exv10w21



 



Exhibit 10.21


MERGER AND PARTNERSHIP PURCHASE AGREEMENT



DATED



JULY 21, 2003



AMONG



ERP ENVIRONMENTAL SERVICES INC.,



CERTAIN SUBSIDIARIES OF ERP ENVIRONMENTAL SERVICES INC.



U S LIQUIDS INC.,



AND



CERTAIN SUBSIDIARIES OF U S LIQUIDS INC.



 






 





MERGER AND PARTNERSHIP PURCHASE AGREEMENT



     This is a Merger and Partnership Purchase Agreement (the “Agreement”)
dated July 21, 2003 among ERP Environmental Services Inc., a Delaware
corporation(“ERP”), U S Liquids Inc., a Delaware corporation (“USL”), U S
Liquids LP Holding Co., a Delaware corporation (“LP”), MBO, Inc., a Delaware
corporation,(“MBO” ), RET Acquisition Corporation, a California corporation
(“RET”), PKY Acquisition Corporation, a Kentucky corporation (“PKY”), PCA
Acquisition Corporation, a California corporation (“PCA”), Romic Environmental
Technologies Corporation, a California corporation (“Romic”), Parallel Products
of Kentucky, Inc., a Kentucky corporation (“Parallel Kentucky”), and USL
Parallel Products of California, a California corporation (“Parallel
California,” and, together with Parallel Kentucky, the “Parallel Companies”),
relating to (i) mergers of RET, PKY and PCA with Romic, Parallel Kentucky and
Parallel California and (ii) the sale by LP and MBO to subsidiaries of ERP of
all the partnership interests in U S Liquids of La, L.P., a Delaware limited
partnership (the “Limited Partnership”). The agreement among the parties is as
follows:


ARTICLE 1



THE MERGERS



     1.1    Agreement to Effect Mergers. At the Effective Time described in
Paragraph 2.3, (i) RET will be merged with and into Romic (the “Romic
Merger”), (ii) PKY will be merged with and into Parallel Kentucky (the
“Parallel Kentucky Merger”), and (iii) PCA will be merged with and into
Parallel California (the “Parallel California Merger,” and, together with the
Parallel Kentucky Merger, the “Parallel Mergers,” the Romic Merger and the
Parallel Mergers together being the “Mergers”).


     1.2    The Romic Merger. (a)    In the Romic Merger, RET will be merged into
Romic, and Romic will be the surviving corporation of the Romic Merger (the
“Romic Surviving Corporation”). Except as specifically provided in this
Agreement, when the Romic Merger


1






 




becomes effective, (i) the real and personal property, other assets, rights,
privileges, immunities, powers, purposes and franchises of Romic will continue
unaffected and unimpaired by the Romic Merger, (ii) the separate existence of
RET will terminate, and RET’s real and personal property, other assets, rights,
privileges, immunities, powers, purposes and franchises will be merged into the
Romic Surviving Corporation, and (iii) the Romic Merger will have the other
effects specified in Section 1107 of the California General Corporation Law
(the “CGCL”).


          (b) The Certificate of Incorporation of the Romic Surviving Corporation
will be amended by the Romic Merger so that from the Effective Time (defined
below) until subsequently amended, the Certificate of Incorporation of the
Romic Surviving Corporation will be the same as the Certificate of
Incorporation of RET immediately before the Effective Time, except that it will
provide that the name of the Romic Surviving Corporation will be “Romic
Environmental Technologies Corporation.” That Certificate of Incorporation,
separate and apart from this Agreement, may be certified as the Certificate of
Incorporation of the Romic Surviving Corporation.



          (c) At the Effective Time, the By-Laws of RET immediately before the
Effective Time will be the By-Laws of the Romic Surviving Corporation, until
they are altered, amended or repealed.



          (d) The directors of RET immediately before the Effective Time will be the
directors of the Romic Surviving Corporation after the Effective Time and will
hold office in accordance with the By-Laws of the Romic Surviving Corporation.



          (e) The officers of Romic immediately before the Effective Time will be
the officers of the Romic Surviving Corporation after the Effective Time and
will hold office at the pleasure of the Board of Directors of the Romic
Surviving Corporation.



2






 





          (f) (i)    Except provided in Paragraph 5.2 , at the Effective Time each
share of common stock of Romic (“Romic Stock”) which is outstanding immediately
before the Effective Time will be converted into and become the right to
receive a sum in cash equal to (x) $21,000,000 (the “Romic Merger Price”),
divided by (y) the total number of shares of Romic Stock that are outstanding
immediately before the Effective Time.



               (ii)    Each share of Romic Stock held in Romic’s treasury or held by any
direct or indirect wholly-owned subsidiary of Romic immediately before the
Effective Time will, at the Effective Time, be cancelled and cease to exist and
no payment will be made with respect to any of those shares.



               (iii)    At the Effective Time, each share of common or preferred stock of RET
(“RET Stock”) which is outstanding immediately before the Effective Time will
be converted into and become one share of an identical class and series of
stock of the Romic Surviving Corporation (“New Romic Stock”). At the Effective
Time, a certificate which represented RET Stock will automatically become and
be a certificate representing the number, class and series of shares of New
Romic Stock into which the RET Stock represented by the certificate was
converted.



          (g) At the Effective Time, each option or warrant issued by Romic that is
outstanding at that time will be cancelled, and no holder of an option or
warrant issued by Romic that is outstanding at the Effective Time will have any
rights after the Effective Time under or with regard to that option or warrant.



     1.3    The Parallel Kentucky Merger. (a) In the Parallel Kentucky Merger,
PKY will be merged into Parallel Kentucky, and Parallel Kentucky will be the
surviving corporation of the Parallel Kentucky Merger (the “Parallel Kentucky
Surviving Corporation”). Except as specifically provided in this Agreement,
when the Parallel Kentucky Merger becomes effective, (i) the real


3






 


and personal property, other
assets, rights, privileges, immunities, powers, purposes and franchises of
Parallel Kentucky will continue unaffected and unimpaired by the Parallel
Kentucky Merger, (ii) the separate existence of PKY will terminate, and PKY’s
real and personal property, other assets, rights, privileges, immunities,
powers, purposes and franchises will be merged into the Parallel Kentucky
Surviving Corporation, and (iii) the Parallel Kentucky Merger will have the
other effects specified in Section 11-060 of the Kentucky Business Corporation
Act.


          (b) The Certificate of Incorporation of the Parallel Kentucky Surviving
Corporation will be amended by the Parallel Kentucky Merger so that from the
Effective Time until subsequently amended, the Certificate of Incorporation of
the Parallel Kentucky Surviving Corporation will be the same as the Certificate
of Incorporation of PKY immediately before the Effective Time, except that it
will provide that the name of the Parallel Kentucky Surviving Corporation will
be “Parallel Products of Kentucky, Inc.” That Certificate of Incorporation,
separate and apart from this Agreement, may be certified as the Certificate of
Incorporation of the Parallel Kentucky Surviving Corporation.



          (c) At the Effective Time, the By-Laws of PKY immediately before the
Effective Time will be the By-Laws of the Parallel Kentucky Surviving
Corporation, until they are altered, amended or repealed.



          (d) The directors of PKY immediately before the Effective Time will be the
directors of the Parallel Kentucky Surviving Corporation after the Effective
Time and will hold office in accordance with the By-Laws of the Parallel
Kentucky Surviving Corporation.



          (e) The officers of Parallel Kentucky immediately before the Effective
Time will be the officers of the Parallel Kentucky Surviving Corporation after
the Effective Time and will hold office at the pleasure of the Board of
Directors of the Parallel Kentucky Surviving Corporation.



4






 





          (f) (i)     Except as provided in Paragraph 5.2(ii), at the Effective Time
each share of common stock of Parallel Kentucky (“Parallel Kentucky Stock”)
which is outstanding immediately before the Effective Time will be converted
into and become the right to receive a sum in cash equal to (x) $5,500,000
(the “Parallel Kentucky Merger Price”), divided by (y) the total number of
shares of Parallel Kentucky Stock that are outstanding immediately before the
Effective Time.



               (ii)     Each share of Parallel Kentucky Stock held in Parallel Kentucky’s
treasury or held by any direct or indirect wholly-owned subsidiary of Parallel
Kentucky immediately before the Effective Time will, at the Effective Time, be
cancelled and cease to exist and no payment will be made with respect to any of
those shares.



               (iii)     At the Effective Time, each share of common or preferred stock of PKY
of any class or series (“PKY Stock”) which is outstanding immediately before
the Effective Time will be converted into and become one share of an identical
class and series of stock of the Parallel Kentucky Surviving Corporation (“New
Parallel Kentucky Stock”). At the Effective Time, a certificate which
represented PKY Stock will automatically become and be a certificate
representing the number, class and series of shares of New Parallel Kentucky
Stock into which the PKY Stock represented by the certificate was converted.



          (g) At the Effective Time, each option or warrant issued by Parallel
Kentucky that is outstanding at that time will be cancelled, and no holder of
an option or warrant issued by Parallel Kentucky that is outstanding at the
Effective Time will have any rights after the Parallel Kentucky Merger under or
with regard to that option or warrant.



     1.4    The Parallel California Merger. (a) In the Parallel California
Merger, PCA will be merged into Parallel California, and Parallel California
will be the surviving corporation of the Parallel California Merger (the
“Parallel California Surviving Corporation”). Except as


5






 




specifically provided
in this Agreement, when the Parallel California Merger becomes effective, (i)
the real and personal property, other assets, rights, privileges, immunities,
powers, purposes and franchises of Parallel California will continue unaffected
and unimpaired by the Parallel California Merger, (ii) the separate existence
of PCA will terminate, and PCA’s real and personal property, other assets,
rights, privileges, immunities, powers, purposes and
franchises will be merged into the Parallel California Surviving
Corporation, and (iii) the Parallel California Merger will have the other
effects specified in Section 1107 of the CGCL.


          (b) The Certificate of Incorporation of the Parallel California Surviving
Corporation will be amended by the Parallel California Merger so that from the
Effective Time until subsequently amended, the Certificate of Incorporation of
the Parallel California Surviving Corporation will be the same as the
Certificate of Incorporation of PCA immediately before the Effective Time,
except that it will provide that the name of the Parallel California Surviving
Corporation will be “Parallel Products of California, Inc.” That Certificate
of Incorporation, separate and apart from this Agreement, may be certified as
the Certificate of Incorporation of the Parallel California Surviving
Corporation.



          (c) At the Effective Time, the By-Laws of PCA immediately before the
Effective Time will be the By-Laws of the Parallel California Surviving
Corporation, until they are altered, amended or repealed.



          (d) The directors of PCA immediately before the Effective Time will be the
directors of the Parallel California Surviving Corporation after the Effective
Time and will hold office in accordance with the By-Laws of the Parallel
California Surviving Corporation.



          (e) The officers of Parallel California immediately before the Effective
Time will be the officers of the Parallel California Surviving Corporation
after the Effective Time and will



6






 





hold office at the pleasure of the Board of
Directors of the Parallel California Surviving Corporation.


          (f) (i)    Except as provided in Paragraph 5.2, at the Effective Time each
share of stock of Parallel California (“Parallel California Stock”) which is
outstanding immediately before the Effective Time will be converted into and
become the right to receive a sum in cash equal to (x) $5,500,000 (the
“Parallel California Merger Price”), divided by (y) the total number of shares
of Parallel California Stock that are outstanding immediately before the
Effective Time.



               (ii)    Each share of Parallel California Stock held in Parallel California’s
treasury or held by any direct or indirect wholly-owned subsidiary of Parallel
California immediately before the Effective Time will, at the Effective Time,
be cancelled and cease to exist and no payment will be made with respect to any
of those shares.



               (iii)    At the Effective Time, each share of common or preferred stock of PCA
(“PCA Stock”) which is outstanding immediately before the Effective Time will
be converted into and become one share of an identical class and series of
stock of the Parallel California Surviving Corporation (“New Parallel
California Common Stock”). At the Effective Time, a certificate which
represented PCA Stock will automatically become and be a certificate
representing the number, class and series of shares of New Parallel California
Stock into which the PCA Stock represented by the certificate was converted.



          (g) At the Effective Time, each option or warrant issued by Parallel
California that is outstanding at that time will be cancelled, and no holder of
an option or warrant issued by Parallel California that is outstanding at the
Effective Time will have any rights under or with regard to that option or
warrant.



7






 





     1.5    Stockholder’s Consents. Simultaneously with the execution of this
Agreement, USL, as the sole stockholder of Romic, Parallel Kentucky and
Parallel California, is executing documents consenting to the Romic Merger and
each of the Parallel Mergers. Execution of those consents will not affect the
rights of USL, contained elsewhere in this Agreement, to terminate this
Agreement under some circumstances without carrying out any of the Mergers.


     1.6    Waiver of Right to Dissent. USL waives any rights it may have under
any statute or otherwise to exercise a dissenting shareholder’s right of
appraisal with regard to any of the Mergers or to seek to receive with regard
to its shares of Romic or either of the Parallel Companies anything other than
the Romic Merger Price, the Parallel Kentucky Merger Price and the Parallel
California Merger Price (together, the “Merger Prices”) described in Paragraphs
1.2(f), 1.3(f) and 1.4(f), adjusted as provided in Paragraph 5.2.


ARTICLE 2



TIME OF MERGERS



     2.1    Date of the Mergers. The day on which the Mergers are to take place
(the “Merger Date”) will be the latest of (i) July 31, 2003, (ii) the third
business day after the day on which all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR
Act”) have expired or been terminated, or (iii) the third business day after
the day on which all the conditions in Article 8 (other than conditions which
it is contemplated will be fulfilled at the Closing) have been fulfilled or
waived.


     2.2    Execution of Certificates of Merger. Not later than 11:00 A.M. New
York City time on the day before the Merger Date, (a) the parties to each of
the Mergers will each execute a certificate of merger or similar document (a
“Certificate of Merger”) substantially in the form of Exhibit 2.2(1), 2.2(2)
or 2.2(3) (with such modifications as may be required by the governmental
officer with which the Certificate of Merger is to be filed), as applicable,
for filing with the


8






 




Secretary of State or other appropriate governmental
officer in the state in which the parties to that Merger are incorporated. If
the Closing is completed, ERP will cause each of the Certificates of Merger to
be filed with the Secretary of State or other appropriate governmental officer
on the Merger Date or as soon after that date as is practicable.


     2.3    Effective Time of the Mergers. Each Merger will become effective at
11:59 P.M. on the day on which the Certificate of Merger or similar document is
filed with the Secretary of State or other appropriate governmental officer in
the state in which the parties to that Merger are incorporated (that being the
“Effective Time” with regard to that Merger).


     2.4    Payment of Merger Prices. At the Closing described in Article 4, ERP
will pay USL a total of $31,058,824, and will deliver $941,176 to the Escrow
Agent described in Paragraph 4.2-F, in payment of the total amount of the
Merger Prices.


ARTICLE 3



PURCHASE OF PARTNERSHIP INTERESTS



     3.1    Purchase of Partnership Interests. At the Closing described in
Article 4, (i) Oilfields LP Holdings, Inc., a subsidiary of ERP, will purchase
from LP, and LP will sell to Oilfields LP Holdings, Inc., all the limited
partner interests in the Limited Partnership, and (ii) Oilfields GP Holdings,
Inc., a subsidiary of ERP, will purchase from MBO, and MBO will sell to
Oilfields GP Holdings, Inc., all the general partner interests in the Limited
Partnership.


     3.2    Purchase Price. The total purchase price that ERP, on behalf of its
subsidiaries, will pay to LP and MBO for all the limited partner and general
partner interests in the Limited Partnership will be $36,000,000 (the
“Partnership Purchase Price”), subject to adjustment as provided in Paragraph
5.2. Of this sum, (i) 99% will be payment to LP for the limited partner
interests, and 1% will be payment to MBO for the general partner interests, in
the Limited Partnership, and (ii) at the Closing, a total of $34,941,176 will
be paid to LP and MBO (with 99%


9






 




being paid to LP and 1% being paid to MBO) and
$1,058,824 will be delivered to the Escrow Agent.


     3.3    Stockholder’s Consents. Simultaneously with the execution of this
Agreement, USL, as the sole stockholder of MBO and LP, is executing documents
consenting to the sale by each of MBO and LP to the sale of all or
substantially all its assets. Execution of those consents will not affect the
rights of USL, contained elsewhere in this Agreement, to terminate this
Agreement, and therefore to terminate the obligations of MBO and LP to sell the
general partner and limited partner interests in the Partnership, under some
circumstances.


Article 4



CLOSING



     4.1    Time and Place of Closing. The closing (the “Closing”) of the payment
of the Merger Prices, the purchase by ERP of all the partnership interests in
the Limited Partnership, and the other
transactions that are the subject of this Agreement, will take place at
the offices of Clifford Chance US LLP, 200 Park Avenue, New York, New York at
10:00 a.m. New York City time on the Merger Date.


     4.2    USL’s Actions at Closing. At the Closing, USL will deliver to ERP or
direct or indirect subsidiaries designated by ERP the following:


          (a) A document addressed to Clifford Chance US LLP, instructing it to file
with the Secretary of State or other appropriate governmental officer in the
state in which the parties to each of the Mergers are incorporated the
certificate of merger or similar document that the parties to the Mergers
previously delivered to Clifford Chance US LLP as contemplated by Paragraph
2.2.



10






 





          (b) Certificates representing all the outstanding shares of Romic Stock,
Parallel Kentucky Stock and Parallel California Stock.



          (c) A copy, executed by USL, of an agreement in a form to be agreed upon
by USL and ERP (the “Transition Services Agreement”) in which (i) USL and ERP
agree to arrangements regarding access to assets and personnel during the
period of six months following the Closing (the “Transition Period”), and (ii)
ERP agrees that during the Transition Period, ERP or its subsidiaries will pay
$333,333 per month to USL (a total of $2,000,000).



          (d) Evidence, reasonably satisfactory to ERP, that USL has contributed to
the Acquired Companies (defined below) or their wholly owned subsidiaries all
the assets listed on Schedule 4.2-D (the “Contributed Assets”) and that the
Acquired Companies shown on Schedule 4.2-D have assumed the liabilities listed
on that Schedule (the “Assumed Liabilities”).



          (e) Evidence, reasonably satisfactory to ERP, that USL has contributed to
the Acquired Companies the net balance of the intercompany obligations of the
Acquired Companies and their subsidiaries to USL and its subsidiaries other
than the Acquired Companies and their subsidiaries (the “Other Subsidiaries”)
(other than accounts payable incurred in the ordinary course of business
between Acquired
Companies or their subsidiaries and Other Subsidiaries), which
contribution will be effected by a release (i) releasing the Acquired Companies
and their subsidiaries from all indebtedness and other obligations to USL and
the Other Subsidiaries (other than accounts payable incurred in the ordinary
course of business between Acquired Companies or their subsidiaries and Other
Subsidiaries), and (ii) releasing USL and the Other Subsidiaries from all
indebtedness and other obligations to the Acquired Companies or their
subsidiaries (other than USL’s obligations under this Agreement and accounts
payable incurred in the ordinary course of business between Acquired Companies
or their subsidiaries and Other Subsidiaries).



11






 





          (f) A copy, executed by USL, of a royalty free license, in a form agreed
upon by USL and ERP, to use information processing software owned by USL (the
“Software License”).



          (g) A copy of an Escrow Agreement, in a form agreed to by both USL and
ERP, among USL, LP, MBO, ERP and Southwest Bank of Texas, N.A. (the “Escrow
Agent”) relating to the Escrow Fund described in Paragraph 5.3.



     4.3    LP’s Actions at Closing At the Closing, LP will deliver to a
subsidiary of ERP designated by ERP the following:


          (a) A document, executed by LP, assigning to a subsidiary of ERP
designated by ERP all the limited partner interests in the Limited Partnership.



          (b) A consent, signed by LP, as limited partner, to subsidiaries of ERP
becoming the sole general partner and the sole limited partner of the :Limited
Partnership.



          (c) A copy, executed by LP, of the Escrow Agreement.



          (d) Any other documents reasonably requested by ERP to cause subsidiaries
of ERP to be the sole general partner and the sole limited partner of the
Limited Partnership.



     4.4    MBO’s Actions at Closing. At the Closing, MBO will deliver to a
subsidiary of ERP designated by ERP the following:


          (a) A document, executed by MBO, assigning to a subsidiary of ERP
designated by ERP all the general partner interests in the Limited Partnership.



          (b) A consent, signed by MBO, as general partner, to subsidiaries of ERP
becoming the sole general partner and the sole limited partner of the :Limited
Partnership.



          (c) A copy, executed by MBO, of the Escrow Agreement.



12






 





          (d) Any other documents reasonably requested by ERP to cause subsidiaries
of ERP to be the sole general partner and the sole limited partner of the
Limited Partnership.



     4.5    ERP’s Actions at Closing. (a)    At the Closing, ERP will deliver to USL
the following:


               (i)    A certified or bank cashier’s check, or evidence of a wire transfer of
immediately available funds to an account specified at least 24 hours before
the Closing by USL, in the amount of $31,058,824 in satisfaction of the
obligations of the Romic Surviving Corporation, the Parallel Kentucky Surviving
Corporation and the Parallel California Surviving Corporation to pay the
portion of the Merger Prices that is to be paid at the Closing.



               (ii)    Evidence of a wire transfer of immediately available funds in the
amount of $2,000,000 to the Escrow Agent.



               (iii)    A letter, substantially in the form of Exhibit 4.5-A, in which ERP
acknowledges that ERP or a subsidiary will be acquiring the shares of New Romic
Stock, New Parallel Kentucky Stock and New Parallel California Stock for
investment, and not with a view to their resale or distribution, except that
ERP will immediately be selling the 6% Junior Convertible Preferred Stock (“New
Junior Preferred Stock”) included in the New Romic Stock, the New Parallel
Kentucky Stock and the New
Parallel California Stock to Three Cities Fund III, L.P., Three Cities
Friends, L.P. and Three Cities GP, L.P., each of which has represented to ERP
that it will be acquiring the shares of New Junior Preferred Stock that are
sold to it for investment and not with a view to their resale or distribution.



               (iv)    A copy, executed by ERP, of the Transition Services Agreement.



               (v)    A copy, executed by ERP, of the Software License.



13






 





               (vi)    A copy, executed by ERP, of the Escrow Agreement.



          (b) At the Closing, ERP will deliver to LP the following:



               (i)    A certified or bank cashier’s check, or evidence of a wire transfer of
immediately available funds to an account specified at least 24 hours before
the Closing by LP, in the amount of $34,591,764 in payment of the portion to be
paid at the Closing of the purchase price for all the limited partner interests
in the Limited Partnership.



               (ii)    A letter, substantially in the form of Exhibit 4.5-B, in which ERP
acknowledges that ERP’s subsidiary will be acquiring the limited partner
interests in the Limited Partnership for investment, and not with a view to
their resale or distribution.



               (iii)    Any other documents ERP’s subsidiary is required by the limited
partnership agreement of the Limited Partnership to execute in order to enable
ERP’s subsidiary to become the sole limited partner of the Limited Partnership.



          (c) At the Closing, ERP will deliver to MBO the following:



               (i)    A certified or bank cashier’s check, or evidence of a wire transfer of
immediately available funds to an account specified at least 24 hours before
the Closing by MBO, in the
amount of $349,412 in payment of the portion to be paid at the Closing of
the purchase price for all the general partner interests in the Limited
Partnership.



               (ii)    A letter, substantially in the form of Exhibit 4.5-C, in which ERP
acknowledges that ERP’s subsidiary will be acquiring the general partner
interests in the Limited Partnership for investment, and not with a view to
their resale or distribution.



14






 





               (iii)    Any other documents ERP’s subsidiary is required by the limited
partnership agreement of the Limited Partnership to execute in order to enable
ERP’s subsidiary to become the sole general partner of the Limited Partnership.



ARTICLE 5



ADJUSTMENT TO PRICES



     5.1    Merger Date Balance Sheet. (a)    Not later than 30 days after the
Merger Date, USL will deliver to ERP a combining and combined balance sheet of
the Romic Surviving Corporation, the Parallel Kentucky Surviving Corporation,
the Parallel California Surviving Corporation and the Limited Partnership
(together, the “Acquired Companies”) and their respective subsidiaries at the
Merger Date (the “Merger Date Balance Sheet”), showing, as of the Merger Date,
the combining and combined assets, liabilities and net worth of the Acquired
Companies and their respective subsidiaries (including the Contributed Assets
and the Assumed Liabilities), with any intercompany items among the Acquired
Companies and their subsidiaries eliminated. The Merger Date Balance Sheet
will include the accounts reflected on the balance sheet as of March 31, 2003
attached as Schedule 5.1, and will be prepared in accordance with generally
accepted accounting principles (“GAAP”), applied in the same way they were
applied in preparing the consolidated financial statements of USL and its
subsidiaries included in USL’s Annual Report on Form 10-K for the year ended
December 31, 2002 (except for (A) changes due to changed requirements of GAAP,
or (B) variances from GAAP that are not material), will be based on the book
values of assets and liabilities on the books of the Acquired Companies and
their subsidiaries immediately before the Closing (which will be the book
values reflected on the consolidated financial statements of USL and its
subsidiaries), and will include the Contributed Assets as assets, and the
Assumed Liabilities as liabilities, of the Acquired Companies, except that (i)
the Merger Date Balance Sheet will not include any indebtedness from which the
Acquired Companies are released at the Closing, (ii) the Merger


15






 




Date Balance
Sheet will not include any liabilities with respect to which USL has agreed to
indemnify ERP or the Acquired Companies, (iii) assets, liabilities, gains,
losses, revenues and expenses in interim periods and as of dates other than
year end, which normally are determined through the application of interim
accounting conventions or procedures, will be determined for the purposes of
the Merger Date Balance Sheet through full application of the procedures used
in preparing USL’s most recent audited financial statements, and (iv) no
accruals or other liabilities will be included on the Merger Date Balance Sheet
as a result of an event or condition that (x) occurs or arises after the Merger
Date, or (y) is discovered after the Merger Date other than as a result of the
procedures USL normally applies in connection with the preparation of year end
financial statements to the extent the accruals or liabilities are required to
be recorded under GAAP.

          (b) During the period of 20 days after USL delivers the Merger Date
Balance Sheet to ERP, USL will make available to ERP all the books and records
in the possession of USL and its subsidiaries, and all the work papers and
back-up materials, that USL used in preparing, or otherwise are relevant to,
the Merger Date Balance Sheet and will make available to ERP and its
representatives during normal business hours personnel of USL or its
subsidiaries who are knowledgeable about the preparation of the Merger Date
Balance Sheet.



          (c) Unless ERP notifies USL within 20 days after USL delivers the Merger
Date Balance Sheet to ERP that ERP disagrees with some of the items on the
Merger Date Balance Sheet, the items on the Merger Date Balance Sheet will be
conclusively deemed to be correct. If within 20 days after USL delivers the
Merger Date Balance Sheet to ERP, ERP notifies USL that ERP disputes particular
items on the Merger Date Balance Sheet (the “Disputed Items”), (i) all the
items on the Merger Date Balance Sheet other than the Disputed Items will
conclusively be deemed to be correct, and (ii) USL and ERP will attempt to
agree during the 15 days following the end of the 20 day period to the
adjustment that should be made, or that no



16







 





adjustment should be made, with
regard to each of the Disputed Items. If within that 15 day period, USL and
ERP agree as to all the Disputed Items, the Merger Date Balance Sheet, adjusted
as agreed upon between USL and ERP, will conclusively be deemed to be correct.
If there are any Disputed Items upon which USL and ERP cannot agree during the
15 day period, Ernst & Young LLP, or another national accounting
firm agreed upon by USL and ERP (the “Accounting Firm”), will be asked to
determine the amount of each of those Disputed Items, calculated as described
in subparagraph (a), and the Merger Date Balance Sheet, reflecting both the
adjustments agreed upon by USL and ERP and the determinations of the Accounting
Firm, will conclusively be deemed to be correct. The fees and expenses of the
Accounting Firm will be shared equally by USL and ERP.


     5.2    Price Adjustment. If the combined total assets minus the combined
total liabilities of the Acquired Companies and their subsidiaries shown on the
Merger Date Balance Sheet (the “Net Asset Amount”) is greater or less than
$62,356,000, (i) each of the Merger Prices and the Partnership Purchase Price
each will be increased or decreased by the amount that is (x) the Net Asset
Amount, minus (y) $62,356,000, times (z) the fraction of which the numerator is
the amount specified in the applicable one of Paragraphs 1.2(f)(i), 1.3(f)(i),
1.4(f)(i) and 3.2 and the denominator is $68,000,000, and (ii) within 20 days
after all the items on the Merger Date Balance Sheet are conclusively deemed
correct under Paragraph 5.1(b), ERP will pay USL, LP and MBO, or USL, LP and
MBO will pay ERP, the respective amounts by which the Merger Prices and the
Partnership Purchase Price are increased or decreased.


     5.3    Funds for Payment of Purchase Price Adjustment. (a) If USL is
required by Paragraph 5.2 to make a payment to ERP, within the 20 day period
described in clause (ii) of Paragraph 5.2, (i) USL and ERP will jointly notify
the Escrow Agent to (x) pay to ERP out of the Escrow Fund the amount USL is
required by Paragraph 5.2 to pay to ERP, and (y) distribute the remainder of
the Escrow Fund to USL. In addition, if the payment USL is required by
Paragraph


17






 




5.2 exceeds the total amount of the Escrow Fund,
within the 20 day period described in clause (ii) of Paragraph 5.2, USL
will pay the excess amount to ERP by wire transfer of immediately available
funds to a bank account specified by ERP.


     5.4    Payment Assurances. If ERP is required by Paragraph 5.2 to make a
payment to USL, within the 20 day period described in clause (ii) of Paragraph
5.2, ERP will pay the amount required by that clause to USL by wire transfer of
immediately available funds to a bank account specified by USL. In order to
ensure that ERP will by able to make that payment, until there is a final
determination of the amount USL or ERP will be required by Paragraph 5.2 to
pay, and if ERP is required to make the payment, until it makes that payment;
ERP will maintain immediate borrowing availability under its loan agreements of
at least $2 million.


ARTICLE 6



REPRESENTATIONS AND WARRANTIES



     6.1    Representations and Warranties of the Companies. USL, LP and MBO
(together, the “Companies”) each represents and warrants to ERP as follows:


          (a) Each of the Companies is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.



          (b) Each of the Companies has all corporate power and authority necessary
to enable it to enter into this Agreement and carry out the transactions
contemplated by this Agreement. All corporate actions necessary to authorize
each of the Companies to enter into this Agreement and carry out the
transactions contemplated by it have been taken. This Agreement has been duly
executed by each of the Companies and is a valid and binding agreement of each
of the Companies, enforceable against each of the Companies in accordance with
its terms.



18






 





          (c) If the consents described on Schedule 6.1-C are obtained, neither the
execution and delivery of this Agreement or of any document to be delivered in
accordance with this Agreement nor the
consummation of the transactions contemplated by this Agreement or by any
document to be delivered in accordance with this Agreement will violate, result
in a breach of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, the Certificate of
Incorporation or by-laws or other organizational documents of any of the
Companies, any agreement or instrument to which any of the Companies or the
Acquired Companies or any subsidiary of any of the Acquired Companies is a
party or by which any of them is bound, any law, or any order, rule or
regulation of any court or governmental agency or other regulatory organization
having jurisdiction over any of them, except to the extent it would not have an
adverse effect on ERP or any of its subsidiaries, including any of the Acquired
Companies or any of their subsidiaries.



          (d) Except as set forth on Schedule 6.1-D, no governmental filings,
authorizations, approvals, or consents, or other governmental action, other
than the expiration or termination of waiting periods under the HSR Act, if
any, are required to permit each of the Companies, and their respective
subsidiaries, to fulfill all their obligations under this Agreement.



          (e) When executed and delivered at the Closing, the Transition Services
Agreement and the Software License each will be a valid and binding agreement
of USL, enforceable against USL in accordance with its terms.



          (f) Each of the Acquired Companies, and each of their respective
subsidiaries, is qualified to do business as a foreign corporation or foreign
entity in each state in which it is required to be qualified, except states in
which the failure to qualify, in the aggregate, would not have a Material
Adverse Effect upon ERP (assuming ERP owns all the Acquired Companies and
nothing else). As used in this Agreement, the term “Material Adverse Effect”
upon a



19






 





company (or group of companies) means a material adverse effect upon (i)
the consolidated financial position of that company (or those companies) and
its (or their) subsidiaries taken as a whole, or (ii) the consolidated results
of operations of that company (or those
companies) and its (or their) subsidiaries taken as a whole compared with
the consolidated results of their operations during the same period of the
prior year.


          (g) The only authorized stock, and the only outstanding stock, of Romic
and the two Parallel Companies are as shown on Schedule 6.1-G. All those
outstanding shares have been duly authorized and issued and are fully paid and
non-assessable. Upon consummation of the Mergers, except as described in
Paragraph 4.5(a)(ii), ERP or its subsidiaries will own all of the outstanding
stock of the Romic Surviving Corporation, the Parallel Kentucky Surviving
Corporation and the Parallel California Surviving Corporation free and clear of
any liens, encumbrances or claims of other persons, other than liens created by
ERP or its subsidiaries. When ERP’s subsidiaries acquire all of the limited and
general partner interests in the Limited Partnership at the Closing as
contemplated by Paragraphs 4.3(a) and 4.4(a), ERP’s subsidiaries (x) will own
those limited partner and general partner interests free and clear of any
liens, encumbrances or claims of other persons, other than liens created by ERP
or its subsidiaries that acquire the limited and general partner interests, and
(ii) ERP’s subsidiaries will own all of the equity interests of any type in the
Limited Partnership. None of USL or any of the Acquired Companies has issued
any options, warrants or convertible or exchangeable securities which are
outstanding, or is a party to any other agreements, which require, or upon the
passage of time, the payment of money or the occurrence of any other event may
require, USL to sell or otherwise transfer, or any of the Acquired Companies to
issue or sell, any stock, partnership interests or other equity interests in
any of the Acquired Companies.



          (h) Schedule 6.1-H is a list of each of the corporations and other
entities of which any of the Acquired Companies owns (or any two or more
Acquired Companies together own)



20






 





directly or indirectly 50% or more of the
equity (each corporation or other entity of which a company owns directly or
indirectly 50% or more of the equity being a “subsidiary” of that company).
Each of the corporations or other entities listed on Schedule 6.1-H (i) has
been duly organized, and is validly existing and in good standing, under the
laws of its state of incorporation or formation. All the shares of stock of
each of the Acquired Companies’ subsidiaries which are owned by any of the
Acquired Companies or any of their subsidiaries are duly authorized and
validly issued and, with regard to stock of corporations or other equity
interests in limited liability entities, fully paid and non-assessable, and are
not subject to any preemptive rights, and none of the Acquired Companies, and
none of their subsidiaries, has issued any options, warrants or convertible or
exchangeable securities, or is a party to any other agreements, which require,
or upon the passage of time, the payment of money or the occurrence of any
other event may require, any of the Acquired Companies or any of their
respective subsidiaries to issue or sell any stock or other equity interests in
any of the Acquired Companies’ subsidiaries, and there are no registration
covenants or transfer or voting restrictions with respect to outstanding
securities of any of the Acquired Companies’ subsidiaries.


          (i) The Acquired Companies operate the beverage recycling and ethanol
production, the oil field waste and the California, Arizona, Oregon and
Washington hazardous and non-hazardous waste disposal and solvent recycling
businesses of USL and its subsidiaries (the “Businesses”). The Acquired
Companies are not engaged in any businesses or other material activities other
than operating the Businesses and activities related to the operation of the
Businesses. The Acquired Companies own or lease all of the assets used in the
operation of the Businesses, other than corporate information systems,
management systems, leased software and other assets described in the
Transition Services Agreement, and the Contributed Assets. USL owns all the
Contributed Assets. On the Merger Date, after the transfer of the



21






 





Contributed
Assets to the Acquired Companies, the Acquired Companies and their subsidiaries
will own or lease all the assets that they need to be able to operate the
Businesses after the Closing in substantially the same manner in which they are
being operated at the date of this Agreement. At the time of the Closing,
none of the Acquired Companies will have any actual or contingent liabilities
other than (i) accounts payable, accrued obligations and other liabilities
incurred in the ordinary course of operating the Businesses, (ii) obligations
with regard to closure, performance and permit related bonds required to enable
the Acquired Companies to obtain or maintain required licenses and permits, or
otherwise required, in order to enable the Acquired Companies to operate the
Businesses, (iii) obligations with regard to letters of credit or other forms
of financial security supporting closure, performance and permit related bonds
required to enable the
Acquired Companies to obtain and maintain required licenses and permits,
or otherwise required, in order to enable the Acquired Companies to operate the
Businesses, (iv) indebtedness incurred to finance the purchase of equipment
currently owned by the Acquired Companies and currently used by the Acquired
Companies in connection with the operation of the Businesses, and (v) the
future costs reserved against on Romic’s books as of the date of this Agreement
as a potentially responsible party with regard to the waste sites, and with
regard to remediation of an environmental condition, described on Schedule
6.1-I.


          (j) Since January 1, 2000, USL has filed with the Securities and Exchange
Commission (“SEC”) all forms, statements, reports and documents it has been
required to file under the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, or the rules under either of them.



          (k) USL’s Annual Report on Form 10-K for the year ended December 31, 2002
(the “USL 10-K”) which was filed with the SEC, including the documents
incorporated by reference in it, contained all the information regarding the
Acquired Companies required to be included in it and, when it was filed, did
not contain an untrue statement of a material fact or



22






 





omit to state a material
fact necessary in order to make the statements made in it, in light of the
circumstances under which they were made, not misleading, except to the extent
disclosed on Schedule 6.1-K. Without limiting what is said in the preceding
sentence, except as disclosed on Schedule 6.1-K, the financial statements
included in the USL 10-K all were prepared in accordance with GAAP applied on a
consistent basis (unless otherwise required by GAAP) and fairly present the
consolidated financial position and the consolidated results of operations of
USL and its subsidiaries at the dates, and for the periods, indicated. USL has
not filed, or been required to file, any reports with the SEC with regard to
any period which ended, or any event which occurred, after January 1, 2003,
other than its Report on Form 10-Q for the quarter ended March 31, 2003, a Form
12b-25 relating to that Report on Form 10-Q and a Form 8-K filed on July 3,
2003. The restatements described on Schedule 6.1-K will not relate to any of
the Businesses, or to any activities currently or previously conducted by any
Acquired Company or any of their subsidiaries.


          (l) The financial data of the Acquired Companies and their subsidiaries at
March 31, 2003, and December 31, 2002, and for the periods ended on those
dates, included in Schedule 6.1-L were prepared in accordance with GAAP (except
that the financial data do not include a statement of cash flows or contain all
the footnotes required by GAAP) and fairly presents the financial position and
results of operations of the Acquired Companies and their subsidiaries at the
date and for the periods to which it relates.



          (m) Since January 1, 2003, except as described on Schedule 6.1-M, the
Acquired Companies have conducted the Businesses in the ordinary course and in
the same manner in which they were conducted prior to January 1, 2003, taking
into account the financial condition of the Acquired Companies.



          (n) Except as shown on Schedule 6.1-N, the Acquired Companies, together
with their subsidiaries, (i) do not own any interests in any entities whose
financial statements were



23






 





not included in the consolidated financial statements
of USL and its subsidiaries included in the USL 10-K, or are not included in
the financial data included in Schedule 6.1-L, to which all the Acquired
Companies and their subsidiaries taken together have made capital contributions
or otherwise transferred assets with a value totaling more than $100,000 as to
contributions and transfers to any single entity or more than $200,000 in
total, or the operating results of which would be reflected on consolidated
financial statements of the Acquired Companies and their subsidiaries on an
equity basis and (ii) are not guarantors of, and will not otherwise be
obligated with regard to, indebtedness of any entity whose financial statements
are not included in the consolidated financial statements of USL and its
subsidiaries included in the USL 10-K, or whose balance sheet is not included
in the financial data included in Schedule 6.1-L, totaling, with regard to all
the Acquired Companies and their subsidiaries taken together, more than
$100,000 as to any single entity or more than $200,000 in total. If the
assets, liabilities and operating results of all the entities listed, or that
should have been listed, on Schedule 6.1-N had been included in the
consolidated financial statements of USL and its subsidiaries included in the
USL 10-K, or all the indebtedness guaranteed by Acquired Companies or their
subsidiaries, or for which Acquired Companies or their subsidiaries may
otherwise be obligated, which is, or
should have been, listed on Schedule 6.1-N were treated as liabilities in
the financial data included in Schedule 6.1-L, there would not have been a
material effect on any of the consolidated current assets, total assets, net
working capital, current liabilities, total liabilities or net worth of the
Acquired Companies and their subsidiaries at December 31, 2002 or on their
consolidated revenues, net income or earnings before interest, taxes,
depreciation and amortization during the year ended December 31, 2002.


          (o) To the knowledge of the executive officers of USL, after having
consulted with the persons at USL and its subsidiaries responsible for
licensing and permitting matters, except with regard to matters that are the
subject of Paragraph 6.1-U, each of the Acquired



24






 





Companies, and each of their
respective subsidiaries, has all licenses and permits from all governmental
authorities that are necessary to permit them to conduct the Businesses as they
are being conducted on the date of this Agreement, other than licenses and
permits the lack of which would not in aggregate have a Material Adverse Effect
on the Acquired Companies. Schedule 6.1-O is a complete list of all licenses
and permits which any of the Acquired Companies or any of their respective
subsidiaries holds at the date of this Agreement that, to the knowledge of the
executive officers of USL, after having consulted with the persons at USL and
its subsidiaries responsible for licensing and permitting matters, is required
for the operation of the Businesses in which they are engaged.


          (p) Except as disclosed in Reports on Form 10-K or Form 10-Q filed by USL
with the Securities and Exchange Commission or matters that are the subject of
Paragraph 6.1(u), the Acquired Companies have at all times operated the
Businesses in accordance with applicable law, in all material respects.



          (q) On the Merger Date, each of the Acquired Companies, and each of their
respective subsidiaries, will own all its assets, free and clear of any liens
or encumbrances other than Permitted Encumbrances, none of which interferes
with the use of the assets that are subject to the liens or encumbrances for
the purposes for which they were acquired. “Permitted Encumbrances” means: (a)
the liens of Taxes, assessments and other governmental levies, fees or charges
which are not due and payable
as of the Closing Date, or which are being contested in good faith and for
which appropriate reserves have been established in accordance with GAAP; (b)
mechanics liens and similar liens for labor, materials or supplies provided
with respect to real property incurred in the ordinary course of business for
amounts which are not due and payable and which would not, individually or in
the aggregate, have a Material Adverse Effect on the Acquired Companies; (c)
zoning, building codes and other land use laws regulating the use or occupancy
of real property or the activities conducted thereon which are



25






 





imposed by any
governmental authority having jurisdiction over such real property which are
not violated by the current use or occupancy of such real property or the
operation of any Business as currently conducted thereon; (d) easements,
covenants, conditions, restrictions and other similar matters of record
affecting title to real property which do not or would not materially impair
the use or occupancy of such real property in the operation of any Business as
currently conducted thereon, (e) landlord’s liens and similar encumbrances and
(f) the liens listed on Schedule 6.1-Q.


          (r) Each of the Acquired Companies and each of their subsidiaries has
filed all Tax Returns (as defined below) which it has been required to file and
has paid all Taxes (as defined below) shown on those returns to be due. Those
Tax Returns accurately reflect all the material Taxes required to have been
paid, except to the extent of items which may be disputed by applicable taxing
authorities but for which there is substantial authority to support the
Acquired Company’s or the subsidiary’s position and which have been adequately
reserved against on the consolidated balance sheet at December 31, 2002
included in the USL 10-K, and in the financial data included in Schedule 6.1-L,
and except that no representations are made with regard to Taxes which are the
subject of the indemnification in Paragraph 12.1. Except as shown on Schedule
6.1-R, (i) no extension of time given by any of the Acquired Companies or any
of their subsidiaries for completion of the audit of any of its Tax Returns is
in effect, (ii) no tax lien has been filed by any taxing authority against any
of the Acquired Companies, any of their subsidiaries, or any of their
respective assets, other than liens for taxes not yet due, (iii) no Federal,
state or local audits or other administrative proceedings or court proceedings
with regard to Taxes are presently pending with regard to
any of the Acquired Companies or any of their subsidiaries, (iv) no
Acquired Company or subsidiary of an Acquired Company is a party to any
agreement providing for the allocation or sharing of Taxes, (v) no Acquired
Company or subsidiary of an Acquired Company has participated in or cooperated
with an international



26






 





boycott as that term is used in Section 999 of the
Internal Revenue Code of 1986, as amended (the “Code”), (vi) no Acquired
Company or subsidiary of an Acquired Company is liable as a transferee, a
successor or otherwise for any Tax incurred by any other person (excluding
Taxes incurred by USL or any of its subsidiaries or affiliates which are the
subject of the indemnification in Paragraph 12.1 or Taxes incurred by other
Acquired Companies or their subsidiaries), (vii) no Acquired Company or
subsidiary of an Acquired Company is required to include in income any
adjustment pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method, and the IRS is not seeking to cause any Acquired
Company or subsidiary of an Acquired Company to make a change in accounting
method, (viii) no Acquired Company or subsidiary of an Acquired Company has
filed a consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a Subsection (f)
asset (as that term is defined in Section 341(f)(4) of the Code) owned by the
Acquired Company or subsidiary of an Acquired Company and no Acquired Company
or subsidiary of an Acquired Company is affected by a consent or agreement of
any other person relating to Section 341(f) of the Code, and (ix) there is no
material intercompany income or gain which may after the Merger Date become
taxable to any Acquired Company or any subsidiary of an Acquired Company,
whether on disposition of particular subsidiaries or otherwise. For the
purposes of this Agreement, the term “Taxes” means all taxes (including, but
not limited to, withholding taxes), assessments, fees, levies and other
governmental charges, and any related interest or penalties. For the purposes
of this Agreement, the term “Tax Return” means any report, return or other
information required to be supplied to a taxing authority in connection with
Taxes.


          (s) Except with regard to matters that are the subject of Paragraph 6.1-U
or as shown on Schedule 6.1-S, no Acquired Company and no subsidiary of an
Acquired Company is a party to any suit or proceeding in any court, or by or
before any governmental



27






 





agency, nor has any officer of USL been notified
that any suit or proceeding is threatened against any of those entities,
other than (i) suits or proceedings that are fully covered by insurance (except
to the extent of a deductible amount not exceeding $250,000 per claim under the
applicable policy), and (ii) suits or proceedings in which the other party
seeks only money damages of less than $100,000 in each instance and less than
$250,000 as to all excluded suits and proceedings.


          (t) Schedule 6.1-T(1) is a complete list of all unions which represent any
employees of any of the Acquired Companies or any of their subsidiaries. USL
has not been notified, and no officer of USL is otherwise aware, that any union
is attempting to organize or otherwise become the bargaining representative for
any employees of any of the Acquired Companies or any of their subsidiaries.
Schedule 6.1-T(2) is a complete list of (i) all written agreements and plans,
including written employment agreements (other than employment agreements none
of which calls for a salary of more than $75,000 per year or has a term of more
than two years) and including “employee benefit plans,” as that term is defined
in the Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
to which USL, any of the Acquired Companies or any of their subsidiaries, or
any other subsidiary of USL, is a party under which it is providing
compensation, retirement benefits or other benefits to employees of Acquired
Companies or of their subsidiaries and (ii) all agreements or other commitments
by USL, any of the Acquired Companies or any of their subsidiaries, or any
other subsidiary of USL, to provide post-retirement medical benefits or other
post-employment benefits to employees or former employees of any of the
Acquired Companies or any of their subsidiaries. Except as shown on Schedule
6.1-T(2), (A) each employee benefit plan listed on Schedule 6.1-T(2) which is
intended to be qualified under Section 401 of the Code is qualified under that
Section, (B) each employee benefit plan listed on Schedule 6.1-T(2) has been
maintained in all material respects in accordance with its terms and any
applicable provisions of



28






 





ERISA or the Code, (C) no plan listed on Schedule
6.1-T(2) is a “defined benefit plan,” as that term is defined in ERISA, (D) no
Acquired Company or subsidiary of an Acquired Company is an “adopting
employer,” or part of a “single employer,” as those terms are defined in ERISA
or the Code, with regard to any employee benefit plan that is not listed on
Schedule
6.1-T(2) or employs any employees who are currently covered under any such
plan, and (E) no plan shown on Schedule 6.1-T(2) has an unfunded benefit
liability, as that term is used in ERISA with respect to defined benefit plans.


          (u) To the knowledge of the executive officers of USL, after having
consulted with the persons at USL and its subsidiaries responsible for
licensing and permitting matters, except as described on Schedule 6.1-U, (i)
the Acquired Companies and their subsidiaries hold all environmental permits
that will be necessary to enable them to conduct the Businesses after the
Closing in the same manner as the Businesses are being conducted on the date of
this Agreement, (ii) none of USL or any of its subsidiaries (including any of
the Acquired Companies or any of their subsidiaries) has received any notice of
material noncompliance or material liability under any Environmental Law (other
than notices received by USL relating to claimed noncompliance or liability
that does not relate to, and could not affect, any of the Acquired Companies or
any of their subsidiaries), (iii) none of the Acquired Companies or any of
their subsidiaries has performed any acts, including but not limited to
releasing, storing or disposing of Hazardous Materials, there is no condition
on any property owned or leased by any Acquired Company or any subsidiary of an
Acquired Company, and there was no condition on any property formerly owned or
leased by any Acquired Company or any subsidiary of an Acquired Company at the
time that that Acquired Company or subsidiary of an Acquired Company (x) was a
subsidiary of USL and (y) owned or leased that property, that presents a
reasonable likelihood of resulting in liability by ERP or any of its
subsidiaries (including any Acquired Company or any subsidiary of an Acquired
Company) under any Environmental Law and (iv)



29






 





none of the Acquired Companies
and none of their subsidiaries is subject to any order of any court or
governmental agency requiring any of the Acquired Companies or any of their
subsidiaries to take, or refrain from taking, any actions in order to comply
with any Environmental Law and no action or proceeding seeking such an order is
pending or, insofar as any officer of USL has actual knowledge, threatened. As
used in this Agreement, the term “Environmental Law” means any Federal, state
or local law, rule, regulation, guideline or other legally enforceable
requirement of a governmental authority with jurisdiction relating to
protection of
the environment or to environmental conditions that affect human health or
safety. As used in this Agreement, “Hazardous Material” means “hazardous
substance,” “pollutant or contaminant,” and “petroleum” as those terms are
defined or used in Section 9601 of the Comprehensive Environment Response and
Liability Act, 42 U.S.C. §§ 9601-9675.


          (v) There are no contracts, agreements or other arrangements that could
result in a requirement that any Acquired Company or any subsidiary of an
Acquired Company make an “excess parachute payment,” as that term is used in
Section 280G of the Code, as a result of the transactions that are the subject
of this Agreement.



          (w) Except as shown on Schedule 6.1-W, no Acquired Company or subsidiary
of an Acquired Company has any contracts (other than employment agreements
listed, or not required to be listed, on Schedule 6.1-T(2)) with, or purchases
any goods or services from, USL or any of its subsidiaries (except other
Acquired Companies or subsidiaries of Acquired Companies), any officer,
director or stockholder of USL or of any of its subsidiaries, any member of the
immediate family of any of them, or any entity owned or controlled by any of
them.



          (x) ERP has had an opportunity to ask questions and receive answers from
USL regarding USL and its subsidiaries (including, the Acquired Companies) and
their respective businesses, properties, prospects and financial condition and
to obtain additional information



30







 





necessary to verify any information furnished
to ERP or to which ERP had access. ERP believes that it has received all the
information it has considered necessary or appropriate for deciding whether to
enter into this Agreement. The foregoing, however, does not in any way limit
or modify the representations and warranties made by the Companies in Section
6.1 or the effects of those representations and warranties.


     6.2    ERP’s Representations and Warranties. ERP represents and warrants to
USL as follows:


          (a) ERP is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware.



          (b) ERP has all power and authority necessary to enable it to enter into
this Agreement and carry out the transactions contemplated by this Agreement.
All actions necessary to authorize ERP to enter into this Agreement and carry
out the transactions contemplated by it have been taken. This Agreement has
been duly executed by ERP and is a valid and binding agreement of ERP,
enforceable against ERP in accordance with its terms.



          (c) Neither the execution and delivery of this Agreement or any document
to be delivered in accordance with this Agreement nor the consummation of the
transactions contemplated by this Agreement or by any document to be delivered
in accordance with this Agreement will violate, result in a breach of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, the certificate of incorporation or by-laws
of ERP, any agreement or instrument to which ERP or any of its subsidiaries is
a party or by which it is bound, any law, or any order, rule or regulation of
any court or governmental agency or other regulatory organization having
jurisdiction over ERP or any of its subsidiaries.



31






 





          (d) No governmental filings, authorizations, approvals or consents, or
other governmental action, other than termination or expiration of the waiting
periods under the HSR Act, are required to permit ERP and its subsidiaries to
fulfill all their obligations under this Agreement.



          (e) When executed and delivered at the Closing, the Transition Services
Agreement will be a valid and binding agreement of ERP, enforceable against ERP
in accordance with its terms.



     6.3    Modifications of Schedules and Notice of Developments. USL may update
the disclosure schedules at any time to reflect matters inadvertently not
included on such disclosure schedules and USL may notify ERP at any time in
writing of any development causing any of its representations in Paragraph 6.1
any longer to be correct. Each updating or notice will be accompanied by
sufficient information (including any relevant documents) that is sufficient to
enable ERP to evaluate the significance of
the facts or developments that are described in the updating or notice.
An updating of a disclosure schedule or written notice pursuant to this
Paragraph 6.3 will be deemed to amend the disclosure schedule and qualify the
representations contained in Paragraph 6.1, and, subject to Paragraph 8.1(b),
to have cured any misrepresentation or breach of warranty that otherwise might
have existed by reason of the facts or developments that are described in the
updating or notice.


     6.4    Termination of Representations and Warranties. All the representations
and warranties in Paragraphs 6.1 and 6.2, other than the representations and
warranties in Paragraph 6.1(g), will terminate at the Closing. The
representations and warranties in Paragraph 6.1(g) will survive for one year
after the Closing.


ARTICLE 7



ACTIONS PRIOR TO THE CLOSING



32






 





     7.1    Activities Until Merger Date. From the date of this Agreement to the
Merger Date, USL will ensure that each of the Acquired Companies and each of
their respective subsidiaries, together and individually, will, except with the
written consent of ERP (which will not be unreasonably withheld with regard to
matters required because of the financial condition of the Acquired Companies,
but which will not constitute waivers of conditions set forth in Paragraph 8.1
or affect the rights of ERP under Paragraph 8.1 or Paragraph 10.1(c)):


          (a) Operate each of the Businesses in the ordinary course and in a manner
consistent with the manner in which it is being operated at the date of this
Agreement.



          (b) Take all commercially reasonable steps available to it in the ordinary
course of business to maintain the goodwill of each of the Businesses, and,
except as otherwise requested by ERP, the continued employment of the
executives and other employees engaged in the Businesses.



          (c) At its expense, maintain all its assets in good repair and condition,
except to the extent of reasonable wear and use and damage by fire or other
unavoidable casualty.



          (d) Not make any borrowings, other than from USL in the ordinary course.



          (e) Not enter into any contractual commitments involving capital
expenditures, loans or advances, and not voluntarily incur any contingent
liabilities, except in each case commitments or contingent liabilities incurred
in the ordinary course of that business.



          (f) Not pay any dividends or make any distributions, loans or advances to
USL or any of its subsidiaries (other than dividends, distributions, loans or
advances made solely to Acquired Companies or their subsidiaries) or to any
stockholders, directors, officers or employees of USL or any of its
subsidiaries, other than advances to directors, officers or employees of
Acquired Companies or their subsidiaries for travel or pursuant to USL’s policy
relating to advances of expenses to employees as it exists at the date of this
Agreement, and



33






 





other normal business expenses and loans or advances to Acquired
Companies or their subsidiaries.


          (g) Maintain the books of account and records relating to the Acquired
Companies and their subsidiaries in accordance with GAAP applied on a
consistent basis (except to the extent of inconsistencies due to changes in
GAAP), subject to normal year-end adjustments and accruals and subject to
variations from GAAP that have not been material to USL and its subsidiaries
taken together.



          (h) Comply in all material respects with all applicable laws and all
regulations of governmental agencies.



          (i) Not sell, dispose of or encumber any property or assets, other than
the transfer to MBO of the LaCassine facility and transfer of the Wastewater
treatment facility, each as described on Schedule 6.1-M, and except in each
case in the ordinary course of business.



          (j) Not enter into or amend any employment, severance or similar agreement
or arrangement, or increase the salaries of any employees, other than through
normal annual merit increases averaging not more than 5% or transfers,
promotions, terminations or replacement hires that are pending at the date of
this Agreement.



          (k) Not adopt any employee compensation, employee benefit or
post-employment benefit plan.



          (l) Not authorize or enter into any agreement to take any of the actions
referred to in subparagraphs (a) through (k) above.



     7.2    HSR Act Filings. USL and ERP will each make as promptly as practicable
(to the extent it has not already done so) the filing, if any, it is required
to make under the HSR Act with regard to the transactions that are the subject
of this Agreement and each of them will


34






 


take all reasonable steps within its
control (including providing information to the Federal Trade Commission and
the Department of Justice) to cause the waiting periods required by the HSR Act
to be terminated or to expire as promptly as practicable. USL will (to the
extent it has not already done so) pay the filing fee for any filings required
under the HSR Act. USL and ERP will each provide information and cooperate in
all other respects to assist the other of them in making its filing under the
HSR Act.


     7.3    Seller’s Efforts to Fulfill Conditions. USL will use all reasonable
efforts to cause all the conditions set forth in Paragraph 8.1 to be fulfilled
prior to or at the Closing.


     7.4    Buyer’s Efforts to Fulfill Conditions. ERP will use all reasonable
efforts to cause all the conditions set forth in Paragraph 8.2 to be fulfilled
prior to or at the Closing.


     7.5    No Solicitation of Offers; Notice of Proposals from Others. (a)    None
of USL, LP or MBO will, and none of them will authorize or permit any of its or
its subsidiaries’ officers, directors, employees, agents or representatives
(including any investment banker, attorney or accountant retained by it or by
any of its subsidiaries) directly or indirectly to, initiate, solicit,
encourage or otherwise facilitate any inquiry or the making of any proposal or
offer with respect to a merger, share purchase, asset purchase or other
transaction involving USL, LP or MBO that would make it impossible or
impractical for the Mergers and the purchase of the partners’ interests in the
Partnership contemplated by this Agreement to take place (a proposal for a
transaction of that type being an “Acquisition Proposal”).


          (b) Subparagraph (a) will not prevent USL from, in response to an
Acquisition Proposal, or an inquiry related to a specific possible Acquisition
Proposal, which USL receives despite complying with subparagraph (a) and which
Acquisition Proposal or inquiry USL’s Board determines, in good faith after
consultation with its independent financial advisor, presents a reasonable
likelihood of resulting (if consummated in accordance with its terms) in a
transaction



35






 





which would be more favorable to USL’s stockholders or creditors
than carrying out the transactions that are the subject of this Agreement,
furnishing non-public information (after receipt of an appropriate
Confidentiality Agreement) to the person, entity or group (the “Potential
Acquiror”) which makes the Acquisition Proposal and entering into discussions
and negotiations with that Potential Acquiror.


          (c) If USL receives an Acquisition Proposal, or an inquiry about a
specific Acquisition Proposal, USL will promptly notify ERP of that fact and
provide ERP with all material information in USL’s possession regarding the
person who made the Acquisition Proposal or inquiry and the proposed terms of
the Acquisition Proposal, or the possible Acquisition Proposal that is the
subject of the inquiry, and all other information that ERP reasonably requests
regarding the Acquisition Proposal or inquiry, and USL will promptly, from time
to time, provide ERP with any additional material information USL obtains, or
other additional information in USL’s possession that ERP reasonably requests,
regarding the Acquisition Proposal or efforts to reach agreement regarding the
transaction that is the subject of the Acquisition Proposal.



ARTICLE 8



CONDITIONS PRECEDENT TO CLOSING



     8.1    Conditions to ERP’s Obligations. The obligations of ERP at the
Closing are subject to satisfaction of the following conditions (any or all of
which may be waived by ERP):


          (a) The representations and warranties of USL, LP and MBO contained in
this Agreement will, except as contemplated by this Agreement, be true and
correct in all material respects (except that representations and warranties
that are qualified as to materiality or as to absence of Material Adverse
Effect will be true and correct in all respects) at the Merger Date with the same
effect as though made on that date (except that representations and warranties
that relate expressly to specified dates or periods need only to have been true
and correct with




36










 



regard to the specified dates or periods) and USL, LP and MBO each will
have delivered to ERP a certificate to
that effect dated that date and signed by the President or a Vice President of
the company that delivers the certificate.


          (b) If USL updates a disclosure schedule or delivers a notice of a
development, as permitted by Paragraph 6.3, ERP will not have notified USL
within five days after ERP receives the updated disclosure schedule or notice
that because of facts or developments disclosed in the updating or notice that
are material with respect to the Acquired Companies, ERP elects not to complete
the transactions that are the subject of this Agreement.



          (c) USL LP and MBO each will have fulfilled in all material respects all
its obligations under this Agreement required to have been fulfilled prior to
or at the Closing, including USL’s having executed each of the Transition
Services Agreement, the Software License and the Escrow Agreement.



          (d) ERP will have received evidence reasonably satisfactory to it that all
mortgages, liens and other security interests on assets of the Acquired
Companies and their subsidiaries (including the Contributed Assets), or on
ownership interests in the Acquired Companies or their subsidiaries, securing
indebtedness under the Second Amended and Restated Credit Agreement dated as of
February 3, 1999 among USL, various financial institutions and Bank of America
National Trust and Savings Association, as Agent, as amended, have been
released.



          (e) No order will have been entered by any court or governmental authority
and be in force that invalidates this Agreement or restrains ERP or any of its
subsidiaries from completing the transactions that are the subject of this
Agreement and no action will be pending against ERP, any of the Acquired
Companies or any subsidiary of any of the Acquired Companies relating to the
consummation of the transactions that are the subject of this

37






 





Agreement that
presents a reasonable likelihood of resulting in an award of damages that would
be material to ERP and its subsidiaries taken as a whole, or to any of the
Businesses, after the Closing.


          (f) All necessary governmental approvals of the changes of control of the
Acquired Companies that is the subject of this Agreement will have been
obtained.



          (g) The consents described on Schedule 6.1-C will have been obtained.



          (h) Parallel Kentucky will have entered into agreements that are
reasonably satisfactory to ERP (i) with Waste Research and Recovery, Inc.
(“WRR”), US Liquids of Florida, Inc. (“USLF”) regarding Parallel Kentucky’s
processing on an exclusive basis waste generated by Coty Corporation (“Coty”)
that is the subject of agreement that is in effect at the date of this
Agreement among WRR, USLF and Coty Corporation or any subsequent agreement or
arrangement between WRR and Coty, (ii) with USL First Source, Inc. (“First
Source”) regarding Parallel Kentucky’s processing on an exclusive basis waste
generated by Cabot Corporation and Pfizer Inc. (or their subsidiaries) that is
the subject of an agreement that is in effect on the date of this Agreement
among First Source, Cabot and Pfizer, and (iii) with Canadian Liquid
Processors, Ltd d/b/a Royal Recycling (“Royal Recycling”) regarding Royal
Recycling’s processing of materials generated in Canada by certain United
States customers of Parallel Kentucky.



          (i) Since July 1, 2003, there will not have been a material adverse change
in the financial condition, results of operations, business or prospects of the
any of the Acquired Companies or the results of operations or prospects of any
of the Businesses.



          (j) ERP will have received opinions from Haynes and Boone LLP, counsel to
USL, and from Richards, Layton & Finger, special Delaware counsel to USL, that
together will be substantially to the effect that (i) USL, LP and MBO each is a
corporation duly organized,


38






 





validly existing and in good standing under the
laws of the State of Delaware; (ii) USL and MBO each has all corporate power
and authority necessary to enable it to enter into this Agreement and to carry
out all the transactions contemplated by this Agreement to which it is a party;
(iii) all corporate actions necessary to authorize each of USL, LP and MBO to
enter into this Agreement and carry out the transactions contemplated by it
have been taken; (iv) this Agreement has been duly executed by each of USL, LP
and MBO and is a valid and binding agreement of each of them, enforceable
against each of them in accordance with its terms, except to the extent
enforceability may be affected by bankruptcy, reorganization or similar laws
affecting the rights of creditors generally or by equitable principles of
general application relating to the availability of remedies (whether in an
action at law or a proceeding in equity); (v) approval of the stockholders of
USL is not required to effect the transactions that are the subject of this
Agreement (which opinion may note that there is no decision of a Delaware court
that addresses under Section 271 of the Delaware General Corporation Law a
transaction under facts and circumstances similar to the facts and
circumstances relating to the transactions that are the subject of this
Agreement), (vi) the Transition Services Agreement and the Software License
each has been duly executed by USL and is a valid and binding agreement of USL,
enforceable against USL in accordance with its terms, except to the extent
enforceability may be affected by bankruptcy, reorganization or similar laws
affecting the rights of creditors generally or by equitable principles of
general application relating to the availability of remedies (whether in an
action at law or a proceeding in equity); (vii) all governmental filings,
notifications, authorizations, approvals or consents, or other governmental
action required to permit each of USL, LP and MBO to fulfill all its
obligations under this Agreement have been made or obtained, provided that no
opinion need be rendered regarding regulatory matters related to the ordinary
course of business activities of the Acquired Companies, including filings,
notifications, authorizations, approvals or consents related to licenses or
permits held by the Acquired Companies or their subsidiaries in the ordinary
course of their businesses; (vii) except as shown

39






 




on Schedule 6.1-V(2), no plan
shown on that Schedule is a “defined benefit plan,” as that term is defined in
ERISA, and (ix) ERP will not, without its consent, become as a result of the
transactions contemplated by this Agreement an adopting employer with regard to
any retirement or other employee benefit plan of USL or of any affiliate of USL
(other than the Acquired Companies and their subsidiaries) of which that
counsel is aware.


          (k) The Merger Date will be not later than August 15, 2003.



     8.2    Conditions to Obligations of USL, LP and MBO. The obligations of USL,
LP and MBO at the Closing are subject to the following conditions (any or all
of which may be waived by either of USL and MBO):


          (a) The representations and warranties of ERP contained in this Agreement
will, except as contemplated by this Agreement, be true and correct in all
material respects (except that representations and warranties that are
qualified as to materiality or as to absence of Material Adverse Effect will be
true and correct in all respects) at the Merger Date with the same effect as
though made on that date (except that representations and warranties that
relate expressly to specified dates or periods need only to have been true and
correct with regard to the specified dates or periods), and ERP will have
delivered to USL a certificate dated that date and signed by the President or a
Vice President of ERP to that effect.



          (b) ERP will have fulfilled in all material respects all its obligations
under this Agreement required to have been fulfilled prior to or at the
Closing, including ERP’s having executed each of the Transition Services
Agreement, the Software License and the Escrow Agreement.



          (c) No order will have been entered by any court or governmental authority
and be in force that invalidates this Agreement or restrains USL, LP or MBO or
any of their subsidiaries from completing the transactions that are the subject
of this Agreement, and no

40






 





action will be pending against any of USL, LP, MBO or
any of their respective subsidiaries (including the Acquired Companies and
their subsidiaries) relating to the transactions that are the subject of this
Agreement that presents a reasonable likelihood of resulting in an award of
damages against USL, LP or MBO that would be material to USL and its
subsidiaries after the Closing taken as a whole.


          (d) USL, LP and MBO will have received an opinion from Clifford Chance US
LLP, counsel to ERP, to the effect that (i) ERP is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, (ii) ERP has all power and authority necessary to enable it to
enter into this Agreement and carry out the transactions contemplated by this
Agreement; (iii) all actions necessary to authorize ERP to enter into this
Agreement and carry out the transactions contemplated by it have been taken;
(iv) this Agreement has been duly executed by ERP and is a valid and binding
agreement of ERP, enforceable against ERP in accordance with its terms, except
to the extent enforceability may be affected by bankruptcy, reorganization or
similar laws affecting the rights of creditors generally or by equitable
principles of general application relating to the availability of remedies
(whether in an action at law or a proceeding in equity); (v) the Transition
Services Agreement has been duly executed by ERP and is a valid and binding
agreement of ERP, enforceable against ERP in accordance with its terms, except
to the extent enforceability may be affected by bankruptcy, reorganization or
similar laws affecting the rights of creditors generally or by equitable
principles of general application relating to the availability of remedies
(whether in an action at law or a proceeding in equity); and (vii) all
governmental filings, authorizations, approvals or consents, or other
governmental action, required to permit ERP to fulfill all its obligations
under this Agreement have been obtained.



          (e) The Merger Date will be not later than August 15, 2003.

41






 





ARTICLE 9



EMPLOYEES OF USL



     9.1    Offers of Employment. ERP will, no later than five business days
before the anticipated Merger Date, offer employment commencing on the Merger
Date to the employees of USL and its subsidiaries who provide management,
supervisory or other services directly to the Acquired Companies, who are
listed on Schedule 9.1. ERP may, at any time after the date of this Agreement
but no later than five business days before the anticipated Merger Date, offer
employment commencing on the Merger Date to employees of USL or its
subsidiaries who are responsible for financial or insurance (including bonding)
matters that affect the Businesses (“Financial Employees”). ERP and its
subsidiaries will not, during the Transition Period, offer employment to any
Financial Employees, without prior consent of USL (but ERP and its subsidiaries
will not be precluded from offering employment to Financial Employees after
they cease to be employees of USL and it subsidiaries).


     9.2    Employee Transition Matters


          (a) The employees of USL who accept employment with ERP that is offered to
them pursuant to Paragraph 9.1 are referred to in this Paragraph 9.2 as the
“Transferred Employees”. As promptly as practicable after the date of this
Agreement, ERP will create a plan of the type that is the subject of Sections
401(a) and 401(k) of the Code (the “ERP 401(k) Plan”) and shall take all
action necessary and appropriate to extend coverage, effective as of the Merger
Date (or as soon after that as is possible), to the Transferred Employees as of
the Merger Date. Transferred Employees shall be credited under the ERP 401(k)
Plan, for eligibility and vesting purposes, with all their service credited by
USL for the purposes of its 401(k) plan. USL shall provide ERP with all such
information as is reasonably necessary for ERP to carry out its obligations
under the foregoing sentence. ERP further agrees to establish an arrangement

42






 





under which a Transferred Employee may provide for payroll withholding for the
purpose of repaying any loan that is outstanding under the USL 401(k) plan as
of the Merger Date.


          (b) Promptly after the ERP 401(k) Plan is formed, ERP shall provide USL
with an opinion letter from Clifford Chance US LLP, or other counsel reasonably
acceptable to USL, to the effect that the ERP 401(k) Plan satisfies the
requirements for qualification and exemption under Sections 401(a) and 501(a)
of the Internal Revenue Code.



          (c) As soon as practicable after the Merger Date, ERP shall accept a
direct trustee-to-trustee transfer on behalf of the Transferred Employees from
the trust maintained under the USL 401(k) plan to the trust under the ERP
401(k) Plan, including cash and participant loans. ERP shall establish
accounts in ERP’s 401(k) Plan for the Transferred Employees for all transferred
amounts. All account balances that are transferred from the USL 401(k) plan to
the ERP 401(k) Plan will be fully vested, and therefore no vesting schedule
will apply to those transferred amounts under the ERP 401(k) Plan.



          (d) As promptly as practicable after the date of this Agreement, ERP shall
create group health, life and disability insurance plans, and shall take all
action necessary and appropriate to extend coverage to the Transferred
Employees and their eligible dependents under those plans. ERP shall cause
such plans that are group health plans (i) to waive all preexisting condition
exclusions and waiting periods otherwise applicable to the Transferred
Employees and their eligible dependents, other than exclusions or waiting
periods that are already in effect under the corresponding USL plans with
respect to such individuals that have not been satisfied as of the Merger Date,
and (ii) to provide each Transferred Employee and his or her eligible
dependents with credit for any co-payments and deductibles paid by them under
the corresponding benefit plans of USL during the portion of the applicable
plan year prior to the Merger Date.

43






 





          (e) ERP will continue the paid time off (“PTO”) hours of each Transferred
Employee that were accrued at USL, but not used, at the Merger Date, and ERP
will permit each Transferred Employees to use or apply those PTO hours to the
same extent and on the same terms that they could have been used or applied
with regard to USL at the Merger Date.



          (f) All accrued service credit of a Transferred Employee with USL (and any
entity affiliated with USL under Section 414(b), (c), (m) or (o) of the Code)
shall be recognized by ERP for all purposes under the employee benefit plans
that it maintains which cover the Transferred Employees, including, without
limitation, health and retirement plans, as well as for paid time off
entitlements.



          (g) USL and ERP shall cooperate with each other in all reasonable respects
relating to any actions to be taken pursuant to this Paragraph 9.2.



ARTICLE 10



TERMINATION



     10.1    Right to Terminate. This Agreement may be terminated at any time
prior to the Closing:


          (a) By mutual consent of ERP and USL.



          (b) By either ERP or USL if, without fault of the terminating party, the
Closing does not occur on or before August 15, 2003.



          (c) By ERP if (i) it is determined that any of the representations and
warranties of USL, LP and MBO contained in this Agreement was not complete and
accurate in all material respects (or that any of the representations and
warranties of USL, LP and MBO that is limited to items that are material or is
qualified as to absence of a Material Adverse Effect was not true and correct
in all respects) on the date of this Agreement, (ii) any of the conditions in
Paragraph

44






 





8.1 is not satisfied or waived by ERP prior to or on the Merger Date,
or (iii) a voluntary or involuntary case is brought by or against, any of USL,
LP or MBO, as a debtor, under the Bankruptcy Code or any state insolvency law.


          (d) By USL if (i) it is determined that any of the representations and
warranties of ERP contained in this Agreement was not complete and accurate in
all material respects (or that any of the representations and warranties of ERP
that is limited to items that are material or is qualified as to absence of a
Material Adverse Effect was not true and correct in all respects) on the date
of this Agreement or (ii) any of the conditions in Paragraph 8.2 is not
satisfied or waived by USL prior to or on the Merger Date.



          (e) By USL if (i) USL has entered into a definitive agreement with a
Potential Acquiror to acquire (x) the Acquired Companies or the Businesses in
their entirety, or (y) any of the Businesses individually, or (z) USL or
substantially all its assets (a “Preferred Agreement”), (ii) before USL entered
into the Preferred Agreement, USL gave ERP at least 10 business days’ prior
notice (A) of the terms of the transaction that is the subject of the Preferred
Agreement (the “Preferred Transaction”), including the value of what the
purchaser proposes to pay in the Preferred Transaction (valuing non-cash
consideration at its fair value as determined in good faith by USL’s Board and
treating any of USL’s secured bank debt that will remain outstanding after the
purchase as part of the value of what the purchaser proposes to pay), and (B)
that unless ERP makes a Matching Amendment to this Agreement, this Agreement
will terminate, (iii) ERP did not agree within 10 business days after it
received the notice to make a Matching Amendment and (iv) USL has paid ERP
$2,000,000 (or such greater amount as is 3% of the sum of the Combined
Transaction Prices).



          (f) A “Matching Amendment” is :

45






 





               (i)    if the Preferred Transaction is an acquisition of all the Acquired
Companies or all the Businesses, an amendment to this Agreement increasing the
total amount of the Merger Prices and the Partnership Purchase Price (the
“Total Transaction Price”) by an amount at least equal to the amount by which
the value of what the purchaser proposes to pay, as specified in the notice
from USL, exceeds $68,000,000;



               (ii)    if the Preferred Transaction is an acquisition of one of the Acquired
Companies or one of the Businesses, an amendment to this Agreement increasing
the Total Transaction Price by an amount at least equal to the amount by which
the value of what the purchaser proposes to pay, as specified in the notice
from USL, exceeds the sum shown on Schedule 10.1-F as the portion of the Total
Transaction Price allocated to that Acquired Company (treating the Parallel
Companies as a single Acquired Company) or to that Business; and



               (iii)    if the Preferred Transaction is an acquisition of USL or
substantially all its assets, an agreement to purchase USL or substantially all
its assets for a purchase price at least equal to the value of what the
purchaser proposes to pay in the Preferred Transaction, as specified in the
notice from USL.



          (g) A notice that this Agreement will terminate given pursuant to clause
(ii) of subparagraph (e) will be irrevocable, unless ERP consents in writing to
its being withdrawn by the USL, and will result in this Agreement’s terminating
when all the conditions specified in clauses (i) through (iv) of subparagraph
(e) have been fulfilled, or on such earlier date as ERP may designate (in which
case USL will continue, after this Agreement terminates, to be obligated to
make the payments and provide the agreement described in clause (iv) of
subparagraph (e), to the extent it has not already done so). When USL delivers
a notice of the

46






 





type of described in clause (ii) of subparagraph (e), ERP’s
obligations under Paragraphs 7.2, 7.4 and 9.2 will terminate.


     10.2    Manner of Terminating Agreement If at any time USL or ERP has the
right under Paragraph 10.1, other than under Paragraph 10.1(e), to terminate
this Agreement, it can terminate this Agreement by a notice to the other of
them that it is terminating this Agreement. Termination under Paragraph
10.1(e) must take place in the manner provided in that Paragraph.


     10.3    Effect of Termination. If this Agreement is terminated pursuant to
Paragraph 10.1, after this Agreement is terminated, no party will have any
further rights or obligations under this Agreement, except as provided in
Paragraph 10.1(e) with regard to a termination under that subparagraph.
Nothing contained in this Paragraph will, however, relieve any party of
liability for any breach of this Agreement that occurs before this Agreement is
terminated.


ARTICLE 11



REPLACEMENT OF USL CREDIT SUPPORT



     11.1    ERP Obligation to Replace Credit Support. As promptly as practicable
after the Closing, but in no event later than 45 days after the Merger Date,
ERP will replace all (i) letters of credit or (ii) other forms of financial
security provided by USL supporting closure, performance and permit related
bonds required to enable the Acquired Companies to obtain required licenses and
permits, or otherwise required, in order to enable the Acquired Companies to
operate the Businesses, and (iii) all other credit support provided by USL for
the benefit of the Acquired Companies that is listed on Schedule 11.1, with
letters of credit or other forms of financial security or credit support
(including, but not limited to, closure, performance and permit related bonds
required to enable the Acquired Companies to obtain required licenses and
permits, or otherwise required, in order to enable the Acquired Companies to
operate the Businesses) regarding which neither USL nor any entity that is a
subsidiary of USL after the

47






 




Mergers and the transactions at the Closing has any
actual or contingent liability and which are not collateralized by any assets
of USL or any of those subsidiaries.


ARTICLE 12



INDEMNIFICATION



     12.1    USL Indemnifications USL will pay, or reimburse the Acquired Companies
and their subsidiaries for, and USL indemnifies ERP, each of the Acquired
Companies and each of their subsidiaries against and agrees to hold each of
them harmless from, all liabilities, costs and expenses incurred with regard
to (i) suits by stockholders of USL, (ii) investigations by the Securities and
Exchange Commission or state securities regulators relating to USL or its
securities, (iii) claims or suits by persons from whom USL acquired companies
or businesses (including the Acquired Companies and the Businesses) relating to
USL’s obligations to pay the purchase prices of those companies or businesses
or otherwise relating to USL’s purchases of those companies or businesses,
other than the acquisition of assets of Safari Environmental Management
Services LLC (“Safari”) under a Warranty Bill of Sale dated as of September 21,
2000 executed by Romic and Safari, (iv) claims or liabilities that were insured
against by Reliance Insurance Company, (v) liabilities related to the
threatened lawsuit described on Schedule 12.1, and (vi) liabilities for Taxes
due from USL or its current or former subsidiaries (including MBO and LP),
other than Taxes attributable to the Acquired Companies or their subsidiaries.


     12.2    ERP Indemnifications. ERP indemnifies USL and each of its
subsidiaries against, and agrees to hold each of them harmless from, all
liabilities, costs and expenses incurred with regard to obligations that arise
after the Merger Date (and did not exist before the Closing Date) with regard
to (i) closure, performance and permit related bonds required to enable the
Acquired Companies to obtain required licenses and permits, or otherwise
required, in order to enable the Acquired Companies to operate the Businesses,
(ii) letters of credit or

48






 




other forms of financial security supporting closure,
performance and permit related bonds required to enable the Acquired Companies
to obtain required licenses and permits, or otherwise required, in order to
enable the Acquired Companies to operate the Businesses or (iii) other credit
support provided by USL for the benefit of the Acquired Companies that is
listed on Schedule 11.1.


     12.3    No Other Remedies. The indemnifications in Articles 12 and 13 will be
the sole and exclusive remedy of the parties under this Agreement after the
Mergers and the transactions at the Closing have been completed with respect to
the transactions contemplated by this Agreement.


ARTICLE 13



ABSENCE OF BROKERS



     13.1    Representations and Warranties Regarding Brokers and Others. ERP and
USL each represents and warrants to the other of them that nobody acted as a
broker, a finder or in any similar capacity in connection with the transactions
that are the subject of this Agreement, except that Rodman & Renshaw acted as
financial advisor to ERP and Jeffries & Company, Inc. acted as a broker and
financial advisor to USL, LP and MBO. All fees of Rodman & Renshaw will be
paid by ERP and all fees of Jeffries & Company, Inc. will be paid by USL. ERP
and USL each indemnifies the other of them against, and agrees to hold the
other of them harmless from, all losses, liabilities and expenses (including,
but not limited to, reasonable fees and expenses of counsel and costs of
investigation) incurred because of any claim by anyone for compensation as a
broker, a finder or in any similar capacity by reason of services allegedly
rendered to the indemnifying party (or as to USL, rendered to LP or MBO) in
connection with the transactions which are the subject of this Agreement.


49






 


ARTICLE 14



AGREEMENT NOT TO COMPETE



     14.1    USL Agreement Not to Compete. During the period of forty-two months
after the Merger Date, USL will not, directly or indirectly through
subsidiaries or otherwise, engage in any business activities in which any of
the Acquired Companies or any of their subsidiaries is engaged at the Merger
Date in any geographic area in which that Acquired Company or subsidiary is
engaged in those business activities at the date of this Agreement. For the
purposes of this Paragraph 14.1, the geographic area in which an Acquired
Company or subsidiary is engaged in a business activity will include the entire
area within 200 miles of any processing facility operated by that Acquired
Company or subsidiary. This paragraph will not prevent USL, directly or
through subsidiaries, from (i) becoming the passive owner of not more than 5%
of the outstanding stock or other equity interests of a publicly traded company
that is engaged in activities of the type described above, (ii) acquiring a
company that generates less than 25% of its total revenues at the time it is
acquired from treating general non-hazardous waste in locations that may
compete with Romic, but that does not have a processing facility within 200
miles of any processing facility being operated by Romic at the date of this
Agreement, or (iii) entering into a national contract for treatment of
hazardous or non-hazardous waste (other than a contract relating primarily to
processing of oilfields waste or beverage recycling), if it enters into
subcontracts or other arrangements under which ERP subsidiaries will treat all
waste that is the subject of the national contract, is generated within 200
miles of any processing facility operated by an ERP subsidiary, and can be
processed by the ERP subsidiary at that processing facility, except that USL or
its subsidiary need not enter into a subcontract or other arrangement with an
ERP subsidiary if (A) a processor that is not related to USL offers to treat
the waste that is generated within some or all of those areas for a price that
is lower than that offered by the ERP subsidiary and the ERP subsidiary elects
not to match that lower price within those areas, or (B) the ERP subsidiary
elects not to enter into a subcontract or

50






 




arrangement with regard to the waste
that is the subject of the national contract. In addition, nothing in this
Paragraph will prevent Royal Recycling from entering into and fulfilling its
obligations under the agreement with Parallel Kentucky described in Paragraph
8.1(h).


ARTICLE 15



GENERAL



     15.1    Expenses. ERP and USL will each pay its own expenses in connection
with the transactions that are the subject of this Agreement, including legal
fees and disbursements. USL will pay all filing fees related to filings under
the HSR Act or other antitrust laws. ERP will pay all filing fees relating to
applications for approvals of governmental agencies that have issued licenses
or permits to any of the Acquired Companies.


     15.2    Access to Properties, Books and Records. From the date of this
Agreement until earlier of the Merger Date or the time this Agreement is
terminated in accordance with Article 10, USL will, and will cause each of its
subsidiaries (including each of the Acquired Companies and each of their
subsidiaries) to give representatives of ERP and of any potential sources of
debt or equity financing to ERP, full access during normal business hours to
all of their respective properties, books and records and to knowledgeable
personnel of USL and its subsidiaries. The Confidentiality Agreement dated
February 24, 2003 between USL and Three Cities Research, Inc. will remain in
effect until after the Closing, and will bind each of the parties to this
Agreement to the same extent as though they had been parties to that
Confidentiality Agreement.


          (b) After the Closing, ERP will provide USL with access to the books and
records of the Acquired Companies and their subsidiaries, and to knowledgeable
personnel of the Acquired Companies, during normal business hours in connection
with (i) the preparation of

51






 





financial statements by USL or its affiliates, (ii)
the preparation of Tax Returns by USL, and (iii) for other purposes reasonably
requested by USL.


          (c) After the Closing, USL will, and will cause its affiliates to, provide
ERP with access to their books and records relating to the Acquired Companies
and their subsidiaries, or otherwise relating to the Businesses, and to
knowledgeable personnel of USL, during normal business hours in connection with
the preparation of Tax Returns by ERP or its affiliates or audits of Tax
Returns of ERP or its affiliates.



     15.3    Press Releases. ERP and USL will consult with each other before
issuing any press releases or otherwise making any public statements with
respect to this Agreement, except that nothing in this Paragraph will prevent
either party or any affiliate of either party from making any statement that is
required by law or by the rules of any securities exchange or securities
quotation system on which securities of that party or an affiliate are listed
or quoted.


     15.4    Entire Agreement. This Agreement and the documents to be delivered in
accordance with this Agreement contain the entire agreement among ERP, USL and
the other parties to this Agreement relating to the transactions that are the
subject of this Agreement and those other documents, all prior negotiations,
understandings and agreements between ERP and USL (including a Term Sheet dated
June 13, 2003) are superseded by this Agreement and those other documents, and
there are no representations, warranties, understandings or agreements
concerning the transactions that are the subject of this Agreement or those
other documents other than those expressly set forth in this Agreement or those
other documents.


     15.5    Effect of Disclosures. Any information disclosed by a party in
connection with any representation or warranty contained in this Agreement
(including any exhibit or schedule to this Agreement) will be treated as having
been disclosed in connection with each representation and warranty made by that
party in this Agreement.


52






 


     15.6    Benefit of Agreement. This Agreement is for the benefit of the
parties to it, their respective successors and any permitted assigns. This
Agreement is not intended to be for the benefit of, or to give any rights to,
anybody other than the parties, their respective successors and any permitted
assigns.


     15.7    Captions. The captions of the articles and paragraphs of this
Agreement are for reference only, and do not affect the meaning or
interpretation of this Agreement.


     15.8    Assignments. Neither this Agreement nor any right of any party under
it may be assigned, except that ERP may assign all or portions of its rights
and obligations under this Agreement to corporations or other entities that are
directly or indirectly majority owned by ERP or by persons or entities who or
which, at the time of the assignment, own all the outstanding shares of ERP, if
ERP unconditionally guarantees that each entity to which ERP’s rights and
obligations are assigned will perform fully all ERP’s obligations under this
Agreement, the Transition Service Agreement and any other agreements entered
into by that entity in accordance with this Agreement.


     15.9    Notices and Other Communications. Any notice or other communication
under this Agreement must be in writing and will be deemed given when it is
delivered in person or sent by facsimile (with proof of receipt at the number
to which it is required to be sent), on the business day after the day on which
it is delivered to a major nationwide delivery service for overnight delivery,
or on the third business day after the day on which it is mailed by first class
mail from within the United States of America, to the following addresses (or
such other address as may be specified after the date of this Agreement by the
party to which the notice or communication is sent):


     If to USL, LP or MB0:



	 
	U S Liquids, Inc.

411 N. Sam Houston Parkway East



53






 




	 
	Suite 400

Houston, Texas 77060-3545

Attention: Gary Van Rooyan

Facsimile No.: 281-272-4545



     with a copy to:



	 
	Guy Young

Haynes and Boone, LLP

1000 Louisiana Street, Suite 4300

Houston, Texas 77002-5012

Facsimile No.: 713-236-5699



     If to ERP:



	 
	ERP Environmental Services, Inc.

c/o Three Cities Research, Inc.

650 Madison Avenue

New York, NY 10022

Attention: J. William Uhrig

Facsimile No.: 212-980-1142




	 
	with a copy to:
	David W. Bernstein, Esq.

Clifford Chance US LLP

200 Park Avenue

New York, New York 10166

Facsimile No.: 212-878-8375



     15.10    Governing Law. (a) This Agreement will be governed by, and
construed under, the substantive laws of the State of Delaware, without regard
to conflicts of laws principles that would apply the laws of any other
jurisdiction.


          (b) Each of the parties to this Agreement agrees that any action or
proceeding relating to this Agreement or the transactions contemplated by it
may be brought in any Federal or state court sitting in the State of Delaware
in the United States of America and each of them (i) consents to the
jurisdiction of each of those courts in any such action or proceeding, (ii)
agrees not to seek to have the venue of any such action or proceeding changed
because of inconvenience of the forum or otherwise (except that nothing in this
subparagraph will prevent a party from removing an action from a Delaware state
court to a Federal court sitting in that

54






 





state), and (iii) agrees that process
in any such action or proceeding may be served by registered mail or in any
other manner permitted by the rules of the court in which the action or
proceeding is brought.


     15.11    Amendments. This Agreement may be amended by, but only by, a
document in writing signed by both ERP and USL.


     15.12    Counterparts. This Agreement may be executed in two or more
counterparts, some of which may contain the signatures of fewer than all the
parties or may contain facsimile copies of pages signed by some of the parties.
Each of those counterparts will be deemed to be an original copy of this
Agreement, but all of them together will constitute one and the same agreement.


55






 


     IN WITNESS WHEREOF, the parties to this Agreement all have executed this
Agreement, intending to be legally bound by it, on the day shown on the first
page of this Agreement.



	 	 	 	 	 	 	 
	ERP ENVIRONMENTAL
SERVICES, INC.	 	U S LIQUIDS INC.
	 	 	 	 	 	 	 
	By:	 	 	 	By:	 	 
	 	 	


	 	 	 	

	 	 	
J.William Uhrig
	 	 	 	William DeArman
	 	 	
President
	 	 	 	Chairman and Chief Executive
	 	 	 	 	 	 	     Officer
	 	 	 	 	 	 	 
	RET ACQUISITION CORPORATION	 	U S LIQUIDS LP HOLDING CO.
	 	 	 	 	 	 	 
	By:	 	 	 	By:	 	 
	 	 	


	 	 	 	

	 	 	
J.William Uhrig
	 	 	 	John Miklich
	 	 	
President
	 	 	 	President
	 	 	 	 	 	 	 
	PKY ACQUISITION CORPORATION	 	MBO, INC.
	 	 	 	 	 	 	 
	By:	 	 	 	By:	 	 
	 	 	


	 	 	 	

	 	 	
J.William Uhrig
	 	 	 	John Miklich
	 	 	
President
	 	 	 	President
	 	 	 	 	 	 	 
	PCA ACQUISITION CORPORATION	 	ROMIC ENVIRONMENTAL TECHNOLOGIES, INC.
	 	 	 	 	 	 	 
	By:	 	 	 	By:	 	 
	 	 	


	 	 	 	

	 	 	
J.William Uhrig
	 	 	 	John Miklich
	 	 	
President
	 	 	 	President
	 	 	 	 	 	 	 
	PARALLEL PRODUCTS OF
KENTUCKY, INC.	 	USL PARALLEL PRODUCTS OF CALIFORNIA, INC.
	 	 	 	 	 	 	 
	By:	 	 	 	By:	 	 
	 	 	


	 	 	 	

	 	 	
J.William Uhrig
	 	 	 	John Miklich
	 	 	
President
	 	 	 	President



56






 




	 	 	 	 	 	 
	ARTICLE 1 THE MERGERS
	 	 	1	 
	 	1.1 Agreement to Effect Mergers
	 	 	1	 
	 	1.2 The Romic Merger
	 	 	1	 
	 	1.3 The Parallel Kentucky Merger
	 	 	3	 
	 	1.4 The Parallel California Merger
	 	 	5	 
	 	1.5 Stockholder’s Consents
	 	 	8	 
	 	1.6 Waiver of Right to Dissent
	 	 	8	 
	ARTICLE 2 TIME OF MERGERS
	 	 	8	 
	 	2.1 Date of the Mergers
	 	 	8	 
	 	2.2 Execution of Certificates of Merger
	 	 	8	 
	 	2.3 Effective Time of the Mergers
	 	 	9	 
	 	2.4 Payment of Merger Prices
	 	 	9	 
	PURCHASE OF PARTNERSHIP INTERESTS
	 	 	9	 
	 	3.1 Purchase of Partnership Interests
	 	 	9	 
	 	3.2 Purchase Price
	 	 	9	 
	 	3.3 Stockholder’s Consents
	 	 	10	 
	 	4.1 Time and Place of Closing
	 	 	10	 
	 	4.2 USL’s Actions at Closing
	 	 	10	 
	 	4.4 MBO’s Actions at Closing
	 	 	12	 
	 	4.5 ERP’s Actions at Closing
	 	 	13	 
	ARTICLE 5 ADJUSTMENT TO PRICES
	 	 	15	 
	 	5.1 Merger Date Balance Sheet
	 	 	15	 
	 	5.2 Price Adjustment
	 	 	17	 
	 	5.4 Payment Assurances
	 	 	18	 
	ARTICLE 6 REPRESENTATIONS AND WARRANTIES
	 	 	18	 
	 	6.1 Representations and Warranties of the Companies
	 	 	18	 
	 	6.2 ERP’s Representations and Warranties
	 	 	31	 
	 	6.3 Modifications of Schedules and Notice of Developments
	 	 	32	 
	 	6.4 Termination of Representations and Warranties
	 	 	32	 
	ARTICLE 7 ACTIONS PRIOR TO THE CLOSING
	 	 	32	 
	 	7.1 Activities Until Merger Date
	 	 	33	 
	 	7.2 HSR Act Filings
	 	 	34	 
	 	7.3 Seller’s Efforts to Fulfill Conditions
	 	 	35	 
	 	7.4 Buyer’s Efforts to Fulfill Conditions
	 	 	35	 



-i-






 



TABLE OF CONTENTS

(continued)




	 	 	 	 	 	 
	 	 	 	Page
	 	 	 
	 	7.5 No Solicitation of Offers; Notice of Proposals from Others
	 	 	35	 
	ARTICLE 8 CONDITIONS PRECEDENT TO CLOSING
	 	 	36	 
	 	8.1 Conditions to ERP’s Obligations
	 	 	36	 
	 	8.2 Conditions to Obligations of USL, LP and MBO
	 	 	40	 
	ARTICLE 9 EMPLOYEES OF USL
	 	 	42	 
	 	9.1 Offers of Employment
	 	 	42	 
	 	9.2 Employee Transition Matters
	 	 	42	 
	ARTICLE 10 TERMINATION
	 	 	44	 
	 	10.1 Right to Terminate
	 	 	44	 
	 	10.2 Manner of Terminating Agreement
	 	 	47	 
	 	10.3 Effect of Termination
	 	 	47	 
	REPLACEMENT OF USL CREDIT SUPPORT
	 	 	47	 
	 	11.1 ERP Obligation to Replace Credit Support
	 	 	47	 
	ARTICLE 12 INDEMNIFICATION
	 	 	48	 
	 	12.2 ERP Indemnifications
	 	 	48	 
	 	12.3 No Other Remedies
	 	 	49	 
	ARTICLE 13 ABSENCE OF BROKERS
	 	 	49	 
	 	13.1 Representations and Warranties Regarding Brokers and Others
	 	 	49	 
	ARTICLE 14 AGREEMENT NOT TO COMPETE
	 	 	50	 
	 	14.1 USL Agreement Not to Compete
	 	 	50	 
	ARTICLE 15 GENERAL
	 	 	51	 
	 	15.1 Expenses
	 	 	51	 
	 	15.2 Access to Properties, Books and Records
	 	 	51	 
	 	15.3 Press Releases
	 	 	52	 
	 	15.4 Entire Agreement
	 	 	52	 
	 	15.5 Effect of Disclosures
	 	 	52	 
	 	15.6 Benefit of Agreement
	 	 	53	 
	 	15.7 Captions
	 	 	53	 
	 	15.8 Assignments
	 	 	53	 
	 	15.9 Notices and Other Communications
	 	 	53	 
	 	15.10 Governing Law
	 	 	54	 
	 	15.11 Amendments
	 	 	55	 
	 	15.12 Counterparts
	 	 	55	 



-ii-






 




Table of Contents



Page





     An extra section break has been inserted above this paragraph. Do not
delete this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.



i