ENVIROSOURCE INC
S-4/A, 1998-03-09
MISC DURABLE GOODS
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   As filed with the Securities and Exchange Commission on March 9, 1998
                                                      Registration No. 333-40749
================================================================================
    

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

   
                                AMENDMENT NO. 3
                                       TO
                                    FORM S-4
                             REGISTRATION STATEMENT
                        UNDER THE SECURITIES ACT OF 1933
    

                               EnviroSource, Inc.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                 <C>                              <C>
           Delaware                             6719                     34-0617390
(State or other jurisdiction of     (Primary Standard Industrial      (I.R.S. Employer
incorporation or organization)      Classification Code Number)      Identification No.)
</TABLE>

                           1155 Business Center Drive
                        Horsham, Pennsylvania 19044-3454
                                 (215) 956-5500
                   (Address, including zip code, and telephone
                         number, including area code, of
                    registrant's principal executive offices)

                                  James C. Hull
                   Vice President and Chief Financial Officer
                               EnviroSource, Inc.
                           1155 Business Center Drive
                        Horsham, Pennsylvania 19044-3454
                                 (215) 956-5500
            (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)

                                 With Copies to:

       Claude A. Baum, Esq.                          Leon Z. Heller, Esq.
      Dechert Price & Rhoads                     General Counsel and Secretary
       30 Rockefeller Plaza                           EnviroSource, Inc.
     New York, New York 10112                     1155 Business Center Drive
          (212) 698-3500                       Horsham, Pennsylvania 19044-3454
                                                       (215) 956-5500

Approximate  date of  commencement  of proposed  sale to the public:  As soon as
practicable after the effective date of this Registration Statement.

If any of the  securities  being  registered  on this Form are being  offered in
connection  with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [  ]

The Registrant hereby amends this  Registration  Statement on such date or dates
as may be necessary to delay its effective date until the Registrant  shall file
a further amendment which specifically  states that this Registration  Statement
shall  thereafter  become  effective  in  accordance  with  Section  8(a) of the
Securities  Act of  1933  or  until  the  Registration  Statement  shall  become
effective on such date as the Commission,  acting pursuant to said Section 8(a),
may determine.

================================================================================

<PAGE>



PROSPECTUS

                                OFFER TO EXCHANGE
                     9 3/4% Senior Notes due 2003, Series B
                               for all outstanding
                     9 3/4% Senior Notes due 2003, Series B

                                       of

                               ENVIROSOURCE, INC.

   
                  THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
              NEW YORK CITY TIME ON APRIL 8, 1998, UNLESS EXTENDED
    


         EnviroSource,  Inc.,  a  Delaware  corporation  ("EnviroSource"  or the
"Company"),  hereby  offers to exchange an aggregate  principal  amount of up to
$50,000,000 of its 9 3/4% Senior Notes due 2003,  Series B (the "New Notes") for
a like  principal  amount of its 9 3/4%  Senior  Notes  due 2003,  Series B (the
"Existing  Notes")  outstanding on the date hereof upon the terms and subject to
the conditions set forth in this  Prospectus and in the  accompanying  letter of
transmittal (the "Letter of Transmittal" and, together with this Prospectus, the
"Exchange  Offer").  The  New  Notes  and the  Existing  Notes  are  hereinafter
collectively  referred  to as the  "Notes."  The  terms  of the  New  Notes  are
identical in all material  respects to those of the Existing  Notes,  except for
certain transfer  restrictions and registration  rights relating to the Existing
Notes. The New Notes will be issued pursuant to, and be entitled to the benefits
of, the Indenture (as defined herein) governing the Existing Notes.

         The New  Notes  will  bear  interest  from  and  including  the date of
consummation  of the Exchange  Offer.  Interest on the New Notes will be payable
semi-annually on June 15 and December 15 of each year, commencing June 15, 1998.
Additionally,  interest  on the New Notes  will  accrue  from the last  interest
payment date on which  interest was paid on the Existing  Notes  surrendered  in
exchange  therefor.  The New Notes will be  redeemable  prior to maturity at the
option of the Company at any time on or after June 15, 1998,  at the  redemption
prices set forth herein,  plus accrued interest.  In addition,  upon a Change of
Control (see  "Description of the Notes -- Certain  Definitions") the Company is
required  to make an  offer to  purchase  outstanding  New  Notes at 101% of the
principal amount thereof,  plus accrued interest.  However,  no assurance can be
given that upon a Change of Control the Company  will have,  or will have access
to,  sufficient  funds to effect  such  purchases.  See "Risk  Factors  -- Risks
Associated with High Leverage and Debt Covenants."

         The New Notes will be unsecured  obligations  of the  Company.  The New
Notes  will rank pari  passu in right of payment  with all  existing  and future
unsubordinated,  unsecured  indebtedness of the Company. The New Notes will rank
senior in right of  payment to all  subordinated  indebtedness  of the  Company.
Because the Company is a holding company that conducts  substantially all of its
business through its subsidiaries, all liabilities of the Company's subsidiaries
will  be  effectively  senior  to the  New  Notes.  The  Company  currently  has
outstanding $220 million  aggregate  principal amount of 9 3/4% Senior Notes due
2003,  the  terms of  which  are  substantially  the  same as the  Notes.  As of
September 30, 1997, the Company  (excluding its subsidiaries) had $270.0 million
of indebtedness  outstanding,  and the Company's  subsidiaries had approximately
$90.8  million  of  liabilities   (including   approximately  $18.6  million  of
indebtedness).

         The New Notes are being offered  hereunder in order to satisfy  certain
obligations of the Company contained in the Registration  Rights Agreement dated
September  30,  1997  (the  "Registration  Rights  Agreement")  by and among the
Company, Morgan Stanley & Co. Incorporated ("Morgan"), Jefferies & Company, Inc.
("Jefferies") and NationsBanc  Capital Markets,  Inc.  (collectively with Morgan
and Jefferies,  the "Placement  Agents") with respect to the initial sale of the
Existing Notes.

         The Company will not receive any proceeds  from the Exchange  Offer and
will pay all the expenses  incident to the Exchange  Offer.  Tenders of Existing
Notes  pursuant to the Exchange  Offer may be withdrawn at any time prior to the
Expiration  Date (as defined  herein) of the  Exchange  Offer.  In the event the
Company  terminates  the  Exchange  Offer and does not accept for  exchange  any
Existing  Notes with respect to the Exchange  Offer,  the Company will  promptly
return such Existing Notes to the holders thereof. See "The Exchange Offer."



<PAGE>



         Each broker-dealer that receives New Notes for its own account pursuant
to the Exchange  Offer must  acknowledge  that it will  deliver a prospectus  in
connection with any resale of such New Notes.  The Letter of Transmittal  states
that by so acknowledging and by delivery of a prospectus,  a broker-dealer  will
not be deemed to admit that it is an  "underwriter"  within  the  meaning of the
Securities Act of 1933, as amended (the "Securities  Act"). This Prospectus,  as
it may be  amended  or  supplemented  from  time  to  time,  may  be  used  by a
broker-dealer  in connection  with resales of New Notes received in exchange for
Existing Notes where such Existing Notes were acquired by such  broker-dealer as
a result of market-making  activities or other trading  activities.  The Company
has agreed that,  for a period of 180 days after the  Expiration  Date,  it will
make this Prospectus  available to any  broker-dealer for use in connection with
any such resale. See "Plan of Distribution."

         Prior to the Exchange  Offer,  there has been no public  market for the
Existing  Notes.  If a market for the New Notes should  develop,  such New Notes
could trade at a discount from their  principal  amount.  The Company  currently
does not  intend to list the New  Notes on any  securities  exchange  or to seek
approval for quotation  through any automated  quotation  system,  and no active
public  market  for the New  Notes is  currently  anticipated.  There  can be no
assurance that an active public market for the New Notes will develop. See "Risk
Factors."

         The Exchange Offer is not conditioned upon any minimum principal amount
of Existing Notes being tendered for exchange pursuant to the Exchange Offer.
                                                    ---------------------

         See "Risk  Factors"  commencing  on page 14 for a discussion of certain
factors that holders of Existing  Notes should  consider in connection  with the
Exchange Offer.
                                                    ---------------------

THESE  SECURITIES  HAVE NOT BEEN APPROVED OR  DISAPPROVED  BY THE SECURITIES AND
EXCHANGE  COMMISSION OR ANY STATE  SECURITIES  COMMISSION NOR HAS THE SECURITIES
AND  EXCHANGE  COMMISSION  OR ANY STATE  SECURITIES  COMMISSION  PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
                              ---------------------

   
The date of this Prospectus is March 9, 1998.
    


                                        2

<PAGE>



                              AVAILABLE INFORMATION

         The Company has filed with the Securities and Exchange  Commission (the
"Commission"  or the "SEC") a Registration  Statement on Form S-4 (the "Exchange
Offer  Registration  Statement,"  which term  shall  encompass  all  amendments,
exhibits,  annexes and schedules thereto) pursuant to the Securities Act and the
rules and  regulations  promulgated  thereunder,  covering  the New Notes  being
offered  hereby.  This Prospectus does not contain all the information set forth
in the Exchange  Offer  Registration  Statement.  For further  information  with
respect to the Company and the Exchange Offer, reference is made to the Exchange
Offer Registration Statement. Certain contracts,  agreements and other documents
referred to in this Prospectus have been filed as exhibits to the Exchange Offer
Registration  Statement,  to which reference is made for a complete  description
thereof.

         The Company is subject to the information and reporting requirements of
the  Securities  Exchange Act of 1934, as amended (the "Exchange  Act"),  and in
accordance therewith files reports,  proxy statements and other information with
the Commission relating to its business,  financial condition and other matters.
Information,   as  of  particular  dates,  concerning  the  Company's  business,
principal  physical  properties,   capital  structure,  material  pending  legal
proceedings,  operating results,  financial  condition,  directors and executive
officers,  their  remuneration,  stock  options  granted to them,  the principal
holders of the Company's securities and any material interest of such persons in
transactions  with the Company and other  matters is required to be disclosed in
proxy  statements and annual reports  distributed to the Company's  stockholders
and  filed  with the  Commission.  Such  reports,  proxy  statements  and  other
information may be inspected at the Commission's public reference  facilities at
450 Fifth Street, N.W., Washington, D.C. 20549, and are available for inspection
at the following regional offices of the Commission: 7 World Trade Center, Suite
1300,  New York,  New York  10048;  and 500 West  Madison  Street,  Suite  1400,
Chicago,  Illinois  60661;  and copies may be obtained,  by mail,  at prescribed
rates from the principal  office of the  Commission  at 450 Fifth Street,  N.W.,
Washington,  D.C. 20549. The Commission  maintains a web site on the Internet at
http://www.sec.gov  that contains reports,  proxy and information statements and
other  information  regarding  registrants  that  file  electronically  with the
Commission.  Such information is also available for inspection at the offices of
NASDAQ Operations,  1735 K Street, N.W.,  Washington,  D.C. 20006. Shares of the
Company's Common Stock are listed for trading on the Pacific Stock Exchange, and
reports,  proxy statements and other  information  concerning the Company can be
inspected at the offices of the Pacific Stock  Exchange at 301 Pine Street,  San
Francisco, California 94104.

                   ------------------------------------------

         The Indenture  requires the Company,  and the Company intends,  to file
with the Trustee (as defined  herein) and mail to holders of the Notes copies of
all quarterly and annual financial reports and all other information,  documents
and  reports  (or  copies  of  such  portions  of any of  the  foregoing  as the
Commission may by rules and regulations prescribe) which the Company is required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act,
within 15 days of filing with the Commission.  See  "Description of the Notes --
General."

                   ------------------------------------------

         THIS  PROSPECTUS  INCLUDES  "FORWARD-LOOKING   STATEMENTS"  WITHIN  THE
MEANING OF U.S. SECURITIES LAWS. ALL STATEMENTS REGARDING THE EXPECTED FINANCIAL
POSITION,  BUSINESS AND FINANCING PLANS OF THE COMPANY AND ITS  SUBSIDIARIES ARE
FORWARD-LOOKING  STATEMENTS.  ALTHOUGH THE COMPANY AND ITS SUBSIDIARIES  BELIEVE
THAT  THE  EXPECTATIONS   REFLECTED  IN  SUCH  FORWARD-LOOKING   STATEMENTS  ARE
REASONABLE, THEY CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE
BEEN CORRECT. THESE EXPECTATIONS MAY BE REVISED AND THE COMPANY'S ACTUAL RESULTS
MAY DIFFER MATERIALLY FROM THOSE INDICATED BY ITS CURRENT PLANS AS A RESULT OF A
VARIETY OF FACTORS,  INCLUDING: (1) THE AVAILABILITY OF FINANCING AND REGULATORY
APPROVALS;   (2)  THE  ABILITY  TO  RETAIN  KEY  CUSTOMERS;  (3)  TECHNOLOGICAL,
REGULATORY OR OTHER DEVELOPMENTS IN THE COMPANY'S  BUSINESS;  (4) CHANGES IN THE
COMPETITIVE  CLIMATE IN WHICH THE COMPANY  OPERATES;  (5) CHANGES IN  APPLICABLE
ENVIRONMENTAL  LAWS AND  REGULATIONS;  (6)  CHANGES  IN  MARKET  DEMAND  FOR THE
COMPANY'S  SERVICES;  AND (7) THE EMERGENCE OF FUTURE  OPPORTUNITIES.  IMPORTANT
FACTORS  THAT  COULD  CAUSE  ACTUAL  RESULTS  TO  DIFFER  MATERIALLY  FROM  SUCH
EXPECTATIONS  ("CAUTIONARY  STATEMENTS")  ARE DISCLOSED IN THIS PROSPECTUS UNDER
"RISK FACTORS." ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING  STATEMENTS MADE
BY OR OTHERWISE  ATTRIBUTABLE TO THE COMPANY, ITS SUBSIDIARIES OR PERSONS ACTING
ON THEIR  BEHALF ARE  EXPRESSLY  QUALIFIED IN THEIR  ENTIRETY BY THE  CAUTIONARY
STATEMENTS.

                                        3

<PAGE>



               ANNEXES AND INCORPORATION OF DOCUMENTS BY REFERENCE

         The  following  documents,  which have been  filed with the  Commission
pursuant to the Exchange Act, are annexed to this Prospectus:

         1.       Quarterly  Report on Form 10-Q of the  Company for the quarter
                  ended September 30, 1997 (the "Third Quarter 10-Q"),  attached
                  hereto as Annex 1;

         2.       Annual  Report on Form 10-K of the  Company for the year ended
                  December 31, 1996 (the "Form 10-K"),  attached hereto as Annex
                  2; and

         3.       Proxy  Statement  of the  Company,  dated  April 30, 1997 (the
                  "Proxy  Statement"),  for the Annual  Meeting of  Stockholders
                  held on June 19, 1997, attached hereto as Annex 3.

         Any statement contained in a document annexed hereto shall be deemed to
be modified or superseded  for purposes of this  Prospectus to the extent that a
statement  contained  herein  modifies or supersedes  such  statement.  Any such
statement so modified or superseded  shall not be deemed,  except as so modified
or superseded, to constitute a part of this Prospectus.

         The annexes attached to this Prospectus (the "Annexes") are an integral
part of this  Prospectus  and should be read  carefully  by Holders of  Existing
Notes.

                   ------------------------------------------

         The Company  hereby  incorporates  in this  Prospectus by reference the
following  documents  heretofore  filed with the  Commission:  (i) the Company's
Annual  Report on Form  10-K for the year  ended  December  31,  1996;  (ii) the
Company's  Quarterly  Report on Form 10-Q for the quarter  ended March 31, 1997;
(iii) the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997;  (iv) the  Company's  Quarterly  Report on Form 10-Q for the quarter ended
September  30,  1997;  (v)  the  Proxy  Statement  for  the  Annual  Meeting  of
Stockholders  held on June 19, 1997;  and (vi) the Company's  Current  Report on
Form 8-K dated February 5, 1997.

         The Company will provide  without charge to each person,  including any
beneficial  owner,  to whom a copy of this  Prospectus is  delivered,  upon such
person's  written or oral  request,  a copy of any and all of the  documents and
information  which are  incorporated by reference herein (other than exhibits to
such documents,  unless such exhibits are specifically incorporated by reference
into such documents).  Such requests are to be addressed to EnviroSource,  Inc.,
1155 Business Center Drive, Horsham, Pennsylvania 19044-3454, Attention: Leon Z.
Heller, Esq., General Counsel and Secretary (Telephone No. (215) 956-5500).

                                        4

<PAGE>




                                     SUMMARY

         The  following  information  is  qualified  in its entirety by the more
detailed  information  and  financial  statements  and notes  thereto  appearing
elsewhere in this  Prospectus,  which includes the Annexes.  Holders of Existing
Notes should  carefully  consider the factors set forth herein under the caption
"Risk Factors" and are urged to read this Prospectus,  including the Annexes, in
its entirety.

                                   THE COMPANY

         EnviroSource  supplies industrial customers with specialized  services,
primarily   the   recycling,   handling,   stabilization   or   landfilling   of
environmentally  sensitive  wastes or by-products.  These services are generally
provided pursuant to long-term  contracts which enable the Company to more fully
integrate its processes with those of its customers. For the year ended December
31, 1996, the Company had revenues from continuing  operations of  approximately
$212.8  million  and  earnings  before  interest  expense,  income tax  expense,
depreciation and amortization ("EBITDA") of approximately $63.4 million.

         The  Company  believes  that  it is  one of the  leading  providers  of
recycling  and waste  management  solutions  to the U.S.  steel  industry.  This
industry and U.S.  companies in general  have been facing  rapidly  changing and
increasingly  complex  environmental  regulations,   with  stiff  penalties  for
non-compliance.  To  adapt,  these  companies  are  attempting  to  become  more
environmentally responsible while remaining both efficient and cost-competitive.
The  Company  has  strategically  positioned  itself to satisfy  these  needs by
providing environmentally sound,  cost-effective industrial waste management and
recycling solutions to its customers,  with a distinct focus on the needs of the
steel industry.  The Company's strategy  capitalizes on satisfying  requirements
for:

         o        Outsourcing  -- performing  on-site  services that allow steel
                  companies  to  narrow   their  focus  to  core   manufacturing
                  processes,  thereby  reducing  operating  costs and conserving
                  capital.

         o        Recycling of by-products -- recovering valuable materials from
                  steel mill by-product streams while simultaneously reducing or
                  eliminating waste disposal problems.

         o        Waste management -- providing environmentally  responsible and
                  cost-effective  disposal alternatives for industrial waste and
                  production residues.

         The Company  provides  its  services  through its two  business  units,
International Mill Service, Inc. and EnviroSource Technologies, Inc.

International Mill Service, Inc. ("IMS")

         IMS is the Company's largest revenue and EBITDA contributor, accounting
for  approximately  $180.0  million,  or 85%, of the Company's total revenues in
1996.  IMS has served the steel  industry  for more than 60 years.  The  Company
believes IMS increases its customers'  productivity by providing  cost-effective
and  reliable  on-site  reclamation  of steel  and iron and a  variety  of other
specialized services.

         U.S. steel mills operate in a highly competitive environment.  Services
that help to reduce  their total  process  costs are  therefore  of  significant
value.  IMS generally  provides these services under long-term  contracts with a
diversified  customer  base of over 55 steel mills in North  America,  including
integrated  mills,  mini-mills and specialty  mills.  Using  specially  designed
equipment,  IMS  provides  a total  recycling  solution  by  processing  slag (a
by-product of steel production),  recovering  valuable metallics and selling the
residual aggregate for road base and other uses. These services are economically
and  environmentally  attractive.  Moreover,  the effective removal of slag on a
continuous basis is critical to a steel mill's ability to remain in operation.

         The  Company  believes  IMS's  metal   reclamation   business  provides
stability and opportunity as a result of the following:


                                        5

<PAGE>




         o        IMS's  metal  reclamation  activities  represent  an  enduring
                  example of outsourcing.  Since  mid-century  and  increasingly
                  today,  steel mills have chosen to focus their  financial  and
                  managerial resources directly on steel production,  relying on
                  companies  like IMS to provide slag  handling,  metal recovery
                  and a variety of other services on a more cost-effective basis
                  than  the  mills  could  provide  themselves.  Most  of  IMS's
                  business  with its steel mill  customers  is  conducted  under
                  long-term  contracts  that contain  price  escalation  clauses
                  intended to offset cost increases.

         o        IMS's revenues are related to steel production  tonnage rather
                  than steel  pricing and thus are not directly  affected by the
                  cyclicality  of steel  prices.  Domestic  steel  production is
                  expected  to  increase  by  approximately  18%  over  the next
                  four-year period.

         o        In its core steel reclamation  business,  management  believes
                  that IMS services  customers  accounting  for more than 30% of
                  total domestic steel  production.  This strong market position
                  reflects  the  numerous  long-standing  relationships  it  has
                  established  in the steel industry based on its reputation for
                  reliable, quality service.

         o        The  industry in which IMS operates is  characterized  by high
                  barriers  to entry.  In addition to  long-term  contracts  and
                  long-term  customer  relationships,  these  barriers  to entry
                  include  significant   initial  investment,   engineering  and
                  environmental  expertise,  slag marketing  experience and high
                  customer switching risks.

         IMS has a diversified  customer base,  with  approximately  half of its
revenues  derived from  integrated  steel producers and half from mini-mills and
specialty  mills.  IMS's largest  customer is USX  Corporation's  Gary Works, in
Gary,  Indiana,  which  is the  largest  steel  mill in the  U.S.  IMS has  been
providing services to this facility since 1981.

EnviroSource Technologies, Inc. ("Technologies")

         Technologies  (which  was  formerly  named  EnviroSource   Treatment  &
Disposal  Services,  Inc. and was commonly  referred to as "TDS")  accounted for
approximately  $32.8 million,  or 15%, of the Company's  total revenues in 1996.
Technologies has been dedicated to the safe,  economical  treatment and disposal
of industrial  and hazardous  wastes since 1976.  The Company has reoriented its
Technologies business to focus more on its steel mini-mill customers' production
and less on the volatile waste remediation  business.  As a result,  the Company
believes that it has reduced  revenue and earnings  volatility and has increased
realizable  synergies  between the  Technologies  and IMS businesses.  In recent
years,   Technologies   has  expanded  its  services  to  provide  for  chemical
stabilization of electric arc furnace ("EAF") dust, which is a material produced
by steel  mini-mills  that has been  designated  a  hazardous  waste by the U.S.
Environmental Protection Agency.  Technologies also owns two of the 19 currently
operating commercial hazardous waste landfills in the U.S.

         The  Company   believes  that  the  U.S.   steel   industry   generated
approximately  700,000  tons of EAF dust in 1997 and the  Company  expects  that
approximately  1,000,000  tons of EAF dust will be  generated  annually by 2001.
This  increase  in  generated  EAF dust  will  occur as the  mini-mill  industry
continues to expand to meet market  needs.  EAF dust must be recycled or treated
and  disposed  of in an  appropriately  secure  landfill.  Steel  companies  are
sensitive to service, process integrity and their all-in cost when they select a
recycling or  stabilization  and disposal option for this material.  The Company
believes  that  its  proprietary  Super  Detox(R)  technology  for the  chemical
stabilization  and disposal of EAF dust  provides an  environmentally  safer and
more cost-effective  solution than the thermal recycling processes  historically
utilized by a large portion of the mini-mill industry.

         The Company  believes that  Technologies  is well positioned to compete
effectively  with all other  processes for EAF dust disposal due to its enhanced
stabilization  capabilities,  its existing  permitted  landfill capacity and the
strategic  locations of its landfills,  which help to minimize freight costs. In
addition,  expanded  use of rail  services  has further  improved  Technologies'
competitive position. In November 1996, rail service providing for the transport
of waste directly to Technologies' Ohio facility became available, making it the
only  hazardous  waste  treatment  and disposal  facility in the U.S.  with such
direct rail service.  This direct rail service has broadened the market reach of
the Ohio site.

         Technologies  continues to service many other  industrial  customers in
the secure treatment and disposal of hazardous wastes.  However, the majority of
the material expected to be disposed in its landfills is treated EAF dust.


                                        6

<PAGE>




         In addition  to its  operations  at its  landfills,  Technologies  also
provides:

         o        on-site treatment of EAF dust at one mini-mill,

         o        on-site waste and landfill management services for a domestic
                  steel producer,

         o        engineering support for various projects sponsored by IMS and
                  steel industry customers, and

         o        management of a wet scrubber sludge plant for an electric
                  utility.

         The Company  expects the demand for its services to increase due to the
greater  volume  of  EAF  dust  being  produced,  the  increased  use  of  scrap
substitutes that lower the zinc level in the dust, and the recent decline in the
value of zinc recovered by competing thermal recycling processes.  Utilizing the
Super Detox(R)  technology,  in 1998 the Company expects to process in excess of
240,000 tons at its Ohio and Idaho facilities.  At these regional facilities and
at one on-site  facility,  in 1997 the Company treated  approximately 35% of the
total volume of EAF dust generated in the United States.

Business Strategy

         EnviroSource's   business  strategy  focuses  on  servicing  the  steel
industry and growing its business through service expansions to existing and new
customers and, potentially, through selective acquisitions.

         o        Service  Expansions:  The  Company  plans to pursue  selective
                  growth  by  offering  an  expanded  range of  services.  These
                  services   represent   a  diverse   array  of   cost-effective
                  solutions, including:

                  --       Specialized  Materials  Handling  -- The  Company has
                           pioneered   alternative   approaches   for   material
                           handling and inventory  management which provide cost
                           savings and improved quality.

                  --       Surface  Conditioning  --  The  Company  provides  an
                           automated  steel slab  surface  conditioning  process
                           (called  scarfing) that helps its customers  increase
                           product  yields and improve  product  quality,  while
                           gaining measurable cost savings.

                  --       Scrap  Preparation  and  Handling  --  The  Company's
                           services  include the  collection of revert scrap and
                           the  handling,  testing,  transporting  and mixing of
                           purchased  scrap for direct  charge into electric arc
                           furnaces.

                  --       Slab Cutting  Services -- The Company is developing a
                           process,  utilizing licensed technology, to cut steel
                           slabs and plates  with  increased  speed and  reduced
                           metal loss, which the Company believes will result in
                           significant  cost savings for both  integrated  mills
                           and certain mini-mills.

                  --       EAF Dust Treatment and Disposal  Service -- Using its
                           Super Detox(R) technology,  the Company is continuing
                           to secure  additional  EAF dust tonnage to more fully
                           utilize its permitted  annual volume  limitations  in
                           Ohio and to capture  additional  market  share at its
                           Idaho facility.

         o        Selective  Acquisitions:  The  Company  may  seek  to  acquire
                  businesses which will result in increased  market  penetration
                  and/or provide  complementary  services which it can market to
                  its existing and prospective  customer base. As an example, in
                  1996,  IMS  acquired  Alexander  Mill  Services,  Inc.,  which
                  provides slag processing services at 10 mini-mills. Management
                  believes  such  acquisitions  should  provide the Company with
                  favorable economics coupled with relatively low risk.


                                        7

<PAGE>




Recent Developments

         o        The union employees of  Wheeling-Pittsburgh  Steel Corporation
                  ("Wheeling-Pittsburgh"),  IMS's second largest customer,  were
                  on strike from October 1, 1996 to August 13, 1997.  The strike
                  was resolved with the execution of a five-year union contract.

                  Wheeling-Pittsburgh  contributed  approximately $13 million in
                  revenue to the Company in 1995.  During the nine months  ended
                  September  30, 1997,  the Company's  earnings were  negatively
                  impacted  by  the  strike.   The  Company   anticipates   that
                  Wheeling-Pittsburgh   will  return  to  historical  levels  of
                  production  in 1998.  See "Risk Factors -- Dependence on Steel
                  Mill Production; Economic Conditions."

         o        On January 21,  1997,  the Company  sold the capital  stock of
                  IMSAMET,  Inc.  ("IMSAMET"),  a wholly-owned  subsidiary  that
                  performed  recycling  and waste  management  services  for the
                  aluminum industry,  for $58 million in cash. The proceeds from
                  the sale were used to repay $56  million of  revolving  credit
                  borrowings  under the Bank Credit Facility (as defined herein)
                  and for  expenses  related to the  transaction.  (In the third
                  quarter of 1997, the Company received an additional $2 million
                  in cash from the  purchaser  of IMSAMET in  connection  with a
                  purchase price  adjustment.)  The  divestiture has allowed the
                  Company  to focus  more on  strengthening  its  position  as a
                  premier steel industry service-provider.

         o        In December  1997,  the U.S. Court of Appeals for the District
                  of Columbia Circuit dismissed a challenge to the action of the
                  U.S.  Environmental  Protection  Agency ("EPA")  delisting EAF
                  dust (an  EPA-listed  hazardous  waste) that is treated by the
                  Company's Super Detox(R) technology. The challenge was brought
                  by one of Technologies' competitors,  which has recently filed
                  a petition for rehearing.

         o        In December 1997, the Company entered into a long-term service
                  arrangement with another company,  providing EnviroSource with
                  access to substantial  additional EAF dust processing capacity
                  utilizing its Super Detox(R) technology.



                                        8

<PAGE>




                               THE EXCHANGE OFFER


Securities Offered                Up to $50,000,000  aggregate  principal amount
                                  of 9 3/4% Senior Notes due 2003, Series B. The
                                  terms of the New Notes and Existing  Notes are
                                  identical in all material respects, except for
                                  certain transfer restrictions and registration
                                  rights relating to the Existing Notes.

The Exchange Offer                The New Notes are being  offered  in  exchange
                                  for a like principal amount of Existing Notes.
                                  Existing   Notes  may  be  exchanged  only  in
                                  integral  multiples of $1,000. The issuance of
                                  the  New   Notes  is   intended   to   satisfy
                                  obligations  of the Company  contained  in the
                                  Registration Rights Agreement.

Expiration Date; Withdrawal
of Tender                         The  Exchange  Offer will expire at 5:00 p.m.,
                                  New York City time,  on April 8, 1998, or such
                                  later  date  and  time  to  which  it  may  be
                                  extended  by  the   Company.   The  tender  of
                                  Existing  Notes pursuant to the Exchange Offer
                                  may be  withdrawn  at any  time  prior  to the
                                  Expiration   Date.   Any  Existing  Notes  not
                                  accepted  for  exchange for any reason will be
                                  returned  without  expense  to  the  tendering
                                  holder  thereof  as  promptly  as  practicable
                                  after the  expiration  or  termination  of the
                                  Exchange Offer.

Certain Conditions to the
Exchange Offer                    The   Company's   obligation   to  accept  for
                                  exchange,  or to issue New  Notes in  exchange
                                  for,   any   Existing   Notes  is  subject  to
                                  compliance  with  any  applicable  law and any
                                  applicable  interpretation by the staff of the
                                  Commission, which may be waived by the Company
                                  in  its  reasonable  discretion.  The  Company
                                  currently  expects that each of the conditions
                                  will be satisfied  and that no waivers will be
                                  necessary.  See "The Exchange  Offer-- Certain
                                  Conditions to the Exchange Offer."

Procedures for Tendering
Existing Notes                    Each  holder  of  Existing  Notes  wishing  to
                                  accept the Exchange Offer must complete,  sign
                                  and  date  the  Letter  of  Transmittal,  or a
                                  facsimile  thereof,  in  accordance  with  the
                                  instructions contained herein and therein, and
                                  mail  or  otherwise  deliver  such  Letter  of
                                  Transmittal, or such facsimile,  together with
                                  such  Existing  Notes and any  other  required
                                  documentation,   to  the  Exchange  Agent  (as
                                  defined  herein) at one of the  addresses  set
                                  forth  herein.  See  "The  Exchange  Offer  --
                                  Procedures for Tendering Existing Notes."

Use of Proceeds                   The Company will not receive any proceeds from
                                  the Exchange Offer.

Exchange Agent                    United  States Trust  Company of New York (the
                                  "Exchange  Agent") is serving as the  Exchange
                                  Agent in connection with the Exchange Offer.

Federal Income Tax
Consequences                      The exchange of Notes pursuant to the Exchange
                                  Offer  should  not  be  a  taxable  event  for
                                  federal  income  tax  purposes.  See  "Certain
                                  Federal Income Tax Considerations."


                                        9

<PAGE>




    Consequences of Exchanging Existing Notes Pursuant to the Exchange Offer

         Based  on  certain  interpretive  letters  issued  by the  staff of the
Commission  to third  parties in unrelated  transactions,  the Company is of the
view that holders of Existing Notes (other than any holder who is an "affiliate"
of the  Company  within the  meaning of Rule 405 under the  Securities  Act) who
exchange  their  Existing  Notes for New Notes  pursuant to the  Exchange  Offer
generally  may  offer  such New  Notes  for  resale,  resell  such New Notes and
otherwise  transfer such New Notes without  compliance with the registration and
prospectus  delivery  provisions of the Securities Act,  provided such New Notes
are  acquired in the ordinary  course of the holders'  business and such holders
have no arrangement with any person to participate in a distribution of such New
Notes.  Each  broker-dealer  that  receives  New  Notes for its own  account  in
exchange for Existing Notes must  acknowledge  that it will deliver a prospectus
in connection with any resale of such New Notes. See "Plan of  Distribution." In
addition,  to comply  with the  securities  laws of  certain  jurisdictions,  if
applicable,  the New  Notes may not be  offered  or sold  unless  they have been
registered or qualified for sale in such  jurisdictions or in compliance with an
available exemption from registration or qualification.  The Company has agreed,
pursuant to the Registration  Rights Agreement and subject to certain  specified
limitations  therein,  to  register  or qualify  the New Notes for offer or sale
under the securities or blue sky laws of such jurisdictions as any holder of the
Notes  reasonably  requests in writing.  If a holder of Existing  Notes does not
exchange such Existing Notes for New Notes pursuant to the Exchange Offer,  such
Existing  Notes will  continue  to be subject to the  restrictions  on  transfer
contained  in the legend  thereon.  In general,  the  Existing  Notes may not be
offered or sold unless  registered  under the Securities Act, except pursuant to
an exemption  from, or in a transaction  not subject to, the  Securities Act and
applicable  state  securities  laws.  Holders of Existing  Notes do not have any
appraisal or dissenters'  rights under the Delaware  General  Corporation Law in
connection with the Exchange  Offer.  See "The Exchange Offer -- Consequences of
Failure to Exchange; Resales of New Notes."

         The Existing  Notes are  currently  eligible for trading in the Private
Offerings,  Resales and Trading through Automated  Linkages  ("PORTAL")  market.
Following commencement of the Exchange Offer but prior to its consummation,  the
Existing  Notes  may  continue  to be  traded in the  PORTAL  market.  Following
consummation  of the  Exchange  Offer,  the New Notes will not be  eligible  for
PORTAL trading.

                                  The New Notes

         The terms of the New Notes are  identical in all  material  respects to
the Existing Notes,  except for certain  transfer  restrictions and registration
rights relating to the Existing Notes.

Securities Offered                $50,000,000  aggregate  principal  amount of 9
                                  3/4%  Senior  Notes  due  2003,  Series B. The
                                  Company currently has outstanding the Existing
                                  Notes  and $220  million  aggregate  principal
                                  amount  of 9 3/4%  Senior  Notes due 2003 (the
                                  "1993   Notes"),   the   terms  of  which  are
                                  substantially the same as the Notes.

Maturity                          June 15, 2003.

Interest Payment Dates            June 15 and December 15,  commencing  June 15,
                                  1998.

Optional Redemption               The  New   Notes  are   redeemable   prior  to
                                  maturity,  in whole or in part,  at the option
                                  of the  Company  at any time on or after  June
                                  15, 1998, at the  redemption  prices set forth
                                  herein,    plus    accrued    interest.    See
                                  "Description   of  the   Notes   --   Optional
                                  Redemption."

Ranking                           The New Notes will be unsecured obligations of
                                  the Company,  will rank pari passu in right of
                                  payment   with   all   existing   and   future
                                  unsecured,  unsubordinated indebtedness of the
                                  Company,  including any Existing Notes and the
                                  1993  Notes,  and  will  rank  senior  to  all
                                  subordinated  indebtedness of the Company.  In
                                  addition,  because  the  Company  is a holding
                                  company that conducts substantially all of its
                                  business   through   its   subsidiaries,   all
                                  liabilities  of  the  Company's  subsidiaries,
                                  including

                                       10

<PAGE>




                                  borrowings  under  the Bank  Credit  Facility,
                                  which  are   guaranteed  by  the  Company  and
                                  secured by certain  of the  Company's  assets,
                                  will be  effectively  senior to the New Notes.
                                  As  of  September   30,   1997,   the  Company
                                  (excluding   its   subsidiaries)   had  $270.0
                                  million of indebtedness  outstanding,  and the
                                  Company's subsidiaries had approximately $90.8
                                  million     of     liabilities      (including
                                  approximately  $18.6 million of indebtedness).
                                  See   "Risk   Factors   --   Holding   Company
                                  Structure;     Security     Interests"     and
                                  "Description of the Notes -- Ranking."

Covenants                         The Indenture  contains  covenants that, among
                                  other things,  limit (i)  Restricted  Payments
                                  (as  defined  herein) by the  Company  and its
                                  Restricted  Subsidiaries  (as defined herein),
                                  (ii) the incurrence of additional indebtedness
                                  by   the    Company    and   its    Restricted
                                  Subsidiaries,   (iii)   payment   restrictions
                                  affecting the Company's subsidiaries, (iv) the
                                  creation   or   existence   of   liens,    (v)
                                  transactions with affiliates and (vi) sales of
                                  assets.   The  Indenture  also  restricts  the
                                  Company's ability to consolidate or merge with
                                  or into,  or to transfer all or  substantially
                                  all of its assets to, another person. However,
                                  these  limitations  are subject to a number of
                                  important  qualifications and exceptions.  See
                                  "Description  of the  Notes--  Covenants"  and
                                  "--Merger and Consolidation."

Change of Control                 Upon a Change of Control,  the  Company  shall
                                  make an offer to  purchase  the New Notes then
                                  outstanding  at a purchase price equal to 101%
                                  of principal  amount,  plus accrued  interest.
                                  There  can be no  assurance  that the  Company
                                  will have  sufficient  funds  available at the
                                  time of any  Change  of  Control  to make  any
                                  required    debt     repayments     (including
                                  repurchases    of   the   New   Notes).    See
                                  "Description    of   the    Notes--    Certain
                                  Definitions"  and  "--Covenants--   Change  of
                                  Control."

                                  Risk Factors

         Holders  of  Existing  Notes  should  carefully  consider  all  of  the
information set forth in this Prospectus and, in particular, should evaluate the
specific  factors under "Risk Factors"  beginning on page 14 in connection  with
the Exchange Offer.


                                       11

<PAGE>




                             SUMMARY FINANCIAL DATA

         The summary consolidated  financial data of the Company for each of the
years in the  three-year  period ended December 31, 1996 and as of September 30,
1997 and for the nine months ended  September 30, 1996 and 1997 presented  below
have been derived from the  consolidated  financial  statements  of the Company,
which are  presented  in the Third  Quarter  10-Q and the Form 10-K.  These data
include IMSAMET as a discontinued  operation through the date of sale of IMSAMET
in January 1997. The Company's consolidated financial statements included in the
Form 10-K have been  audited by Ernst & Young  LLP,  independent  auditors.  The
summary  consolidated  financial  data as of September 30, 1997 and for the nine
months  ended  September  30,  1996 and 1997  were  derived  from the  unaudited
financial  statements  included  in the Third  Quarter  10-Q.  In the opinion of
management,   the  unaudited   financial   statements  include  all  adjustments
(consisting  of normal  recurring  accruals and "unusual  items,  net" set forth
below) necessary to present fairly the information set forth therein.
<TABLE>
<CAPTION>
                                                                                                       Nine Months
                                                        Year Ended December 31,                     Ended September 30,
                                             -------------------------------------------        --------------------------
                                                1994             1995            1996              1996             1997
                                             ----------       ----------      ----------        ----------       ---------
                                                                                                          (unaudited)
                                                                                 (dollars in thousands)
Statement of Operations Data:

<S>                                            <C>              <C>             <C>               <C>             <C>     
Revenues                                       $230,434         $223,722        $212,789          $160,155        $168,977
Cost of revenues                                164,879          163,070         166,099           122,997         133,398
Selling, general and administrative
  expenses                                       29,035           26,163          23,165            16,781          18,561
Unusual items, net                                   --           (2,624)          4,650             5,600             500
                                             ----------         --------        --------          --------        --------
Operating income                                 36,520           37,113          18,875            14,777          16,518
Interest income                                     983            1,133           1,356             1,096             815
Interest expense                                (21,974)         (23,483)        (28,187)          (20,757)        (21,763)
                                               --------         --------        --------          --------        --------
Income (loss) from continuing
  operations before income taxes                 15,529           14,763          (7,956)           (4,884)         (4,430)
Income tax (expense) benefit:
   Current                                       (2,576)          (1,262)         (1,134)             (704)         (1,042)
   Deferred                                      (1,704)          (3,946)          4,400                --             284
                                               --------         --------        --------          --------        --------
Income (loss) from continuing
  operations                                     11,249            9,555          (4,690)           (5,588)         (5,188)
Income (loss) from discontinued
  IMSAMET operations(1)                            (190)             949             399               711           9,600
                                               ---------        --------        --------          --------        --------
Income (loss) before extraordinary loss          11,059           10,504          (4,291)           (4,877)          4,412
Extraordinary debt extinguishment loss                              (806)
Net income (loss)                              $ 11,059         $  9,698        $ (4,291)         $ (4,877)       $  4,412
                                               ========         ========        ========          ========        ========

Ratio of earnings to fixed charges(2)              1.54x            1.49x             --                --              --
Deficiency in earnings available
  to cover fixed charges(2)                  $       --        $      --        $  7,583          $  4,603        $  4,175

Cash Flow Data:

Cash provided by operating activities          $ 42,016         $ 41,905        $ 28,163          $ 25,021        $ 26,361
Cash provided (used) by investing activities    (60,823)         (54,288)        (32,321)          (28,329)         20,408
Cash provided (used) by financing activities     16,614           12,361           5,469             4,501         (47,579)
</TABLE>


                                       12

<PAGE>

<TABLE>
<CAPTION>
                                                                                                        Nine Months
                                                         Year Ended December 31,                   Ended September 30,
                                             -------------------------------------------        --------------------------
 
                                                1994             1995            1996              1996             1997
                                             ----------       ----------      ----------        ----------       ---------
                                                                                                          (unaudited)
                                                                               (dollars in thousands)
Selected Operating Data and Financial Ratios:

<S>                                               <C>              <C>              <C>               <C>             <C>  
Operating margin                                  15.85%           16.59%           8.87%             9.23%           9.78%
EBITDA(3)                                      $ 72,834         $ 75,098        $ 63,373          $ 45,292        $ 44,253
Capital expenditures                             39,261           32,560          21,883            19,088          21,551
Additions to landfill permits and
  closure expenditures                            1,199            1,125           3,186             2,442           2,790
Depreciation and amortization(4)                 35,008           33,616          35,976            26,650          27,725
EBITDA to interest expense                         2.87x            2.74x           2.01x             1.95x           2.03x
EBITDA to cash interest expense                    3.02x            2.88x           2.10x             2.04x           2.14x


                                                                                              September 30, 1997
                                                                                                  (unaudited)
                                                                                                (in thousands)

Balance Sheet Data:

Cash and cash equivalents                                                                          $  8,868
Total assets                                                                                        420,485
Working capital                                                                                       2,118
Long-term debt (including current portion)                                                          288,564
Stockholders' equity                                                                                 44,280

- -----------------------------
<FN>
(1)      The Company sold its IMSAMET  subsidiary in January 1997. See Note D to
         the consolidated financial statements in the Form 10-K.

(2)      For the purpose of  computing  the ratio of earnings to fixed  charges,
         "fixed  charges"  consist  of  interest  on  debt  (including  interest
         allocated  to  discontinued   operations,   interest   capitalized  and
         amortization of debt issuance costs) and the interest element in rental
         payments.  "Earnings"  consist  of income  from  continuing  operations
         before  fixed  charges and income  taxes and  amortization  of interest
         capitalized  in prior periods.  The Company  incurred  deficiencies  in
         earnings available to cover fixed charges of $6,607 in 1992 and $17,839
         in 1993.

(3)      EBITDA represents earnings before interest expense, income tax expense,
         depreciation  and  amortization.  EBITDA  amounts  and  related  ratios
         include the results of IMSAMET through 1996. In addition, in accordance
         with the  Indenture,  the EBITDA amount for the year ended December 31,
         1996  includes a $4,400  deferred  income tax  benefit,  and the EBITDA
         amount for the  nine-month  period ended  September 30, 1997 includes a
         $284 deferred income tax benefit.  The Company has included EBITDA data
         (which  are not a measure  of  financial  performance  under  generally
         accepted  accounting  principles)  because  such  data  may be  used by
         certain investors and because such data will be used in determining the
         permissibility of incurring additional debt under the Indenture.

(4)      Includes depreciation of property, plant and equipment and amortization
         of goodwill, Ohio landfill deferred charges,  landfill permits and debt
         issuance costs.
</FN>
</TABLE>


                                       13

<PAGE>



                                  RISK FACTORS

         Holders  of  Existing  Notes  should  carefully  consider  all  of  the
information set forth herein and in the Annexes,  and in particular the specific
factors  set  forth  below.  The risk  factors  set forth  below  are  generally
applicable to the Existing Notes as well as the New Notes.

         This  Prospectus  includes  "forward  looking  statements"  within  the
meaning of Section 27A of the  Securities  Act and  Section 21E of the  Exchange
Act. Although EnviroSource believes that its plans,  intentions and expectations
reflected in such  forward-looking  statements  are  reasonable,  it can give no
assurance  that  such  plans,  intentions  or  expectations  will  be  achieved.
Important  factors that could cause  actual  results to differ  materially  from
EnviroSource's  forward-looking  statements are set forth below and elsewhere in
this Prospectus.  All forward-looking statements attributable to EnviroSource or
persons  acting on its behalf are expressly  qualified in their  entirety by the
cautionary statements set forth below.

Risks Associated with High Leverage and Debt Covenants

         As of September 30, 1997, the Company had outstanding on a consolidated
basis  approximately  $289 million of indebtedness.  On a pro forma basis, after
giving  effect to the sale of the Existing  Notes,  the  application  of the net
proceeds  therefrom  and the  Company's  sale  of its  IMSAMET  subsidiary,  the
Company's  earnings  before fixed charges would have been  insufficient to cover
its fixed charges for the year ended December 31, 1996 by $8.7 million,  and its
EBITDA less  capital  expenditures  and  interest  expense  (and also  excluding
non-cash  deferred  income  tax  benefit)  would  have been  approximately  $2.2
million.  For the nine months ended  September 30, 1997, the Company's  earnings
before  fixed  charges  were  insufficient  to cover its fixed  charges for such
period by $4.2 million,  and its EBITDA less capital  expenditures  and interest
expense  (and also  excluding  non-cash  deferred  income tax  benefit) for such
period was approximately $0.7 million.

         The degree to which the Company is leveraged  could  negatively  impact
(i) the ability of the Company to obtain any  necessary  financing in the future
for working capital,  capital  expenditures,  debt service requirements or other
purposes,  (ii) the  Company's  flexibility  in planning  for,  or reacting  to,
changes in its business,  (iii) the  Company's  position with respect to some of
its competitors,  who may be less highly leveraged than the Company and (iv) the
Company's cash available to fund  operations,  because a substantial  portion of
the Company's cash flows must be used to service its indebtedness, including the
Notes and the 1993 Notes.

         The  ability of the  Company to meet debt  service  obligations  and to
reduce total debt will be dependent upon its future  performance which, in turn,
will be subject to general  economic  conditions and to financial,  business and
other factors,  including factors beyond its control.  To a significant  degree,
the  Company's  future  performance  will be  influenced by the general level of
activity  in the  steel  industry,  which is  subject  to a variety  of  factors
including foreign competition and labor relations.

         The Company  believes  that,  based on current levels of operations and
anticipated growth,  cash flow from operations,  together with funds on hand and
other available sources of funds,  including  borrowings under IMS's bank credit
facility  (the "Bank  Credit  Facility"),  which has a  borrowing  and letter of
credit  capacity of $50  million  and matures in 2001,  will be adequate to make
required   payments  of  principal   and  interest  on  the  Company's  and  its
subsidiaries'  respective debt, to permit anticipated capital  expenditures,  to
make required  trust fund payments in connection  with landfill  activities,  to
fund working capital requirements and to enable the Company and its subsidiaries
to comply  with the terms of their debt  agreements.  The  Company  has  amended
certain  financial  covenants in the Bank Credit  Facility  twice during 1997 to
relax the covenant  requirements.  See "Management's  Discussion and Analysis of
Financial   Condition  and  Results  of  Operations  --  Liquidity  and  Capital
Resources"  in the Third  Quarter  10-Q and in the Form 10-K.  If the Company is
unable to generate  sufficient cash flow or otherwise  obtain funds necessary to
make required  payments,  or if the Company  otherwise  fails to comply with the
various  covenants in its  indebtedness,  it would be in default under the terms
thereof,  which would permit the holders of such  indebtedness to accelerate the
maturity of such indebtedness and could cause defaults under other  indebtedness
of the Company.  Such defaults  could result in a default on the Notes and could
delay or preclude payment of interest or principal on the Notes.

         If the Company and its subsidiaries are unable to comply with the terms
of their  debt  agreements  and  fail to  generate  sufficient  cash  flow  from
operations in the future,  they may be required to refinance all or a portion of
their existing debt or to obtain additional financing. There can be no assurance
that any such  refinancing  would be possible or that any  additional  financing
could be obtained, particularly in view of the Company's anticipated high levels
of debt, the fact that the Company's

                                       14

<PAGE>



consolidated  accounts  receivable  have been given as collateral to secure bank
borrowings  of the  Company  and  its  subsidiaries,  and  the  debt  incurrence
restrictions  under its debt  agreements.  If no such  refinancing or additional
financing  were  available,  the Company  could be forced to default on its debt
obligations  and,  as an  ultimate  remedy,  seek  protection  under the federal
bankruptcy laws.

Loss History

         The Company  experienced  a net loss of $4.3 million for the year ended
December  31,  1996.  See  "Management's  Discussion  and  Analysis of Financial
Condition and Results of Operations" in the Form 10-K. In addition,  in 1996 and
the nine months ended September 30, 1996 and 1997, earnings were insufficient to
cover fixed charges.  Although the Company realized a profit for the nine months
ended  September  30,  1997,  there can be no  assurance  that the Company  will
continue to be profitable. See "Summary -- Summary Financial Data."

Dependence on Key Customers

         USX Corporation ("USX") accounted for an aggregate of approximately 20%
of the Company's  consolidated  revenues from continuing  operations in 1996 and
for the nine months ended September 30, 1997,  pursuant to a number of contracts
which  terminate  at  various  times over the next four  years.  The loss by the
Company of any of its key  customers,  particularly  in the IMS  business  unit,
either as a result  of early  termination  or  non-renewal,  or any  significant
disruption  or reduction  in such  customers'  businesses  would have a material
adverse effect on the Company's revenues and operating income.

Dependence on Steel Mill Production; Economic Conditions

         The  Company's  revenues  are  largely  dependent  on  levels  of steel
production  at its  customers'  mills.  Although  primarily  driven by  economic
factors, steel production can, at times, be negatively impacted by random events
such as strikes  and mill  outages.  For  example,  the  Company  experienced  a
downswing  in  earnings  as a  result  of a 10 1/2  month  strike  by the  union
employees of  Wheeling-Pittsburgh  that ended on August 13,  1997,  and a 60 day
blast furnace  outage  during 1996 at USX that  resulted  from an explosion.  In
addition,   the  Company's   business  is  also  affected  by  general  economic
conditions.  There can be no assurance that an economic downturn will not result
in a reduction in the volume of waste disposed at the Company's  operations,  in
the level of steel  production  in the  United  States or in the price  that the
Company can charge for its services.  For example,  depressed market  conditions
led to lower treatment and disposal  tonnage in 1996,  contributing to a decline
in the Company's revenues for that year.

Competition

         The IMS and Technologies business units face intense competition in the
respective industries in which they operate and both require substantial capital
resources.  IMS  currently  has  one  large  competitor,  the  Heckett-MultiServ
division of Harsco Corporation,  and a number of smaller competitors,  including
several new entrants.  The  Technologies  business unit faces  competition  from
several competitors,  and although the Company is increasing its market share in
the EAF dust stabilization business, its principal competitor formerly accounted
for at least 60% of the U.S.  market.  Technologies'  expansion in the treatment
and  handling of EAF dust has  resulted  in price  reductions  and severe  price
competition.  There can be no  assurance  that the Company  will not continue to
experience  such price  competition in the future or that such activity will not
have a  material  adverse  effect  on  the  Company's  business  or  results  of
operations.  In  addition,  both  of the  Company's  business  units  face  some
competitors which have significantly larger operations and greater resources.

Risks Associated with Environmental Regulations and Compliance

         While  certain  of  the  Company's   businesses  have  benefitted  from
increased environmental  regulation,  they are subject to extensive and changing
regulations  by federal,  state and local  authorities  because such  businesses
treat, store or dispose of regulated substances. The regulatory process requires
these  businesses to obtain and retain  governmental  permits to conduct various
aspects of their  operations.  The failure to obtain or retain  certain of these
permits,  or the violation,  modification  or revocation of such permits,  could
have an  adverse  effect  on such  businesses  and,  potentially,  the  Company,
including the ability of the Company to service its debt obligations,  including
payment of interest or principal on the Notes.


                                       15

<PAGE>



         In  particular,  Envirosafe  Services  of  Ohio,  Inc.  and  Envirosafe
Services of Idaho,  Inc. (the "Envirosafe  Companies"),  which operate hazardous
waste landfills, are subject to a complex,  evolving array of federal, state and
local environmental laws and regulations.  Such requirements not only can affect
the demand for the  Envirosafe  Companies'  services,  but can also  require the
Company  to incur  significant  costs for such  matters as  facility  upgrading,
remediation  or other  corrective  action,  facility  closure  and  post-closure
maintenance  and  monitoring.  Future  imposition  of  additional  environmental
compliance  requirements  could have a material adverse effect on the results of
operations  and/or  financial  condition of the Company  and/or its  Treatment &
Disposal  Services  business segment (which includes the Envirosafe  Companies),
but the Company is unable to predict any such future  requirements.  The Company
believes that its consolidated  financial statements  appropriately  reflect all
presently-known   compliance   costs  in  accordance  with  generally   accepted
accounting  principles.  Stringent  interpretation  of  environmental  laws  and
regulations governing hazardous waste treatment and disposal facilities by state
and federal  regulators  also subjects the Company to violations  and fines from
time to time, none of which has been material to the Company.

         Heightened public awareness of environmental issues has placed federal,
state and local governments  under continuing  pressure to propose and adopt new
laws,  regulations or initiatives for the environmental  services industry.  The
Company  cannot  predict  the  extent to which any  legislative,  regulatory  or
enforcement  developments  may affect the  operation  of its  businesses  or its
future financial condition.

Holding Company Structure; Security Interests

         The Company  currently  conducts  substantially  all of its  operations
through  subsidiaries.  A  significant  portion of the assets of the Company are
owned by its  subsidiaries.  As a holding  company,  the Company is dependent on
dividends or other  intercompany  transfers of funds from these  subsidiaries to
meet its debt service and other  obligations,  including the payment of interest
and  principal  on  the  Notes.  The  Notes  are  unsecured  and  therefore  are
effectively  subordinated to any secured  indebtedness of the Company.  The Bank
Credit Facility is collateralized by security interests in assets of the Company
and its  subsidiaries,  including  substantially  all of the  capital  stock and
accounts receivable of its domestic subsidiaries.  Consequently, in the event of
a bankruptcy,  liquidation,  dissolution,  reorganization or similar  proceeding
with respect to the Company or any of its  subsidiaries,  the  Company's  assets
securing  borrowings  under the Bank  Credit  Facility  and other  assets of the
Company's  subsidiaries would be available to satisfy obligations under the Bank
Credit Facility and other creditors of the subsidiaries before any payment could
be made on the Notes. In addition,  to the extent such assets did not satisfy in
full the secured  indebtedness,  the holders of such  indebtedness  would have a
claim  against  the  Company's  subsidiaries  for any  shortfall  that  would be
effectively senior to the Notes. Accordingly, there may only be a limited amount
of assets  available  to satisfy  any claims of the holders of the Notes upon an
acceleration of the Notes.

         The Company's  subsidiaries  are separate  legal  entities that have no
obligation  to pay any  amounts  due  pursuant to the Notes or to make any funds
available therefor,  whether by dividends,  loans or other payments. Because the
Company's  subsidiaries  have not  guaranteed  the payment of the  principal  or
interest on the Notes,  the  Company's  rights and the rights of its  creditors,
including  holders  of Notes,  to  participate  in the  distribution  or realize
proceeds from the assets of any subsidiary of the Company upon such subsidiary's
liquidation or recapitalization are effectively subordinated to the prior claims
of the  subsidiary's  creditors,  including  the  lenders  under the Bank Credit
Facility,  and to any security interest in the assets of such subsidiary held by
such lenders and other creditors.

Risks Associated with Acquisitions

         As  described in the  "Summary,"  the Company may  selectively  acquire
businesses  which will result in increased  market  penetration  and/or  provide
complementary  services  which it can  market to its  existing  and  prospective
customer base. To finance such  acquisitions,  the Company may incur  additional
indebtedness, including secured indebtedness. In pursuing such acquisitions, the
Company would face such commonly  encountered risks as, for example,  failing to
assimilate the operations and personnel of the acquired  businesses,  disrupting
the Company's  ongoing business,  dissipating the Company's  limited  management
resources  and  impairing  relationships  with  employees  and  customers of the
acquired business as a result of changes in ownership and management. During the
early part of this integration period, profitability of an acquired business may
decrease  from  profit  levels  attained  prior  to the  acquisition.  Moreover,
additional indebtedness incurred to make acquisitions could adversely affect the
Company's liquidity and results of operations.


                                       16

<PAGE>



Control of the Company

         Freeman  Spogli & Co.,  the general  partner of FS Equity  Partners II,
L.P., the Company's  principal  stockholder,  controls  approximately 47% of the
total outstanding voting power of the Company. As a result, Freeman Spogli & Co.
has the  ability to  control  the  Company's  management,  policy and  financing
decisions  and, as a practical  matter,  to elect the entire Board of Directors.
See "Security  Ownership of Certain  Beneficial  Owners and  Management"  in the
Proxy Statement.

Document Subpoena

         In October 1996 IMS received a grand jury subpoena requesting documents
pursuant to an inquiry  relating to the processing of iron and steel slag in the
United States and Canada being  conducted by the Antitrust  Division of the U.S.
Department  of  Justice.  Although  the  Company  has given the  government  its
complete  cooperation  and is confident  that it conducts its operations in full
compliance  with the law,  the Company has not been  informed by the  government
that this inquiry has been concluded.

Risk of Fraudulent Conveyance Liability

         If a court were to find that, at the time the Company granted  security
interests to or for the benefit of the lenders under the Bank Credit Facility or
any of its subsidiaries  granted security  interests or delivered  guarantees to
such or any other of their lenders,  the Company or any such subsidiary,  as the
case may be, did not receive fair  consideration or reasonably  equivalent value
for the grant of such security  interests or delivery of such guarantees and the
Company or such  subsidiary  (i) was  insolvent at such time,  (ii) was rendered
insolvent by reason of the grant of such security  interests or delivery of such
guarantees,  (iii)  was  engaged  or  was  about  to  engage  in a  business  or
transaction for which its remaining assets were  unreasonably  small in relation
to the business or  transaction  or (iv)  intended to incur,  assume or issue or
believed it would incur, assume or issue debts beyond its ability to pay as they
became due, then a creditor or  representative  of creditors could seek to avoid
the grant of such security interests and delivery of such guarantees. This could
result in an event of default with respect to the Bank Credit  Facility or other
agreement or instrument, as applicable,  which, under the terms thereof (subject
to applicable  laws),  would allow the lenders under the Bank Credit Facility or
other  agreement  or  instrument  to  accelerate  the  indebtedness  outstanding
thereunder.  Such events  could result in a default on the Notes and could delay
or preclude payment of interest or principal on the Notes.

Lack of Public Market for the Notes

         Although the 1993 Notes have  substantially the same terms as the Notes
and the Existing Notes  currently are eligible for trading in the PORTAL Market,
the New Notes are new  securities  for which there is currently  no  established
market.  The Company  does not intend to apply for a listing or quotation of the
New Notes. If the New Notes are traded after their issuance, they may trade at a
discount from their initial offering price,  depending upon prevailing  interest
rates, the market for similar securities (such as the 1993 Notes), the financial
condition and  prospects of the Company and other factors  beyond the control of
the Company,  including  general  economic  conditions.  Although the  Placement
Agents have informed the Company that they currently  intend to make a market in
the New Notes,  they are not  obligated to do so, and any such market making may
be  discontinued at any time without  notice.  Accordingly,  no assurance can be
given as to the  development  or  liquidity  of any  trading  market for the New
Notes.  Holders of the New Notes  should be aware that they may be  required  to
bear the financial risks of their  investment for an indefinite  period of time.
See "Description of the Notes."


                                       17

<PAGE>



                                 USE OF PROCEEDS

         The Company will not receive any proceeds from the Exchange Offer.  The
net  proceeds to the Company  from the sale of the  Existing  Notes were used as
follows:  (i) $47.0 million was applied to repay the Company's  borrowings under
the Bank  Credit  Facility  and (ii)  approximately  $0.5  million  was used for
capital expenditures.  The amount outstanding under the Bank Credit Facility was
$47.0 million on September 30, 1997, virtually all of which had been incurred to
finance  capital  expenditures.  Interest  on  borrowings  under the Bank Credit
Facility  accrues at variable rates,  currently at prime plus 1.25% and at LIBOR
plus 2.5%, and the Bank Credit  Facility  terminates in January 2001. The entire
$50 million current amount of the Bank Credit  Facility (which includes  letters
of credit) may be reborrowed.

                                 CAPITALIZATION

         The following table sets forth the capitalization of EnviroSource as of
September 30, 1997. This table should be read in conjunction with  "Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  and
the consolidated financial statements of the Company, which are set forth in the
Third Quarter 10-Q and the Form 10-K.


                                                              September 30, 1997
                                                                  (unaudited)
                                                                (in thousands)

Short-term debt:
   Current portion of long-term debt                             $      6,248
                                                                 ============

Long-term debt:
   Bank Credit Facility(1)                                     $         --
   9 3/4% Senior Notes due 2003                                       220,000
   9 3/4% Senior Notes due 2003, Series B                              50,000
   Other debt                                                          12,316
                                                                 ------------
      Total long-term debt                                            282,316
Stockholders' equity:
   Common stock, par value $.05 per share, 60,000,000
     shares authorized, 40,713,765 shares issued and
     outstanding                                                        2,036
   Capital in excess of par value                                     174,190
   Accumulated deficit                                               (130,219)
   Stock purchase loans receivable from officers                         (690)
   Canadian translation adjustment                                     (1,037)
                                                               --------------
   Total stockholders' equity                                          44,280
                                                                -------------
              Total capitalization                               $    326,596
                                                                 ============
- ------------------------------------
(1)      The ongoing $50,000 of revolving  credit borrowing and letter of credit
         capacity  declines  by  12.5%  in each of  January  1999  and  2000 and
         terminates in January 2001.



                                       18

<PAGE>



                               THE EXCHANGE OFFER

Terms Of The Exchange Offer; Period For Tendering Existing Notes

   
         Upon  the  terms  and  subject  to the  conditions  set  forth  in this
Prospectus  and  in the  accompanying  Letter  of  Transmittal  (which  together
constitute the Exchange  Offer),  the Company will accept for exchange  Existing
Notes which are  properly  tendered on or prior to the  Expiration  Date and not
withdrawn as permitted below. As used herein,  the term "Expiration  Date" means
5:00 p.m., New York City time, on April 8, 1998; provided,  however, that if the
Company has extended  the period of time for which the  Exchange  Offer is open,
the term "Expiration  Date" means the latest time and date to which the Exchange
Offer is extended.

         As of the date of this Prospectus,  $50.0 million  aggregate  principal
amount of the Existing Notes are outstanding. This Prospectus, together with the
Letter of  Transmittal,  is first  being  sent on or about  March 9, 1998 to all
holders of Existing  Notes known to the Company.  The  Company's  obligation  to
accept Existing Notes for exchange  pursuant to the Exchange Offer is subject to
certain  conditions  as set forth under "-- Certain  Conditions  to the Exchange
Offer" below.
    

         The Company  expressly  reserves the right, at any time or from time to
time, to extend the period of time during which the Exchange  Offer is open, and
thereby  delay  acceptance  for any  exchange of any Existing  Notes,  by giving
notice of such extension to the holders thereof. During any such extension,  all
Existing Notes previously tendered will remain subject to the Exchange Offer and
may be accepted for exchange by the Company. Any Existing Notes not accepted for
exchange for any reason will be returned without expense to the tendering holder
thereof as promptly as  practicable  after the  expiration or termination of the
Exchange Offer.

         The Company  expressly  reserves  the right to amend or  terminate  the
Exchange  Offer,  and  not  to  accept  for  exchange  any  Existing  Notes  not
theretofore accepted for exchange,  upon the occurrence of any of the conditions
of the  Exchange  Offer  specified  below  under "-- Certain  Conditions  to the
Exchange  Offer." The  Company  will give  notice of any  extension,  amendment,
non-acceptance  or  termination to the holders of the Existing Notes as promptly
as  practicable,  such notice in the case of any extension to be issued no later
than  9:00  a.m.,  New York  City  time,  on the next  business  day  after  the
previously scheduled Expiration Date.

         Holders of  Existing  Notes do not have any  appraisal  or  dissenters'
rights  under  the  Delaware  General  Corporation  Law in  connection  with the
Exchange Offer.

Procedures For Tendering Existing Notes

         The tender to the Company of Existing  Notes by a holder thereof as set
forth below and the acceptance  thereof by the Company will constitute a binding
agreement  between  the  tendering  holder  and the  Company  upon the terms and
subject to the conditions set forth in this  Prospectus and in the  accompanying
Letter of Transmittal.  Except as set forth below, a holder who wishes to tender
Existing  Notes for  exchange  pursuant to the  Exchange  Offer must  transmit a
properly completed and duly executed Letter of Transmittal,  including all other
documents required by such Letter of Transmittal, to United States Trust Company
of New York at one of the addresses set forth below under "-- Exchange Agent" on
or prior to the Expiration  Date. In addition,  either (i) certificates for such
Existing  Notes must be received by the Exchange  Agent along with the Letter of
Transmittal,  or  (ii)  a  timely  confirmation  of  a  book-entry  transfer  (a
"Book-Entry  Confirmation")  of  such  Existing  Notes,  if  such  procedure  is
available,  into the Exchange  Agent's  account at The Depository  Trust Company
("DTC") pursuant to the procedures for book-entry transfer described below, must
be received by the Exchange  Agent prior to the  Expiration  Date, or the holder
must comply with the guaranteed delivery procedures  described below. THE METHOD
OF DELIVERY OF EXISTING  NOTES,  LETTERS OF  TRANSMITTAL  AND ALL OTHER REQUIRED
DOCUMENTS  IS AT THE  ELECTION  AND RISK OF THE HOLDER.  IF SUCH  DELIVERY IS BY
MAIL, IT IS RECOMMENDED  THAT REGISTERED  MAIL,  PROPERLY  INSURED,  WITH RETURN
RECEIPT REQUESTED,  BE USED. IN ALL CASES,  SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY  DELIVERY.  NO LETTERS OF  TRANSMITTAL OR EXISTING NOTES SHOULD BE
SENT TO THE COMPANY.

         Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be,  must be  guaranteed  unless the  Existing  Notes  surrendered  for
exchange  pursuant  thereto  are  tendered  (i) by a  registered  holder  of the
Existing  Notes  who  has  not  completed  the box  entitled  "Special  Issuance
Instructions" or "Special Delivery Instructions" on the Letter of

                                       19

<PAGE>



Transmittal  or (ii) for the  account of an  Eligible  Institution  (as  defined
herein).  In the event that signatures on a Letter of Transmittal or a notice of
withdrawal,  as the case may be, are required to be guaranteed,  such guarantees
must be by a firm which is a  participant  in a recognized  signature  guarantee
medallion program (collectively, "Eligible Institutions"). If Existing Notes are
registered  in the  name of a  person  other  than a  signer  of the  Letter  of
Transmittal, the Existing Notes surrendered for exchange must be endorsed by, or
be accompanied  by a written  instrument or instruments of transfer or exchange,
in satisfactory  form as determined by the Company in its sole discretion,  duly
executed by, the registered holder with the signature  thereon  guaranteed by an
Eligible Institution.

         All questions as to the validity,  form, eligibility (including time of
receipt)  and  acceptance  of  Existing  Notes  tendered  for  exchange  will be
determined by the Company in its sole discretion,  which  determination shall be
final and binding. The Company reserves the absolute right to reject any and all
tenders of any particular  Existing Notes not properly tendered or to not accept
any particular  Existing Notes which  acceptance  might,  in the judgment of the
Company or its  counsel,  be unlawful.  The Company  also  reserves the absolute
right to waive any defects or irregularities or conditions of the Exchange Offer
as to any particular  Existing Notes either before or after the Expiration  Date
(including  the  right to waive the  ineligibility  of any  holder  who seeks to
tender Existing Notes in the Exchange Offer).  The  interpretation  of the terms
and conditions of the Exchange Offer as to any particular  Existing Notes either
before or after the Expiration Date (including the Letter of Transmittal and the
instructions  thereto) by the Company shall be final and binding on all parties.
Unless  waived,  any defects or  irregularities  in  connection  with tenders of
Existing Notes for exchange must be cured within such reasonable  period of time
as the Company shall determine.  Neither the Company, the Exchange Agent nor any
other  person  shall be under  any duty to give  notification  of any  defect or
irregularity  with  respect to any tender of Existing  Notes for  exchange,  nor
shall any of them incur any liability for failure to give such notification.

         If the Letter of  Transmittal  or any Existing  Notes or instruments of
transfer  or  exchange  are  signed  by  trustees,  executors,   administrators,
guardians,  attorneys-in-fact,  officers of  corporations  or others acting in a
fiduciary  or  representative  capacity,  such persons  should so indicate  when
signing, and, unless waived by the Company,  proper evidence satisfactory to the
Company of their authority to so act must be submitted.

         Each broker-dealer holder, by tendering,  will represent to the Company
that, among other things,  the New Notes acquired pursuant to the Exchange Offer
are being  obtained  in the  ordinary  course of business of such holder and any
beneficial  holder  thereof,  that neither  such holder nor any such  beneficial
holder has an arrangement or understanding with any person to participate in the
distribution  of such New Notes and that  neither such holder nor any such other
beneficial holder is an "affiliate," as defined under Rule 405 of the Securities
Act,  of the  Company.  If the holder is not a  broker-dealer,  such holder must
represent  that  it is  not  engaged  in nor  does  it  intend  to  engage  in a
distribution of the New Notes.

Acceptance Of Existing Notes For Exchange; Delivery Of New Notes

         For each  Existing  Note  accepted  for  exchange,  the  holder of such
Existing Note will receive a New Note having a principal amount equal to that of
the surrendered  Existing Note. For purposes of the Exchange Offer,  the Company
shall be deemed to have accepted  properly  tendered Existing Notes for exchange
when,  as and if the Company has given oral and  written  notice  thereof to the
Exchange Agent.

         In all  cases,  issuance  of New  Notes  for  Existing  Notes  that are
accepted  for exchange  pursuant to the  Exchange  Offer will be made only after
timely receipt by the Exchange Agent of certificates  for such Existing Notes or
a timely  Book-Entry  Confirmation  of such  Existing  Notes  into the  Exchange
Agent's  account  at DTC,  a  properly  completed  and duly  executed  Letter of
Transmittal and all other required documents. If any tendered Existing Notes are
not  accepted  for any  reason  set  forth in the terms  and  conditions  of the
Exchange Offer or if Existing Notes are submitted for a greater principal amount
than the holder desires to exchange,  such unaccepted or non-exchanged  Existing
Notes will be returned  without expense to the tendering  holder thereof (or, in
the case of Existing  Notes  tendered by  book-entry  transfer into the Exchange
Agent's account at DTC pursuant to the book-entry transfer procedures  described
below,  such  non-exchanged  Existing  Notes  will  be  credited  to an  account
maintained  with DTC) as promptly as  practicable  after the  expiration  of the
Exchange Offer.


                                       20

<PAGE>



Book-Entry Transfer

         Any financial  institution  that is a participant  in DTC's systems may
make  book-entry  delivery  of Existing  Notes by causing  DTC to transfer  such
Existing Notes into the Exchange Agent's account at DTC in accordance with DTC's
procedures  for transfer.  However,  although  delivery of Existing Notes may be
effected  through  book-entry  transfer  at DTC,  the Letter of  Transmittal  or
facsimile thereof with any required signature  guarantees and any other required
documents  must,  in any case,  be  transmitted  to and received by the Exchange
Agent at one of the  addresses  set forth below under "-- Exchange  Agent" on or
prior to the Expiration  Date or the guaranteed  delivery  procedures  described
below must be complied with.

Guaranteed Delivery Procedures

         If a  registered  holder of the Existing  Notes  desires to tender such
Existing Notes and the Existing  Notes are not  immediately  available,  or time
will not permit such  holder's  Existing  Notes or other  required  documents to
reach the Exchange  Agent  before the  Expiration  Date,  or the  procedure  for
book-entry  transfer  cannot be  completed  on a timely  basis,  a tender may be
effected if (i) the tender is made through an Eligible  Institution,  (ii) prior
to the  Expiration  Date,  the Exchange  Agent has received  from such  Eligible
Institution a properly  completed and duly executed  Letter of Transmittal (or a
facsimile thereof) and Notice of Guaranteed Delivery,  substantially in the form
provided by the Company (by telegram,  telex,  facsimile  transmission,  mail or
hand  delivery),  setting  forth the name and  address of the holder of Existing
Notes and the amount of  Existing  Notes  tendered,  stating  that the tender is
being made thereby and  guaranteeing  that,  within five New York Stock Exchange
("NYSE")  trading days after the date of  execution of the Notice of  Guaranteed
Delivery, the certificates for all physically tendered Existing Notes, in proper
form for  transfer,  or a Book-Entry  Confirmation,  as the case may be, and any
other documents  required by the Letter of Transmittal  will be deposited by the
Eligible  Institution with the Exchange Agent and (iii) the certificates for all
physically tendered Existing Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the Letter
of Transmittal  are received by the Exchange Agent within five NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.

Withdrawal Rights

         Tenders of  Existing  Notes may be  withdrawn  at any time prior to the
Expiration  Date.  For a  withdrawal  to  be  effective,  a  written  notice  of
withdrawal  must be received by the Exchange  Agent at one of the  addresses set
forth  below under "--  Exchange  Agent."  Any such  notice of  withdrawal  must
specify  the  name of the  person  having  tendered  the  Existing  Notes  to be
withdrawn,  identify the Existing Notes to be withdrawn (including the principal
amount of such Existing Notes), and (where  certificates for Existing Notes have
been transmitted)  specify the name in which such Existing Notes are registered,
if different from that of the withdrawing  holder.  If certificates for Existing
Notes have been  delivered or otherwise  identified to the Exchange  Agent then,
prior to the  release of such  certificates,  the  withdrawing  holder must also
submit the serial numbers of the particular  certificates  to be withdrawn and a
signed  notice  of  withdrawal,   with  signatures  guaranteed  by  an  Eligible
Institution  unless such holder is an Eligible  Institution.  If Existing  Notes
have been tendered pursuant to the procedure for book-entry  transfer  described
above,  any notice of withdrawal must specify the name and number of the account
at DTC to be credited with the  withdrawn  Existing  Notes and otherwise  comply
with the procedures of such facility. All questions as to the validity, form and
eligibility  (including  time of receipt) of such notices will be  determined by
the Company,  whose determination shall be final and binding on all parties. Any
Existing Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer.  Any Existing Notes which have been
tendered  for  exchange  but  which are not  exchanged  for any  reason  will be
returned to the holder  thereof  without cost to such holder (or, in the case of
Existing Notes tendered by book-entry transfer into the Exchange Agent's account
at DTC pursuant to the book-entry  transfer  procedures  described  above,  such
Existing  Notes  will be  credited  to an  account  maintained  with DTC for the
Existing Notes) as soon as practicable after withdrawal,  rejection of tender or
termination  of the Exchange  Offer.  Properly  withdrawn  Existing Notes may be
retendered by following one of the procedures described under "-- Procedures for
Tendering Existing Notes" above at any time on or prior to the Expiration Date.

Certain Conditions To The Exchange Offer

         Notwithstanding  any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange,  or to issue New Notes in exchange
for, any Existing Notes and may terminate or amend the Exchange Offer if,

                                       21

<PAGE>



at any time before the  acceptance  of such  Existing  Notes for exchange or the
exchange of New Notes for such Existing Notes,  the Company  determines that the
Exchange Offer violates  applicable  law, any applicable  interpretation  of the
staff of the  Commission  or any  order of any  governmental  agency or court of
competent jurisdiction.

         The  foregoing  conditions  are for the sole benefit of the Company and
may be asserted by the Company  regardless of the  circumstances  giving rise to
any such  condition  or may be waived by the  Company in whole or in part at any
time and from time to time in its  reasonable  discretion.  The  failure  by the
Company at any time to exercise any of the foregoing  rights shall not be deemed
a waiver of such  right and each such  right  shall be deemed an  ongoing  right
which may be asserted at any time and from time to time.

         In  addition,  the Company  will not accept for  exchange  any Existing
Notes  tendered,  and no New  Notes  will be  issued  in  exchange  for any such
Existing  Notes, if at such time any stop order shall be threatened or in effect
with  respect  to the  Exchange  Offer  Registration  Statement  of  which  this
Prospectus  constitutes a part or the  qualification  of the Indenture under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). In any such
event the Company is required  under the  Registration  Rights  Agreement to use
every  reasonable  effort  to obtain  the  withdrawal  of any stop  order at the
earliest possible time.

Exchange Agent

         United  States  Trust  Company  of New York has been  appointed  as the
Exchange  Agent for the  Exchange  Offer.  All executed  Letters of  Transmittal
should be  directed  to the  Exchange  Agent at one of the  addresses  set forth
below. Questions and requests for assistance,  requests for additional copies of
this  Prospectus  or of the Letter of  Transmittal  and  requests for Notices of
Guaranteed  Delivery  should be  directed to the  Exchange  Agent  addressed  as
follows:

                                    By Mail:
                     United States Trust Company of New York
                           P.O. Box 843 Cooper Station
                            New York, New York 10276
                       Attention: Corporate Trust Services

                            By Hand before 4:30 p.m.:
                     United States Trust Company of New York
                                  111 Broadway
                            New York, New York 10006
                 Attention: Lower Level, Corporate Trust Window

                By Overnight Courier and by Hand after 4:30 p.m.:
                     United States Trust Company of New York
                            770 Broadway, 13th Floor
                            New York, New York 10003

                                  By Facsimile:
                                 (212) 780-0592
                           Attention: Customer Service

                              Confirm by Telephone:
                                 (800) 548-6565

         Delivery  other  than as set forth  above will not  constitute  a valid
delivery.

Fees and Expenses

         The Company  will not make any  payments to brokers,  dealers or others
soliciting  acceptances of the Exchange  Offer.  The principal  solicitation  is
being made by mail; however,  additional  solicitations may be made in person or
by telephone by officers, employees and agents of the Company.

                                       22

<PAGE>




         The expenses to be incurred in connection  with the Exchange Offer will
be paid by the Company.  Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.

Transfer Taxes

         Holders  who  tender  their  Existing  Notes for  exchange  will not be
obligated to pay any transfer taxes in connection therewith, except that holders
who  instruct  the Company to register New Notes in the name of, or request that
Existing  Notes not tendered or not  accepted in the Exchange  Offer be returned
to, a person other than the registered  tendering holder will be responsible for
the payment of any applicable transfer tax thereon.

Consequences Of Failure To Exchange; Resales Of New Notes

         Holders of Existing  Notes who do not exchange their Existing Notes for
New Notes  pursuant to the Exchange Offer will (i) continue to be subject to the
restrictions  on  transfer  of such  Existing  Notes as set forth in the  legend
thereon as a consequence  of the issuance of the Existing  Notes pursuant to the
exemptions   from,  or  in  transactions   not  subject  to,  the   registration
requirements  of the Securities Act and applicable  state  securities  laws, and
(ii) forfeit any rights or  privileges  granted  under the  Registration  Rights
Agreement.  Existing  Notes not  exchanged  pursuant to the Exchange  Offer will
continue  to  accrue  interest  at 9 3/4% per annum  and will  otherwise  remain
outstanding  in accordance  with their terms.  Holders of Existing  Notes do not
have any appraisal or dissenters' rights under the Delaware General  Corporation
Law in connection with the Exchange  Offer.  In general,  the Existing Notes may
not be  offered or sold  unless  registered  under the  Securities  Act,  except
pursuant  to an  exemption  from,  or  in a  transaction  not  subject  to,  the
Securities  Act and  applicable  state  securities  laws.  The Company  does not
currently  anticipate  that  it will  register  the  Existing  Notes  under  the
Securities Act. However,  (i) if the Company  determines that the Exchange Offer
registration  is not available or may not be  consummated as soon as practicable
after the last Exchange Date (as defined in the Registration  Rights  Agreement)
because it would violate applicable law or the applicable interpretations of the
staff of the  Commission,  (ii) the  Exchange  Offer is not for any other reason
consummated by March 30, 1998 or (iii) the Exchange Offer has been completed and
in the opinion of counsel for the Placement Agents a registration  statement (in
addition  to the  Exchange  Offer  Registration  Statement)  must be filed and a
non-Exchange Offer Prospectus (as defined in the Registration  Rights Agreement)
must be delivered by the  Placement  Agents in  connection  with any offering or
sale of New Notes,  the Company is  obligated  to use its best efforts to file a
registration  statement  on  the  appropriate  form  under  the  Securities  Act
providing for the sale by Holders of Existing  Notes held by such persons and to
have such registration statement declared effective by the Commission.

         Based  on  certain  interpretive  letters  issued  by the  staff of the
Commission  to third  parties in unrelated  transactions,  the Company is of the
view that New Notes  issued  pursuant to the  Exchange  Offer may be offered for
resale,  resold or otherwise  transferred by holders thereof (other than (i) any
such holder which is an  "affiliate"  of the Company  within the meaning of Rule
405 under the Securities Act or (ii) any broker-dealer  that purchases New Notes
from  the  Company  to  resell  pursuant  to Rule  144A or any  other  available
exemption)  without  compliance with the  registration  and prospectus  delivery
provisions of the Securities  Act,  provided that such New Notes are acquired in
the  ordinary  course  of  such  holders'  business  and  such  holders  have no
arrangement or understanding  with any person to participate in the distribution
of such New Notes.  If any  holder has any  arrangement  or  understanding  with
respect to the  distribution  of the New Notes to be  acquired  pursuant  to the
Exchange Offer, such holder (i) cannot rely on the applicable interpretations of
the staff of the  Commission  and (ii) must  comply  with the  registration  and
prospectus  delivery  requirements  of the Securities  Act in connection  with a
secondary resale transaction. A broker-dealer who holds Existing Notes that were
acquired  for its own  account  as a result of  market-making  or other  trading
activities  may be deemed  to be an  "underwriter"  within  the  meaning  of the
Securities  Act  and  must,   therefore,   deliver  a  prospectus   meeting  the
requirements  of the Securities Act in connection  with any resale of New Notes.
Each such  broker-dealer that receives New Notes for its own account in exchange
for  Existing   Notes,   where  such  Existing   Notes  were  acquired  by  such
broker-dealer  as  a  result  of  market-making   activities  or  other  trading
activities, must acknowledge in the Letter of Transmittal that it will deliver a
prospectus  in  connection  with any  resale  of such New  Notes.  See  "Plan of
Distribution."

         In  addition,  in order to comply with the  securities  laws of certain
jurisdictions,  if  applicable,  the New Notes may not be offered or sold unless
they have been  registered  or qualified  for sale in such  jurisdictions  or an
exemption from  registration or qualification is available and is complied with.
The Company  has  agreed,  pursuant to the  Registration  Rights  Agreement  and
subject to certain specified limitations therein, to register or qualify the New
Notes  for  offer  or  sale  under  the  securities  or  blue  sky  laws of such
jurisdictions as any holder of the Notes reasonably requests in writing.

                                       23

<PAGE>



                            DESCRIPTION OF THE NOTES

General

         The  Existing  Notes  were  issued  under  the  Indenture  dated  as of
September  30, 1997 (the  "Indenture"),  between  the Company and United  States
Trust Company of New York, as trustee (the "Trustee"),  in a private transaction
that was not subject to the registration requirements of the Securities Act. The
terms of the  Indenture  apply to the Existing  Notes and to the New Notes to be
issued in exchange therefor pursuant to the Exchange Offer (all such Notes being
referred  to herein  collectively  as the  "Notes").  The  following  summary of
certain  provisions  of the  Indenture  is subject to, and is  qualified  in its
entirety by reference  to, all the  provisions of the  Indenture,  including the
definitions  of certain terms therein and those terms made a part thereof by the
Trust  Indenture  Act.  Copies  of the  Indenture  and the  Registration  Rights
Agreement  are  available  as  set  forth  under  "Available  Information."  For
definitions of certain capitalized terms used in the following summary,  see "--
Certain Definitions."

         The Notes have been and will be issued in fully  registered  form only,
without coupons, in denominations of $1,000 or integral multiples thereof.

         The  Notes  are  transferable  and  exchangeable  at the  office of the
Registrar.  Principal  (and  premium,  if any) and  interest  are payable at the
office of the Paying  Agent,  but at the option of the Company,  interest may be
paid by check mailed to the registered  holders at their  registered  addresses.
The Company has  appointed  the  Trustee as the Paying  Agent and the  Registrar
under the Indenture.

         The Company has no sinking  fund or  mandatory  redemption  obligations
with respect to the Notes.

         The Company is subject to the informational  reporting  requirements of
Section 13 and 15(d) under the Exchange Act and, in accordance therewith,  files
certain  reports  and other  information  with the  Commission.  See  "Available
Information." The Indenture  requires the Company,  and the Company intends,  to
distribute to holders of the Notes at their  registered  addresses copies of all
quarterly and annual financial reports and all other information,  documents and
reports (or copies of such  portions of any of the  foregoing as the  Commission
may by rules and  regulations  prescribe)  which the Company is required to file
with the Commission  pursuant to Section 13 or 15(d) of the Exchange Act, within
15 days of filing with the Commission.  In addition,  the Company has covenanted
in the Indenture that if Sections 13 and 15(d) cease to apply,  the Company will
cause annual and  quarterly  financial  statements,  including any notes thereto
(and, with respect to annual reports,  an auditors' report by an accounting firm
of established national reputation) and a "Management's  Discussion and Analysis
of Financial  Condition  and Results of  Operations,"  comparable  to that which
would  be  required  to  appear  in  annual  or  quarterly  reports  under  such
provisions, to be filed with the Commission for public availability and with the
Trustee,  and to be mailed to Noteholders at their  registered  addresses within
the time periods specified in the Indenture.

Terms of the Notes

         The Notes are unsecured senior  obligations of the Company,  limited to
$50 million aggregate  principal amount,  and will mature on June 15, 2003. Each
Note bears  interest at 9 3/4% per annum  (except as set forth in the  following
paragraph) from June 15, 1997 or from the most recent  Interest  Payment Date to
which interest has been paid or provided for,  payable  semiannually (to Holders
of record at the  close of  business  on the June 1 or  December  1  immediately
preceding  the Interest  Payment  Date) on June 15 and December 15 of each year,
commencing December 15, 1997.

         If by six months after the date of initial  sale of the Existing  Notes
the Company has not  consummated  the Exchange  Offer for the Existing  Notes or
caused a shelf  registration  statement  with respect to resales of the Existing
Notes to be declared  effective,  the interest  rate on the Existing  Notes will
increase by 0.5% per annum until the  consummation of such Exchange Offer or the
effectiveness of such a registration statement.



                                       24

<PAGE>



Optional Redemption

         The  Company may not redeem the Notes  prior to June 15,  1998.  On and
after such date,  the  Company  may redeem the Notes at any time as a whole,  or
from time to time in part,  at the  following  redemption  prices  (expressed in
percentages of principal amount),  plus accrued interest to the redemption date,
if redeemed during the 12-month period  beginning June 15 of the years indicated
below:


                   Year                                Redemption Price
                   ----                                ----------------

                   1998                                104.875%
                   1999                                103.250%
                   2000                                101.625%
                   2001 and thereafter                 100.000%

Selection for Redemption

         In the case of any  partial  redemption,  selection  of the  Notes  for
redemption  will be made by the Trustee on a pro rata  basis,  by lot or by such
other  method  that  complies  with  applicable  legal and  securities  exchange
requirements,  if any, and that the Trustee in its sole discretion shall deem to
be fair and appropriate;  provided that no Note of $1,000 in original  principal
amount or less shall be redeemed in part.  If any Note is to be redeemed in part
only, the notice of redemption  relating to such Note shall state the portion of
the principal amount thereof to be redeemed. A Note in principal amount equal to
the unredeemed  portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note.

Ranking

         The  Indebtedness  evidenced  by the Notes  rank pari passu in right of
payment to all Senior Indebtedness of the Company (including the 1993 Notes) and
senior in right of payment to all  Subordinated  Obligations of the Company.  In
addition,  because the Company is a holding company that conducts  substantially
all of its business through its  Subsidiaries,  all liabilities,  including Bank
Credit Facility borrowings, of the Company's Subsidiaries are effectively senior
to the Notes. As of September 30, 1997, the Company (excluding its subsidiaries)
had $270.0 million of indebtedness  outstanding,  and the Company's Subsidiaries
had approximately  $90.8 million of liabilities  (including  approximately $18.6
million of indebtedness) effectively senior to the Notes.

Certain Definitions

         Set forth  below is a summary of certain of the  defined  terms used in
the Indenture.

         "Additional  Assets"  means (i) any  property or assets  related to the
primary  businesses of the Company and its Subsidiaries;  (ii) the Capital Stock
of a Person that becomes a Restricted  Subsidiary as a result of the acquisition
of such Capital Stock by the Company or another  Restricted  Subsidiary or (iii)
Capital Stock  constituting a minority  interest in any Person that at such time
is a Restricted Subsidiary.

         "Affiliate" of any specified Person means any other Person, directly or
indirectly,  controlling  or  controlled  by or under direct or indirect  common
control  with  such  specified  Person.  For the  purposes  of this  definition,
"control"  when used with  respect to any  Person  means the power to direct the
management and policies of such Person, directly or indirectly,  whether through
the  ownership of voting  securities,  by contract or  otherwise;  and the terms
"controlling" and "controlled" have meanings  correlative to the foregoing.  For
purposes of the covenants entitled  "Transactions with Affiliates" and "Sales of
Assets"  only,  "Affiliate"  shall  also  mean any  beneficial  owner of  shares
representing  5% or more of the total  voting  power of the  Voting  Stock (on a
fully  diluted  basis) of the Company or of rights or warrants to purchase  such
stock  (whether  or not  currently  exercisable)  and any Person who would be an
Affiliate of any such beneficial owner pursuant to the first sentence hereof.


                                       25

<PAGE>



         "Asset Sale" means any sale,  transfer or other disposition  (including
by way of merger,  consolidation or sale leaseback  transactions,  but excluding
(except as provided for in the provisions  described in the last paragraph under
"-- Covenants -- Sales of Assets") those  permitted by the provisions  described
under "-- Merger and  Consolidation")  by the Company or any  Subsidiary  to any
Person other than the Company or any Wholly Owned Subsidiary,  of (i) all or any
of the Capital Stock of any Restricted Subsidiary, (ii) all or substantially all
of the  assets  of any  division  or  line of  business  of the  Company  or any
Restricted Subsidiary or (iii) any other assets of the Company or any Subsidiary
outside of the  ordinary  course of business of the Company or such  Subsidiary;
provided, however, the term "Asset Sale" shall not include any sale, transfer or
disposition  of assets in any fiscal  year  which,  when taken  individually  or
combined  with other sales,  transfers  or  dispositions  of assets  during such
fiscal year,  constitutes less than the sum of (x) 5% of the Company's  Tangible
Net Assets as determined on the consolidated  balance sheet of the Company as of
the end of the most recent fiscal  quarter for which  financial  statements  are
available plus (y) $5 million.

         "Average Life" means, as of the date of determination,  with respect to
any Indebtedness or Preferred  Stock, the quotient  obtained by dividing (i) the
sum of the  products of the numbers of years from the date of  determination  to
the dates of each successive scheduled principal payment of such Indebtedness or
scheduled  redemption or similar  payment with respect to such  Preferred  Stock
multiplied by the amount of such payment by (ii) the sum of all such payments.

         "Business Day" means each day which is not a Legal Holiday.

         "Capital Stock" means any and all shares, interests,  participations or
other equivalents  (however designated) of capital stock of a corporation or any
and all equivalent ownership interests in a Person (other than a corporation).

         "Capitalized  Lease Obligation" means an obligation that is required to
be classified and accounted for as a capitalized  lease for financial  reporting
purposes in accordance with GAAP, and the amount of Indebtedness  represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with such  principles;  and the Stated Maturity  thereof shall be the
date of the last  payment of rent or any other amount due under such lease prior
to the first date upon which such lease may be terminated by the lessee  without
payment of a penalty.

         "Change  of  Control"  means  any  of the  following  events:  (i)  the
liquidation or dissolution of the Company,  (ii) the acquisition by any "Person"
or related group (within the meaning of Section  13(d)(3) or Section 14(d)(2) of
the  Exchange  Act,  or any  successor  provision  to either  of the  foregoing,
including any "group" acting for the purpose of acquiring,  holding or disposing
of securities  within the meaning of Rule  13d-5(b)(1)  under the Exchange Act),
other than the  Principals,  in a single  transaction  or in a related series of
transactions,  by way of merger,  consolidation or other business combination or
purchase  of  beneficial  ownership  (within the meaning of Rule 13d-3 under the
Exchange  Act,  or any  successor  provision)  of more than (x) 30% of the total
voting  power  entitled to vote in the election of the Board of Directors of the
Company or such other Person  surviving the transaction and (y) the total voting
power (entitled to vote in the election of the Board of Directors of the Company
or such other Person surviving the transaction) of the Principals;  (iii) during
any period of two  consecutive  years,  individuals who at the beginning of such
period  constituted  the  Company's  Board of Directors  (together  with any new
directors  whose election or  appointment by such board or whose  nomination for
election or  appointment  by the  shareholders  of the Company was approved by a
vote of a  majority  of the  directors  then  still in  office  who were  either
directors at the beginning of such period or whose  election or  nomination  for
election  was  previously  so  approved)  cease for any reason to  constitute  a
two-thirds  majority of the Company's Board of Directors then in office; or (iv)
the sale, transfer,  conveyance or other disposition of all or substantially all
of the assets of IMS, Conversion Systems and Technologies, taken as a whole.

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the  aggregate  amount of EBITDA for the period of the most  recent
four consecutive fiscal quarters for which financial statements are available to
(ii) the Consolidated Interest Expense for such four fiscal quarters;  provided,
however,  (1) that if the Company or any Restricted  Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains  outstanding or (2)
if the  transaction  giving  rise to the  need  to  calculate  the  Consolidated
Coverage Ratio is (x) an Incurrence of Indebtedness or (y) a transaction covered
under the  provisions  described  under "--  Merger and  Consolidation,"  or any
combination of the foregoing,  both EBITDA and Consolidated Interest Expense for
such period shall be calculated  after giving effect on a pro forma basis to (A)
any new  Indebtedness  Incurred during such period as if such  Indebtedness  had
been Incurred on the first

                                       26

<PAGE>



day of such period and (B) the repayment, redemption,  repurchase, defeasance or
discharge  of  any  Indebtedness  repaid,  redeemed,  repurchased,  defeased  or
discharged  during such period with the proceeds of new Indebtedness  (including
the Indebtedness giving rise to the need to calculate the Consolidated  Coverage
Ratio) or from the sale of any Capital  Stock  (other than  Redeemable  Stock or
Exchangeable Stock) as if such repayment, redemption,  repurchase, defeasance or
discharge had been made on the first day of such period; provided, further, that
if within the period  during which EBITDA or  Consolidated  Interest  Expense is
measured, the Company or any of its Restricted  Subsidiaries shall have made any
Asset Sales,  (1) the EBITDA for such period shall be reduced by an amount equal
to the EBITDA (if positive) directly attributable to the assets or Capital Stock
which are the subject of such Asset Sales for such  period,  or  increased by an
amount equal to the EBITDA (if negative), directly attributable thereto for such
period  and (2) the  Consolidated  Interest  Expense  for such  period  shall be
reduced  by an  amount  equal  to the  Consolidated  Interest  Expense  directly
attributable  to any  Indebtedness  for which neither Company nor any Restricted
Subsidiary  shall  continue  to be liable as a result of any such  Asset Sale or
repaid, redeemed,  defeased,  discharged or otherwise retired in connection with
or with the  proceeds  of the assets or Capital  Stock  which are the subject of
such Asset Sales for such period; and provided,  further, that if the Company or
any Restricted  Subsidiary  shall have made any acquisition of assets or Capital
Stock  (occurring  by merger or  otherwise)  since the  beginning of such period
(including any  acquisition  of assets or Capital Stock  occurring in connection
with a transaction  causing a calculation  to be made  hereunder) the EBITDA and
Consolidated Interest Expense for such period shall be calculated,  after giving
pro forma effect  thereto  (and without  regard to clause (ii) of the proviso to
the definition of "Consolidated  Net Income"),  as if such acquisition of assets
or Capital  Stock took place on the first day of such  period.  For  purposes of
this  definition,  whenever pro forma effect is to be given to an acquisition of
assets or Capital Stock, the amount of income or earnings relating thereto,  and
the amount of Consolidated  Interest  Expense  associated with any  Indebtedness
Incurred  in  connection  therewith,  shall  be  determined  in good  faith by a
responsible financial or accounting officer of the Company.

         "Consolidated  Interest  Expense"  means,  for any period,  the sum of,
without  duplication,  (a) the total  interest  expense of the  Company  and its
consolidated subsidiaries (other than Unrestricted Subsidiaries),  determined on
a consolidated  basis in accordance  with GAAP,  including (i) interest  expense
attributable  to capital  leases,  (ii)  amortization  of debt discount and debt
issuance  cost,  (iii)  noncash   interest   payments,   (iv)   amortization  of
commissions,  discounts  and other fees and charges owed with respect to letters
of credit and bankers' acceptance  financing,  (v) interest actually paid by the
Company or any such  subsidiary  under any  guarantee of  Indebtedness  or other
obligation  of any other Person and (vi) net costs  incurred  during such period
under interest rate swaps, caps, collars,  options and similar  arrangements and
foreign exchange hedges (including amortization of fees); (b) the product of (x)
the aggregate amount for such period of Preferred Stock dividends paid (in cash)
during  such  period in respect of all  Preferred  Stock of the  Company and its
consolidated  subsidiaries (other than Unrestricted  Subsidiaries) excluding any
such  dividends  paid to the Company or any Wholly  Owned  Subsidiary  and (y) a
fraction,  the  numerator  of which is one and the  denominator  of which is one
minus the then current  combined  federal,  state and local statutory income tax
rate,  expressed as a decimal;  and (c) the cash  contributions  to any employee
stock ownership plan to the extent such  contributions are used by such employee
stock  ownership  plan to pay  interest  or fees to any person  (other  than the
Company or a Restricted  Subsidiary)  in connection  with loans incurred by such
employee stock ownership plan to purchase Capital Stock of the Company.

         "Consolidated Net Income" means, for any period,  the net income of the
Company and its consolidated subsidiaries, determined on a consolidated basis in
accordance  with GAAP;  provided,  however,  that there shall not be included in
such Consolidated Net Income: (i) any net income of any Person if such Person is
not a Restricted  Subsidiary,  except that (A) the  Company's  equity in the net
income of any such Person for such period shall be included in such Consolidated
Net  Income up to the  aggregate  amount of cash  actually  distributed  by such
Person  during such period to the Company or a Subsidiary as a dividend or other
distribution  and (B) the Company's  equity in a net loss of any such Person for
such period shall be included in determining such Consolidated Net Income (other
than with  respect to an  Unrestricted  Subsidiary  in which case the  Company's
equity in any such net loss shall not be so  included);  (ii) any net income (or
loss) of any Person  acquired  by the  Company or a  Subsidiary  in a pooling of
interests  transaction  for any  period  prior to the date of such  acquisition;
(iii) any gains in excess of losses realized upon the sale or other  disposition
of  any  property,   plant  or  equipment  of  the  Company  or  its  Restricted
Subsidiaries (including pursuant to any sale-and-leaseback arrangement) which is
not sold or  otherwise  disposed of in the  ordinary  course of business and any
gains in excess of losses  realized  upon the sale or other  disposition  by the
Company or any  Restricted  Subsidiary of any Capital Stock of any Person;  (iv)
any reduction  applicable to a charge in lieu of income taxes resulting from (x)
the application of the Company's tax loss carryforwards  attributable to periods
prior to the  confirmation  of the  Reorganization  Plan or (y) the  payment  of
liabilities  recorded in conjunction  with the Company's 1988  acquisition of IU
International  Corporation;  and  (v)  the  cumulative  effect  of a  change  in
accounting  principles;  and (vi) any  extraordinary  losses  resulting from the
Recapitalization.

                                       27

<PAGE>




         "Consolidated  Net Worth" of the Company means the total of the amounts
shown on the  consolidated  balance  sheet of the Company  and its  consolidated
subsidiaries   (other  than   Unrestricted   Subsidiaries),   determined   on  a
consolidated  basis in  accordance  with GAAP,  as of the end of the most recent
fiscal quarter of the Company for which financial statements are available prior
to the taking of any action for the purpose of which the  determination is being
made,  as (i) the par or stated value of all  outstanding  Capital Stock of such
person plus (ii)  paid-in  capital or capital  surplus  relating to such Capital
Stock  plus  (iii)  any  retained  earnings  or  earned  surplus  less  (A)  any
accumulated deficit to the extent, if any, not reflected in retained earnings or
earned surplus,  (B) any amounts  attributable to Redeemable Stock issued by the
Company (to the extent otherwise  included) and (C) any amounts  attributable to
Exchangeable Stock issued by the Company (to the extent otherwise included).

         "Conversion  Systems"  means  Conversion  Systems,   Inc.,  a  Delaware
corporation.

         "Credit  Agreement"  means that certain Credit  Agreement,  dated as of
June 24, 1993, by and among the Company,  IMS and the several  lenders from time
to time parties  thereto,  including any related notes,  guarantees,  collateral
documents,  instruments and agreements executed in connection therewith, in each
case as amended or modified,  and further  including any agreement or agreements
(including that certain Credit Agreement,  dated as of December 19, 1995, by and
among  the  Company,  IMS and the  several  lenders  from  time to time  parties
thereto,   including  any  related  notes,  guarantees,   collateral  documents,
instruments  and  agreements  executed in  connection  therewith,  as amended or
modified) that renew, refund, replace or refinance the same.

         "Default"  means any event which is, or after notice or passage of time
or both would be, an Event of Default.

         "EBITDA" for any period means the sum of  Consolidated  Net Income (but
without giving effect to adjustments,  accruals, deductions or entries resulting
from purchase accounting for transactions which occur after the date of the 1993
Indenture,  extraordinary  losses  or gains  and any  gains or  losses  from any
transaction  of  the  type  described  in  clause  (iii)  of the  definition  of
"Consolidated  Net  Income"),  plus the  following to the extent  includable  in
calculating Consolidated Net Income: (a) all tax expense relating to taxes based
on income  or  profit,  (b)  Consolidated  Interest  Expense,  (c)  depreciation
expense,  and (d) amortization  expense  (including any permit and closure costs
amortization and accruals relating to landfills) in each case for such period.

         "Exchangeable  Stock"  means any  Capital  Stock  which by its terms is
exchangeable  or  convertible at the option of any Person other than the Company
into another  security (other than Capital Stock of the Company which is neither
Exchangeable Stock nor Redeemable Stock).

         "GAAP" means generally accepted accounting  principles set forth in the
opinions and  pronouncements of the Accounting  Principles Board of the American
Institute of Certified Public  Accountants and statements and  pronouncements of
the Financial  Accounting  Standards  Board or in such other  statements by such
other entity as approved by a significant segment of the accounting  profession,
which were in effect on the date of the 1993 Indenture.

         "Guarantee" is defined to mean any obligation, contingent or otherwise,
of any Person  directly or indirectly  guaranteeing  any  Indebtedness  or other
obligation  of any other  Person and,  without  limiting the  generality  of the
foregoing, any obligation,  direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or  advance or supply  funds for the  purchase or
payment of) such  Indebtedness or other obligation of such other Person (whether
arising by virtue of partnership arrangements,  or by agreement to keep-well, to
purchase assets, goods,  securities or services, to take-or-pay,  or to maintain
financial  statement  conditions or otherwise) or (ii) entered into for purposes
of  assuring  in any other  manner  the  obligee of such  Indebtedness  or other
obligation of the payment  thereof or to protect such  obligation of the payment
thereof or to protect such obligee  against loss in respect thereof (in whole or
in part);  provided that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business.  The term  "Guarantee"
used as a verb has a corresponding meaning.

         "Holder"  or  "Noteholder"  means the  Person  in whose  name a Note is
registered on the Registrar's books.

         "Incur" means, as applied to any obligation,  to create,  incur, issue,
assume,  guarantee  or in any  other  manner  become  liable  with  respect  to,
contingently or otherwise,  such  obligation,  and "Incurred,"  "Incurrence" and
"Incurring" shall each have a correlative meaning;  provided,  however, that any
Indebtedness or Capital Stock of a Person existing at the time

                                       28

<PAGE>



such Person becomes  (after the date of the Indenture) a Subsidiary  (whether by
merger, consolidation,  acquisition or otherwise) shall be deemed to be Incurred
by such  Subsidiary at the time it becomes a Subsidiary;  and provided  further,
that any  amendment,  modification  or waiver of any  provision  of any document
pursuant to which Indebtedness was previously Incurred shall not be deemed to be
an Incurrence of  Indebtedness  as long as (i) such  amendment,  modification or
waiver does not (A) if such Indebtedness is contractually  subordinated in right
of payment to the Notes,  change to an earlier date the Stated Maturity  thereof
or the date of any scheduled or required  principal  payment thereon or the time
or circumstances under which such Indebtedness may or shall be redeemed,  (B) if
such  Indebtedness  is  contractually  subordinated  in right of  payment to the
Notes,   modify  or  affect,  in  any  manner  adverse  to  the  Holders,   such
subordination,  (C) if  the  Company  is the  obligor  thereon,  provide  that a
Restricted  Subsidiary  shall  be an  obligor  or  (D)  violate,  or  cause  the
Indebtedness  to  violate,  the  provisions  described  under "--  Covenants  --
Limitation on Payment Restrictions Affecting Subsidiaries" and "-- Limitation on
Liens" and (ii) such Indebtedness  would, after giving effect to such amendment,
modification  or waiver as if it were an Incurrence,  comply with the provisions
of  clause  (i)  of  the  first  proviso  to  the  definition  of   "Refinancing
Indebtedness."

         "Indebtedness"  of any  Person  means,  without  duplication,  (i)  the
principal  of and premium (if any such premium is then due and owing) in respect
of (A)  indebtedness  of such  Person for money  borrowed  and (B)  indebtedness
evidenced  by notes,  debentures,  bonds or other  similar  instruments  for the
payment of which such  Person is  responsible  or liable;  (ii) all  Capitalized
Lease Obligations of such Person;  (iii) all obligations of such Person Incurred
as the deferred purchase price of property,  all conditional sale obligations of
such  Person  and all  obligations  of such  Person  under any  title  retention
agreement;  (iv) all  obligations  of such Person for the  reimbursement  of any
obligor  on  any  letter  of  credit,  banker's  acceptance  or  similar  credit
transaction  (other than  obligations with respect to letters of credit securing
obligations  (other  than  obligations  described  in (i) through  (iii)  above)
entered  into in the  ordinary  course of  business of such Person to the extent
such  letters of credit are not drawn upon or, if and to the extent  drawn upon,
such  drawing is  reimbursed  no later  than the tenth  Business  Day  following
receipt by such Person of a demand for  reimbursement  following  payment on the
letter of credit); (v) the amount of all obligations of such Person with respect
to the scheduled  redemption,  repayment or other repurchase prior to the Stated
Maturity  of  the  Notes  of any  Redeemable  Stock  and,  with  respect  to any
Subsidiary  (other than a Wholly Owned  Subsidiary),  any other  Preferred Stock
(but excluding in each case any accrued dividends, provided that for purposes of
the definition of "Refinancing  Indebtedness",  such accrued dividends shall not
be  excluded);  (vi) all  obligations  of the type  referred  to in clauses  (i)
through (v) of other  Persons and all dividends of other Persons for the payment
of which,  in either case,  such Person is  responsible  or liable,  directly or
indirectly,  as  obligor,  guarantor  or  otherwise,  including  by means of any
Guarantee,  the amount of any such  obligation to be the maximum  amount of such
Person's  responsibility or liability for the guaranteed  obligation;  and (vii)
all  obligations  of the type  referred to in clauses (i) through  (vi) of other
Persons  secured by any Lien on any property or asset of such Person (whether or
not such  obligation is assumed by such Person),  the amount of such  obligation
being  deemed to be the  lesser of the value of such  property  or assets or the
amount of the obligation so secured; provided,  however, that Indebtedness shall
not include trade accounts payable arising in the ordinary course of business.

         "Interest  Payment Date" means the stated maturity of an installment of
interest on the Notes.

         "Investment"   in  any  Person  means  any  loan  or  advance  to,  any
acquisition of Capital Stock, equity interest,  obligation or other security of,
or capital  contribution  or other  investment in, or any Guarantee with respect
to, such Person. For purposes of the definition of "Unrestricted Subsidiary" and
the covenant described under "-- Covenants -- Limitation on Restricted Payments"
only, (i) "Investment" shall include the portion (proportionate to the Company's
equity  interest in such  Subsidiary) of the fair market value of the net assets
of any Subsidiary at the time that such Subsidiary is designated an Unrestricted
Subsidiary and shall exclude the portion  (proportionate to the Company's equity
interest in such  Subsidiary)  of the fair market value of the net assets of any
Unrestricted  Subsidiary  at the  time  that  such  Unrestricted  Subsidiary  is
designated  a  Restricted  Subsidiary  of the  Company;  and (ii)  any  property
transferred to or from an  Unrestricted  Subsidiary  shall be valued at its fair
market value at the time of such  transfer,  in each case as  determined  by the
Board of Directors in good faith.

         "Lien" means any mortgage,  lien,  pledge,  charge,  or other  security
interest or encumbrance of any kind.

         "Net Available Cash" means the cash payments received by the Company or
a Subsidiary in connection  with an Asset Sale  (including  any cash received by
way  of  deferred  payment  of  principal  pursuant  to a  note  or  installment
receivable  or otherwise,  but only as and when  received) net of (i) all legal,
title and  recording  tax  expenses,  commissions  and other  fees and  expenses
Incurred,  and all federal,  state, local and foreign taxes required to be paid,
or accrued as a liability under

                                       29

<PAGE>



GAAP,  as a  consequence  of such  Asset  Sale,  (ii) all  payments  made on any
Indebtedness  which is  secured by any assets  subject  to such Asset  Sale,  in
accordance  with the terms of any Lien upon or other  security  agreement of any
kind with  respect to such  assets,  or which must by its terms,  or in order to
obtain a necessary  consent to such Asset Sale, or by  applicable  law be repaid
out of the  proceeds  from such Asset Sale,  (iii) all  distributions  and other
payments  required to be made to minority  interest holders in Subsidiaries as a
result of such Asset Sale, and (iv) any  liabilities  associated with the assets
sold  pursuant to such Asset Sale and retained by the Company or any  Subsidiary
after such Asset Sale, and any reasonable  amount  reserved for  indemnification
obligations  relating  to such  Asset  Sale,  in  each  case  as  determined  in
accordance with GAAP.

         "Net Cash  Proceeds"  means,  with  respect to any  issuance or sale of
Capital  Stock,  the cash  proceeds of such  issuance or sale net of  attorneys'
fees,  accountants' fees,  underwriters' or placement agents' fees, discounts or
commissions  and  brokerage,  consultancy  and other fees  actually  incurred in
connection  with such  issuance  or sale and net of taxes  paid or  payable as a
result thereof.

         "1993  Indenture"  means that  certain  Indenture,  dated as of July 1,
1993,  between the  Company  and United  States  Trust  Company of New York,  as
trustee, as amended or modified.

         "1993  Notes" means the $220 million  aggregate  principal  amount of 9
3/4%  Senior  Notes due 2003  issued  under the 1993  Indenture,  as  amended or
modified.

         "Non-Convertible Capital Stock" means, with respect to any corporation,
any Capital  Stock of such  corporation  which is not  convertible  into another
security  (other  than  non-convertible   common  stock  of  such  corporation);
provided,  however,  that  Non-Convertible  Capital  Stock shall not include any
Redeemable Stock or Exchangeable Stock.

         "Permitted  Liens"  means,  with respect to any Person,  (a) pledges or
deposits  by  such  Person  under  workmen's  compensation  laws,   unemployment
insurance laws or similar legislation, or good faith deposits in connection with
bids, tenders,  contracts (other than for the payment of Indebtedness) or leases
to which such  Person is a party,  or  deposits  to secure  public or  statutory
obligations of such Person or deposits of cash or United States Government bonds
to secure surety or appeal bonds to which such Person is a party, or deposits as
security for  contested  taxes or import  duties or for the payment of rent,  in
each case Incurred in the ordinary course of business; (b) Liens imposed by law,
such as carriers', warehousemen's and mechanics' Liens in each case for sums not
yet due or being  contested in good faith by  appropriate  proceedings  or other
Liens  arising out of  judgments  or awards  against such Person with respect to
which such Person  shall then be  prosecuting  appeal or other  proceedings  for
review; (c) Liens for taxes not yet subject to penalties for nonpayment or which
are being contested in good faith and by appropriate  proceedings;  (d) Liens in
favor of issuers of surety  bonds or letters of credit  issued  pursuant  to the
request of and for the  account  of such  Person in the  ordinary  course of its
business;  provided,  however  that such  letters of credit  may not  constitute
Indebtedness;  (e) minor survey  exceptions,  minor  encumbrances,  easements or
reservations of, or rights of others for, rights of way, sewers, electric lines,
telegraph and telephone  lines and other  similar  purposes,  or zoning or other
restrictions as to the use of real properties or Liens incidental to the conduct
of the business of such Person or to the ownership of its properties  which were
not Incurred in connection with  Indebtedness or other  extensions of credit and
which do not in the  aggregate  materially  adversely  affect  the value of said
properties  or  materially  impair their use in the operation of the business of
such  Person;   (f)  Liens  securing   Indebtedness   Incurred  to  finance  the
construction or purchase of, or repairs, improvements or additions to, property;
provided,  however,  that such  property  can be  pledged  to  secure  only such
Indebtedness which is permitted under the covenant described under "-- Covenants
- -- Limitation on Incurrence of Indebtedness"  reduced  dollar-for-dollar  by the
outstanding principal amount of Indebtedness in excess of $60 million secured in
reliance on clause (g) of this definition;  provided further,  however, that the
Lien  may not  extend  to any  property  (other  than  the  property  purchased,
constructed,  repaired  or  improved  or  contracts  relating to the use of such
property and/or revenues generated by such property) owned by the Company or any
Restricted  Subsidiary  at the time the Lien is Incurred,  and the  Indebtedness
secured  by the Lien may not be  Incurred  more than 365 days after the later of
the acquisition,  completion of construction,  repair, improvement,  addition or
commencement  of  full  operation  of the  property  subject  to the  Lien;  and
provided,  further,  however,  that  subject to clause (o) below,  any such Lien
securing such  Indebtedness  Incurred  after October 13, 1995 may extend only to
property purchased, constructed, repaired or improved after October 13, 1995 and
contracts  relating to the use of such  property and revenues  generated by such
property  after such  date;  (g) Liens to secure  Indebtedness  under the Credit
Agreement of up to $100 million in aggregate principal amount outstanding at any
one time and all Guarantees thereof;  (h) Liens existing on the date of the 1993
Indenture; (i) Liens on property or shares of stock of a Person at the time such
Person becomes a Subsidiary; provided, however, that

                                       30

<PAGE>



any such Lien may not extend to any other  property  owned by the Company or any
Restricted  Subsidiary;  (j)  Liens on  property  at the time the  Company  or a
Subsidiary acquires the property, including any acquisition by means of a merger
or consolidation  with or into the Company or a Subsidiary;  provided,  however,
that (x) the Lien may not extend to any other  property  owned by the Company or
any Restricted Subsidiary and (y) in the case of a merger or consolidation,  the
Lien  was  in  existence   prior  to  the   contemplation   of  such  merger  or
consolidation;  (k)  Liens  securing  Indebtedness  or  other  obligations  of a
Subsidiary owing to the Company or a Wholly Owned Subsidiary; (l) Liens Incurred
by a Person  other than the  Company or any  Subsidiary  on assets  that are the
subject of a Capitalized  Lease  Obligation to which the Company or a Subsidiary
is a party; provided, however, that any such Lien may not secure Indebtedness of
the  Company  or any  Subsidiary  (except  by  virtue  of  clause  (vii)  of the
definition of "Indebtedness")  and may not extend to any other property owned by
the  Company  or any  Restricted  Subsidiary;  (m) Liens to secure  Indebtedness
permitted  under clause  (vii) in the second  paragraph  under "--  Covenants --
Limitation  on  Incurrence  of  Indebtedness,"  provided that such Liens may not
extend to any property other than (i) property  owned by Envirosafe  Services of
Idaho,  Inc. and (ii) property used to secure the  Indebtedness  permitted under
clause  (vii) in the second  paragraph  under "--  Covenants  --  Limitation  on
Incurrence of  Indebtedness;"  (n) Liens by which the Notes are secured  equally
and ratably with other  Indebtedness  of the Company  pursuant to the provisions
described  under "--  Covenants -- Limitation on Liens;" and (o) Liens to secure
any  refinancing,  refunding,  extension,  renewal or replacement (or successive
refinancings,  refundings,  extensions, renewals or replacements) as a whole, or
in part,  of any  Indebtedness  secured by any Lien referred to in the foregoing
clauses (f), (g), (h), (i) and (j);  provided,  however,  that (x) such new Lien
shall be limited to all or part of the same  property  that secured the original
Lien  (plus  improvements  on  such  property),  except  that  in  the  case  of
Indebtedness  secured by Liens otherwise  permitted under clause (f), such Liens
may  extend to the  property  contemplated  by clause  (f) so long as such Liens
would otherwise be permitted  thereunder,  and (y) the  Indebtedness  secured by
such Lien at such time is not  increased  (other than by an amount  necessary to
pay  fees  and  expenses,   including  premiums,  related  to  the  refinancing,
refunding, extension, renewal or replacement of such Indebtedness).

         "Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.

         "Preferred  Stock", as applied to the Capital Stock of any corporation,
means  Capital  Stock of any  class or  classes  (however  designated)  which is
preferred as to the payment of dividends,  or as to the  distribution  of assets
upon  any  voluntary  or   involuntary   liquidation   or  dissolution  of  such
corporation,   over  shares  of  Capital  Stock  of  any  other  class  of  such
corporation.

         "Principal"  means  (i)  Freeman  Spogli & Co.,  a  California  general
partnership,  and any of its  affiliates  and (ii) any  member of the  executive
management  of  the  Company  prior  to  the  occurrence  of  the   circumstance
constituting a potential Change of Control.

         "Recapitalization"  means the  following  transactions  effected by the
Company:  (i) an  investment  in equity  securities  of the  Company  by certain
affiliates of Freeman  Spogli & Co. and certain other Persons in May 1993,  (ii)
the  public  offering  and sale of the 1993  Notes,  and  (iii)  the  repayment,
repurchase or defeasance of certain  Indebtedness  of the Company  substantially
contemporaneously with the sale of the 1993 Notes.

         "Redeemable  Stock"  means  any  Capital  Stock  that by its  terms  or
otherwise  is required  to be  redeemed  (other than upon a Change of Control or
Asset Sale) on or prior to the first  anniversary of the Stated  Maturity of the
Notes or is  redeemable at the option of the holder  thereof  (other than upon a
Change  of  Control  or  Asset  Sale)  at any  time  on or  prior  to the  first
anniversary of the Stated Maturity of the Notes.

         "Refinancing Indebtedness" means Indebtedness that refunds, refinances,
replaces,  renews,  repays or extends  (including  pursuant to any defeasance or
discharge  mechanism)  (collectively,  "refinances," with "refinanced"  having a
correlative meaning) any Indebtedness existing on the date of the 1993 Indenture
or Incurred in compliance  with the Indenture (or, if Incurred prior to the date
of the  Indenture,  with  the 1993  Indenture)  (including  Indebtedness  of the
Company  that  refinances   Indebtedness   of  any  Restricted   Subsidiary  and
Indebtedness  of any  Restricted  Subsidiary  that  refinances  Indebtedness  of
another   Restricted   Subsidiary)   including   Indebtedness   that  refinances
Refinancing   Indebtedness;   provided,   however,   that  (i)  the  Refinancing
Indebtedness is contractually  subordinated in right of payment to the Notes and
the 1993 Notes to at least the same  extent (if any) as the  Indebtedness  being
refinanced or such refinancing is permitted under the covenants  described under
"-- Covenants -- Limitation on Restricted Payments," (ii) where the Indebtedness
being refinanced

                                       31

<PAGE>



is not Senior Indebtedness,  the Refinancing Indebtedness is scheduled to mature
either (a) no earlier than the  Indebtedness  being  refinanced or (b) after the
Stated Maturity of the Notes, (iii) the Refinancing  Indebtedness has an Average
Life at the time such  Refinancing  Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being refinanced and (iv) such
Refinancing  Indebtedness is in an aggregate principal amount (or if issued with
original issue discount, an aggregate issue price) that is equal to or less than
the aggregate  principal amount (or if issued with original issue discount,  the
aggregate  accreted value) then outstanding  (plus fees and expenses,  including
any premium and  defeasance  costs)  under the  Indebtedness  being  refinanced;
provided,  that  Refinancing  Indebtedness  shall not include  Indebtedness of a
Subsidiary that refinances Indebtedness of the Company.

         "Reorganization  Plan"  means the  reorganization  plan of White  Motor
Corporation, the Company's predecessor corporation, pursuant to which it emerged
from its reorganizational proceedings in 1983.

         "Restricted   Payment"  with  respect  to  any  Person  means  (i)  the
declaration or payment of any dividends or any other  distributions  of any sort
in respect of its Capital Stock  (including  any payment in connection  with any
merger or consolidation  involving the Company) or similar payment to the direct
or indirect  holders of its Capital Stock (other than dividends or distributions
payable  solely in Capital  Stock or rights to acquire  Non-Convertible  Capital
Stock  and  dividends  or  distributions  payable  solely  to the  Company  or a
Restricted Subsidiary,  and other than pro rata dividends or other distributions
made by a Subsidiary that is not a Wholly Owned  Subsidiary,  if such Subsidiary
was not a Wholly Owned Subsidiary on the date of the 1993 Indenture, to minority
stockholders  (or owners of an  equivalent  interest in the case of a Subsidiary
that is an entity other than a corporation)),  (ii) the purchase,  redemption or
other acquisition or retirement for value of any Capital Stock of the Company or
any  Subsidiary or other  Affiliate of the Company (other than any Capital Stock
owned by the Company or any Wholly  Owned  Subsidiary),  or the  exercise by the
Company  of any  option  to  exchange  any  Capital  Stock  that by its terms is
exchangeable  solely at the option of the Company (other than into Capital Stock
of the  Company  which is  neither  Exchangeable  Stock nor  Redeemable  Stock),
provided  that  the  issuance  by the  Company  of  Capital  Stock  (other  than
Redeemable Stock or Exchangeable  Stock) upon the conversion by its terms of any
convertible  Capital  Stock or other  security or the  exercise of any option or
warrant to purchase  Capital  Stock shall not  constitute a Restricted  Payment,
(iii) the purchase, repurchase,  redemption,  defeasance or other acquisition or
retirement  for value,  prior to  scheduled  maturity,  scheduled  repayment  or
scheduled sinking fund payment of any Subordinated  Obligations  (other than the
purchase,  repurchase or other acquisition of Subordinated Obligations purchased
in anticipation of satisfying a sinking fund obligation,  principal  installment
or final maturity,  in each case due within one year of the date of acquisition)
or (iv) the  making of any  Investment  in any  Unrestricted  Subsidiary  or any
Affiliate of the Company  other than a Restricted  Subsidiary  or a Person which
will become a Restricted Subsidiary as a result of any such Investment.

         "Restricted  Subsidiary"  shall mean IMS,  Conversion  Systems  and the
Envirosafe  Companies,  any intermediate holding company between such Restricted
Subsidiary and the Company and any other  Subsidiary that is not an Unrestricted
Subsidiary.

         "Senior  Indebtedness"  means other senior Indebtedness of the Company,
including  Indebtedness under the Credit Agreement and 1993 Notes,  ranking pari
passu with the Notes.

         "Significant   Subsidiary"   means  any   Subsidiary   (other  than  an
Unrestricted Subsidiary) that would be a "Significant Subsidiary" of the Company
within  the  meaning  of Rule  1-02  under  Regulation  S-X  promulgated  by the
Commission.

         "Stated  Maturity"  means,  with  respect  to any  security,  the  date
specified  in such  security  as the fixed date on which the  principal  of such
security is due and  payable,  including  pursuant to any  mandatory  redemption
provision  (but  excluding  any provision  providing for the  repurchase of such
security  at  the  option  of the  holder  thereof  upon  the  happening  of any
contingency).

         "Subordinated   Obligation"  means  any  Indebtedness  of  the  Company
(whether  outstanding on the date of the Indenture or hereafter  Incurred) which
is contractually  subordinate or junior in right of payment to the Notes and the
1993 Notes.

         "Subsidiary"  means  (i) a  corporation  at least a  majority  of whose
Capital  Stock with  voting  power,  under  ordinary  circumstances,  to elect a
majority of the Board of Directors of such corporation is at the time,  directly
or  indirectly,  owned  or  controlled  by  the  Company,  by  a  Subsidiary  or
Subsidiaries of the Company, or by the Company and a Subsidiary or

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Subsidiaries  of the Company or (ii) any other Person (other than a corporation)
in which the Company,  a Subsidiary or Subsidiaries of the Company,  directly or
indirectly,  at the date of  determination,  has at least a  majority  ownership
interest.

         "Tangible Net Assets" with respect to any Person means the consolidated
assets of such Person  determined  in  accordance  with GAAP,  except that there
shall be deducted  therefrom all intangible assets  (including  goodwill and any
other intangibles determined in accordance with GAAP but which shall not include
landfill permits,  closure trust funds and deferred charges and unamortized debt
issuance costs).

         "Unrestricted  Subsidiary" means (i) any Subsidiary that at the time of
determination  shall be  designated an  Unrestricted  Subsidiary by the Board of
Directors  in  the  manner   provided  below  and  (ii)  any  subsidiary  of  an
Unrestricted  Subsidiary.  The Board of Directors may  designate any  Subsidiary
(including any newly acquired or newly formed  Subsidiary) to be an Unrestricted
Subsidiary  unless such  Subsidiary  owns any Capital Stock of, or owns or holds
any Lien on any property of, the Company or any other  Subsidiary  that is not a
subsidiary of the Subsidiary to be so designated; provided, however, that either
(A) the Subsidiary to be so designated has total assets of $1,000 or less or (B)
if such Subsidiary has assets greater than $1,000,  that such designation  would
be permitted under the covenant  entitled  "Limitation on Restricted  Payments."
The  Board of  Directors  may  designate  any  Unrestricted  Subsidiary  to be a
Restricted Subsidiary of the Company; provided,  however, that immediately after
giving  effect  to such  designation  (x) to the  extent  that the  Unrestricted
Subsidiary has any Indebtedness  (other than Indebtedness that could be Incurred
under  clauses  (ii)-(vi)  under "--  Covenants --  Limitation  on Incurrence of
Indebtedness"),  the  Company  could  Incur  $1.00  of  additional  Indebtedness
pursuant to the provisions  described in the first paragraph under "-- Covenants
- -- Limitation on  Incurrence of  Indebtedness"  after giving pro forma effect to
such  Unrestricted  Subsidiary's  Indebtedness as if it had been Incurred at the
beginning of the  applicable  four-quarter  period and (y) no Default shall have
occurred and be continuing. Any such designation by the Board of Directors shall
be  evidenced  to the Trustee by promptly  filing with the Trustee a copy of the
board resolution giving effect to such designation and an Officers'  Certificate
certifying  that  such  designation  complied  with  the  foregoing  provisions;
provided,  however, that the failure to so file such resolution and/or Officers'
Certificate  with the  Trustee  shall not impair or affect the  validity of such
designation.

         "U.S.  Government  Obligations"  means  securities  that are (i) direct
obligations  of the United  States of America  for the payment of which its full
faith and  credit is  pledged  or (ii)  obligations  of a Person  controlled  or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is  unconditionally  guaranteed as a full faith and
credit  obligation by the United States of America,  which, in either case under
clauses (i) or (ii) are not callable or redeemable before the maturity thereof.

         "Voting  Stock"  with  respect to any Person  means the  Capital  Stock
normally entitled to vote in elections of the Board of Directors.

         "Wholly   Owned   Subsidiary"   means  a  Subsidiary   (other  than  an
Unrestricted  Subsidiary)  all the Capital Stock of which (other than directors'
qualifying shares) is owned by the Company or another Wholly Owned Subsidiary.

Covenants

         The  Indenture   contains  covenants   including,   among  others,  the
following:

  Limitation on Restricted Payments

         Under  the  terms of the  Indenture,  so long as any of the  Notes  are
outstanding,  the  Company  shall  not,  and shall  not  permit  any  Restricted
Subsidiary to, directly or indirectly,  make any Restricted Payment,  unless (i)
no Default under the Indenture  shall have occurred and be continuing  (or would
result  therefrom);  (ii)  upon  giving  effect,  as if  paid,  to the  proposed
Restricted Payment,  the Company would be permitted to Incur an additional $1.00
of  Indebtedness  pursuant to the  provisions  described in the first  paragraph
under "--  Limitation  on  Incurrence  of  Indebtedness;"  and (iii) upon giving
effect, as if paid, to the proposed Restricted Payment,  the aggregate amount of
all such Restricted  Payments subsequent to the date of the 1993 Indenture shall
not  exceed the sum of (A) 50% of  aggregate  Consolidated  Net  Income  accrued
during the period  (treated as one accounting  period) from the beginning of the
fiscal quarter  beginning after the date of the 1993 Indenture to the end of the
most recent fiscal quarter for which financial statements are available,  (or if
such  Consolidated  Net Income is a deficit,  minus 100% of such  deficit),  and
minus 100% of the amount of any write-downs, write-offs and other negative

                                       33

<PAGE>



revaluations  not  otherwise  reflected in  Consolidated  Net Income during such
period;  (B) the aggregate  Net Cash Proceeds  received by the Company after the
date of the 1993 Indenture from the issue or sale (other than to a Subsidiary or
an employee stock ownership plan) of Capital Stock (other than Redeemable  Stock
or Exchangeable  Stock) of the Company and warrants,  options or other rights to
acquire such Capital Stock;  (C) the amount by which the principal amount of and
any  accrued   interest  on  Indebtedness  of  the  Company  or  its  Restricted
Subsidiaries  is reduced on the  Company's  consolidated  balance sheet upon the
conversion or exchange  (other than by a  Subsidiary)  subsequent to the date of
the  1993  Indenture  of any  Indebtedness  of  the  Company  or any  Restricted
Subsidiary  convertible or exchangeable for Capital Stock (other than Redeemable
Stock or Exchangeable Stock) of the Company (less the amount of any cash, or the
value of any  other  property,  distributed  by the  Company  or any  Restricted
Subsidiary upon such conversion or exchange); and (D) an amount equal to the net
reduction in Investments in Unrestricted Subsidiaries resulting from payments of
interest on Indebtedness,  dividends,  repayments of loans or advances, or other
transfers of assets,  in each case to the Company or any  Restricted  Subsidiary
from  Unrestricted   Subsidiaries,   or  from   redesignations  of  Unrestricted
Subsidiaries as Restricted  Subsidiaries (valued in each case as provided in the
definition of "Investments"), or resulting from the receipt of proceeds from the
sale or other  disposition of an Unrestricted  Subsidiary,  not to exceed in the
case of any Unrestricted Subsidiary the amount of Investments previously made by
the Company or any  Restricted  Subsidiary in such  Unrestricted  Subsidiary and
which was  treated  as a  Restricted  Payment  under the  Indenture  or the 1993
Indenture  (excluding  the amount of any such  Investment  made  pursuant to the
provisions  described  in  clause  (iv) of the  next  paragraph  under  the 1993
Indenture).

         Notwithstanding  the limitations set forth under clauses (ii) and (iii)
of the preceding paragraph (and in addition to the amount (if any) of Restricted
Payments permitted to be made under such clause (iii)) and as long as no Default
shall have occurred and be continuing (or would result  therefrom),  the Company
and the  Restricted  Subsidiaries  may  make  Restricted  Payments  which in the
aggregate while any of the Notes remain outstanding do not exceed $3 million. In
addition,  the failure to satisfy the  conditions  set forth in clauses (ii) and
(iii) of the preceding  paragraph will not prohibit any of the following as long
as the condition set forth in clause (i) of the preceding  paragraph  (except as
set  forth  below)  is  satisfied  (and  payments  made in  accordance  with the
following  will not (except as set forth in clause  (iii)  below) be included in
the  calculation  of  Restricted  Payments  described  in  clause  (iii)  of the
preceding  paragraph  and will not be taken into  account  for  purposes  of the
preceding  sentence):  (i) any  purchase  or  redemption  of  Capital  Stock  or
Subordinated  Obligations of the Company made by exchange for, conversion of, or
in an amount not in excess of the proceeds of the substantially  concurrent sale
of,  Capital  Stock  of  the  Company  (other  than  (x)  Redeemable   Stock  or
Exchangeable  Stock and (y) Capital  Stock issued or sold to a Subsidiary  or an
employee stock ownership plan);  provided,  however, that notwithstanding clause
(i) of the preceding  paragraph,  the occurrence or existence of a Default shall
not prohibit the making of such purchase or redemption;  and provided,  further,
the Net Cash  Proceeds  from such sale shall be excluded  from  subclause (B) of
clause (iii) of the  preceding  paragraph;  (ii) any purchase or  redemption  of
Subordinated  Obligations  of the Company made by exchange  for, or in an amount
not in excess of the proceeds of the  substantially  concurrent  Incurrence  of,
Indebtedness of the Company; provided, however, that such Indebtedness (A) shall
be  contractually  subordinated  in right of  payment  to the Notes and the 1993
Notes to at least the same extent as the Subordinated  Obligations so exchanged,
purchased  or redeemed,  (B) shall be scheduled to mature  either (x) no earlier
than such Subordinated Obligations or (y) after the Stated Maturity of the Notes
and (C) shall have an Average  Life equal to or greater than the Average Life of
such  Subordinated  Obligations;  (iii)  dividends paid within 60 days after the
date of declaration  thereof if at such date of declaration  such dividend would
have complied with the  provisions of the  Indenture;  provided,  however,  that
notwithstanding  clause  (i) of  the  preceding  paragraph,  the  occurrence  or
existence of a Default at such time of payment shall not prohibit the payment of
such dividends;  and provided,  further that such dividends shall be included in
the calculation of the amount of Restricted  Payments  described in clause (iii)
of the preceding paragraph;  (iv) Investments in Unrestricted Subsidiaries in an
aggregate  amount not to exceed $5 million in any fiscal  year since the date of
the 1993 Indenture;  provided,  however,  any portion thereof not utilized under
the Indenture or the 1993 Indenture  since the date of the 1993 Indenture may be
utilized in any  subsequent  year;  (v) any  repurchase of the Company's  Common
Stock  required to be  repurchased  by the Company's  Reorganization  Plan as in
effect on the date of the 1993 Indenture; (vi) loans to employees of the Company
or its  Subsidiaries  extended in connection  with purchases of Capital Stock of
the Company not to exceed $3 million in the  aggregate at any time  outstanding;
or (vii) the  redemption  from time to time of all or any part of the  Company's
Subordinated  Notes due 1998 or the other retirement of such Subordinated  Notes
called for redemption in 1993.

  Limitation on Incurrence of Indebtedness

         Under the terms of the Indenture,  the Company shall not, and shall not
permit  any  Restricted  Subsidiary  to,  directly  or  indirectly,   Incur  any
Indebtedness (other than the Notes and any other Indebtedness  outstanding as of
the date of the

                                       34

<PAGE>



Indenture)  unless, in the case of Indebtedness  Incurred by the Company,  after
giving effect thereto, the Consolidated Coverage Ratio determined at the time of
such Incurrence is greater than or equal to 2.25 to 1.

         The  foregoing  provision  will not limit the ability of the Company or
any Restricted Subsidiary to Incur the following  Indebtedness:  (i) Refinancing
Indebtedness;  provided,  however,  that the characterization of Indebtedness as
Refinancing  Indebtedness  may not cause or permit  Indebtedness  Incurred under
clauses (ii), (iii), (v) or (vii) below to exceed the maximum amounts allowed by
the terms of each such clause, and, to that end (x) if Refinancing  Indebtedness
is Incurred to refinance any  Indebtedness  originally  Incurred under either of
clauses  (ii) or (iii)  then the  amount of  Indebtedness  permitted  under such
clause  in  question  shall  be  reduced  by  the  amount  of  such  Refinancing
Indebtedness  (and any  Refinancing  Indebtedness  that  directly or  indirectly
refinances   such   Refinancing   Indebtedness)   outstanding  at  the  time  of
determination,  and (y) if Refinancing Indebtedness is Incurred to refinance any
Indebtedness  originally  Incurred under either of clauses (v) or (vii) then the
amount of Indebtedness  permitted under such clause in question shall be reduced
permanently by the amount of such Refinancing Indebtedness;  (ii) in addition to
any Indebtedness  otherwise permitted to be Incurred under the Indenture,  up to
$30 million in aggregate principal amount of Indebtedness of the Company and its
Restricted Subsidiaries at any one time outstanding; provided that the amount of
such  Indebtedness  Incurred  by  Restricted  Subsidiaries  shall not exceed $15
million in  aggregate  principal  amount at any one time  outstanding;  (iii) in
addition  to any  Indebtedness  otherwise  permitted  to be  Incurred  under the
Indenture,  Indebtedness  under the  Credit  Agreement  of up to $60  million in
aggregate  principal  amount  outstanding  at any one  time  and all  Guarantees
thereof;  (iv) Indebtedness of the Company which is owed to and held by a Wholly
Owned  Subsidiary and Indebtedness of a Wholly Owned Subsidiary which is owed to
and held by the Company or a Wholly Owned Subsidiary;  provided,  however,  that
any  subsequent  issuance or transfer of any Capital  Stock which results in any
such Wholly  Owned  Subsidiary  ceasing to be a Wholly Owned  Subsidiary  or any
transfer  of such  Indebtedness  (other  than to the  Company or a Wholly  Owned
Subsidiary)  shall be deemed, in each case, to constitute the Incurrence of such
Indebtedness by the Company or by a Wholly Owned Subsidiary, as the case may be;
(v)  Indebtedness  solely to finance capital  expenditures of the Company or any
Restricted  Subsidiary  in an  aggregate  principal  amount not to exceed in any
fiscal year $30  million;  provided,  however,  that if in any fiscal year ended
after the date of the 1993 Indenture the amount of Indebtedness  Incurred solely
to finance capital expenditures of the Company or any Restricted  Subsidiary was
or is less  than  $30  million,  such  unused  portion  may be  utilized  in any
subsequent  year;  and  provided  further  that in  calculating  the  amount  of
Indebtedness  permitted to be Incurred under this clause (v) in any fiscal year,
there shall also be included any Indebtedness  Incurred under clause (vii) below
in such fiscal  year;  (vi)  Guarantees  by the  Company,  or by any  Restricted
Subsidiary,  of  Indebtedness  of any  Restricted  Subsidiary  or  the  Company;
provided  that such  Indebtedness  is permitted to be Incurred by the Company or
such  Restricted  Subsidiary  pursuant to the provisions of this  covenant;  and
(vii)  Indebtedness  not to exceed $12  million in  aggregate  principal  amount
Incurred  since  the  date  of the  1993  Indenture  as  industrial  development
financing by Envirosafe  Services of Idaho, Inc.;  provided that no Indebtedness
may be Incurred  under this clause (vii) unless at the time of  Incurrence,  and
after giving effect thereto,  the Company and its Restricted  Subsidiaries could
Incur $1.00 of Indebtedness under clause (v) above.

         Notwithstanding  the provisions of this covenant  described  above, the
Indenture provides that the Company or any Restricted Subsidiary shall not Incur
any  Indebtedness if the proceeds thereof are used,  directly or indirectly,  to
repay, prepay,  redeem,  defease,  retire,  refund or refinance any Subordinated
Obligations   unless  such  repayment,   prepayment,   redemption,   defeasance,
retirement,  refunding or refinancing is not prohibited  under "-- Limitation on
Restricted  Payments" or unless such  Indebtedness  shall be subordinated to the
Notes  and the 1993  Notes to at least  the  same  extent  as such  Subordinated
Obligations.

         The $50,000,000 of  indebtedness  represented by the Notes was incurred
to refinance Bank Credit Facility debt used to finance  capital  expenditures as
well as to  finance  future  capital  expenditures.  As a  result,  the  amounts
available for capital expenditure  financing in the  above-mentioned  clause (v)
have been reduced by $50,000,000. See "Use of Proceeds."

  Limitation on Payment Restrictions Affecting Subsidiaries

         Under the terms of the Indenture,  the Company shall not, and shall not
permit  any  Subsidiary,  to,  create or  otherwise  cause or permit to exist or
become effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends to or make any other distributions on
its Capital Stock to, or pay any Indebtedness or other  obligations owed to, the
Company or any  Restricted  Subsidiary,  (ii) make any loans or  advances to the
Company  or  (iii)  transfer  any of its  property  or  assets  to the  Company;
provided,  however, that the foregoing shall not apply to (a) any encumbrance or
restriction pursuant to the Indenture, the 1993 Indenture or any other agreement
or instrument in effect at

                                       35

<PAGE>



or  entered  into on the  date of the 1993  Indenture;  (b) any  encumbrance  or
restriction  with respect to a Subsidiary  pursuant to an agreement  relating to
any  Indebtedness  Incurred by such  Subsidiary on or prior to the date on which
such  Subsidiary  becomes a Subsidiary  and  outstanding  on such date;  (c) any
encumbrance or restriction  pursuant to an agreement effecting (1) a refinancing
of  Indebtedness  referred  to in clause  (a) or (b) above or  contained  in any
amendment or  modification  with respect to such  Indebtedness  or (2) any other
Indebtedness  Incurred  pursuant to the provisions  described in clause (iii) of
the second  paragraph  under "--  Limitation  on  Incurrence  of  Indebtedness;"
provided,  however, that the encumbrances and restrictions contained in any such
agreement,  amendment or  modification  are no more  restrictive in any material
respect with respect to the matters  referred to in clauses (i),  (ii) and (iii)
above  than  the  encumbrances   and  restrictions   with  respect  to  (x)  the
Indebtedness being refinanced, amended or modified in the case of clause (1), or
(y) the Credit  Agreement,  in the case of clause (2); (d) in the case of clause
(iii)  above,  customary  non-assignment  provisions  of any leases  governing a
leasehold interest or of any supply,  license or other agreement entered into in
the  ordinary  course of  business  of the  Company or any  Subsidiary;  (e) any
restrictions  with  respect to a  Subsidiary  imposed  pursuant to an  agreement
entered  into for the sale or  disposition  of all or  substantially  all of the
Capital Stock or assets of such  Subsidiary  pending the closing of such sale or
disposition;  (f) in the case of clause (iii) above,  restrictions  contained in
security  agreements  securing  Indebtedness  of a Subsidiary to the extent such
restrictions  restrict  the transfer of the  property  subject to such  security
agreements;  or (g)  any  encumbrance  or  restriction  existing  by  reason  of
applicable law.

  Limitation on Liens

         Under the terms of the Indenture,  the Company shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly,  Incur or permit to
exist any Lien of any nature  whatsoever  on any of its  properties  (including,
without limitation, Capital Stock of a Restricted Subsidiary),  whether owned at
the date of the Indenture or thereafter  acquired,  other than Permitted  Liens,
without  effectively  providing  that the Notes  shall be  secured  equally  and
ratably  with (or  prior  to) the  obligations  so  secured  for so long as such
obligations are so secured.

  Limitations on Issuance of Capital Stock by Subsidiaries

         Under the terms of the  Indenture,  the  Company  will not  permit  any
Restricted  Subsidiary  to issue any Capital  Stock to any Person (other than to
the  Company  or a Wholly  Owned  Subsidiary)  or declare  or pay  dividends  or
distributions  on or repurchase  or redeem any Capital  Stock of any  Subsidiary
(other than to the Company or a Wholly Owned Subsidiary).

  Change of Control

         Under the terms of the  Indenture,  in the event of a Change of Control
(as defined as described under "-- Certain Definitions"), the Company shall make
an offer to purchase  all or any part  (equal to $1,000 or an integral  multiple
thereof) of each  Holder's  Notes (the "Change of Control  Offer") at a purchase
price equal to 101% of the principal amount thereof plus accrued interest to the
Change of Control Payment Date (as defined herein) on the terms set forth in the
provision.  The date on which the Company shall  purchase the Notes  pursuant to
this provision  (the "Change of Control  Payment Date") shall be no earlier than
30 days, nor later than 60 days,  after the notice  referred to below is mailed,
unless a longer  period shall be required by law.  The Company  shall notify the
Trustee in writing promptly after the occurrence of any Change of Control of the
Company's obligation to purchase the Notes.

         Notice of a Change of Control  Offer  shall be mailed by the Company to
the Holders of the Notes at their last  registered  address  (with a copy to the
Trustee and the Paying  Agent) within thirty (30) days after a Change in Control
has  occurred.  The Change of Control  Offer shall  remain open from the time of
mailing until five (5) Business Days before the Change of Control  Payment Date.
The notice shall contain all instructions and materials necessary to enable such
Holders  to tender  (in whole or in part) the Notes  pursuant  to the  Change of
Control Offer. The notice, which shall govern the terms of the Change of Control
Offer,  shall state: (a) that the Change of Control Offer is being made pursuant
to this  provision;  (b) the  purchase  price and the Change of Control  Payment
Date; (c) that any Note not surrendered or accepted for payment will continue to
accrue  interest;  (d) that any Note accepted for payment pursuant to the Change
of Control  Offer  shall  cease to accrue  interest  after the Change of Control
Payment Date; (e) that any Holder electing to have a Note purchased (in whole or
in part) pursuant to a Change of Control Offer will be required to surrender the
Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Note  completed,  to the Paying  Agent at the  address  specified  in the
notice (or otherwise make effective  delivery of the Note pursuant to book-entry
procedures and the related rules of the applicable  depositories)  at least five
Business Days before the Change of Control Payment Date; and (f) that any Holder
will be entitled

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<PAGE>



to withdraw  his or her election if the Paying  Agent  receives,  not later than
three  Business  Days prior to the Change of Control  Payment  Date, a telegram,
telex,  facsimile  transmission  or letter setting forth the name of the Holder,
the  principal  amount  of the Note the  Holder  delivered  for  purchase  and a
statement that such Holder is  withdrawing  his or her election to have the Note
purchased.

         On the Change of Control Payment Date, the Company shall (i) accept for
payment the Notes or portions thereof, surrendered and properly tendered and not
withdrawn, pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent money  sufficient to pay the purchase price of all the Notes,  or portions
thereof,  so  accepted  and (iii)  deliver to the  Trustee the Notes so accepted
together  with an  Officers'  Certificate  stating  that  such  Notes  have been
accepted for payment by the Company.  The Paying  Agent shall  promptly  mail or
deliver  to  Holders  of Notes so  accepted  payment  in an amount  equal to the
purchase  price.  Holders whose Notes are purchased  only in part will be issued
new Notes  equal in  principal  amount to the  unpurchased  portion of the Notes
surrendered.

  Transactions with Affiliates

         Under the terms of the Indenture,  the Company shall not, and shall not
permit any of its Restricted Subsidiaries to, directly or indirectly, enter into
or permit to exist any  transaction  (including,  the purchase,  sale,  lease or
exchange of any property or the  rendering of any service) with any Affiliate of
the Company (an "Affiliate Transaction") on terms that are less favorable to the
Company or such  Restricted  Subsidiary,  as the case may be,  than those  which
might be obtained at the time of such transaction in arms-length dealings with a
Person who is not such an Affiliate; provided that with respect to any Affiliate
Transaction  involving  aggregate payments in excess of $5 million,  the Company
shall deliver to the Trustee a resolution of the Board of Directors set forth in
an Officers'  Certificate  certifying that such Affiliate  Transaction  complies
with the foregoing  requirements and such Affiliate Transaction is approved by a
majority  of the  disinterested  members of Board of  Directors.  The  foregoing
restriction  shall not apply to the payment of any  Restricted  Payment which is
permitted to be paid pursuant to the covenant  described under "-- Limitation on
Restricted  Payments"  and  transactions  between the Company or any  Restricted
Subsidiary, on the one hand, and any other Subsidiary, on the other hand, in the
ordinary course of business.

  Sales of Assets

         Under  the  terms  of  the  Indenture,  neither  the  Company  nor  any
Restricted  Subsidiary shall consummate any Asset Sale unless (i) the Company or
such Restricted Subsidiary receives consideration at the time of such Asset Sale
at least  equal to the fair market  value,  as  determined  in good faith by the
Board  of  Directors,  of the  shares  or  assets  subject  to such  Asset  Sale
(including  the value of any  noncash  consideration),  (ii) at least 80% of the
consideration  thereof received by the Company or such Restricted  Subsidiary is
in the form of cash and (iii) an amount equal to 100% of the Net Available  Cash
is applied by the Company (or such Subsidiary,  as the case may be) as set forth
herein. For purposes of this provision, the following are deemed to be cash: (x)
any Indebtedness (as reflected on the Company's  consolidated  balance sheet) of
the Company or any  Restricted  Subsidiary for which neither the Company nor any
Restricted Subsidiary will continue to be liable,  directly or indirectly,  as a
result of such Asset  Sale;  and (y)  securities  received by the Company or any
Restricted  Subsidiary from such  transferee that are promptly  converted by the
Company or such Restricted  Subsidiary into cash. Nothing in this covenant shall
prohibit the Company or any Subsidiary from transferring  assets,  properties or
Capital  Stock  of any  Subsidiary  to any  Wholly  Owned  Subsidiary  or to the
Company,  nor shall the  provisions  of this  covenant be applicable to any such
transfer.  Under the terms of the  Indenture,  the Company  shall not permit any
Unrestricted  Subsidiary  to  make  any  Asset  Sale  unless  such  Unrestricted
Subsidiary receives  consideration at the time of such Asset Sale at least equal
to the fair market value of the shares or assets so disposed of as determined in
good faith by the Board of Directors.

         Under the terms of the  Indenture,  within 365 days (such  period being
the "Application Period") following the consummation of an Asset Sale (or in the
case of Net Available Cash from the conversion of securities, within such number
of days  after  the  receipt  of such  cash),  the  Company  or such  Restricted
Subsidiary  shall apply the Net Available  Cash from such Asset Sale as follows:
(i) first, to the extent the Company or such Restricted  Subsidiary  elects,  to
reinvest in Additional Assets (including by means of an investment in Additional
Assets by a  Restricted  Subsidiary  with Net  Available  Cash  received  by the
Company or another  Restricted  Subsidiary);  (ii) second,  to the extent of the
balance of such Net Available Cash after  application in accordance  with clause
(i),  and to the extent the Company or such  Restricted  Subsidiary  elects,  to
prepay,  repay or purchase Senior  Indebtedness (other than any Preferred Stock)
of the  Company  or  its  Restricted  Subsidiaries  (in  each  case  other  than
Indebtedness  owed to the Company or an Affiliate of the Company),  (iii) third,
to the extent of the

                                       37

<PAGE>



balance of such Net Available Cash after  application in accordance with clauses
(i) and (ii), to make an offer to purchase the Notes at a purchase price of 100%
of principal  amount plus accrued  interest to the Purchase Date pursuant to and
subject to the conditions set forth in the Indenture. To the extent that any Net
Available  Cash of  Asset  Sales  remains  after  the  application  of such  Net
Available Cash in accordance with this paragraph, the Company or such Restricted
Subsidiary  may utilize  such  remaining  Net  Available  Cash in any manner not
otherwise prohibited by the Indenture.

         If  Indebtedness of the Company issued on or after the date of the 1993
Indenture  and  ranking  pari  passu in right of payment  with the Notes  (which
includes  the 1993  Notes)  is at the time  outstanding,  and the  terms of such
Indebtedness  provide that a similar  offer is to be made with  respect  thereto
(the 1993 Indenture has such terms),  then the offer to purchase the Notes shall
be made  concurrently  with such  other  offer,  and the  Notes  and such  other
Indebtedness shall be accepted pro rata in proportion to the aggregate principal
amounts which the holders of Notes and such Indebtedness, respectively, elect to
have redeemed.

         Under the terms of the Indenture,  the Company shall not be required to
make an offer to purchase the Notes if the Net Available  Cash available from an
Asset Sale  (after  application  of the  proceeds as provided in clauses (i) and
(ii) of the second  paragraph above) is less than $10 million for any particular
Asset Sale  (which  lesser  amounts  shall be carried  forward  for  purposes of
determining  whether an offer is required with respect to the Net Available Cash
from any subsequent Asset Sale).

         Notwithstanding  the foregoing,  this provision  shall not apply to, or
prevent an Asset Sale that also constitutes a Change of Control (see "-- Certain
Definitions")  provided the Company has complied with its obligations  under the
covenant  described  under "-- Change of Control," and in such case no violation
of this provision shall be deemed to have occurred as a consequence thereof.

         In the event of the transfer of substantially  all (but not all) of the
property  and assets of the Company as an entirety to a Person in a  transaction
permitted under the covenant described under "-- Merger and  Consolidation," the
Successor  Corporation shall be deemed to have sold the properties and assets of
the Company not so transferred  for purposes of this covenant,  and shall comply
with the  provisions  of this covenant with respect to such deemed sale as if it
were an Asset Sale.

Merger and Consolidation

         Under the terms of the  Indenture,  the Company  shall not  consolidate
with  or  merge  with  or  into  any  other   corporation  or  transfer  all  or
substantially  all of its  properties  and assets as an  entirety  to any Person
unless: (a) either the Company shall be the continuing Person, or the Person (if
other than the Company) formed by such  consolidation  or into which the Company
is merged or to which the  properties  and assets of the  Company as an entirety
are transferred (the "Successor Corporation"),  shall be a corporation organized
and  existing  under the laws of the United  States or any state  thereof or the
District of Columbia and shall expressly assume, by an indenture supplemental to
the  Indenture,  executed and  delivered to the Trustee,  in form and  substance
reasonably satisfactory to the Trustee, all the obligations of the Company under
the Indenture and the Notes; (b) immediately before and immediately after giving
effect to such  transaction  (and  treating any  Indebtedness  which  becomes an
obligation of the Successor Corporation or any Restricted Subsidiary as a result
of such  transaction  as having been Incurred by such  Successor  Corporation or
such Restricted  Subsidiary at the time of such  transaction),  no Default shall
have occurred and be continuing; (c) the Company shall have delivered, or caused
to be  delivered,  to the  Trustee an  Officers'  Certificate  and,  as to legal
issues,  an  Opinion  of  Counsel,   each  in  form  and  substance   reasonably
satisfactory to the Trustee stating that such consolidation,  merger or transfer
and  such  supplemental  indenture  comply  with  this  provision  and  that all
conditions  precedent herein provided for relating to such transaction have been
complied  with; (d)  immediately  after giving effect to such  transaction,  the
Successor  Corporation  shall have  Consolidated Net Worth in an amount which is
not less than the Consolidated Net Worth  immediately prior to such transaction;
and (e)  immediately  after  giving  effect to such  transaction  on a pro forma
basis, the Consolidated  Coverage Ratio of the Successor Corporation is at least
2.0:1,  or, if less, at least equal to the  Consolidated  Coverage  Ratio of the
Company   immediately  prior  to  such   transaction;   provided  that,  if  the
Consolidated Coverage Ratio of the Company immediately prior to such transaction
is  within  the  range  set  forth in  Column  (A)  below,  then  the pro  forma
Consolidated Coverage Ratio of the Successor Corporation shall be at least equal
to the lesser of (1) the ratio  determined by  multiplying  the  percentage  set
forth in column  (B) below by the  Consolidated  Coverage  Ratio of the  Company
immediately  prior to such transaction and (2) the ratio set forth in column (C)
below:


                                       38

<PAGE>




                    (A)                       (B)                    (C)
                    ---                       ---                    ---

            2.22:1 to 2.99:1                  90%                    2.4:1
            3.00:1 to 3.99:1                  80%                    2.8:1
            4.00:1 or more                    70%                    2.9:1

and  provided,  further,  that  if,  immediately  after  giving  effect  to such
transaction  on a pro  forma  basis,  the  Consolidated  Coverage  Ratio  of the
Successor Corporation is 3.0:1 or more, the calculation in the preceding proviso
shall be inapplicable and such transaction shall be deemed to have complied with
the requirements of such provision.

         Notwithstanding  the foregoing clauses (b), (d) and (e), any Restricted
Subsidiary  may  consolidate  with,  merge into or  transfer  all or part of its
properties  and assets to the Company or any Wholly Owned  Subsidiary  or Wholly
Owned  Subsidiaries  so  long as the  requirements  of  clauses  (a) and (c) are
satisfied in connection therewith.

         Upon any such  assumption by the Successor  Corporation,  the Successor
Corporation  shall  succeed to and be  substituted  for the  Company,  under the
Indenture and the Notes,  and the Company  shall  thereupon be released from all
obligations  under the  Indenture  and under  the Notes and the  Company  as the
predecessor  corporation  may thereupon or at any time  thereafter be dissolved,
wound up or  liquidated.  The  Successor  Corporation  thereupon may cause to be
signed, and may issue either in its own name or in the name of the Company,  all
or any of the Notes issuable  under the Indenture  which  theretofore  shall not
have been signed by the Company and delivered to the Trustee; and upon the order
of the  Successor  Corporation  instead of the  Company  and  subject to all the
terms, conditions and limitations prescribed in the Indenture, the Trustee shall
authenticate  and shall  deliver any new Notes which the  Successor  Corporation
thereafter  shall  cause to be signed  and  delivered  to the  Trustee  for that
purpose.  All the Notes so issued shall in all respects have the same legal rank
and benefit under the Indenture as the Notes theretofore or thereafter issued in
accordance  with the terms of the  Indenture  as though  all such Notes had been
issued at the date of the execution of the Indenture.

         In the case of any such consolidation, merger or transfer, such changes
in form (but not in substance) may be made in the Notes  thereafter to be issued
as may be appropriate.

Events of Default

         "Events of Default" are defined in the  Indenture as (i) default for 30
days in payment of any interest  installment due and payable on the Notes,  (ii)
default in payment of the principal when due of the Notes,  or failure to redeem
or purchase the Notes when required pursuant to the Indenture,  (iii) default in
performance  of any other  covenants or  agreements in the Indenture for 30 days
after  written  notice to the  Company by the  Trustee or to the Company and the
Trustee by the Holders of at least 25% in  principal  amount of the  outstanding
Notes,  (iv) the  occurrence  of a default  under  any  mortgage,  indenture  or
instrument  under  which there may be issued or by which there may be secured or
evidenced any Indebtedness (other than Indebtedness  evidenced by the Notes) for
money borrowed by the Company or any Subsidiary, whether or not it exists on the
date of the Indenture,  the outstanding  aggregate  principal amount of which is
not less than $10 million (or its foreign currency equivalent),  and as a result
of such default either such  Indebtedness  shall be due or the  acceleration  of
such  Indebtedness  shall be  declared,  or  Indebtedness  of the Company or any
Subsidiary in an aggregate principal amount of not less than $10 million (or its
foreign  currency  equivalent),  is not paid within any applicable  grace period
after final maturity,  unless such Indebtedness or declaration,  as the case may
be, is discharged or rescinded or annulled  within 30 days  following the giving
of notice to the  Company by the  Trustee or to the  Company  and the Trustee by
Holders of not less than 25% in  principal  amount of the  Notes;  (v) any final
judgment or order (not covered by  insurance)  for the payment of money shall be
rendered  against  the  Company or any  Significant  Subsidiary  in an amount in
excess of $5 million  individually  or $5 million in the  aggregate for all such
final  judgments or orders against all such Persons  (treating any  deductibles,
self-insurance or retention as not so covered) and shall not be discharged,  and
there shall be any period of 30 consecutive  days  following  entry of the final
judgment  or order in  excess of $5  million  individually  or in the  aggregate
during which a stay of enforcement of such final judgment or order, by reason of
a pending appeal or otherwise,  shall not be in effect;  and (vi) certain events
of bankruptcy, insolvency and reorganization of the Company.

         If any Event of Default  (other than an Event of Default  described  in
clause (vi) with respect to the Company)  has  occurred and is  continuing,  the
Indenture provides that the Trustee may by notice to the Company, or the Holders
of not less  than 25% in  principal  amount  of the  Notes  may by notice to the
Company and the Trustee, declare the principal amount

                                       39

<PAGE>



of the Notes, premium, if any, and any accrued and unpaid interest to be due and
payable  immediately.  If an Event of  Default  described  in  clause  (vi) with
respect to the Company  occurs,  the  principal of and interest on all the Notes
shall  ipso  facto  become  and be  immediately  due  and  payable  without  any
declaration  or other  act on the part of the  Trustee  or any  Holders  of such
Notes.  The Holders of a majority in principal  amount of the Notes by notice to
the  Trustee  may  rescind any such  declaration  and its  consequences  (if the
rescission  would not  conflict  with any  judgment  or decree) if all  existing
Events of Default  (other than the nonpayment of principal of or interest on the
Notes which shall have become due by such declaration)  shall have been cured or
waived.

         The  Company  must  file   annually  with  the  Trustee  a  certificate
describing  any Default by the Company in the  performance  of any conditions or
covenants that has occurred under the Indenture and its status. The Company must
give  the  Trustee  written  notice  within  30 days of any  Default  under  the
Indenture that could mature into an Event of Default  described in clause (iii),
(iv), (v) or (vi) of the second preceding paragraph.

         The Trustee under the Indenture is entitled, subject to the duty of the
Trustee  during a  Default  to act  with  the  required  standard  of  care,  to
indemnification  satisfactory  to the  Trustee  against any loss,  liability  or
expense before  proceeding to exercise any right or power under the Indenture at
the  direction  of the  Holders of the Notes or which  requires  the  Trustee to
expend or risk its own funds or otherwise  incur any  financial  liability.  The
Indenture  also provides  that the Holders of a majority in principal  amount of
the Notes may direct the time, method and place of conducting any proceeding for
any remedy  available to the Trustee or exercising any trust or power  conferred
on the  Trustee;  however,  the Trustee may refuse to follow any such  direction
that conflicts with law or the Indenture,  is unduly prejudicial to the right of
other Holders of the Notes or would involve the Trustee in personal liability.

         The  Indenture  provides  that while the  Trustee  generally  must mail
notice of a Default or Event of Default  to the  Holders of the Notes  within 90
days of occurrence,  the Trustee may withhold notice to the Holders of the Notes
of any  Default  or Event of  Default  (except  in  payment on the Notes) if the
Trustee in good faith  determines  that the withholding of such notice is in the
interest of the Holders of the Notes.

Modification of the Indenture

         Under the terms of the Indenture, the Company and the Trustee may, with
the consent of the Holders of a majority in principal  amount of the outstanding
Notes, amend or supplement the Indenture or the Notes,  except that no amendment
or supplement may, without the consent of each affected  Noteholder,  (i) reduce
the  principal  amount of Notes whose  Holders  must  consent to an amendment or
supplement;  (ii) reduce the  principal of or change the Stated  Maturity of any
Note or reduce the premium  payable upon the  redemption  of any Note, or change
the time at which any Note may or shall be redeemed; (iii) reduce the rate of or
change the time for  payment of  interest  on any Note;  (iv) waive a Default or
Event of Default in the payment of principal of, premium, if any, or interest on
the Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the then outstanding Notes and
a waiver of the payment default that resulted from such acceleration);  (v) make
any Note  payable in money  other than that  stated in the Notes;  (vi) make any
change in the  provisions of the Indenture  relating to waivers of past Defaults
or the  rights of  Holders  of Notes to  receive  payments  of  principal  of or
interest on the Notes;  (vii) waive a  redemption  payment  with  respect to any
Note; or (viii) make any change in the  provisions of the Indenture  relating to
amendments of the Indenture that require the consent of Holders of each affected
Note.

Actions by Noteholders

         Under the terms of the  Indenture,  a  Noteholder  may not  pursue  any
remedy with respect to the Indenture or the Notes (except actions for payment of
overdue principal, premium, if any, or interest) unless (i) the Holder has given
notice to the Trustee of a continuing Event of Default, (ii) Holders of at least
25% in principal  amount of the Notes have made a written request to the Trustee
to pursue such  remedy,  (iii) such Holder or Holders  have  offered the Trustee
security or indemnity reasonably  satisfactory to it against any loss, liability
or expense,  (iv) the Trustee has not complied with such request  within 60 days
of such request and offer and (v) the Holders of a majority in principal  amount
of the Notes have not given the Trustee an  inconsistent  direction  during such
60-day period.


                                       40

<PAGE>



Defeasance, Discharge and Termination

  Defeasance and Discharge

         The Indenture provides that the Company will be discharged from any and
all  obligations  in respect of the Notes and the  provisions of such  Indenture
will no longer be in effect with respect to the Notes  (except for,  among other
matters,  certain obligations to register the transfer or exchange of the Notes,
to replace stolen,  lost or mutilated  Notes, to maintain paying agencies and to
hold monies for payment in trust,  and the rights of Holders to receive payments
of  principal  and  interest  thereon),  on the  123rd day after the date of the
deposit  with the Trustee,  in trust,  of money or U.S.  Government  Obligations
that,  through the  payment of  interest  and  principal  in respect  thereof in
accordance with their terms,  will provide money in an amount  sufficient to pay
the principal of, premium,  if any, and accrued interest on the Notes,  when due
in accordance  with the terms of the  Indenture and the Notes.  Such a trust may
only be established if, among other things, (i) the Company has delivered to the
Trustee an Opinion of Counsel  to the effect  that  Holders  will not  recognize
income,  gain or loss for  federal  income  tax  purposes  as a  result  of such
deposit,  defeasance  and discharge and will be subject to federal income tax on
the same  amount and in the same manner and at the same times as would have been
the case if such deposit,  defeasance  and  discharge  had not  occurred,  which
Opinion  of Counsel  must  refer to and be based  upon a ruling of the  Internal
Revenue Service or a change in applicable federal income tax law occurring after
the date of the Indenture  and (ii) no Default  under the  Indenture  shall have
occurred  and be  continuing  on the date of such  deposit  or during the period
ending on the 123rd day after such date of deposit  and such  deposit  shall not
result in or  constitute  a Default  or result in a breach or  violation  of, or
constitute a default under, any other material  agreement or instrument to which
the Company is a party or by which the Company is bound.

  Defeasance of Certain Covenants and Certain Events of Default

         The Indenture further provides that (i) the provisions of the Indenture
will no longer be in effect with respect to the provisions  described in clauses
(d) and (e) under "Merger and  Consolidation"  and all the  covenants  described
herein under "-- Covenants," (ii) clause (iii) under "-- Events of Default" with
respect  to such  covenants  and  clauses  (d)  and (e)  under  "--  Merger  and
Consolidation"  shall not apply and (iii)  clauses (iv) and (v) under "-- Events
of Default" shall be deemed not to be Events of Default under the Indenture,  in
each case,  upon the deposit with the Trustee or the Paying Agent,  in trust, of
money or U.S.  Government  Obligations  that through the payment of interest and
principal in respect  thereof in accordance  with their terms will provide money
in an amount  sufficient to pay the principal of,  premium,  if any, and accrued
interest on the Notes when due in  accordance  with the terms of the  Indenture.
Such a trust may only be  established  if, among other  things,  the  provisions
described  in  clause  (ii) of the  immediately  preceding  paragraph  have been
satisfied  and the Company has delivered to the Trustee an Opinion of Counsel to
the effect that the Holders will not recognize income,  gain or loss for federal
income  tax  purposes  as a result of such  deposit  and  defeasance  of certain
covenants and Events of Default and will be subject to federal income tax on the
same  amount and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred.

  Defeasance and Certain Other Events of Default

         In the event the Company  exercises its option to omit  compliance with
certain  covenants and  provisions of the Indenture with respect to the Notes as
described in the immediately  preceding paragraph and the Notes are declared due
and  payable  because  of the  occurrence  of an Event of Default  that  remains
applicable,  the amount of money or U.S. Government  Obligations on deposit with
the Trustee will be  sufficient to pay principal of and interest on the Notes on
the  respective  dates on which the amounts are due but may not be sufficient to
pay amounts  due on such Notes at the time of the  acceleration  resulting  from
such  Event of  Default.  However,  the  Company  shall  remain  liable for such
payments.

  Termination of Company's Obligations in Certain Circumstances

         The Indenture further provides that the Company will be discharged from
any and all  obligations  in  respect  of the  Notes and the  provisions  of the
Indenture  will no longer be in effect with respect to the Notes  (except to the
extent  provided under "-- Defeasance and Discharge") if the Notes mature within
one year or all of them are to be called  for  redemption  within one year under
arrangements  satisfactory  to the  Trustee  for the  giving  of the  notice  of
redemption,  and the Company  deposits with the Trustee or the Paying Agent,  in
trust,  money or U.S.  Government  Obligations  that,  through  the  payment  of
interest and principal in respect thereof in accordance  with their terms,  will
provide money in an amount sufficient to pay

                                       41

<PAGE>



the principal of, premium, if any, and accrued interest on the Notes when due in
accordance with the terms of the Indenture and the Notes.  Such a trust may only
be established if, among other things,  (i) no Default under the Indenture shall
have occurred and be  continuing on the date of such deposit,  (ii) such deposit
will not result in or  constitute  a Default or result in a breach or  violation
of, or constitute a Default under, any other material agreement or instrument to
which the  Company is a party or by which it is bound and (iii) the  Company has
delivered to the Trustee an Opinion of Counsel stating that such conditions have
been complied with.  Pursuant to this provision,  the Company is not required to
deliver an Opinion of Counsel  to the effect  that  Holders  will not  recognize
income,  gain or loss for U.S.  federal  income tax purposes as a result of such
deposit  and  termination,  and there is no  assurance  that  Holders  would not
recognize income,  gain or loss for U.S. federal income tax purposes as a result
thereof or that Holders would be subject to U.S.  federal income tax on the same
amount and in the same  manner and at the same times as would have been the case
if such deposit and termination had not occurred.

No Personal Liability of Incorporators, Stockholders, Officers, Directors or
Employees

         The Indenture  provides  that no  incorporator,  stockholder,  officer,
director or employee of the Company shall be liable for any  obligations  of the
Company  under the Notes or the  Indenture or for any claim based  thereon or in
respect thereof.  Each Holder,  by accepting the Notes,  waives and releases all
such liability.

Concerning the Trustee

         United  States  Trust  Company  of New York is the  Trustee  under  the
Indenture  and is Paying  Agent and  Registrar  for the  Notes.  Notices  to the
Trustee,  Paying Agent and Registrar  under the Indenture  should be directed to
United States Trust  Company of New York,  144 West 47th Street,  New York,  New
York 10036, Attention: Corporate Trust Division.

Governing Law

         Under  the  terms of the  Indenture,  the laws of the State of New York
govern the Indenture and the Notes.


                                       42

<PAGE>



                          BOOK-ENTRY; DELIVERY AND FORM

         Except as set forth  below,  the New Notes will  initially be issued in
the form of one  registered  note in global form  without  coupons  (the "Global
Note"). Upon issuance,  the Global Note will be deposited with, or on behalf of,
DTC and registered in the name of Cede & Co., as nominee of DTC.

         If a holder  tendering  Existing  Notes so requests,  such holder's New
Notes will be issued as described  below under "--  Certificated  Securities" in
registered form without coupons (the "Certificated Securities").

         DTC has  advised  the Company  that it is (i) a limited  purpose  trust
company  organized under the laws of the State of New York, (ii) a member of the
Federal Reserve System, (iii) a "clearing corporation" within the meaning of the
Uniform  Commercial Code, as amended,  and (iv) a "Clearing  Agency"  registered
pursuant to Section 17A of the Exchange Act. DTC was created to hold  securities
for its  participants  (collectively,  the  "Participants")  and facilitates the
clearance and settlement of securities transactions between Participants through
electronic  book-entry  changes to the  accounts  of its  Participants,  thereby
eliminating the need for physical  transfer and delivery of certificates.  DTC's
Participants  include  securities  brokers and dealers  (including the Placement
Agents),  banks and trust  companies,  clearing  corporations  and certain other
organizations.  Access to DTC's system is also  available to other entities such
as banks,  brokers,  dealers and trust  companies  (collectively,  the "Indirect
Participants")  that clear through or maintain a custodial  relationship  with a
Participant, either directly or indirectly.

         The Company expects that pursuant to procedures  established by DTC (i)
upon  deposit of the Global Note,  DTC will credit the accounts of  Participants
who elect to  exchange  Existing  Notes with an  interest in the Global Note and
(ii)  ownership of the New Notes will be shown on, and the transfer of ownership
thereof will be effected only through,  records  maintained by DTC (with respect
to  the  interest  of   Participants),   the   Participants   and  the  Indirect
Participants. The laws of some states require that certain persons take physical
delivery  in  definitive  form of  securities  that  they own and that  security
interests  in  negotiable  instruments  can only be  perfected  by  delivery  of
certificates representing the instruments.

         So long as DTC or its  nominee  is the  registered  owner of the Global
Note, DTC or such nominee, as the case may be, will be considered the sole owner
or holder of the New Notes represented by the Global Note for all purposes under
the Indenture.  Except as provided below, owners of beneficial  interests in the
Global Note will not be entitled  to have New Notes  represented  by such Global
Note  registered  in their  names,  will not  receive or be  entitled to receive
physical  delivery of  Certificated  Securities,  and will not be considered the
owners or holders  thereof under the Indenture for any purpose,  including  with
respect to the giving of any directions,  instruction or approval to the Trustee
thereunder. As a result, the ability of a person having a beneficial interest in
New Notes  represented  by the Global Note to pledge such interest to persons or
entities that do not  participate  in DTC's system,  or to otherwise take action
with  respect  to such  interest,  may be  affected  by the  lack of a  physical
certificate evidencing such interest.

         The Company  understands that under existing industry practice,  in the
event the  Company  requests  any action of holders or an owner of a  beneficial
interest in the Global  Note  desires to take any action that DTC, as the holder
of such Global Note, is entitled to take, DTC would  authorize the  Participants
to take such action and the Participant  would authorize  persons owning through
such  Participants  to  take  such  action  or  would  otherwise  act  upon  the
instruction  of such persons.  Neither the Company nor the Trustee will have any
responsibility  or  liability  for any  aspect  of the  records  relating  to or
payments made on account of New Notes by DTC, or for maintaining, supervising or
reviewing any records of DTC relating to such New Notes.

         Payments  with  respect  to the  principal  of,  premium,  if any,  and
interest on any New Notes  represented by the Global Note registered in the name
of DTC or its  nominee  on the  applicable  record  date will be  payable by the
Trustee to or at the  direction  of DTC or its  nominee in its  capacity  as the
registered  holder of the  Global  Note  representing  such New Notes  under the
Indenture.  Under the terms of the  Indenture,  the  Company and the Trustee may
treat the persons in whose names the New Notes,  including the Global Note,  are
registered as the owners  thereof for the purpose of receiving  such payment and
for any and all other purposes whatsoever. Consequently, neither the Company nor
the Trustee has or will have any  responsibility or liability for the payment of
such amounts to beneficial owners of New Notes (including principal, premium, if
any,  and  interest),  or to  immediately  credit the  accounts of the  relevant
Participants  with such payment,  in amounts  proportionate  to their respective
holdings in principal amount of beneficial  interest in the Global Note as shown
on  the  records  of  DTC.   Payments  by  the  Participants  and  the  Indirect
Participants to the beneficial owners of New Notes will be

                                       43

<PAGE>



governed  by  standing  instructions  and  customary  practice  and  will be the
responsibility of the Participants or the Indirect Participants (as the case may
be).

Certificated Securities

         If: (i) the  Company  notifies  the  Trustee in writing  that DTC is no
longer  willing  or able to act as a  depository  and the  Company  is unable to
locate a qualified  successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
definitive  form under the Indenture,  then, upon surrender by DTC of its Global
Note,  Certificated Securities will be issued to each person that DTC identifies
as the  beneficial  owner of the New Notes  represented  by the Global Note.  In
addition,  any person  having a  beneficial  interest  in the Global Note or any
holder of Existing  Notes whose  Existing  Notes have been accepted for exchange
may,  upon  request to the Trustee or the  Exchange  Agent,  as the case may be,
exchange such beneficial interest or Existing Notes for Certificated Securities.
Upon any such  issuance,  the Trustee is required to register such  Certificated
Securities  in the  name of such  person  or  persons  (or  the  nominee  of any
thereof), and cause the same to be delivered thereto.

         Neither the  Company  nor the Trustee  shall be liable for any delay by
DTC or any  Participant or Indirect  Participant  in identifying  the beneficial
owners of the related New Notes and each such person may  conclusively  rely on,
and shall be  protected  in relying on,  instructions  from DTC for all purposes
(including  with respect to the  registration  and delivery,  and the respective
principal amounts, of the New Notes to be issued).



                                       44

<PAGE>



                    CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

         The following  summary  describes  certain United States federal income
tax  consequences of the Exchange Offer.  Except where noted, it deals only with
Existing Notes, and the New Notes received therefor,  held as capital assets and
does not deal with special situations, such as those of dealers in securities or
currencies,  tax exempt organizations,  individual retirement accounts and other
tax deferred accounts, financial institutions, life insurance companies, persons
holding  Existing  Notes as a part of a hedging or conversion  transaction  or a
straddle,  persons subject to the alternative minimum tax or holders of Existing
Notes whose  "functional  currency" is not the U.S. dollar,  nor does it discuss
tax  consequences  to  subsequent  purchasers  (persons who did not purchase the
Existing Notes pursuant to their original  issue).  Furthermore,  the discussion
below is based upon the  provisions  of the Internal  Revenue  Code of 1986,  as
amended (the "Code"), and regulations, rulings and judicial decisions thereunder
as of the date hereof, and such authorities may be repealed, revoked or modified
so as to  result  in  federal  income  tax  consequences  different  from  those
discussed  below.  No rulings will be sought from the Internal  Revenue  Service
(the "IRS") with respect to the federal income tax  consequences of the Exchange
Offer.  In  addition,  except as otherwise  indicated,  the  following  does not
consider the effect of any applicable foreign, state, local or other tax laws or
estate or gift tax considerations.  Persons considering the exchange of Existing
Notes should  consult their own tax advisors  concerning  the federal income tax
consequences  in  light  of  their  particular   situations,   as  well  as  any
consequences arising under the laws of any other taxing jurisdiction.

The Exchange Offer

         The exchange of Existing Notes pursuant to the Exchange Offer should be
treated as a continuation of the corresponding  Existing Notes because the terms
of the New Notes are not  materially  different  from the terms of the  Existing
Notes.  Accordingly,  such  exchange  should not  constitute a taxable  event to
United States Holders and, therefore,  (i) no gain or loss should be realized by
United States Holders upon receipt of a New Note, (ii) the holding period of the
New Note should  include  the  holding  period of the  Existing  Note  exchanged
therefor  and (iii) the adjusted tax basis of the New Note should be the same as
the adjusted  tax basis of the  Existing  Note  exchanged  therefor  immediately
before the exchange. As used herein, a "United States Holder" of a Note means an
initial  holder  that  is  a  citizen  or  resident  of  the  United  States,  a
corporation,  partnership  or other entity  created or organized in or under the
laws of the United States or any political  subdivision  thereof,  an estate the
income of which is subject to United States federal income  taxation  regardless
of its  source,  or a trust  if (i) a U.S.  court  is able to  exercise  primary
supervision  over the  administration  of the  trust  and (ii) one or more  U.S.
trustees or fiduciaries have the authority to control all substantial  decisions
of the trust.  A  "Non-United  States  Holder" is a holder  that is not a United
States Holder.

Stated Interest on Notes

         Except as set forth below, interest on a Note will generally be taxable
to a United States Holder as ordinary  income from domestic  sources at the time
it is paid or accrued in accordance  with the United States  Holder's  method of
accounting for tax purposes.

         Failure of the Company to consummate  the Exchange  Offer or to file or
cause to be declared  effective a  registration  statement  as  described  under
"Description of the Notes -- Terms of the Notes," will cause additional interest
to accrue on the Existing Notes in the manner  described  therein.  According to
U.S. Treasury regulations, the possibility of a change in the interest rate will
not affect the amount of interest  income  recognized  by a United States Holder
(or the timing of such  recognition) if the likelihood of the change,  as of the
date the Notes were issued, was remote. The Company believes that the likelihood
of a change in the interest  rate on the  Existing  Notes is remote and does not
intend to treat the  possibility  of a change in the interest  rate as affecting
the yield to maturity  of any  Existing  Note.  In the  unlikely  event that the
interest rate on the Notes is  increased,  then such  increased  interest may be
treated as original  issue  discount,  includable  by a United  States Holder in
income as such  interest  accrues,  in advance  of  receipt of any cash  payment
thereof.  The Notes are  considered  not to have been issued with original issue
discount.

Market Discount

         If a United States  Holder  purchases a Note for an amount that is less
than its  principal  amount,  the  amount of the  difference  will be treated as
"market  discount" for U.S. federal income tax purposes,  unless such difference
is less than a specified de minimis  amount.  Under the market discount rules, a
United States Holder will be required to treat any partial

                                       45

<PAGE>



principal  payment on, or any gain on the sale,  exchange,  retirement  or other
disposition  of, a Note as ordinary  income to the extent of the market discount
which has not  previously  been  included  in income  and is  treated  as having
accrued on such Note at the time of such  payment or  disposition.  In addition,
the United  States  Holder may be required to defer,  until the  maturity of the
Note or its earlier disposition in a taxable  transaction,  the deduction of all
or a portion of the interest expense on any  indebtedness  incurred or continued
to purchase or carry such Note.

         Any market  discount will be considered  to accrue  ratably  during the
period from the date of acquisition to the maturity date of the Note, unless the
United States Holder elects to accrue on a constant  interest  method.  A United
States  Holder may elect to include  market  discount in income  currently as it
accrues (on either a ratable or  constant  interest  method),  in which case the
rule described above regarding  deferral of interest  deductions will not apply.
This election to include market discount in income currently, once made, applies
to all market discount  obligations  acquired on or after the first taxable year
to which the election  applies and may not be revoked without the consent of the
IRS.

Amortizable Bond Premium

         A United States Holder that purchases a Note for an amount in excess of
the  principal  amount  will be  considered  to  have  purchased  the  Note at a
"premium." A United  States  Holder  generally may elect to amortize the premium
over the remaining term of the Note on a constant yield method.  However, if the
Note was purchased at a time when the Note may have been optionally redeemed for
an amount that was in excess of its principal amount,  special rules would apply
that could result in a deferral of the  amortization of bond premium until later
in the term of the Note.  The amount  amortized in any year will be treated as a
reduction of the United  States  Holder's  interest  income from the Note.  Bond
premium  on a Note  held by a United  States  Holder  that does not make such an
election  will  decrease the gain or increase the loss  otherwise  recognized on
disposition  of the Note.  The election to amortize  premium on a constant yield
method, once made, applies to all debt obligations held or subsequently acquired
by the  electing  United  States  Holder  on or after the first day of the first
taxable  year to which the election  applies and may not be revoked  without the
consent of the IRS.

Sale, Exchange and Retirement of Notes

         Upon the sale, exchange, redemption, retirement or other disposition of
a Note, a United States Holder  generally  will  recognize gain or loss equal to
the difference between the amount realized upon the sale, exchange,  redemption,
retirement  or other  disposition  and such  holder's  adjusted tax basis of the
Note. A United States Holder's adjusted tax basis in a Note will, in general, be
the  United  States  Holder's  cost  therefor,   increased  by  market  discount
previously  included  in income by the United  States  Holder and reduced by any
amortized premium  previously  deducted from income by the United States Holder.
Except as  described  above  with  respect to market  discount  or except to the
extent the gain or loss is attributable  to accrued but unpaid stated  interest,
such  gain or  loss  will  be  capital  gain or  loss.  Under  recently  enacted
legislation, an individual United States Holder generally will be subject to tax
on the net amount of his or her capital gain realized on the sale or exchange of
a Note at a  maximum  rate of (i) 28% for a Note held for more than one year but
not more than eighteen  months,  (ii) 20% for a Note held for more than eighteen
months and (iii)  provided  that the  holding  period for such Note is deemed to
begin after December 31, 2000,  pursuant to a special  election,  18% for a Note
held for more than five years. Special rules (and generally lower maximum rates)
apply  for  individuals  whose  taxable  income  is below  certain  levels.  The
deductibility of capital losses is subject to limitations.

         The exchange of an Existing  Note by a United  States  Holder for a New
Note should not constitute a taxable exchange.  A United States Holder will have
the same tax basis and holding  period in the New Note as it did in the Existing
Note. See "-- The Exchange Offer."

Non-United States Holders

         Under  present  United  States  federal  income and estate tax law, and
subject to the discussion below concerning backup withholding:

                  (a) no United States federal  withholding  tax will be imposed
         with  respect  to the  payment by the  Company  or its paying  agent of
         principal, premium, if any, or interest on a Note owned by a Non-United
         States Holder (the "Portfolio Interest  Exception"),  provided (i) that
         such Non-United States Holder does not actually or  constructively  own
         10% or more of the total combined  voting power of all classes of stock
         of the Company entitled to vote within

                                       46

<PAGE>



         the  meaning  of  section  871(h)(3)  of the Code  and the  regulations
         thereunder,  (ii) such  Non-United  States  Holder is not a  controlled
         foreign  corporation  that is related,  directly or indirectly,  to the
         Company through stock ownership, (iii) such Non-United States Holder is
         not a bank whose  receipt of interest on a Note is described in section
         881(c)(3)(A)  of the  Code  and  (iv)  such  Non-United  States  Holder
         satisfies the statement  requirement  (described  generally  below) set
         forth  in  section  871(h)  and  section  881(c)  of the  Code  and the
         regulations thereunder;

                  (b) no United States federal  withholding  tax will be imposed
         generally  with respect to any gain or income  realized by a Non-United
         States Holder upon the sale, exchange, redemption,  retirement or other
         disposition of a Note; and

                  (c) a Note beneficially owned by an individual who at the time
         of death is a  Non-United  States  Holder will not be subject to United
         States  federal  estate  tax as a result  of such  individual's  death,
         provided that such individual does not actually or  constructively  own
         10% or more of the total combined  voting power of all classes of stock
         of the Company entitled to vote within the meaning of section 871(h)(3)
         of the Code and  provided  that the interest  payments  with respect to
         such  Note  would  not  have  been,  if  received  at the  time of such
         individuals death,  effectively  connected with the conduct of a United
         States trade or business by such individual.

         To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Note,  or a  financial  institution  holding the Note on behalf of
such owner,  must provide,  in accordance  with specified  procedures,  a paying
agent of the Company with a statement to the effect that the beneficial owner is
not a  United  States  Holder.  Pursuant  to  current  temporary  U.S.  Treasury
regulations, these requirements will be met if (1) the beneficial owner provides
his name and address, and certifies,  under penalties of perjury, that he is not
a United States Holder (which  certification  may be made on an IRS Form W-8 (or
substitute form)) or (2) a financial  institution  holding the Note on behalf of
the beneficial owner certifies,  under penalties of perjury, that such statement
has been received by it and  furnishes a paying agent with a copy  thereof.  The
IRS has proposed  regulations  that, if finalized,  would modify  certain of the
certification requirements described above.

         If a Non-United  States Holder cannot satisfy the  requirements  of the
Portfolio Interest Exception described in (a) above,  payments on a Note made to
such  Non-United  States Holder will be subject to a 30%  withholding tax unless
the  beneficial  owner of the Note provides the Company or its paying agent,  as
the case may be, with a properly executed (1) IRS Form 1001 (or substitute form)
claiming an exemption  from or reduction of  withholding  under the benefit of a
tax treaty or (2) IRS Form 4224 (or substitute  form) stating that interest paid
on the  Note  is not  subject  to  withholding  tax  because  it is  effectively
connected  with the  beneficial  owner's  conduct of a trade or  business in the
United States.

         If a Non-United  States Holder is engaged in a trade or business in the
United States and payment on a Note is effectively connected with the conduct of
such trade or business,  the  Non-United  States  Holder,  although  exempt from
United States federal  withholding  tax as discussed  above,  will be subject to
United  States  federal  income tax on such payment on a net income basis in the
same manner as if it were a United States Holder. In addition, if such Holder is
a foreign corporation, it may be subject to a branch profits tax equal to 30% of
its effectively  connected earnings and profits for the taxable year, subject to
adjustments.  For this purpose,  such payment on a Note will be included in such
foreign corporation's earnings and profits.

         Any gain or income  realized  upon the sale,  exchange,  retirement  or
other  disposition  of a Note  generally  will not be subject  to United  States
federal income tax unless (i) such gain or income is effectively  connected with
a trade or business in the United States of the Non-United States Holder or (ii)
in the case of a Non-United States Holder who is an individual,  such individual
is present in the United States for 183 days or more in the taxable year of such
sale,  exchange,  retirement or other disposition,  and certain other conditions
are met.

Information Reporting and Backup Withholding

         In general,  information reporting  requirements will apply to payments
on a Note  and to the  proceeds  of the  sale of a Note  made to  United  States
Holders  other than certain  exempt  recipients  (such as  corporations).  A 31%
backup  withholding  tax will apply to such payments if the United States Holder
fails to provide a taxpayer identification number or certification of foreign or
other exempt status or fails to report in full dividend and interest income.

                                       47

<PAGE>




         No information  reporting or backup  withholding  will be required with
respect to payments made by the Company or any paying agent to Non-United States
Holders if a statement described in (a)(iv) under "-- Non-United States Holders"
has  been  received  and the  payor  does  not have  actual  knowledge  that the
beneficial owner is a United States person.

         In addition,  backup  withholding  and  information  reporting will not
apply if  payments  on a Note are paid or  collected  by a  foreign  office of a
custodian,  nominee or other foreign agent on behalf of the beneficial  owner of
such Note,  or if a foreign  office of a broker (as defined in  applicable  U.S.
Treasury  regulations)  pays the  proceeds  of the  sale of a Note to the  owner
thereof. If, however,  such nominee,  custodian,  agent or broker is, for United
States federal income tax purposes, a United States person, a controlled foreign
corporation or a foreign person that derives 50% or more of its gross income for
certain  periods  from the conduct of a trade or business in the United  States,
such  payments  will  be  subject  to  information  reporting  (but  not  backup
withholding),   unless  (1)  such  custodian,   nominee,  agent  or  broker  has
documentary  evidence in its records that the  beneficial  owner is not a United
States person and certain other  conditions are met or (2) the beneficial  owner
otherwise establishes an exemption.  Temporary U.S. Treasury regulations provide
that the U.S. Treasury is considering whether backup withholding will apply with
respect to payments of principal, premium, if any, interest or the proceeds of a
sale that are not subject to backup withholding under the current regulations.

         Payments on a Note paid to the  beneficial  owner of a Note by a United
States  office of a  custodian,  nominee or agent,  or the payment by the United
States office of a broker of the proceeds of sale of a Note,  will be subject to
both backup  withholding and information  reporting  unless the beneficial owner
provides the statement  referred to in (a)(iv) above and the payor does not have
actual  knowledge  that  the  beneficial  owner  is a United  States  person  or
otherwise establishes an exemption.

         Any  amounts  withheld  under  the  backup  withholding  rules  will be
credited  toward such Holder's  United States federal  income tax liability,  if
any. To the extent that the amounts  withheld exceed the Holder's tax liability,
the excess may be refunded to the Holder  provided the required  information  is
furnished to the IRS. In addition to providing  the necessary  information,  the
Holder  must file a United  States tax return in order to obtain a refund of the
excess withholding.


                                       48

<PAGE>



                              PLAN OF DISTRIBUTION

         Each broker-dealer that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge in the Letter of Transmittal that it will
deliver a  prospectus  in  connection  with any resale of such New  Notes.  This
Prospectus,  as it may be amended or supplemented from time to time, may be used
by a broker-dealer  in connection with resales of New Notes received in exchange
for  Existing  Notes  where such  Existing  Notes were  acquired  as a result of
market-making  activities  or other trading  activities.  The Company has agreed
that,  for a period of 180 days  after the  Expiration  Date,  it will make this
Prospectus,  as amended or supplemented,  available to any broker-dealer for use
in  connection  with any such resale.  In addition,  until June 7, 1998 (90 days
after the date of this Prospectus),  all dealers  effecting  transactions in the
New Notes may be required to deliver a prospectus.

         The Company will not receive any  proceeds  from any sale of New Notes.
New Notes  received  by  broker-dealers  for their own  account  pursuant to the
Exchange Offer may be sold from time to time in one or more  transactions in the
over-the-counter  market,  in  negotiated  transactions,  through the writing of
options on the New Notes or a combination  of such methods of resale,  at market
prices  prevailing at the time of resale,  at prices related to such  prevailing
market  price or  negotiated  prices.  Any such  resale may be made  directly to
purchasers or to or through  brokers or dealers who may receive  compensation in
the form of  commissions  or  concessions  from any  such  broker-dealer  or the
purchasers of any such New Notes. Any broker-dealer  that resells New Notes that
were received by it for its own account  pursuant to the Exchange  Offer and any
broker or dealer that  participates  in a distribution  of such New Notes may be
deemed to be an "underwriter"  within the meaning of the Securities Act, and any
profit  on any such  resale  of New Notes  and any  commissions  or  concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by  delivering a  prospectus,  a  broker-dealer  will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.

         For a period of 180 days after the  Expiration  Date,  the Company will
promptly  send  additional  copies  of  this  Prospectus  and any  amendment  or
supplement to this Prospectus to any broker-dealer  that requests such documents
in the  Letter of  Transmittal.  The  Company  has  agreed  to pay all  expenses
incident to the Exchange  Offer  (including  the expenses of one counsel for the
holders of the Existing  Notes) other than  commissions  or  concessions  of any
brokers  or  dealers  and will  indemnify  the  holders  of the  Existing  Notes
(including  any   broker-dealers)   against   certain   liabilities,   including
liabilities under the Securities Act.


                                       49

<PAGE>



                                  LEGAL MATTERS

         The legality of the New Notes  offered  hereby is being passed upon for
the Company by Dechert Price & Rhoads,  New York, New York,  special counsel for
the Company.

                                     EXPERTS

         The consolidated  financial statements of EnviroSource,  Inc. appearing
in the Annual Report (Form 10-K) for the year ended December 31, 1996, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial  statements are incorporated herein by reference in reliance upon such
report  given  upon the  authority  of such firm as experts  in  accounting  and
auditing.


                                       50

<PAGE>



                                     ANNEX 1


         The Third Quarter 10-Q was previously  filed by the registrant  through
the EDGAR system and is therefore excluded from this EDGAR filing.



<PAGE>



                                     ANNEX 2


         The Form 10-K was previously filed by the registrant  through the EDGAR
system and is therefore excluded from this EDGAR filing.


<PAGE>



                                     ANNEX 3


         The Proxy Statement was previously filed by the registrant  through the
EDGAR system and is therefore excluded from this EDGAR filing.


<PAGE>


<TABLE>
<CAPTION>

<S>     <C>                                                                      <C>
         No person has been  authorized  to give any                             PROSPECTUS
information  or to make  any  representations  other
than those  contained  in this  Prospectus  and,  if
given or made, such  information or  representations
must not be relied upon as having  been  authorized.                             $50,000,000
This Prospectus does not constitute an offer to sell
or  the   solicitation   of  an  offer  to  buy  any
securities other than those to which it relates, nor
does  it   constitute   an  offer  to  sell  or  the
solicitation  of an offer to buy such  securities in
any  circumstances  in which  such  solicitation  is                             ENVIROSOURCE
unlawful.  Neither the  delivery of this  Prospectus
nor  any  sale  made  hereunder  shall,   under  any
circumstances, create any implication that there has
been no change in the affairs of the  Company  since
the date  hereof or that the  information  contained
herein is correct as of any time  subsequent  to the
date hereof.


                 TABLE OF CONTENTS
                                                 Page                          OFFER TO EXCHANGE
                                                 ----                 9 3/4% Senior Notes due 2003, Series B
                                                                               for al outstanding
Available Information............................. 3                  9 3/4% Senior NOtes due 2003, Series B
Annexes and Incorporation of
  Documents By Reference.......................... 4
Summary........................................... 5
Summary Financial Data........................... 12
Risk Factors..................................... 14
Use of Proceeds.................................. 18
Capitalization................................... 18
The Exchange Offer............................... 19
Description of the Notes......................... 24
Book-Entry; Delivery and Form.................... 43
   
Certain Federal Income Tax
  Consequences................................... 45                             March 9, 1998
    
Plan of Distribution............................. 49
Legal Matters.................................... 50
Experts.........................................  50


   
         Until  June 7, 1998 (90 days after the date
of   this   Prospectus),   all   dealers   effecting
transactions   in   the   Notes,   whether   or  not
participating in the original  distribution,  may be
required  to  deliver  a  Prospectus.   This  is  in
addition to the  obligation  of dealers to deliver a
Prospectus  when  acting  as  underwriters  and with
respect to their unsold allotments or subscriptions.
</TABLE>
    

<PAGE>

                                     PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20.  Indemnification of Directors and Officers

         EnviroSource  is a Delaware  corporation.  Article VII Section 4 of the
Company's  By-Laws  provides  that the Company may  indemnify  its  officers and
directors  to the full  extent  permitted  by law.  Section  145 of the  General
Corporation  Law of the  State of  Delaware  ("GCL")  provides  that a  Delaware
corporation  has the power to indemnify  its  officers and  directors in certain
circumstances.

         Subsection  (a) of Section  145 of the GCL  empowers a  corporation  to
indemnify any director or officer, or former director or officer,  who was or is
a party  or is  threatened  to be made a party  to any  threatened,  pending  or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative  (other  than an action  by or in the  right of the  corporation),
against expenses (including attorneys' fees). judgments,  fines and amounts paid
in settlement  actually and reasonably  incurred in connection with such action,
suit or proceeding provided that such director or officer acted in good faith in
a manner  reasonably  believed to be in or not opposed to the best  interests of
the corporation, and with respect to any criminal action or proceeding, provided
that such  director  or officer  had no cause to believe  his or her conduct was
unlawful.

         Subsection  (b) of the Section 145 empowers a corporation  to indemnify
any director or officer, or former director or officer, who was or is a party or
is threatened to be made a party to any threatened,  pending or completed action
or suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that such person acted in any of the  capacities set forth
above,  against expenses actually and reasonably incurred in connection with the
defense or  settlement  of such action or suit  provided  that such  director or
officer acted in good faith and in a manner  reasonably  believe to be in or not
opposed to the best interests of the corporation, except that no indemnification
may be made in respect of any claim,  issue or matter as to which such  director
or officer shall have been adjudged to be liable to the  corporation  unless and
only to the extent  that the Court of Chancery or the court in which such action
was brought shall  determine  that despite the  adjudication  of liability  such
director  or officer is fairly and  reasonably  entitled to  indemnity  for such
expenses which the court shall deem proper.

         Section 145 further provides that the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to in subsections (a) and (b) or in the defense of any claim,  issue or
matter  therein,  he or she shall be  indemnified  against  expenses  (including
attorneys'  fees) actually and  reasonably  incurred by him or her in connection
therewith;  that indemnification provided for by Section 145 shall not be deemed
exclusive  of any other rights to which the  indemnified  party may be entitled;
and that the corporation shall have power to purchase and maintain  insurance on
behalf of a  director  or  officer  of the  corporation  against  any  liability
asserted  against him or her or  incurred by him or her in any such  capacity or
arising ut of his status as such whether or not the  corporation  would have the
power to indemnify him against such liabilities under Section 145.

         Article TENTH of the Company's  Certificate of Incorporation  currently
provides  that no  director  shall be  personally  liable to the  Company or its
stockholders  for monetary  damages for breach of fiduciary  duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its  stockholders,  (ii) for acts or  omissions  not in good faith or
which involve intentional  misconduct or a knowing violation of law, (iii) under
Section  174 of the GCL,  or (iv) for any  transaction  from which the  director
derived an improper personal benefit.


                                      II-1
<PAGE>



Item 21.  Exhibits and Financial Statement Schedules

(a) Exhibits:

Exhibit
  No.                                  Description
  ---                                  -----------

 3.1      Amended  and  Restated  Certificate  of  Incorporation  of the Company
          (incorporated  herein by reference to Appendix A (pages A-1 to A-3) to
          the Company's  Proxy Statement filed April 29, 1996, in respect of its
          1996 Annual Meeting of Stockholders (File No. 1-1363))
 3.2      Amendment  of  Amended  and  Restated   Certificate  of  Incorporation
          (incorporated  herein by  reference to Page 2 to the  Company's  Proxy
          Statement  filed April 30, 1997, in respect of its 1997 Annual Meeting
          of Stockholders (File No. 1-1363))
 3.3      By-Laws of the Company  (incorporated herein by reference to Exhibit C
          (pages C-1 to C-9) to the Company's  Proxy  Statement  filed April 24,
          1987, in respect of its 1987 Annual Meeting of Stockholders  (File No.
          1-1363))
 3.4      Amendment  to the  By-Laws  of the  Company  (incorporated  herein  by
          reference to Exhibit 3.4 to the  Company's  Annual Report on Form 10-K
          for the fiscal year ended December 31, 1987 (File No. 1-1363))
 3.5      By-Law Amendment  Adopted March 26, 1997 By Unanimous  Written Consent
          of the  Board of  Directors,  Effective  June 19,  1997  (incorporated
          herein by reference to Exhibit 3.5 to the Company's  Quarterly  Report
          on Form 10-Q for the  fiscal  quarter  ended  June 30,  1997 (File No.
          1-1363))
 4.1      Indenture,  dated as of September  30,  1997,  between the Company and
          United States Trust  Company of New York, as Trustee,  relating to the
          Company's  9-3/4% Senior Notes due 2003,  Series B, including the form
          of such notes  attached as Exhibit A thereto  (incorporated  herein by
          reference  to Exhibit 4.6 to the  Company's  Quarterly  Report on Form
          10-Q for the fiscal  quarter  ended  September  30,  1997 (File No. 1-
          1363))
 4.2      Registration  Rights Agreement,  dated as of September 30, 1997, among
          the Company,  Morgan Stanley & Co. Incorporated,  Jefferies & Company,
          Inc. and NationsBanc  Capital Markets,  Inc.  (incorporated  herein by
          reference  to Exhibit 4.7 to the  Company's  Quarterly  Report on Form
          10-Q for the  fiscal  quarter  ended  September  30,  1997  (File  No.
          1-1363))
 4.3      Loan and Security  Agreement,  dated as of April 6, 1993,  between IMS
          Funding Corporation and Greyhound Financial Corporation.  (The Company
          agrees to  furnish a copy of such  agreement  to the  Commission  upon
          request)
 4.4      Agreement Amending Loan and Security Agreement and Corporate Guarantee
          Agreement,  dated as of  December  8,  1995,  between  FINOVA  Capital
          Corporation (formerly known as Greyhound Financial  Corporation),  IMS
          Funding Corporation, and International Mill Service, Inc. (The Company
          agrees to  furnish a copy of such  agreement  to the  Commission  upon
          request)
 4.5      Indenture,  dated as of July 1, 1993,  between  the Company and United
          States  Trust  Company  of  new  York,  as  Trustee,  relating  to the
          Company's  9-3/4%  Senior Notes due 2003,  including  the form of such
          notes attached as Exhibit A thereto  (incorporated herein by reference
          to Exhibit 4.10 to the Company's Quarterly Report on Form 10-Q for the
          fiscal quarter ended June 30, 1993 (File No. 1-1363))
 4.6      First  Supplemental  Indenture,  dated as of November 2, 1995, between
          the Company and United  States Trust  Company of New York, as Trustee,
          relating to the Company's  9-3/4% Senior Notes due 2003  (incorporated
          herein by reference to Exhibit 4.15 to the Company's  Quarterly Report
          on Form 10-Q for the fiscal quarter ended September 30, 1995 (File No.
          1-1363))
 4.7      Second Supplemental Indenture, dated as of September 24, 1997, between
          the Company and United  States Trust  Company of New York, as Trustee,
          relating to the Company's  9-3/4% Senior Notes due 2003  (incorporated
          herein by reference to Exhibit 4.5 to the Company's  Quarterly  Report
          on Form 10-Q for the fiscal quarter ended September 30, 1997 (File No.
          1-1363))
 4.8      Registration  Rights  Agreement,  dated as of May 13, 1993,  among the
          Company,  FS Equity  partners II, L.P., The IBM Retirement  Plan Trust
          Fund and Enso  Partners,  L.P.  (incorporated  herein by  reference to
          Exhibit  4.29  to  Amendment  No.  1  to  the  Company's  Registration
          Statement on Form S-1, filed June 14, 1993 (File No. 33-62050))

                                      II-2

<PAGE>



 4.9      Warrant to purchase shares of Common Stock or the Company issued to FS
          Equity  Partners  II,  L.P.,  dated as of May 13,  1993  (incorporated
          herein  by  reference  to  Exhibit  4.30  to  Amendment  No.  1 to the
          Company's  Registration  Statement  on Form S-1,  filed June 14,  1993
          (File No. 33-62050))
 4.10     Warrant to purchase  shares of Common  Stock of the Company  issued to
          The  IBM  Retirement  Plan  Trust  Fund,  dated  as of  May  13,  1993
          (incorporated  herein by reference to Exhibit 4.31 to Amendment  No. 1
          to the Company's  Registration  Statement on Form S-1,  filed June 14,
          1993 (File No. 33-62050))
 4.11     Warrant to purchase  shares of Common  Stock of the Company  issued to
          Enso Partners,  L.P., dated as of May 13, 1993 (incorporated herein by
          reference  to  Exhibit  4.32  to  Amendment  No.  1 to  the  Company's
          Registration  Statement  on Form S-1,  filed  June 14,  1993 (File No.
          33-62050))
 4.12     Loan  Agreement,  dated as of June 1,  1994,  between  the  Industrial
          Development   Corporation  of  Owyhee  County,  Idaho  and  Envirosafe
          Services of Idaho,  Inc.  relating to  $8,500,000  Industrial  Revenue
          Bonds,  Series  1994.  (The  Company  agrees to furnish a copy of such
          agreement to the Commission upon request)
 4.13     Credit  Agreement,  dated as of December 19, 1995,  among the Company,
          International  Mill  Service,   Inc.,  the  lenders  parties  thereto,
          NationsBank,  N.A., as  Administrative  Agent,  and Credit Lyonnais as
          Syndication Agent (incorporated herein by reference to Exhibit 4.14 to
          the  Company's  Annual  Report on Form 10-K for the fiscal  year ended
          December 31, 1995 (File No. 1-1363))
 4.14     Assignment  and  Acceptance,  dated as of  February  8, 1996,  between
          NationsBank,  N.A. and Banque Paribas;  and Assignment and Acceptance,
          dated as of February 8, 1996,  between Credit Lyonnais New York Branch
          and Banque Paribas  (incorporated  herein by reference to Exhibit 4.13
          to the Company's  Quarterly Report on Form 10-Q for the fiscal quarter
          ended March 31, 1996 (File No. 1-1363))
 4.15     First  Amendment,  dated as of May 15, 1996, to the Credit  Agreement,
          dated as of December 19, 1995, among the Company,  International  mill
          Service,  Inc., the lenders  parties  thereto,  NationsBank,  N.A., as
          Administrative   Agent,  and  Credit  lyonnais  as  Syndication  Agent
          (incorporated  herein by reference  to Exhibit  4.15 to the  Company's
          Quarterly  Report on Form 10-Q for the fiscal  quarter  ended June 30,
          1996 (File No. 1-1363))
 4.16     Second  Amendment,  dated  as of  December  23,  1996,  to the  Credit
          Agreement,   dated  as  of  December  19,  1995,  among  the  Company,
          International  Mill  Service,   Inc.,  the  lenders  parties  thereto,
          NationsBank,  N.A., as  Administrative  Agent,  and Credit Lyonnais as
          Syndication Agent (incorporated herein by reference to Exhibit 4.13 to
          the  Company's  Annual  Report on Form 10-K for the fiscal  year ended
          December 31, 1996 (File No. 1-1363))
 4.17     Third  Amendment,  effective  as of  June  30,  1997,  to  the  Credit
          Agreement,   dated  as  of  December  19,  1995,  among  the  Company,
          International  Mill  Service,   Inc.,  the  lenders  parties  thereto,
          NationsBank,  N.A., as  Administrative  Agent,  and Credit Lyonnais as
          Syndication Agent (incorporated herein by reference to Exhibit 4.14 to
          the  Company's  Quarterly  Report on Form 10-Q for the fiscal  quarter
          ended June 30, 1997 (File No. 1-1363))
 4.18     Fourth  Amendment,  effective as of September  23, 1997, to the Credit
          Agreement,   dated  as  of  December  19,  1995,  among  the  Company,
          International  Mill  Service,   Inc.,  the  lenders  parties  thereto,
          NationsBank,  N.A., as  Administrative  Agent,  and Credit Lyonnais as
          Syndication Agent (incorporated herein by reference to Exhibit 4.18 to
          the  Company's  Quarterly  Report on Form 10-Q for the fiscal  quarter
          ended September 30, 1997 (File No. 1-1363))
 5.1      Opinion of Dechert Price & Rhoads
10.1      Placement Agreement dated September 25, 1997 among the Company, Morgan
          Stanley & Co. Incorporated,  Jefferies & Company, Inc. and NationsBanc
          Capital  Markets,  Inc.,  with respect to the 9-3/4%  Senior Notes due
          2003, Series B*
10.2      Restated  Incentive  Stock  Option  Plan of the  Company,  as  amended
          (incorporated  herein  by  reference  to  Exhibit  A to the  Company's
          Registration  Statement on Form S-8,  filed January 17, 1989 (File No.
          33- 26633))
10.3      Promissory  note of Louis A.  Guzzetti,  Jr.,  dated  March 31,  1993,
          payable to the Company,  amending and replacing the  Promissory  notes
          dated  October  15,  1987,  march 31,  1991 and march 31, 1992 and the
          letter Amendments dated April 13, 1991 and May 12, 1992  (incorporated
          herein by reference to Exhibit 10.13 to Post-Effective Amendment No. 1
          to the Company's  Registration  Statement on Form S-1, filed September
          16, 1993 (File No. 33-46930))

10.4      Promissory  Notes  of  Aarne  Anderson,  George  E.  Fuehrer  and  Mr.
          Guzzetti, dated as of April 1, 1993, payable to the Company,  amending
          and replacing the Promissory Notes dated January 13, 1989, April 1,

                                      II-3

<PAGE>



          1991 and April 1, 1992  (incorporated  herein by  reference to Exhibit
          10.17 to  Post-Effective  Amendment No. to the Company's  Registration
          Statement on Form S-1, filed September 16, 1993 (File No. 33-46930))
10.5      Stock Option Agreement,  dated March 18, 1992, between the Company and
          Raymond P. Caldiero (incorporated herein by reference to Exhibit 10.20
          to the Company's  Annual Report on Form 10-K for the fiscal year ended
          December 31, 1992 (File No. 1-1363))
10.6      Stock Option Agreement,  dated March 18, 1992, between the Company and
          Jeffrey G. Miller  (incorporated  herein by reference to Exhibit 10.21
          to the Company's  Annual Report on Form 10-K for the fiscal year ended
          December 31, 1992 (File No. 1-1363))
10.7      Amendment,  dated August 5, 1993, to the Stock Option Agreement, dated
          March  18,   1992,   between   the   Company  and  Jeffrey  G.  Miller
          (incorporated  herein by reference to Exhibit 10.22 to  Post-Effective
          Amendment No. 1 to the Company's  Registration  Statement on Form S-1,
          filed September 16, 1993 (File No. 33-46930))
10.8      Stock Option Agreement,  dated August 5, 1993, between the Company and
          Wallace B. Askins  (incorporated  herein by reference to Exhibit 10.23
          to  Post-Effective  Amendment  No.  1 to  the  Company's  Registration
          Statement on Form S-1, filed September 16, 1993 (File No. 33-46930))
10.9      1993  Stock  Option  Plan  of  the  Company  (incorporated  herein  by
          reference  to  Exhibit  10.21  to  Amendment  No.  1 to the  Company's
          Registration  Statement  on Form S-1,  filed  June 14,  1993 (File No.
          33-62050))
10.10     EnviroSource,   Inc.  Stock  Option  Plan  for  Non-Affiliated
          Directors,  dated  as of  January  1,  1995  (incorporated  herein  by
          reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K
          for the fiscal year ended December 31, 1994 (File No. 1-1363))
10.11     Supplemental  Executive  Retirement  Plan  of the  Company,  effective
          January 1, 1995 (incorporated  herein by reference to Exhibit 10.19 to
          the  Company's  Annual  Report on Form 10-K for the fiscal  year ended
          December 31, 1994 (File No. 1-1363))
10.12     Employment Agreement,  dated November 5, 1996, between the Company and
          Aarne Anderson  (incorporated  herein by reference to Exhibit 10.12 to
          the  Company's  Quarterly  Report  on Form 10-Q for the  period  ended
          September 30, 1996 (File No. 1-1363))
10.13     Employment Agreement,  dated November 5, 1996, between the Company and
          William B. Davis (incorporated herein by reference to Exhibit 10.13 to
          the  Company's  Quarterly  Report  on Form 10-Q for the  period  ended
          September 30, 1996 (File No. 1-1363))
10.14     Employment Agreement,  dated November 5, 1996, between the Company and
          James C. Hull  (incorporated  herein by reference to Exhibit  10.14 to
          the  Company's  Quarterly  Report  on Form 10-Q for the  period  ended
          September 30, 1996 (File No. 1-1363))
10.15     Stock Purchase  Agreement,  dated November 26, 1996, by and among IMCO
          Recycling Inc.,  IMSAMET,  Inc. and EnviroSource,  Inc.  (incorporated
          herein by reference to Exhibit  10.1 to the  Company's  Form 8-K filed
          January 21, 1997 (file No. 1-1363))
10.16     Amendment  No. 1,  dated as of January  21,  1997,  to Stock  Purchase
          Agreement,  dated November 26, 1996, by and among IMCO Recycling Inc.,
          IMSAMET, Inc. and EnviroSource, Inc. (incorporated herein by reference
          to Exhibit 10.2 to the Company's Form 8-K filed January 21, 1997 (File
          No. 1-1363))
12.1      Statement of Ratio of Earnings to Fixed Charges
21.1      Subsidiaries  of the  Company  (incorporated  herein by  reference  to
          Exhibit  21.1 to the  Company's  Annual  Report  on Form  10-K for the
          fiscal year ended December 31, 1996 (File No. 1-1363))
23.1      Consent of Dechert Price & Rhoads (included in Exhibit 5.1)
23.2      Consent of Ernst & Young LLP
24        Power of Attorney*
25        Statement of Eligibility and Qualification, Form T-1, of United States
          Trust Company of New York*

99.1      Form of Letter of Transmittal

   
99.2      Form of Notice of Guaranteed Delivery

*       Previously filed

(b)  Financial Statement Schedules:
    

        Schedules  are omitted  because of the absence of the  conditions  under
which they are  required or because  the  information  required by such  omitted
schedules is set forth in the Company's  Annual Report on Form 10-K for the year
ended  December  31,  1996,  attached to and  incorporated  by  reference in the
Prospectus.

                                      II-4

<PAGE>




Item 22.  Undertakings

        (a)  The undersigned registrant hereby undertakes:

                  (1) to file,  during any  period in which  offers or sales are
        being made, a post-effective amendment to this registration statement:

                            (i) to include  any  prospectus  required by Section
                  10(a)(3) of the Securities Act of 1933;

                           (ii) to reflect in the prospectus any facts or events
                  arising after the effective date of the registration statement
                  (or the most recent  post-effective  amendment thereof) which,
                  individually  or in the  aggregate,  represent  a  fundamental
                  change  in the  information  set  forth  in  the  registration
                  statement.  Notwithstanding  the  foregoing,  any  increase or
                  decrease in volume of securities  offered (if the total dollar
                  value of  securities  offered  would not exceed that which was
                  registered)  and any deviation from the low or high end of the
                  estimated  maximum offering range may be reflected in the form
                  of  prospectus  filed  with the  Commission  pursuant  to Rule
                  424(b) if, in the  aggregate,  the changes in volume and price
                  represent  no more than a 20% change in the maximum  aggregate
                  offering price set forth in the  "Calculation  of Registration
                  Fee" table in the effective registration statement; and

                           (iii)  to  include  any  material   information  with
                  respect to the plan of distribution  not previously  disclosed
                  in the  registration  statement or any material change to such
                  information in the registration statement;

                  (2) that, for the purpose of determining  any liability  under
        the Securities Act of 1933, each such post-effective  amendment shall be
        deemed to be a new  registration  statement  relating to the  securities
        offered therein,  and the offering of such securities at that time shall
        be deemed to be the initial bona fide offering thereof; and

                  (3) to remove from  registration by means of a  post-effective
        amendment any of the securities  being registered which remain unsold at
        the termination of the offering.

        (b)  Insofar  as  indemnification  for  liabilities  arising  under  the
Securities Act of 1933 may be permitted to directors,  officers and  controlling
persons of the registrant  pursuant to the foregoing  provisions,  or otherwise,
the  registrant  has been  advised  that in the  opinion of the  Securities  and
Exchange  Commission such  indemnification is against public policy as expressed
in the Act and is,  therefore,  unenforceable.  In the  event  that a claim  for
indemnification  against  such  liabilities  (other  than  the  payment  by  the
registrant of expenses  incurred or paid by a director,  officer or  controlling
person of the  registrant  in the  successful  defense  of any  action,  suit or
proceeding)  is  asserted by such  director,  officer or  controlling  person in
connection with the securities being registered,  the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit  to a  court  of  appropriate  jurisdiction  the  question  whether  such
indemnification  by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

        (c) The undersigned  registrant hereby undertakes to respond to requests
for information  that is incorporated by reference into the prospectus  pursuant
to Item 4, 10(b),  11 or 13 of this Form,  within one business day of receipt of
such  request,  and to send the  incorporated  documents  by first class mail or
other equally  prompt means.  This includes  information  contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.

        (d) The undersigned registrant hereby undertakes to supply by means of a
post-effective  amendment  all  information  concerning a  transaction,  and the
company  being  acquired  involved  therein,  that  was not the  subject  of and
included in the registration statement when it became effective.

                                      II-5

<PAGE>



                                   SIGNATURES

   
        Pursuant to the  requirements of the Securities Act of 1933, as amended,
the  Registrant  has  duly  caused  this  Amendment  No.  3 to the  Registration
Statement  to be  signed  on its  behalf  by  the  undersigned,  thereunto  duly
authorized, in the Township of Horsham, Commonwealth of Pennsylvania, on the 6th
day of March, 1998.

                                      ENVIROSOURCE, INC.

                                      By:  /s/ Louis A. Guzzetti, Jr.
                                           --------------------------

                                           Louis A. Guzzetti, Jr.
                                           President and Chief Executive Officer

        Pursuant to the  requirements of the Securities Act of 1933, as amended,
this Amendment No. 3 to the Registration  Statement has been signed below by the
following persons in the capacities indicated on March 6, 1998.

    
Signature                                                Title
- ---------                                                -----

/s/ Louis A. Guzzetti, Jr.
- -------------------------
Louis A. Guzzetti, Jr.                       President, Chief Executive
                                             Officer and Director
                                             (Principal Executive Officer)
/s/ James C. Hull
- -------------------------
James C. Hull                                Vice President and Chief
                                             Financial cial Officer (Principal
                                             Financial and Accounting Officer)
/s/ Ronald P. Spogli*
- -------------------------
Ronald P. Spogli                             Chairman of the Board of Directors

/s/ Wallace B. Askins*
- -------------------------
Wallace B. Askins                            Director

/s/ Raymond P. Caldiero*
- -------------------------
Raymond P. Caldiero                          Director

/s/ Robert N. Gurnitz*
- -------------------------
Robert N. Gurnitz                            Director

/s/ Jeffrey G. Miller*
- -------------------------
Jeffrey G. Miller                            Director

/s/ Jon D. Ralph*
- -------------------------
Jon D. Ralph                                 Director

/s/ John M. Roth*
- -------------------------
John M. Roth                                 Director

/s/ J. Frederick Simmons*
- -------------------------
J. Frederick Simmons                         Director


*By:/s/ Leon Z. Heller
    ---------------------
      Leon Z. Heller
      Attorney-in-Fact



                                      II-6

<PAGE>



Exhibit 5.1     Opinion of Dechert Price & Rhoads



                             Dechert Price & Rhoads
                              30 Rockefeller Plaza
                            New York, New York 10112
                                  212-698-3500









   
                                                        March 9, 1998
    


EnviroSource, Inc.
1155 Business Center Drive
Horsham, Pennsylvania 19044-3454


                               EnviroSource, Inc.
                     9 3/4% Senior Notes due 2003, Series B
                     --------------------------------------


Dear Sirs:

         We have acted as  special  counsel to  EnviroSource,  Inc.,  a Delaware
corporation  (the  "Issuer"),  in connection  with the filing by the Issuer of a
Registration   Statement  on  Form  S-4,   Registration   No.   333-40749   (the
"Registration  Statement"),  with the Securities and Exchange Commission for the
purpose of registering $50 million aggregate  principal amount of the Issuer's 9
3/4% Senior Notes Due 2003,  Series B (the "New Notes") under the Securities Act
of 1933, as amended (the "Act").  The New Notes are to be issued in exchange for
an equal aggregate  principal  amount of the Issuer's  outstanding 9 3/4% Senior
Notes due 2003,  Series B (the "Existing  Notes")  pursuant to the  Registration
Rights  Agreement,  dated as of September 30, 1997,  among the Issuer and Morgan
Stanley & Co.  Incorporated,  Jefferies & Company,  Inc. and NationsBanc Capital
Markets, Inc. filed as Exhibit 4.2 to the Registration Statement.  The New Notes
are to be issued  pursuant to the terms of the Indenture,  dated as of September
30, 1997 (the  "Indenture"),  between the Issuer and United States Trust Company
of  New  York,  as  trustee  (the  "Trustee"),  filed  as  Exhibit  4.1  to  the
Registration  Statement.  The  Indenture  is to be  qualified  under  the  Trust
Indenture Act of 1939, as amended (the "TIA").

         In  connection  with the  foregoing,  we have  reviewed  such  records,
documents,  agreements, letters and certificates, and examined such questions of
law, as we have  considered  necessary  or  appropriate  for the purpose of this
opinion  letter.  In making our examination of records,  documents,  agreements,
letters  and  certificates,   we  have  assumed,   with  your  permission,   the
authenticity of the same, the correctness of the information  contained therein,
the  genuineness of all  signatures,  the authority of all persons  entering and
maintaining   records  or   executing   documents,   agreements,   letters   and
certificates,  and the conformity to authentic  originals of all items submitted
to  us  as  copies  (whether  certified,  conformed,  photostatic  or  by  other
electronic  means)  of  original  records,  documents,  agreements,  letters  or
certificates.  In  rendering  our  opinions  hereinbelow,  we have  relied as to
certain  factual  matters  upon   certificates   of  public   officials   and/or
certificates and letters of certain officers of the Issuer.

         We have also assumed, with your permission, that the Indenture has been
duly authorized,  executed and delivered by the Trustee and constitutes a legal,
valid and binding agreement of the Trustee.



<PAGE>


   
EnviroSource, Inc.
March 9, 1998
Page 2
    



         Based upon and subject to the foregoing, and subject to the limitations
set  forth  below,  we are of the  opinion  that the New  Notes  have  been duly
authorized by the Issuer and, when the Registration  Statement has been declared
effective  under the Act, when the Indenture has been duly  qualified  under the
TIA,  when the New Notes have been duly  executed by the Issuer and when the New
Notes have been duly  authenticated  by the Trustee in accordance with the terms
of the Indenture and issued and delivered  against exchange of Existing Notes in
accordance  with the  terms set  forth in the  Prospectus  forming a part of the
Registration  Statement,  the New Notes will be valid and binding obligations of
the Issuer.

         The  foregoing  opinion  is subject  to:  (i) the effect of  applicable
bankruptcy,  reorganization,  insolvency, moratorium, arrangement and other laws
affecting creditors' rights generally, including, without limitation, the effect
of  statutory  or  other  laws  regarding  fraudulent  conveyances,   fraudulent
transfers and preferential  transfers,  and (ii) limitations  imposed by general
principles of equity (regardless of whether considered in a proceeding at law or
in equity).

         The foregoing  opinion is rendered to the Issuer in connection with the
filing of the Registration Statement and for no other purpose.

         We are  members of the Bar of the State of New York,  and we express no
opinion as to the laws of any  jurisdiction  other than the federal  laws of the
United  States of America,  the laws of the State of New York and, to the extent
necessary to render the opinions expressed hereinabove,  the General Corporation
Law of the State of Delaware.

         This opinion letter speaks only as of the date hereof, and the opinions
expressed  hereinabove  shall not be  deemed  to relate to facts and  conditions
prevailing, or any law in effect, at any time after the date hereof.

         We hereby  consent to the filing of this opinion  letter as Exhibit 5.1
to the  Registration  Statement  and to the use of our name  under  the  caption
"Legal Matters" in the Prospectus forming a part of the Registration  Statement.
In giving  the  foregoing  consent,  we do not  admit  that we come  within  the
category  of  persons  whose  consent  is  required  by the Act or the rules and
regulations promulgated thereunder.

                                                Very truly yours,

                                                /s/ DECHERT PRICE & RHOADS




<PAGE>



Exhibit 12.1    Statement of Ratio of Earnings to Fixed Charges


<TABLE>
<CAPTION>
                                                                                                                       Nine Months
                                                                                                                          Ended
                                                                 Year Ended December 31,                                Sept. 30,
                                          -------------------------------------------------------------------        -------------
                                            1992          1993           1994           1995          1996                1997
                                            ----          ----           ----           ----          ----                ----

<S>                                       <C>           <C>            <C>            <C>           <C>              <C>        
Consolidated pretax income
  from continuing operations              $  (6,131)    $ (17,581)     $  15,529      $  14,763     $  (7,956)       $   (4,430)

Interest expense:
  Continuing operations                      29,572        25,261         21,974         23,483        28,187            21,763
  Allocated to IMSAMET as
    described in Note D
    to the financial statements               3,458         3,087          3,178          3,649         3,273
  Incurred directly by IMSAMET                  623           515            220            268            57
                                          ---------     ---------      ---------      ---------     ----------       ----------
                                             33,653        28,863         25,372         27,400        31,517            21,763

Amortization of interest
  capitalized in prior periods                  328           358            368            375           373               255
Interest portion of rental expense            1,800         2,070          2,340          3,060         3,030             2,245
                                          ---------     ---------      ---------      ---------     ----------       ----------

   Earnings                               $  29,650     $  13,710      $  43,609      $  45,598     $  26,964        $   19,833
                                          =========     =========      =========      =========     =========        ==========




Interest expense:
Interest expense set forth above          $  33,653     $  28,863      $  25,372      $  27,400     $  31,517        $   21,763
Interest capitalized during period              804           616            627            196
Interest portion of rental expense            1,800         2,070          2,340          3,060         3,030             2,245
                                          ---------     ---------      ---------      ---------     ----------       ----------

   Fixed Charges                          $  36,257     $  31,549      $  28,339      $  30,656     $  34,547        $   24,008
                                          =========     =========      =========      =========     =========        ==========



Ratio of Earnings to Fixed Charges               --            --           1.54           1.49            --                --

Deficiency in Earnings Available
   to Cover Fixed Charges                $    6,607     $  17,839      $     --       $      --     $    7,583       $    4,175

</TABLE>








<PAGE>



Exhibit 23.2    Consent of Ernst & Young LLP









   
We  consent  to the  references  to our firm under the  captions  "Experts"  and
"Summary Financial Data" in Amendment No. 3 to the Registration  Statement (Form
S-4) and related  Prospectus  of  EnviroSource,  Inc.  for the  registration  of
$50,000,000 aggregate principal amount of 9 3/4% Senior Notes due 2003, Series B
and to the  incorporation by reference  therein of our report dated February 21,
1997,  with respect to the  consolidated  financial  statements  and schedule of
EnviroSource,  Inc. included in its Annual Report (Form 10-K) for the year ended
December 31, 1996, filed with the Securities and Exchange Commission.


                                                           /s/ ERNST & YOUNG LLP
                                                           ---------------------
                                                               ERNST & YOUNG LLP


Stamford, Connecticut
March 5, 1998
    

<PAGE>



Exhibit 99.1      Form of Letter of Transmittal



   
  THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON APRIL 8,
  1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF EXISTING NOTES MAY
       BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE
    

                               ENVIROSOURCE, INC.

                              LETTER OF TRANSMITTAL

                     9 3/4% SENIOR NOTES DUE 2003, SERIES B

                   TO: UNITED STATED TRUST COMPANY OF NEW YORK
                               THE EXCHANGE AGENT
<TABLE>
<CAPTION>
<S>                  <C>                                             <C>
                     By Mail:                                        By Hand before 4:30 p.m.:
     United States Trust Company of New York                  United States Trust Company of New York
           P.O. Box 843 Cooper Station                                      111 Broadway
             New York, New York 10276                                 New York, New York 10006
       Attention: Corporate Trust Services                 Attention: Lower Level, Corporate Trust Window

By Overnight Courier and by Hand after 4:30 p.m.:                          By Facsimile:
     United States Trust Company of New York                               (212) 780-0592
             770 Broadway, 13th Floor                               Attention: Customer Service
             New York, New York 10003
                                                                       Confirm by Telephone:
                                                                           (800) 548-6565
</TABLE>



   DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
     TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE
       LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS
          ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CARE-
              FULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.

  HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR EXISTING NOTES
      PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW)
    THEIR EXISTING NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.

   
         The undersigned  acknowledges  receipt of the Prospectus dated March 9,
1998 (the "Prospectus") of EnviroSource, Inc. (the "Company") and this Letter of
Transmittal  (the  "Letter  of  Transmittal"),  which  together  constitute  the
Company's Offer to Exchange (the "Exchange  Offer") $1,000  principal  amount of
its 9 3/4% Senior Notes due 2003,  Series B (the "New  Notes"),  which have been
registered under the Securities Act of 1933, as amended (the "Securities  Act"),
pursuant to a Registration Statement of which the Prospectus is a part, for each
$1,000 principal amount of its outstanding 9 3/4% Senior Notes due 2003,  Series
B (the "Existing Notes"), of which $50,000,000  principal amount is outstanding,
upon the terms and  conditions  set forth in the  Prospectus  and this Letter of
Transmittal.  Other  capitalized  terms  used but not  defined  herein  have the
meaning given to them in the Prospectus.
    

         For each  Existing  Note  accepted  for  exchange,  the  holder of such
Existing Note will receive a New Note having a principal amount equal to that of
the  surrendered  Existing Note.  Interest on the New Notes will accrue from the
last  interest  payment date on which  interest  was paid on the Existing  Notes
surrendered  in  exchange  therefor.  Holders of  Existing  Notes  accepted  for
exchange  will be deemed to have waived the right to receive any other  payments
or accrued  interest on the Existing Notes.  The Company  reserves the right, at
any time or from time to time, to extend the Exchange  Offer at its  discretion,
in which event the term "Expiration Date" shall mean the latest time and date to
which the Exchange  Offer is extended.  The Company shall notify  holders of the
Existing


<PAGE>



Notes of any extension by means of a press release or other public  announcement
prior to 9:00  A.M.,  New York City  time,  on the next  business  day after the
previously scheduled Expiration Date.

         This  Letter  of   Transmittal  is  to  be  used  by  Holders  if:  (i)
certificates  representing  Existing Notes are to be physically delivered to the
Exchange Agent herewith by Holders;  (ii) tender of Existing Notes is to be made
by book-entry  transfer to the Exchange  Agent's account at The Depository Trust
Company  ("DTC"),  pursuant to the procedures set forth in the Prospectus  under
"The Exchange Offer - Procedures for Tendering  Existing Notes" by any financial
institution  that is a  participant  in DTC and whose name appears on a security
position  listing as the owner of  Existing  Notes or (iii)  tender of  Existing
Notes is to be made according to the guaranteed delivery procedures set forth in
the  Prospectus  under "The Exchange  Offer - Guaranteed  Delivery  Procedures."
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.

         The term "Holder" with respect to the Exchange  Offer means any person:
(i) in whose name Existing  Notes are  registered on the books of the Company or
any other  person  who has  obtained a  properly  completed  bond power from the
registered  Holder;  or (ii) whose  Existing Notes are held of record by DTC (or
its nominee) who desires to deliver such Existing  Notes by book-entry  transfer
at DTC. The  undersigned  has  completed,  executed and delivered this Letter of
Transmittal to indicate the action the undersigned  desires to take with respect
to the Exchange Offer.

         The  instructions  included  with this  Letter of  Transmittal  must be
followed.  Questions and requests for assistance or for additional copies of the
Prospectus,  this Letter of Transmittal or the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 11 herein.

                                        2

<PAGE>



         HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR
         EXISTING NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS
             ENTIRETY. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
                     CAREFULLY BEFORE CHECKING ANY BOX BELOW
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------

                             DESCRIPTION OF 9 3/4% SENIOR NOTES DUE 2003, SERIES B (EXISTING NOTES)
- ----------------------------------------------------------------------------------------------------------------------------------

                                                                                                                Principal Amount
       Name(s) and Address(es) of Registered Holder(s)          Certificate     Aggregate Principal Amount      Tendered (If Less
                  (Please fill in, if blank)                    Number(s)*     Represented by Certificate(s)       Than All)**
- ----------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>

                                                               -------------------------------------------------------------------

                                                               -------------------------------------------------------------------

                                                               -------------------------------------------------------------------

                                                               -------------------------------------------------------------------

         
- ----------------------------------------------------------------------------------------------------------------------------------
*    Need not be completed by Holders tendering by book-entry transfer.

**   Unless  indicated in the column labeled  "Principal  Amount  Tendered," any
     tendering  Holder of  Existing  Notes will be deemed to have  tendered  the
     entire  aggregate  principal  amount  represented  by  the  column  labeled
     "Aggregate  Principal Amount Represented by  Certificate(s)."  If the space
     provided above is inadequate,  list the  certificate  numbers and principal
     amounts on a separate  signed schedule and affix the list to this Letter of
     Transmittal.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


               The minimum permitted tender is $1,000 in principal
                amount of Existing Notes. All other tenders must
                        be integral multiples of $1,000.

                                        3

<PAGE>


- ----------------------------------           ----------------------------------
    SPECIAL ISSUANCE INSTRUCTIONS               SPECIAL DELIVERY INSTRUCTIONS
   (SEE INSTRUCTIONS 4, 5, AND 6)               (SEE INSTRUCTIONS 4, 5 AND 6)

     To  be   completed   ONLY   if               To   be   completed  ONLY  if
certificates  for New Notes  issued          certificates for Existing Notes in
in  exchange  for  Existing   Notes          a principal amount not tendered or
accepted for exchange,  or Existing          not accepted for exchange, are to 
Notes not  tendered or not accepted          be sent to someone other than the 
for  exchange,  are to be issued in          undersigned, or to the undersigned
the name of someone  other than the          at an address other than that shown
undersigned  or,  if such  Existing          above.
Notes   are   being   tendered   by
book-entry  transfer,   to  someone
other   than  DTC  or  to   another
account maintained by DTC.

Issue certificate(s) to:                     Mail certificate(s) to:

Name:                                        Name:
      -----------------------------                -----------------------------

Address:                                     Address: 
        ---------------------------                   --------------------------

- -----------------------------------          -----------------------------------
        (Include Zip Code)                            (Include Zip Code)

- -----------------------------------          -----------------------------------
  (Taxpayer Identification or                    (Taxpayer Identification or
      Social Security No.)                           Social Security No.)

DTC Acct. No.
              ---------------------          -----------------------------------




[ ]      CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
         TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE
         FOLLOWING:
         Name of Tendering Institution:
                                       -----------------------------------------
         DTC Book-Entry Account No.:
                                    --------------------------------------------
         Transaction Code No.:
                              --------------------------------------------------

[ ]      CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED PURSUANT TO A
         NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
         COMPLETE THE FOLLOWING:
         Name(s) of Registered Holder(s):
                                         ---------------------------------------
         Window Ticket Number (if any):
                                       -----------------------------------------
         Date of Execution of Notice of Guaranteed Delivery:
                                                            --------------------

         IF DELIVERED BY BOOK-ENTRY TRANSFER, PLEASE COMPLETE THE FOLLOWING:
         Account Number:                 Transaction Code Number:
                        ----------------                         ---------------
[ ]      CHECK HERE IF YOU ARE A  BROKER-DEALER  AND ARE RECEIVING NEW NOTES FOR
         YOUR OWN ACCOUNT IN EXCHANGE FOR EXISTING NOTES THAT WERE ACQUIRED AS A
         RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES.
         Name:
         Address:



                                        4

<PAGE>

Ladies and Gentlemen:

         Subject  to the  terms  and  conditions  of  the  Exchange  Offer,  the
undersigned hereby tenders to the Company the principal amount of Existing Notes
indicated  above.  Subject to and effective  upon the acceptance for exchange of
the principal  amount of Existing Notes tendered in accordance  with this Letter
of  Transmittal,  the undersigned  sells,  assigns and transfers to, or upon the
order of, the Company all right, title and interest in and to the Existing Notes
tendered hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange  Agent its agent and  attorney-in-fact  (with full  knowledge  that the
Exchange  Agent also acts as the agent of the Company  and as Trustee  under the
Indenture  for the  Existing  Notes and New Notes) with  respect to the tendered
Existing Notes with full power of substitution to (i) deliver  certificates  for
such Existing Notes to the Company, or transfer ownership of such Existing Notes
on the account books maintained by DTC and deliver all accompanying  evidence of
transfer and authenticity to, or upon the order of, the Company and (ii) present
such  Existing  Notes for  transfer  on the books of the Company and receive all
benefits  and  otherwise  exercise  all rights of  beneficial  ownership of such
Existing  Notes,  all in accordance with the terms and subject to the conditions
of the Exchange Offer.  The power of attorney granted in this paragraph shall be
deemed irrevocable and coupled with an interest.

         The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Existing Notes
tendered  hereby and that the Company will acquire good and  unencumbered  title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim, when the same are acquired by the Company. The
undersigned  hereby further  represents  that any New Notes acquired in exchange
for  Existing  Notes  tendered  hereby will have been  acquired in the  ordinary
course of business of the Holder  receiving such New Notes,  whether or not such
person is the Holder,  that neither the Holder nor any such other person has any
arrangement or understanding  with any person to participate in the distribution
of such New Notes and that  neither  the Holder nor any such other  person is an
"affiliate,"  as defined in Rule 405 under the Securities Act, of the Company or
any of its subsidiaries.

         The  undersigned  also  acknowledges  that this Exchange Offer is being
made in  reliance  on an  interpretation  by the  staff  of the  Securities  and
Exchange  Commission  (the "SEC") that the New Notes  issued in exchange for the
Existing Notes pursuant to the Exchange Offer may be offered for resale,  resold
and otherwise transferred by holders thereof (other than any such holder that is
an  "affiliate"  of the  Company  within  the  meaning  of Rule  405  under  the
Securities  Act),  without  compliance  with  the  registration  and  prospectus
delivery  provisions  of the  Securities  Act,  provided that such New Notes are
acquired in the ordinary course of such holders'  business and such holders have
no  arrangements  or  understandings  with  any  person  to  participate  in the
distribution of such New Notes. If the undersigned is not a  broker-dealer,  the
undersigned  represents that it is not engaged in, and does not intend to engage
in, a distribution of New Notes. If the undersigned is a broker-dealer that will
receive New Notes for its own account in exchange for  Existing  Notes that were
acquired as a result of market-making activities or other trading activities, it
acknowledges  that it will deliver a prospectus in connection with any resale of
such New Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an  "underwriter"  within the
meaning of the Securities Act.

         The undersigned will, upon request,  execute and deliver any additional
documents  deemed  by the  Exchange  Agent or the  Company  to be  necessary  or
desirable  to complete  the  assignment,  transfer  and purchase of the Existing
Notes tendered hereby. All authority conferred or agreed to be conferred by this
Letter of Transmittal shall survive the death,  incapacity or dissolution of the
undersigned  and  every  obligation  of the  undersigned  under  this  Letter of
Transmittal   shall  be  binding   upon  the   undersigned's   heirs,   personal
representatives,  successors and assigns,  trustees in bankruptcy or other legal
representatives  of the  undersigned.  This  tender  may be  withdrawn  only  in
accordance  with the  procedures  set forth in "The Exchange  Offer - Withdrawal
Rights" section of the Prospectus.

         For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly  tendered  Existing Notes when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.

         If any tendered  Existing Notes are not accepted for exchange  pursuant
to the  Exchange  Offer for any  reason,  certificates  for any such  unaccepted
Existing  Notes will be returned  (except as noted below with respect to tenders
through DTC), without expense,  to the undersigned at the address shown below or
at  such  different   address  as  may  be  indicated  under  "Special  Delivery
Instructions" as promptly as practicable after the Expiration Date.


                                        5

<PAGE>



         The undersigned  understands that tenders of Existing Notes pursuant to
the procedures  described under the caption "The Exchange Offer - Procedures for
Tendering Existing Notes" in the Prospectus and in the instructions  hereto will
constitute a binding  agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Exchange Offer.

         Unless  otherwise  indicated  under  "Special  Issuance  Instructions,"
please issue the certificates  representing the New Notes issued in exchange for
the Existing  Notes  accepted  for  exchange  and return any Existing  Notes not
tendered or not accepted for exchange in the name(s) of the  undersigned  (or in
either such event in the case of the  Existing  Notes  tendered  through DTC, by
credit  to the  undersigned's  account  at  DTC).  Similarly,  unless  otherwise
indicated under "Special  Delivery  Instructions,"  please send the certificates
representing  the New Notes issued in exchange for the Existing  Notes  accepted
for  exchange  and any  certificates  for  Existing  Notes not  tendered  or not
accepted  for exchange  (and  accompanying  documents,  as  appropriate)  to the
undersigned at the address shown below the undersigned's  signature(s),  unless,
in either  event,  tender is being  made  through  DTC.  In the event  that both
"Special  Issuance   Instructions"  and  "Special  Delivery   Instructions"  are
completed,  please issue the  certificates  representing the New Notes issued in
exchange  for the Existing  Notes  accepted for exchange and return any Existing
Notes not tendered or not accepted for exchange in the name(s) of, and send said
certificates to, the person(s) so indicated. The undersigned recognizes that the
Company has no obligation  pursuant to the "Special  Issuance  Instructions" and
"Special Delivery  Instructions" to transfer any Existing Notes from the name of
the registered Holder(s) thereof if the Company does not accept for exchange any
of the Existing Notes so tendered.

         Holders of Existing  Notes who wish to tender their  Existing Notes and
(i)  whose  Existing  Notes are not  immediately  available  or (ii) who  cannot
deliver their Existing Notes,  this Letter of Transmittal or any other documents
required  hereby to the Exchange  Agent,  or cannot  complete the  procedure for
book-entry  transfer,  prior to the  Expiration  Date, may tender their Existing
Notes  according  to  the  guaranteed  delivery  procedures  set  forth  in  the
Prospectus  under  the  caption  "The  Exchange  Offer  -  Guaranteed   Delivery
Procedures."  See  Instruction  1  regarding  the  completion  of the  Letter of
Transmittal printed below.

                                        6

<PAGE>



                                 SIGNATURE PAGE

                         PLEASE SIGN HERE WHETHER OR NOT
               EXISTING NOTES ARE BEING PHYSICALLY TENDERED HEREBY


X                                                                      , 1998
 ---------------------------------------------      -------------------
                                                           Date

X                                                                      , 1998
 ---------------------------------------------      -------------------
     Signature(s) of Registered Holder(s)                  Date
         or Authorized Signatory

Area Code and Telephone Number:
                               --------------------

         The above lines must be signed by the registered  Holder(s) of Existing
Notes as their name(s) appear(s) on the Existing Notes or, if the Existing Notes
are tendered by a participant  in DTC, as such  participant's  name appears on a
security  position  listing as the owner of  Existing  Notes,  or by a person or
persons  authorized to become registered  Holder(s) by a properly completed bond
power from the registered  Holder(s),  a copy of which must be transmitted  with
this  Letter  of  Transmittal.  If  Existing  Notes  to  which  this  Letter  of
Transmittal  relates are held of record by two or more joint  Holders,  then all
such holders must sign this Letter of Transmittal. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative  capacity, such person must
(i) set forth his or her full title below and (ii) unless waived by the Company,
submit evidence  satisfactory to the Company of such person's  authority to act.
See Instruction 4 regarding the completion of this Letter of Transmittal printed
below.


Name(s):
        ------------------------------------------------------------------------
                                   (Please Print)

Capacity:
         -----------------------------------------------------------------------
                                      (Title)

Address:
        ------------------------------------------------------------------------
                                  (Include Zip Code)

Signature(s)  Guaranteed by an Eligible  Institution (if required by 
Instruction 4):

           ------------------------------------------------------
                           (Authorized Signature)


           ------------------------------------------------------
                                  (Title)


           ------------------------------------------------------
                              (Name of Firm)

Dated:                                               , 1998
      -----------------------------------------------


                                        7

<PAGE>

                                  INSTRUCTIONS

                    Forming Part of the Terms and Conditions
                              of the Exchange Offer

         1.  Delivery  of  this  Letter  of  Transmittal   and  Existing  Notes;
Guaranteed Delivery Procedures. This Letter of Transmittal is to be completed by
Holders,  either if certificates are to be forwarded  herewith or if tenders are
to be made pursuant to the  procedures  for delivery by book-entry  transfer set
forth in "The Exchange Offer - Book-Entry  Transfer"  section of the Prospectus.
Certificates  for  all  physically   tendered   Existing  Notes,  or  Book-Entry
Confirmation,  as the  case may be,  as well as a  properly  completed  and duly
executed  Letter of Transmittal (or manually  signed  facsimile  hereof) and any
other documents required by this Letter of Transmittal,  must be received by the
Exchange  Agent at one of the  addresses  set  forth  herein  on or prior to the
Expiration  Date,  or the  tendering  Holder  must  comply  with the  guaranteed
delivery  procedures set forth below.  Existing Notes tendered hereby must be in
denominations of principal amount of $1,000 and any integral multiple thereof.

         Holders  whose  certificates  for  Existing  Notes are not  immediately
available  or who  cannot  deliver  their  certificates  and all other  required
documents  to the  Exchange  Agent on or prior to the  Expiration  Date,  or who
cannot  complete the procedure for  book-entry  transfer on a timely basis,  may
tender their Existing Notes pursuant to the guaranteed  delivery  procedures set
forth in "The Exchange Offer - Guaranteed  Delivery  Procedures"  section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through an
Eligible  Institution  (as defined in  Instruction  4 below),  (ii) prior to the
Expiration Date, the Exchange Agent must receive from such Eligible  Institution
a properly  completed  and duly  executed  Letter of  Transmittal  (or facsimile
thereof) and Notice of Guaranteed Delivery (by facsimile  transmission,  mail or
hand delivery), substantially in the form provided by the Company, setting forth
the name and address of the Holder of Existing  Notes and the amount of Existing
Notes tendered,  stating that the tender is being made thereby and  guaranteeing
that,  within five New York Stock Exchange  ("NYSE") trading days after the date
of execution of the Notice of  Guaranteed  Delivery,  the  certificates  for all
physically tendered Existing Notes, or a Book-Entry Confirmation,  and any other
documents  required  by this  Letter of  Transmittal  will be  deposited  by the
Eligible Institution with the Exchange Agent, and (iii) the certificates for all
physically tendered Existing Notes, in proper form for transfer, or a Book-Entry
Confirmation,  as the case may be,  and all  other  documents  required  by this
Letter of  Transmittal,  are  received by the  Exchange  Agent  within five NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.

         THE METHOD OF  DELIVERY  OF THIS LETTER OF  TRANSMITTAL,  THE  EXISTING
NOTES  AND ALL  OTHER  REQUIRED  DOCUMENTS  IS AT THE  ELECTION  AND RISK OF THE
TENDERING  HOLDERS,  BUT THE  DELIVERY  WILL BE DEEMED  MADE ONLY WHEN  ACTUALLY
RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF EXISTING NOTES ARE SENT BY MAIL,
IT IS  SUGGESTED  THAT  THE  MAILING  BE MADE  SUFFICIENTLY  IN  ADVANCE  OF THE
EXPIRATION DATE TO PERMIT THE DELIVERY TO THE EXCHANGE AGENT PRIOR TO 5:00 P.M.,
NEW YORK CITY TIME, ON THE EXPIRATION DATE.

         See "The Exchange Offer" section in the Prospectus.

         2. Tender by Holder.  Only a Holder of  Existing  Notes may tender such
Existing Notes in the Exchange  Offer.  Any beneficial  holder of Existing Notes
who is not the  registered  Holder and who wishes to tender should  arrange with
the  registered  Holder to execute and deliver this Letter of Transmittal on his
or her  behalf  or must,  prior to  completing  and  executing  this  Letter  of
Transmittal  and delivering his or her Existing Notes,  either make  appropriate
arrangements  to register  ownership of the Existing Notes in such holder's name
or obtain a properly completed bond power from the registered Holder.

         3. Partial Tenders.  Tenders of Existing Notes will be accepted only in
integral  multiples of $1,000.  If less than the entire  principal amount of any
Existing  Notes is tendered,  the tendering  Holder should fill in the principal
amount tendered in the fourth column of the box entitled  "Description of 9 3/4%
Senior Notes due 2003,  Series B (Existing  Notes)" above.  The entire principal
amount of Existing Notes  delivered to the Exchange Agent will be deemed to have
been tendered unless  otherwise  indicated.  If the entire principal amount of a
Holder's  Existing Notes is not tendered,  then Existing Notes for the principal
amount  of  Existing  Notes  not  tendered  and a  certificate  or  certificates
representing  New Notes issued in exchange for any Existing  Notes  accepted for
exchange

                                        8

<PAGE>



will be sent to the Holder at his or her registered  address (unless a different
address  is  provided  in the  appropriate  box on this  Letter of  Transmittal)
promptly after the Existing Notes are accepted for exchange.

         4. Signatures on this Letter of Transmittal; Endorsements and Powers of
Attorney;  Guarantee of  Signatures.  If this Letter of Transmittal is signed by
the registered Holder of the Existing Notes tendered hereby,  the signature must
correspond  exactly  with the name as  written  on the face of the  certificates
without any change whatsoever.

         If any tendered Existing Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.

         If any tendered  Existing  Notes are  registered in different  names on
several certificates,  it will be necessary to complete, sign and submit as many
separate   copies  of  this  Letter  of   Transmittal  as  there  are  different
registrations of certificates.

         When this Letter of Transmittal  is signed by the registered  Holder(s)
of the Existing Notes specified herein and tendered  hereby,  no endorsements of
certificates or separate bond powers are required.  If,  however,  the New Notes
are to be  issued,  or any  Existing  Notes not  tendered  or not  accepted  for
exchange are to be reissued,  to a person or persons  other than the  registered
Holder(s),  then  endorsements  of  any  certificate(s)  transmitted  hereby  or
separate bond powers are required. Signatures on such certificate(s) or power(s)
must be guaranteed by an Eligible Institution.

         If this  Letter of  Transmittal  is signed by a person  other  than the
registered Holder(s) of any certificate(s) specified herein, such certificate(s)
must be  endorsed  or  accompanied  by  appropriate  bond  powers  or  powers of
attorney,  in each case  signed  exactly as the name or names on the  registered
Holder(s)  appear(s) on the certificate(s) and signatures on such certificate(s)
or power(s) must be guaranteed by an Eligible Institution.

         If this  Letter of  Transmittal  or any  certificates,  bond  powers or
powers of attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact,  officers of  corporations or others acting in a fiduciary or
representative  capacity,  such  persons  should so indicate  when  signing and,
unless waived by the Company,  proper  evidence  satisfactory  to the Company of
their authority to so act must be submitted.

         Endorsements on  certificates  for Existing Notes or signatures on bond
powers or powers of attorney  required by this  Instruction 4 must be guaranteed
by a firm which is a participant in a recognized  signature  guarantee medallion
program (an "Eligible Institution").

         Signatures  on this  Letter of  Transmittal  must be  guaranteed  by an
Eligible  Institution unless the Existing Notes are tendered (i) by a registered
Holder of Existing  Notes  (which  term,  for  purposes of the  Exchange  Offer,
includes any DTC participant  whose name appears on a security  position listing
as the Holder of such  Existing  Notes) who has not  completed  the box entitled
"Special  Issuance  Instructions"  or "Special  Delivery  Instructions"  on this
Letter of Transmittal, or (ii) for the account of an Eligible Institution.

         5. Special Issuance and Delivery Instructions. Tendering Holders should
indicate,  in the  applicable  box or boxes,  the name and  address to which New
Notes or substitute Existing Notes not tendered or not accepted for exchange are
to be issued or sent,  if  different  from the name and  address  of the  person
signing this Letter of Transmittal (or in the case of a tender of Existing Notes
through  DTC,  if  different  from DTC).  In the case of issuance in a different
name, the taxpayer  identification or social security number of the person named
must also be indicated.  Holders tendering Existing Notes by book-entry transfer
may request that New Notes issued in exchange  for Existing  Notes  accepted for
exchange or Existing  Notes not tendered or accepted  for exchange  exchanged be
credited to such account  maintained at DTC as such Holder may designate hereon.
If no such  instructions  are  given,  such New  Notes  or  Existing  Notes  not
exchanged  will be returned to the name and address of the person  signing  this
Letter of Transmittal.

         6. Tax  Identification  Number.  Federal income tax law requires that a
Holder whose  Existing  Notes are accepted for exchange must provide the Company
(as payer ) with his, her or its correct Taxpayer Identification Number ("TIN"),
which, in the case of an exchanging  Holder who is an individual,  is his or her
social security

                                        9

<PAGE>



number. If the Company is not provided with the correct TIN or an adequate basis
for  exemption,  such  Holder  may be subject  to a $50  penalty  imposed by the
Internal Revenue Service (the "IRS"),  and payments made with respect to the New
Notes or Exchange  Offer may be subject to backup  withholding at a 31% rate. If
withholding results in an overpayment of taxes, a refund may be obtained. Exempt
Holders   (including,   among  others,  all  corporations  and  certain  foreign
individuals)  are  not  subject  to  these  backup   withholding  and  reporting
requirements.  See  the  enclosed  "Guidelines  for  Certification  of  Taxpayer
Identification Number on Substitute Form W-9."

         To prevent backup withholding, each exchanging Holder must provide his,
her or its correct TIN by completing the  Substitute  Form W-9 included below in
this Letter of Transmittal, certifying that the TIN provided is correct (or that
such  Holder  is  awaiting  a TIN) and that the  Holder is  exempt  from  backup
withholding because (i) the Holder has not been notified by the IRS that he, she
or it is  subject to backup  withholding  as a result of a failure to report all
interest or  dividends,  or (ii) the IRS has notified the Holder that he, she or
it is no longer subject to backup  withholding.  In order to satisfy the Company
that a foreign  individual  qualifies as an exempt  recipient,  such Holder must
submit a statement  signed  under  penalty of perjury  attesting  to such exempt
status. Such statements may be obtained from the Exchange Agent. If the Existing
Notes  are in more  than one name or are not in the  name of the  actual  owner,
consult the substitute Form W-9 for  information on which TIN to report.  If you
do not provide your TIN to the Company within 60 days,  backup  withholding  may
begin and continue until you furnish your TIN to the Company.

         7. Transfer  Taxes.  The Company will pay all transfer  taxes,  if any,
applicable to the exchange of Existing Notes pursuant to the Exchange Offer. If,
however,  certificates  representing New Notes or Existing Notes not tendered or
accepted for exchange are to be delivered  to, or are to be registered or issued
in the  name of,  any  person(s)  other  than the  registered  Holder(s)  of the
Existing Notes tendered hereby,  or if tendered Existing Notes are registered in
the name of any person other than the person signing this Letter of Transmittal,
or if a transfer  tax is  imposed  for any reason  other  than the  exchange  of
Existing  Notes  pursuant  to the  Exchange  Offer,  then the amount of any such
transfer  taxes  (whether  imposed on the  registered  Holder(s) or on any other
person(s)) will be payable by the tendering Holder(s).  If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted  herewith,  the
amount  of  such  transfer  taxes  will be  billed  directly  to such  tendering
Holder(s).

         Except as provided in this  Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Existing Notes listed in this Letter of
Transmittal.

         8. Waiver of  Conditions.  The Company  reserves the absolute  right to
amend,  waive or modify  conditions to in the Exchange  Offer in the case of any
Existing Notes tendered (and to refuse to do so).

         9. No Conditional Transfers. No alternative,  conditional, irregular or
contingent tenders will be accepted. All tendering Holders of Existing Notes, by
execution of this Letter of Transmittal, shall waive any right to receive notice
of the acceptance of their Existing Notes for exchange.

         Neither  the  Company,  the  Exchange  Agent  nor any  other  person is
obligated  to give  notice of any  defect or  irregularity  with  respect to any
tender of Existing Notes,  nor shall any of them incur any liability for failure
to give any such notice.

         10. Mutilated,  Lost, Stolen or Destroyed Existing Notes. Any tendering
Holder  whose  Existing  Notes have been  mutilated,  lost,  stolen or destroyed
should contact the Exchange Agent at one of the addresses  indicated  herein for
further instructions.

         11.  Requests  for  Assistance  or  Additional  Copies.  Questions  and
requests for assistance for additional copies of the Prospectus,  this Letter of
Transmittal,   the  Notice  of  Guaranteed   Delivery  or  the  "Guidelines  for
Certification  of Taxpayer  Identification  Number on Substitute Form W-9 may be
directed  to  the  Exchange  Agent  at one of  the  addresses  specified  in the
Prospectus.

                                       10

<PAGE>



                        (DO NOT WRITE IN THE SPACE BELOW)


Account Number:                             Transaction Code Number:
                ------------------                                   -----------


     Certificate                Existing                      Existing
     Surrendered              Notes Tendered                Notes Accepted

- ---------------------     -----------------------      -------------------------

- ---------------------     -----------------------      -------------------------

- ---------------------     -----------------------      -------------------------



Delivery Prepared by: 
                      ----------------------------------

Checked by:
            --------------------------------------------

Date:
      --------------------------------------------------


                                       11

<PAGE>

                        PAYER'S NAME: ENVIROSOURCE, INC.
<TABLE>
<CAPTION>
___________________________________________________________________________________________________________________

<S>                       <C>
                          Name (if joint  names,  list first and  circle  the name of the  person or entity  whose
                          number you enter in Part 1 below. See instructions if your name has changed.)
                          _________________________________________________________________________________________

SUBSTITUTE                Address_________________________________________________________________________________

FORM W-9                  City, state and ZIP code________________________________________________________________
Department of the
Treasury                  List account number(s) here (optional)__________________________________________________
Internal Revenue         __________________________________________________________________________________________
Service                  
Payer's Request for       Part 1-PLEASE PROVIDE YOUR TAXPAYER IDENTIFICA-TION               Social Security number
TIN                       NUMBER ("TIN") IN THE BOX AT RIGHT AND CERTIFY BY
                          SIGNING AND DATING BELOW.                                         or TIN _______________
                         __________________________________________________________________________________________

                          Part 2-Check the box if you are not subject to backup  withholding  under the provisions
                          of section  3408(a)(1)(c)  of the  Internal  Revenue  Code because (1) you have not been
                          notified that you are subject to backup withholding as a result of failure to report all
                          interest or dividends or (2) the Internal  Revenue Service has notified you that you are
                          no longer subject to backup withholding [  ].
                         __________________________________________________________________________________________
                          CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I
                          CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM                Part 3 --
                          IS TRUE, CORRECT AND COMPLETE.

                                                                                            AWAITING TIN  [   ]
                          Signature _____________________     Date _____________
___________________________________________________________________________________________________________________

</TABLE>

NOTE:    FAILURE  TO  COMPLETE  AND  RETURN  THIS  FORM  MAY  RESULT  IN  BACKUP
         WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
         OFFER.  PLEASE  REVIEW THE ENCLOSED  GUIDELINES  FOR  CERTIFICATION  OF
         TAXPAYER  IDENTIFICATION  NUMBER ON SUBSTITUTE  FORM W-9 FOR ADDITIONAL
         DETAILS.


                                       12



Exhibit 99.2       Form of Notice of Guaranteed Delivery


                          NOTICE OF GUARANTEED DELIVERY
                                       FOR
                     9 3/4% SENIOR NOTES DUE 2003, SERIES B
                                       OF
                               ENVIROSOURCE, INC.


   
         As set forth in the Prospectus  dated March 9, 1998 (the  "Prospectus")
of  EnviroSource,  Inc.  (the  "Company")  and in  the  accompanying  Letter  of
Transmittal  (the  "Letter  of  Transmittal"),  this  form or one  substantially
equivalent  hereto must be used to accept the  Company's  offer to exchange (the
"Exchange  Offer") all of its outstanding 9 3/4% Senior Notes due 2003, Series B
(the "Existing Notes") for its 9 3/4% Senior Notes due 2003, Series B which have
been  registered  under the Securities Act of 1933, as amended,  if certificates
for the Existing Notes are not  immediately  available or if the Existing Notes,
the Letter of  Transmittal  or any other  documents  required  thereby cannot be
delivered to the Exchange Agent, or the procedure for book-entry transfer cannot
be completed, prior to 5:00 P.M., New York City time, on the Expiration Date (as
defined below). This form may be delivered by an Eligible Institution by hand or
transmitted by facsimile transmission, overnight courier or mail to the Exchange
Agent as set forth below. Capitalized terms used but not defined herein have the
meaning given to them in the Prospectus.
    

         THE  EXCHANGE  OFFER WILL EXPIRE AT 5:00 P.M.,  NEW YORK CITY TIME,  ON
APRIL 8, 1998, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE").  TENDERS OF
EXISTING NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION
DATE.


                   To: United States Trust Company of New York
                               The Exchange Agent
<TABLE>
<CAPTION>
<S>                  <C>                                             <C>       
                     By Mail:                                        By Hand before 4:30 p.m.:
           United States Trust Company                        United States Trust Company of New York
                   of New York                                             111 Broadway
           P.O. Box 843 Cooper Station                               New York, New York 10006
             New York, New York 10276                     Attention: Lower Level, Corporate Trust Window
       Attention: Corporate Trust Services
                                                                           By Facsimile:
By Overnight Courier and by Hand after 4:30 p.m.:                         (212) 780-0592
           United States Trust Company                              Attention: Customer Service
                   of New York
             770 Broadway, 13th Floor                                  Confirm by Telephone:
             New York, New York 10003                                     (800) 548-6565
</TABLE>



         DELIVERY  OF  THIS  INSTRUMENT  TO  AN  ADDRESS,   OR  TRANSMISSION  OF
INSTRUCTIONS VIA FACSIMILE,  OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.

         This form is not to be used to guarantee signatures.  If a signature on
the Letter of Transmittal to be used to tender  Existing Notes is required to be
guaranteed by an "Eligible  Institution"  under the instructions  thereto,  such
signature  guarantee must appear in the space provided therefor in the Letter of
Transmittal.




<PAGE>



Ladies and Gentlemen:

         The  undersigned  hereby  tenders  to the  Company,  upon the terms and
subject  to the  conditions  set  forth  in the  Prospectus  and the  Letter  of
Transmittal (which together  constitute the "Exchange Offer"),  receipt of which
are hereby acknowledged,  ___________________ (fill in number of Existing Notes)
Existing Notes pursuant to the guaranteed  delivery  procedures set forth in the
Prospectus and Instruction 1 of the Letter of Transmittal.

         The  undersigned  understands  that  tenders of Existing  Notes will be
accepted  only in  principal  amounts  equal to  $1,000  or  integral  multiples
thereof. The undersigned  understands that tenders of Existing Notes pursuant to
the Exchange Offer may not be withdrawn  after 5:00 p.m., New York City time, on
the Expiration Date.

         All authority herein conferred or agreed to be conferred by this Notice
of Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned  and  every  obligation  of the  undersigned  under  this  Notice of
Guaranteed Delivery shall be binding upon the heirs,  personal  representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.

            NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.

Certificate No(s). for Existing Notes       Name(s) of Record Holder(s):
(if available):


_____________________________________       ____________________________________


_____________________________________       ____________________________________

                                            PLEASE PRINT OR TYPE

Principal Amount of Existing Notes:
                                            Address:

_____________________________________       ____________________________________

                                            ____________________________________


If Existing Notes will be delivered         Area code and Tel. No.______________
by book-entry transfer at the 
Depository Trust Company,
Depository Account No.:


_____________________________________
                                            Signature(s):


                                            ____________________________________

                                            ____________________________________

                                            Dated:________________________, 1998


         This Notice of  Guaranteed  Delivery  must be signed by the  registered
holder(s)  of Existing  Notes  exactly as its (their)  name(s)  appear(s) on the
certificate(s)  for Existing Notes covered hereby or on a DTC security  position
listing  naming it (them) as the owner of such Existing  Notes,  or by person(s)
authorized  to  become  registered   holder(s)  by  endorsements  and  documents
transmitted  with this  Notice of  Guaranteed  Delivery.  If  signature  is by a
trustee, executor, administrator,  guardian, attorney-in-fact,  officer or other
person acting in a fiduciary or  representative  capacity,  such  person(s) must
provide the following information:


                                        2

<PAGE>

                 Please print name(s), title(s) and address(es)


Name(s):
        ------------------------------------------------------------------------

Capacity(ies):
              ------------------------------------------------------------------

Address(es):
             -------------------------------------------------------------------


- --------------------------------------------------------------------------------


                                        3

<PAGE>

                                    GUARANTEE
                    (NOT TO BE USED FOR SIGNATURE GUARANTEE)

         The  undersigned,  a member firm of a  registered  national  securities
exchange or of the  National  Association  of  Securities  Dealers,  Inc.,  or a
commercial bank or trust company having an office or correspondent in the United
States or an "Eligible  Guarantor  Institution" as defined in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), hereby (a)
represents  that the tender of Existing Notes effected hereby complies with Rule
14e-4 under the Exchange Act and (b) guarantees to deliver to the Exchange Agent
a certificate or certificates  representing  the Existing Notes tendered hereby,
in proper form for transfer (or a  confirmation  of the  book-entry  transfer of
such Existing Notes into the Exchange  Agent's  account at DTC,  pursuant to the
procedures for book-entry transfer set forth in the Prospectus),  and a properly
completed and duly executed Letter of Transmittal (or manually signed  facsimile
thereof) together with any required signatures and any other required documents,
at one of the Exchange Agent's  addresses set forth above,  within five New York
Stock  Exchange  trading  days  after the date of  execution  of this  Notice of
Guaranteed Delivery.

         THE  UNDERSIGNED  ACKNOWLEDGES  THAT  IT MUST  DELIVER  THE  LETTER  OF
TRANSMITTAL  AND EXISTING NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE
TIME PERIOD  SPECIFIED FORTH ABOVE AND THAT ANY FAILURE TO DO SO COULD RESULT IN
FINANCIAL LOSS TO THE UNDERSIGNED.


Name of Firm:
              --------------------------     -----------------------------------
                                                     Authorized Signatures

Address:                                     Name: 
         -------------------------------           -----------------------------
                                                       Please Print or Type

- ----------------------------------------     Title:
                                Zip Code            ----------------------------
Area Code
and Tel. No.:                                Date:
              --------------------------           -----------------------, 1998


NOTE:    DO NOT SEND  EXISTING  NOTES WITH THIS FORM;  EXISTING  NOTES SHOULD BE
         SENT WITH YOUR LETTER OF  TRANSMITTAL  SO THAT THEY ARE RECEIVED BY THE
         EXCHANGE AGENT WITHIN THE TIME PERIOD SPECIFIED FORTH ABOVE.


                                        4



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