##### 



Exhibit 10.6

EXECUTIVE SEVERANCE AGREEMENT

THIS EXECUTIVE SEVERANCE AGREEMENT (the Agreement) is entered into by
and between U S LIQUIDS INC. (the Company) and WILLIAM M. DEARMAN (the
Employee), dated as of the 31st day of December, 2002.

WHEREAS, The Board of Directors of the Company (the Board) has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the full attention and continued dedication
of the Employee; and

WHEREAS, the Board believes that it can accomplish that objective by
providing the Employee with compensation arrangements upon a termination of his
employment with the Company under certain circumstances, or upon the occurrence
of certain other events, which provide the Employee with individual financial
security and which are competitive with those of other corporations.

NOW, THEREFORE, it is hereby agreed as follows:



| | 1. |  | CERTAIN DEFINITIONS.
| | -- |  | --------------------



| | (a) |  | The Effective Date shall be August 28, 2002.
| | --- |  | ----------------------------------------------
|
| | (b) |  | A Change of Control shall mean:             



| |  |  | (i) The acquisition by any person, entity or group, within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the Exchange Act), of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act), of 30% or more of either the then
outstanding shares of common stock or the combined voting
power of the Companys then outstanding voting securities
entitled to vote generally in the election of directors;
provided, however, that any such acquisition which occurs as
part of a financing or refinancing of the Company or a public
or private offering of the Companys stock by the Company,
which, in any case, is approved by the Incumbent Board, shall
not be a change of control; or
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (ii) Individuals who, as of the date hereof, constitute the
Board (as of the date hereof the Incumbent Board) cease for
any reason to constitute at least a majority of the Board,
provided, however, that any person becoming a director
subsequent to the date hereof whose election, or nomination
for election by the Companys shareholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board (other than an election or nomination of
an individual whose initial                                                                                                                                                                                                                                             





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| |  |  | assumption of office is in connection with an actual or
threatened election contest relating to the election of the
Directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act)
shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or                                                                                                                                                                                                                                              
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with
respect to which persons who were the stockholders of the
Company immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than
50% of the combined voting power entitled to vote generally in
the election of directors of the reorganized, merged or
consolidated companys then outstanding voting securities, or
a liquidation or dissolution of the Company or the sale of all
or substantially all of the assets of the Company.



| |  |  | (c) The Employment Period means the period during which Employee
is employed by Employer.                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (d) A liquidation of the Company shall mean that all or
substantially all of the assets or business of the Company are or
are intended to be sold in one or more, or a series of, sales, that
any remaining assets are or are intended to be converted to cash
with the intention that the debts and obligations of the Company be
paid, that the Company cease conducting business, that the corporate
entity be dissolved and that any remaining cash be distributed to
the Companys shareholders.



| | 2. |  | AT WILL EMPLOYMENT. The Employee understands and hereby acknowledges
and agrees that his employment with the Company is at will and can be
terminated by either the Company or the Employee at any time for any
reason or for no reason.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 3. |  | TERMINATION OF EMPLOYMENT.                                                                                                                                                                                                                  



| |  |  | (a) Death or Disability. The Employees employment shall terminate
automatically upon the Employees death during the Employment
Period. If the Company determines in good faith that Disability of
the Employee has occurred during the Employment Period (pursuant to
the definition of Disability set forth below), it may give to the
Employee written notice of its intention to terminate the Employees
employment. In such event, the Employees employment with the
Company shall terminate effective on the 30th day after receipt of
such notice by the Employee (the Disability Effective Date),
provided that, within the 30 days after such receipt, the Employee
shall not have returned to full-time performance of the Employees
duties. For purposes of this Agreement, Disability shall mean the
absence of the Employee from the Employees duties with the Company
on a full-time basis for 180 calendar days as a result of incapacity
due to mental
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | or physical illness which is determined to be total and permanent by
a physician selected by the Company or its insurers and acceptable
to the Employee or the Employees legal representatives (such
agreement as to acceptability not to be withheld unreasonably).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (b) Cause. The Company may terminate the Employees employment
during the Employment Period for Cause. For purposes of this
Agreement, Cause means (i) an act or acts of personal dishonesty
taken by the Employee and intended to result in personal enrichment
of the Employee at the expense of the Company, (ii) repeated
material breaches by the Employee of the Employees duties and
obligations to the Company (other than as a result of incapacity due
to physical or mental illness) which are demonstrably willful and
deliberate on the Employees part and which are not remedied in a
reasonable period of time after receipt of written notice from the
Company specifying the nature of such breach or (iii) the conviction
of the Employee of a felony. For purposes of subsection (ii),
Employees service on corporate, civic or charitable boards or
committees, delivering lectures or fulfilling speaking engagements,
teaching at educational institutions or managing personal
investments shall not constitute a material breach so long as such
activities do not unduly interfere with the performance of
Employees responsibilities; and the continued conduct of any such
activities (or the conduct of activities similar in nature and scope
thereto) as were conducted by Employee prior to the Effective Date
shall not constitute undue interference.
|
| |  |  | (c) Good Reason. The Employees employment may be terminated
by the Employee during the Employment Period for Good Reason.
For purposes of this Agreement, Good Reason means:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               



| |  |  | (i) The assignment to the Employee of any duties or
responsibilities that are inconsistent in any respect with the
Employees position (including status, offices, titles,
authority and reporting requirements), or any other action by
the Company or any affiliate which results in a diminution in
such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice
thereof given by the Employee;
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (ii) the Companys requiring the Employee to be based at any
office or location other than the Companys headquarters
office in Houston, Texas, except for travel reasonably
required in the performance of the Employees
responsibilities;                                                                                                                                                                                                                                                                                                                         
|
| |  |  | (iii) any reduction in the amount of the Employees then
annual base compensation (Annual Base Salary), which, on the
date hereof, is $240,000.00 per annum; any failure of the
Company to pay the full amount (less applicable deductions) of
any two consecutive installments of the Annual Base Salary
when such installment becomes due (for                                                                                                                                                                                                                   

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| |  |  | purposes hereof an installment is the portion of the Annual
Base Salary payable on the Companys regular payroll date); or
any circumstance where the full amount (less applicable
deductions) of an installment of the Annual Base Salary is not
paid to Employee and other key employees of the Company do not
likewise receive the same percentage less than the full amount
of the same installment of their annual base salary;                                                                                                                                                                                                                                                                                                                                                                         
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (iv) the refusal by the Company to include Employee as a
participant in incentive, savings, stock option, retirement,
welfare benefit and similar plans, practices or policies
generally applicable to other key employees of the Company or
the imposition by the Company of levels of entitlement and
eligibility requirements under such plans, practices or
policies that are not commensurate with those of other key
employees of the Company; to provide other benefits
(including, without limitation, health, life and disability
insurance and vacation or paid time off) that are generally
available to other key employees of the Company or to promptly
reimburse Employee for travel, entertainment and business
expenses in accordance with the Companys established
reimbursement policies;
|
| |  |  | (v) the failure or neglect by the Company to obtain and
maintain Directors and Officers Liability insurance policies
at coverage levels reasonably adequate (as determined by the
Companys insurance consultants) to protect the Companys
officers and directors from the usual and customary risks
covered by such policies, taking into account the nature of
the Companys business and the reporting and disclosure
requirements and obligations, and liabilities associated
therewith, of a public company;                                                                                                                                                                                                                                                                                         
|
| |  |  | (vi) the occurrence of a Change of Control; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  |  | (vii) the failure of the Company to comply with and satisfy
Section 7(c) of this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | (viii) the knowing or intentional commission of any criminal
act under federal or state law by any director or the Chief
Executive Officer, Chief Financial Officer, President, Chief
Operating Officer, Chief Accounting Officer, Controller,
Treasurer or General Counsel of the Company while acting on
behalf of the Company in his or her official capacity and
within the scope of his or her duties, including any criminal
act under the Sarbanes-Oxley Act of 2002 or under federal
securities law; provided, however, that Good Reason shall
not exist if Employee participated in such criminal act or was
aware of its commission or intended commission and did not
take reasonable steps to prevent or report it.                                                                            

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| |  |  | For purposes of this Section 3.(c), the term affiliate shall
include any company which controls, is controlled by, or is under
common control with the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (d) Notice of Termination. Any termination by the Company for Cause
or by the Employee for Good Reason shall be communicated by Notice
of Termination to the other party hereto given in accordance with
Section 8. (b) of this Agreement. For purposes of this Agreement, a
Notice of Termination means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon,
(ii) sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employees
employment under the provisions so indicated, and (iii) if the Date
of Termination (as defined below) is other than the date of receipt
of such notice, specifies the termination date (which date shall be
not more than thirty (30) days after the giving of such notice). The
failure by the Employee or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing
of Good Reason or Cause shall not waive any right of the Employee or
the Company hereunder or preclude the Employee or the Company from
asserting such fact or circumstance in enforcing the Employees or
the Companys rights hereunder.
|
| |  |  | (e) Date of Termination. Date of Termination means the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be; provided, however, that (i) if the
Employees employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be the date on
which the Company notifies the Employee of such termination, and
(ii) if the Employees employment is terminated by reason of death
or Disability, the Date shall be the date of death of the Employee
or the Disability Effective Date, as the case may be.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



| | 4. |  | OBLIGATIONS OF THE COMPANY UPON TERMINATION.
| | -- |  | --------------------------------------------



| |  |  | (a) Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Employees employment other than for Cause, Disability or death or
if the Employee shall terminate his employment for Good Reason:
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | (i) The Company shall pay to the Employee in a lump sum in
cash within 30 days after the Date of Termination the
aggregate of the following amounts:
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | (A) to the extent not theretofore paid, the
Employees Annual Base Salary through the Date of
Termination; and                                                                               
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (B) the product of (x) the annual cash bonus (Annual
Bonus) paid to the Employee for the last full fiscal
year (if any) ending during the Employment Period or, if
higher, the Annual Bonus

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| |  |  | paid to the Employee for the last fiscal year prior to
the date that a Change of Control occurred (as
applicable, the Recent Bonus) and (y) a fraction, the
numerator of which is the number of days in the current
fiscal year through the Date of Termination and the
denominator of which is 365; provided, however, the
Company shall be obligated to make the foregoing payment
ONLY if on the Date of Termination the Employee has
satisfied all of the eligibility requirements for the
award of a bonus under the Companys then current
Incentive Bonus Plan (other than any requirement that
the participant be employed by the Company on the date
of such award, grant or other determination); and
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (C) if the Employee has deferred any compensation, all
amounts previously deferred (together with any accrued
interest thereon) and not yet paid by the Company, and
any accrued vacation pay not yet paid by the Company
(the sum of the amounts in clauses (A), (B), and (C)
shall be hereinafter referred to as the Accrued
Obligations); and                                                                                                                                                                                                                                                                                                                                                               
|
| |  |  | (D) the product of (x) 1.00 and (y) the Annual Base
Salary on the Date of Termination; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  |  | (E) all amounts in Employees retirement plan accounts
which will become fully vested upon the Date of
Termination notwithstanding the existing vesting
schedule; provided, however, that Employers 401k plan
shall not be considered a retirement plan for this
purpose.                                                                                                                                                                                                                                                                                                                                                                                                                                       



| |  |  | (ii) For one year from the Date of Termination (the Benefit
Continuation Period), the Company shall continue to provide
medical and dental insurance and life insurance benefits to
the Employee and/or the Employees family at the same level
(and at the same cost to the Employee) as were being provided
to the Employee on the day prior to the day on which the
Notice of Termination was given. For purposes hereof, the
Employee shall be considered to have remained employed until
the end of the Benefit Continuation Period and to have retired
on the last day of such period. If the terms of any benefit
plan referred to in this section do not permit continued
participation by the Employee, then the Company will arrange
for other coverage, providing substantially similar benefits,
at the same cost to the Employee; and
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (iii) All options and similar awards granted to the Employee
by the Company shall immediately vest notwithstanding any
vesting schedule in any option or award agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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| |  |  | (b) Death. If the Employees employment is terminated by reason of
the Employees death during the Employment Period, this Agreement
shall terminate and the Company shall have no further obligations to
the Employees legal representatives under this Agreement, other
than payment of the Accrued Obligations. All such Accrued
Obligations shall be paid to the Employees estate or beneficiary,
as applicable, in a lump sum in cash within thirty (30) days of the
Date of Termination. Anything in this Agreement to the contrary
notwithstanding, Employees family shall be entitled to receive
benefits at least equal to the most favorable benefits provided by
the Company and its subsidiaries to surviving families of employees
of the Company and such subsidiaries under such plans, programs,
practices and policies relating to family death benefits, if any, in
effect at any time during the 90-day period immediately preceding
the date on which a Change of Control occurs or, if more favorable
to the Employee and/or the Employees family, as in effect on the
date of Employees death, with respect to other key employees of the
Company.                            
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (c) Disability. If the Employees employment is terminated by reason
of the Employees Disability during the Employment Period, this
Agreement shall terminate without further obligations to the
Employee, other than payment of all Accrued Obligations. All such
Accrued Obligations shall be paid to the Employee in a lump sum in
cash within 30 days of the Date of Termination. Anything in this
Agreement to the contrary notwithstanding, the Employee shall also
be entitled after the Disability Effective Date to receive
disability benefits at least equal to the most favorable of those
provided by the Company and its subsidiaries to disabled employees
and/or their families under such plans, programs, practices and
policies relating to disability, if any, in accordance with the most
favorable plan, programs, practices and policies of the Company and
its subsidiaries in effect at any time during the 90-day period
immediately preceding the date on which a Change of Control occurs
or on the Date of Termination or, if more favorable to Employee
and/or Employees family, as in effect at any time thereafter, with
respect to other key employees of the Company.
|
| |  |  | (d) Cause; Other than for Good Reason. If the Employees employment
shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the
Employee other than the obligation to pay to the Employee the Annual
Base Salary through the Date of Termination plus the amount of any
compensation previously deferred by the Employee (together with
accrued interest thereon) in each case to the extent theretofore
unpaid. If the Employee terminates employment other than for Good
Reason, this Agreement shall terminate without further obligations
to the Employee, other than those obligations accrued or earned and
vested (if applicable) by the Employee through the Date of
Termination, including for this purpose, all Accrued Obligations.
All such Accrued Obligations shall be paid to the Employee in a lump
sum in cash within 30 days of the Date of Termination.                                                                                                                                                                                                                                                             

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| | 5. |  | NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Employee, during the term of his employment with the Company,
from continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company or
any of its subsidiaries and for which the Employee may qualify, nor shall
anything herein limit or otherwise affect such rights as the Employee may
have under any stock option or other agreements with the Company or any of
its subsidiaries. Amounts which are vested benefits or which the Employee
is otherwise entitled to receive under any plan, program, policy or
practice of the Company or any of its subsidiaries at or subsequent to the
Date of Termination shall be payable in accordance with such plan,
program, policy or practice, except to the extent otherwise specifically
provided in this Agreement.
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | FULL SETTLEMENT; RESOLUTION OF DISPUTES.
| | -- |  | ----------------------------------------



| |  |  | (a) The Companys obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder
constitutes its full and final obligation and liability to the
Employee in the event of termination of the Employees employment
with the Company. The Companys obligation to make said payments
shall not be affected by any set-off, counterclaim, recoupment,
right or action which the Company may have against the Employee. In
no event shall the Employee be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to
the Employee under any of the provisions of this Agreement. The
Company agrees to pay, to the full extent permitted by law, all
legal fees and expenses which the Employee may incur as a result of
any unsuccessful contest by the Company of the validity or
enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof, plus in each case
interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Code for any period during which the Company is in
default in its obligation to make any payment hereunder.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (b) If there shall be any dispute between the Company and the
Employee (i) in the event of any termination of the Employees
employment by the Company, whether such termination was for Cause,
or (ii) in the event of any termination of employment by the
Employee, whether Good Reason existed, then, unless and until there
is a final, nonappealable judgment by a court of competent
jurisdiction declaring that such termination was for Cause or that
the determination by the Employee of the existence of Good Reason
was not made in good faith, the Company shall pay all amounts, and
provide all benefits, to the Employee and/or the Employees family,
as the case may be, that the Company would be required to pay or
provide pursuant to Section 6 as though such termination were by the
Company without Cause or by the Employee for Good Reason; provided,
however, that the Company shall not be required to pay any disputed
amounts pursuant to this paragraph except upon receipt of a written
undertaking by or on behalf of the Employee to repay all such
amounts to which the Employee is ultimately adjudged by such court
not to be entitled, accompanied by security for        

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| |  |  | the full and faithful performance of such undertaking in a form
reasonably acceptable to the Company.
| |  |  | -----------------------------------------------------------------------------------------------------



| | 7. |  | SUCCESSORS.
| | -- |  | -----------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) This Agreement is personal to the Employee and without the prior
written consent of the Company shall not be assignable by the
Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Employees legal representatives.                                                                                                                                                                                                             
|
| | (b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all
or substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this
Agreement, Company shall mean the Company as hereinbefore defined
and any successor to its business and/or assets.



| | 8. |  | MISCELLANEOUS.
| | -- |  | --------------



| |  |  | (a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas without reference to principles
of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto and their respective
successors and legal representatives.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:                                                                                                                                                                                                                



| |  |  | If to the Employee:                                                                                      
| |  |  | ---------------------------------------------------------------------------------------------------------
|
| |  |  | Bill DeArman
43 East Stillforest
Houston, Texas 77024                                                    
|
| |  |  | If to the Company:                                                                                       
|
| |  |  | U S Liquids Inc.
411 N. Sam Houston Parkway E., Suite 400
Houston, Texas 77060
Attention: General Counsel

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| |  |  | or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addresses.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.                                
|
| |  |  | (d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.    
|
| |  |  | (e) The Employees or the Companys failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a
waiver of such provision or any other provision hereof.         
|
| |  |  | (f) This Agreement and the Letter Agreement dated September 18, 2002
contain the entire understanding of the Company and the Employee
with respect to the subject matter hereof.                   

IN WITNESS WHEREOF, the Employee has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf by its authorized
representative, all as of the date and year first above written.

| |  |                                                                             |  | 
| |  | --------------------------------------------------------------------------- |  | 
| |  |                                                                             |  | 
| |  | WILLIAM M. DeARMAN                                                          |  | 
| |  |                                                                             |  | 
| |  | U S LIQUIDS INC.                                                           
| |  |                                                                             |  | 
| |  | By:                                                                         |  | 
| |  |                                                                             |  | 
| |  | Name: Gary J. Van Rooyan
Title: Senior Vice President & Corporate
Secretary |  | 

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