due and payable. All principal amounts and accrued interest would become due without further notice.

        On December 31, 2002, Universal purchased all of the equity in the lessor under the high-yield operating lease facility for $16.7 million, plus accrued and unpaid preferred return on the equity. As a result of this equity investment by Universal in the lessor, the lessor became a fully consolidated entity of Universal as of December 31, 2002.

        Also on December 31, 2002, Universal completed the process of having a nationally recognized insurance company provide to the holder of notes associated with the ABS operating lease facility a policy guaranteeing the payment of the principal and interest on the notes and obtaining a credit rating on the notes by Standard & Poor's and Moody's Investors Service. With the policy, the rating agencies rated the underlying notes "AAA" and "Aaa," respectively, resulting in a lower interest rate for the notes. Concurrently with the credit rating process, the equity in the lessor was reduced and Universal no longer considers the remaining outstanding equity of the lessor as comparable to that expected for a substantive business involved in similar leasing transactions with similar risks and rewards. Therefore, the lessor became a fully consolidated entity of Universal as of December 31, 2002. Further, concurrently with the credit rating process, the outstanding debt under the ABS operating lease facility was increased from $159.5 million to $175 million at December 31, 2002.

        As a result of the changes in the high-yield and ABS operating lease facilities discussed in this Note 4 and consistent with the purchase accounting rules set forth in SFAS No. 141, "Business Combinations," Universal recorded in its consolidated balance sheet approximately $614.8 million of contract compression equipment, approximately $707.2 million in long-term debt and a noncurrent liability of approximately $15.2 million related to interest rate swaps pertaining to the ABS operating lease facility (see Note 7 for discussion of interest rate swaps). Additionally, upon consolidation of the lessors of these operating lease facilities, the deferred gain previously recorded was eliminated.

        Universal guaranteed certain of the obligations under the operating lease facilities. The high-yield operating lease facility is collateralized by a first priority security interest in all of the assets owned by the lessor under that facility. The ABS operating lease facility is collateralized by a first priority security interest in all of the assets owned by the lessor and lessee under that facility. The assets owned by the lessee, a wholly owned subsidiary of Universal, were transferred to the lessee from Universal. As discussed above, the assets related to the high-yield and ABS operating lease facilities are included in the consolidated balance sheet.

        The results of operations through December 31, 2002 includes operating lease expense since prior to this date, the lessors under the operating leases were unaffiliated entities of Universal.

F-42

        Maturities of long-term debt as of March 31, 2003 are as follows (in thousands):

2004		$	3,084
2005			16,190
2006			16,213
2007			16,236
2008			778,192
Thereafter			110,822
	Total	$	940,737

5. Capital Leases

        Properties and equipment at March 31, 2003 and 2002 include the following amounts for capitalized leases (in thousands):

		For the Year Ended March 31,
		2003			2002
Compression equipment		$	3,546		$	11,809
Furniture and fixtures			2,556			—
Less accumulated depreciation			(534	)		(1,844	)
	Net assets under capital leases	$	5,568		$	9,965

        Future minimum lease payments under non-cancelable capital leases as of March 31, 2003 are as follows (in thousands):

2004		$	1,539
2005			2,363
2006			654
2007			110
2008			274
Thereafter			—
	Total minimum lease payments	$	4,940
Less imputed interest costs			(522	)
	Present value of net minimum lease payments	$	4,418

F-43

6. Income Taxes

        Income tax expense (benefit) for the years ended March 31, 2003, 2002 and 2001 consisted of the following (in thousands):

			2003		2002			2001
Current:
	Foreign		$	4,142	$	6,664		$	1,771
Deferred:
	Federal			13,624		25,157			2,426
	State			1,551		272			320
	Foreign			1,658		(1,162	)		(646	)
		Total	$	20,975	$	30,931		$	3,871

        A reconciliation of the provision (benefit) for income taxes and the amount computed by applying the federal statutory income tax rate to income before taxes and extraordinary item for the years ended March 31, 2003, 2002 and 2001 is as follows (in thousands):

		2003		2002		2001
Income tax expense (benefit) at statutory rate		$	19,071	$	28,119	$	3,276
State taxes			1,008		177		232
Foreign taxes			149		2,491		(28	)
Non-deductible expenses and other			747		144		391
	Total	$	20,975	$	30,931	$	3,871

        The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at March 31 are (in thousands):

			2003			2002
Deferred tax assets:
	Net operating loss carryforwards		$	112,970		$	92,479
	Accrued reserves			1,647			2,730
	Inventory reserves and unicap			—			3,642
	Foreign tax credit			1,779			1,779
	Other			3,277			11,388
		Total		119,673			112,018
Valuation allowance				(1,779	)		(1,779	)
		Total		117,894			110,239
Deferred tax liabilities:
	Depreciation differences on properties and equipment			(254,830	)		(222,653	)
	Other			(5,340	)		(10,881	)
		Total		(260,170	)		(233,534	)
Net deferred tax liability			$	(142,276	)	$	(123,295	)

        A valuation allowance was established at March 31, 2000 against Universal's deferred tax assets related to foreign tax credits. Universal believes that it is probable that all other deferred tax assets will be realized on

F-44

future tax returns, primarily from the generation of future taxable income through both profitable operations and future reversals of existing taxable temporary differences.

        At March 31, 2003, Universal had net operating loss ("NOL") carryforwards of approximately $323.2 million available to offset future taxable income. Annual utilization of the carryforwards could be limited by Section 382 of the Internal Revenue Code of 1986, as amended. If not utilized, the NOL carryforwards will expire as follows (in thousands):

2007		$	629
2008			1,849
2009			1,943
2010			953
2011			—
2018			4,562
2019			34,784
2020			58,790
2021			58,740
2022			85,394
2023			75,567
	Total	$	323,211

7. Accounting for Interest Rate Swaps

        In accordance with SFAS No. 133, all derivative instruments must be recognized in the balance sheet at fair value, and changes in such fair values are recognized in earnings unless specific hedging criteria are met. Changes in the values of derivatives that meet these hedging criteria will ultimately offset related earnings effects of the hedged item pending recognition in earnings.

        As of March 31, 2003 Universal had interest rate swaps to convert variable interest payments related to the $175 million under the ABS operating lease facility to fixed interest payments. These swaps terminate in February 2013 and have a weighted average fixed rate of 5.5% and total notional amount of $175 million. As of December 31, 2002, the lessor related to the operating lease facility became a consolidated entity and the swaps were included in Universal's consolidated financial statements. In accordance with SFAS No. 133, Universal recorded a $15.4 million noncurrent liability related to the derivative instrument. Consistent with accounting rules discussed in SFAS No. 141, "Business Combinations," the offsetting amount was recorded as an increase to the value of property, plant and equipment.

        The swaps, which Universal has designated as cash flow hedging instruments, meet the specific hedge criteria and any changes in their fair values subsequent to March 31, 2003 will be recognized in other comprehensive income or loss. Because the terms of the hedged item and the swaps substantially coincide, the hedge is expected to exactly offset changes in expected cash flows due to fluctuations in the variable rate and therefore, Universal currently does not expect any ineffectiveness.

        The counterparty to Universal's interest rate swap agreements is a major international financial institution. Universal continually monitors the credit quality of this financial institution and does not expect non-performance by it.

F-45

8. Employee Benefits

        Universal has a defined contribution 401(k) plan covering substantially all employees. Universal makes matching contributions under this plan equal to 50% of each participant's contribution of up to 6% of the participant's compensation. In September 2001, Universal amended Universal's 401(k) plan for all domestic employees. The amended plan allows Universal to make matching contributions in the form of Company stock, instead of cash. For the fiscal year ended 2002, the Company's cash and stock contributions to the plan were approximately $0.5 and $0.8 million, respectively. For the fiscal year ended 2003, the Company's stock contributions to the plan were approximately $1.6 million.

        The Employee Stock Purchase Plan ("ESPP") is intended to encourage employees to participate in Universal's growth by providing them the opportunity to acquire a proprietary interest in the Company's long-term performance and success through the purchase of shares of common stock at a price possibly less than fair market value. In 2001, the Company's stockholders approved the ESPP, under which 250,000 shares of the Holdings' common stock could be purchased by employees. An employee is eligible to participate after completing 90 days of employment. Each quarter, an eligible employee may elect to withhold up to 10% of his or her salary to purchase shares of Company stock at a price equal to 85 to 100% of the fair market value of the stock as of the first day of the quarter or the last day of the quarter, whichever is lower. The ESPP will terminate on the date that all shares of common stock authorized for sale under the ESPP have been purchased, except as otherwise extended by authorizing additional shares under the ESPP. At March 31, 2003, 170,153 shares remained available for sale under the ESPP. During 2003 and 2002, $0.8 million and $0.2 million were charged to expense relating to the ESPP.

        Universal utilizes grants of restricted stock as long-term compensation for its executive officers. Universal's restricted stock plan provides for the award of up to 200,000 shares of Holdings' common stock to certain officers and key employees. Unearned compensation was charged for the market value of the restricted shares as these shares were issued in accordance with the restricted stock plan. The unearned compensation is shown as a reduction on stockholders' equity in the accompanying consolidated balance sheets and is being amortized ratably over the restricted period of five years. During fiscal years ending March 31, 2003 and 2002, $0.3 million and $0.4, respectively, were charged to expense relating to the restricted stock plan. The weighted average share price during 2003 was $17.00 compared to $28.55 in 2002. Generally, common stock subject to restricted stock grants will vest 0% upon the first anniversary of the grant and 25% on each anniversary thereafter through the fifth anniversary.

        The Employees' Supplemental Savings Plan, (the "ESSP") provides executive officers the opportunity to defer up to 25% of their compensation that cannot be deferred under the existing 401(k) plan due to IRS limitations. Participants can also defer up to 100% of their bonuses. The Company matches 50% of the first 6% of compensation, excluding any bonus deferred. The vesting periods are generally the same as the 401(k) plan. Prior to September 1, 2002, Universal's matching contributions were in the form of cash. Since September 1, 2002, Universal's matching contributions related to the Employees' Supplemental Savings Plan have been in the form of Holdings' common stock. During 2003 and 2002, amounts charged to expense relating to the ESSP were insignificant.

9. Commitments and Contingencies

        In the ordinary course of business, Universal is involved in various pending or threatened legal actions. In the opinion of management, the amount of ultimate liability, if any, with respect to these actions will not have a materially adverse effect on Universal's financial position, operating results or cash flows.

        In December 1999, Weatherford Global sold the assets and properties of its Gemini compressor business in Corpus Christi, Texas to GE Packaged Power, L.P., or GEPP. Under the terms of that sale, Weatherford Global

F-46

agreed to purchase from GEPP $38.0 million of compressor components over five years and $3.0 million of parts over three years, and GEPP agreed to provide compressors to Weatherford Global during that time period at negotiated prices. Universal assumed this obligation in connection with our acquisition of Weatherford Global in February 2001. As of March 31, 2003, approximately $25 million of components and approximately $11 million of parts have been purchased from GEPP. We have not satisfied in full our purchase commitment in respect of components for the 2002 contract year under this agreement with GEPP. The unsatisfied portion of this commitment is approximately $5 million. GEPP could assert its right to enforce this obligation. However, GEPP has not indicated any interest to seek to enforce this part of the purchase obligation at this time. The parties have undertaken to renegotiate this agreement.

        Universal has no other commitments or contingent liabilities, which, in the judgment of management, would result in losses that would materially affect Universal's consolidated financial position or operating results.

10. Industry Segments and Geographic Information

        Universal has four principal business segments: Domestic Contract Compression, International Contract Compression, Fabrication and Aftermarket Services. The two contract compression segments provide natural gas compression rental and maintenance services to meet specific customer requirements. The international contract compression segment represents all of Universal's international rental and maintenance operations (including Canada). The fabrication segment provides services related to the design, engineering and assembly of natural gas and air compressors for sale to third parties in addition to those that Universal uses in its contract compression fleet. The aftermarket services segment sells parts and components, and provides maintenance to customers who own compression equipment, customers who utilize equipment in Universal's contract compression fleet and customers who lease equipment from Universal's competitors. Fabrication and aftermarket services revenues presented in the table below include only sales to third parties.

        Universal's reportable segments are strategic business units that offer different products and services. They are managed separately since each business requires different marketing strategies due to customer specifications. Universal evaluates the performance of its reportable segments based on gross profit. Gross profit is defined as total revenue less direct costs. Universal has no material sales between segments, and accordingly, there are no inter-segment revenues to be reported.

F-47

        The following table presents revenues, gross profits and total assets by industry segment for the fiscal years ended March 31, 2003, 2002 and 2001 (in thousands):

		Fiscal Years Ended
		2003		2002		2001
Revenues:
Domestic contract compression		$	265,465	$	267,550	$	126,686
International contract compression			66,505		60,185		22,549
Fabrication			162,678		211,265		61,779
Aftermarket services			130,570		140,989		21,452
	Total	$	625,218	$	679,989	$	232,466
Gross Profit:
Domestic contract compression		$	169,868	$	169,892	$	80,465
International contract compression			53,769		43,411		16,425
Fabrication			16,075		24,347		9,041
Aftermarket services			28,256		30,696		3,476
	Total	$	267,968	$	268,346	$	109,407
Identifiable Assets:
Domestic contract compression		$	1,496,850	$	808,200	$	771,059
International contract compression			209,141		206,610		178,718
Fabrication			103,468		115,877		88,170
Aftermarket services			144,047		146,094		133,587
	Total	$	1,953,506	$	1,276,781	$	1,171,534

        No one customer accounted for more than 10% of net sales for any of the periods presented.

F-48

Geographic Area

        The following table illustrates revenues, gross profit and total assets by geographic locations for the year ended March 31, 2003 (in thousands):

			Fiscal Years Ended
			2003		2002		2001
Revenues:
	United States		$	449,480	$	524,475	$	196,957
	Canada			74,293		91,615		9,495
	Latin America			62,937		55,909		23,826
	Asia Pacific			38,508		7,990		2,188
		Total	$	625,218	$	679,989	$	232,466
Gross Profit:
	United States		$	198,869	$	212,309	$	93,818
	Canada			15,219		17,150		12,547
	Latin America			41,770		32,480		1,437
	Asia Pacific			12,110		6,407		1,605
		Total	$	267,968	$	268,346	$	109,407
Identifiable Assets:
	United States		$	1,702,620	$	1,057,947	$	910,478
	Canada			90,076		85,336		89,578
	Latin America			121,872		102,499		142,449
	Asia Pacific			38,938		30,999		29,029
		Total	$	1,953,506	$	1,276,781	$	1,171,534

11. Selected Quarterly Financial Data (Unaudited)

        Summarized quarterly financial data for the years ended March 31, 2003 and 2002 is as follows (in thousands):

		March 31		December 31		September 30		June 30
2003:
	Revenue	$	154,589	$	164,584	$	154,582	$	151,464
	Gross profit		68,682		66,751		64,816		67,718
	Net income		6,923		8,583		7,659		10,351
2002:
	Revenue	$	187,941	$	177,379	$	174,308	$	140,361
	Gross profit		69,440		71,255		68,129		59,521
	Net income		12,319		13,751		12,793		10,545

12. Extraordinary Losses

        During the year ended March 31, 2001, Universal incurred extraordinary losses of $10.6 million ($6.6 million net of tax) related to its debt restructuring that occurred concurrently with Holdings' initial public offering.

F-49

13. Other Non-Recurring Charges

        During the year ended March 31, 2001, Universal recorded restructuring charges of $8.7 million ($5.1 million net of tax). The primary components of this charge were costs associated with the early termination of a management agreement in the amount of $6.5 million, a consulting agreement in the amount of $0.3 million, estimated severance for Universal employees terminated or identified as transitional in connection with the Weatherford Global merger in the amount of $0.8 million, fees associated with closing of Universal locations in connection with the Weatherford Global merger in the amount of $0.9 million and other related fees in connection with Holdings' initial public offering and concurrent financing transactions in the amount of $0.2 million.

14. Subsequent Events

Tender Offer, Redemption and Senior Notes Financing

        On May 14, 2003, Universal commenced a tender offer to purchase any and all of the outstanding $229.8 million aggregate principal amount of its 9⁷/8% senior discount notes due 2008 at a price equal to 104.938% of the principal amount, plus a premium of 0.412% for notes tendered prior to the early expiration date for the tender offer, which was May 20, 2003. Of the $229.8 million aggregate principal amount of 9⁷/8% senior discount notes outstanding, $169.2 million principal amount was tendered prior to the early expiration date.

        On May 27, 2003, Universal completed a private offering of $175.0 million aggregate principal amount of 7¹/4% senior notes due 2010. Universal used the net proceeds of the new senior notes offering, together with cash on hand, to pay the purchase price, including the premium, plus accrued and unpaid interest, for the 9⁷/8% senior discount notes purchased pursuant to the tender offer.

        On May 27, 2003, pursuant to the terms of the indenture governing the 9⁷/8% senior discount notes, Universal called for redemption the remaining $60.6 million principal amount of 9⁷/8% senior discount notes outstanding. The redemption price will be equal to 104.938% of the principal amount of the 9⁷/8% senior discount notes, plus accrued and unpaid interest to, but not including, the redemption date. The closing of the redemption is scheduled for June 26, 2003 and will be funded with available cash and additional borrowings under Universal's revolving credit facility. As a result of the tender offer and the redemption, Universal expects to retire all of the outstanding 9⁷/8% senior discount notes.

Transfer of Tulsa Fabrication Activities to Houston

        On April 28, 2003, Universal announced the transfer of substantially all of its fabrication activities based in Tulsa, Oklahoma to its existing facility in Houston, Texas. Total consolidation-related costs are expected to be approximately $2 million ($1.2 million after-tax), incurred over the six-month period ending September 30, 2003.

F-50

UNIVERSAL COMPRESSION HOLDINGS, INC.
UNIVERSAL COMPRESSION, INC.

SCHEDULE II—

VALUATION AND QUALIFYING ACCOUNTS

Item	Balance at Beginning of Period		Charged to Costs and Expenses(1)		Collections/ Deductions(2)			Acquired Allowances(3)		Balance at Close of Period
	(In thousands)
2003 Allowance for doubtful accounts	$	7,470	$	4,981	$	(4,305	)		—	$	8,146
2002 Allowance for doubtful accounts	$	2,771	$	2,349	$	(94	)	$	2,444	$	7,470
2001 Allowance for doubtful accounts	$	227	$	235	$	(77	)	$	2,386	$	2,771

(1)

Amounts accrued for uncollectibility

(2)

Uncollectible accounts written off, net of recoveries

(3)

Amounts recorded on balance sheets of acquired companies

Item	Balance at Beginning of Period		Charged to Costs and Expenses(1)		Inventory Write-offs(2)			Acquired Reserves/ (Deductions)(3)			Balance at Close of Period
	(In thousands)
2003 Reserve for inventory obsolescence	$	10,537	$	3,856	$	(3,925	)		—		$	10,468
2002 Reserve for inventory obsolescence	$	17,607	$	475	$	(2,522	)	$	(5,023	)	$	10,537
2001 Reserve for inventory obsolescence	$	1,005		—	$	(587	)	$	17,189		$	17,607

(1)

Amounts accrued for inventory obsolescence

(2)

Amounts written-off for inventory obsolescence

(3)

Amounts recorded related to acquired companies

E-1

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on June 17, 2003.

UNIVERSAL COMPRESSION HOLDINGS, INC.
By:	/s/  STEPHEN A. SNIDER Stephen A. Snider President and Chief Executive Officer

POWER OF ATTORNEY

        KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Stephen A. Snider, Ernie L. Danner, J. Michael Anderson and D. Bradley Childers, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue thereof.

        Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons in the capacities indicated on June 17, 2003.

Signature	Title
/s/  STEPHEN A. SNIDER Stephen A. Snider	President, Chief Executive Officer and Director (Principal Executive Officer)
/s/  J. MICHAEL ANDERSON J. Michael Anderson	Senior Vice President and Chief Financial Officer (Principal Financial Officer)
/s/  DENNIS S. BALDWIN Dennis S. Baldwin	Controller (Principal Accounting Officer)
/s/  ERNIE L. DANNER Ernie L. Danner	Executive Vice President and Director
/s/  THOMAS C. CASE Thomas C. Case	Director
/s/  JANET F. CLARK Janet F. Clark	Director

II-1

/s/  BERNARD J. DUROC-DANNER Bernard J. Duroc-Danner	Director
/s/  URIEL E. DUTTON Uriel E. Dutton	Director
/s/  LISA W. RODRIGUEZ Lisa W. Rodriguez	Director
/s/  WILLIAM M. PRUELLAGE William M. Pruellage	Director
/s/  SAMUEL URCIS Samuel Urcis	Director

II-2

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on June 17, 2003.

UNIVERSAL COMPRESSION, INC.
By:	/s/  STEPHEN A. SNIDER Stephen A. Snider President and Chief Executive Officer

        Pursuant to the requirements of the Securities Exchange act of 1934, this report has been signed by the following persons in the capacities indicated on June 17, 2003.

Signature	Title
/s/  STEPHEN A. SNIDER Stephen A. Snider	President, Chief Executive Officer and Director (Principal Executive Officer)
/s/  J. MICHAEL ANDERSON J. Michael Anderson	Senior Vice President and Chief Financial Officer (Principal Financial Officer)
/s/  DENNIS S. BALDWIN Dennis S. Baldwin	Controller (Principal Accounting Officer)
/s/  ERNIE L. DANNER Ernie L. Danner	Director

II-3

UNIVERSAL COMPRESSION HOLDINGS, INC.
CERTIFICATION PURSUANT TO
17 CFR 240.13a-14
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen A. Snider, certify that:

        1.     I have reviewed this annual report on Form 10-K of Universal Compression Holdings, Inc. (the "registrant");

        2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

        3.     Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

        4.     The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;



b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and



c)

presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

        5.     The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors:

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and



b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

        6.     The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 17, 2003
/s/  STEPHEN A. SNIDER Name: Stephen A. Snider
Title: Chief Executive Officer

UNIVERSAL COMPRESSION HOLDINGS, INC.
CERTIFICATION PURSUANT TO
17 CFR 240.13a-14
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, J. Michael Anderson, certify that:

        1.     I have reviewed this annual report on Form 10-K of Universal Compression Holdings, Inc. (the "registrant");

        2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

        3.     Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

        4.     The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;



b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and



c)

presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

        5.     The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors:

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and



b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

        6.     The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 17, 2003
/s/  J. MICHAEL ANDERSON Name: J. Michael Anderson
Title: Chief Financial Officer

UNIVERSAL COMPRESSION, INC.
CERTIFICATION PURSUANT TO
17 CFR 240.15d-14
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen A. Snider, certify that:

        1.     I have reviewed this annual report on Form 10-K of Universal Compression, Inc. (the "registrant");

        2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

        3.     Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

        4.     The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;



b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and



c)

presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

        5.     The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors:

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and



b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

        6.     The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 17, 2003
/s/  STEPHEN A. SNIDER Name: Stephen A. Snider
Title: Chief Executive Officer

UNIVERSAL COMPRESSION, INC.
CERTIFICATION PURSUANT TO
17 CFR 240.15d-14
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, J. Michael Anderson, certify that:

        1.     I have reviewed this annual report on Form 10-K of Universal Compression, Inc. (the "registrant");

        2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

        3.     Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

        4.     The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;



b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and



c)

presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

        5.     The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors:

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and



b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

        6.     The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 17, 2003
/s/  J. MICHAEL ANDERSON Name: J. Michael Anderson
Title: Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
2.1	Agreement and Plan of Merger dated October 23, 2000, by and among Universal Compression Holdings, Inc., Universal Compression, Inc., Weatherford International, Inc., WEUS Holding, Inc. and Enterra Compression Company (incorporated by reference to Exhibit 10.1 of Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on October 26, 2000).
3.1	Restated Certificate of Incorporation of Universal Compression Holdings, Inc. (incorporated by reference to Exhibit 3.1 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).
3.2	Restated Bylaws of Universal Compression Holdings, Inc. (incorporated by reference to Exhibit 3.2 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).
	97/8% Senior Discount Notes due 2008
4.1	Indenture, dated February 20, 1998, between Universal Compression, Inc. (as successor to TW Acquisition Corporation) and the United States Trust Company of New York, as Trustee, with respect to the 97/8% Senior Discount Notes due 2008 (incorporated by reference to Exhibit 4.3 of Universal Compression, Inc.'s Registration Statement on Form S-4 filed with the SEC on March 19, 1998 (File No. 333-48279)).
4.2	First Supplemental Indenture, dated May 9, 2000, between Universal Compression, Inc. and United States Trust Company of New York, as Trustee, with respect to the 97/8% Senior Discount Notes due 2008 (incorporated by reference to Exhibit 4.7 of Amendment No. 2, filed with the SEC on May 22, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).
4.3	Second Supplemental Indenture, dated May 30, 2000, by and among Universal Compression, Inc., Universal Compression Holdings, Inc. and United States Trust Company of New York, as Trustee, with respect to the 97/8% Senior Discount Notes due 2008 (incorporated by reference to Exhibit 4.3 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).
4.4	Third Supplemental Indenture, dated October 15, 2000, by and among Universal Compression, Inc., Gas Compression Finance Corporation, G.C.S. Distributing L.L.C., Gas Compression Realty L.L.C. and United States Trust Company of New York, as Trustee, with respect to the 97/8% Senior Discount Notes due 2008 (incorporated by reference to Exhibit 4.4 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).
4.5	Specimen of Universal Compression, Inc.'s (as successor to TW Acquisition Corporation) 97/8% Senior Discount Notes due 2008 (incorporated by reference to Exhibit 4.2 of Universal Compression, Inc.'s Registration Statement on Form S-4 filed with the SEC on March 19, 1998 (File No. 333-48279)).
4.6*	Notice of Redemption of Universal Compression, Inc.'s 97/8% Senior Discount Notes due 2008, dated May 27, 2003.
	87/8% Senior Secured Notes due 2008
4.7	Indenture, dated February 9, 2001, among BRL Universal Equipment 2001 A, L.P. and BRL Universal Equipment Corp., as Issuers, and The Bank of New York, as Indenture Trustee, with respect to the 87/8% Senior Secured Notes due 2008 (incorporated by reference to Exhibit 10.4 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000).
4.8	First Supplemental Indenture, dated September 11, 2001, among BRL Universal Equipment 2001 A, L.P. and BRL Universal Equipment Corp., as Issuers, and The Bank of New York, as Indenture Trustee, with respect to the 87/8% Senior Secured Notes due 2008 (incorporated by reference to Exhibit 4.1 of Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on October 24, 2001).
	ABS Operating Lease Facility

4.9	Indenture, dated December 31, 2002, between BRL Universal Compression Funding I 2002, L.P., as Issuer, and Wells Fargo Bank Minnesota, National Association, as Indenture Trustee, with respect to the ABS operating lease facility (incorporated by reference to Exhibit 4.1 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
4.10	Series 2002-1 Supplement, dated December 31, 2002, to Indenture, dated December 31, 2002, between BRL Universal Compression Funding I 2002, L.P. and Wells Fargo Bank Minnesota, National Association, as Indenture Trustee, with respect to the ABS operating lease facility (incorporated by reference to Exhibit 4.2 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
	71/4% Senior Notes due 2010
4.11*	Indenture, dated May 27, 2003, by and between Universal Compression, Inc., as Issuer, and The Bank of New York, as Trustee.
4.12*	Specimen of Universal Compression, Inc.'s 71/4% Senior Notes due 2010 (included as Exhibit 1 to Exhibit 4.11 hereof and incorporated herein by reference).
	Senior Secured Notes Operating Lease Facility
10.1	Equipment Lease Agreement, dated February 9, 2001, between BRL Universal Equipment 2001 A, L.P., as Lessor, and Universal Compression, Inc., as Lessee, with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.2 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-4 filed with the SEC on March 20, 2001 (File No. 333-57302)).
10.2	First Amendment to Equipment Lease Agreement, dated October 15, 2001, between BRL Universal Equipment 2001 A, L.P., as Lessor, and Universal Compression, Inc., as Lessee, with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.1 of Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on October 24, 2001).
10.3	Second Amendment to Equipment Lease Agreement, dated November 20, 2002, between BRL Universal Equipment 2001 A, L.P., as Lessor, and Universal Compression, Inc., as Lessee, with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.2 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
10.4	First Amended and Restated Participation Agreement, dated October 15, 2001, among Universal Compression, Inc., as Lessee; Universal Compression Holdings, Inc., as Guarantor; BRL Universal Compression Equipment 2001 A, L.P., as Lessor; the financial institutions listed on the signature pages as Tranche B Lenders; The Bank of New York, not in its individual capacity but as Indenture Trustee, Paying Agent, Transfer Agent and Registrar for the Tranche A Noteholders; BRL Universal Equipment Management, Inc., as Lessor General Partner; Bankers Trust Company, as Administrative Agent and Collateral Agent for the Tranche B Lenders and Indenture Trustee on behalf of the Tranche A Noteholders; Deutsche Banc Alex. Brown Inc., as Arranger; The Bank of Nova Scotia, as Syndicate Agent for Tranche B Lenders; Bank One, N.A., as Documentation Agent for Tranche B Lenders; and First Union National Bank, as Managing Agent; with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.2 of Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on October 24, 2001).
10.5	Participation Agreement Supplement No. 1, dated October 23, 2001, among Universal Compression, Inc., as Lessee, Universal Compression Holdings, Inc., as Guarantor, BRL Universal Equipment 2001 A, L.P., as Lessor, and The Bank of New York, not in its individual capacity but as Indenture Trustee for the Tranche A Noteholders, with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.3 of Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on October 24, 2001).

10.6	First Amendment to First Amended and Restated Participation Agreement, dated November 20, 2002, among Universal Compression, Inc., BRL Universal Equipment 2001 A, L.P. and Deutsche Bank Trust Company Americas, with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.1 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
10.7	Tranche B Loan Agreement, dated February 9, 2001, among BRL Universal Equipment 2001 A, L.P., as Borrower, Bankers Trust Company, as Administrative Agent and Collateral Agent, and the Tranche B Lenders, with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.4 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-4 filed with the SEC on March 20, 2001 (File No. 333-57302) ).
10.8	First Amendment to Tranche B Loan Agreement, dated October 15, 2001, among BRL Universal Equipment 2001 A, L.P. and Bankers Trust Company, as Administrative Agent for Tranche B Lenders and as Collateral Agent, with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.4 of Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on October 24, 2001).
10.9	Engagement and Indemnity Letter, dated February 9, 2001 among Universal Compression, Inc., Universal Compression Holdings, Inc., Deutsche Banc Alex. Brown Inc., First Union Securities, Inc., Goldman Sachs & Co., Banc One Capital Markets, Inc., Scotia Capital (USA), Inc., BRL Universal Equipment 2001 A, L.P., and BRL Universal Equipment Corp., with respect to the senior secured notes operating lease facility (incorporated by reference to Exhibit 10.12 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000).
	ABS Lease Facility
10.10	Master Equipment Lease Agreement, dated December 31, 2002, between BRL Universal Compression Funding I 2002, L.P., as Head Lessor, and UCO Compression 2002 LLC, as Head Lessee, with respect to the ABS operating lease facility (incorporated by reference to Exhibit 10.3 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
10.11	Guaranty, dated December 31, 2002, made by Universal Compression Holdings, Inc. for the benefit of UCO Compression 2002 LLC, BRL Universal Compression Funding I 2002, L.P. and Wells Fargo Bank Minnesota, N.A., with respect to the ABS operating lease facility (incorporated by reference to Exhibit 10.4 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
10.12	Management Agreement, dated December 31, 2002, among Universal Compression, Inc., UCO Compression 2002 LLC and BRL Universal Compression Funding I 2002, L.P., with respect to the ABS operating lease facility (incorporated by reference to Exhibit 10.5 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
10.13	Back-up Management Agreement, dated December 31, 2002, among Caterpillar Inc., UCO Compression 2002 LLC, BRL Universal Compression Funding I 2002, L.P. and Universal Compression, Inc., with respect to the ABS operating lease facility (incorporated by reference to Exhibit 10.6 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
10.14	Head Lessee Security Agreement, dated December 31, 2002, between UCO Compression 2002 LLC, as Grantor and BRL Universal Compression Funding I 2002, L.P., as Secured Party, with respect to the ABS operating lease facility (incorporated by reference to Exhibit 10.7 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
10.15	Intercreditor and Collateral Agency Agreement, dated December 31, 2002, among Universal Compression, Inc., UCO Compression 2002 LLC and BRL Universal Compression Funding I 2002, L.P., Wells Fargo Bank Minnesota, National Association, Wachovia Bank, National Association and Bank One, N.A., with respect to the ABS operating lease facility (incorporated by reference to Exhibit 10.8 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).

10.16	Insurance and Indemnity Agreement, dated December 31, 2002, by and among Ambac Assurance Corporation, BRL Universal Compression Funding I 2002, L.P., Universal Compression, Inc., UCO Compression 2002 LLC and Wells Fargo Bank Minnesota, N.A., with respect to the ABS operating lease facility (incorporated by reference to Exhibit 10.9 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002).
	Bank Agreements
10.17	Senior Secured Revolving Credit Agreement, dated February 9, 2001, among Universal Compression, Inc., as Borrower, First Union National Bank, as Administrative Agent, Bank One, N.A., as Syndication Agent, and the lenders signatory thereto (incorporated by reference to Exhibit 10.6 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-4 filed with the SEC on March 20, 2001 (File No. 333-57302)).
10.18	First Amendment and Supplement to Senior Secured Revolving Credit Agreement, dated October 15, 2001, among Universal Compression, Inc., as Borrower, First Union National Bank, as Administrative Agent, Bank One, N.A., as Syndication Agent, and the lenders signatory thereto (incorporated by reference to Exhibit 10.13 of Universal Compression Holdings, Inc.'s Annual Report on Form 10-K for the fiscal year ended March 31, 2002).
10.19	Second Amendment and Supplement to Senior Secured Revolving Credit Agreement, dated September 30, 2002, among Universal Compression, Inc., as Borrower, Wachovia Bank, National Association, formerly First Union National Bank, as Administrative Agent, Bank One, N.A., as Syndication Agent, and the lenders signatory thereto (incorporated by reference to Exhibit 10.3 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002).
10.20	Guaranty and Collateral Agreement made by Universal Compression Holdings, Inc. and Universal Compression, Inc. and in favor of First Union National Bank, as Administrative Agent, dated February 9, 2001 (incorporated by reference to Exhibit 10.8tfo Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000).
10.21	Security Agreement (Pledge and Assignment), dated February 9, 2001, between Universal Compression International, Inc. and First Union National Bank, as Administrative Agent (incorporated by reference to Exhibit 10.9 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000).
	Executive Compensation Plans and Arrangements
10.22†	Universal Compression Holdings, Inc. Incentive Stock Option Plan (incorporated by reference to Exhibit 10 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the period ended September 30, 1998).
10.23†	Amendment Number One to Incentive Stock Option Plan, dated April 20, 2000 (incorporated by reference to Exhibit 10.3 of Amendment No. 2, filed with the SEC on May 22, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).
10.24†	Amendment Number Two to Incentive Stock Option Plan, dated May 15, 2000 (incorporated by reference to Exhibit 10.4 of Amendment No. 2, filed with the SEC on May 22, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).
10.25†	Amendment Number Three to Incentive Stock Option Plan, dated November 27, 2000 (incorporated by reference to Exhibit 4.7 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 filed with the SEC on February 9, 2001 (File No. 333-55260)).
10.26†	Amendment Number Four to Incentive Stock Option Plan, dated August 15, 2002 (incorporated by reference to Exhibit 4.8 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 filed with the SEC on September 12, 2002 (File No. 333-99473)).
10.27†	Form of Stock Option Agreement under the Incentive Stock Option Plan for outside directors of Universal Compression Holdings, Inc.'s Board of Directors (incorporated by reference to Exhibit 10.30 of Universal Compression Holdings, Inc.'s Annual Report on Form 10-K for the fiscal year ended March 31, 2002).
10.28*†	Form of Stock Option Agreement under the Incentive Stock Option Plan for employees.
10.29†	Universal Compression Holdings, Inc. Restricted Stock Plan for Executive Officers (incorporated by reference to Exhibit 4.2 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 filed with the SEC on August 17, 2001 (File No. 333-67784)).

10.30†	Form of Restricted Stock Agreement under the Restricted Stock Plan for Executive Officers (incorporated by reference to Exhibit 10.8 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001).
10.31†	Universal Compression Holdings, Inc. Directors' Stock Plan (incorporated by reference to Exhibit 4.3 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 filed with the SEC on August 17, 2001 (File No. 333-67784)).
10.32†	Universal Compression, Inc. Employees' Supplemental Savings Plan (incorporated by reference to Exhibit 10.42 of Universal Compression Holdings, Inc.'s Annual Report on Form 10-K for the year ended March 31, 2001).
10.33†	Amendment Number One to Employees' Supplemental Savings Plan, dated January 1, 2002 (incorporated by reference to Exhibit 10.53 of Universal Compression Holdings, Inc.'s Annual Report on Form 10-K for the year ended March 31, 2002).
10.34†	Amendment Number Two to Employees' Supplemental Savings Plan, dated August 15, 2002 (incorporated by reference to Exhibit 4.13 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 filed with the SEC on September 12, 2002 (File No. 333-99473)).
10.35*†	Amendment Number Three to Employees' Supplemental Savings Plan, dated September 1, 2002.
10.36†	Universal Compression Holdings, Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.1 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 filed with the SEC on August 17, 2001 (File No. 333-67784)).
10.37†	Amendment Number One to Employee Stock Purchase Plan, dated December 20, 2001 (incorporated by reference to Exhibit 10.56 of Universal Compression Holdings, Inc.'s Annual Report on Form 10-K for the year ended March 31, 2002).
10.38†	Form of Indemnification Agreement for executive officers and directors of Universal Compression Holdings, Inc. (incorporated by reference to Exhibit 10.27 of Amendment No. 1, filed with the SEC on May 3, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).
10.39†	Form of Change of Control Agreement for executive officers of Universal Compression Holdings, Inc. (incorporated by reference to Exhibit 10.4 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002).
10.40†	Letter dated March 15, 2001, with respect to certain retirement benefits to be provided to Stephen A. Snider (incorporated by reference to Exhibit 10.43 of Universal Compression Holdings, Inc.'s Annual Report on Form 10-K for the year ended March 31, 2001).
10.41*†	Involuntary Termination Agreement, dated October 25, 2001, by and between Universal Compression, Inc. and Richard Leong.
	Registration Rights Agreements
10.42	Registration Rights Agreement, dated February 9, 2001, by and between Universal Compression Holdings, Inc. and WEUS Holding, Inc. (incorporation by reference to Exhibit 4.3 to Universal Compression Holdings, Inc.'s Quarterly Report of Form 10-Q for the quarter ended December 31, 2000).
10.43*	Registration Rights Agreement, dated May 27, 2003, by and among Universal Compression, Inc. and the parties listed as signatories thereto, with respect to Universal Compression, Inc.'s 71/4% Senior Notes due 2010.
10.44	Registration Rights Agreement, dated February 20, 1998 by and among Universal Compression Holdings, Inc., Castle Harlan Partners III, L.P. and each other party listed as signatory thereto (incorporated by reference to Exhibit 10.14 to Universal Compression Holdings, Inc.'s Registration Statement on Form S-4 dated March 19, 1998 (File No. 333-48283)).
10.45	Form of Instruments of Accession to Registration Rights Agreement for each of Richard W. FitzGerald and Valerie L. Banner (incorporated by reference to Exhibit 4.10 to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).
10.46	Instrument of Accession to Registration Rights Agreement, dated April 28, 2000, for Energy Spectrum Partners LP (incorporated by reference to Exhibit 10.19 to Amendment No. 2 dated May 22, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).
21.1*	List of Subsidiaries.

23.1*	Consent of Deloitte & Touche LLP.
24.1*	Powers of attorney (set forth on the signature page hereof).
99.1*	Certifications of the Chief Executive Officer and Chief Financial Officer of Universal Compression Holdings, Inc. Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2*	Certifications of the Chief Executive Officer and Chief Financial Officer of Universal Compression, Inc. Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*

Filed herewith.

†

Management Contract or Compensatory Plan or Arrangement.

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Table of Contents
PART I
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

ITEM 1. Business
ITEM 2. Properties
ITEM 3. Legal Proceedings
ITEM 4. Submission of Matters to a Vote of Security Holders

PART II

ITEM 5. Market for Registrants' Common Equity and Related Stockholder Matters
ITEM 6. Selected Financial Data

SELECTED HISTORICAL FINANCIAL DATA UNIVERSAL COMPRESSION HOLDINGS, INC.
SELECTED HISTORICAL FINANCIAL DATA UNIVERSAL COMPRESSION, INC.

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RISK FACTORS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS UNIVERSAL COMPRESSION, INC.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 8. Financial Statements and Supplementary Data
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

PART III

ITEM 10. Directors and Executive Officers of the Company
ITEM 11. Executive Compensation
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
ITEM 13. Certain Relationships and Related Transactions
ITEM 14. Controls and Procedures
ITEM 15. Principal Accountant Fees and Services

PART IV

ITEM 16. Exhibits, Financial Statement Schedules and Reports On Form 8-K

EXHIBIT INDEX
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
UNIVERSAL COMPRESSION HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (In thousands)
UNIVERSAL COMPRESSION HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
UNIVERSAL COMPRESSION HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
UNIVERSAL COMPRESSION HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
UNIVERSAL COMPRESSION, INC. CONSOLIDATED BALANCE SHEETS (In thousands)
UNIVERSAL COMPRESSION, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands)
UNIVERSAL COMPRESSION, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY For the years ended March 31, 2003, 2002 and 2001 (In thousands)
UNIVERSAL COMPRESSION, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
UNIVERSAL COMPRESSION, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNIVERSAL COMPRESSION HOLDINGS, INC. UNIVERSAL COMPRESSION, INC. SCHEDULE II— VALUATION AND QUALIFYING ACCOUNTS
SIGNATURES
POWER OF ATTORNEY
SIGNATURES
UNIVERSAL COMPRESSION HOLDINGS, INC. CERTIFICATION PURSUANT TO 17 CFR 240.13a-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
UNIVERSAL COMPRESSION HOLDINGS, INC. CERTIFICATION PURSUANT TO 17 CFR 240.13a-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
UNIVERSAL COMPRESSION, INC. CERTIFICATION PURSUANT TO 17 CFR 240.15d-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
UNIVERSAL COMPRESSION, INC. CERTIFICATION PURSUANT TO 17 CFR 240.15d-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT INDEX

EX-4.6

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Exhibit 4.6

UNIVERSAL COMPRESSION, INC.

Notice of Redemption of 9⁷/8% Senior Discount Notes due 2008, Series B

        CUSIP No.: 913433AB4

        Notice of redemption is hereby given with respect to all of the 9⁷/8% Senior Discount Notes due 2008, Series B (CUSIP No.: 913433AB4) (the "Notes), of Universal Compression, Inc. (the "Company"). Pursuant to Section 3.04 of the Indenture between TW Acquisition Corporation (of which the Company is its successor) and United States Trust Company of New York, as trustee (of which The Bank of New York is its successor), dated as of February 20, 1998, as amended (the "Indenture"), the following information is provided:

(1)

the Redemption Date is June 26, 2003 (the "Redemption Date");



(2)

the redemption price to be paid is $1,049.38 per $1,000 face amount of the Notes, plus accrued interest;



(3)

the name of the Paying Agent is The Bank of New York (the "Paying Agent");



(4)

the subparagraph of the Notes pursuant to which such redemption is being made is Subparagraph 5;



(5)

the Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price plus accrued interest

By Mail:	By Hand:
The Bank of New York P. O. Box 396 East Syracuse, NY 13057 Attn: Fiscal Agencies Dept./ Bond Redemption Unit	The Bank of New York 111 Sanders Creek Parkway East Syracuse, NY 13057 Attn: Fiscal Agency Dept./ Bond Redemption Unit

;and

(6)

unless the Company defaults in making the redemption payment, interest on the Notes or applicable portions thereof called for redemption ceases to accrue on and after the Redemption Date, and the only remaining right of the holders of such Notes is to receive payment of the redemption price plus accrued interest as of the Redemption Date upon surrender to the Paying Agent of the Notes redeemed.

        No representation is made as to the accuracy of the CUSIP numbers listed in this notice or printed on the Notes.

NOTICE

        Withholding of 30% of gross redemption proceeds of any payment made within the United States may be required by the Economic Growth and Tax Relief Reconciliation Act of 2001 (the "Act") unless the Paying Agent has the correct taxpayer identification number (social security or employer identification number) or exemption certificate of the payee. Please furnish a properly completed Form W-9 or exemption certificate or equivalent when presenting your securities.

DATED: May 27, 2003

UNIVERSAL COMPRESSION, INC.
By:	/s/  J. MICHAEL ANDERSON J. Michael Anderson Senior Vice President and Chief Financial Officer

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Exhibit 4.11

UNIVERSAL COMPRESSION, INC.

AND

THE BANK OF NEW YORK,
Trustee

INDENTURE

Dated as of May 27, 2003

7¹/4% SENIOR NOTES DUE 2010

TABLE OF CONTENTS

ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION			1
	SECTION 1.1	Definitions	1
	SECTION 1.2	Incorporation by Reference of Trust Indenture Act	19
	SECTION 1.3	Rules of Construction	19
ARTICLE II THE NOTES			20
	SECTION 2.1	Form and Dating.	20
	SECTION 2.2	Execution and Authentication	20
	SECTION 2.3	Registrar and Paying Agent	21
	SECTION 2.4	Paying Agent to Hold Money in Trust	21
	SECTION 2.5	Noteholder Lists	21
	SECTION 2.6	Transfer and Exchange	22
	SECTION 2.7	Replacement Notes	22
	SECTION 2.8	Outstanding Notes	22
	SECTION 2.9	Temporary Notes	22
	SECTION 2.10	Cancellation	22
	SECTION 2.11	Defaulted Interest	22
	SECTION 2.12	CUSIP Numbers	23
	SECTION 2.13	Issuance of Add-Onl Notes	23
ARTICLE III SATISFACTION AND DISCHARGE			23
	SECTION 3.1	Satisfaction and Discharge of Indenture	23
	SECTION 3.2	Application of Trust Money	24
	SECTION 3.3	Repayment to Company	24
ARTICLE IV REMEDIES			24
	SECTION 4.1	Events of Default	24
	SECTION 4.2	Acceleration of Maturity; Rescission and Annulment	26
	SECTION 4.3	Collection of Indebtedness and Suits for Enforcement by Trustee	26
	SECTION 4.4	Trustee May File Proofs of Claim	27
	SECTION 4.5	Trustee May Enforce Claims Without Possession of Notes	27
	SECTION 4.6	Application of Money Collected	28
	SECTION 4.7	Limitation on Suits	28
	SECTION 4.8	Unconditional Right of Holders to Receive Principal, Premium and Interest	28
	SECTION 4.9	Restoration of Rights and Remedies	29
	SECTION 4.10	Rights and Remedies Cumulative	29
	SECTION 4.11	Delay or Omission Not Waiver	29
	SECTION 4.12	Control by Holders	29
	SECTION 4.13	Waiver of Past Defaults	29
	SECTION 4.14	Waiver of Stay, Extension or Usury Laws	30
	SECTION 4.15	Undertaking for Costs	30
ARTICLE V THE TRUSTEE			30
	SECTION 5.1	Notice of Defaults	30
	SECTION 5.2	Certain Rights of Trustee	30
	SECTION 5.3	Trustee Not Responsible for Recitals or Issuance of Notes	31
	SECTION 5.4	May Hold Notes	32
	SECTION 5.5	Money Held in Trust	32

	SECTION 5.6	Compensation and Reimbursement	32
	SECTION 5.7	Corporate Trustee Required; Eligibility	33
	SECTION 5.8	Conflicting Interests	33
	SECTION 5.9	Resignation and Removal; Appointment of Successor	33
	SECTION 5.10	Acceptance of Appointment by Successor	34
	SECTION 5.11	Merger, Conversion, Consolidation or Succession to Business	35
	SECTION 5.12	Preferential Collection of Claims Against Company	35
ARTICLE VI HOLDERS' LISTS AND REPORTS BY TRUSTEE			35
	SECTION 6.1	Disclosure of Names and Addresses of Holders	35
	SECTION 6.2	Reports By Trustee	35
ARTICLE VII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE			36
	SECTION 7.1	Company May Consolidate, etc., Only on Certain Terms	36
	SECTION 7.2	Successor Substituted	36
ARTICLE VIII SUPPLEMENTAL INDENTURES			37
	SECTION 8.1	Supplemental Indentures without Consent of Holders	37
	SECTION 8.2	Supplemental Indentures with Consent of Holders	37
	SECTION 8.3	Execution of Supplemental Indentures	38
	SECTION 8.4	Effect of Supplemental Indentures	38
	SECTION 8.5	Conformity with Trust Indenture Act	38
	SECTION 8.6	Reference in Notes to Supplemental Indentures	38
	SECTION 8.7	Notice of Supplemental Indentures	39
ARTICLE IX COVENANTS			39
	SECTION 9.1	Payment of Principal, Premium, if any, and Interest	39
	SECTION 9.2	Maintenance of Office or Agency	39
	SECTION 9.3	Money for Note Payments to Be Held in Trust	39
	SECTION 9.4	Corporate Existence	40
	SECTION 9.5	Payment of Taxes and Other Claims	40
	SECTION 9.6	Maintenance of Properties	41
	SECTION 9.7	Insurance	41
	SECTION 9.8	Statement by Officers as to Default	41
	SECTION 9.9	Reports	42
	SECTION 9.10	Limitation on Liens	42
	SECTION 9.11	Waiver of Certain Covenants	42
	SECTION 9.12	Limitation of Guarantees by Restricted Subsidiaries	42
	SECTION 9.13	Limitation on Restricted Payments.	43
	SECTION 9.14	Limitation on Incurrence of Additional Indebtedness	47
	SECTION 9.15	Change of Control.	48
	SECTION 9.16	Limitation on Asset Sales.	49
	SECTION 9.17	Limitation on Transactions with Affiliates.	51
	SECTION 9.18	Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries.	53

ii

	SECTION 9.19	Limitation on Preferred Stock of Restricted Subsidiaries.	54
	SECTION 9.20	Limitation on Conduct of Business.	54
ARTICLE X REDEMPTION OF NOTES			54
	SECTION 10.1	Redemption and Repurchase.	54
	SECTION 10.2	Election to Redeem; Notice to Trustee	54
	SECTION 10.3	Selection by Trustee of Notes to Be Redeemed	55
	SECTION 10.4	Notice of Redemption	55
	SECTION 10.5	Deposit of Redemption Price	56
	SECTION 10.6	Securities Payable on Redemption Date	56
	SECTION 10.7	Notes Redeemed in Part	56
	SECTION 10.8	Optional Redemption; Optional Redemption Unpon Equity Offerings	56
ARTICLE XI DEFEASANCE AND COVENANT DEFEASANCE			57
	SECTION 11.1	Company's Option to Effect Defeasance or Covenant Defeasance	57
	SECTION 11.2	Defeasance and Discharge.	57
	SECTION 11.3	Covenant Defeasance.	58
	SECTION 11.4	Conditions to Defeasance or Covenant Defeasance.	58
	SECTION 11.5	Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions.	59
	SECTION 11.6	Reinstatement.	60
ARTICLE XII CONVERSION			60
	SECTION 12.1	No Conversion	60
ARTICLE XIII MISCELLANEOUS			61
	SECTION 13.1	Compliance Certificates and Opinions	61
	SECTION 13.2	Form of Documents Delivered to Trustee	61
	SECTION 13.3	Acts of Holders	61
	SECTION 13.4	Notices, etc. to Trustee and Company	62
	SECTION 13.5	Notice to Holders; Waiver	63
	SECTION 13.6	Effect of Headings and Table of Contents	63
	SECTION 13.7	Successors and Assigns	63

iii

	SECTION 13.8	Separability Clause	63
	SECTION 13.9	Benefits of Indenture	63
	SECTION 13.10	Governing Law; Trust Indenture Act Controls	63
	SECTION 13.11	Legal Holidays	64
	SECTION 13.12	No Recourse Against Others	64
	SECTION 13.13	Duplicate Originals	64
	SECTION 13.14	No Adverse Interpretation of Other Agreements	64
ARTICLE XIV GUARANTEES			64
	SECTION 14.1	Unconditional Guarantee	64
	SECTION 14.2	Guarantors May Consolidate, etc. on Certain Terms	65
	SECTION 14.3	Release of a Guarantor	66
	SECTION 14.4	Limitation of Guarantor's Liability	66
	SECTION 14.5	Contribution	66
	SECTION 14.6	Execution and Delivery of Evidence of Guarantee	66
	SECTION 14.7	Severability	67
	SECTION 14.8	Payment	67
Rule 144A/Regulation S Appendix    App.1
Exhibit 1—Form of Initial Notes			I-1
Exhibit A-1—Form of Exchange Note or Private Exchange Note			A-1
Exhibit B—Form of Supplemental Indenture			B-1

iv

CROSS-REFERENCE SHEET

Provisions of the Trust Indenture Act of 1939
and the Indenture

Trust Indenture Act Section		Indenture Section
§310	(a)(1)	5.7
	(a)(2)	5.7
	(b)	5.4, 5.8, 5.9(d)(i)
§311		5.4
§312		6.1
	(b)	6.1
§313		1.1
	(a)	6.2
	(b)	6.2
	(c)	6.2
§314	(a)(4)	9.8(a), 9.9
	(c)	13.1
	(e)	13.1
§315	(a)	5.2
	(b)	5.1
§315	(c)	5.2
	(d)	5.2
	(e)	5.9(d)
§316
	(a)(1)(B)	9.11
	(c)	13.3(d)
§318	(c)	13.10(b)

This Cross-Reference Sheet shall not, for any purpose,
be deemed to be a part of the Indenture.

v

        INDENTURE, dated as of May 27, 2003 between UNIVERSAL COMPRESSION, INC., a Texas corporation (hereinafter called the "Company"), and THE BANK OF NEW YORK, a New York banking corporation, trustee (hereinafter called the "Trustee").

RECITALS OF THE COMPANY

        WHEREAS, the Company desires to issue 7¹/4% Senior Notes due 2010, the issuance of which was authorized by or pursuant to resolution of the Board of Directors of the Company; and

        WHEREAS, all things necessary have been done to make the Notes, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, and to make this Indenture a valid agreement of the Company, in accordance with their and its terms;

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

        For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Notes, as follows:

ARTICLE I

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

 SECTION 1.1    Definitions.

        "ABS Lease Facility" means the operating lease facility for which UCO Compression is the lessee under the Master Equipment Lease Agreement, dated as of December 31, 2002, between UCO Compression and BRL Universal Compression Funding I 2002, L.P., a Delaware limited partnership, and the agreements related thereto which collectively provide financing capacity of up to $200 million for UCO Compression as such agreements may be amended, restated, modified, renewed or supplemented.

        "ABS Refinancing Indebtedness" means any Refinancing by the Company or any Restricted Subsidiary of Indebtedness specified in clause (v) of the definition of Indebtedness that does not (a) result in an increase in the aggregate principal amount of Indebtedness being Refinanced reflected, as of the date of the proposed Refinancing, on the Company's consolidated balance sheet as of the end of the most recent fiscal quarter prior to such Refinancing (plus accrued interest and plus the amount of any premium and reasonable fees, expenses and other amounts payable by the Company or any of the Restricted Subsidiaries in connection with such Refinancing) or (b) create Indebtedness with (i) a final maturity earlier than six months following the final maturity of the Notes or (ii) an effective interest rate per annum that is higher than the interest rate per annum on the Notes.

        "Acceleration Notice" has the meaning specified in Section 4.2.

        "Acquired Indebtedness" means Indebtedness of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Company or at the time it merges or consolidates with the Company or any of the Company's Subsidiaries or assumed in connection with the acquisition of assets from such Person and in each case not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such acquisition, merger or consolidation.

        "Act," when used with respect to any Holder, has the meaning specified in Section 13.3.

        "Add-On Notes" means, subject to the Company's compliance with Section 9.14, 7¹/4% Senior Notes due 2010 issued from time to time after the Issue Date under the terms of this Indenture (other than pursuant to Section 2.6, 2.7, 2.9 or 10.7 of this Indenture and other than Exchange Notes or Private Exchange Notes issued pursuant to an exchange offer for other Notes outstanding under this Indenture).

        "Adjusted Net Assets" of a Guarantor at any date shall mean the amount by which the fair value of the Properties of such Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under the Guarantee of such Guarantor at such date.

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        "Affiliate" means, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative of the foregoing.

        "Agent Members" has the meaning specified in Section 2.1(b) of the Appendix.

        "Appendix" has the meaning specified in Section 2.1.

        "Asset Acquisition" means (a) an Investment by the Company or any Restricted Subsidiary of the Company in any other Person pursuant to which such Person shall become a Restricted Subsidiary of the Company or any Restricted Subsidiary of the Company, or shall be merged with or into the Company or any Restricted Subsidiary of the Company, or (b) the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person (other than a Restricted Subsidiary of the Company) which constitute all or substantially all of the assets of such Person or comprise any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business.

        "Asset Sale" means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business, sales of equipment pursuant to purchase options entered into by the Company or a Restricted Subsidiary of the Company in the ordinary course of business, sales of inventory in the ordinary course of business or payments or dispositions of cash or Cash Equivalents in the ordinary course of business), assignment or other transfer for value by the Company or any of its Restricted Subsidiaries (excluding any Lien granted in accordance with Section 9.10 hereof) to any Person other than the Company or a Restricted Subsidiary of the Company, in a single transaction or series of related transactions, of (a) any Capital Stock of any Restricted Subsidiary of the Company; or (b) any other property or assets of the Company or any Restricted Subsidiary of the Company other than in the ordinary course of business; provided, however, that Asset Sales shall not include (i) a transaction or series of related transactions for which the Company or its Restricted Subsidiaries receive aggregate consideration of less than $2.0 million, (ii) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Company as permitted under Article VII herunder, (iii) a Restricted Payment permitted under Section 9.13 hereof and (iv) dispositions of damaged, obsolete or worn out property in the ordinary course of business.

        "Board of Directors" means, as to any Person, the board of directors, management committee or other bodies governing the management of such Person or the general partner of such Person or any duly authorized committee thereof.

        "Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.

        "BRL Lease Facility" means the operating lease facility relating to the Company under the Equipment Lease Agreement, dated as of February 9, 2001, as amended by the first and second amendments thereto, between the Company and BRL Universal Equipment 2001 A, L.P., a Delaware limited partnership, and the agreements related thereto that collectively provided financing to the Company in an aggregate amount of $532.2 million as such agreements may be amended, restated, modified, renewed or supplemented.

        "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in the Borough of Manhattan, The City of New York, New York, or the city in which the Trustee's Corporate Trust Office is located, are authorized or obligated by law or executive order to close.

        "Capitalized Lease Obligation" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP.

        "Capital Stock" means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including

2

each class of Common Stock and Preferred Stock of such Person and (ii) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person.

        "Cash Equivalents" means (i) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's Ratings Services, a division of McGraw Hill, Inc. ("S&P") or Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $500,000,000; (v) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (iv) above; (vi) investment grade paper that matures six months or less from the date of purchase and that is rated less than A-1 from S&P or P-1 from Moody's, not to exceed $20 million; (vii) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (i) through (v) above; and (viii) investments made by Foreign Restricted Subsidiaries in local currencies in instruments issued by or with entities of such jurisdiction having correlative attributes to the foregoing.

        "Change of Control" means the occurrence of one or more of the following events: (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions, but other than by the granting of a Lien in accordance with this Indenture or by way of consolidation or merger permitted pursuant to Article VII of this Indenture) of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any Person or "group" (as defined in Section 13(d)(3) of the Exchange Act) (whether or not otherwise in compliance with the provisions of this Indenture) other than to the Permitted Holders; (ii) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company (whether or not otherwise in compliance with the provisions of this Indenture); (iii) any Person or "group" within the meaning of Section 13(d) of the Exchange Act (other than the Permitted Holders) shall become the "beneficial owner" as defined in Rule 13d-3 under the Exchange Act, of shares representing at least a majority of the aggregate voting power represented by the Capital Stock of the Company; or (iv) the replacement of a majority of the Board of Directors of the Company or Holdings over a two-year period from the directors who constituted the Board of Directors of the Company or Holdings, as the case may be, at the beginning of such period, and such replacement shall not have been approved by either (A) a vote of at least a majority of the Board of Directors of the Company or Holdings, as the case may be, then still in office who either were members of such Board of Directors at the beginning of such period or whose election as a member of such Board of Directors was previously so approved or (B) in the case of the Board of Directors of the Company, Holdings.

        "Change of Control Notice" has the meaning specified in Section 9.15(c).

        "Change of Control Offer" has the meaning specified in Section 9.15(a).

        "Change of Control Payment Date" has the meaning specified in Section 9.15(c).

        "Change of Control Purchase Price" has the meaning specified in Section 9.15(a).

        "Code" shall mean the Internal Revenue Code of 1986, as amended, as now or hereafter in effect, together with all regulations, rulings and interpretations thereof or thereunder issued by the Internal Revenue Service.

        "Commission" or "SEC" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.

3

        "Common Stock" of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person's common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock.

        "Company" means the Person named as the "Company" in the first paragraph of this Indenture, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person.

        "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman, its President, any Vice President, its Treasurer or an Assistant Treasurer, and delivered to the Trustee.

        "Consolidated EBITDA" means, with respect to any Person, for any period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to the extent Consolidated Net Income has been reduced thereby, (A) all income taxes of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes attributable to the extraordinary or nonrecurring gains or losses or taxes attributable to sales or dispositions outside the ordinary course of business), (B) Consolidated Interest Expense, (C) Consolidated Rental Expense, (D) Consolidated Non-cash Charges less any non-cash items increasing Consolidated Net Income for such period, all as determined on a consolidated basis for such Person and its Restricted Subsidiaries in accordance with GAAP, and (E) any expense of the Company or its Restricted Subsidiaries incurred in connection with the overhaul of equipment that can be reclassified as a capital expenditure in accordance with GAAP.

        "Consolidated Fixed Charge Coverage Ratio" means, with respect to any Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the "Four Quarter Period") ending on or prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of such Person for the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving effect on a pro forma basis for the period of such calculation to (i) the incurrence or repayment of any Indebtedness of such Person or any of its Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA (including any pro forma expense and cost reductions that have occurred or are reasonably expected to occur, in the reasonable judgment of the chief financial officer of the Company, whether or not those reductions could be reflected in pro forma financial statements prepared on a basis consistent with Regulation S-X under the Securities Act) attributable to the assets which are the subject of the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Four Quarter Period. Furthermore, in calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; and (2) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements

4

relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements.

        "Consolidated Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) Consolidated Interest Expense, (ii) Consolidated Rental Expense, and (iii) the product of (x) the amount of all dividend payments on any series of Preferred Stock of such Person (other than dividends paid in Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued during such period times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local tax rate of such Person, expressed as a decimal.

        "Consolidated Interest Expense" means, with respect to any Person for any period, the sum of, without duplication: (i) the aggregate of the interest expense of such Person and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, including without limitation, (a) any amortization of debt discount and amortization or write-off of deferred financing costs, (b) the net costs under Interest Swap Obligations and Currency Agreements, (c) all capitalized interest and (d) the interest portion of any deferred payment obligation, and (ii) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP; excluding, however, any amount of such interest expense of any Restricted Subsidiary if the net income of such Restricted Subsidiary is excluded in the calculation of Consolidated Net Income pursuant to clause (d) of the definition thereof (but only in the same proportion as the net income of such Restricted Subsidiary is excluded from the calculation of Consolidated Net Income pursuant to clause (d) of the definition thereof).

        "Consolidated Net Income" means, with respect to any Person, for any period, the aggregate net income (or loss) of such Person and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom (without duplication) (a) after-tax gains or losses from Asset Sales, (b) after-tax items classified as extraordinary or nonrecurring gains or losses, (c) the net income (but not loss) of any Restricted Subsidiary of the referent Person to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is restricted by a contract, operation of law or otherwise, except for any dividends or distributions actually paid by such Restricted Subsidiary to the referent Person, (d) the net income (but not loss) of any Person, other than a Restricted Subsidiary of the referent Person, except to the extent of cash dividends or distributions paid to the referent Person or to a Restricted Subsidiary of the referent Person by such Person, (e) income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued) and (f) the cumulative effect of a change in accounting principles.

        "Consolidated Non-cash Charges" means, with respect to any Person, for any period, the aggregate depreciation, amortization and other non-cash expenses, including extraordinary, unusual or non-recurring expenses, of such Person and its Restricted Subsidiaries reducing Consolidated Net Income of such Person and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (excluding any such charges which require an accrual of or a reserve for cash charges for any future period).

        "Consolidated Rental Expense" means, with respect to any Person, for any period, the aggregate of the rental expense of such Person and its Restricted Subsidiaries related to Operating Lease Facilities of such Person and its Restricted Subsidiaries for such period, determined on a consolidated basis.

        "Corporate Trust Office" means the principal corporate trust office of the Trustee, at which at any particular time its corporate trust business shall be administered, which office at the date of execution of this Indenture is located at 101 Barclay Street, 8W, New York, New York 10286, Attention: Corporate Trust Administration.

        "Credit Agreement" means the Credit Agreement dated as of February 9, 2001, among the Company and the lenders party thereto in their capacities as lenders thereunder and Wachovia Bank, National Association (formerly known as First Union National Bank), as agent, together with the documents related thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise

5

modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder or adding Restricted Subsidiaries of the Company as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders.

        "Credit Facilities" means, one or more debt facilities (including, without limitation, the Credit Agreement and the ABS Lease Facility) or commercial paper facilities, in each case with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time.

        "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary of the Company against fluctuations in currency values.

        "Default" means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default.

        "Depository" has the meaning specified in Section 1.1 of the Appendix.

        "Disinterested Director" means, with respect to any transaction or series of transactions in respect of which a Board Resolution of the Company or a Restricted Subsidiary is required to be delivered under this Indenture, a member of the Board of Directors of the Company or the Restricted Subsidiary who does not have any material direct or indirect financial interest (other than an interest arising solely from the beneficial ownership of Capital Stock of the Company or such Restricted Subsidiary, as the case may be) in or with respect to such transaction or series of transactions.

        "Disqualified Capital Stock" means that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, is convertible or exchangeable for Indebtedness or Disqualified Capital Stock, or is redeemable at the sole option of the holder thereof on or prior to the first anniversary of the final maturity date of the Notes, provided that any Capital Stock that would not constitute Disqualified Capital Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the stated maturity of the Notes shall not constitute Disqualified Capital Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in Sections 9.15 and 9.16 of this Indenture, respectively, and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to the Company's repurchase of such Notes as are required to be repurchased pursuant to such covenants.

        "Equity Offering" has the meaning specified in Section 10.8.

        "Event of Default" has the meaning specified in Section 4.1.

        "Exchange Act" means the Securities Exchange Act of 1934, as amended and any successor act thereto.

        "Exchange Notes" has the meaning specified in Section 1.1 of the Appendix.

        "Existing Notes" means the Company's 9⁷/8% Senior Discount Notes due 2008 that were issued on February 20, 1998.

        "fair market value" means, with respect to any asset or property, the price which could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair market value shall be determined by the Board of Directors of the Company and shall be evidenced by a Board Resolution of the Board of Directors of the Company delivered to the Trustee.

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        "Federal Bankruptcy Code" means the United States Bankruptcy Code of Title 11 of the United States Code, as amended from time to time.

        "Foreign Restricted Subsidiary" means any Restricted Subsidiary of the Company (i) whose jurisdiction of incorporation is other than the United States of America, any state thereof, the District of Columbia or any possession thereof and (ii) which derives substantially all of its income from jurisdictions other than the United States of America.

        "Four Quarter Period" has the meaning specified in the definition of "Consolidated Fixed Charge Coverage Ratio."

        "Funding Guarantor" has the meaning specified in Section 14.5.

        "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which were in effect as of the Issue Date, provided, however, that all reports and other financial information provided by the Company to the Holders or the Trustee shall be prepared in accordance with GAAP as in effect on the date of such report or other financial information.

        "Global Note" has the meaning specified in Section 2.1(a) of the Appendix.

        "Guarantee" means a guarantee of the payment of the Notes in accordance with the terms of this Indenture.

        "Guarantor" means each of the Company's Restricted Subsidiaries that in the future executes a supplemental indenture in which such Restricted Subsidiary agrees to be bound by the terms of this Indenture as a Guarantor; provided that any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when its respective Guarantee is released in accordance with the terms of this Indenture.

        "Guaranty Agreement" means a supplemental indenture, in a form satisfactory to the Trustee, pursuant to which a Guarantor guarantees the Company's obligations with respect to the Notes on the terms provided for in this Indenture.

        "Holder" means a Person in whose name a Note is registered in the Security Register.

        "Holdings" means Universal Compression Holdings, Inc., a Delaware corporation.

        "Indebtedness" means with respect to any Person on any date of determination (without duplication):

          (i)  the principal in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable, including, in each case, any premium on such indebtedness to the extent such premium has become due and payable,

         (ii)  all Capitalized Lease Obligations of such Person,

        (iii)  all Obligations of such Person issued or assumed as the deferred purchase price of property acquired by such Person or services received by such Person, all conditional sale obligations and all Obligations under any title retention agreement (but excluding (i) trade accounts payable and other accrued liabilities arising in the ordinary course of business that are not overdue by 120 days or more or are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted) and (ii) Obligations under long-term service or supply contracts which require minimum periodic payments provided that any such service or supply contracts have terms that are no less favorable to such Person than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate of such Person),

        (iv)  all Obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction,

7

         (v)  Obligations of such Person in respect of the ABS Lease Facility, regardless of whether the obligations are reflected on such Person's balance sheet;

        (vi)  guarantees and other contingent obligations in respect of Indebtedness of other Persons of the type referred to in clauses (i) through (v) above and clause (viii) below to the extent such Indebtedness is so guaranteed, other than endorsements, with recourse, of negotiable instruments in the ordinary course of business,

       (vii)  all Obligations of any other Person of the type referred to in clauses (i) through (v) above which are secured by any lien on any property or asset of such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset and the amount of the Obligation so secured,

      (viii)  all Obligations of such Person under Currency Agreements and Interest Swap of such Person other than hedging arrangements that are entered into in the ordinary course of business and not for speculative purposes as determined in good faith by the Board of Directors of the Company or the chief financial officer of the Company, and

        (ix)  all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any,

provided, however, Indebtedness shall not include any liability for Federal, state, local and other taxes owed or owing by such Person.

        Notwithstanding the foregoing, in connection with the purchase by the Company or any Restricted Subsidiary of any business, the term "Indebtedness" will exclude post-closing payment adjustments to which the seller may become entitled to the extent such payment is determined by a final closing balance sheet or such payment depends on the performance of such business after the closing; provided, however, that, at the time of closing, the amount of any such payment is not determinable and, to the extent such payment thereafter becomes fixed and determined, the amount is paid within 30 days thereafter.

        For purposes hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, provided that the amount outstanding at any time of any Indebtedness issued with original issue discount is the accreted value of such indebtedness.

        "Indenture" means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof.

        "Initial Notes" has the meaning specified in Section 1.1 of the Appendix.

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        "Insolvency or Liquidation Proceeding" means, with respect to any Person, (a) an insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization proceeding or other similar case or proceeding in connection therewith, relating to such Person or to its creditors, as such, or its assets, (b) any liquidation, dissolution or other winding-up of such Person, whether voluntary or involuntary, or (c) any assignment for the benefit of creditors or any other marshaling of assets and liabilities of such Person.

        "Interest Payment Date" means, with respect to any Note, the Stated Maturity of an installment of interest on the Note.

        "Interest Swap Obligations" means the obligations of any Person pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements.

        "Investment" means, with respect to any Person, any direct or indirect loan or other extension of credit (including, without limitation, a guarantee but excluding commission, travel and similar advances to officers and employees made in the ordinary course of business) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any Person. "Investment" shall exclude (i) extensions of trade credit by the Company and its Restricted Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the Company or such Restricted Subsidiary, as the case may be, and (ii) the acquisition of Capital Stock, securities or other properties or assets by the Company or any of its Restricted Subsidiaries for, and to the extent, consideration consisting of Capital Stock of the Company. For the purposes of Section 9.13, (i) "Investment" shall (A) include and be valued at the fair market value of the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary and (B) exclude the fair market value of the net assets of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any Investment shall be the original cost of such Investment plus the cost of all additional Investments by the Company or any of its Restricted Subsidiaries, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment, reduced by the payment of dividends or distributions in connection with such Investment or any other amounts received in respect of such Investment; provided that no such payment of dividends or distributions or receipt of any such other amounts shall reduce the amount of any Investment if such payment of dividends or distributions or receipt of any such amounts would be included in Consolidated Net Income. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Common Stock of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, the Company no longer owns, directly or indirectly, greater than 50% of the Common Stock of such Restricted Subsidiary, the Company shall be deemed to have made an investment on the date of such sale equal to the fair market value of the Common Stock of such Restricted Subsidiary not sold or disposed of.

        "Issue Date" means May 27, 2003.

        "Lien" means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest).

        "Maturity" means, with respect to any Note, the date on which any principal of such Note becomes due and payable as provided therein or herein, whether at the Stated Maturity with respect to such principal or by declaration of acceleration, call for redemption or purchase or otherwise.

        "Moody's" has the meaning specified in the definition of "Cash Equivalents."

        "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment constituting interest) received by the

10

Company or any of its Restricted Subsidiaries from such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales or brokerage commissions), (b) net taxes paid or payable as a result of such Asset Sale, (c) repayment of Indebtedness that is required to be repaid in connection with such Asset Sale, (d) amounts required to be paid to any Person (other than the Company or any of its Restricted Subsidiaries) owning a beneficial interest in the assets which are subject to such Asset Sale and (e) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale.

        "Net Proceeds Offer" has the meaning specified in Section 9.16(c).

        "Net Proceeds Offer Amount" has the meaning specified in Section 9.16(c).

        "Net Proceeds Offer Trigger Date" has the meaning specified in Section 9.16(c).

        "Net Proceeds Payment Date" has the meaning specified in Section 9.16(f).

        "Notes" has the meaning specified in Section 1.1 of the Appendix. For purposes of this Indenture, the term "Notes" shall, except where the context otherwise requires, include the Guarantees, if any.

        "Obligations" means all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

        "Offered Price" has the meaning specified in Section 9.16(c).

        "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer, the Controller or the Secretary of such Person or any other officer designated by the Board of Directors serving in a similar capacity.

        "Officers' Certificate" means a certificate signed by an Officer of the Company and delivered to the Trustee.

        "Operating Lease Facility" means the ABS Lease Facility, the BRL Lease Facility and any similar operating lease facility or financing arrangements established after the Issue Date.

        "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, including an employee of the Company.

        "Outstanding," when used with respect to Notes, means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture, except:

        (a)   Notes theretofore canceled by the Trustee or delivered to the Trustee for cancellation;

        (b)   Notes, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of Notes; provided that, if the Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made;

        (c)   Notes, except to the extent provided in Sections 11.2 and 11.3, with respect to which the Company has effected defeasance and/or covenant defeasance as provided in Article XI;

        (d)   Notes which have been paid pursuant to Section 2.7 or in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands the Notes are valid obligations of the Company; and

        (e)   Notes irrevocably tendered to the Company pursuant to an offer to purchase made by the Company for whose payment money in the necessary amount has been theretofore deposited with the Trustee or any

11

depositary (other than the Company) in trust; provided that the Company has waived any conditions to its obligation to purchase the Notes pursuant to such offer;

provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Notes have given any request, demand, authorization, direction, consent, notice or waiver hereunder, and for the purpose of making the calculations required by TIA Section 313, Notes owned by the Company or any other obligor upon the Notes or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in making such calculation or in relying upon any such request, demand, authorization, direction, consent, notice or waiver, only Notes which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Any Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Company or any other obligor upon the Notes or any Affiliate of the Company or such other obligor.

        "Pari Passu Indebtedness" means any Indebtedness of the Company that is pari passu in right of payment to the Notes.

        "Paying Agent" has the meaning specified in Section 2.3.

        "Permitted Holder(s)" means any of Holdings, Weatherford International, Inc. and their respective Affiliates.

        "Permitted Indebtedness" means, without duplication, each of the following:

        (i)    Indebtedness under the Notes (excluding any Add-On Notes), this Indenture and the Guarantees, if any;

        (ii)   additional Indebtedness of the Company and its Restricted Subsidiaries under Credit Facilities in a principal amount outstanding under this clause (ii) at any time not to exceed $165 million;

        (iii)  other Indebtedness of the Company and its Restricted Subsidiaries outstanding on the Issue Date, reduced by the amount of any scheduled amortization payments or mandatory prepayments (in each case when actually paid) or permanent reductions thereon;

        (iv)  Interest Swap Obligations of the Company covering Indebtedness of the Company or any of its Restricted Subsidiaries and Interest Swap Obligations of any Restricted Subsidiary of the Company covering Indebtedness of such Restricted Subsidiary and its Restricted Subsidiaries; provided, however, that such Interest Swap Obligations are entered into to protect the Company and its Restricted Subsidiaries from fluctuations in interest rates on Indebtedness permitted by this Indenture to the extent the notional principal amount of such Interest Swap Obligation does not exceed the principal amount of the Indebtedness to which such Interest Swap Obligation relates;

        (v)   Indebtedness under Currency Agreements; provided that in the case of Currency Agreements which relate to Indebtedness, such Currency Agreements do not increase the Indebtedness of the Company and its Restricted Subsidiaries outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder;

        (vi)  Indebtedness of a Restricted Subsidiary of the Company to the Company or to another Restricted Subsidiary of the Company for so long as such Indebtedness is held by the Company or a Restricted Subsidiary of the Company, in each case subject to no Lien held by a Person other than the Company or a Restricted Subsidiary of the Company; provided that if as of any date any Person other than the Company or a Restricted Subsidiary of the Company owns or holds any such Indebtedness or holds a Lien, other than pursuant to the Credit Facilities, in respect of such Indebtedness, such date shall be deemed the date of the incurrence of Indebtedness not constituting Permitted Indebtedness by the issuer of such Indebtedness;

        (vii) Indebtedness of the Company to a Restricted Subsidiary of the Company for so long as such Indebtedness is held by a Restricted Subsidiary of the Company, in each case subject to no Lien other than pursuant to the Credit Facilities; provided that (a) any Indebtedness of the Company to any Restricted Subsidiary of the Company is unsecured and subordinated, pursuant to a written agreement, to the Company's obligations

12

under this Indenture and the Notes and (b) if as of any date any Person other than a Restricted Subsidiary of the Company owns or holds any such Indebtedness or any Person, other than pursuant to the Credit Facilities, holds a Lien in respect of such Indebtedness, such date shall be deemed the date of the incurrence of Indebtedness not constituting Permitted Indebtedness by the Company;

        (viii) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within three Business Days of incurrence;

        (ix)  Indebtedness of the Company or any of its Restricted Subsidiaries represented by letters of credit for the account of the Company or such Restricted Subsidiary, as the case may be, in order to provide security for workers' compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business;

        (x)   Indebtedness represented by Capitalized Lease Obligations and Purchase Money Indebtedness of the Company and its Restricted Subsidiaries incurred in the ordinary course of business not to exceed $20.0 million at any one time outstanding;

        (xi)  Indebtedness (A) in respect of performance, surety or appeal bonds or letters of credit provided in the ordinary course of business, or (B) arising, from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing any such obligations of the Company or any of its Restricted Subsidiaries, in any case incurred in connection with the disposition of any business, assets or Restricted Subsidiary of the Company (excluding herefrom any guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary of the Company for the purpose of financing such acquisition), in a principal amount not to exceed the gross proceeds actually received by the Company or any of its Restricted Subsidiaries in connection with such disposition;

        (xii) Indebtedness of the Company or any of its Restricted Subsidiaries, to the extent the net proceeds thereof are substantially contemporaneously (A) used to purchase Notes tendered in a Change of Control Offer or (B) deposited to defease the Notes pursuant to Article XI of this Indenture;

        (xiii)     guarantees of Indebtedness of the Company or any of its Restricted Subsidiaries by any Restricted Subsidiary provided the guarantee of such Indebtedness is permitted by and made in accordance with Section 9.12 of this Indenture; and guarantees of Indebtedness of any Restricted Subsidiary of the Company by the Company provided that such Indebtedness is permitted by Section 9.14 of this Indenture;

        (xiv) Refinancing Indebtedness and ABS Refinancing Indebtedness; and

        (xv) additional Indebtedness of the Company and its Restricted Subsidiaries in an aggregate principal amount not to exceed $25.0 million at any one time outstanding.

        "Permitted Investments" means:

        (i)    Investments by the Company or any Restricted Subsidiary of the Company in any Person that is or will become immediately after such Investment a Restricted Subsidiary of the Company or that will merge or consolidate into the Company or a Restricted Subsidiary of the Company;

        (ii)   Investments in the Company by any Restricted Subsidiary of the Company; provided that any Indebtedness evidencing such Investment in the Company is unsecured and subordinated, pursuant to a written agreement, to the Company's obligations under the Notes and this Indenture;

        (iii)  Investments in cash and Cash Equivalents;

        (iv)  loans and advances to employees and officers of the Company and its Restricted Subsidiaries in the ordinary course of business for bona fide business purposes not in excess of $5.0 million at any one time outstanding;

13

        (v)   Currency Agreements and Interest Swap Obligations entered into in the ordinary course of the Company's or its Restricted Subsidiaries' businesses and otherwise in compliance with this Indenture, including without limitation margin deposits made pursuant thereto;

        (vi)  Investments in Unrestricted Subsidiaries and joint ventures not to exceed $7.5 million at any one time outstanding;

        (vii) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers;

        (viii)     Investments made by the Company or its Restricted Subsidiaries as a result of consideration received in connection with an Asset Sale made in compliance with Section 9.16;

        (ix)  Investments made through the issuance of Qualified Capital Stock;

        (x)   Investments made by Holdings and contributed to the Company or its Restricted Subsidiaries;

        (xi)  Investments existing on the Issue Date.

        (xii) Investments in capital stock or evidences of indebtedness received in connection with the settlement of bona fide litigation; and

        (xii) other Investments not to exceed $10.0 million at any one time outstanding.

        "Permitted Liens" means the following types of Liens:

        (i)    Liens existing on the Issue Date;

        (ii)   Liens in respect of, required by or incurred in accordance with any Credit Facilities;

        (iii)  Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) being contested in good faith by appropriate proceedings;

        (iv)  statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith;

        (v)   Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance bonds, surety bonds, return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money);

        (vi)  Liens arising by reason of any judgment, decree or order of any court but not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment, decree or order shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired;

        (vii) easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries;

        (viii)     Liens representing the interest or title of a lessor under any Capitalized Lease Obligation; provided that such Liens do not extend to any property or assets which is not leased property subject to such Capitalized Lease Obligation;

        (ix)  Liens upon specific items of inventory or other goods and proceeds of the Company or any of its Restricted Subsidiaries securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

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        (x)   Liens securing reimbursement obligations with respect to letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof;

        (xi)  Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Company or any of its Restricted Subsidiaries, including rights of offset and set-off;

        (xii) Liens securing Interest Swap Obligations which Interest Swap Obligations relate to Indebtedness that is otherwise permitted under this Indenture;

        (xiii)     Liens securing Capitalized Lease Obligations and Purchase Money Indebtedness permitted pursuant to Section 9.14; provided, however, that in the case of Purchase Money Indebtedness (A) the Indebtedness shall not exceed the cost of such property or assets and shall not be secured by any property or assets of the Company or any Restricted Subsidiary of the Company other than the property and assets so acquired or constructed and (B) the Lien securing such Indebtedness shall be created within 180 days of such acquisition or construction or, in the case of a Refinancing of any Purchase Money Indebtedness, within 180 days of such Refinancing;

        (xiv) Liens securing Indebtedness under Currency Agreements;

        (xv) Liens securing Acquired Indebtedness incurred in accordance with Section 9.14; provided that (A) such Liens secured such Acquired Indebtedness at the time of and prior to the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company and were not granted in connection with, or in anticipation of, the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company and (B) such Liens do not extend to or cover any property or assets of the Company or of any of its Restricted Subsidiaries other than the property or assets that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Company or a Restricted Subsidiary of the Company;

        (xvi) Liens securing Refinancing Indebtedness, provided that such Liens extend to or cover only the property or assets currently securing the Indebtedness being Refinanced; and

        (xvii)     other Liens of the Company or any Restricted Subsidiary of the Company with respect to obligations that do not exceed $5.0 million at any one time outstanding.

        "Person" means an individual, partnership, corporation, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof.

        "Predecessor Notes" of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 2.7 hereof in exchange for a mutilated Note or in lieu of a lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note.

        Preferred Stock" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation.

        "Private Exchange Notes" has the meaning specified in Section 1.1 of the Appendix.

        "Property" means, with respect to any Person, any interest of such Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, Capital Stock in any other Person.

        "Purchase Money Indebtedness" means Indebtedness of the Company and its Restricted Subsidiaries incurred in the normal course of business for the purpose of financing all or any part of the purchase price, or the cost of installation, construction or improvement, of property or equipment.

        "Purchase Notice" has the meaning set forth in Section 9.16(e).

        "Qualified Capital Stock" means any Capital Stock that is not Disqualified Capital Stock.

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        "Redemption Date," when used with respect to any Note to be redeemed, in whole or in part, means the date fixed for such redemption by or pursuant to this Indenture.

        "Redemption Price," when used with respect to any Note to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture.

        "Reference Date" has the meaning specified in Section 9.12.

        "Refinance" means, in respect of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have correlative meanings.

        "Refinancing Indebtedness" means any Refinancing by the Company or any Restricted Subsidiary of the Company of Indebtedness incurred in accordance with Section 9.14 (other than pursuant to clause (ii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi), (xii), (xiii) or (xv) of the definition of Permitted Indebtedness), in each case (other than Refinancing Indebtedness incurred to Refinance all of the Notes) that does not (1) result in an increase in the aggregate principal amount of Indebtedness of such Person as of the date of such proposed Refinancing (plus accrued interest and plus the amount of any premium and reasonable fees, expenses and other amounts payable by the Company or any of its Restricted Subsidiaries in connection with such Refinancing) or (2) create Indebtedness with (A) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier than the final maturity of the Indebtedness being Refinanced; provided that (x) if such Indebtedness being Refinanced is Indebtedness solely of the Company (other than Refinancing Indebtedness incurred to Refinance all of the Notes), then such Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if such Indebtedness being Refinanced is subordinate or junior to the Notes, then such Refinancing Indebtedness shall be subordinate to the Notes at least to the same extent and in the same manner as the Indebtedness being Refinanced.

        "Registrar" or "Securities Registrar" has the meaning specified in Section 2.3.

        "Registration Rights Agreement" has the meaning specified in Section 1.1 of the Appendix.

        "Regular Record Date" for the interest payable on any Interest Payment Date means May 1 or November 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date.

        "Replacement Assets" means either (x) properties and assets that replace the properties and assets that were the subject of the Asset Sale or (y) any properties or assets that will be used or are useful in our business or the business of our Restricted Subsidiaries as existing on the Issue Date or in businesses similar or reasonably related thereto or in the capital stock of any entity a majority of whose assets consists of the properties or assets described under (x) or (y).

        "Responsible Officer," when used with respect to the Trustee, means any Vice President, any assistant vice president, any senior trust officer, any trust officer or assistant trust officer in the corporate trust department of the Trustee, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

        "Restricted Payment" has the meaning specified in Section 9.13.

        "Restricted Subsidiary" of any Person means any Subsidiary of such Person which at the time of determination is not an Unrestricted Subsidiary.

        "S&P" has the meaning specified in the definition of "Cash Equivalents."

        "SEC" means the Securities and Exchange Commission.

        "Securities Act" means the Securities of 1933, as amended, and any successor statute.

        "Securities Custodian" has the meaning specified in Section 1.1 of the Appendix.

        "Security Register" has the meaning specified in Section 2.3.

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        "Significant Subsidiary," with respect to any Person, means any Restricted Subsidiary of such Person that satisfies the criteria for a "significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Securities Act.

        "Stated Maturity" means, when used with respect to any Note or any installment of interest thereon, the date specified in such Note as the fixed date on which the principal of such Note or such installment of interest is due and payable, and, when used with respect to any other Indebtedness or any installment of interest thereon, means the date specified in the instrument evidencing or governing such Indebtedness as the fixed date on which the principal of such Indebtedness or such installment of interest is due and payable.

        "Subordinated Indebtedness" means Indebtedness of the Company that is expressly subordinated in right of payment to the Notes or the Guarantees.

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        "Subsidiary," with respect to any Person, means (i) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person or (ii) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person.

        "Surviving Entity" has the meaning specified in Section 7.1(a).

        "Tax Sharing Agreement" means the tax sharing agreement between the Company and Holdings as in effect on the date hereof, and as thereafter modified in any way not adverse to the Company or the Holders.

        "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as amended and in force at the date as of which this Indenture was executed, except as provided in Section 8.5.

        "Transaction Date" has the meaning specified in the definition of "Consolidated Fixed Charge Coverage Ratio."

        "Trustee" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee.

        "UCO Compression" means UCO Compression 2002 LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company.

        "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time.

        "Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such Person that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the Board of Directors of such Person in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of such Person may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided that (x) the Company certifies to the Trustee that such designation complies with Section 9.13 and (y) each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any of its Restricted Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if immediately before and immediately after giving effect to such designation, (A) the Company or its Restricted Subsidiaries could incur the Indebtedness of such Unrestricted Subsidiary under Section 9.14 and (B) no Default or Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions.

        "U.S. Government Obligations" has the meaning specified in Section 11.4(a).

        "Vice President," when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president."

        "Voting Stock" of a person means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not, at the time, stock of any other class or classes would have voting power by reason of the happening of any contingency).

        "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding aggregate principal amount of such Indebtedness into (b) the sum of the total of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in

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respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment.

 SECTION 1.2    Incorporation by Reference of Trust Indenture Act.

        Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings:

        "indenture securities" means the Notes and the Guarantees, if any,

        "indenture security holder" means a Holder,

        "indenture to be qualified" means this Indenture,

        "indenture trustee" or "institutional trustee" means the Trustee, and

        "obligor" on the indenture securities means the Company, the Guarantors, if any, or any other obligor on the Notes or the Guarantees, if any.

        All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule and not otherwise defined herein have the meanings assigned to them therein.

 SECTION 1.3    Rules of Construction.

        For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

        (a)   the terms defined in this Article or the Appendix have the meanings assigned to them in this Article or the Appendix, as the case may be, and include the plural as well as the singular;

        (b)   all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP;

        (c)   the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; references to any Article, Section or Exhibit are references to Articles, Sections and Exhibits in or to this Indenture unless otherwise specified; and the term "including" embraces the words "without limitation;"

        (d)   unless the context otherwise requires, the word "or" is not exclusive;

        (e)   provisions apply to successive events and transactions; and

        (f)    references to agreements and other instruments include subsequent amendments and waivers but only to the extent not prohibited by this Indenture.

ARTICLE II

THE NOTES

 SECTION 2.1    Form and Dating.

        Provisions relating to the Initial Notes, the Private Exchange Notes and the Exchange Notes are set forth in the Rule 144A/Regulation S Appendix attached hereto (the "Appendix"), which is hereby incorporated in and expressly made part of this Indenture. The Initial Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit 1 to the Appendix, which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Notes, the Private Exchange Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A-1 to the Appendix, which is hereby incorporated in and expressly made a part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Note shall be dated the date of its authentication. The terms of the Notes set forth in the Appendix are part of the terms of this Indenture.

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 SECTION 2.2    Execution and Authentication.

        At least one Officer shall sign the Notes for the Company by manual or facsimile signature. The Company's seal may be impressed, affixed, imprinted or reproduced on the Notes and, if the Company so elects, it may be in facsimile form.

        If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless.

        A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture.

        On the Issue Date, the Trustee shall authenticate and deliver $175 million of Initial Notes, and, at any time and from time to time thereafter, the Trustee shall authenticate and deliver Notes for original issue in an aggregate principal amount specified in such order, in each case upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order shall specify the amount of the Notes to be authenticated and the date on which the original issue of Notes is to be authenticated and, in the case of an issuance of Add-On Notes pursuant to Section 2.13 after the Issue Date, shall certify that such issuance is in compliance with Section 9.14.

        Prior to authentication and delivery of such Notes, and accepting the additional responsibilities under this Indenture in relation to such Notes, the Trustee shall be entitled to receive, and shall be fully protected in relying upon:

        (i)    an Officers' Certificate pursuant to Section 13.01 that all conditions precedent provided for in this Indenture have been complied with; and

        (ii)   an Opinion of Counsel stating:

        (1)   that such Notes, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and binding obligations of the Company enforceable in accordance with their terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, or other laws relating to or affecting creditors' rights and by general principles of equity and similar matters; and

        (2)   that the execution and delivery by the Company of such Notes does not violate any statute, rule or regulation of the United States of America, the State of New York, the State of Texas or the General Corporation Laws of the State of Delaware.

        The Trustee shall have the right to decline to authenticate and deliver any Notes under this Section if the Trustee, being advised by counsel, determines that such action may not lawfully be taken or if the Trustee in good faith shall determine that such action would expose the Trustee to personal liability to existing Holders.

        The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Notes. Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands.

 SECTION 2.3    Registrar and Paying Agent.

        The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange (the "Registrar" or "Securities Registrar") and an office or agency where Notes may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Notes (the "Security Register") and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent.

        The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall

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implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 5.6. The Company or any Subsidiary may act as Paying Agent, Registrar, co-registrar or transfer agent.

        The Company initially appoints the Trustee as Registrar and Paying Agent in connection with the Notes.

 SECTION 2.4    Paying Agent to Hold Money in Trust.

        Prior to 11:00 A.M., New York City time, on each due date of the principal of, premium, if any, on and interest on any Note, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal, premium and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal of, premium, if any, on or interest on the Notes and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee.

 SECTION 2.5    Noteholder Lists.

        The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least five Business Days before each Stated Maturity and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders.

 SECTION 2.6    Transfer and Exchange.

        The Notes shall be issued in registered form and shall be transferable only upon the surrender of a Note for registration of transfer. When a Note is presented to the Registrar or a co-registrar with a written request to register a transfer, the Registrar shall register the transfer as requested if the requirements of this Indenture and Section 8-401(a) of the Uniform Commercial Code are met. When Notes are presented to the Registrar or a co-registrar with a request to exchange them for an equal principal amount of Notes of other denominations, the Registrar shall make the exchange as requested if the same requirements are met.

 SECTION 2.7    Replacement Notes.

        If a mutilated Note is surrendered to the Registrar or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Note if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Note is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Note.

        Every replacement Note is an additional obligation of the Company.

        The provisions of this Section 2.7 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement of mutilated, lost, destroyed or wrongfully taken Notes.

 SECTION 2.8    Outstanding Notes.

        Notes outstanding at any time shall be those that satisfy the definition of Outstanding set forth in Section 1.1 hereof.

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 SECTION 2.9    Temporary Notes.

        Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes and deliver them in exchange for temporary Notes.

 SECTION 2.10    Cancellation.

        The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and dispose of, in accordance with its customary procedures (subject to the record retention requirements of the Exchange Act), all Notes surrendered for registration of transfer, exchange, payment or cancellation unless the Company directs the Trustee to deliver canceled Notes to the Company. Upon written request from the Company, the Trustee will deliver to the Company a certificate of disposition of canceled Notes. The Company may not issue new Notes to replace Notes it has redeemed, paid or delivered to the Trustee for cancellation.

 SECTION 2.11    Defaulted Interest.

        If the Company defaults in a payment of interest on the Notes, the Company shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the persons who are Holders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Holder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid.

 SECTION 2.12    CUSIP Numbers.

        The Company in issuing the Notes may use numbers assigned by the Committee on Uniform Securities Identification Procedures ("CUSIP") and corresponding International Notes Identification Numbers ("ISIN") (if then generally in use) and, if so, the Trustee shall use CUSIP numbers and corresponding ISINs (if then generally in use) in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in the CUSIP or ISIN numbers.

 SECTION 2.13    Issuance of Add-On Notes.

        The Company shall be entitled, subject to its compliance with Section 9.14, to issue Add-On Notes under this Indenture which shall have identical terms as the Initial Notes issued on the Issue Date, other than with respect to the date of issuance and issue price. The Initial Notes issued on the Issue Date, any Add-On Notes and all Exchange Notes or Private Exchange Notes issued in exchange therefor shall be treated as a single class for all purposes under this Indenture.

        With respect to any Add-On Notes, the Company shall set forth in a resolution of the Board of Directors and an Officers' Certificate, a copy of each which shall be delivered to the Trustee, the following information:

(1)

the aggregate principal amount of such Add-On Notes to be authenticated and delivered pursuant to this Indenture;



(2)

the issue price, the issue date and the CUSIP number of such Add-On Notes; provided, however, that no Add-On Notes may be issued at a price that would cause such Add-On Notes to have "original issue discount" within the meaning of Section 1273 of the Code; and



(3)

whether such Add-On Notes shall be Transfer Restricted Notes and issued in the form of Initial Notes as set forth in Exhibit 1 to the Appendix or shall be issued in the form of Exchange Notes as set forth in Exhibit A-1 to the Appendix.

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ARTICLE III

SATISFACTION AND DISCHARGE

 SECTION 3.1    Satisfaction and Discharge of Indenture.

        This Indenture shall upon Company Request cease to be of further effect (except as to surviving rights of registration of transfer or exchange of the Notes, as expressly provided for in this Indenture and the Note), and upon payment of all amounts due the Trustee under Section 5.6, the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture when:

        (a)   either

        (i)    all Notes theretofore authenticated and delivered (other than (A) Notes which have been mutilated, destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.7 and (B) Notes for whose payment money or United States governmental obligations of the type described in clause (i) of the definition of Cash Equivalents whose maturity is not later than the Stated Maturity of principal of and remaining interest on such Notes has theretofore been deposited in trust with the Trustee or any Paying Agent or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 9.3) have been delivered to the Trustee for cancellation, or

        (ii)   all Notes not theretofore delivered to the Trustee for cancellation

        (A)  have become due and payable, or

        (B)  will become due and payable at their Stated Maturity within one year, or

        (C)  are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company,

and the Company, in the case of (ii)(A), (ii)(B) or (ii)(C) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount in the currency in which the Notes are denominated sufficient to pay and discharge the entire indebtedness on such Notes not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Notes which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be, together with instructions from the Company irrevocably directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be;

        (b)   the Company has paid or caused to be paid all other sums payable hereunder by the Company; and

        (c)   the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each satisfactory in form to the Trustee, which, taken together, state that all conditions precedent herein relating to the satisfaction and discharge of this Indenture have been complied with.

        Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 5.6 shall survive and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (a)(i) of this Section, the obligations of the Trustee under Section 3.2 and the last paragraph of Section 9.3 shall survive such satisfaction and discharge.

 SECTION 3.2    Application of Trust Money.

        Subject to the provisions of the last paragraph of Section 9.3, all money deposited with the Trustee pursuant to Section 3.1 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee.

 SECTION 3.3    Repayment to Company.

        The Trustee and the Paying Agent shall promptly turn over to the Company upon Company Request any excess money or securities held by them at any time.

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ARTICLE IV

REMEDIES

 SECTION 4.1    Events of Default.

        The following events will be defined in this Indenture as "Events of Default":

        (a)   the failure to pay interest and liquidated damages, if any, on any Note when the same becomes due and payable and the default continues for a period of 30 days;

        (b)   the failure to pay the principal of any Notes, when the same becomes due and payable, at maturity, upon redemption or otherwise (including the failure to make a payment to purchase Notes tendered pursuant to a Change of Control Offer or a Net Proceeds Offer);

        (c)   the failure to comply with Article VII, which will constitute an Event of Default after the Company receives written notice specifying the default (and demanding that such default be remedied and stating that such notice is a "Notice of Default") from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Notes;

        (d)   a default in the observance or performance of any covenant or agreement contained described under Sections 9.10, 9.13, 9.14, 9.15 and 9.16 of this Indenture which default continues for a period of 30 days after the Company receives written notice specifying the default (and demanding that such default be remedied and stating that such notice is a "Notice of Default") from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Notes;

        (e)   a default in the observance or performance of any other covenant or agreement contained in this Indenture, which default continues for a period of 60 days after the Company receives written notice specifying the default (and demanding that such default be remedied and stating that such notice is a "Notice of Default") from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Notes;

        (f)    the failure to pay at final maturity (giving effect to any applicable grace periods and any extensions thereof) the principal amount of any Indebtedness of the Company or any Restricted Subsidiary (other than a Foreign Restricted Subsidiary that is not a Significant Subsidiary) of the Company, or the acceleration of the final stated maturity of any such Indebtedness if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final maturity or which has been accelerated, aggregates $20.0 million or more;

        (g)   one or more judgments (not covered by insurance as to which the carrier has assumed the defense or acknowledged coverage) in an aggregate amount in excess of $20.0 million shall have been rendered against the Company or any of its Restricted Subsidiaries (other than a Foreign Restricted Subsidiary that is not a Significant Subsidiary) and such judgments shall remain undischarged, unpaid or unstayed in such aggregate amount for a period of 60 consecutive days after such judgment or judgments become final and non-appealable;

        (h)   the commencement by the Company or any Significant Subsidiary of a voluntary case or proceeding under the Federal Bankruptcy Code or any other applicable federal or state bankruptcy, insolvency, reorganization or other similar law or any other case or proceeding to be adjudicated bankrupt or insolvent, or the consent by the Company or any other Significant Subsidiary to the entry of a decree or order for relief in respect thereof in an involuntary case or proceeding under the Federal Bankruptcy Code or any other applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by the Company or any other Significant Subsidiary of a petition or consent seeking reorganization or relief under any applicable federal or state law, or the consent by it under any such law to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of any of the Company or any other Significant Subsidiary or of all or substantially all of their consolidated assets, or the making by it of a general assignment for the benefit of creditors under any such law, or the admission by it in writing of its inability to pay its debts generally as they become due and in each case the order or decree remains unstayed and in effect for 60 days; or

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        (i)    any of the Guarantees ceases to be in full force and effect or any of the Guarantees is declared to be null and void and unenforceable or any of the Guarantees is found to be invalid or any of the Guarantors denies its liability under its Guarantee (other than by reason of release of a Guarantor in accordance with the terms of this Indenture).

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 SECTION 4.2    Acceleration of Maturity; Rescission and Annulment.

        If an Event of Default (other than an Event of Default specified in Section 4.1(h) above with respect to the Company) shall occur and be continuing, the Trustee or the Holders of at least 25% in principal amount of outstanding Notes may declare the principal of and accrued and unpaid interest and liquidated damages, if any, on all the Notes to be due and payable by notice in writing to the Company and the Trustee specifying the respective Event of Default and that it is a "notice of acceleration" (the "Acceleration Notice"), and the same (i) shall become immediately due and payable or (ii) if there are any amounts outstanding under the Credit Facilities, shall become immediately due and payable upon the first to occur of an acceleration under the Credit Facilities or 5 Business Days after receipt by the Company and the representative under the Credit Facilities of such Acceleration Notice. In the event of an acceleration because an Event of Default set forth in Section 4.1(f) above has occurred and is continuing, such acceleration shall be automatically rescinded and annulled if the event of default triggering such Event of Default pursuant to Section 4.1(f) shall be remedied or cured by the Company or the relevant Restricted Subsidiary or waived by the holders of the relevant Indebtedness within 30 days after the date of the Acceleration Notice with respect thereto. If an Event of Default specified in Section 4.1(h) above with respect to the Company occurs and is continuing, then all unpaid principal of, premium and liquidated damages, if any, and accrued and unpaid interest on all of the outstanding Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.

        At any time after a declaration of acceleration with respect to the Notes as described in the preceding paragraph, the Holders of a majority in principal amount of the Notes may rescind and cancel such declaration and its consequences

        (a)   if the rescission would not conflict with any judgment or decree,

        (b)   if all existing Events of Default have been cured or waived except nonpayment of principal or interest or liquidated damages, if any, that has become due solely because of the acceleration,

        (c)   to the extent the payment of such interest is lawful, if interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid,

        (d)   if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances and

        (e)   in the event of the cure or waiver of an Event of Default of the type described in Section 4.1(h), the Trustee shall have received an Officers' Certificate and an Opinion of Counsel that such Event of Default has been cured or waived.

No such rescission shall affect any subsequent Default or impair any right consequent thereto.

        Holders of the Notes may not enforce this Indenture or the Notes except as provided in this Indenture and under the TIA. Subject to the provisions of this Indenture relating to the duties of the Trustee, the Trustee is under no obligation to exercise any of its rights or powers under this Indenture at the request, order or direction of any of the Holders, unless such Holders have offered to the Trustee reasonable indemnity.

 SECTION 4.3    Collection of Indebtedness and Suits for Enforcement by Trustee.

        The Company covenants that if an Event of Default specified in clause (a) or (b) of Section 4.1 occurs and is continuing, the Company will, upon demand of the Trustee, pay to the Trustee for the benefit of the Holders of the Notes, the whole amount then due and payable on the Notes for principal (and premium, if any) and interest and interest on any overdue principal (and premium, if any) and, to the extent that payment of such interest shall be legally enforceable, upon any overdue installment of interest, at the rate or rates prescribed therefor in the Notes, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

        If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or

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any other obligor upon the Notes and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the Property of the Company or any other obligor upon the Notes, wherever situated.

        If an Event of Default with respect to the Notes occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of the Notes by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in any provision of the Notes or this Indenture or in aid of the exercise of any power granted therein or herein, or to enforce any other proper remedy.

 SECTION 4.4    Trustee May File Proofs of Claim.

        In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Notes or the Property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company or such other obligor for the payment of overdue principal, premium, if any, or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise:

          (i)  to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Notes and to file such other papers or documents and take any other actions including participation as a full member of any creditor or other committee as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and

         (ii)  to collect and receive any moneys or other Property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 5.6.

        Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

 SECTION 4.5    Trustee May Enforce Claims Without Possession of Notes.

        All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered.

 SECTION 4.6    Application of Money Collected.

        Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in the case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

        FIRST: To the payment of all amounts due the Trustee under Section 5.6;

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        SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any, on) and interest on the Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal (and premium, if any) and interest, respectively; and

        THIRD: The balance, if any, to the Company.

 SECTION 4.7    Limitation on Suits.

        No Holder of a Note shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:

          (i)  such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Notes;

         (ii)  the Holders of not less than 25% in principal amount of the Outstanding Notes shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;

        (iii)  such Holder or Holders have offered to the Trustee reasonable indemnity satisfactory to it against the costs, expenses and liabilities to be incurred in compliance with such request;

        (iv)  the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

         (v)  no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of Outstanding Notes;

it being understood and intended that no one or more Holders of Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes, or to obtain or to seek to obtain priority or preference over any other Holders of Notes or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders of Notes.

 SECTION 4.8    Unconditional Right of Holders to Receive Principal, Premium and Interest.

        Notwithstanding any other provision in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment, as provided herein (including, if applicable, under Article XI) and in such Note of the principal of (and premium and liquidated damages, if any, on) and (subject to Section 2.10) interest on such Note on the respective Stated Maturities expressed in such Note (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.

 SECTION 4.9    Restoration of Rights and Remedies.

        If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereunder, and all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted.

 SECTION 4.10    Rights and Remedies Cumulative.

        Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of Section 2.7, no right or remedy herein conferred upon or reserved to the Trustee or to Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy

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hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

 SECTION 4.11    Delay or Omission Not Waiver.

        No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.

 SECTION 4.12    Control by Holders.

        The Holders of not less than a majority in principal amount of the Outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee with respect to the Notes, or exercising any trust or power conferred on the Trustee, provided that:

          (i)  such direction shall not be in conflict with any rule of law or with this Indenture,

         (ii)  the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and

        (iii)  the Trustee need not take any action which might involve it in personal liability or be prejudicial to the Holders not joining therein.

 SECTION 4.13    Waiver of Past Defaults.

        The Holders of not less than a majority in aggregate principal amount of the Outstanding Notes may on behalf of the Holders of all the Notes waive any existing Default or Event of Default hereunder and its consequences with respect to the Notes, except a Default or Event of Default:

          (i)  in the payment of the principal of, premium, if any, or interest on any Note, or

         (ii)  in respect of a covenant or provision hereof which under Article VIII cannot be modified or amended without the consent of the Holder of each Outstanding Note affected.

        Upon any such waiver, such Default or Event of Default shall cease to exist for every purpose under this Indenture, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon.

 SECTION 4.14    Waiver of Stay, Extension or Usury Laws.

        The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension, or usury law or other law, which would prohibit or forgive the Company from paying all or any portion of the principal of (premium, if any, on) and/or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and the Company covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

 SECTION 4.15    Undertaking for Costs.

        In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorney's fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 4.15 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 4.8, or a suit by Holders of more than 10% in principal amount of the then Outstanding Notes.

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ARTICLE V

THE TRUSTEE

 SECTION 5.1    Notice of Defaults.

        If an Event of Default occurs and is continuing and if it is known to an Officer of the Trustee, the Trustee shall mail to each Holder notice of the Event of Default within 90 days after obtaining knowledge thereof. Except in the case of an Event of Default in payment of principal of (or premium or liquidated damages, if any, on) or interest on any Note, including an accelerated payment, an Event of Default in payment on the Change of Control Payment Date pursuant to an offer to purchase the Notes upon a Change of Control or on the date of payment of an accepted Net Proceeds Offer and an Event of Default with respect to the provision of Article VII of this Indenture, the Trustee may withhold the notice if and so long as a committee of its directors and/or officers of the Trustee in good faith determines that withholding the notice is in the interest of the Holders.

 SECTION 5.2    Certain Rights of Trustee.

        Subject to the provisions of TIA Sections 315(a) through 315(d):

        (a)   the Trustee may rely conclusively and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document (whether in its original or facsimile form) believed by it to be genuine and to have been signed or presented by the proper party or parties;

        (b)   any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution;

        (c)   whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely conclusively upon an Officers' Certificate;

        (d)   the Trustee may consult with counsel of its selection, and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

        (e)   the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;

        (f)    the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the expense of the Company and shall incur no liability of any kind by reason of such inquiry or ivestigation;

        (g)   the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;

        (h)   the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture;

        (i)    the Trustee shall not be deemed to have notice of any Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is

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received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture;

        (j)    the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder; and

        (k)   the Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.

        The Trustee shall not be required to advance, expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

 SECTION 5.3    Trustee Not Responsible for Recitals or Issuance of Notes.

        The recitals contained herein and in the Notes, except for the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Notes and perform its obligations hereunder, and that the statements made by it in a Statement of Eligibility on Form T-1 supplied to the Company are true and accurate, subject to the qualifications set forth herein. The Trustee shall not be accountable for the use or application by the Company of the Notes or the proceeds thereof.

 SECTION 5.4    May Hold Notes.

        The Trustee, any Paying Agent, any Security Registrar or any other agent of the Company or the Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company with the same rights it would have if it were not the Trustee, Paying Agent, Security Registrar or such other agent.

 SECTION 5.5    Money Held in Trust.

        Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company.

 SECTION 5.6    Compensation and Reimbursement.

        The Company agrees:

        (a)   to pay to the Trustee from time to time such compensation as shall be agreed in writing from time to time between the Company and the Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

        (b)   except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel, except any such expense, disbursement or advance shall be determined to have been caused by the Trustee's own negligence or willful misconduct); and

        (c)   to indemnify the Trustee or any predecessor Trustee for, and to hold it harmless against, any and all loss, liability, damage, claim or expense, including taxes (other than taxes based on the income of the Trustee) incurred without negligence or willful misconduct on its part, (i) arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder or (ii) in connection with enforcing this indemnification provision.

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        The obligations of the Company under this Section 5.6 to compensate the Trustee, to pay or reimburse the Trustee for expenses, disbursements and advances and to indemnify and hold harmless the Trustee shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture and resignation or removal of the Trustee or any other termination under any Insolvency or Liquidation Proceeding. As security for the performance of such obligations of the Company, the Trustee shall have a claim and lien prior to the Notes upon all property and funds held or collected by the Trustee as such, except funds held in trust for payment of principal of (and premium, if any, on) or interest on any Note. Such lien shall survive the satisfaction and discharge of this Indenture or any other termination under any Insolvency or Liquidation Proceeding.

        When the Trustee incurs expenses or renders services after the occurrence of an Event of Default specified in paragraph (h) of Section 4.1 of this Indenture, such expenses and the compensation for such services are intended to constitute expenses of administration under any Insolvency or Liquidation Proceeding.

 SECTION 5.7    Corporate Trustee Required; Eligibility.

        There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined capital and surplus of at least $50,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section 5.7, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.

 SECTION 5.8    Conflicting Interests.

        The Trustee shall comply with the provisions of Section 310(b) of the Trust Indenture Act.

 SECTION 5.9    Resignation and Removal; Appointment of Successor.

        (a)   No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 5.10.

        (b)   The Trustee may resign at any time by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 5.10 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee.

        (c)   The Trustee may be removed at any time by Act of Holders of a majority in principal amount of the Outstanding Notes, delivered to the Trustee and to the Company. If the instrument of acceptance by a successor Trustee required by Section 5.10 shall not have been delivered to the Trustee within 30 days after the giving of such notice of removal, the Trustee being removed may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee.

        (d)   If at any time:

          (i)  the Trustee shall fail to comply with the provisions of TIA Section 310(b) after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Note for at least six months, or

         (ii)  the Trustee shall cease to be eligible under Section 5.7 and shall fail to resign after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Note for at least six months, or

        (iii)  the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation;

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then, in any such case, (A) the Company, by a Board Resolution, may remove the Trustee, or (B) subject to TIA Section 315(e), any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

        (e)   If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Notes delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or Holders and accepted appointment in the manner required by Section 5.10, any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. Such successorship may, but need not be, evidenced by a supplemental indenture.

        (f)    The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to the Holders in the manner provided for in Section 13.5. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office.

 SECTION 5.10    Acceptance of Appointment by Successor.

        Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective, and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of all amounts due it under Section 5.6, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments to more fully and certainly vest in and confirm to such successor Trustee all such rights, powers and trusts.

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        No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article.

 SECTION 5.11    Merger, Conversion, Consolidation or Succession to Business.

        Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Notes shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Notes; and in case at that time any of the Notes shall not have been authenticated, any successor Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force that is provided anywhere in the Notes or in this Indenture; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Notes in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.

 SECTION 5.12    Preferential Collection of Claims Against Company.

        If and when the Trustee shall be or become a creditor of the Company (or any other obligor under the Notes), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company or any such other obligor.

ARTICLE VI

HOLDERS' LISTS AND REPORTS BY TRUSTEE

 SECTION 6.1    Disclosure of Names and Addresses of Holders.

        Every Holder of Notes, by receiving and holding the same, agrees with the Company, the Security Registrar and the Trustee that none of the Company, the Security Registrar or the Trustee, or any agent of any of them, shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with TIA Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under TIA Section 312(b).

 SECTION 6.2    Reports By Trustee.

        Within 60 days after May 15 of each year commencing with May 15, 2004, the Trustee shall transmit by mail to the Holders, as their names and addresses appear in the Security Register, a brief report dated as of such May 15 in accordance with and to the extent required under TIA Section 313(a). The Trustee shall also comply with TIA Sections 313(b) and 313(c).

        The Company shall promptly notify the Trustee in writing if the Notes become listed on any stock exchange or automatic quotation system.

        A copy of each Trustee's report, at the time of its mailing to Holders, shall be mailed to the Company and filed with the Commission and each stock exchange, if any, on which the Notes are listed.

ARTICLE VII

CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

 SECTION 7.1    Company May Consolidate, etc., Only on Certain Terms.

        The Company shall not, in a single transaction or series of related transactions, consolidate or merge with or into any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any of its

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Restricted Subsidiaries to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of its assets (determined on a consolidated basis for the Company and its Restricted Subsidiaries) whether as an entirety or substantially as an entirety to any Person unless:

        (a)   either (i) the Company is the surviving or continuing corporation or (ii) the Person (if other than the Company) formed by the consolidation or into which the Company is merged or the Person that acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of the Company and its Restricted Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia and (y) shall expressly assume, by supplemental indenture (in form satisfactory in all respects to the Trustee), executed and delivered to the Trustee, the due and punctual payment of the principal of, premium and liquidated damages, if any, and interest on, all of the Notes and the performance of every covenant of the Notes, this Indenture and the Registration Rights Agreement on the part of the Company to be performed or observed;

        (b)   immediately after giving effect to that transaction and the assumption contemplated by clause (a)(ii)(y) above (including giving effect to any Indebtedness and Acquired Indebtedness incurred in connection with or in respect of such transaction), the Company or the Surviving Entity, as the case may be, shall be able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 9.14 of this Indenture;

        (c)   immediately after giving effect to the transaction and the assumption contemplated by clause (a)(ii)(y) above (including, without limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing; and

        (d)   the Company or the Surviving Entity shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that the consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition complies, and if a supplemental indenture is required in connection with such transaction, such supplemental indenture shall comply, with the applicable provisions of this Indenture and that all conditions precedent in this Indenture relating to the transaction have been satisfied.

        For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more of our Restricted Subsidiaries the Capital Stock of which constitutes all or substantially all of the Company's properties and assets, shall be deemed to be the transfer of all or substantially all of the Company's properties and assets.

 SECTION 7.2    Successor Substituted.

        Upon any consolidation of the Company with or merger of the Company with or into any other entity or any sale, assignment, lease, conveyance, transfer or other disposition of all or substantially all of the Properties of the Company to any Person in accordance with Section 7.1, the successor Person formed by such consolidation or into which the Company is merged or to which such sale, assignment, conveyance, transfer or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and in the event of any such sale, assignment, conveyance, transfer or other disposition, the Company, if surviving such sale, assignment, conveyance, transfer or other disposition, shall be discharged of all obligations and covenants under this Indenture and the Notes, except if any such sale assignment, conveyance, transfer or other disposition is made by means of a lease, in which case the Company shall not be so discharged. For purposes of the preceding sentence, the term "Company" means Universal Compression, Inc. or any successor person.

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ARTICLE VIII

SUPPLEMENTAL INDENTURES

 SECTION 8.1    Supplemental Indentures without Consent of Holders.

        Without the consent of any Holders, the Company, when authorized by a Board Resolution, any Guarantors, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:

        (a)   to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company contained herein and in the Notes; or

        (b)   to add to the covenants of the Company for the benefit of Holders or to surrender any right or power herein conferred upon the Company; or

        (c)   to add any additional Events of Default; or

        (d)   to evidence and provide for the acceptance of appointment hereunder by a successor Trustee pursuant to the requirements of Sections 5.9 and 5.10; or

        (e)   to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to qualify, or maintain the qualification of, this Indenture under the TIA or to make any other provisions with respect to matters or questions arising under this Indenture; provided that such action shall not adversely affect the interests of the Holders in any material respect; or

        (f)    to secure the Notes pursuant to the requirements of Section 9.10 or otherwise; or

        (g)   to provide for uncertificated Notes in addition to or in place of certificated Notes; or

        (h)   to evidence and provide for the acceptance of appointment hereunder by a separate trustee with respect to the Notes and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the appointment of more than one Trustee; or

        (i)    to add any Person as a Guarantor as provided in Section 9.12(a) hereof or to evidence the succession of another Person to any Guarantor and the assumption by any such successor of the covenants and agreements of such Guarantor contained herein, in the Notes and in the Guarantee; or

        (j)    to release a Guarantor from its Guarantee pursuant to Section 9.12(c), 11.2 or 11.3 hereof.

 SECTION 8.2    Supplemental Indentures with Consent of Holders.

        With the consent of the Holders of a majority in principal amount of the Outstanding Notes affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, any Guarantors, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Notes under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby:

        (a)   change the Stated Maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the coin or currency in which any Note or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date); or

        (b)   reduce the percentage of aggregate principal amount of the Outstanding Notes, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture; or

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        (c)   modify any of the provisions of this Section or Sections 4.13 and 9.11, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby; or

        (d)   amend, change or modify the obligation of the Company to make and consummate a Change of Control Offer in the event of a Change of Control, or to make and consummate a Net Proceeds Offer with respect to any Asset Sale or modify any of the provisions or definitions with respect thereto.

        It shall not be necessary for any Act of the Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.

 SECTION 8.3    Execution of Supplemental Indentures.

        In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be provided with, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise.

 SECTION 8.4    Effect of Supplemental Indentures.

        Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

 SECTION 8.5    Conformity with Trust Indenture Act.

        Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.

 SECTION 8.6    Reference in Notes to Supplemental Indentures.

        Any Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Notes.

 SECTION 8.7    Notice of Supplemental Indentures.

        Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of Section 8.2, the Company shall give notice thereof to the Holders of each Outstanding Note affected, in the manner provided for in Section 13.5, setting forth in general terms the substance of such supplemental indenture.

ARTICLE IX

COVENANTS

 SECTION 9.1    Payment of Principal, Premium, if any, and Interest.

        The Company covenants and agrees for the benefit of the Holders of Notes that it will duly and punctually pay the principal of (and premium, if any, on) and interest on the Notes in accordance with the terms of the Notes and this Indenture. The Company shall pay interest (including post-petition interest in any proceeding under the Federal Bankruptcy Code or any similar state bankruptcy law) on overdue principal, and premium, if any, at the rate prescribed therefor in such Notes to the extent lawful; and it shall pay interest (including post-petition interest in any proceeding under the Federal Bankruptcy Code or any similar state bankruptcy law) on overdue installments of interest (without regard to any applicable grace period) at the prescribed rate to the extent lawful.

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 SECTION 9.2    Maintenance of Office or Agency.

        The Company shall maintain in the City of New York an office or agency where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Corporate Trust Office shall be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the aforementioned office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands.

        The Company may also from time to time designate one or more other offices or agencies (in or outside of the City of New York) where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the City of New York in accordance with the requirements provided herein for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency.

 SECTION 9.3    Money for Note Payments to Be Held in Trust.

        If the Company shall at any time act as its own Paying Agent with respect to the Notes, it shall, on or before each due date of the principal of (and premium, if any, on) or interest on any of the Notes, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act.

        Whenever the Company shall have one or more Paying Agents for the Notes, it will, on or before 11:00 A.M., New York City time, on each due date of the principal of (and premium, if any, on), or interest on, any Notes, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company shall promptly notify the Trustee of such action or any failure so to act.

        The Company shall cause each Paying Agent for the Notes (other than the Trustee) to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will:

        (a)   hold all sums held by it for the payment of the principal of (and premium, if any, on) or interest on the Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;

        (b)   give the Trustee notice of any default by the Company (or any other obligor upon the Notes) in the making of any payment of principal (and premium, if any) or interest; and

        (c)   at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.

        The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums.

        Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any, on) or interest on any Note and remaining unclaimed for two

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years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request unless an abandoned property law designates another Person, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the city of each place of payment of principal of, (and premium, if any on) and interest on the Notes notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company.

 SECTION 9.4    Corporate Existence.

        Except as expressly permitted by Article VII or other provisions of this Indenture, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence, rights (charter and statutory) and franchises of the Company and each Restricted Subsidiary; provided, however, that the Company shall not be required to preserve any such existence of its Restricted Subsidiaries, right or franchise, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not disadvantageous in any material respect to Holders.

 SECTION 9.5    Payment of Taxes and Other Claims.

        The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all taxes, assessments and governmental charges levied or imposed upon the Company or any Restricted Subsidiary or upon the income, profits or Property of the Company or any Restricted Subsidiary and (b) all lawful claims for labor, materials and supplies, which, if unpaid, might by law become a Lien upon the Property of the Company or any Restricted Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which appropriate provision has been made in accordance with GAAP.

 SECTION 9.6    Maintenance of Properties.

        The Company shall cause all material Properties owned by the Company or any Restricted Subsidiary and used or held for use in the conduct of its business or the business of any Restricted Subsidiary to be maintained and kept in good condition, repair and working order (ordinary wear and tear excepted), all as in the judgment of the Company may be necessary so that its business may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the maintenance of any of such Properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Restricted Subsidiary and not disadvantageous in any material respect to the Holders. Notwithstanding the foregoing, nothing contained in this Section 9.6 shall limit or impair in any way the right of the Company and its Restricted Subsidiaries to sell, divest and otherwise to engage in transactions that are otherwise permitted by this Indenture.

 SECTION 9.7    Insurance.

        The Company shall at all times keep all of its and its Restricted Subsidiaries' Properties which are of an insurable nature insured (including appropriate self-insurance) with insurers, believed by the Company to be responsible, against loss or damage to the extent that, in the reasonable good faith opinion of the Company, property of similar character is usually so insured by corporations similarly situated and owning like properties.

        The Company may adopt such other plan or method of protection, in lieu of or supplemental to insurance with insurers, whether by the establishment of an insurance fund or reserve to be held and applied to make good losses from casualties, or otherwise, conforming to the systems of self-insurance, in the reasonable good faith

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opinion of the Company, maintained by corporations similarly situated and owning like properties, as may be determined by the Board of Directors.

 SECTION 9.8    Statement by Officers as to Default.

        (a)   The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year of the Company an Officers' Certificate, one of the signers of which shall be the principal executive officer, principal financial officer or principal accounting officer of the Company, stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of such Officer's knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which such Officer may have knowledge and what action the Company is taking or proposes to take with respect thereto). Such Officers' Certificate shall comply with TIA Section 314(a)(4). For purposes of this Section 9.8(a), such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture.

        (b)   The Company shall, so long as any Notes are Outstanding, deliver to the Trustee forthwith upon any Officer becoming aware of any Default or Event of Default in the performance of any covenant, agreement or condition contained in this Indenture, an Officers' Certificate specifying such Default or Event of Default and the status thereof.

 SECTION 9.9    Reports.

        The Company shall file on a timely basis with the Commission, to the extent such filings are accepted by the Commission and whether or not the Company has a class of securities registered under the Exchange Act, the annual reports, quarterly reports and other documents that the Company would be required to file if it were subject to Section 13 or 15(d) of the Exchange Act). The Company will also be required to file with the Trustee copies of such reports and documents within 15 days after the date on which the Company files such reports and documents with the Commission or the date on which the Company would be required to file such reports and documents if the Company were so required. The Company also will furnish at its cost copies of such reports and documents to any Holder of Notes promptly upon written request, irrespective of whether or not the Company files any such report or document with the Commission. The Company and each Guarantor also shall comply with other provisions of TIA Section 314(a).

        Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates).

 SECTION 9.10    Limitation on Liens.

        The Company shall not, and shall not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any Liens (other than Permitted Liens) upon any of their respective properties securing any Indebtedness of us or any of our Restricted Subsidiaries, unless the Notes or the Guarantees, as applicable, are equally and ratably secured; provided that if the Indebtedness is Subordinated Indebtedness, the Lien securing that Indebtedness will be subordinated and junior to the Lien securing the Notes or the Guarantees.

 SECTION 9.11    Waiver of Certain Covenants.

        The Company may omit in any particular instance to comply with any term, provision or condition set forth in Sections 9.5 through 9.10, Sections 9.12 through 9.14 and Sections 9.17 through 9.20 hereof if, before or after the time for such compliance, the Holders of at least a majority in principal amount of the Outstanding Notes and the Guarantors, by Act of such Holders and written agreement of the Guarantors, waive such compliance in such instance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the

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obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. When a Default or an Event of Default is so waived, it shall be deemed cured and shall cease to exist to the extent provided in such waiver. This Section 9.11 shall be in lieu of Section 316(a)(1)(B) of the TIA and such Section 316(a)(1)(B) of the TIA is hereby expressly excluded from this Indenture and the Notes, as permitted by the TIA.

 SECTION 9.12    Limitation of Guarantees by Restricted Subsidiaries.

        (a)   The Company shall not permit any Restricted Subsidiary that is not a Guarantor to guarantee the payment of any Indebtedness of the Company, pledge any of its assets to secure any Indebtedness of the Company or otherwise provide direct credit support for any Indebtedness of the Company, in each case, unless (i) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to this Indenture, in substantially the form of Exhibit B hereto, providing for a Guarantee of the Notes by such Restricted Subsidiary; and (ii) such Restricted Subsidiary shall deliver to the Trustee an Opinion of Counsel to the effect that such supplemental indenture has been duly executed and authorized and such Guarantee constitutes a valid, binding and enforceable obligation of such Restricted Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy, insolvency or similar laws (including, without limitation, all laws relating to fraudulent transfers) and except insofar as enforcement thereof is subject to general principles of equity.

        (b)   Notwithstanding the foregoing paragraph (a), any Guarantee by a Restricted Subsidiary of the Notes shall be automatically and unconditionally released and discharged, without any further action required on the part of the Trustee or any holder, upon: (i) the unconditional release of that Restricted Subsidiary from its liability in respect of the Indebtedness in connection with which that Guarantee was executed and delivered pursuant to the preceding paragraph; or (ii) any sale or other disposition (by merger or otherwise) to any Person that is not a Restricted Subsidiary of the Company of all of the Company's direct or indirect Capital Stock in, or all or substantially all of the assets of, that Restricted Subsidiary; provided that (a) such sale or disposition of the Capital Stock or assets is otherwise in compliance with the terms of this Indenture and (b) that assumption, guarantee or other liability of the Restricted Subsidiary has been released by the Holders of the other Indebtedness so guaranteed.

 SECTION 9.13    Limitation on Restricted Payments.

        (a)   The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, take the following actions:

          (i)  declare or pay any dividend or make any distribution (other than dividends or distributions payable in our Qualified Capital Stock or in options, warrants, or other rights to purchase that Qualified Capital Stock (but excluding any debt security or Disqualified Capital Stock convertible into, or exchangeable for, that Qualified Capital Stock)) on or in respect of shares of the Company's Capital Stock to holders of that Capital Stock,

         (ii)  purchase, redeem or otherwise acquire or retire for value any of the Company's Capital Stock or any warrants, rights or options to purchase or acquire shares of any class of that Capital Stock (in each case, other than in exchange for our Qualified Capital Stock or options, warrants or other rights to purchase that Qualified Capital Stock (but excluding any debt security, or Disqualified Capital Stock convertible into, or exchangeable for, that Qualified Capital Stock)),

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        (iii)  make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any of the Company's Indebtedness that is subordinate or junior in right of payment to the Notes, or

        (iv)  make any Investment (other than Permitted Investments),

(each of the foregoing actions set forth in clauses (i), (ii), (iii) and (iv) being referred to as a "Restricted Payment"), if at the time of the Restricted Payment or immediately after giving effect thereto,

        (I)   a Default or an Event of Default shall have occurred and be continuing,

        (II)  the Company is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 9.14, or

        (III) the aggregate amount of Restricted Payments (including the proposed Restricted Payment) made subsequent to the issue date of the Existing Notes (the amount expended for those purposes, if other than in cash, being the fair market value of such property as determined reasonably and in good faith by the Company's Board of Directors) exceeds the sum of:

        (v)   50% of our cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) earned from the beginning of the first fiscal quarter subsequent to the issue date of the Existing Notes and on or prior to the date the Restricted Payment occurs (the "Reference Date") (treating such period as a single accounting period); plus

        (w)  the sum of (A) 100% of the aggregate net cash proceeds and the fair market value of property other than cash (as determined by the Company's Board of Directors) received by the Company from any Person (other than one of its Subsidiaries or a trust established by the Company or any of its Subsidiaries for the benefit of the Company's or its Subsidiaries' employees) from the issuance and sale subsequent to the issue date of the Existing Notes and on or prior to the Reference Date of Qualified Capital Stock of the Company or options, warrants or other rights to purchase that Qualified Capital Stock (but excluding any debt security or Disqualified Capital Stock convertible into, or exchangeable for, that Qualified Capital Stock (B) 100% of the fair market value (as determined by the Company's Board of Directors) of property constituting Replacement Assets received by the Company or a Restricted Subsidiary subsequent to the Issue Date in exchange for Qualified Capital Stock of the Company (other than any such property received from a Subsidiary of the Company or a trust established by the Company or any of its Subsidiaries for the benefit of the Company's or its Subsidiaries' employees); plus

        (x)   without duplication of any amounts included in clause (III)(w) above, 100% of the aggregate net cash proceeds of any equity contribution received by the Company from a holder of its Capital Stock (excluding, in the case of clauses (III)(x) and (y), any net cash proceeds from an Equity Offering to the extent used to redeem the Notes in compliance with the provisions set forth under Section 10.8(b)) subsequent to the issue date of the Existing Notes and on or prior to the Reference Date; plus

        (y)   100% of the aggregate net cash proceeds received by the Company from any other Person (other than one of the Company's Subsidiaries) from the issuance and sale (subsequent to the issue date of the Existing Notes and on or prior to the Reference Date) of debt securities or shares of Disqualified Capital Stock that have been converted into or exchanged for the Company's Qualified Capital Stock, together with the aggregate cash received by the Company at the time of the conversion or exchange; plus

        (z)   without duplication, the sum of (1) the aggregate amount returned in cash to the Company or one of the Company's Restricted Subsidiaries on or with respect to Investments (other than Permitted Investments) made subsequent to the issue date of the Existing Notes and on or prior to the Reference Date, whether through interest payments, principal payments, dividends or

44

other distributions or payments, (2) the net cash proceeds received by the Company or any of its Restricted Subsidiaries from the disposition of all or any portion of Investments (other than to one of the Subsidiaries of the Company) subsequent to the issue date of the Existing Notes and on or prior to the Reference Date and (3) upon redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary subsequent to the Issue Date and on or prior to the Reference Date, the portion (proportionate to our equity interest in that Subsidiary) of the fair market value of the net assets of that Subsidiary at the time that Unrestricted Subsidiary is designated a Restricted Subsidiary; provided, however, that the sum of clauses (1), (2) and (3) above shall not exceed the aggregate amount of all such Investments (excluding Permitted Investments) made by the Company or any Restricted Subsidiary subsequent to the Issue Date.

        The sum of the amounts accumulated pursuant to clause (v) through (z) of the foregoing paragraph III was $167.1 million as of the Issue Date.

        (b)   Notwithstanding paragraph (a) above, the Company and its Restricted Subsidiaries may take the following actions:

        (i)    the payment of any dividend within 60 days after the date of declaration of the dividend if the dividend would have been permitted on the date of declaration;

        (ii)   the acquisition of any shares of the Company's Capital Stock, either (I) solely in exchange for shares of the Company's Qualified Capital Stock or options, warrants or other rights to purchase the Company's Qualified Capital Stock (other than any debt security or Disqualified Capital Stock convertible into, or exchangeable for, the Company's Qualified Capital Stock) or (II) through the application of net proceeds of a substantially concurrent sale for cash (other than to one of the Company's Subsidiaries or to a trust established by the Company or any of its Subsidiaries for the benefit of the Company's or its Subsidiaries' employees) of shares of the Company's Qualified Capital Stock or options, warrants, or other rights to purchase the Company's Qualified Capital Stock (other than any debt security or Disqualified Capital Stock convertible into, or exchangeable for, the Company's Qualified Capital Stock);

        (iii)  the acquisition of any of the Company's Indebtedness that is subordinate or junior in right of payment to the Notes either (I) solely in exchange for shares of Qualified Capital Stock of the Company, or options, warrants or other rights to purchase such Qualified Capital Stock or (II) through the application of net proceeds of a substantially concurrent sale for cash (other than to one of the Company's Subsidiaries) of (A) shares of our Qualified Capital Stock or (B) Refinancing Indebtedness;

        (iv)  dividends or payments to Holdings of cash to be immediately applied to repurchases by Holdings of Qualified Capital Stock of Holdings or options to purchase such Qualified Capital Stock from directors or employees or former directors or former employees of Holdings or any of its Subsidiaries or their authorized representatives upon the death, disability or termination of employment of such persons or pursuant to the terms of any customary agreement under which such Qualified Capital Stock or options were issued, in an aggregate amount not to exceed $2.0 million plus the amount of any life insurance proceeds received by Holdings or any of its Subsidiaries during such year related to any such death;

        (v)   the repurchase of any Indebtedness that is subordinated to the Notes at a purchase price not greater than 101% of the principal amount of the Indebtedness in the event of a change of control in accordance with provisions similar to Section 9.15; provided that, prior to or simultaneously with the repurchase, the Company has made the Change of Control Offer as provided in that covenant with respect to the Notes and have repurchased all Notes validly tendered for payment in connection with that Change of Control Offer;

        (vi)  the declaration or payment of dividends on the Company's Common Stock (or the payment to Holdings to fund the payment by Holdings of dividends on Common Stock of Holdings) following an Equity Offering by the Company or Holdings, as the case may be, in an amount per annum not to exceed 6% of the net cash proceeds received by the Company, or contributed to the Company by Holdings, in all Equity Offerings subsequent to the Issue Date;

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        (vii) payments or distributions to dissenting stockholders pursuant to applicable law, pursuant to or in connection with a consolidation, merger or transfer of assets that complies with the provisions of this Indenture applicable to mergers, consolidations and transfers of all or substantially all of the Company's property and assets;

        (viii) any dividends or payments to Holdings in respect of overhead expenses, legal, accounting, commissions, reporting and other professional fees and expenses of Holdings incurred in the ordinary course of business and that are directly attributable to the Company's operations and the Company's Restricted Subsidiaries; and

        (ix)  payments to holders of Qualified Capital Stock of the Company (I) in lieu of the issuance of fractional shares of Qualified Capital Stock of the Company or (II) to redeem or repurchase stock purchase or similar rights issued as a shareholder rights device; provided that the payments made pursuant to this clause (ix) from the Issue Date through the final stated maturity of the notes may not exceed $2.0 million;

        (x)   repurchases, acquisitions or retirements of shares of Qualified Capital Stock of the Company or Holdings deemed to occur upon the exercise of stock options or similar rights issued under employee benefits plans of the Company or Holdings if those shares represent all or a portion of the exercise price or are surrendered in connection with satisfying any income tax obligations; and

        (xi)  other Restricted Payments in an aggregate amount since the Issue Date not to exceed $15.0 million;

provided that, except in the case of clauses (i) and (ii), no Default or Event of Default shall have occurred and be continuing or occur as a consequence of the actions or payments set forth therein. In determining the aggregate amount of Restricted Payments made subsequent to the issue date of the Existing Notes in accordance with clause III contained in Section 9.13(a), amounts expended, without duplication, pursuant to clauses (i), (ii), (iii)(I), (iv) through (vii), and (xi) shall be included in such calculation.

        Not later than 30 days after the date of making any Restricted Payment (but not including any transaction described in the preceding paragraph), the Company shall deliver to the Trustee an Officers' Certificate stating that the Restricted Payment complies with this Indenture and setting forth in reasonable detail the basis upon which the required calculations were computed, which calculations may be based upon our latest available internal quarterly financial statements.

        (c)   In determining Consolidated Net Income of the Company (including any components of the definition thereof) under paragraph (a) above, (i) the Company shall use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period, in each case to the extent relevant in making such determination and (ii) the Company shall be permitted to rely in good faith on the financial statements and other financial data derived from the books and records of the Company that are available on the date of determination. If the Company makes a Restricted Payment which, at the time of the making of such Restricted Payment, would in the good faith determination of the Company be permitted under the requirements of this Indenture, such Restricted Payment shall be deemed to have been made in compliance with this Indenture notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Net Income of the Company for any period, subject to, in the case of clauses (i) and (ii) above, the application of the various components of Consolidated Net Income pursuant to the definition thereof.

 SECTION 9.14    Limitation on Incurrence of Additional Indebtedness.

        The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively, "incur") any Indebtedness (other than Permitted Indebtedness); provided, however, that if no Event of Default shall have occurred and be continuing at the time of or as a consequence of the incurrence of any such Indebtedness, the Company and its Restricted Subsidiaries that are Guarantors may incur Indebtedness (including, without limitation, Acquired Indebtedness) if on the date of the

46

incurrence of that Indebtedness, after giving effect to the incurrence thereof, the Company's Consolidated Fixed Charge Coverage Ratio is greater than 2.0 to 1.0.

        For purposes of determining compliance with this covenant,

        (i)    in the event that an item of Indebtedness (including Acquired Indebtedness) meets the criteria of more than one of the types of Indebtedness permitted by this covenant, the Company may in its sole discretion classify (or later reclassify, in whole or in part, in its sole discretion) that item of Indebtedness and will be permitted to include the amount and type of each class of Indebtedness in the test specified in the first paragraph of this covenant and/or in one of the clauses of the definition of the term "Permitted Indebtedness,"

        (ii)   the amount of Indebtedness issued at a price that is less than the principal amount thereof shall be equal to the amount of liability in respect thereof determined in accordance with GAAP,

        (iii)  Indebtedness incurred in connection with, or in contemplation of, any transaction described in the definition of the term "Acquired Indebtedness" shall be deemed to have been incurred by the Company or one of its Restricted Subsidiaries, as the case may be, at the time an acquired Person becomes a Restricted Subsidiary (or is merged into the Company or a Restricted Subsidiary) or at the time of the acquisition of assets, as the case may be,

        (iv)  the maximum amount of Indebtedness that the Company and its Restricted Subsidiaries may incur pursuant to this covenant will not be deemed to be exceeded, with respect to any outstanding Indebtedness, due solely to the result of fluctuations in the exchange rates of currencies,

        (v)   guarantees or Liens supporting Indebtedness permitted to be incurred under this covenant may be issued or granted if otherwise issued or granted in accordance with the terms of this Indenture, and

        (vi)  accrual of interest or dividends, the accretion of accreted value or liquidation preference, and the payment of interest or dividends in the form of additional Indebtedness or Disqualified Capital Stock will not be deemed to be an incurrence of Indebtedness for purposes of this covenant.

 SECTION 9.15    Change of Control.

        (a)   Upon the occurrence of a Change of Control, the Company shall be obligated to make an offer to purchase (a "Change of Control Offer") all or a portion of the then Outstanding Notes, in whole or in part, from the Holders of such Notes in integral multiples of $1,000, at a purchase price (the "Change of Control Purchase Price") equal to 101% of the aggregate principal amount of such Notes, plus accrued and unpaid interest on, and premium and liquidated damages, if any, to the Change of Control Payment Date (as defined below), in accordance with the procedures set forth in paragraphs (b), (c) and (d) of this Section. The Company shall, subject to the provisions described below, be required to purchase all Notes properly tendered into the Change of Control Offer and not withdrawn. The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer at the same purchase price, at the same times and otherwise in substantial compliance with the requirements applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer.

        (b)   The Change of Control Offer is required to remain open for at least 20 Business Days and until the close of business on the fifth Business Day prior to the Change of Control Payment Date.

        (c)   Not later than the 30th day following any Change of Control, the Company shall give to the Trustee in the manner provided in Section 13.4 and each Holder of the Notes in the manner provided in Section 13.5, a notice (the "Change of Control Notice") stating:

        (1)   that a Change in Control has occurred and that such Holder has the right to require the Company to repurchase such Holder's Notes, or portion thereof, at the Change of Control Purchase Price;

        (2)   any information regarding such Change of Control required to be furnished pursuant to Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder (to the extent that the

47

provisions of any securities laws or regulations conflict with the provisions of this Section 9.15(c)(2), the Company shall comply with applicable securities laws and regulations and shall not be deemed to have breached its obligations under the provisions of this Section 9.15 by virtue thereof);

        (3)   a purchase date (the "Change of Control Payment Date") which shall be on a Business Day and no earlier than 30 days nor later than 45 days from the date the Change of Control Notice is given;

        (4)   that any Note, or portion thereof, not tendered or accepted for payment will continue to accrue interest;

        (5)   that unless the Company defaults in depositing money with the Paying Agent in accordance with the last paragraph of paragraph (d) of this Section 9.15, or payment is otherwise prevented, any Note, or portion thereof, accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; and

        (6)   the instructions a Holder must follow in order to have its Notes repurchased in accordance with paragraph (d) of this Section.

        (d)   Holders electing to have Notes purchased will be required to surrender such Notes to the Company at the address specified in the Change of Control Notice prior to the close of business on the third Business Day prior to the Change of Control Payment Date. Holders will be entitled to withdraw their election if the Company receives, not later than three Business Days prior to the Change of Control Payment Date, a facsimile transmission or letter setting forth the name of the Holder, the certificate number(s) and principal amount of the Notes delivered for purchase by the Holder as to which his election is to be withdrawn and a statement that such Holder is withdrawing his election to have such Notes purchased. Holders whose Notes are purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered.

        On the Change of Control Payment Date, the Company shall (i) accept for payment all Notes or portions thereof tendered pursuant to a Change of Control Offer; (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so tendered; and (iii) deliver or cause to be delivered to the Trustee the Notes so accepted. The Paying Agent shall promptly mail or deliver to Holders of the Notes so accepted payment in an amount equal to the purchase price, and the Company shall execute and the Trustee will promptly authenticate and mail or make available for delivery to such Holders a new Note equal in principal amount to any unpurchased portion of the Note which any Holder did not surrender for purchase. Any Notes not so accepted will be promptly mailed or delivered to the Holder thereof. The Company shall announce the results of a Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. For purposes of this Section 9.15, the Trustee will act as the Paying Agent.

        (e)   The Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer at the Change of Control Purchase Price, at the same times and otherwise in compliance with the requirements applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer.

 SECTION 9.16    Limitation on Asset Sales.

        (a)   The Company shall not, and shall not permit any Restricted Subsidiary to consummate an Asset Sale unless:

        (i)    the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by the Company's Board of Directors or by written appraisal from a qualified nationally recognized appraisal firm), and

        (ii)   at least 75% of the consideration received by the Company or the Restricted Subsidiary, as the case may be, from the Asset Sale shall be in the form of cash or Cash Equivalents;

provided that (a) the amount of any liabilities of the Company or the Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any Guarantee of the Notes and other than liabilities in respect of Disqualified Capital Stock or Preferred Stock of any Guarantor) that are assumed by

48

the transferee of the assets and for which the Company or the Restricted Subsidiary is released from all liability related thereto in connection with the Asset Sale and (b) the fair market value of any marketable securities received by the Company or the Restricted Subsidiary in exchange for the assets that are converted into cash within 90 days shall be deemed to be cash for purposes of this provision.

        (b)   In the event of an Asset Sale, the Company shall apply, or cause the Restricted Subsidiary to apply, the Net Cash Proceeds relating to the Asset Sale within 365 days of receipt thereof either

        (i)    to repay or prepay any secured Indebtedness,

        (ii)   to make an investment in Replacement Assets,

        (iii)  a combination of prepayment and investment permitted by the foregoing clauses (A) and (B), or

        (iv)  to repay or prepay any Existing Notes pursuant to the terms of the indenture governing the Existing Notes.

        (c)   After 365 days from the day on which the aggregate amount of Net Cash Proceeds that have not been applied as permitted in Section 9.16(b) (a "Net Proceeds Offer Amount") exceeds $20.0 million (the "Net Proceeds Offer Trigger Date"), the Company shall make an offer to purchase (the "Net Proceeds Offer") from all Holders and any then outstanding Pari Passu Indebtedness required to be repurchased or repaid on a permanent basis in connection with an Asset Sale, on a pro rata basis, that amount of Notes and such other Pari Passu Indebtedness equal to the Net Proceeds Offer Amount at a price equal to 100% of the principal amount of the Notes and such other Pari Passu Indebtedness to be purchased, plus accrued and unpaid interest and liquidated damages thereon, if any, to the date of purchase (the "Offered Price"). If at any time any non-cash consideration received by the Company or any of its Restricted Subsidiaries, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to the non-cash consideration), then the conversion or disposition will be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof will be applied in accordance with this Section 9.16. To the extent that the aggregate principal amount of Notes and other Pari Passu Indebtedness tendered pursuant to the Net Proceeds Offer is less than the Net Proceeds Offer Amount the Company and its Restricted Subsidiaries may use the deficiency for any purpose not prohibited by this Indenture. If the aggregate principal amount of Notes and other Pari Passu Indebtedness validly tendered and not withdrawn by holders thereof exceeds the Net Proceeds Offer Amount, the Notes and other Pari Passu Indebtedness to be purchased will be selected on a pro rata basis based on the amounts tendered. Upon completion of a Net Proceeds Offer, the amount of Net Proceeds Offer Amount will be reset to zero.

        (d)   Notwithstanding the immediately preceding paragraphs (b) and (c), the Company and its Restricted Subsidiaries will be permitted to consummate an Asset Sale without complying with paragraphs (b) and (c) to the extent (i) at least 80% of the consideration for the Asset Sale constitutes Replacement Assets and (ii) the Asset Sale is for fair market value; provided that any consideration not constituting Replacement Assets received by the Company or any of its Restricted Subsidiaries in connection with any Asset Sale permitted to be consummated under this paragraph will be deemed to be Net Cash Proceeds subject to the provisions of this Section 9.16.

        (e)   Not less than 30 days nor more than 45 days following the Net Proceeds Offer Trigger Date the Company shall give to the Trustee in the manner provided in Section 13.4 hereof and each Holder of the Notes in the manner provided in Section 13.5 hereof notice (a "Purchase Notice") of each Net Proceeds Offer. Upon receiving the Purchase Notice for the Net Proceeds Offer, Holders may elect to tender their Notes in whole or in part in integral multiples of $1,000 in principal amount in exchange for cash. A Net Proceeds Offer shall remain open for a period of 20 Business Days or such longer period as may be required by law, and the purchase of such Note shall be consummated within 60 days following the mailing of the Net Proceeds Offer.

        (f)    The Purchase Notice shall set forth a purchase date (the "Net Proceeds Payment Date"), which shall be on a Business Day no earlier than 30 days nor later than 70 days from the Trigger Date. The Purchase Notice shall also state (A) that a Trigger Date with respect to one or more Asset Sales has occurred and that such Holder has the right to require the Company to repurchase such Holder's Notes at the Offered Price, subject to the limitations described in the forgoing paragraph (f), (B) any information regarding such Net Proceeds Offer

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required to be furnished pursuant to Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder, (C) that any Note, or portion thereof, not tendered or accepted for payment will continue to accrue interest, (D) that, unless the Company defaults in depositing money with the Paying Agent in accordance with clause (ii) of paragraph (h) of this Section 9.16, or payment is otherwise prevented, any Note, or portion thereof, accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue interest after the Net Proceeds Payment Date, and (E) the instructions a Holder must follow in order to have its Notes repurchased in accordance with paragraph (h) of this Section.

        (g)   Holders electing to have Notes purchased will be required to surrender such Notes to the Company at the address specified in the Purchase Notice at least five Business Days prior to the Net Proceeds Payment Date. Holders will be entitled to withdraw their election if the Company receives, not later than three Business Days prior to the Net Proceeds Payment Date, a facsimile transmission or letter setting forth the name of the Holder, the certificate number(s) and principal amount of the Notes delivered for purchase by the Holder as to which his election is to be withdrawn and a statement that such Holder is withdrawing his election to have such Notes purchased. Holders whose Notes are purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered.

        (h)   On the Net Proceeds Payment Date, the Company shall (i) accept for payment Notes or portions thereof tendered pursuant to a Net Proceeds Offer in an aggregate principal amount equal to the Net Proceeds Offer Amount or such lesser amount of Notes as has been tendered, (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so tendered in an aggregate principal amount equal to the Net Proceeds Offer Amount or such lesser amount and (iii) deliver or cause to be delivered to the Trustee the Notes so accepted. The Paying Agent shall promptly mail or deliver to Holders of the Notes so accepted payment in an amount equal to the purchase price, and the Company shall execute and the Trustee will promptly authenticate and mail or make available for delivery to such Holders a new Note equal in principal amount to any unpurchased portion of the Note which any such Holder did not surrender for purchase. Any Notes not so accepted will be promptly mailed or delivered to the Holder thereof. The Company shall announce the results of a Net Proceeds Offer on or as soon as practicable after the Net Proceeds Payment Date. For purposes of this Section 9.16, the Trustee will act as the Paying Agent.

 SECTION 9.17    Limitation on Transactions with Affiliates.

        (a)   The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate Transactions permitted under paragraph (b) below and (y) Affiliate Transactions on terms that are no less favorable than those that might reasonably have been obtained in a comparable transaction at that time on an arm's-length basis from a Person that is not an Affiliate of the Company or such Restricted Subsidiary. All Affiliate Transactions (and each series of related Affiliate Transactions that are part of a common plan) involving aggregate payments or other property with a fair market value in excess of $5.0 million shall be approved by a majority of the Disinterested Directors or a majority of the Disinterested Directors of the Board of Directors of such Restricted Subsidiary, as the case may be, such approval to be evidenced by a Board Resolution stating that the Board of Directors has determined that the transaction complies with the foregoing provisions; provided, however, if there are not any members of the Board of Directors of the Company or such Restricted Subsidiary, as the case may be, that are Disinterested Directors with respect to such Affiliate Transaction or series of related Affiliated Transactions, such Affiliate Transaction shall not require such approval if the Company or such Restricted Subsidiary, as the case may be, obtains a favorable opinion as to the fairness of such Affiliate Transaction or series of related Affiliate Transactions to us or the relevant Restricted Subsidiary, as the case may be, from a financial point of view, from a nationally recognized firm qualified to render such fairness opinions and file the opinion with the Trustee. In addition to the foregoing requirements, if the Company or any of its Restricted Subsidiaries enters into an Affiliate Transaction (or a series of Affiliate Transactions that are part of a common plan) that involves an aggregate fair market value of more than $20.0 million, the Company or the Restricted Subsidiary, as the case may be, will, prior to the consummation thereof, obtain a favorable opinion as to the fairness of the transaction or series of related transactions to the Company or the relevant Restricted Subsidiary, as the case may be, from a

50

financial point of view, from a nationally recognized firm qualified to render such fairness opinions and file the opinion with the Trustee.

        (b)   The restrictions set forth in clause (a) above shall not apply to:

        (i)    reasonable fees and compensation paid to and indemnity provided on behalf of, officers, directors, employees or consultants of us or any of the Company's Restricted Subsidiaries as determined in good faith by the Company's Board of Directors or senior management of the Company or the Restricted Subsidiary, as applicable;

        (ii)   transactions exclusively between or among the Company and any of its Restricted Subsidiaries or exclusively between or among our Restricted Subsidiaries, provided the transactions are not otherwise prohibited by this Indenture;

        (iii)  any transaction made in accordance with the terms of any agreement as in effect as of the Issue Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) in any replacement agreement thereto so long as any amendment or replacement agreement is not materially more disadvantageous to the Holders than the original agreement as in effect on the Issue Date;

        (iv)  Restricted Payments permitted by this Indenture;

        (v)   the Tax Sharing Agreement;

        (vi)  employment agreements with officers and employees of the Company and its Restricted Subsidiaries, in the ordinary course of business;

        (vii) loans and advances to employees not to exceed $5.0 million outstanding at any one time, in the ordinary course of business;

        (viii) arrangements with directors of the Company existing on the Issue Date as disclosed in the Company's filings with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, prior to the Issue Date;

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        (ix)  transactions with a Person that is an Affiliate of the Company solely because the Company owns Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock) of that Person; and

        (x)   sales of Capital Stock (other than Disqualified Capital Stock) to the Company's Affiliates.

 SECTION 9.18    Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries.

        The Company shall not, and shall not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any of the Company's Restricted Subsidiaries to:

        (a)   pay dividends or make any other distributions on or in respect of its Capital Stock to us or any of our Restricted Subsidiaries;

        (b)   make loans or advances, or to pay any Indebtedness or other obligation owed, to us or any other of our Restricted Subsidiaries; or

        (c)   transfer any of its property or assets to us or any other of our Restricted Subsidiaries,

except for such encumbrances or restrictions existing under or by reason of:

        (1)   applicable law;

        (2)   this Indenture;

        (3)   agreements governing Indebtedness in existence on the Issue Date and Credit Facilities as in effect on the date of this Indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, than the restrictions contained in such predecessor agreements;

        (4)   any agreement or instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired;

        (5)   encumbrances and restrictions contained in agreements existing on the Issue Date;

        (6)   in the case of clause (c) above: (A) agreements or instruments arising or agreed to in the ordinary course of business that restrict in a customary manner the subletting, assignment or transfer of any property or asset subject to a lease, license, conveyance or other contract and (B) any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of our or any of our Restricted Subsidiaries entered into in compliance with this Indenture;

        (7)   an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, any of our Restricted Subsidiaries;

        (8)   provisions in agreements or instruments that prohibit the payment of dividends or the making of other distributions with respect to any Capital Stock of a Person other than on a pro rata basis;

        (9)   an agreement governing Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clause (2), (3), (4) or (5) above; provided, however, that the provisions relating to the encumbrance or restriction contained in any that Indebtedness are no less favorable to the Holders in any material respect than the provisions relating to the encumbrance or restriction contained in agreements referred to in clause (2), (3), (4) or (5).

        (10) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on that property of the nature described in Section 9.18(c);

        (11) any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition;

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        (12) Liens securing Indebtedness otherwise permitted to be incurred under the provisions of Section 9.10 that limit the right of the debtor to dispose of the assets subject to such Liens;

        (13) provisions with respect to the disposition or distribution of assets or property pending the consummation of a sale of such assets or property contained in asset sale agreements and other similar agreements entered into in the ordinary course of business;

        (14) restrictions on cash or other deposits or net worth imposed by customers under contract entered into in the ordinary course of business;

        (15) customary provisions in bona fide contracts for the sale of property or assets; and

        (16) customary non-assignment provisions of any contract or lease entered into in the ordinary course of business.

        Nothing contained in Section 9.18(c) shall prevent us or any of our Restricted Subsidiaries from creating, incurring, assuming or suffering to exist any Lien created, incurred, assumed or suffered to exist in accordance with the other terms of this Indenture.

 SECTION 9.19    Limitation on Preferred Stock of Restricted Subsidiaries.

        The Company will not permit any of its Restricted Subsidiaries to issue any Preferred Stock (other than to the Company or to one of its Restricted Subsidiaries) or permit any Person (other than one of its Restricted Subsidiaries) to own any Preferred Stock of any of its Restricted Subsidiaries; provided that the foregoing shall not prohibit the creation of a Lien in any Preferred Stock under the Credit Facilities and otherwise created in accordance with this Indenture.

 SECTION 9.20    Limitation on Conduct of Business.

        The Company shall not, and shall not permit any of its Restricted Subsidiaries to, engage in any businesses that are not the same, similar or reasonably related to the business in which the Company and its Restricted Subsidiaries were engaged on the Issue Date.

ARTICLE X

REDEMPTION OF NOTES

 SECTION 10.1    Redemption and Repurchase.

        (a)   There shall be no sinking fund for the retirement of the Notes or other mandatory redemption obligation.

        (b)   The Company, at its option, may redeem the Notes in accordance with the provisions of the Notes and this Indenture, including, without limitation, Section 10.8.

        (c)   The Company, at the option of the Holders thereof, shall repurchase the Notes in accordance with the provisions of and at the Change of Control Purchase Price or the Offered Price, as the case may be, set forth in the Notes and in accordance with the provisions of this Indenture, including, without limitation, Sections 9.15 and 9.16.

 SECTION 10.2    Election to Redeem; Notice to Trustee.

        The election of the Company to redeem any Notes shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 30 days prior to the Redemption Date fixed by the Company, furnish to the Trustee an Officers' Certificate setting forth such Redemption Date, the Redemption Price and, if less than all the Notes are to be redeemed, the principal amount of Notes to be redeemed and shall deliver to the Trustee such documentation and records as shall enable the Trustee to select the Notes to be redeemed pursuant to Section 10.3. Any election to redeem Notes shall be revocable until the Company gives a notice of redemption pursuant to Section 10.4 to the Holders of Notes to be redeemed.

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 SECTION 10.3    Selection by Trustee of Notes to Be Redeemed.

        If less than all the Notes are to be redeemed, the particular Notes to be redeemed shall be selected not less than 30 days nor more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Notes not previously called for redemption, pro rata, by lot or by any other method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions of the principal of Notes; provided, however, that any such partial redemption shall be in integral multiples of $1,000.

        The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Notes selected for partial redemption, the principal amount thereof to be redeemed.

        For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Notes shall relate, in the case of any Note redeemed or to be redeemed only in part, to the portion of the principal amount of such Note which has been or is to be redeemed.

 SECTION 10.4    Notice of Redemption.

        Notice of redemption shall be given in the manner provided for in Section 13.5 not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Notes to be redeemed.

        All notices of redemption shall identify the Notes to be redeemed (including CUSIP number) and shall state:

        (a)   the Redemption Date;

        (b)   the Redemption Price;

        (c)   if less than all Outstanding Notes are to be redeemed, the identification (and, in the case of a partial redemption of any series, the principal amounts) of the particular Notes to be redeemed;

        (d)   that on the Redemption Date the Redemption Price (together with accrued interest to the Redemption Date payable as provided in Section 10.6) will become due and payable upon each such Note, or the portion thereof, to be redeemed, and that, unless the Company shall default in the payment of the Redemption Price and any applicable accrued interest, interest thereon will cease to accrue on and after said date; and

        (e)   the place or places where such Notes are to be surrendered for payment of the Redemption Price.

        Notice of redemption of Notes to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. Notice, if given in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, failure to give such notice or any defect therein to the Holder of any Note shall not affect the validity of any proceedings for the redemption of any other Note.

 SECTION 10.5    Deposit of Redemption Price.

        On or before 11:00 A.M., New York City time, on any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 9.3) an amount of money sufficient to pay the Redemption Price of, and accrued and unpaid interest on, all the Notes which are to be redeemed on such Redemption Date.

 SECTION 10.6    Securities Payable on Redemption Date.

        Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified (together with accrued and unpaid interest to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued and unpaid interest) such Notes shall cease to bear interest. Upon surrender of any such Note for redemption in accordance with said notice, such Note shall be paid by the Company at the Redemption Price, together with accrued and unpaid interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Notes, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 2.11.

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        If any Note called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Note.

 SECTION 10.7    Notes Redeemed in Part.

        Any Note which is to be redeemed only in part shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 9.2 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Note without service charge, a new Note or Notes of like tenor, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal amount of the Note so surrendered.

 SECTION 10.8    Optional Redemption; Optional Redemption Upon Equity Offerings.

        (a)   Optional Redemption. The Notes are redeemable, at the option of the Company, in whole at any time or in part from time to time, on and after May 15, 2007, upon not less than 30 nor more than 60 days' notice, at the following Redemption Prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on May 15 of the years set forth below, plus, in each case, accrued and unpaid interest and liquidated damages thereon, if any, to the Redemption Date:

Year	Percentage
2007	103.625	%
2008	101.813	%
2009 and thereafter	100.000	%

        (b)    Optional Redemption Upon Equity Offerings.    At any time, or from time to time, on or prior to May 15, 2006, we may, at our option, use the net cash proceeds of one or more Equity Offerings (as defined below) to redeem the Notes (which includes Add-On Notes, if any) at a redemption price equal to 107.250% of the principal amount of the Notes to be redeemed on the date of redemption plus accrued and unpaid interest and liquidated damages, if any, to the date of redemption; provided that at least 65% of the aggregate principal amount of Notes (which includes Add-On Notes, if any) remains outstanding immediately after any redemption. To effect the foregoing redemption with the proceeds of any Equity Offering, the redemption must be completed not more than 180 days after the consummation of any such Equity Offering.

        As used in the preceding paragraph, "Equity Offering" means an underwritten public offering of Qualified Capital Stock of Holdings or the Company pursuant to a registration statement filed with the SEC in accordance with the Securities Act or any private placement of Qualified Capital Stock of Holdings or the Company (other than to any person who, prior to the private placement, was an Affiliate of Holdings or the Company and other than any private placement of Qualified Capital Stock of the Company to Holdings if in connection therewith Holdings incurs Indebtedness to finance the purchase price of such Qualified Capital Stock); provided that, in the event of an Equity Offering by Holdings, Holdings contributes to the capital of the Company the portion of the net cash proceeds of the Equity Offering necessary to pay the aggregate redemption price of the Notes to be redeemed pursuant to the preceding paragraph.

        Any redemption pursuant to this Section 10.8 shall be made, to the extent applicable, pursuant to the provisions of Sections 10.2 through 10.7 hereof.

ARTICLE XI

DEFEASANCE AND COVENANT DEFEASANCE

 SECTION 11.1    Company's Option to Effect Defeasance or Covenant Defeasance.

        The Company may, at its option, at any time, elect to have either Section 11.2 or Section 11.3 hereof be applied to all Outstanding Notes upon compliance with the conditions set forth below in this Article XI.

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 SECTION 11.2    Defeasance and Discharge.

        Upon the Company's exercise under Section 11.1 hereof of the option applicable to this Section 11.2, the Company shall be deemed to have been discharged from its obligations with respect to all Outstanding Notes on the date the conditions set forth in Section 11.4 hereof are satisfied (hereinafter, "legal defeasance"). For this purpose, such legal defeasance means that the Company and the Guarantors shall be deemed (a) to have paid and discharged their respective obligations under the Outstanding Notes; provided, however, that the Notes shall continue to be deemed to be "Outstanding" for purposes of Section 11.5 hereof and the other Sections of this Indenture referred to in clauses (i) and (ii) below, and (b) to have satisfied all their other obligations under such Notes and this Indenture (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of Outstanding Notes to receive, solely from the trust fund described in Section 11.4 hereof and as more fully set forth in such Section, payments in respect of the principal of (and premium and liquidated damages, if any, on) and interest on such Notes when such payments are due (or at such time as the Notes would be subject to redemption at the option of the Company in accordance with this Indenture), (ii) the respective obligations of the Company and any Guarantors under Sections 2.3, 2.5, 2.6, 2.7, 2.9, 2.10, 4.8, 4.14, 5.6, 5.9, 5.10, 9.1, 9.2, 9.3 and 9.4 hereof, (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith, and (iv) the obligations of the Company and any Guarantors under this Article XI. Subject to compliance with this Article XI, the Company may exercise its option under this Section 11.2 notwithstanding the prior exercise of its option under Section 11.3 hereof.

 SECTION 11.3    Covenant Defeasance.

        Upon the Company's exercise under Section 11.1 hereof of the option applicable to this Section 11.3, (i) the Company shall be released from its obligations under any covenant contained in Article VII and in Sections 9.4 through 9.20 hereof, and (ii) the Guarantors shall be released from their obligations under Article XIV, in both cases on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"), and the Notes shall thereafter be deemed not to be "Outstanding" for the purposes of any direction, waiver, consent, declaration or other Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "Outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Sections 4.1(c), 4.1(d) or 4.1(e) hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby.

 SECTION 11.4    Conditions to Defeasance or Covenant Defeasance.

        The following shall be the conditions to application of either Section 11.2 or Section 11.3 hereof to the Outstanding Notes:

        (a)   The Company or any Guarantor shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 5.7 hereof who shall agree to comply with the provisions of this Article XI applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Notes, (i) cash in U.S. Dollars in an amount, or (ii) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, the principal of (and premium, if any, on) and interest on the Outstanding Notes on the Stated Maturity (or Redemption Date, if applicable) of such principal (and premium, if any) or installment of interest; provided that the Trustee shall have been irrevocably instructed in writing by the Company to apply such money or the proceeds of such U.S. Government Obligations to said payments with respect to the Notes.

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Before such a deposit, the Company may give to the Trustee, in accordance with Section 10.2 hereof, a notice of its election to redeem all of the Outstanding Notes at a future date in accordance with Article X hereof, which notice shall be irrevocable. Such irrevocable redemption notice, if given, shall be given effect in applying the foregoing. For this purpose, "U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt.

        (b)   No Default or Event of Default with respect to the Notes shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default arising in connection with the substantially contemporaneous borrowing of funds to fund the deposit referenced in clause (a) above) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit.

        (c)   Such legal defeasance or covenant defeasance shall not cause the Trustee to have a conflicting interest under this Indenture or the Trust Indenture Act with respect to any securities of the Company.

        (d)   Such legal defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under this Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound, as evidenced to the Trustee in an Officers' Certificate delivered to the Trustee concurrently with such deposit.

        (e)   In the case of an election under Section 11.2 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the applicable federal income tax laws and, as a result of such ruling or change in applicable federal income tax laws, as the case may be, the Holders of the Outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such legal defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such legal defeasance had not occurred (it being understood that the Trustee shall be under no obligation to investigate the basis of correctness of such ruling).

        (f)    In the case of an election under Section 11.3 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred.

        (g)   The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the legal defeasance under Section 11.2 hereof or the covenant defeasance under Section 11.3 (as the case may be) have been complied with.

        (h)   the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others.

        (i)    the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally.

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        Notwithstanding the foregoing, the Opinion of Counsel required by clause (e) above with respect to a legal defeasance need not be delivered if all Notes not theretofore delivered to the Trustee for cancellation (x) have become due and payable or (y) will become due and payable on the maturity date within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company.

 SECTION 11.5    Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions.

        Subject to the provisions of the last paragraph of Section 9.3 hereof, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 11.5, the "Trustee") pursuant to Section 11.4 hereof in respect of the Outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law.

        The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Governmental Obligations deposited pursuant to Section 11.4 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities.

        Anything in this Article XI to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 11.4 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent legal defeasance or covenant defeasance, as applicable, in accordance with this Article.

 SECTION 11.6    Reinstatement.

        If the Trustee or any Paying Agent is unable to apply any money in accordance with Section 11.5 hereof by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Guarantors' obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 11.2 or 11.3 hereof, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 11.5 hereof; provided, however, that if the Company or any Guarantor makes any payment of principal of (or premium, if any, on) or interest on any Note following the reinstatement of its obligations, the Company or such Guarantor shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent."

ARTICLE XII

CONVERSION

 SECTION 12.1    No Conversion.

        The Notes shall not be convertible into any other securities.

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ARTICLE XIII

MISCELLANEOUS

 SECTION 13.1    Compliance Certificates and Opinions.

        Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act or this Indenture. Each such certificate and each such opinion shall be in the form of an Officers' Certificate or an Opinion of Counsel, as applicable, and shall comply with the requirements of this Indenture.

        Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:

          (i)  a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;

         (ii)  a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

        (iii)  a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

        (iv)  a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.

        The certificates and opinions provided pursuant to this Section 13.1 and the statements required by this Section 13.1 shall comply in all respects with TIA Sections 314(c) and (e).

 SECTION 13.2    Form of Documents Delivered to Trustee.

        In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

        Any certificate or opinion of an Officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such Opinion of Counsel may be based, insofar as it relates to factual matters, upon an Officers' Certificate of an Officer or Officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate with respect to such matters is erroneous.

        Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

 SECTION 13.3    Acts of Holders.

        (a)   Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a

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writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section.

        (b)   The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient.

        (c)   The ownership, principal amount and serial numbers of Notes held by any Person, and the date of holding the same, shall be proved by the Security Register.

        (d)   If the Company shall solicit from Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding TIA Section 316(c), such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Outstanding Notes have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Notes shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than eleven months after the record date.

        (e)   Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Note.

 SECTION 13.4    Notices, etc. to Trustee and Company.

        Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with:

          (i)  the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing and delivered in person or mailed by certified or registered mail (return receipt requested) to the Trustee at its Corporate Trust Office; or

         (ii)  the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and delivered in person or mailed by certified or registered mail (return receipt requested) to the Company addressed to it at the Company's principal office located at 4444 Brittmoore Road, Houston, Texas 77041, or at any other address otherwise furnished in writing to the Trustee by the Company.

 SECTION 13.5    Notice to Holders; Waiver.

        Where this Indenture provides for notice of any event to Holders by the Company or the Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed,

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to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

        In case by reason of the suspension of or irregularities in regular mail service or by reason of any other cause, it shall be impracticable to mail notice of any event to Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice for every purpose hereunder.

 SECTION 13.6    Effect of Headings and Table of Contents.

        The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

 SECTION 13.7    Successors and Assigns.

        All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. All agreements of the Trustee in this Indenture shall bind its successor.

 SECTION 13.8    Separability Clause.

        In case any provision in this Indenture or in the Securities of any series shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and a Holder shall have no claim therefore against any party hereto.

 SECTION 13.9    Benefits of Indenture.

        Nothing in this Indenture or in the Notes, express or implied, shall give to any Person (other than the parties hereto, any Paying Agent, any Securities Registrar and their successors hereunder and the Holders) any benefit or any legal or equitable right, remedy or claim under this Indenture.

 SECTION 13.10    Governing Law; Trust Indenture Act Controls.

        (a)   THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THE TRUST INDENTURE ACT IS APPLICABLE. THE COMPANY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES, AND THE COMPANY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED BY ANY SUCH COURT.

        (b)   Whether prior to or following the qualification of this Indenture under the Trust Indenture Act, if and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by operation of Section 318(c) of the Trust Indenture Act upon an indenture qualified under the TIA, such imposed duties shall control.

 SECTION 13.11    Legal Holidays.

        In any case where any Interest Payment Date, Redemption Date, or Stated Maturity or Maturity of any Note shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Notes) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Redemption Date or at the Stated Maturity or Maturity; provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date, Stated Maturity or Maturity, as the case may be.

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 SECTION 13.12    No Recourse Against Others.

        A director, officer, employee or stockholder of the Company or any Guarantor shall not have any liability, by reason of his or its status as such director, officer, employee or stockholder, for any obligations of the Company or any Guarantor under the Notes, any Guarantee or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder, by accepting any Note, waives and releases all such liability to the extent permitted by applicable law.

 SECTION 13.13    Duplicate Originals.

        The parties may sign any number of copies or counterparts of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

 SECTION 13.14    No Adverse Interpretation of Other Agreements.

        This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

ARTICLE XIV

GUARANTEES

 SECTION 14.1    Unconditional Guarantee.

        Each Restricted Subsidiary that hereafter becomes a Guarantor shall unconditionally, jointly and severally, guarantee (each such guarantee to be referred to herein as a "Guarantee," with all such guarantees being referred to herein as the "Guarantees") to each Holder of Notes authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, the full and prompt performance of the Company's obligations under this Indenture and the Notes and that:

        (a)   the principal of (or premium, if any, on) and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, to the extent lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and

        (b)   in case of any extension of time of payment or renewal of any Notes or of any such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise;

subject, however, in the case of clauses (a) and (b) above, to the limitations set forth in Section 14.4 hereof.

        Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. The obligations of each Guarantor hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor shall waive diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and shall covenant that its Guarantee will not be discharged except by complete performance of the obligations contained in the Notes, this Indenture and in the Guarantee. If any Holder or the Trustee is required by any court or otherwise to return to the Company, any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or any Guarantor, any amount paid by the Company or any Guarantor to the Trustee or such Holder, the Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. No Guarantor shall be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed by the Guarantee until payment in full of all obligations guaranteed thereby. Each Guarantor shall further agree that, as between each Guarantor, on the one hand, and the Holders and the Trustee, on the other

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hand, (i) the maturity of the obligations guaranteed by the Guarantee may be accelerated as provided in Article IV hereof for the purposes of the Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed by the Guarantee, and (ii) in the event of any acceleration of such obligations as provided in Article IV hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by each Guarantor for the purpose of the Guarantee.

 SECTION 14.2    Guarantors May Consolidate, etc. on Certain Terms.

        (a)   Except as set forth in Articles VII and IX hereof, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor or shall prevent any sale or conveyance of the assets of a Guarantor as an entirety or substantially as an entirety, to the Company or another Guarantor.

        (b)   Except as set forth in Articles VII and IX hereof, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into a Person or Persons other than the Company or a Guarantor (whether or not affiliated with the Guarantor), or successive consolidations or mergers in which a Guarantor or its successor or successors shall be a party or parties, or shall prevent any sale or conveyance of the Properties of a Guarantor as an entirety or substantially as an entirety, to a Person other than the Company or another Guarantor (whether or not Affiliated with the Guarantor) authorized to acquire and operate the same; provided, however, that, subject to Sections 14.2(a) and 14.3 hereof, (A) immediately after such transaction, and giving effect thereto, no Default or Event of Default shall have occurred as a result of such transaction and be continuing, (B) such transaction shall not violate any of the covenants in Sections 9.1 through 9.20 hereof, (C) each Guarantor shall covenant and agree that, upon any such consolidation or merger, such Guarantor's Guarantee set forth in this Article XIV, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by such Guarantor, shall be expressly assumed (in the event that the Guarantor is not the surviving Person in the merger), by supplemental indenture satisfactory in form to the Trustee, executed and delivered to the Trustee, by such Person formed by such consolidation, or into which the Guarantor shall have merged (except to the extent the following Section 14.3 would result in the release of such Guarantee in which case such surviving Person does not have to execute any such supplemental indenture), and (D) the Company will, at the time of that transaction after giving pro forma effect thereto as if the transaction had occurred at the beginning of the four quarter reference period, be permitted to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the first paragraph of Section 9.14. In the case of any such consolidation or merger, and upon the assumption by the successor Person, by supplemental indenture executed and delivered to the Trustee and satisfactory in form to the Trustee of the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor.

 SECTION 14.3    Release of a Guarantor.

        The Guarantee of any Restricted Subsidiary may be released upon the terms and subject to the conditions set forth in Sections 9.12(b), 11.2 and 11.3 hereof. Each Guarantor that is designated as an Unrestricted Subsidiary in accordance with the provisions of this Indenture shall be released from all of its Guarantee and related obligations set forth in this Indenture for so long as it remains an Unrestricted Subsidiary. The Trustee shall deliver an appropriate instrument evidencing such release upon receipt of a Company Request accompanied by an Officers' Certificate and an Opinion of Counsel certifying that such sale or other disposition was made by the Company in accordance with the provisions of this Indenture. Any Guarantor not so released remains liable for the full amount of principal of (and premium, if any, on) and interest on the Notes as provided in this Article XIV.

 SECTION 14.4    Limitation of Guarantor's Liability.

        Each Guarantor shall confirm, and by its acceptance hereof each Holder hereby confirms, that it is the intention of all such parties that the Guarantee by such Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or conveyance for purposes of any federal or state law. To effectuate the foregoing intention, the Holders hereby irrevocably agree, and each Guarantor shall irrevocably agree, that the obligations of each

65

Guarantor under its Guarantee shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to Section 14.5 hereof, result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. This Section 14.4 is for the benefit of the creditors of each Guarantor.

 SECTION 14.5    Contribution.

        In order to provide for just and equitable contribution among the Guarantors, the Guarantors shall agree, inter se, that in the event any payment or distribution is made by any Guarantor (a "Funding Guarantor") under its Guarantee, such Funding Guarantor shall be entitled to a contribution from each other Guarantor (if any) in a pro rata amount based on the Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by that Funding Guarantor in discharging the Company's obligations with respect to the Notes or any other Guarantor's obligations with respect to its Guarantee.

 SECTION 14.6    Execution and Delivery of Evidence of Guarantee.

        To evidence the Guarantee set forth in Section 14.1 hereof, the Company shall cause this Indenture or a supplemental indenture to be executed on behalf of each Guarantor by its President or one of its Vice Presidents.

 SECTION 14.7    Severability.

        In case any provision of the Guarantee shall be invalid, illegal or unenforceable, that portion of such provision that is not invalid, illegal or unenforceable shall remain in effect, and the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 SECTION 14.8    Payment.

        For purposes of this Article XIV, a payment with respect to any Guarantee or with respect to principal of or interest on any Note or any Guarantee shall include, without limitation, payment of principal of and interest on any Note, any depositing of funds under Article III, IV or XI hereof, any payment on account of any repurchase or redemption of any Note and any payment or recovery on any claim (whether for rescission or damages and whether based on contract, tort, duty imposed by law, or any other theory of liability) relating to or arising out of the offer, sale or purchase of any Note.

        IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written.

ISSUER:
UNIVERSAL COMPRESSION, INC., a Texas corporation
By:	/s/  J. MICHAEL ANDERSONChief Financial Officer and Senior Vice President
TRUSTEE:
THE BANK OF NEW YORK, as Trustee
By:	/s/  JOHN GUILIANOVice President

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RULE 144A/REGULATION S APPENDIX

PROVISIONS RELATING TO INITIAL NOTES,
PRIVATE EXCHANGE NOTES
AND EXCHANGE NOTES

        1.    Definitions

        1.1    Definitions

        For the purposes of this Appendix the following terms shall have the meanings indicated below:

        "Depository" means The Depository Trust Company, its nominees and their respective successors.

        "Exchange Notes" means (1) the 7¹/4% Senior Subordinated Notes due 2010 issued pursuant to the Indenture in connection with the Registered Exchange Offer pursuant to a Registration Rights Agreement and (2) Add-On Notes, if any, issued pursuant to a registration statement filed with the SEC under the Securities Act.

        "Initial Purchasers" means (1) with respect to the Initial Notes issued on the Issue Date, Lehman Brothers Inc., Merrill Lynch, Pierce Fenner & Smith Incorporated, Wachovia Securities, Inc., and (2) with respect to each issuance of Add-On Notes, the Persons purchasing such Add-On Notes under the related Purchase Agreement.

        "Initial Notes" means (1) $175 million aggregate principal amount of 7¹/4% Senior Notes due 2010 issued on the Issue Date and (2) Add-On Notes, if any, issued in a transaction exempt from the registration requirements of the Securities Act.

        "Notes" means the Initial Notes, the Exchange Notes and the Private Exchange Notes, treated as a single class.

        "Private Exchange" means the offer by the Company, pursuant to a Registration Rights Agreement, to the Initial Purchasers to issue and deliver to each Initial Purchaser, in exchange for the Initial Notes held by the Initial Purchaser as part of its initial distribution, a like aggregate principal amount of Private Exchange Notes.

        "Private Exchange Notes" means any 7¹/4% Senior Notes due 2010 issued in connection with a Private Exchange.

        "Purchase Agreement" means (1) with respect to the Initial Notes issued on the Issue Date, the Purchase Agreement dated May 21, 2003, among the Company and the Initial Purchasers, and (2) with respect to each issuance of Add-On Notes, the purchase agreement or underwriting agreement among the Company and the Persons purchasing such Add-On Notes.

        "QIB" means a "qualified institutional buyer" as defined in Rule 144A.

        "Registered Exchange Offer" means the offer by the Company, pursuant to a Registration Rights Agreement, to certain Holders of Initial Notes, to issue and deliver to such Holders, in exchange for the Initial Notes, a like aggregate principal amount of Exchange Notes registered under the Securities Act.

        "Registration Rights Agreement" means (1) with respect to the Initial Securities issued on the Issue Date, the Registration Rights Agreement dated May 27, 2003, among the Company and the Initial Purchasers, and (2) with respect to each issuance of Add-On Notes issued in a transaction exempt from the registration requirements of the Securities Act, the registration rights agreement, if any, among the Company and the Persons purchasing such Add-On Notes under the related Purchase Agreement.

        "Securities Act" means the Securities Act of 1933, as amended, and any successor statute.

        "Securities Custodian" means the custodian with respect to a Global Note (as appointed by the Depository), or any successor Person thereto and shall initially be the Trustee.

        "Shelf Registration Statement" means the registration statement issued by the Company in connection with the offer and sale of Initial Notes or Private Exchange Notes pursuant to a Registration Rights Agreement.

App. 1

        "Transfer Restricted Notes" means Notes that bear or are required to bear the legend set forth in Section 2.3(b) hereto.

        1.2    Other Definitions

Term	Defined in Section:
"Agent Members"	2.1(b	)
"Global Note"	2.1(a	)
"Regulation S"	2.1(a	)
"Restricted Global Note"	2.1(a	)
"Rule 144A"	2.1(a	)

        2.    The Notes.

        2.1    (a) Form and Dating.    Initial Notes offered and sold to a QIB in reliance on Rule 144A under the Securities Act ("Rule 144A") or in reliance on Regulation S under the Securities Act ("Regulation S"), in each case as provided in a Purchase Agreement, and Private Exchange Notes, as provided in a Registration Rights Agreement, shall be issued initially in the form of one or more permanent global Notes in definitive, fully registered form without interest coupons with the global securities legend and restricted securities legend set forth in Exhibit 1 hereto (each, a "Restricted Global Note"), which shall be deposited on behalf of the purchasers of the Initial Notes represented thereby with the Trustee, at its principal corporate trust office, as custodian for the Depository (or with such other custodian as the Depository may direct), and registered in the name of the Depository or a nominee of the Depository, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided. Exchange Notes shall be issued in global form (with the global securities legend set forth in Exhibit 1 hereto) or in certificated form at the option of the Holders thereof from time to time. Exchange Notes issued in global form and Restricted Global Notes are sometimes referred to in this Appendix as "Global Notes."

        (b)    Book-Entry Provisions.    This Section 2.1(b) shall apply only to a Global Note deposited with or on behalf of the Depository.

        The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b), authenticate and deliver initially one or more Global Notes that (a) shall be registered in the name of the Depository for such Global Note or Global Notes or the nominee of such Depository and (b) shall be delivered by the Trustee to such Depository or pursuant to such Depository's instructions or held by the Trustee as custodian for the Depository.

        Members of, or participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository or by the Trustee as the custodian of the Depository or under such Global Note, and the Company, the Trustee and any agent of the Company or the Trustee shall be entitled to treat the Depository as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Note.

        (c)    Certificated Notes.    Except as provided in this Section 2.1 or Section 2.3 or 2.4, owners of beneficial interests in Restricted Global Notes shall not be entitled to receive physical delivery of certificated Notes.

        2.2    Authentication.    The Trustee shall authenticate and deliver: (1) on the Issue Date, an aggregate principal amount of $175 million 7¹/4% Senior Notes due 2010, (2) from time to time after the Issue Date, any Add-On Notes for an original issue in an aggregate principal amount specified in the written order of the Company pursuant to Section 2.2 of the Indenture and (3) Exchange Notes or Private Exchange Notes for issue only in a Registered Exchange Offer or a Private Exchange, respectively, pursuant to a Registration Rights

App. 2

Agreement, for a like principal amount of Initial Notes, in each case upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order shall specify the amount of the Notes to be authenticated and the date on which the original issue of Notes is to be authenticated and, in the case of any issuance of Add-On Notes pursuant to Section 2.13 of the Indenture, shall certify that such issuance is in compliance with Section 9.14 of the Indenture.

        2.3    Transfer and Exchange.

        (a)    Transfer and Exchange of Global Notes.    (i) The transfer and exchange of Global Notes or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. A transferor of a beneficial interest in a Global Note shall deliver to the Registrar a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary to be credited with a beneficial interest in the Global Note. The Registrar shall, in accordance with such instructions instruct the Depository to credit to the account of the Person specified in such instructions a beneficial interest in the Global Note and to debit the account of the Person making the transfer the beneficial interest in the Global Note being transferred.

         (ii)  Notwithstanding any other provisions of this Appendix (other than the provisions set forth in Section 2.4), a Global Note may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository.

        (iii)  In the event that a Restricted Global Note is exchanged for Notes in certificated registered form pursuant to Section 2.4 of this Appendix, prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Notes, such Notes may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Notes intended to ensure that such transfers comply with Rule 144A or Regulation S, as the case may be) and such other procedures as may from time to time be adopted by the Company.

        (b)    Legend.

          (i)  Except as permitted by the following paragraphs (ii), (iii) and (iv), until the expiration of the applicable holding period with respect to the Notes set forth in Rule 144(k) of the Securities Act, each Note certificate evidencing the Restricted Global Notes (and all Notes issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form:

THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE BLUE SKY LAWS OF THE STATES OF THE UNITED STATES.

         (ii)  Upon any sale or transfer of a Transfer Restricted Note (including any Transfer Restricted Note represented by a Restricted Global Note) pursuant to Rule 144 under the Securities Act, the Registrar shall permit the transferee thereof to exchange such Transfer Restricted Note for a certificated Note that does not

App. 3

bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Note, if the transferor thereof certifies in writing to the Registrar that such sale or transfer was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Note).

        (iii)  After a transfer of any Initial Notes or Private Exchange Notes pursuant to and during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Notes or Private Exchange Notes, as the case may be, all requirements pertaining to legends on such Initial Note or such Private Exchange Note will cease to apply, the requirements requiring any such Initial Note or such Private Exchange Note issued to certain Holders be issued in global form will cease to apply, and a certificated Initial Note or Private Exchange Note or an Initial Note or Private Exchange Note in global form, in each case without restrictive transfer legends, will be available to the transferee of the Holder of such Initial Notes or Private Exchange Notes upon exchange of such transferring Holder's certificated Initial Note or Private Exchange Note or directions to transfer such Holder's interest in the Global Note, as applicable.

        (iv)  Upon the consummation of a Registered Exchange Offer with respect to the Initial Notes, all requirements pertaining to such Initial Notes that Initial Notes issued to certain Holders be issued in global form will still apply with respect to Holders of such Initial Notes that do not exchange their Initial Notes, and Exchange Notes in certificated or global form will be available to Holders that exchange such Initial Notes in such Registered Exchange Offer.

         (v)  Upon the consummation of a Private Exchange with respect to the Initial Notes, all requirements pertaining to such Initial Notes that Initial Notes issued to certain Holders be issued in global form will still apply with respect to Holders of such Initial Notes that do not exchange their Initial Notes, and Private Exchange Notes in global form with the global securities legend and the Restricted Notes Legend set forth in Exhibit 1 hereto will be available to Holders that exchange such Initial Notes in such Private Exchange.

        (c)    Cancellation or Adjustment of Global Note.    At such time as all beneficial interests in a Global Note have either been exchanged for certificated Notes, redeemed, purchased or canceled, such Global Note shall be returned to the Depository for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for certificated Notes, redeemed, purchased or canceled, the principal amount of Notes represented by such Global Note shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Notes Custodian for such Global Note) with respect to such Global Note, by the Trustee or the Notes Custodian, to reflect such reduction.

        (d)    Obligations with Respect to Transfers and Exchanges of Notes.

          (i)  To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate certificated Notes and Global Notes at the Registrar's or co-registrar's request.

         (ii)  No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant to Sections 8.6, 9.15 and 10.7 of the Indenture).

        (iii)  The Registrar or co-registrar shall not be required to register the transfer of or exchange of any Note for a period beginning 15 Business Days before the mailing of a notice of an offer to repurchase or redeem Notes or 15 Business Days before an interest payment date.

        (iv)  Prior to the due presentation for registration of transfer of any Note, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary.

         (v)  All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange.

App. 4

        (e)    No Obligation of the Trustee.

          (i)  The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Note, a member of, or a participant in, the Depository or other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Notes. All notices and communications to be given to the Holders and all payments to be made to Holders under the Notes shall be given or made only to or upon the order of the registered Holders (which shall be the Depository or its nominee in the case of a Global Note). The rights of beneficial owners in any Global Note shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners.

         (ii)  The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depository participants, members or beneficial owners in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

        2.4    Certificated Notes.

        (a)   A Restricted Global Note deposited with the Depository or with the Trustee as custodian for the Depository pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of certificated Notes in an aggregate principal amount equal to the principal amount of such Global Note, in exchange for such Global Note, only if such transfer complies with Section 2.3 and (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for such Restricted Global Note or if at any time such Depository ceases to be a "clearing agency" registered under the Exchange Act and, in either case, a successor depositary is not appointed by the Company within 90 days of such notice, (ii) an Event of Default has occurred and is continuing and the Depository requests the Trustee or the Company that certificated Notes be issued or (iii) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of certificated Notes under this Indenture.

        (b)   Any Restricted Global Note that is transferable to the beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by the Depository to the Trustee located at its principal corporate trust office in the Borough of Manhattan, The City of New York, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Restricted Global Note, an equal aggregate principal amount of certificated Initial Notes of authorized denominations. Any portion of a Restricted Global Note transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 principal amount and any integral multiple thereof and registered in such names as the Depository shall direct. Any certificated Initial Note or Private Exchange Note delivered in exchange for an interest in the Restricted Global Note shall, except as otherwise provided by Section 2.3(b), bear the restricted securities legend set forth in Exhibit 1 hereto.

        (c)   Subject to the provisions of Section 2.4(b), the registered Holder of a Global Note shall be entitled to grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.

        (d)   In the event of the occurrence of any of the events specified in Section 2.4(a), the Company shall promptly make available to the Trustee a reasonable supply of certificated Notes in definitive, fully registered form without interest coupons.

App. 5

EXHIBIT 1
to
RULE 144A/REGULATION S APPENDIX

[FORM OF FACE OF INITIAL NOTE]

[Global Note Legend]

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

        TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

[Restricted Securities Legend]

        THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE BLUE SKY LAWS OF THE STATES OF THE UNITED STATES.

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No.	CUSIP No.
	ISIN No.
	$

7¹/4% Senior Notes due 2010

        Universal Compression, Inc., a Texas corporation, promises to pay to Cede & Co., or registered assigns, the principal sum of            Dollars on May 15, 2010.

Interest Payment Dates: May 15 and November 15

Record Dates: May 1 and November 1

Additional provisions of this Note are set forth on the other side of this Note.

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        IN WITNESS WHEREOF, Universal Compression, Inc. caused this instrument to be duly executed.

UNIVERSAL COMPRESSION, INC.
by	Name: Title:

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Dated:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THE BANK OF NEW YORK
	as Trustee, certifies that this is one of the Notes referred to in the Indenture.
by	Authorized Signatory

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[FORM OF REVERSE SIDE OF INITIAL NOTE]

7¹/4% Senior Note due 2010

        1.    Interest

        Universal Compression, Inc., a Texas corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Note at the rate per annum shown above; provided, however, that if a Registration Default (as defined in the Registration Rights Agreement) occurs, liquidated damages by way of additional interest will accrue on this Note at a rate equal to $.05 per week per $1,000 principal amount of Notes (increasing by an additional $.05 per week per $1,000 principal amount of Note with respect to each subsequent 90-day period that occurs after the date on which such Registration default occurs up to a maximum additional interest rate of $.50 per week per $1,000 principal amount of Notes) from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured. The Company will pay interest semiannually on May 15 and November 15 of each year, commencing November 15, 2003. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from May 27, 2003. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

        2.    Method of Payment

        The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered holders of Notes at the close of business on the May 1 or November 1 next preceding the Interest Payment Date even if Notes are canceled after the Regular Record Date and on or before the Interest Payment Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Notes represented by a Global Note (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Note (including principal, premium and interest) by mailing a check to the registered address of each Holder thereof; provided, however, that payments on a certificated Note held by any Holder owning Notes in the principal amount of $500,000 or more will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).

        3.    Paying Agent and Registrar

        Initially, The Bank of New York, a New York banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its Subsidiaries may act as Paying Agent, Registrar or co-registrar.

        4.    Indenture

        The Company issued the Notes under an Indenture dated as of May 27, 2003 ("Indenture"), between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Act for a statement of those terms.

        The Notes are general unsecured obligations of the Company. The Company shall be entitled, subject to its compliance with Section 9.14 of the Indenture, to issue Add-On Notes pursuant to Section 2.13 of the Indenture. The Initial Notes issued on the Issue Date, any Add-On Notes and all Exchange Notes or Private Exchange Notes issued in exchange therefor will be treated as a single class for all purposes under the Indenture. The Indenture contains covenants that limit the ability of the Company and its subsidiaries to incur additional indebtedness; pay dividends or distributions on, or redeem or repurchase capital stock; make investments; engage in transactions with affiliates; create liens on assets; transfer or sell assets; guarantee of indebtedness by subsidiaries; restrict

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dividends or other payments of subsidiaries; and consolidate, merge or transfer all or substantially all of its assets and the assets of its subsidiaries. These covenants are subject to important exceptions and qualifications as provided in the Indenture.

        5.    Optional Redemption and Repurchase

        Optional Redemption.    The Notes are redeemable, at the option of the Company, in whole at any time or in part from time to time, on and after May 15, 2007, upon not less than 30 nor more than 60 days' notice, at the following Redemption Prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on May 15 of the years set forth below, plus, in each case, accrued and unpaid interest and liquidated damages thereon, if any, to the Redemption Date:

Year	Percentage
2007	103.625	%
2008	101.813	%
2009 and thereafter	100.000	%

        Optional Redemption Upon Equity Offerings.    At any time, or from time to time, on or prior to May 15, 2006, we may, at our option, use the net cash proceeds of one or more Equity Offerings (as defined below) to redeem the Notes (which includes Add-On Notes, if any) at a redemption price equal to 107.250% of the principal amount of the Notes to be redeemed on the date of redemption plus accrued and unpaid interest and liquidated damages, if any, to the date of redemption; provided that at least 65% of the aggregate principal amount of Notes (which includes Add-On Notes, if any) remains outstanding immediately after any redemption. To effect the foregoing redemption with the proceeds of any Equity Offering, the redemption must be completed not more than 180 days after the consummation of any such Equity Offering.

        As used in the preceding paragraph, "Equity Offering" means an underwritten public offering of Qualified Capital Stock of Universal Compression Holdings, Inc. ("Holdings") or the Company pursuant to a registration statement filed with the SEC in accordance with the Securities Act or any private placement of Qualified Capital Stock of Holdings or the Company (other than to any person who, prior to the private placement, was an Affiliate of Holdings or the Company and other than any private placement of Qualified Capital Stock of the Company to Holdings if in connection therewith Holdings incurs Indebtedness to finance the purchase price of such Qualified Capital Stock); provided that, in the event of an Equity Offering by Holdings, Holdings contributes to the capital of the Company the portion of the net cash proceeds of the Equity Offering necessary to pay the aggregate redemption price of the Notes to be redeemed pursuant to the preceding paragraph.

        Any redemption pursuant to Section 10.8 of the Indenture shall be made, to the extent applicable, pursuant to the provisions of Sections 10.2 through 10.7 of the Indenture.

        In the case of any redemption of Notes, interest installments whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Notes, or one or more Predecessor Notes, of record at the close of business on the relevant Regular Record Date referred to on the face hereof. Notes (or portions thereof) for whose redemption and payment provision is made in accordance with the Indenture shall cease to bear interest from and after the Redemption Date.

        At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase all or any part specified by the Holder (so long as the principal amount of such part is $1,000 or an integral multiple of $1,000 in excess thereof) of the Notes held by such Holder on a Business Day selected by the Company no earlier than 30 days nor later than 45 days after the date the notice of a Change of Control is mailed, at a purchase price equal to 101% of the principal amount thereof together with accrued and unpaid interest to the Change of Control Payment Date. The Holder shall have the right to withdraw any Change of Control Purchase election (in whole or in a portion thereof that is $1,000 or an integral multiple of $1,000 in excess thereof) at any time prior to the close of business on the third Business Day next preceding the Change of Control Payment Date by delivering a written notice of withdrawal to the Company in accordance with the terms of the Indenture.

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        In the event of redemption or purchase of this Note in part only, a new Note or Notes for the unredeemed or unpurchased portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof.

        The Notes do not have the benefit of any sinking fund obligations.

        6.    Notice of Redemption

        Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address. Notes in denominations larger than $1,000 principal amount may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the Redemption Price of and accrued interest on all Notes (or portions thereof) to be redeemed on the Redemption Date is deposited with the Paying Agent by 11:00 A.M., New York City time, on the Redemption Date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Notes (or such portions thereof) called for redemption.

        7.    Denominations; Transfer; Exchange

        The Notes are in registered form without coupons in denominations of $1,000 principal amount and whole multiples of $1,000. A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer or exchange of any Notes selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) or any Notes for a period of 15 days before a selection of Notes to be redeemed or 15 days before an Interest Payment Date.

        8.    Persons Deemed Owners

        The registered Holder of this Note may be treated as the owner of it for all purposes.

        9.    Unclaimed Money

        If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.

        10.    Discharge and Defeasance

        Subject to certain conditions, the Company at any time shall be entitled to terminate some or all of its obligations under the Notes and the Indenture if the Company or a Guarantor deposits with the Trustee money or U.S. Government Obligations for the payment of principal of (and premium, if any, on) and interest on the Outstanding Notes to redemption or Stated Maturity, as the case may be.

        11.    Amendment, Waiver

        Subject to certain exceptions set forth in the Indenture, (i) the Indenture and the Notes may be amended with the written consent of the Holders of at least a majority in principal amount of the Outstanding Notes and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount of the Outstanding Notes. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company, the Guarantors, if any, and the Trustee shall be entitled to amend the Indenture to cure any ambiguity, omission, defect or inconsistency, or to comply with Article VII of the Indenture, or to provide for uncertificated Notes in addition to or in place of certificated Notes, or to add or release any Guarantors, or to secure the Notes, or to add additional covenants or surrender rights and powers conferred on the Company, or to qualify the Indenture under the Act, or to make any change that does not adversely affect the rights of any Holder in any material respect.

        12.    Defaults and Remedies

        As set forth in the Indenture, an Event of Default is generally: (a) failure to pay principal when due upon Stated Maturity, redemption or otherwise; (b) default for 30 days in payment of interest and liquidated damages,

I-7

if any, on any of the Notes; (c) default in the performance of agreements relating to mergers, consolidations and sales of all or substantially all assets or to make or consummate a Change of Control Offer or Net Proceeds Offer; (d) default for 30 days in the observance or performance of covenants and agreements concerning Change of Control, Limitation on Incurrence of Additional Indebtedness, Limitation on Asset Sales and Limitation on Liens contained in the Indenture; (e) failure for 60 days after notice to comply with any other covenants in the Indenture or the Notes; (f) certain payment defaults under, the acceleration prior to the maturity of, and the exercise of certain enforcement rights with respect to, certain Indebtedness of the Company or any Restricted Subsidiary in an aggregate principal amount of at least $20,000,000; (g) cessation, or assertion thereof by the Company or any Guarantor, of any Guarantee to be fully effective; (h) certain final judgments against the Company or any Restricted Subsidiary in an aggregate amount of $20,000,000 or more over the coverage in applicable insurance policies which remain unsatisfied and either become subject to commencement or enforcement proceedings or remain unstayed for a period of 60 consecutive days; and (i) certain events of bankruptcy, insolvency or re-organization of the Company or any of its Significant Subsidiaries.

        If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Notes may declare the principal amount of and accrued and unpaid interest and liquidated damages, if any, on all the Notes to be due and payable, except that (i) in the case of an Event of Default arising from certain events of bankruptcy, insolvency or reorganization of the Company or any of its Significant Subsidiaries, the principal amount of the Notes will become due and payable immediately without further action or notice and (ii) in the case of an Event of Default which relates to certain payment defaults, acceleration or the exercise of certain enforcement rights with respect to certain Indebtedness, any acceleration of the Notes will be automatically rescinded if any such Indebtedness is repaid or if the default relating to such Indebtedness is cured or waived and if the holders thereof have accelerated such Indebtedness then such holders have rescinded their declaration of acceleration or if in certain circumstances the proceedings or enforcement action with respect to the Indebtedness that is the subject of such Event of Default is terminated or rescinded.

        No Holder may pursue any remedy under the Indenture unless the Trustee shall have failed to act after notice of an Event of Default and written request by Holders of at least 25% in principal amount of the Outstanding Notes, and the offer to the Trustee of reasonable indemnity; however, such provision does not affect the right to sue for enforcement of any overdue payment on a Note by the Holder thereof. Subject to certain limitations, Holders of a majority in principal amount of the Outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default (except Default in payment of principal, premium or interest) if it determines in good faith that withholding the notice is in the interest of the Holders. The Company is required to file annual reports with the Trustee as to the absence or existence of defaults.

        13.    Trustee Dealings with the Company

        Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

        14.    No Recourse Against Others

        A director, officer, employee or stockholder, as such, of the Company or any Guarantor shall not have any liability for any obligations of the Company or any Guarantor under the Notes, any Guarantee or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes.

        15.    Authentication

        This Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Note.

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        16.    Abbreviations

        Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

        17.    CUSIP and ISIN Numbers

        Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP and ISIN numbers to be printed on the Notes and has directed the Trustee to use CUSIP and ISIN numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

        18.    Holders' Compliance with Registration Rights Agreement

        Each Holder of a Note, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein.

        19.    Guarantors

        Under the circumstances set forth in the Indenture, the Company's payment obligations under the Notes may be jointly and severally guaranteed by existing or future Restricted Subsidiaries of the Company as Guarantors.

        20.    Governing Law

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THE ACT IS APPLICABLE.

        The Company will furnish to any Holder upon written request and without charge to the Holder a copy of the Indenture or the Registration Rights Agreement. Requests may be made to:

Universal Compression, Inc.
4444 Brittmoore Road
Houston, TX 77041
Attention: Investor Relations

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ASSIGNMENT FORM

To assign this Note, fill in the form below:

I or we assign and transfer this Note to

(Print or type assignee's name, address and zip code)

(Insert assignee's soc. sec. or tax I.D. No.)

and irrevocably appoint                        agent to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:	Your Signature:
Sign exactly as your name appears on the other side of this Note.
Signature Guarantee:
Signature must be guaranteed

        Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

In connection with any transfer of any of the Notes evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of

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such Notes and the last date, if any, on which such Notes were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Notes are being transferred in accordance with its terms:

        CHECK ONE BOX BELOW

(1)	o	in the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) pursuant to and in compliance with Rule 144A under the Securities Act of 1933;
(2)	o	outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933;
(3)	o	pursuant to an exemption from registration provided by Rule 144 under the Securities Act of 1933; or
(4)	o	pursuant to an effective registration statement under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (2) or (3) is checked, the Trustee shall be entitled to require, prior to registering any such transfer of the Notes, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, such as the exemption provided by Rule 144 under such Act.

Signature

TO BE COMPLETED BY PURCHASER IF (1) ABOVE IS CHECKED.

        The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Dated:
	NOTICE:	To be executed by an executive officer

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[TO BE ATTACHED TO GLOBAL NOTES]

SCHEDULE OFINCREASES OR DECREASES IN GLOBAL NOTE

        The following increases or decreases in this Global Note have been made:

Date of
Exchange Amount of decrease in
amount of
Principal
this Global Note Amount of increase in
Principal amount of
this Global Note Principal amount of
this Global Note
following such
decrease or increase) Signature of
authorized officer of
Trustee or Securities
Custodian

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OPTION OF HOLDER TO ELECT PURCHASE

        If you want to elect to have this Note purchased by the Company pursuant to Section 9.15 or 9.16 of the Indenture, check the box:

o

        If you want to elect to have only part of this Note purchased by the Company pursuant to Section 9.15 or 9.16 of the Indenture, state the amount in principal amount: $                  

Date:	Your Signature:
		(Sign exactly as your name appears on the other side of this Note.)

Signature Guarantee:

(Signature must be guaranteed)

        Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

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EXHIBIT A-1
to
RULE 144A/REGULATION S APPENDIX

[FORM OF FACE OF EXCHANGE NOTE
OR PRIVATE EXCHANGE NOTE]*/**

*/If the Note is to be issued in global form add the Global Notes Legend from Exhibit 1 to this Appendix and the attachment from such Exhibit 1 captioned "[TO BE ATTACHED TO GLOBAL NOTES]—SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTES".

**/If the Note is a Private Exchange Note issued in a Private Exchange to an Initial Purchaser holding an unsold portion of its initial allotment, add the Restricted Securities Legend from Exhibit 1 to this Appendix and replace the Assignment Form included in this Exhibit A-1 with the Assignment Form included in such Exhibit 1.

A-1

No.	CUSIP No.
	ISIN No.
	$

7¹/4% Senior Note due 2010

        Universal Compression, Inc., a Texas corporation, promises to pay to            , or registered assigns, the principal sum of                        Dollars on May 15, 2010.

        Interest Payment Dates: May 15 and November 15.

        Record Dates: May 1 and November 1.

        Additional provisions of this Note are set forth on the other side of this Note.

        IN WITNESS WHEREOF, Universal Compression, Inc. has caused this instrument to be duly executed.

UNIVERSAL COMPRESSION, INC. by
	Name: Title:
Dated:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THE BANK OF NEW YORK,
	as Trustee, certifies
	that this is one of
	the Notes referred
	to in the Indenture.
by
	Authorized Signatory

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[FORM OF REVERSE SIDE OF EXCHANGE NOTE
OR PRIVATE EXCHANGE NOTE]

7¹/4% Senior Note due 2010

        1.    Interest.

        Universal Compression, Inc., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Note at the rate per annum shown above[; provided, however, that if a Registration Default (as defined in the Registration Rights Agreement) occurs, liquidated damages by way of additional interest will accrue on this Note at a rate of equal to $.05 per week per $1,000 principal amount of Notes (increasing by an additional $.05 per week per $1,000 principal amount of Notes with respect to each such subsequent 90-day period that occurs after the date on which such Registration Default occurs up to a maximum additional interest rate of $.50 per week per $1,000 principal amount of Notes) from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured.](1) The Company will pay interest semiannually on May 15 and November 15 of each year, commencing November 15, 2003. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from May 27, 2003. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

(1)

Insert if at the date of issuance of the Exchange Note or Private Exchange Note (as the case may be) any Registration Default has occurred with respect to the related Initial Notes during the interest period in which such date of issuance occurs.

        2.    Method of Payment.

        The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered holders of Notes at the close of business on the May 1 or November 1 next preceding the Interest Payment Date even if Notes are canceled after the Regular Record Date and on or before the Interest Payment Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Notes represented by a Global Note (including principal, premium, if any, and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Note (including principal, premium, if any, and interest) by mailing a check to the registered address of each Holder thereof; provided, however, that payments on a certificated Note held by any Holder owning Notes in the principal amount of $500,000 or more will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).

        3.    Paying Agent and Registrar.

        Initially, The Bank of New York, a New York banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its Subsidiaries may act as Paying Agent, Registrar or co-registrar.

        4.    Indenture.

        The Company issued the Notes under an Indenture dated May 27, 2003 ("Indenture"), between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Act for a statement of those terms.

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        The Notes are general unsecured obligations of the Company. The Company shall be entitled, subject to its compliance with Section 9.14 of the Indenture, to issue Add-On Notes pursuant to Section 2.13 of the Indenture. The Initial Notes issued on the Issue Date, any Add-On Notes and all Exchange Notes or Private Exchange Notes issued in exchange therefor will be treated as a single class for all purposes under the Indenture. The Indenture contains covenants that limit the ability of the Company and its subsidiaries to incur additional indebtedness; pay dividends or distributions on, or redeem or repurchase capital stock; make investments; engage in transactions with affiliates; create liens on assets; transfer or sell assets; guarantee of indebtedness by subsidiaries; restrict dividends or other payments of subsidiaries; and consolidate, merge or transfer all or substantially all of its assets and the assets of its subsidiaries; and engage in business activities unrelated to its current activities. These covenants are subject to important exceptions and qualifications as provided in the Indenture.

        5.    Optional Redemption and Repurchase.

        Optional Redemption.    The Notes are redeemable, at the option of the Company, in whole at any time or in part from time to time, on and after May 15, 2007, upon not less than 30 nor more than 60 days' notice, at the following Redemption Prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on May 15 of the years set forth below, plus, in each case, accrued and unpaid interest and liquidated damages thereon, if any, to the Redemption Date:

Year	Percentage
2007	103.625	%
2008	101.813	%
2009 and thereafter	100.000	%

        Optional Redemption Upon Equity Offerings.    At any time, or from time to time, on or prior to May 15, 2006, we may, at our option, use the net cash proceeds of one or more Equity Offerings (as defined below) to redeem the Notes (which includes Add-On Notes, if any) at a redemption price equal to 107.250% of the principal amount of the Notes to be redeemed on the date of redemption plus accrued and unpaid interest and liquidated damages, if any, to the date of redemption; provided that at least 65% of the aggregate principal amount of Notes (which includes Add-On Notes, if any) remains outstanding immediately after any redemption. To effect the foregoing redemption with the proceeds of any Equity Offering, the redemption must be completed not more than 180 days after the consummation of any such Equity Offering.

        As used in the preceding paragraph, "Equity Offering" means an underwritten public offering of Qualified Capital Stock of Universal Compression Holdings, Inc. ("Holdings") or the Company pursuant to a registration statement filed with the SEC in accordance with the Securities Act or any private placement of Qualified Capital Stock of Holdings or the Company (other than to any person who, prior to the private placement, was an Affiliate of Holdings or the Company and other than any private placement of Qualified Capital Stock of the Company to Holdings if in connection therewith Holdings incurs Indebtedness to finance the purchase price of such Qualified Capital Stock); provided that, in the event of an Equity Offering by Holdings, Holdings contributes to the capital of the Company the portion of the net cash proceeds of the Equity Offering necessary to pay the aggregate redemption price of the Notes to be redeemed pursuant to the preceding paragraph.

        Any redemption pursuant to Section 10.8 of the Indenture shall be made, to the extent applicable, pursuant to the provisions of Sections 10.2 through 10.7 of the Indenture.

        In the case of any redemption of Notes, interest installments whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Notes, or one or more Predecessor Notes, of record at the close of business on the relevant Regular Record Date referred to on the face hereof. Notes (or portions thereof) for whose redemption and payment provision is made in accordance with the Indenture shall cease to bear interest from and after the Redemption Date.

        At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase all or any part specified by the Holder (so long as the principal amount of such part is $1,000 or an integral multiple of $1,000 in excess thereof) of the Notes held by such Holder on a Business Day selected by the Company no earlier than 30 days nor later than 45 days after the date notice of a Change of

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Control is mailed, at a purchase price equal to 101% of the principal amount thereof together with accrued and unpaid interest to the Change of Control Payment Date. The Holder shall have the right to withdraw any Change of Control Purchase election (in whole or in a portion thereof that is $1,000 or an integral multiple of $1,000 in excess thereof) at any time prior to the close of business on the third Business Day next preceding the Change of Control Payment Date by delivering a written notice of withdrawal to the Company in accordance with the terms of the Indenture.

        In the event of redemption or purchase of this Note in part only, a new Note or Notes for the unredeemed or unpurchased portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof.

        The Notes do not have the benefit of any sinking fund obligations.

        6.    Notice of Redemption.

        Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notes in denominations larger than $1,000 principal amount may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the Redemption Price of and accrued interest on all Notes (or portions thereof) to be redeemed on the Redemption Date is deposited with the Paying Agent by 11:00 A.M., New York City time, on the Redemption Date and certain other conditions are satisfied, on and after such date interest and liquidated damages, if any, ceases to accrue on such Notes (or such portions thereof) called for redemption.

        7.    Denominations; Transfer; Exchange.

        The Notes are in registered form without coupons in denominations of $1,000 principal amount and whole multiples of $1,000. A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer or exchange of any Notes selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) or any Notes for a period of 15 days before a selection of Notes to be redeemed or 15 days before an interest payment date.

        8.    Persons Deemed Owners.

        The registered Holder of this Note may be treated as the owner of it for all purposes.

        9.    Unclaimed Money.

        If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee or Paying Agent for payment.

        10.    Discharge and Defeasance.

        Subject to certain conditions, the Company at any time shall be entitled to terminate some or all of its obligations under the Notes and the Indenture if the Company or a Guarantor deposits with the Trustee money or U.S. Government Obligations for the payment of principal of (and premium, if any, on) and interest on the Outstanding Notes to redemption or Stated Maturity, as the case may be.

        11.    Amendment, Waiver.

        Subject to certain exceptions set forth in the Indenture, (i) the Indenture and the Notes may be amended with the written consent of the Holders of at least a majority in principal amount of the Outstanding Notes and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount of the Outstanding Notes. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company, the Guarantors, if any, and the Trustee shall be entitled to amend the Indenture to cure any ambiguity, omission, defect or inconsistency, or to comply with Article VII of the Indenture, or to provide for uncertificated Notes in addition to or in place of certificated Notes, or to add or release Guarantors, or to secure the Notes, or to add additional covenants or surrender rights and powers

A-5

conferred on the Company, or to qualify the Indenture under the Act, or to make any change that does not adversely affect the rights of any Holder in any material respect.

        12.    Defaults and Remedies

        As set forth in the Indenture, an Event of Default is generally: (a) failure to pay principal when due upon Stated Maturity, redemption or otherwise; (b) default for 30 days in payment of interest and liquidated damages, is any, on any of the Notes; (c) default in the performance of agreements relating to mergers, consolidations and sales of all or substantially all assets or to make or consummate a Change of Control Offer or Net Proceeds Offer; (d) default for 30 days in the observance or performance of covenants and agreements concerning Change of Control, Limitation on Incurrence of Additional Indebtedness, Limitation on Asset Sales and Limitation on Liens contained in the Indenture; (e) failure for 60 days after notice to comply with any other covenants in the Indenture or the Notes; (f) certain payment defaults under, the acceleration prior to the maturity of, and the exercise of certain enforcement rights with respect to, certain Indebtedness of the Company or any Restricted Subsidiary in an aggregate principal amount of at least $20,000,000; (g) cessation, or assertion thereof by the Company or any Guarantor, of any Guarantee to be fully effective; (h) certain final judgments against the Company or any Restricted Subsidiary in an aggregate amount of $20,000,000 or more over the coverage in applicable insurance policies which remain unsatisfied and either become subject to commencement or enforcement proceedings or remain unstayed for a period of 60 consecutive days; and (i) certain events of bankruptcy, insolvency or re-organization of the Company or any of its Significant Subsidiaries.

        If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Notes may declare the principal amount of and accrued and unpaid interest and liquidated damages, if any, on all the Notes to be due and payable, except that (i) in the case of an Event of Default arising from certain events of bankruptcy, insolvency or reorganization of the Company or any of its Significant Subsidiaries, the principal amount of the Notes will become due and payable immediately without further action or notice and (ii) in the case of an Event of Default which relates to certain payment defaults, acceleration or the exercise of certain enforcement rights with respect to certain Indebtedness, any acceleration of the Notes will be automatically rescinded if any such Indebtedness is repaid or if the default relating to such Indebtedness is cured or waived and if the holders thereof have accelerated such Indebtedness then such holders have rescinded their declaration of acceleration or if in certain circumstances the proceedings or enforcement action with respect to the Indebtedness that is the subject of such Event of Default is terminated or rescinded.

        No Holder may pursue any remedy under the Indenture unless the Trustee shall have failed to act after notice of an Event of Default and written request by Holders of at least 25% in principal amount of the Outstanding Notes, and the offer to the Trustee of reasonable indemnity; however, such provision does not affect the right to sue for enforcement of any overdue payment on a Note by the Holder thereof. Subject to certain limitations, Holders of a majority in principal amount of the Outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default (except Default in payment of principal, premium or interest) if it determines in good faith that withholding the notice is in the interest of the Holders. The Company is required to file annual reports with the Trustee as to the absence or existence of defaults.

        13.    Trustee Dealings with the Company.

        Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

        14.    No Recourse Against Others.

        A director, officer, employee or stockholder, as such, of the Company or any Guarantor or the Trustee shall not have any liability for any obligations of the Company or any Guarantor under the Notes, any Guarantee or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes.

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        15.    Authentication.

        This Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Note.

        16.    Abbreviations.

        Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

        17.    CUSIP and ISIN Numbers.

        Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP and ISIN numbers to be printed on the Notes and has directed the Trustee to use CUSIP and ISIN numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

        [18.    Holders' Compliance with Registration Rights Agreement.(2)

(2)

Insert this provision only if the Note is a Private Exchange Note.

        Each Holder of a Note, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein.]

        [19.]    Guarantors.

        Under the circumstances set forth in the Indenture, the Company's payment obligations under the Notes may be jointly and severally guaranteed by existing or future Restricted Subsidiaries of the Company as Guarantors.

        [20.]    Governing Law.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THE ACT IS APPLICABLE.

        The Company will furnish to any Holder upon written request and without charge to the Holder a copy of the Indenture [and the Registration Rights Agreement](3). Requests may be made to:

(3)

Insert this provision only if the Note is a Private Exchange Note.

Universal Compression, Inc.
4444 Brittmoore Road
Houston, TX 77041
Attention: Investor Relations

A-7

ASSIGNMENT FORM

To assign this Note, fill in the form below:

I or we assign and transfer this Note to

(Print or type assignee's name, address and zip code)

(Insert assignee's soc. sec. or tax I.D. No.)

and irrevocably appoint                        agent to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:	Your Signature:
Sign exactly as your name appears on the other side of this Note.
Signature Guarantee:
(Signature must be guaranteed)

        Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

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OPTION OF HOLDER TO ELECT PURCHASE

        If you want to elect to have this Note purchased by the Company pursuant to Section 9.15 or 9.16 of the Indenture, check the box:

o

        If you want to elect to have only part of this Note purchased by the Company pursuant to Section 9.15 or 9.16 of the Indenture, state the amount in principal amount: $                  

Date:	Your Signature:
		(Sign exactly as your name appears on the other side of this Note.)

Signature Guarantee:
	(Signature must be guaranteed)

        Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

A-9

EXHIBIT B

UNIVERSAL COMPRESSION, INC.

and

the Guarantors named herein

7¹/4% SENIOR NOTES DUE 2010

FORM OF SUPPLEMENTAL INDENTURE

DATED AS OF                        ,        

THE BANK OF NEW YORK,

Trustee

B-1

        This SUPPLEMENTAL INDENTURE, dated as of                        ,         , is among Universal Compression, Inc., a Texas corporation (the "Company"), each of the parties identified under the caption "Guarantors" on the signature page hereto (the "Guarantors") and The Bank of New York, a New York banking corporation, as Trustee.

RECITALS

        WHEREAS, the Company and the Trustee have entered into an Indenture, dated as of May 27, 2003 (the "Indenture"), pursuant to which the Company has issued its 7¹/4% Senior Notes due 2010 (the "Notes"); and

        WHEREAS, Section 8.2(i) of the Indenture provides that the Company, the Guarantors and the Trustee may amend or supplement the Indenture in order to add any new Guarantor to comply with Section 9.12 thereof, without the consent of the Holders of the Notes; and

        WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Guarantors and of the Trustee necessary to make this Supplemental Indenture a valid instrument legally binding on the Company, the Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

        NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

ARTICLE 1

SECTION 1.01.    This Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

SECTION 1.02.    This Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Guarantors and the Trustee.

ARTICLE 2

        From this date, in accordance with Section 9.12 and by executing this Supplemental Indenture, the Guarantors whose signatures appear below are subject to the provisions of the Indenture to the extent provided for in Article XIV thereunder. Each of such Guarantors waives, and agrees not in any manner whatsoever to claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Guarantor under its Guarantee until such time as the obligations guaranteed thereby are paid in full.

ARTICLE 3

SECTION 3.01.    Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

SECTION 3.02.    Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Supplemental Indenture. The recitals contained herein are made by the Company and the Guarantors and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. This Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

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SECTION 3.03.    THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS SUPPLEMENTAL INDENTURE.

SECTION 3.04.    The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

SECTION 3.05.    The Trustee makes no representations as to the validity or sufficiency of this Supplemental Indenture.

        IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first written above.

UNIVERSAL COMPRESSION, INC.
By
	Name: Title:
[GUARANTORS]
By
	Name: Title:
THE BANK OF NEW YORK, as Trustee
By
	Name: Title:

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UNIVERSAL COMPRESSION, INC. AND THE BANK OF NEW YORK, Trustee INDENTURE Dated as of May 27, 2003 7 1/4% SENIOR NOTES DUE 2010

EX-10.28

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Exhibit 10.28

STOCK OPTION AGREEMENT

        THIS STOCK OPTION AGREEMENT, effective as of                        , 20    by and between UNIVERSAL COMPRESSION HOLDINGS, INC., a Delaware corporation ("Holdings"), and                        (the "Employee"), who is an Employee of Universal Compression, Inc. ("Universal"), a wholly-owned subsidiary of Holdings.

        WHEREAS, Holdings has agreed to grant to the Employee an option to purchase Holdings Common Stock, $.01 par value per share, (the "Common Stock") pursuant to the terms and conditions of this Agreement in consideration for services to Universal; and

        NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties agree as follows:

        1.    GRANT OF OPTION.    Holdings grants to the Employee an option (the "Option") to purchase                         (                        ) shares of Common Stock at an Exercise Price per share equal to $                        . The Option shall expire on the tenth anniversary of the Grant Date, unless sooner terminated under the provisions hereof. This Option is granted under the Universal Compression Holdings, Inc. Incentive Stock Option Plan, as amended (the "Plan"), a copy of which is attached hereto as Exhibit "A" and is incorporated herein by reference, and shall constitute an Incentive Stock Option under Section 422 of the Internal Revenue Code of 1986, as amended, (the "Code") to the extent permissible under Section 422(d) of the Code, and otherwise shall be a Non-qualified Stock Option. All capitalized terms not otherwise defined in this Agreement shall have the respective meaning of such terms as defined in the Plan.

        2.    OPTION TERMS AND CONDITIONS.

        (a)    Exercise of Option.    The Option shall become exercisable in accordance with the following schedule:

ANNIVERSARY OF GRANT DATE	AGGREGATE AMOUNT EXERCISABLE
Date	331/3	%
Date	662/3	%
Date	100	%

provided, however, the Option shall become immediately exercisable upon (i) the acquisition by any Person, other than an Affiliate of Castle Harlan Partners III, L.P. (as defined in the Plan) of fifty-one percent (51%) or more of the Common Stock of Holdings, or (ii) a sale of all or substantially all of the assets of Holdings.

        (b)    Termination of Employment.

        (i)    Termination due to Death, Disability or Retirement.    In the event the Employee's employment with Universal terminates on account of death, Disability (as defined in the Plan) or retirement after age 65, the Option shall terminate as of the date of Employee's termination of employment, except for the portion of the Option which is exercisable as of the date of termination of employment, which shall terminate three months following the date of Employee's death, Disability or retirement after age 65.

        (ii)    Termination of Employment Without Cause.    In the event Universal terminates Employee's employment without Cause (as defined in the Plan), the Option shall terminate as of the date of Employee's termination of employment, except for the portion of the Option which is exercisable as of the date of termination of employment, which shall terminate 30 days following the date of such termination of employment.

        (iii)    Termination of Employment for Cause or Voluntary Resignation.    In the event the Employee's employment with Universal shall terminate for Cause (as defined in the Plan), or the Employee voluntarily resigns his or her employment with Universal, the Option, whether or not exercisable as of the date of termination of employment, shall terminate in its entirety on the date of termination.

        3.    NON-TRANSFERABILITY.    No Option granted hereby and no right arising thereunder shall be transferable other than by will or by the laws of descent and distribution. During the lifetime of the Employee, the Option shall be exercisable only by the Employee. If the Option is exercisable at the date of the Employee's

death and is transferred by will or by the laws of descent and distribution, the Option shall be exercisable in accordance with the terms of such Option by the executor or administrator, as the case may be, of the Employee's estate for a period of three (3) months after the date of the Employee's death and shall then terminate.

        4.    MODE OF EXERCISE.    The Option shall be exercised by giving to Holdings written notice stating (a) the number of shares with respect to which the Option is being exercised, (b) the aggregate Exercise Price for such shares, and (c) the method of payment. At the option of the Employee, such aggregate Exercise Price may be paid: (i) in cash; (ii) with the consent of the Board, which consent may be given or withheld in its sole discretion, by delivery of a promissory note to Holdings payable over a three (3) year period and bearing interest at the prime rate; (iii) with the consent of the Administrator of the Plan, which consent may be given or withheld in its sole discretion, by delivery of shares of Common Stock owned by the Employee having a Fair Market Value (as determined by Section 5 below) equal in amount to the aggregate Exercise Price of the Option being exercised; (iv) by any combination of (i), (ii) and (iii); or (v) with the consent of the Administrator of the Plan, which consent may be given or withheld in its sole discretion, by cancellation of a portion of the Option as determined by the Administrator of the Plan.

        5.    FAIR MARKET VALUE OF COMMON STOCK.    The "Fair Market Value" of the Common Stock on any day shall be determined by the Board as follows: (i) if the Common Stock is listed on a national securities exchange or quoted through the NASDAQ National Market System, the Fair Market Value on any day shall be the average of the high and low reported Consolidated Trading sales prices, or if no such sale is made on such day, the average of the closing bid and asked prices reported on the Consolidated Trading listing for such day; (ii) if the Common Stock is quoted on the NASDAQ inter-dealer quotation system, the Fair Market Value on any day shall be the average of the representative bid and asked prices at the close of business for such day; (iii) if the Common Stock is not listed on a national stock exchange or quoted on NASDAQ, the Fair Market Value on any day shall be the average of the high bid and low asked prices reported by the National Quotation Bureau, Inc. for such day; or (iv) if none of clauses (i) - (iii) are applicable, the Fair Market Value as may be determined by the Board or the Administrator of the Plan, there being no obligation to make such determination.

        6.    OPTION SUBJECT TO SECURITIES AND OTHER REGULATIONS.    The Option granted hereunder and the obligation of Holdings to sell and deliver shares under such Option shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. Holdings, in its discretion, may postpone the issuance or delivery of shares upon any exercise of the Option until completion of any stock exchange listing, or other qualification of such shares under any state or federal law, rule or regulation as Holdings may consider appropriate, and may require the Employee, his or her beneficiary or his or her legal representative to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of the shares in compliance with applicable laws, rules and regulations.

        Upon demand by the Board, the Employee (or any person acting under Section 3 above) shall deliver to the Board at the time of exercise of the Option a written representation that the shares to be acquired upon the exercise of the Option are being acquired for his or her own account and not with a view to, or for resale in connection with, any distribution in violation of federal or state securities laws. Upon such demand, delivery of such representation prior to the delivery of any shares issued upon exercise of the Option shall be a condition precedent to the right of the Employee or such other person to purchase any shares.

        7.    NO RIGHTS AS STOCKHOLDER PRIOR TO EXERCISE OF OPTION.    The Participant shall not have any rights as a stockholder with respect to any shares subject to the Option prior to the date on which the Employee is recorded as the holder of such shares on the records of Holdings.

        8.    NO RIGHTS WITH RESPECT TO CONTINUANCE OF EMPLOYMENT.    Neither the grant of the Option nor any action taken with respect thereto shall be construed as giving the Employee the right to be retained in the employ of Universal or any subsidiary or affiliate, nor shall it interfere in any way with the right of Universal or any such subsidiary or affiliate to terminate any Employee's employment at any time for any reason, or for no reason at all.

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        9.    TAXES.    Holdings may make such provisions and take such steps as it may deem necessary or appropriate for the withholding of all Federal, state, local and other taxes required by law to be withheld with respect to the Option including, but not limited to: (i) reducing the number of shares of Common Stock otherwise deliverable, based upon their Fair Market Value on the date of exercise, to permit deduction of the amount of any such withholding taxes from the amount otherwise payable under this Agreement; (ii) deducting the amount of any such withholding taxes from any other amount then or thereafter payable to the Employee; or (iii) requiring the Employee, his or her beneficiary or his or her legal representative to pay to Holdings the amount required to be withheld or to execute such documents as Holdings deems necessary or desirable to enable it to satisfy its withholding obligations as a condition of releasing the Common Stock.

        10.    GOVERNING LAW.    This Agreement shall be governed and construed in accordance with the laws of the State of Delaware applicable to contract made and to be performed entirely within such state.

        11.    COUNTERPARTS.    This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart.

        12.    NOTICES.    Any notice or other communication required or which may be given hereunder shall be in writing and shall be delivered personally, telecopied with confirmed receipt, sent by certified, registered, or express mail, postage prepaid, or sent by a national next-day delivery service to the parties at the following addresses or at such other addresses as shall be specified by the parties by like notice, and shall be deemed given when so delivered personally or telecopied, or if mailed, 2 days after the date of mailing, or, if by national next-day delivery service, on the day after delivery to such service as follows:

(i)

if to Holdings, at:

Universal Compression Holdings, Inc.
4444 Brittmoore Road
Houston, Texas 77041-8004
Attention: J. Michael Anderson,
                   Senior Vice President and Chief Financial Officer
Telecopier Number: 713-466-6720

with a copy to:

Universal Compression, Inc.
4444 Brittmoore Road
Houston, Texas 77041-8004
Attention: D. Bradley Childers,
                   Senior Vice President and General Counsel
Telecopier Number: 713-466-6720

(ii)

if to Employee, to him or her at:

Universal Compression, Inc.
4444 Brittmoore Road
Houston, Texas 77041-8004

        13.    HEADINGS.    The headings in this Agreement are for convenience of reference only and shall not in any manner define or limit the scope or intent of any provisions of this Agreement.

        14.    SEVERABILITY.    If any term, provision, covenant or restriction of this Agreement, or any part thereof, is held by a court of competent jurisdiction or any foreign federal, state, county or local government or any other governmental, regulatory or administrative agency or authority to be invalid, void, unenforceable or against public policy for any reason, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

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        IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have executed this Agreement effective as of the Grant Date above mentioned.

EMPLOYEE

Employee Signature

Print Employee Name

Employee Social Security Number

UNIVERSAL COMPRESSION HOLDINGS, INC.

Stephen A. Snider
President and Chief Executive Officer

Division President

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STOCK OPTION AGREEMENT

EX-10.35

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Exhibit 10.35

AMENDMENT NUMBER THREE
TO THE UNIVERSAL COMPRESSION, INC.
EMPLOYEES' SUPPLEMENTAL SAVINGS PLAN

        WHEREAS, Universal Compression, Inc. (the "Company") maintains the Universal Compression, Inc. Employees' Supplemental Savings Plan, effective July 1, 1998 (the "Plan");

        WHEREAS, Section 11.1 of the Plan reserves to the Company the right to amend the Plan by action of its Board of Directors (the "Board"); and

        WHEREAS, the Board has approved the amendment to the Plan to provide that a Participant's Matching Contributions that are deemed invested in the common stock of Universal Compression Holdings, Inc. shall be distributed in such form;

        NOW, THEREFORE, the Plan is hereby amended as follows:

        1.     Section 3.3(g) of the Plan is hereby amended, effective September 1, 2002, to read as follows:

"Each Eligible Employee executing a Supplemental Salary Deferral Agreement may also elect, but shall not be required to elect, to specify the manner in which such Participant shall receive such distributions, which election shall be either as a single lump-sum cash distribution or in installments; provided, however, that such Participant shall receive a distribution in the form of Universal Compression Holdings, Inc. common stock with respect to post-August 31, 2002 Matching Contributions that are deemed invested in such stock."

        2.     Section 8.1(d) of the Plan is hereby amended, effective September 1, 2002, to read as follows:

"Distributions made under this Section 8.1 shall be in cash and in a single lump sum, except that a Participant may elect pursuant to Section 3.3(g) hereof in his Supplemental Salary Deferral Agreement to receive installments payments in the case of distributions on a Termination Date resulting from retirement from the Company; provided, however, that such Participant shall receive a distribution in the form of Universal Compression Holdings, Inc. common stock with respect to post-August 31, 2002 Matching Contributions that are deemed invested in such stock."

        3.     Section 8.2(c) of the Plan is hereby amended, effective September 1, 2002, to read as follows:

"Distributions made under this Section 8.2 shall be in cash and in a single lump sum paid within sixty (60) days after the Participant's death; provided, however, that such Participant's Death Beneficiary shall receive a distribution in the form of Universal Compression Holdings, Inc. common stock with respect to post-August 31, 2002 Matching Contributions that are deemed invested in such stock."

        IN WITNESS WHEREOF, and as evidence of the adoption of this amendment by the Company, the undersigned officer being duly authorized has signed this amendment to be effective as of September 1, 2002.

UNIVERSAL COMPRESSION, INC.
By:	/s/  RICHARD W. FITZGERALD Richard W. FitzGerald Senior Vice President & Chief Financial Officer

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AMENDMENT NUMBER THREE TO THE UNIVERSAL COMPRESSION, INC. EMPLOYEES' SUPPLEMENTAL SAVINGS PLAN

EX-10.41

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Exhibit 10.41

October 25, 2001

Richard Leong
Houston, TX

CONFIDENTIAL

RE:

Termination Agreement

Dear Rich:

        As discussed, Universal Compression, Inc. ("Company") has agreed to extend the following benefits to you if you are involuntarily terminated by the Company for any reason other than Cause (as defined below) during the three (3) year period commencing on your effective date of employment:

1)

A cash payment equal to one year of your then current annual base salary (not including any applicable bonus or other forms of incentive compensation) to be paid in a single lump sum payment as soon as reasonably practicable after your termination, and



2)

Company-paid executive medical and dental continuation coverage (pursuant to any COBRA election that you may make) for a one-year period following your termination.

        For purposes of this Agreement, Cause shall mean (a) any criminal act, (b) any misconduct (including but not limited to, a positive illegal drug test result), (c) any nonperformance of your duties, (d) any acts of insubordination, or (e) any acts of dishonesty.

        Notwithstanding the above, the Company's obligation to make any payments under this Agreement will be contingent upon your execution of a release and waiver of any and all claims against the Company.

        If this Agreement represents our understanding, please execute below my signature.

Agreed:	/s/  STEPHEN A. SNIDER        Stephen A. Snider	Date:	10/25/01
Agreed:	/s/  RICHARD LEONG        Richard Leong	Date:	10/30/01

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Exhibit 10.41

EX-10.43

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Exhibit 10.43

$175,000,000
UNIVERSAL COMPRESSION, INC.
7¹/4% Senior Notes due 2010
REGISTRATION RIGHTS AGREEMENT

        May 27, 2003

LEHMAN BROTHERS INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
WACHOVIA SECURITIES, INC.
BANC ONE CAPITAL MARKETS, INC.
c/o Lehman Brothers Inc.
745 Seventh Avenue
New York, New York 10019

Dear Sirs:

        Universal Compression, Inc, a Texas corporation (the "Company"), proposes to issue and sell to you (the "Initial Purchasers"), upon the terms set forth in a purchase agreement dated May 21, 2003 (the "Purchase Agreement"), $175,000,000 aggregate principal amount of its 7¹/4% Senior Notes due 2010 (the "Initial Notes"). The Initial Notes will be issued pursuant to an Indenture, to be dated as of the date hereof (the "Indenture"), between the Company and The Bank of New York, as trustee (the "Trustee"). To satisfy a condition to the obligations of the Initial Purchasers under the Purchase Agreement, the Company agrees with the Initial Purchasers, for the benefit of the Initial Purchasers and the subsequent holders of the Notes (as defined below) (collectively the "Holders"), as follows:

        1.    Registered Exchange Offer.    Unless not permitted by applicable law (after the Company has complied with the ultimate paragraph of this Section 1), the Company shall prepare and, not later than 90 days (such 90th day being a "Filing Deadline") after the date on which the Initial Purchasers purchase the Initial Notes pursuant to the Purchase Agreement (the "Closing Date"), file with the Securities and Exchange Commission (the "Commission") a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act"), with respect to a proposed offer (the "Registered Exchange Offer") to the Holders of Transfer Restricted Notes (as defined in Section 6 hereof), who are not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer, to issue and deliver to such Holders, in exchange for the Initial Notes, a like aggregate principal amount of debt securities of the Company issued under the Indenture, identical in all material respects to the Initial Notes and registered under the Securities Act (the "Exchange Notes"). The Company shall (i) use its commercially reasonable best efforts to cause such Exchange Offer Registration Statement to be declared effective under the Securities Act within 180 days after the Closing Date (such 180th day being an "Effectiveness Deadline"); (ii) promptly following the effectiveness of the Exchange Offer Registration Statement, offer the Exchange Notes in exchange for surrender of the Initial Notes; and (iii) use its commercially reasonable best efforts to keep the Registered Exchange Offer open for not less than 30 days (or longer, if required by applicable law) after the date notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period").

        When the Company commences the Registered Exchange Offer, the Company (i) will be entitled to consummate the Registered Exchange Offer 30 days after such commencement (provided that the Company has accepted all the Initial Notes theretofore validly tendered in accordance with the terms of the Registered Exchange Offer) and (ii) will be required to consummate the Registered Exchange Offer on or before the 60th business day after the date on which the Exchange Offer Registration Statement is declared effective (the "Consummation Deadline").

        Following the declaration of the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder of Transfer Restricted Notes electing to exchange the Initial Notes for Exchange Notes (assuming that such Holder is not an affiliate of the Company within the meaning of the Securities Act,

acquires the Exchange Notes in the ordinary course of such Holder's business and has no arrangements with any person to participate in the distribution of the Exchange Notes and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such Exchange Notes from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States.

        The Company acknowledges that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, in the absence of an applicable exemption therefrom, (i) each Holder which is a broker-dealer electing to exchange Initial Notes, acquired for its own account as a result of market making activities or other trading activities, for Exchange Notes (an "Exchanging Dealer"), is required to deliver a prospectus containing the information set forth in (a) Annex A hereto on the cover, (b) Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section, and (c) Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Notes received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell Notes (as defined below) acquired in exchange for Initial Notes constituting any portion of an unsold allotment, is required to deliver a prospectus containing the information required by Item 507 or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such sale.

        The Company shall use its commercially reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein, in order to permit such prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Notes; provided, however, that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers and the Initial Purchasers have sold all Exchange Notes held by them (unless such period is extended pursuant to Section 3(j) below) and (ii) the Company shall make such prospectus and any amendment or supplement thereto available to any broker- dealer for use in connection with any resale of any Exchange Notes for a period of not less than 180-days after the consummation of the Registered Exchange Offer.

        If, upon consummation of the Registered Exchange Offer, any Initial Purchaser holds Initial Notes acquired by it as part of its initial distribution, the Company, simultaneously with the delivery of the Exchange Notes pursuant to the Registered Exchange Offer, shall issue and deliver to such Initial Purchaser upon the written request of such Initial Purchaser, in exchange (the "Private Exchange") for the Initial Notes held by such Initial Purchaser, a like principal amount of debt securities of the Company issued under the Indenture and identical in all material respects to the Initial Notes (the "Private Exchange Notes"). The Initial Notes, the Exchange Notes and the Private Exchange Notes are herein collectively called the "Notes."

        In connection with the Registered Exchange Offer, the Company shall:

        (a)   mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal;

        (b)   keep the Registered Exchange Offer open for not less than 30 days (or longer, if required by applicable law) after the date notice thereof is mailed to the Holders;

        (c)   utilize the services of a depositary for the Registered Exchange Offer, which may be the Trustee or an affiliate of the Trustee;

        (d)   permit Holders to withdraw tendered Initial Notes at any time prior to the close of business, New York time, on the last business day on which the Registered Exchange Offer shall remain open; and

        (e)   otherwise comply with all applicable laws.

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        As soon as practicable after the close of the Registered Exchange Offer or the Private Exchange, as the case may be, the Company shall:

        (x)   accept for exchange all the Notes validly tendered and not withdrawn pursuant to the Registered Exchange Offer and the Private Exchange; and

        (y)   cause the Trustee to deliver promptly to each Holder of the Initial Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Initial Notes of such Holder so accepted for exchange.

        The Indenture will provide that the Exchange Notes will not be subject to the transfer restrictions set forth in the Indenture and that all the Notes will vote and consent together on all matters as one class and that none of the Notes will have the right to vote or consent as a class separate from one another on any matter.

        Interest on each Exchange Note and Private Exchange Note issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Initial Notes surrendered in exchange therefor or, if no interest has been paid on the Initial Notes, from the date of original issue of the Initial Notes.

        Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the commencement of the Registered Exchange Offer (i) any Exchange Notes received by such Holder will be acquired in the ordinary course of business, (ii) such Holder has no arrangements or understanding with any person to participate in the distribution of the Initial Notes or the Exchange Notes within the meaning of the Securities Act, (iii) such Holder is not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company or if it is an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Notes and (v) if such Holder is a broker-dealer, that it will receive Exchange Notes for its own account in exchange for Initial Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes.

        Notwithstanding any other provisions hereof, the Company will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

        If following the date hereof there has been announced a change in Commission policy with respect to exchange offers that in the reasonable opinion of counsel to the Company raises a substantial question as to whether the Registered Exchange Offer is permitted by applicable federal law, the Company will seek a no-action letter or other favorable decision from the Commission allowing the Company to consummate the Registered Exchange Offer. The Company will pursue the issuance of such a decision to the Commission staff level. In connection with the foregoing, the Company will take all such other actions as may be requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (i) participating in telephonic conferences with the Commission, (ii) delivering to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that the Registered Exchange Offer should be permitted and (iii) diligently pursuing a resolution (which need not be favorable) by the Commission staff.

        2.    Shelf Registration.    If, (i) because of any change in law or in applicable interpretations thereof by the staff of the Commission, the Company is not permitted to effect a Registered Exchange Offer, as contemplated by Section 1 hereof, (ii) the Registered Exchange Offer is not consummated by the 240th day after the Closing Date, (iii) any Initial Purchaser so requests with respect to the Initial Notes (or the Private Exchange Notes) not

3

eligible to be exchanged for Exchange Notes in the Registered Exchange Offer and held by it following consummation of the Registered Exchange Offer or (iv) any Holder (other than an Exchanging Dealer) is not eligible to participate in the Registered Exchange Offer or, in the case of any Holder (other than an Exchanging Dealer) that participates in the Registered Exchange Offer, such Holder does not receive freely tradeable Exchange Notes on the date of the exchange and any such Holder so requests, the Company shall take the following actions (the date on which any of the conditions described in the foregoing clauses (i) through (iv) occur, including in the case of clause (iii) or (iv) the receipt of the required notice, being a "Trigger Date"):

        (a)   The Company shall promptly (but in no event more than 60 days after the Trigger Date (such 60th day being a "Shelf Filing Deadline")) use its commercially reasonable best efforts to file with the Commission and thereafter cause to be declared effective (x) in the case of clause (i) above, no later than 180 days after the Closing Date and (y) otherwise no later than 60 days after the Shelf Filing Deadline (such 180th day or 60th day being an "Effectiveness Deadline") a registration statement (the "Shelf Registration Statement" and, together with the Exchange Offer Registration Statement, a "Registration Statement") on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Notes (as defined in Section 6(d)) by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the "Shelf Registration"); provided, however, that no Holder (other than an Initial Purchaser) shall be entitled to have the Notes held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder.

        (b)   The Company shall use its commercially reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Notes, for a period of two years (or for such longer period if extended pursuant to Section 3(j) below) from the date of its effectiveness or such shorter period that will terminate when all the Notes covered by the Shelf Registration Statement (i) have been sold pursuant thereto or (ii) are no longer subject to restrictions on resale pursuant to Rule 144 under the Securities Act, or any successor rule thereof.

        (c)   Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

        3.    Registration Procedures.    In connection with any Shelf Registration contemplated by Section 2 hereof and, to the extent applicable, any Registered Exchange Offer contemplated by Section 1 hereof, the following provisions shall apply:

        (a)   The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that an Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Registered Exchange Offer or the Shelf Registration Statement, the Company shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as such Initial Purchaser reasonably may propose; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement and include the information set forth in Annex D hereto in the letter of transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by an Initial Purchaser, include the information required by Item 507 or 508 of Regulation S-K under the Securities Act, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement; (iv) include within the prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution,"

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reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the staff of the Commission with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of Exchange Notes received by such broker-dealer in the Registered Exchange Offer (a "Participating Broker-Dealer"), whether such positions or policies have been publicly disseminated by the staff of the Commission or such positions or policies, in the reasonable judgment of the Initial Purchasers based upon advice of counsel (which may be in-house counsel), represent the prevailing views of the staff of the Commission; and (v) in the case of a Shelf Registration Statement, include the names of the Holders who propose to sell Notes pursuant to the Shelf Registration Statement as selling securityholders.

        (b)   The Company shall give written notice to the Initial Purchasers, the Holders of the Notes and any Participating Broker-Dealer from whom the Company has received prior written notice that it will be a Participating Broker-Dealer in the Registered Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made):

        (i)    when the Registration Statement or any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective;

        (ii)   of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information;

        (iii)  of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose;

        (iv)  of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Notes for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

        (v)   of the happening of any event that requires the Company to make changes in the Registration Statement or the prospectus in order that the Registration Statement or the prospectus do not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in light of the circumstances under which they were made) not misleading.

        (c)   The Company shall make every commercially reasonable effort to obtain the withdrawal at the earliest possible time, of any order suspending the effectiveness of the Registration Statement.

        (d)   The Company shall furnish to each Holder of Notes included within the coverage of the Shelf Registration, without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference).

        (e)   The Company shall deliver to each Initial Purchaser, and to any other Holder who so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if any Initial Purchaser or any such Holder requests, all exhibits thereto (including those incorporated by reference).

        (f)    The Company shall, during the Shelf Registration Period, deliver to each Holder of Notes included within the coverage of the Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of the Notes in connection with the offering and sale of the Notes covered by the prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement.

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        (g)   The Company shall deliver to each Initial Purchaser, any Exchanging Dealer, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement and any amendment or supplement thereto as such persons may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by any Initial Purchaser, if necessary, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer in connection with the offering and sale of the Exchange Notes covered by the prospectus, or any amendment or supplement thereto, included in such Exchange Offer Registration Statement.

        (h)   Prior to any public offering of the Notes pursuant to any Registration Statement, the Company shall register or qualify or cooperate with the Holders of the Notes included therein and their respective counsel in connection with the registration or qualification of the Notes for offer and sale under the securities or "blue sky" laws of such states of the United States as any Holder of the Notes reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Notes covered by such Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject.

        (i)    The Company shall cooperate with the Holders of the Notes to facilitate the timely preparation and delivery of certificates representing the Notes to be sold pursuant to any Registration Statement free of any restrictive legends.

        (j)    Upon the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 3(b) above during the period for which the Company is required to maintain an effective Registration Statement, the Company shall promptly prepare and file a post-effective amendment to the Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of the Notes or purchasers of Notes, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Initial Purchasers, the Holders of the Notes and any known Participating Broker-Dealer in accordance with paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Initial Purchasers, the Holders of the Notes and any such Participating Broker-Dealers shall suspend use of such prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 2(b) above and the Exchange Offer Registration Statement provided for in Section 1 above shall each be extended by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchasers, the Holders of the Notes and any known Participating Broker-Dealer shall have received such amended or supplemented prospectus pursuant to this Section 3(j).

        (k)   Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Initial Notes, the Exchange Notes or the Private Exchange Notes, as the case may be, and provide the applicable trustee with certificates for the Initial Notes, the Exchange Notes or the Private Exchange Notes, as the case may be, in a form eligible for deposit with The Depository Trust Company.

        (l)    The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Registered Exchange Offer or the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period.

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        (m)  The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture.

        (n)   The Company may require each Holder of Notes to be sold pursuant to the Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of the Notes as the Company may from time to time reasonably require for inclusion in the Shelf Registration Statement, including requiring the Holder to properly complete and execute such selling Note Holder notice and questionnaires, and any amendments or supplements thereto, as the Company may reasonably deem necessary or appropriate, and the Company may exclude from such registration the Notes of any Holder that fails to furnish such information within a reasonable time after receiving such request.

        (o)   The Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as any Holder of the Notes shall reasonably request in order to facilitate the disposition of the Notes pursuant to any Shelf Registration.

        (p)   In the case of any Shelf Registration, the Company shall (i) make reasonably available for inspection by the Holders of the Notes, any underwriter participating in any disposition pursuant to the Shelf Registration Statement and any attorney, accountant or other agent retained by the Holders of the Notes or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and (ii) cause the Company's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders of the Notes or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchasers by you and on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 4 hereof.

        (q)   In the case of any Shelf Registration, the Company, if requested by any Holder of Notes covered thereby, shall cause (i) its counsel to deliver an opinion and updates thereof relating to the Notes in customary form addressed to such Holders and the managing underwriters, if any, thereof and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement (it being agreed that the matters to be covered by such opinion shall include the existence and good standing of the Company; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 3(o) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the applicable Notes; the absence of governmental approvals required to be obtained in connection with the Shelf Registration Statement, the offering and sale of the applicable Notes, or any agreement of the type referred to in Section 3(o) hereof; the compliance as to form of such Shelf Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act, respectively; and, as of the date of the opinion and as of the effective date of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, and from any documents incorporated by reference therein of an untrue statement of a material fact or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any such documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act); (ii) its officers to execute and deliver all customary documents and certificates and updates thereof requested by any underwriters of the applicable Notes and (iii) its independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in the Shelf Registration Statement to provide to the selling Holders of the applicable Notes and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72.

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        (r)   In the case of the Registered Exchange Offer, if requested by any Initial Purchaser or any known Participating Broker-Dealer, the Company shall cause (i) its counsel to deliver to such Initial Purchaser or such Participating Broker-Dealer a signed opinion in the form set forth in Exhibit C to the Purchase Agreement with such changes as are customary in connection with the preparation of a Registration Statement and (ii) its independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in the Registration Statement to deliver to such Initial Purchaser or such Participating Broker-Dealer a comfort letter, in customary form, meeting the requirements as to the substance thereof as set forth in Section 7(e) of the Purchase Agreement, with appropriate date changes.

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        (s)   If a Registered Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Initial Notes by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Company shall mark, or caused to be marked, on the Initial Notes so exchanged that such Initial Notes are being canceled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall the Initial Notes be marked as paid or otherwise satisfied.

        (t)    The Company will use its reasonable best efforts to (a) if the Initial Notes have been rated prior to the initial sale of such Initial Notes, confirm such ratings will apply to the Notes covered by a Registration Statement, or (b) if the Initial Notes were not previously rated, cause the Notes covered by a Registration Statement to be rated with the appropriate rating agencies, if so requested by Holders of a majority in aggregate principal amount of Notes covered by such Registration Statement, or by the managing underwriters, if any.

        (u)   In the event that any broker-dealer registered under the Exchange Act shall underwrite any Notes or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "Rules") of the National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Notes or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company will assist such broker-dealer in complying with the requirements of such Rules, including, without limitation, by (i) if such Rules, including Rule 2720, shall so require, engaging a "qualified independent underwriter" (as defined in Rule 2720) to participate in the preparation of the Registration Statement relating to such Notes, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Notes, (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 5 hereof and (iii) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules.

        (v)   The Company shall use its reasonable best efforts to take all other steps necessary to effect the registration of the Notes covered by a Registration Statement contemplated hereby.

        4.    Registration Expenses.

        (a)   All expenses incident to the Company's performance of and compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement is ever filed or becomes effective, including without limitation;

        (i)    all registration and filing fees and expenses;

        (ii)   all fees and expenses of compliance with federal securities and state "blue sky" or securities laws;

        (iii)  all expenses of printing (including printing of Prospectuses), messenger and delivery services and telephone;

        (iv)  all fees and disbursements of counsel for the Company; and

        (v)   all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance).

The Company will bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any person, including special experts, retained by the Company.

        (b)   In connection with any Registration Statement required by this Agreement, the Company will reimburse the Initial Purchasers and the Holders of Transfer Restricted Notes who are tendering Initial Notes in the Registered Exchange Offer and/or selling or reselling Notes pursuant to the "Plan of

9

Distribution" contained in the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Vinson & Elkins L.L.P. unless another firm shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Notes for whose benefit such Registration Statement is being prepared.

        5.    Indemnification.

        (a)   The Company agrees to indemnify and hold harmless each Holder of the Notes, any Participating Broker-Dealer and each person, if any, who controls such Holder or such Participating Broker-Dealer within the meaning of the Securities Act or the Exchange Act (each Holder, any Participating Broker-Dealer and such controlling persons are referred to collectively as the "Indemnified Parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Notes) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to a Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder or Participating Broker-Dealer from whom the person asserting any such losses, claims, damages or liabilities purchased the Notes concerned, to the extent that a prospectus relating to such Notes was required to be delivered by such Holder or Participating Broker-Dealer under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder or Participating Broker-Dealer results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Notes to such person, a copy of the final prospectus if the Company had previously furnished copies thereof to such Holder or Participating Broker-Dealer; provided further, however, that this indemnity agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party. The Company shall also indemnify underwriters, their officers and directors and each person who controls such underwriters within the meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Holders of the Notes if requested by such Holders.

        (b)   Each Holder of the Notes, severally and not jointly, will indemnify and hold harmless the Company and its officers and employees, each of its directors, and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such director, officer, employee or controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause,

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shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such director, officer, employee or controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any such director, officer, employee or controlling person.

        (c)   Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party in writing of the commencement thereof; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability that it may have under this Section 5 except to the extent it has been materially prejudiced by such failure and; provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under this Section 5. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. Notwithstanding the election of the indemnifying party to assume the defense of such action, such indemnified party shall have the right to employ separate counsel and to participate in the defense of such action, and the indemnified party shall bear the fees, costs and expenses of such separate counsel (and shall pay such fees, costs and expenses promptly after receipt of any invoice therefor from the indemnifying party). However, if any of the following circumstances shall occur, the indemnifying party shall bear the fees, costs and expenses of such separate counsel (and shall pay such fees, costs and expenses promptly after receipt of any invoice therefor from the indemnified party): (i) in the reasonable judgment of the indemnified party, the use of counsel chosen by the indemnifying party to represent such indemnified party would present such counsel with a conflict of interest; (ii) the defendants in, or targets of, any such action include both an indemnified party and the indemnifying party, and such indemnified party shall have reasonable concluded that there may be legal defenses available to it or to other indemnified parties which are different from or in addition to those available to the indemnifying party (in which case the indemnifying party shall not have the right to direct the defense of such action on behalf of the indemnified party); (iii) the indemnifying party shall not have employed counsel satisfactory to such indemnified party, in the exercise of such indemnified party's reasonable judgment, to represent such indemnified party within a reasonable time after notice of the institution of any such action; or (iv) the indemnifying party shall authorize such indemnified party to employ separate counsel at the expense of the indemnifying party. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action, and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

        (d)   If the indemnification provided for in this Section 5 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall, to the extent such indemnification is unavailable or insufficient, contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a

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material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 5(d), the Holders of the Notes shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Notes pursuant to a Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company.

        (e)   The agreements contained in this Section 5 shall survive the sale of the Notes pursuant to a Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party.

        6.    Additional Interest Under Certain Circumstances.

        (a)   By way of liquidated damages, additional interest (the "Additional Interest") with respect to the Initial Notes shall be assessed as follows if any of the following events occur (each such event in clauses (i) through (iv) below being herein called a "Registration Default"):

        (i)    any Registration Statement required by this Agreement is not filed with the Commission on or prior to the Filing Deadline or Shelf Filing Deadline, as applicable;

        (ii)   any Registration Statement required by this Agreement is not declared effective by the Commission on or prior to the applicable Effectiveness Deadline;

        (iii)  the Registered Exchange Offer has not been consummated on or prior to the Consummation Deadline; or

        (iv)  any Registration Statement required by this Agreement has been declared effective by the Commission but (A) such Registration Statement thereafter ceases to be effective or (B) such Registration Statement or the related prospectus ceases to be usable in connection with resales of Transfer Restricted Notes during the periods specified herein because either (1) any event occurs as a result of which the related prospectus forming part of such Registration Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or (2) it shall be necessary to amend such Registration Statement or supplement the related prospectus, to comply with the Securities Act or the Exchange Act or the respective rules thereunder.

Each of the foregoing will constitute a Registration Default whatever the reason for any such event and whether it is voluntary or involuntary or is beyond the control of the Company or pursuant to operation of law or as a result of any action or inaction by the Commission.

        Additional Interest shall accrue on the Initial Notes over and above the interest set forth in the title of the Initial Notes from and including the date on which any such Registration Default shall occur to but excluding the date on which all such Registration Defaults have been cured, at a rate of $.05 per week per $1,000 principal amount of Initial Notes (the "Additional Interest Rate") for the first 90-day period immediately following the occurrence of such Registration Default. The Additional Interest Rate shall increase by an additional $.05 per week per $1,000 principal amount of Initial Notes with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum Additional

12

Interest Rate of $.50 per week per $1,000 principal amount of Notes. Additional Interest shall not accrue under more than one of clauses (i) through (iv) of the preceding paragraph at any one Time.

        (b)   A Registration Default referred to in Section 6(a)(iv) hereof shall be deemed not to have occurred and be continuing in relation to a Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus or (y) other material events, with respect to the Company that would need to be described in such Shelf Registration Statement or the related prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related prospectus to describe such events; provided, however, that in any case if such Registration Default occurs for a continuous period in excess of 30 days, Additional Interest shall be payable in accordance with the above paragraph from the day such Registration Default occurs until such Registration Default is cured.

        (c)   Any amounts of Additional Interest due pursuant to Section 6(a) will be payable in cash on the regular interest payment dates with respect to the Notes.

        (d)   "Transfer Restricted Notes" means each Note until (i) the date on which such Note has been exchanged by a person other than a broker-dealer for a freely transferable Exchange Note in the Registered Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered Exchange Offer of an Initial Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Note is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.

        7.    Rules 144 and 144A.    The Company shall use its best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder of Notes, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Company covenants that it will take such further action as any Holder of Notes may reasonably request, all to the extent required from time to time to enable such Holder to sell Notes without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Company will provide a copy of this Agreement to prospective purchasers of Initial Notes identified to the Company by the Initial Purchasers upon request. Upon the request of any Holder of Initial Notes, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act.

        8.    Underwritten Registrations.    If any of the Transfer Restricted Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering ("Managing Underwriters") will be selected, with the reasonable approval of the Company, by the Holders of a majority in aggregate principal amount of such Transfer Restricted Notes to be included in such offering.

        No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Notes on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.

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        9.    Miscellaneous.

        (a)    Remedies.    Each of the parties hereto acknowledges and agrees that the payment of Additional Interest as provided in Section 6 hereof shall be the exclusive remedy for any failure by the Company to comply with its obligations under Sections 1 and 2 hereof.

        (b)    No Inconsistent Agreements.    The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof.

        (c)    Amendments and Waivers.    The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Company and the written consent of the Holders of a majority in principal amount of the Notes affected by such amendment, modification, supplement, waiver or consent. Without the consent of the Holder of each Note, however, no modification may change the provisions relating to the payment of Additional Interest.

        (d)    Notices.    All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery:

        (1)   if to a Holder of the Notes, at the most current address given by such Holder to the Company;

        (2)   if to the Initial Purchasers, to them in care of:

Lehman Brothers Inc.
399 Park Avenue
New York, NY 10022
Fax No.: (646) 758-4231
Attention: Syndicate Registration Department

with a copy to:

Lehman Brothers Inc.
Office of the General Counsel
399 Park Avenue
New York, NY 10022
Fax No. (212) 528-4748
Attention: Director of Litigation; and

Vinson & Elkins L.L.P.
1001 Fannin Street
2300 First City Tower
Houston, Texas 77002-6760
Fax No.: (713) 615-5320
Attention: Thomas P. Mason; or

        (3)   if to the Company at its address as follows:

Universal Compression, Inc.
4444 Brittmoore Rd.
Houston, TX 77041
Fax No. (713) 466-6720
Attention: General Counsel

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with a copy to:

Gardere Wynne Sewell LLP
1000 Louisiana Street, Suite 3400
Houston, Texas 77002
Fax No. (713) 276-6561
Attention: Carol Burke

        All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient's facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery.

        (e)    Third Party Beneficiaries.    The Holders shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder.

        (f)    Successors and Assigns.    This Agreement shall be binding upon the Company and its successors and assigns.

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

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

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

        (j)    Severability.    If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

        (k)    Notes Held by the Company.    Whenever the consent or approval of Holders of a specified percentage of principal amount of Notes is required hereunder, Notes held by the Company or its affiliates (other than subsequent Holders of Notes if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Notes) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.

        (l)    Submission to Jurisdiction.    By the execution and delivery of this Agreement, the Company submits to the nonexclusive jurisdiction of the competent Federal and state courts in the Borough of Manhattan in the City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

15

        If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the several Initial Purchasers and the Company in accordance with its terms.

Very truly yours,
UNIVERSAL COMPRESSION, INC.
by:	/s/  J. MICHAEL ANDERSON
	Name:	J. Michael Anderson
	Title:	Chief Financial Officer and Senior Vice President

The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.

LEHMAN BROTHERS INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
WACHOVIA SECURITIES, INC.
BANC ONE CAPITAL MARKETS, INC.

By:	LEHMAN BROTHERS INC.
by:	/s/  JAMES E. SAXTON, JR.
	Name:	James E. Saxton, Jr.
	Title:	Managing Director

16

ANNEX A

        Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Initial Notes where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution."

ANNEX B

        Each broker-dealer that receives Exchange Notes for its own account in exchange for Initial Notes, where such Initial Notes were acquired by such broker-dealer as a result of market- making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution."

ANNEX C

PLAN OF DISTRIBUTION

        Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Initial Notes where such Initial Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until                        , 2003, all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus.(1)

(1)

In addition, if applicable the legend required by Item 502(b) of Regulation S-K will appear on the outside back cover page of the Exchange Offer prospectus.

        The Company will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.

        For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holders of the Notes) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.

ANNEX D

        If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Initial Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.

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Exhibit 10.43

EX-21.1

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Exhibit 21.1

LIST OF SUBSIDIARIES

Company	Jurisdiction of Incorporation/organization
Universal Compression Argentina, S.A.	Argentina
Universal Compression (Australia) Pty, Ltd.	Australia
Universal Compression Finance Company, Ltd.	Barbados
Universal Compression LTDA	Brazil
Universal Compression (Ontario), Ltd.	British Virgin Islands
Universal Compression (Canada) Holdings, Ltd.	Canada
Universal Compression Canada, Ltd.	Canada
Universal Compression International, Ltd.	Cayman Island
Universal Compression of Colombia, Ltd.	Cayman Island
Uniwhale Ltd.	Cayman Island
Uniwhale de Colombia E.U.	Colombia
Universal Compression, Inc.	Delaware
Compression Systems International, Inc.	Delaware
Universal Compression International, Inc.	Delaware
UCO Compression 2002 L.L.C.	Delaware
Enterra Compression Investment Company	Delaware
Universal Compression Company, L.P.	Delaware
UCO Compression Holding, L.L.C.	Delaware
Universal Compression Services, L.P.	Delaware
UCO Compression LLC	Delaware
BRL Universal Equipment 2001 A, L.P.	Delaware
BRL Universal Compression Funding I 2002, L.P.	Delaware
PT Universal Compression Indonesia	Indonesia
Compression Services de Mexico, S.A. de C.V.	Mexico
Universal Compression de Mexico, S.A. de C.V.	Mexico
Universal Compression B.V.	Netherlands
Universal Compression del Peru, S.R.L.	Peru
Universal Compression (Thailand), Ltd.	Thailand
Universal Compression de Venezuela Unicom, C.A.	Venezuela
Universal Compression Services de Venezuela, C.A.	Venezuela

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Exhibit 21.1

EX-23.1

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Exhibit 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement No. 333-61774 on Form S-3 and Registration Statement Nos. 333-37648, 333-55260, 333-67784, 333-69504, and 333-99473 on Form S-8 of Universal Compression Holdings, Inc. of our report dated May 23, 2003 appearing in this Annual Report on Form 10-K of Universal Compression Holdings, Inc. for the year ended March 31, 2003.

/s/ DELOITTE & TOUCHE LLP
Houston, Texas
May 23, 2003

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Exhibit 23.1

EX-99.1

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Exhibit 99-1

UNIVERSAL COMPRESSION HOLDINGS, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Universal Compression Holdings, Inc. (the "Company") on Form 10-K for the period ending March 31, 2003 (the "Report"), I, Stephen A. Snider, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ STEPHEN A. SNIDER
Stephen A. Snider
Chief Executive Officer
June 17, 2003

In connection with the Annual Report of Universal Compression Holdings, Inc. (the "Company") on Form 10-K for the period ending March 31, 2003 (the "Report"), I, J. Michael Anderson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ J. MICHAEL ANDERSON
J. Michael Anderson
Chief Financial Officer
June 17, 2003

These certifications accompany this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934.

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Exhibit 99-1

UNIVERSAL COMPRESSION HOLDINGS, INC. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-99.2

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Exhibit 99-2

UNIVERSAL COMPRESSION, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Universal Compression, Inc. (the "Company") on Form 10-K for the period ending March 31, 2003 (the "Report"), I, Stephen A. Snider, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ STEPHEN A. SNIDER
Stephen A. Snider
Chief Executive Officer
June 17, 2003

        In connection with the Annual Report of Universal Compression, Inc. (the "Company") on Form 10-K for the period ending March 31, 2003 (the "Report"), I, J. Michael Anderson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ J. MICHAEL ANDERSON
J. Michael Anderson
Chief Financial Officer
June 17, 2003

        These certifications accompany this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934.

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Exhibit 99-2

UNIVERSAL COMPRESSION, INC. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002