SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-1363
Envirosource, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 34-0617390
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1155 Business Center Drive, Horsham, Pennsylvania 19044-3454
(Address of principal executive offices) (Zip Code)
(215) 956-5500
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
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The number of shares outstanding of the Registrant's Common Stock as of the
close of business on May 7, 1999 was 5,813,394.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements.
--------------------
<TABLE>
<CAPTION>
ENVIROSOURCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31, December 31,
1999 1998
----------- -----------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,837 $ 5,134
Accounts receivable, less allowance for
doubtful accounts of $1,196 in 1999
and $1,045 in 1998 35,992 32,305
Other current assets 3,403 3,520
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Total current assets 42,232 40,959
Property, plant and equipment, at cost 283,478 304,324
Less allowance for depreciation (138,695) (157,387)
----------- -----------
144,783 146,937
Goodwill, less amortization 126,723 127,931
Closure trust funds and deferred charges,
less amortization 32,275 33,205
Landfill permits, less amortization 22,584 22,974
Other assets 15,089 15,450
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$ 383,686 $ 387,456
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</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ENVIROSOURCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - (continued)
(Dollars in thousands)
March 31, December 31,
1999 1998
----------- -----------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 12,747 $ 10,949
Salaries, wages and related benefits 8,073 7,370
Insurance obligations 4,495 4,588
Interest 8,221 1,412
Other current liabilities 12,313 11,535
Current portion of debt 2,387 5,549
----------- -----------
Total current liabilities 48,236 41,403
Long term debt:
9 3/4% Senior Notes due 2003 270,000 270,000
Other long term debt 26,791 28,023
Other liabilities 37,785 38,187
Stockholders' equity:
Common stock, par value $.05 per share,
shares authorized - 20,000,000,
shares issued and outstanding -
5,813,394 in 1999 and 1998 291 291
Capital in excess of par value 175,969 175,969
Accumulated deficit (173,835) (164,771)
Accumulated other comprehensive income (1,461) (1,556)
Stock purchase loan receivable from
officer (90) (90)
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Total stockholders' equity 874 9,843
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$ 383,686 $ 387,456
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</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ENVIROSOURCE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except for per share amounts)
Three Months Ended March 31,
1999 1998
----------- -----------
<S> <C> <C>
Revenues $ 48,283 $ 59,579
Cost of revenues 40,236 48,218
Selling, general and
administrative expenses 6,254 6,261
Unusual charges 2,964 411
----------- -----------
Operating (loss) income (1,171) 4,689
Interest income 183 237
Interest expense (7,807) (7,586)
----------- -----------
Loss before income taxes (8,795) (2,660)
Income tax (expense) benefit:
Current (269) (283)
Deferred - 1,371
----------- -----------
Net loss $ (9,064) $ (1,572)
=========== ===========
Net loss per share $ (1.56) $ (.27)
=========== ===========
Weighted average shares 5,813 5,813
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ENVIROSOURCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Three Months Ended March 31,
1999 1998
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<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (9,064) $ (1,572)
Adjustments to reconcile net loss
to cash provided by operating activities:
Deferred income taxes - (1,371)
Depreciation 6,379 6,983
Amortization 2,774 3,063
Unusual charges, net of payments 1,298 (591)
Changes in working capital 5,547 7,122
Other 162 90
----------- -----------
Cash provided by operating activities 7,096 13,724
INVESTING ACTIVITIES
Property, plant and equipment:
Additions (5,358) (7,818)
Proceeds from dispositions 735 182
Landfill permit additions and closure
expenditures (113) (664)
Closure trust fund recovery (payments), net 634 (190)
Ongoing cash flows related to
IU International acquisition (625) (662)
Other (272) (252)
----------- -----------
Cash used by investing activities (4,999) (9,404)
FINANCING ACTIVITIES
Debt issuance 22,000 2,000
Debt repayment (26,394) (9,003)
----------- -----------
Cash used by financing activities (4,394) (7,003)
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CASH AND CASH EQUIVALENTS
Decrease during the period (2,297) (2,683)
Beginning of year 5,134 9,942
----------- -----------
End of period $ 2,837 $ 7,259
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</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
ENVIROSOURCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 1999 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. The condensed consolidated balance sheet at December
31, 1998 has been derived from audited financial statements at that date. For
further information, refer to the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
Comprehensive Income: The components of comprehensive income for the three
- ---------------------
months ended March 31, 1999 and 1998 are as follows (in thousands):
1999 1998
----------- -----------
Net loss $ (9,064) $ (1,572)
Canadian translation adjustment 95 61
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Comprehensive income (loss) $ (8,969) $ (1,511)
=========== ===========
NOTE B -- UNUSUAL CHARGES
The Company initiated a profit improvement program in the first quarter of 1998.
Costs incurred during the three month period ended March 31, 1998 totaled $.4
million and consisted of $.3 million of employee severance and $.2 million of
program consulting fees and expenses reduced by a $.1 million gain from the
disposition of excess equipment. Costs incurred during the three months ended
March 31, 1999 totaled $3 million and consist of $2.3 million of employee
severance and $.7 million of program consulting fees and expenses.
<PAGE>
ENVIROSOURCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE C -- BUSINESS SEGMENTS
Information by business segment for the three months ended March 31, 1999 and
1998 is as follows (in thousands):
1999 1998
----------- -----------
Revenues
IMS $ 42,101 $ 49,425
Technologies 6,182 10,154
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$ 48,283 $ 59,579
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Unusual item (charges) credits, net
IMS $ (45) $ 151
Technologies (530) -
Corporate headquarters (2,389) (562)
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$ (2,964) $ (411)
=========== ===========
Total operating income (loss)
IMS $ 3,810 $ 6,228
Technologies (2,125) (77)
Corporate headquarters (2,856) (1,462)
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$ (1,171) $ 4,689
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NOTE D -- OTHER INFORMATION
As of March 31, 1999, $5.7 million of standby letters of credit and $18 million
of revolving credit borrowings were outstanding under the Company's $43.8
million bank credit facility.
During the three months ended March 31, 1999 and 1998, the Company paid interest
of $.5 million and $.3 million.
Current income tax expense consists of state and foreign income taxes. In each
of the three months ended March 31, 1999 and 1998, the Company made cash income
tax payments of $.3 million.
NOTE E -- COMMITMENTS AND CONTINGENCIES
As of March 31, 1999, the Company is committed to spend an additional $6.1
million for equipment.
As of March 31, 1999, the Company is contingently liable for $5.7 million of
standby letters of credit outstanding under its bank credit agreement, including
$3.5 million that secure liabilities already reflected in the condensed
consolidated balance sheet.
<PAGE>
ENVIROSOURCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE E -- COMMITMENTS AND CONTINGENCIES - CONTINUED
The Company is required to maintain trust funds to secure its obligations to
close its landfills and perform post-closure monitoring and maintenance
procedures. Based on current regulations, planned improvements to waste
treatment facilities and permitted capacity, such trust funds are adequately
funded and currently require only the reinvestment of Idaho trust fund earnings
that the Company includes in interest income. In the three months ended March
31, 1999, the Company recovered from the Idaho trust fund $790,000 that was in
excess of current requirements.
The Company's Ohio and Idaho facilities hold operating permits issued by state
and federal environmental agencies under the Resource Conservation and Recovery
Act that require renewal and modification from time to time. The Company expects
that it will obtain the renewals and modifications to its permits that it
requires to continue to provide landfill capacity in its approved disposal cells
well into the next decade.
The Company and its competitors and customers 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 treatment and disposal services,
but could 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. It is possible that the future
imposition of additional environmental compliance requirements could have a
material effect on the Company's results of operations or financial condition,
but the Company is unable to predict any such future requirements. The Company
believes that the consolidated financial statements appropriately reflect all
presently-known compliance costs in accordance with generally accepted
accounting principles.
The Company is a party to litigation and proceedings arising in the normal
course of its present or former businesses. In the opinion of management, the
outcome of such matters will not have a material adverse effect on the Company's
financial condition or results of operations.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations.
-------------------------
RESULTS OF OPERATIONS
1999
Three months ended better/(worse)
March 31, than 1998
------------------------ ------------------------
1999 1998 Amount %
----------- ----------- ----------- -----------
(Dollars in thousands)
Revenues
IMS $ 42,101 $ 49,425 $ (7,324) (14.8%)
Technologies 6,182 10,154 (3,972) (39.1%)
----------- ----------- -----------
$ 48,283 $ 59,579 $ (11,296) (19.0%)
=========== =========== ===========
Gross profit
IMS $ 8,144 $ 10,373 $ (2,229) (21.5%)
Technologies (97) 988 (1,085) (109.8%)
----------- ----------- -----------
$ 8,047 $ 11,361 $ (3,314) (29.2%)
=========== =========== ===========
Operating income (loss)
IMS $ 3,855 $ 6,077 $ (2,222) (36.6%)
Technologies (1,595) (77) (1,518) -
Corporate headquarters (467) (900) 433 48.1%
Unusual charges (2,964) (411) (2,553) -
----------- ----------- -----------
$ (1,171) $ 4,689 $ (5,860) (125.0%)
=========== =========== ===========
IMS revenues decreased as compared to the 1998 first quarter. The
revenue decrease is attributable to the overall steel industry slowdown (fewer
melt tons being processed by the Company's steel industry customers), a
reduction in slag and scrap sales to third parties, and the late 1998 loss of a
steel industry customer that contributed $2.5 million of revenues in the first
quarter of 1998. Technologies first quarter revenues decreased as compared to
the same period of 1998 due to a reduction in the volume of waste processed, the
processing of a greater proportion of lower-priced clean-up project business and
because of competitive market conditions.
IMS's and Technologies' gross profit decreased primarily due to the
reasons noted above.
Selling, general and administrative expenses were comparable to the
1998 first quarter.
The Company initiated a profit improvement program in the first quarter
of 1998. Unusual charges incurred during the three month period ended March 31,
1998 totaled $.4 million and consisted of $.3 million of employee severance and
$.2 million of program consulting fees and expenses reduced by a $.1 million
gain from the disposition of excess equipment. Unusual charges incurred
<PAGE>
during the three month period ended March 31, 1999 related to the Company's
profit improvement program totaled $3 million and consisted of $2.3 million of
employee severance and $.7 million of program consulting fees and expenses.
Interest expense for the period increased as debt levels were slightly
higher in 1999.
Due to the factors described above, the 1999 net loss was $9.1 million
as compared with the 1998 net loss of $1.6 million.
DEFERRED INCOME TAXES
The $1.4 million deferred income tax benefit recognized in the 1998
first quarter was determined using the effective federal income tax rate that
was then expected for the year. The benefit varied from the amount computed by
applying the 35% federal statutory rate primarily due to the amortization of
goodwill and the effect of state and Canadian income taxes. The benefit was
reversed later in 1998 and in the fourth quarter of 1998 all of the Company's
net deferred tax assets were charged against operations to reduce to zero the
carrying value of its net deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements arise primarily from the funding
of capital expenditures, working capital needs and debt service obligations.
Historically, the Company has met such requirements with cash flows generated by
operations and with additional debt financing.
The Company expects 1999 capital expenditures of $20 to $25 million,
primarily for equipment replacements and new services. Through March 31, 1999,
the Company spent $5.4 million for capital additions and is committed for an
additional $6.1 million.
Technologies' landfill permits require the Company to fund closure and
post-closure monitoring and maintenance obligations by maintaining essentially
non-refundable trust funds. Based on current regulations, planned improvements
to waste treatment facilities and permitted capacity, such trust funds are
adequately funded. In the quarter ended March 31, 1999, the Company recovered
from the Idaho trust fund $790,000 that was in excess of current requirements.
<PAGE>
Cash on hand, funds from operations and borrowing capacity under the
bank credit facility are expected to satisfy the Company's normal operating and
debt service requirements.
Because its businesses are environmentally-oriented, and therefore
highly regulated, the Company is subject to violations alleged by environmental
regulators and, occasionally, fines. Such violations and fines have not had, and
are not expected to have, a material impact on the Company's business. It is
possible that the future imposition of additional environmental compliance
requirements could have a material effect on the Company's results of operations
or financial condition, but the Company is unable to predict any such future
requirements.
YEAR 2000 READINESS DISCLOSURE
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define applicable years. Computer programs
that have date-sensitive software may recognize a date coded "00" as the year
1900 rather than the year 2000. This could result in system failures or
miscalculations that could cause disruptions of operations, including temporary
inability to process transactions.
The Company has completed an assessment of its computer information
systems. In the normal course of business, the Company has purchased new
software packages for most of its computer systems and is currently purchasing
and implementing new software for the rest. The Company is presently testing
Year 2000-compliant upgrades to its core financial and operational software, and
expects to implement such upgraded software by the end of the second quarter of
1999. The Company recently implemented a Year 2000-compliant application to
support its hazardous waste landfill operations. By mid-1999, all of the
Company's other software will be upgraded, through routine software releases
from reliable software suppliers, to accommodate the Year 2000 transition. The
Company has not incurred and does not anticipate incurring material incremental
costs for Year 2000 issues relating to its computer information systems since
all updates or replacements of such systems shall have occurred in the ordinary
course of business and the Company expects to be in compliance by the end of
1999.
The Company is currently assessing its non-information technology
systems, including telecommunications and embedded systems. Many of these
systems will be upgraded in the ordinary course of business, prior to December
31, 1999, and such upgrades are expected to accommodate the Year 2000. The
remaining non-information technology systems will be upgraded or replaced as
necessary to be Year 2000 compliant by December 31, 1999. The costs of
compliance for non-information technology systems that would not otherwise be
replaced or upgraded in the ordinary course of business are not expected to be
material.
<PAGE>
The Company is also addressing the Year 2000 activities of its
suppliers and customers. The Company intends to contact significant suppliers
and customers to determine if they are Year 2000 compliant, and if they are not,
to ask when they will be compliant. This information will be used to assess the
extent of interruption that could occur in the Company's operations if a
supplier or customer were non-compliant. There can be no guarantee that failure
to address Year 2000 issues by a third party would not have a material adverse
effect on the Company. However, the Company believes that its communications
with its suppliers and customers will minimize these risks.
The Company's Year 2000 program is based on management's best estimates
of the Company's requirements. However, there can be no guarantee of the success
of the Company's Year 2000 program and actual results could differ materially
from the Company's plans. Factors that could impact implementation of this
program include, but are not limited to, the availability of trained personnel,
the ability to identify and correct all affected applications, and the failure
of third parties on which the Company relies to resolve their Year 2000 issues.
To date, the Company has not made any contingency plans to address Year
2000 risks. Contingency plans will be developed if it appears that the Company
or its significant suppliers or customers will not be Year 2000 compliant and
such noncompliance can be expected to have a material adverse impact on the
Company's operations.
SAFE HARBOR STATEMENT
Some of the statements in Management's Discussion and Analysis of
Financial Condition and Results of Operations are forward-looking statements.
These statements are based on current expectations that involve a number of
risks and uncertainties which could cause actual results to differ materially
from those projected. These forward-looking statements should be read in
conjunction with the financial statements contained herein which include
information describing factors that could cause actual results to differ
materially from those projected in such forward-looking statements.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits.
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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 - Amendment of Amended and Restated Certificate of Incorporation
(incorporated herein by reference to Pages 13 and 14 of the
Company's Proxy Statement filed April 30, 1998, in respect of its
1998 Annual Meeting of Stockholders (File No. 1-1363)).
3.4 - 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)).
3.5 - 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)).
3.6 - By-Laws Amendment Adopted March 26, 1997 By Unanimous Written
Consent of the Board of Directors, Effective June 19, 1997
(incorporated 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 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)).
<PAGE>
4.2 - 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)).
4.3 - 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).
4.4 - 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).
4.5 - Registration Rights Agreement, dated as of September 30, 1997,
among the Company and Morgan Stanley Dean Witter, Jeffries &
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)
4.6 - 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)).
4.7 - 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).
<PAGE>
4.8 - 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)).
4.9 - 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)).
4.10- 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)).
4.11- Third Amendment, dated 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
hereto, 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)).
4.12- Fourth Amendment, dated 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)).
<PAGE>
4.13- Fifth Amendment, dated as of March 5, 1998, 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 Annual Report on Form 10-K for the fiscal
year ended December 31,1997 (File No. 1-1363)).
4.14- Sixth Amendment, dated as of March 26, 1999, 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 Annual Report on Form 10-K for the fiscal
year ended December 31,1998 (File No. 1-1363)).
4.15*- Seventh Amendment, dated as of April 9, 1999, 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.
10.1- 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)).
10.2- Promissory Note of Louis A. Guzzetti, Jr., dated March 31,
1998, payable to the Company, amending and replacing the
Promissory Note dated March 31, 1993 (incorporated herein by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1998 (File No.
1-1363)).
10.3- Promissory Notes of Aarne Anderson, George E. Fuehrer and Louis
A. Guzzetti, Jr., dated as of March 31, 1998, payable to the
Company, amending and replacing the Promissory Notes dated April
1, 1993(incorporated herein by reference to Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1998 (File No. 1-1363)).
<PAGE>
10.4*- Amendment To Note Related To Stock Purchase, dated as of January
15, 1999, between the Company and Louis A. Guzzetti, Jr.
10.5*- Amendment To Note Related To Stock Purchase, dated as of February
12, 1999, between the Company and George E. Fuehrer.
10.6*- Promissory Note of Aarne Anderson, dated March 31, 1999, payable
to the Company, amending and replacing the Promissory Note dated
March 31, 1998.
10.7- 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)).
10.8- 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)).
10.9- 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)).
10.10- 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)).
10.11- Envirosource, Inc. 1993 Stock Option Plan (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)).
10.12- 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)).
<PAGE>
10.13- 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)).
10.14- Envirosource, Inc. 1999 Stock Option Plan (incorporated herein by
reference to Appendix A to the Company's Proxy Statement filed
April 30, 1999, in respect of its 1999 Annual Meeting of
Stockholders (File No. 1-1363)).
10.15- 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)).
10.16- 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)).
10.17- 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))
10.18*- Confidential Severance Agreement, dated as of January 15, 1999,
between the Company and Louis A. Guzzetti, Jr.
10.19*- Employment Agreement, dated as of January 20, 1999, between the
Company and John T. DiLacqua.
10.20*- Confidential Severance Agreement, dated as of February 12, 1999,
between the Company and George E. Fuehrer.
10.21*- Letter Agreement, dated February 15, 1999, between the Company
and John C. Heenan.
10.22*- Letter Agreement, dated March 23, 1999, between the Company and
James C. Hull.
* Filed herewith.
<PAGE>
(b) Reports on Form 8-K.
-------------------
During the last quarter of the fiscal year ended December 31, 1998, the
Company filed no Current Reports on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 11, 1999
ENVIROSOURCE, INC.
By: /s/James C. Hull
----------------
Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Number Description Page
4.15 Seventh Amendment to the Credit Agreement EXHIBIT 1
10.4 Amendment To Note Related To Stock Purchase, EXHIBIT 2
dated as of January 15, 1999, between the Company
and Louis A. Guzzetti, Jr.
10.5 Amendment To Note Related To Stock Purchase, EXHIBIT 3
dated as of February 12, 1999, between the Company
and George E. Fuehrer.
10.6 Promissory Note of Aarne Anderson, dated EXHIBIT 4
March 31, 1999, payable to the Company, amending
and replacing the Promissory Note dated March 31, 1998.
10.18 Confidential Severance Agreement, dated as of EXHIBIT 5
January 15, 1999, between the Company and
Louis A. Guzzetti, Jr.
10.19 Employment Agreement, dated as of January EXHIBIT 6
20, 1999, between the Company and John T. DiLacqua.
10.20 Confidential Severance Agreement, dated as of EXHIBIT 7
February 12, 1999, between the Company and
George E. Fuehrer.
10.21 Letter Agreement, dated February 15, 1999, EXHIBIT 8
between the Company and John C. Heenan.
10.22 Letter Agreement, dated March 23, 1999, EXHIBIT 9
between the Company and James C. Hull.
EXECUTION COPY
SEVENTH AMENDMENT, dated as of April
9, 1999, to the Credit Agreement, dated as
of December 19, 1995 (as amended to the date
hereof, the "Credit Agreement"), among
International Mill Service, Inc., a
Pennsylvania corporation (the "Borrower"),
Envirosource, Inc., a Delaware corporation
(the "Parent"), the several banks and other
financial institutions parties thereto (the
"Lenders"), NationsBank, N.A., as
administrative agent for the Lenders (in
such capacity, the "Administrative Agent"),
and Credit Lyonnais New York Branch, the New
York branch of a banking organization
organized under the laws of the Republic of
France, as syndication agent for the
Lenders.
PRELIMINARY STATEMENTS:
(1) The Borrower has requested that the Lenders agree to make various
changes in the Credit Agreement.
(2) The parties hereto have agreed, subject to the terms and conditions
hereof, to grant the requests of the Borrower and to amend the Credit Agreement
as provided herein.
(3) Capitalized terms used and not otherwise defined herein shall have
the meanings assigned to such terms in the Credit Agreement (the Credit
Agreement, as amended by, and together with, this Seventh Amendment, and as
hereinafter amended, modified, extended or restated from time to time, being
called the "Amended Agreement").
Accordingly, the parties hereto hereby agree as follows:
SECTION 1.01. Amendments to Section 1.1. The definition of "EBITDA" in
Section 1.1 of the Credit Agreement is hereby amended by deleting the last
sentence thereof and inserting the following in lieu thereof:
"For purposes of the Pricing Ratio and Sections 7.1(a), 7.1(c)
and 7.1(d) only, EBITDA shall be determined without regard to
(a) restructuring expenses of the Parent and its Subsidiaries
incurred with respect to 1993 of $900,000 and reorganization
expenses of the Parent and its Subsidiaries incurred in 1996
up to $4,500,000 and (b) unusual charges (other than any
aggregate net gain or any aggregate net loss arising from the
sale, exchange or other disposition of capital assets that are
classified as unusual charges) of the Parent and its
Subsidiaries incurred in any Reference Period during 1998 and
1999 of up to $5,640,000."
<PAGE>
SECTION 1.02. Representations and Warranties. The Parent and the
Borrower hereby represent and warrant to each Lender that:
(a) The representations and warranties set forth in Section 4
of the Credit Agreement, and in each other Loan Document, are true and
correct in all material respects on and as of the date hereof and on
and as of the Seventh Amendment Effective Date (as defined in Section
1.03) with the same effect as if made on and as of the date hereof or
the Seventh Amendment Effective Date, as the case may be, except to the
extent such representations and warranties expressly relate solely to
an earlier date (in which case such representations and warranties
shall have been true and correct in all material respects on and as of
such earlier date).
(b) Each of the Loan Parties is in compliance with all the
terms and conditions of the Credit Agreement and the other Loan
Documents on its part to be observed or performed and no Default or
Event of Default has occurred or is continuing.
(c) The execution, delivery and performance by each of the
Borrower and the Parent of this Seventh Amendment have been duly
authorized by such party.
(d) This Seventh Amendment constitutes the legal, valid and
binding obligation of each of the Borrower and the Parent, enforceable
against it in accordance with its terms, except as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws affecting creditors' rights generally.
(e) The execution, delivery and performance by each of the
Borrower and the Parent of this Seventh Amendment (i) do not conflict
with or violate (A) any provision of law, statute, rule or regulation,
or of the certificate of incorporation or by-laws of the Borrower or
the Parent, (B) any order of any Governmental Authority or (C) any
provision of any indenture, agreement or other instrument to which the
Borrower or the Parent is a party or by which it or any of its property
may be bound and (ii) do not require any consents under, result in a
breach of or constitute (with notice or lapse of time or both) a
default under any such indenture, agreement or instrument.
SECTION 1.03. Effectiveness. This Seventh Amendment shall become
effective only upon satisfaction of the following conditions precedent and upon
such date, this Seventh Amendment shall be deemed to be effective as of March
26, 1999 (the "Seventh Amendment Effective Date"):
(a) The Administrative Agent shall have received duly executed
counterparts of this Seventh Amendment which, when taken together, bear
the authorized signatures of the Borrower, the Parent and the Required
Lenders.
(b) (i) The representations and warranties set forth in
Section 1.02 shall be true and correct on and as of the Seventh
Amendment Effective Date, (ii) no Default or Event of Default has
occurred or is continuing and (iii) there shall not be any action
pending or any judgment, order or decree in effect which is likely to
<PAGE>
restrain, prevent or impose materially adverse conditions upon
performance by any Loan Party of its obligations under the Loan
Documents.
(c) The Borrower shall have paid in full all fees and
reasonable expenses in connection with the Credit Agreement and the
other Loan Documents including, without limitation, the fees and
expenses set forth in Sections 1.05 hereto.
(d) The Administrative Agent shall have received from each of
the Guarantors duly executed Consents, in the form attached hereto as
Exhibit A, which bear the authorized signatures of such Guarantors.
(e) The Administrative Agent shall have received an opinion of
counsel to the Borrower, the Parent and the other Loan Parties in form
and substance satisfactory to the Administrative Agent.
(f) The Administrative Agent shall have received such other
documents, legal opinions, instruments and certificates as it shall
reasonably request and such other documents, legal opinions,
instruments and certificates shall be satisfactory in form and
substance to the Administrative Agent and its counsel. All corporate
and other proceedings taken or to be taken in connection with this
Seventh Amendment and all documents incidental thereto, whether or not
referred to herein, shall be satisfactory in form and substance to the
Administrative Agent and its counsel.
SECTION 1.04. APPLICABLE LAW. THIS SEVENTH AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 1.05. Expenses. The Borrower shall pay all reasonable
out-of-pocket expenses incurred by the Agents in connection with the
preparation, negotiation, execution and delivery and the Agents' and the
Lenders' enforcement of this Seventh Amendment, including, but not limited to,
the reasonable fees and disbursements of counsel. The agreements set forth in
this Section 1.05 shall survive the termination of this Seventh Amendment and
the Amended Agreement.
SECTION 1.06. Counterparts. This Seventh Amendment may be executed in
any number of counterparts, each of which shall constitute an original but all
of which when taken together shall constitute but one agreement.
SECTION 1.7. Reference to and Effect on the Loan Documents. (a) On and
after the Seventh Amendment Effective Date, each reference in the Amended
Agreement to "this Agreement", "hereunder", "hereof" or words of like import
referring to the Credit Agreement, and each reference in the other Loan
Documents to "the Credit Agreement", "thereunder", "thereof" or words of like
import referring to the Credit Agreement, shall mean and be a reference to the
Amended Agreement as amended by this Seventh Amendment.
(b) Each of the amendments provided herein shall apply and be
effective only with respect to the provisions of the Credit Agreement
<PAGE>
specifically referred to by such amendment. Except as specifically
amended above, the Credit Agreement and the Revolving Credit Notes, and
all other Loan Documents, are and shall continue to be in full force
and effect and are hereby in all respects ratified and confirmed.
(c) Except as specifically provided above, the execution,
delivery and effectiveness of this Seventh Amendment shall not operate
as a waiver of any right, power or remedy of any Lender, any Agent or
any Secured Party under any of the Loan Documents, nor constitute a
waiver of any provision of any of the Loan Documents.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Seventh
Amendment to be duly executed by their duly authorized officers, all as of the
date first above written.
INTERNATIONAL MILL SERVICE, INC.
By: /s/WILLIAM B. DAVIS
-------------------
Title: Vice President and Treasurer
ENVIROSOURCE, INC.
By: /s/WILLIAM B. DAVIS
-------------------
Title: Vice President and Treasurer
NATIONSBANK, N.A., as Administrative
Agent, as Issuing Lender, as Swingline Lender
and as a Lender
By: /s/JOHN W. POCALYKO
--------------------
Title: Managing Director
CREDIT LYONNAIS NEW YORK BRANCH, as
Syndication Agent and as a Lender
By: /s/ATTILA KOC
------------------------------------
Title: Senior Vice President
PARIBAS, as a Lender
By:
------------------------------------
Title:
By:
------------------------------------
Title:
ROYAL BANK OF CANADA
By: /s/ JOHN D'ANGELO
------------------------------------
Title: Manager
<PAGE>
EXHIBIT A
CONSENT
Dated as of April 9, 1999
Each of the undersigned, as a Guarantor under one of the Guarantees,
dated as of December 19, 1995 (each, a "Guarantee") in favor of the
Administrative Agent for the Lenders parties to the Credit Agreement referred to
in the foregoing Seventh Amendment, hereby consents to the Seventh Amendment and
hereby confirms and agrees that (i) the Guarantee to which such Guarantor is a
party is, and shall continue to be, in full force and effect and is hereby
ratified and confirmed in all respects except that, upon the effectiveness of,
and on and after the date of, the Seventh Amendment, each reference in such
Guarantee to the Loan Documents or any thereof, "thereunder", "thereof" or words
of like import shall mean and be a reference to the Loan Documents or such Loan
Document as amended prior to the date of and by the Seventh Amendment and (ii)
the Security Documents (as defined in the Credit Agreement referred to in the
foregoing Seventh Amendment) to which such Guarantor is a party and all of the
Collateral described therein do, and shall continue to, secure the payment of
all of the Obligations (as defined therein).
IMS STEEL SERVICES, INC.
By:
------------------------------------------------
Title:
CONVERSION SYSTEMS, INC.
By:
------------------------------------------------
Title:
<PAGE>
ENVIROSOURCE MANAGEMENT CORP.
By:
------------------------------------------------
Title:
ENVIROSAFE SERVICES OF IDAHO, INC.
By:
------------------------------------------------
Title:
ENVIROSAFE SERVICES OF NORTH AMERICA, INC.
By:
------------------------------------------------
Title:
ENVIROSAFE SERVICES OF OHIO, INC.
By:
------------------------------------------------
Title:
ENVIROSAFE SERVICES OF TEXAS, INC.
By:
------------------------------------------------
Title:
ENVIROSOURCE CORP.
By:
------------------------------------------------
Title:
<PAGE>
ENVIROSOURCE TECHNOLOGIES, INC.
By:
------------------------------------------------
Title:
ETDS, INC.
By:
------------------------------------------------
Title:
IU INTERNATIONAL CORPORATION
By:
------------------------------------------------
Title:
IU NORTH AMERICA FINANCE, INC.
By:
------------------------------------------------
Title:
IU NORTH AMERICA, INC.
By:
------------------------------------------------
Title:
MARCUS HOOK PROCESSING, INC.
By:
------------------------------------------------
Title:
<PAGE>
McGRAW CONSTRUCTION COMPANY, INC.
By:
------------------------------------------------
Title:
NEOAX INVESTMENT CORP.
By:
------------------------------------------------
Title:
NOSROC CORP.
By:
------------------------------------------------
Title:
SONCOR CORP.
By:
------------------------------------------------
Title:
IMS WAYLITE INC.
By:
------------------------------------------------
Title:
AMENDMENT TO NOTE RELATED TO STOCK PURCHASE
THIS AMENDMENT, dated as of January 15, 1999 (the "Amendment")
to that certain promissory note (the "Note"), dated January 13, 1989, by and
between Mr. Louis A. Guzzetti, Jr. ("Purchaser") as borrower, and Envirosource,
Inc. (the "Company") as lender, entered into in connection with the purchase on
January 19, 1989 of 46,750 shares of Company Common Stock (the "Stock"), recites
and provides as follows:
WHEREAS, the Purchaser executed the Note in exchange for funds
used to purchase such Stock at the Company's request in order to permit the
purchase of the Stock on terms arranged by the Company with the Company's
bankruptcy estate trustee;
WHEREAS, at the time the Company negotiated such Stock
purchase, the Company desired to acquire the Stock and certain other common
stock offered with it as part of a block sale, but was precluded from such
acquisition by certain contractual obligations of the Company;
WHEREAS, the Company and the Purchaser, at the time the Note
and Stock purchase were executed, understood such Stock purchase to have been
undertaken at the Company's request in furtherance of Company objectives;
WHEREAS, the Purchaser has requested an adjustment to the
outstanding principal balance of the Note to reflect a decline in value of the
Stock so purchased, and Company has agreed to such adjustment subject to
satisfaction of certain conditions and for other good and valuable consideration
described hereinbelow; and
WHEREAS, all acts necessary to constitute this Amendment as a
valid and binding instrument have been done;
NOW, THEREFORE, THIS AMENDMENT TO NOTE RELATED TO STOCK
PURCHASE, WITNESSETH, that:
1. As of the date hereof, the principal amount of the Note is
reduced from its currently outstanding balance of $535,400 (which amount
includes capitalized interest accrued and unpaid by Purchaser through the date
hereof) to $50,000 (the "Revised Principal Amount").
2. From and after the date hereof, interest shall accrue on
the Revised Principal Amount at a per annum rate of 6%, compounded monthly, and
shall be payable in cash on the last business day of each calendar month through
its final maturity date.
<PAGE>
3. The Revised Principal Amount, and any accrued and unpaid
interest thereon, shall be due and payable in full on January 31, 1999.
4. In consideration of the foregoing, Purchaser agrees to sell
the Stock not later than January 31, 1999, either to the Company, to the
Company's designee, or on the open market, as the Company shall direct. If sold
to the Company or its designee, the price per share of Stock shall be the
average of the closing price on NASDAQ for Company Common Stock for the 5
business days preceding the date of purchase. Purchaser further agrees to waive
any claim it may have against the Company arising out of or otherwise connected
with the execution of the Note and the Stock purchase described hereinabove.
5. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF PENNSYLVANIA APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED THEREIN, NOTWITHSTANDING ANY PENNSYLVANIA OR OTHER CHOICE OF
LAW RULES TO THE CONTRARY.
6. This Amendment may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts together constitute but one and the same instrument.
7. Except as specifically amended hereby, the Note is in all
respects ratified and confirmed. From and after the date hereof, each reference
to the Note shall be deemed to be a reference to such document as amended
hereby. Capitalized terms used herein and not otherwise defined herein shall
have the meanings given them in the Note.
IN WITNESS WHEREOF, the parties have caused this Amendment to
Note Related to Stock Purchase to be duly executed, in the case of the Company
by an officer duly authorized to execute this Amendment, as of the 15th day of
January, 1999.
ENVIROSOURCE, INC., as lender
By: /s/LEON Z. HELLER
-----------------
Name: Leon Z. Heller
Title: Vice President, General Counsel and Secretary
LOUIS A. GUZZETTI, Jr., as borrower
/s/LOUIS A. GUZZETTI, JR.
-------------------------
AMENDMENT TO NOTE RELATED TO STOCK PURCHASE
THIS AMENDMENT, dated as of February 12, 1999 (the "Amendment") to that
certain promissory note (the "Note"), dated January 13, 1989, by and between Mr.
George E. Fuehrer ("Purchaser") as borrower, and Envirosource, Inc. (the
"Company") as lender, entered into in connection with the purchase on January
19, 1989 of 29,350 shares of Company Common Stock (4,193 shares subsequent to
the June 1998 one-for-seven reverse split of Company Common Stock) (the
"Stock"), and currently represented by a promissory note dated March 31, 1998,
recites and provides as follows:
WHEREAS, the Purchaser executed the Note in exchange for funds used to
purchase such Stock at the Company's request in order to permit the purchase of
the Stock on terms arranged by the Company with the Company's bankruptcy estate
trustee;
WHEREAS, at the time the Company negotiated such Stock purchase, the
Company desired to acquire the Stock and certain other common stock offered with
it as part of a block sale, but was precluded from such acquisition by certain
contractual obligations of the Company;
WHEREAS, the Company and the Purchaser, at the time the Note and Stock
purchase were executed, understood such Stock purchase to have been undertaken
at the Company's request in furtherance of Company objectives;
WHEREAS, the Purchaser has requested an adjustment to the outstanding
principal balance of the Note to reflect a decline in value of the Stock so
purchased, and Company has agreed to such adjustment subject to satisfaction of
certain conditions and for other good and valuable consideration described
hereinbelow; and
WHEREAS, all acts necessary to constitute this Amendment as a valid and
binding instrument have been done;
NOW, THEREFORE, THIS AMENDMENT TO NOTE RELATED TO STOCK PURCHASE,
WITNESSETH, that:
1. As of the date hereof, the principal amount of the Note is reduced
from its currently outstanding balance of $211,208 (which amount includes
capitalized interest accrued and unpaid by Purchaser through the date hereof) to
$9,500 (the "Revised Principal Amount").
2. From and after the date hereof, interest shall accrue on the Revised
Principal Amount at a per annum rate of 6%, compounded monthly, and shall be
payable in cash on the last business day of each calendar month through its
final maturity date.
3. The Revised Principal Amount, and any accrued and unpaid interest
thereon, shall be due and payable in full on March 31, 1999.
<PAGE>
4. In consideration of the foregoing, Purchaser agrees to sell the
Stock not later than March 31, 1999 on the open market. Purchaser further agrees
to waive any claim it may have against the Company arising out of or otherwise
connected with the execution of the Note and the Stock purchase described
hereinabove.
5. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED THEREIN, NOTWITHSTANDING ANY PENNSYLVANIA OR OTHER CHOICE OF LAW
RULES TO THE CONTRARY.
6. This Amendment may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts together constitute but one and the same instrument.
7. Except as specifically amended hereby, the Note is in all respects
ratified and confirmed. From and after the date hereof, each reference to the
Note shall be deemed to be a reference to such document as amended hereby.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given them in the Note.
IN WITNESS WHEREOF, the parties have caused this Amendment to Note
Related to Stock Purchase to be duly executed, in the case of the Company by an
officer duly authorized to execute this Amendment, as of the 12th day of
February, 1999.
ENVIROSOURCE, INC., as lender
By: /s/LEON Z. HELLER
------------------
Name: Leon Z. Heller
Title: Vice President, General Counsel and Secretary
GEORGE E. FUEHRER, as borrower
/s/GEORGE E. FUEHRER
--------------------
PROMISSORY NOTE
March 31, 1999
FOR VALUE RECEIVED, the undersigned ("Borrower") hereby promises to pay
to the order of ENVIROSOURCE, INC., a Delaware corporation ("Lender"), at its
office at 1155 Business Center Drive, Horsham, PA 19044, or such other place as
may be designated to Borrower by Lender in writing, in lawful money of the
United States of America, the principal amount of $135,374.00 on the earlier to
occur of (i) March 31, 2000 and (ii) thirty (30) days after termination of
Borrower's employment with Lender (the "Maturity Date"). The principal amount of
this Note from time to time outstanding shall bear interest at the rate of six
percent (6%) per annum. Interest shall begin to accrue from and including the
date first above written. All accrued and unpaid interest shall be due and
payable on the Maturity Date in like money at the above-described office. The
principal amount hereof may be prepaid in whole or in part from time to time
without premium or penalty; provide that accrued and unpaid interest on the
principal amount being prepaid shall be paid at the time of such pre-payment.
If Borrower dies while in the employ of Lender, then this Note shall
automatically be deemed to be prepaid in full and all the indebtedness
represented hereby shall be forgiven.
If any payment on this Note becomes due and payable on a Saturday or
other day on which commercial banks in New York City are authorized or required
by law to close, the maturity thereof shall be extended to the next succeeding
business day and, with respect to payment of principal, interest thereon shall
be payable at the rate provided above during such extension.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the Commonwealth of Pennsylvania.
/s/AARNE ANDERSON
-----------------
Aarne Anderson
CONFIDENTIAL SEVERANCE AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of
January 15, 1999 by and between LOUIS A. GUZZETTI, JR. ("Guzzetti") and
ENVIROSOURCE, INC., a Delaware corporation (the "Corporation").
RECITALS:
A. Guzzetti has tendered his resignation as an employee,
officer, and a director of the Corporation and each of its subsidiary and
affiliated companies, effective January 15, 1999;
B. The Corporation desires to enter into an agreement to
facilitate a smooth transition from Guzzetti to his successor. In addition, the
Corporation desires to obtain certain benefits as more fully set forth herein.
AGREEMENT
NOW, THEREFORE in consideration of the foregoing recitals and
the covenants contained herein, the parties agree as follows:
1. Consulting Relationship. The Corporation agrees to continue
-----------------------
to utilize the services of Guzzetti, and Guzzetti agrees to continue to serve
the Corporation as a consultant for thirty (30) months from the date hereof (the
"Consulting Term") on an as-needed, non-exclusive basis on the terms set forth
in this Agreement. In particular, to fulfill his obligations as a consultant,
Guzzetti shall be available, when requested, at reasonable times and places,
upon reasonable notice, but in any event no more than five (5) days per month
during the first six months of the Consulting Term and no more than five (5)
days per calendar quarter for the remainder of the Consulting Term. The
Corporation and Guzzetti agree to cooperate in good faith in the scheduling of
Guzzetti's duties so that such duties will not interfere with any full time
employment accepted by Guzzetti.
2. Compensation and Benefits
-------------------------
(a) In return for Guzzetti's execution of this
Agreement and the Waiver and Release attached hereto as Exhibit "A" (the
"Release"), Guzzetti shall receive compensation at the rate of $34,167 per month
during the Consulting Term for consulting services, which shall be paid in
accordance with the Corporation's current payroll practices. The Corporation
shall deduct from the compensation paid to Guzzetti under this Section 2(a) all
applicable taxes and appropriate deductions.
<PAGE>
(b) If Guzzetti accepts full time employment with
a new employer prior to the end of the Consulting Term, all amounts that would
otherwise become payable pursuant to Section 2(a) above for periods after the
date Guzzetti commences such employment to and including the end of the
Consulting Term, net of withholding obligations, (the "Accelerated Payment"),
shall become due and shall be applied, to the extent needed, by the Corporation
against payment of the "1986 Loan" (as defined in Section 3(d) hereof). Any
amounts due and owing that are in excess of the amount required to pay the 1986
Loan shall be paid to Guzzetti. Notwithstanding the foregoing, in the event that
the Corporation asserts that by accepting such new employment, Guzzetti would
violate Section 6(a) below, the remaining payments due hereunder shall not be
accelerated and applied in the manner otherwise provided in this Section 2(b),
but shall be suspended pending determination of the Corporation's assertion. In
the event Guzzetti advises the Corporation in writing that he disputes the
Corporation's assertion, the Corporation and Guzzetti shall as promptly as
practicable submit the dispute to expedited arbitration in the manner provided
in Section 8.1. If the Corporation's position is sustained in the arbitration,
the provisions of Section 8.2 shall apply. If the arbitration is determined in
Guzzetti's favor, the remaining payments due to Guzzetti under this Agreement
shall be accelerated and applied by the Corporation as soon as practicable in
the manner provided in this Section 2(b).
(c) In the event Guzzetti dies or becomes disabled
disabled during the Consulting Term, the Accelerated Payment described in
Section 2(b) above shall become due and shall be applied by the Corporation
against payment of the 1986 Loan as described in Section 3(d) hereof. Any
remaining amounts owing under the 1986 Loan after the application of the
Accelerated Payment pursuant to Section 3(d) shall be forgiven. For purposes of
this Section 2(c), Guzzetti shall be deemed disabled if, according to the
determination of a physician approved by the Corporation in its reasonable
discretion, he is unable to engage in any substantial gainful employment
substantially comparable to that in which he was engaged as an employee of the
Corporation, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than six (6) months.
(d) Guzzetti shall not incur any reimbursable
expenses in rendering his services hereunder unless such expenses have received
the prior approval of the Chairman or CEO of the Corporation. The Corporation
shall from time to time promptly reimburse Guzzetti, upon receipt of proper
documentation, for all reasonable out-of-pocket pre-approved expenses that are
incurred by Guzzetti during the Consulting Term.
<PAGE>
(e) Guzzetti shall not be entitled to receive any
compensation or benefits from the Corporation for his employment during the
Consulting Term except as expressly set forth herein.
3. Other Agreements. The Corporation and Guzzetti further
-----------------
agree as follows:
(a) Effective as of the date hereof, during the
Consulting Term and only until the commencement by Guzzetti of full time
employment, Guzzetti shall be entitled to participate in the Corporation's group
medical and dental insurance plans on the same terms and conditions as
applicable to employees of the Corporation. Thereafter, Guzzetti shall be
advised of, and be entitled to, his COBRA rights and benefits.
(b) The Corporation will pay Guzzetti for all
accrued salary and three (3) weeks of accrued unused vacation pay within fifteen
(15) of the execution of this agreement.
(c) Guzzetti agrees to return to the Corporation,
within thirty (30) days of the execution of this Agreement, his Company provided
automobile.
(d) The parties agree that as of the date hereof,
a certain promissory note dated October 15, 1987 made by Guzzetti in favor of
the Corporation (the "1986 Loan") is reconstituted such that the outstanding
principal thereof, plus accrued interest, shall bear interest at the rate of 6%
per annum, payable in cash on each March 31, June 30, September 30 and December
31. The outstanding principal of the 1986 Loan and all accrued interest thereof,
as reconstituted pursuant to this Section 3(d), shall be payable in full on the
earlier of (i) July 15, 2001 or (ii) the date on which the Accelerated Payment
described in Section 2(b) above is due, which Accelerated Payment shall be
applied by the Corporation toward repayment of the 1986 Loan. The parties agree
that as of the date hereof, the outstanding principal amount (including financed
interest payments) of the 1986 Loan is $525,432.00.
(e) Guzzetti agrees that within sixty (60) days
following the date hereof, he will pay the Corporation the amount of
$150,000.00, to be applied by the Corporation toward the repayment of the 1986
Loan, as reconstituted pursuant to Section 3(d) above.
4. Return of Property. Guzzetti represents that he has
--------------------
delivered to the Corporation all documents and materials (and copies thereof) of
a confidential or proprietary nature, which are the property of the Corporation,
or any subsidiary or affiliate thereof, and which relate to the Corporation or
any subsidiary or affiliate thereof, or any of their products and/or services,
including (without limitation) information contained in or on computer files,
disks or other data storage media. In
<PAGE>
addition to the above, Guzzetti will return all tangible property of the
Corporation of more than nominal value.
5. Relationship of the Parties. Guzzetti shall have no power
---------------------------
hereunder to act in the name of, or on behalf of, the Corporation or in any way
bind the Corporation in any regard, except as authorized in writing by the
Chairman or CEO of the Corporation.
6. Covenants.
---------
(a) Guzzetti agrees that during the Consulting
Term (the "Applicable Period"), he will not knowingly, directly or indirectly:
(i) own or control any debt, equity or other interest in (except as a passive
investor of less than 1% of the capital stock or publicly traded notes or
debentures of a publicly held company), or (ii) (1) act as a director, officer,
manager, employee, participant or consultant to or accept or solicit any office
to act as any of the foregoing or (2) be obligated to or connected in any
advisory, business or ownership capacity in each case with respect to the KO-61
processing, slag processing, scrap yard management, slag hauling or other
related steel mill services, currently engaged in by the Corporation or any of
its subsidiaries (collectively "Envirosource").
(b) During the Applicable Period, Guzzetti will
not knowingly solicit, directly or indirectly, and shall not knowingly cause or
assist any other person or entity to solicit, any person that is employed at
that time by Envirosource to hire or employ such person, whether on Guzzetti's
own behalf or on behalf of a supplier, competitor or customer of Envirosource.
As used herein the word "indirectly" includes but is not limited to, attempting
to induce any employee of Envirosource to leave Envirosource for any purpose.
(c) Guzzetti further agrees not to knowingly
divulge to anyone any negative, untrue or defamatory information, whether or not
proprietary or confidential, concerning Envirosource. The Corporation shall not
make any statement which disparages the personal or business reputation of
Guzzetti.
(d) Guzzetti shall cooperate in good faith with
the Corporation and the Corporation's counsel in connection with any pending
administrative proceeding, arbitration, mediation or litigation or subsequent
administrative proceeding, arbitration, mediation or litigation relating to the
time of his employment with the Corporation, including but not limited to
providing information and/or documents, participating in informal interview(s)
and appearing for deposition(s) and/or testimony if deemed necessary by the
Corporation. Notwithstanding the foregoing, nothing in this paragraph shall
obligate Guzzetti to expend any sum or incur any liability in connection with
<PAGE>
such cooperation. In the event such cooperation requires a commitment of time
beyond the limits set forth in Section 1 above, the parties shall mutually agree
on compensation to be provided Guzzetti for such services.
7. Confidential Information. Guzzetti shall not knowingly in
-------------------------
any manner use (other than in the performance of services under this Agreement)
or disclose any material trade secret information with respect to customers,
suppliers or products, prices, call lists or other confidential plans,
processes, procedures, business concepts, forecasts, drawings, ideas,
discoveries, materials or information concerning the operations, business or
financial affairs of the Corporation, or any subsidiary or affiliate thereof,
gained during or as a result of his employment by the Corporation. Guzzetti
agrees that he shall not knowingly in any manner use (other than in the
performance of services under this Agreement) or disclose any material
confidential third party information gained during or as a result of his
employment by with the Corporation. The parties agree that the terms and
conditions of this Agreement, except with respect to Section 8.1, shall remain
confidential and shall not be disclosed to any other person (other than
Guzzetti's family members, attorneys, and accountants, who shall be informed of
and bound by the confidentiality provisions of this Agreement) other than as
required by court order, legal process of applicable law or as otherwise agreed
to by Guzzetti and the Corporation. Any disclosures permitted hereunder shall
not be made in a manner derogatory to any other party hereto. The provisions of
this Section 7 shall not apply to any information which becomes generally
available to the public, other than as a result of any disclosure, direct or
indirect, by Guzzetti.
8. Miscellaneous.
-------------
8.1 Arbitration. All controversies, claims,
-----------
disputes, and matters in question arising out of, or relating to, this Agreement
or the breach thereof, shall be decided by arbitration in accordance with the
provisions of this paragraph. The arbitration proceedings shall be conducted
under the applicable rules of the American Arbitration Association or its
successor in effect at the time a demand for arbitration under the rules is
made. The arbitration board will consist of a single arbitrator. The decision of
the arbitrator, including determination of the amount of any damages suffered,
shall be conclusive, final, and binding upon the parties hereto, and their
respective heirs, legal representatives, successors, and assigns. The fees and
costs associated with the arbitration proceeding shall be shared equally by the
parties. Such fees and costs shall not include the fees and costs of the parties
respective attorneys and witnesses, which shall be borne by the party incurring
such fees and costs. Notwithstanding the foregoing, and in addition to the
remedy of arbitration, the parties agree that the violation of the provisions of
<PAGE>
Section 6 and/or 7 cannot be reasonably or adequately compensated in damages
and, in addition to any other relief to which the Corporation may be entitled
by reason of such violation, the Corporation shall also be entitled to seek
permanent and temporary injunctive and equitable relief in a court of competent
jurisdiction.
8.2 Certain Breaches of Agreement. In the event
-----------------------------
of Guzzetti's breach of Sections 6 and/or 7 hereof, the Corporation shall have
no further obligations under Sections 2 and 3(a) of this Agreement. This
Agreement shall be null and void if Guzzetti cancels the Release.
8.3 Notices. Except as otherwise provided
-------
herein, any notice or demand which, by the provisions hereof, is required or
which may be given to or served upon the parties hereto shall be in writing and,
if by telegram, facsimile or telex, shall be deemed to have been validly served,
given or delivered when sent, if by personal delivery, shall be deemed to have
been validly served, given or delivered upon actual delivery and, if mailed,
shall be deemed to have been validly served, given or delivered three business
days after deposit in the United States mails, as registered or certified mail,
with proper postage prepaid and addressed to the party or parties to be
notified, at the following addresses (or such other address(es) as a party may
designate for itself by like notice):
If to the Corporation: Envirosource, Inc.
1155 Business Center Drive
Horsham, PA 19044
Attn: Chief Executive Officer
If to Guzzetti: Louis A. Guzzetti, Jr.
90 Ferris Hill
New Canaan, CT 06840
8.4 Successors and Assigns. The parties hereto
----------------------
acknowledge that the Corporation shall have the right to assign, with absolute
discretion, any or all of its rights and obligations under this Agreement to any
of its affiliates, successors or assigns, and this Agreement shall inure to the
benefit of, and be binding upon, such respective affiliates, successors and
assigns of the Corporation in the same manner and to the same extent as if such
affiliate, successors or assigns were original parties thereto. In the event of
a failure to perform by an assignee, the Corporation shall remain liable
hereunder. The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it whether or not such
<PAGE>
succession had taken place. In the event of an assignment, the nonsolicitation
provision of Section 6(b) shall be deemed to apply only with respect to
employees of Envirosource and its subsidiaries and the non-disparagement and
confidentiality provisions of Sections 6(c) and 7, respectively, shall be deemed
to apply only with respect to Envirosource and its subsidiaries. This Agreement
shall be deemed to be personal to Guzzetti and shall not be assignable by
Guzzetti.
8.5 Governing Law. This Agreement shall be
-------------
governed by, and construed and interpreted in accordance with the laws of the
Commonwealth of Pennsylvania (without regard to choice of law principles). The
arbitrator or parties agree that all actions and proceedings arising directly or
indirectly hereunder shall be litigated or otherwise resolved in the State of
Pennsylvania and hereby waive any objection based on forum non conveniens and
any objection to venue of any action instituted hereunder.
8.6 Amendment; Waiver. This Agreement may be
-----------------
amended only by an instrument in writing executed by the parties hereto. No
waiver, express or implied, of any breach of any covenant, agreement or duty
shall be held or construed as a waiver of any other breach of the same or any
other covenant, agreement or duty.
8.7 Entire Agreement. This Agreement and the
----------------
Release constitute the entire agreements of the parties hereto and fully
supersede and replace any and all prior agreements and understandings, whether
oral or written, express or implied, between the parties pertaining to the
subject matter of this Agreement and the Release.
8.8 Severability. Should any provision of this
------------
Agreement be declared or be determined by any arbitrator or court to be illegal
or invalid, the validity of the remaining parts, terms or provisions shall not
be affected thereby and the illegal or invalid part, term or provisions shall be
deemed not to be part of this Agreement. The parties intend this Agreement to be
enforced as written. However, if any provision, or any part thereof, is held to
be unenforceable because of the scope or duration of such provision Guzzetti and
the Corporation agree that the arbitrator or court making such determination
shall have the power to reduce the scope, duration and/or area of such
provisions in order to make such provision enforceable to the fullest extent
permitted by law, and/or to delete specific words and phrases
("blue-penciling"), and in its reduced or blue-penciled form such provision
shall then be enforceable and shall be enforced.
8.9 Captions. The captions of the several
--------
sections and paragraphs of this Agreement are used for convenience only
<PAGE>
and shall not be considered or referred to in resolving questions of
interpretation with respect to this Agreement.
8.10 Counterparts. This Agreement may be executed
------------
in counterparts, each of which will be deemed an original, and both of which
together shall constitute one and the same Agreement.
8.11 Negotiation. Guzzetti acknowledges that he
-----------
has had an opportunity to negotiate with regard to the terms of this Agreement
and to receive advice of counsel with regard to it and has carefully read and
considered this Agreement and fully understands the extent and impact of its
provisions, and has executed this Agreement voluntarily and without coercion,
undue influence, threats, or intimidation of any kind or type whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
The Corporation
ENVIROSOURCE, INC.
By: /s/LEON Z. HELLER
------------------
Its: Vice President, General Counsel and Secretary
GUZZETTI
/s/LOUIS A. GUZZETTI, JR.
--------------------------
Louis A. Guzzetti, Jr.
<PAGE>
EXHIBIT "A"
WAIVER AND RELEASE AGREEMENT
This Release is given
By the Releasor(s): Louis A. Guzzetti, Jr.
Address: 90 Ferris Hill
New Canaan, Connecticut 06840
hereinafter referred to as "I",
To the Releasee(s): ENVIROSOURCE, INC. and its parent, division, subsidiary and
affiliated corporations (including predecessors and
successors) and their Officers, Directors, Employees and
Representatives
sometimes hereinafter referred to as "You."
1. Release. I hereby release and give up any and all actions, causes of actions,
-------
claims and rights (hereinafter "Claims") which I may have against You. This
releases all claims, including those of which I am not aware and those not
mentioned herein. This Waiver and Release Agreement ("Release") applies to
Claims resulting from anything that has happened up to now. I specifically
release any and all Claims relating in any way to my employment relationship, or
resignation from employment effective January 15, 1999, with You, including but
not limited to any Claims arising under the Age Discrimination in Employment
Act, the Older Workers Benefit Protection Act of 1990, Title VII of the Civil
Rights Act of 1964, the Equal Pay Act, the Employee Retirement Income Security
Act, the Fair Labor Standards Act, the Consolidated Omnibus Budget
Reconciliation Act of 1986, or any other federal, state or local laws or
ordinances and any common law claims under tort, contract, or any other theories
now or hereafter recognized. This Release specifically includes, but without
limitation, all Claims arising out of my employment relationship with You.
2. Waiver. I hereby acknowledge and assume all risks or chances that the
------
injuries claimed to have resulted from the above stated matter may become
greater or more extensive than now known, anticipated or expected. I understand
that this instrument shall be effective as a full and final release of all
Claims. In connection with the above waiver, I am aware that I may hereafter
discover Claims or facts in addition to or different from those I now know or
believe to exist with respect to the subject matter of this instrument or You.
However, I and my successors and assigns hereby settle and release all of the
Claims which I may have against You.
1.
<PAGE>
3. No Admissions. I agree and acknowledge that this Release is not to be
--------------
construed as an admission of any violation of any federal, state or local
statutes, ordinance or regulation or any duty allegedly owed by You to me. You
specifically disclaim any liability to me on any basis.
4. Time Periods. I have been given the opportunity to take a period of at least
------------
twenty-one (21) days within which to consider this Release. If I choose to sign
this Release before that time period expires, I do so knowingly and voluntarily.
I also understand that I have the right to change my mind and cancel this
Release within seven (7) days following the date that I have signed it. This
Release will not be effective until the end of this seven (7) day period.
5. Consideration. In exchange for, consideration of and reliance on my execution
-------------
of this Release, You and I have (a) executed and agreed to perform that certain
Confidential Severance Agreement dated as of January 15, 1999 ("Agreement") and
(b) You agree to commence payment to me upon the expiration of the seven (7) day
time period referred to in Paragraph 4 above, the payments pursuant to Section 2
of the Agreement. I agree that I will not seek anything further, including any
other payment from You. I further agree, in return for receipt of the foregoing
payments, to abide by all of your rules, policies and procedures applicable to
current and former employees.
6. Confidentiality. I agree that the terms and conditions of this Release shall
---------------
remain confidential and shall not be disclosed to any other person (other than
my family members, attorneys, and accountants who shall be informed of and bound
by the confidentiality provisions of this Release) other than as required by
court order, legal process or applicable law or as otherwise agreed to by You
and me. I understand that this provision regarding confidentiality constitutes a
substantial inducement for You to enter into this Release.
7. Who is Bound. I am bound by this Release. Anyone who succeeds to my rights
------------
and responsibilities, such as my heirs or the executor of my estate, is also
bound by this Release. This Release is made for your benefit and that of anyone
who succeeds to your rights and responsibilities.
8. No Inducements. I further warrant that no promise or inducement for this
---------------
Release has been made except as set forth herein, that this Release is executed
without reliance upon any statement or representation by any person or parties
released, their officers, directors, employees, agents or representatives,
concerning any fact material to my act in releasing them, and that I am legally
competent to execute this Release and accept full responsibility therefor.
9. Representations. I understand and agree that I understand the contents,
---------------
implications, and consequences of this Release, and that I agree to the terms of
this Release and have executed it voluntarily. I have had an opportunity to
discuss the terms of this Release with individuals of my own choosing who are
not associated with You. I have been advised by You to consult with an attorney
of my own choosing.
2.
<PAGE>
10. Entire Agreement. This Release and the Agreement constitute the entire
-----------------
agreements between You and I concerning the subject matter hereof and supersede
all prior agreements between You and I. This Release may not be modified orally.
I understand and agree to the terms of this Release.
11. Governing Law. This Release is made and entered into in the State of
--------------
Pennsylvania and shall in all respects be interpreted, enforced and governed
under the laws of said State. The language of all parts of this Release shall
cause to be construed as a whole, according to its fair meaning, and not
strictly for or against You or I.
12. Invalidity. Should any provisions of this Release be determined by any court
----------
to be illegal or invalid, the validity of the remaining parts, terms or
provisions shall not be affected thereby and said illegal or invalid part, term
or provision shall be deemed not to be a part of this Release.
13. Arbitration. All controversies, claims, disputes, and matters in question
-----------
arising out of, or relating to, this Release or the breach thereof, shall be
decided by arbitration in accordance with the provisions of Section 8.1 of the
Agreement.
I ACKNOWLEDGE AND AGREE THAT I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY
PRIOR TO EXECUTING THIS RELEASE; THAT TO THE EXTENT I HAVE DESIRED I HAVE
AVAILED MYSELF OF THAT RIGHT; THAT I HAVE CAREFULLY READ AND UNDERSTAND ALL OF
THE PROVISIONS OF THIS RELEASE; THAT I MAY REVOKE THIS RELEASE WITHIN SEVEN (7)
DAYS AFTER YOU HAVE EXECUTED IT; AND THAT I AM VOLUNTARILY ENTERING INTO THIS
RELEASE.
IN WITNESS WHEREOF, the undersigned has executed this Release
as of the date written freely and voluntarily.
DATED AS OF: January 15, 1999 ENVIROSOURCE, INC.
By:______________________
DATED AS OF: January 15, 1999 ACKNOWLEDGED AND AGREED:
-------------------------
LOUIS A. GUZZETTI, JR.
3.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of January 20, 1999 between
Envirosource, Inc., a Delaware corporation having its principal executive office
at Horsham, Pennsylvania (the "Company"), and John T. DiLacqua (the "Employee").
RECITALS
WHEREAS, the Company desires to employ the Employee in an executive
capacity and the Employee desires to enter the Company's employ;
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and obligations contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Company and the Employee hereby agree as follows:
1. Employment and Term.
-------------------
1.1 The Company agrees to employ the Employee, and the Employee agrees
to accept employment by the Company and to serve the Company as the Company's
President and Chief Executive Officer. The authority, duties and
responsibilities of the Employee shall include those described in this
Agreement, and such other or additional duties of an executive nature as may
from time to time be assigned to the Employee by the Board of Directors (or a
committee thereof). While employed hereunder, the Employee shall devote
substantially all of his business time and attention to the affairs of the
Company and use his best efforts to perform faithfully and efficiently his
duties and responsibilities; provided that the Employee may serve on corporate,
civic or charitable boards or committees, or manage personal investments, so
long as such activities do not significantly interfere with the performance of
the Employee's obligations under this Agreement.
1.2 Unless sooner terminated pursuant to other provisions hereof, the
Employee's period of employment under this Agreement shall be three years (the
"Employment Period"), initially commencing on January 20, 1999 and terminating
on January 19, 2002. The Company may renew this Agreement, with the consent of
the Employee, by giving written notice to the Employee at least 30 days prior to
the end of the then effective Employment Period. If the Employee gives written
notice of his consent to the Company within 20 days following receipt of the
Company's notice of its intention to renew, this Agreement shall be renewed on
the terms in effect as of the renewal date except that the Base Salary for the
renewal term shall be adjusted for the renewal term to an annual amount equal to
the product of (a) the Base Salary in effect on the last day of the existing
term times (b) a fraction, the numerator of which is (i) the Consumer Price
Index for Urban Wage Earners and Clerical Workers (1982-84=100) for the
Philadelphia-Wilmington-Atlantic City area) (the "Index") as reported for the
<PAGE>
period ended closest to the last day of the then ending term of this Agreement
and (ii) the denominator of which is the Index as reported for the period ended
closest to the first day of the then ending term of this Agreement. The
Company's notice of election to renew shall specify (to the latest practicable
date preceeding the date of the notice) what the Base Salary, as adjusted in
accordance with the previous sentence, would be for the renewal term.
2. Compensation and Benefits.
-------------------------
2.1 Base Salary. As compensation for his services provided hereunder,
-----------
the Company shall pay to the Employee until the Date of Termination an annual
base salary of $400,000 (the "Base Salary"). The Base Salary shall be payable in
equal semi-monthly installments or in accordance with the Company's established
policy, subject to such payroll and withholding deductions as may be required by
law and other deductions, as directed by the Employee, applied generally to
employees of the Company for insurance and other employee benefit plans.
2.2 Bonus. In addition to the Base Salary, the Employee shall be
-----
eligible for an annual incentive bonus based on the achievement of certain
financial and individual performance targets to be set by the Compensation
Committee of the Board of Directors on an annual basis. If such targets are met,
the Employee's annual incentive bonus will be equal to 50% of his Base Salary.
If such targets are exceeded, the Employee's annual incentive bonus could reach
up to 75% of his Base Salary, calculated in accordance with a formula to be set
by the Compensation Committee. Notwithstanding the foregoing, Employee's minimum
annual incentive bonus for the first year of Employee's employment shall be
$100,000 (25% of his Base Salary). The annual incentive bonus shall be paid no
later than March 31st of the year following the year in which it is earned. For
example, the annual incentive bonus for the 1999-year shall be paid no later
than March 31, 2000.
2.3 Vacation. The Employee shall be entitled to three (3) weeks paid
--------
vacation during each one year period commencing on the Effective Date.
2.4 Stock Options. Upon execution of this Agreement, the Company shall
-------------
grant the Employee options to purchase 100,000 shares of Common Stock (the
"Options"). The price of the Options shall be the average bid price for the
Common Stock at the close of business for each of the five business days from
January 5, 1999 through January 11, 1999, inclusive. The Options shall vest in
three equal installments on each of the first three anniversaries of this
Agreement, provided that the Employee has been continuously employed by the
Company for such period. Such vesting will become immediate if there is a Change
in Control.
2.5 Incentive, Savings and Retirement Plans. The Employee shall be
------------------------------------------
eligible to participate in and shall receive all benefits under all executive
<PAGE>
incentive, option, savings and retirement plans and programs maintained by the
Company for the benefit of its executive officers and/or employees.
2.6 Other Benefit Plans. The Employee and/or the Employee's dependents,
-------------------
as the case may be, shall be eligible to participate in and shall receive all
benefits under each insurance and other benefit plan of the Company maintained
for the benefit of its employees.
2.7 Reimbursement of Expenses. Subject to the Company's policy
--------------------------
regarding the reimbursement of reasonable travel and business expenses as in
effect from time to time during the Employment Period, the Company shall
reimburse the Employee for such expenses from time to time, at the Employee's
request upon presentation of expense statements and such other supporting
information as the Company may customarily require of it executives.
3. Termination.
-----------
3.1 Death. This Agreement shall terminate automatically upon the death
-----
of the Employee. Notwithstanding the termination of this Agreement by virtue of
the death of Employee, should Employee be living and employed by Company on
December 31st of any year, his estate shall be paid the incentive bonus due to
Employee in accordance with the terms and time periods provided for in Section
2.2 hereof.
3.2 Disability. The Company may terminate this Agreement, upon written
----------
notice to the Employee delivered in accordance with Sections 3.7 and 9.2 hereof,
upon the Disability of the Employee.
3.3 Cause. The Company may terminate this Agreement for Cause, upon
-----
written notice to the Employee delivered in accordance with Sections 3.7 and 9.2
hereof. For purposes of this Agreement, "Cause" means (a) the conviction of, or
plea of guilty or nolo contendere by, the Employee of a felony or other serious
crime, (b) the Employee's grossly negligent or willful refusal to perform his
duties and responsibilities as contemplated in this Agreement, but only after
Employee has received written notice from the Company setting forth with
particularity Employee's performance deficiency and Employee has failed to cure
such deficiency to the Company's reasonable satisfaction within 30 days of
receipt of such notice, (c) the Employee's engaging in activities which would
constitute a breach of any term of this Agreement, but only after Employee has
received written notice from the Company setting forth with particularity
Employee's breach and Employee has failed to cure such breach to the Company's
reasonable satisfaction within five days of receipt of such notice, or (d)
Employee's engaging in fraud or other illegal conduct to the material detriment
of the Company.
3.4 Without Cause. The Company may terminate this Agreement Without
-------------
Cause, upon written notice to the Employee delivered in accordance with Sections
3.7 and 9.2 hereof. For purposes of this Agreement, the Employee will be deemed
<PAGE>
to have been terminated "Without Cause" if the Employee is terminated by the
Company for any reason other than Cause, Disability, death or non-renewal.
3.5 Change in Control. The Employee may terminate this Agreement, upon
-----------------
written notice to the Company delivered within 30 days of a Change in Control in
accordance with Sections 3.7 and 9.2 hereof, if, as a result of such Change in
Control, Employee is not offered a similar position to that of the Company's
President and Chief Executive Officer with similar responsibilities and equal or
greater compensation than he was being paid at the time of Change in Control
and/or is asked to move his principal office beyond 50 miles from the Employee's
then-current principal office location.
3.6 Release. If the Employee's employment shall terminate during the
-------
Employment Period, the Employee agrees, upon payment to the Employee of all
amounts due under Sections 4.2 or 4.3 hereof, as applicable, to execute a
release of claims in the form attached hereto as Exhibit A.
3.7 Notice of Termination. Any termination of this Agreement (i) by the
---------------------
Company for Cause, Without Cause or as a result of the Employee's Disability or
(ii) by the Employee for any reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (a) indicates the specific termination provision in this Agreement relied
upon, (b) sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Employee's employment under the provision
so indicated and (c) specifies the termination date, if such date is other than
the date of receipt of such notice.
4. Obligations of Company upon Termination.
---------------------------------------
4.1 By the Company for Cause or by Employee other than in connection
-----------------------------------------------------------------------
with a Change in Control. If this Agreement shall be terminated either by the
- ------------------------
Company for Cause or by the Employee for any reason other than pursuant to
Section 3.5 hereof, the Company shall pay to the Employee, in a lump sum in cash
within 30 days after the Date of Termination, the aggregate of the Employee's
Base Salary (as in effect on the Date of Termination) through the Date of
Termination, if not theretofore paid, and, in the case of compensation
previously deferred by the Employee, all amounts of such compensation previously
deferred and not yet paid by the Company.
4.2 By the Company Without Cause. If this Agreement shall be
----------------------------
terminated by the Company Without Cause:
(i) The Company shall pay to the Employee, in a lump sum in
cash within 30 days after the Date of Termination, the sum of (A) the
aggregate of the Employee's Base Salary (as in effect on the Date of
Termination) through the Date of Termination, if not theretofore paid,
<PAGE>
and, in the case of compensation previously deferred by the Employee,
all amounts of such compensation previously deferred and not yet paid
by the Company, (B) a severance payment equal to one year of Base
Salary plus the amount of the target bonus that would be payable to the
Employee for the year in which the termination occurs (such target
bonus amount to be payable regardless of the Company's actual results
for such year); and (C) if the same has not been previously paid to the
Employee, the incentive bonus, if any, earned by the Employee as
provided in Section 2.2 of this Agreement for the year preceding the
year of termination; and
(ii) for the 12-month period following the Date of
Termination, the Employee and the Employee's dependents shall continue
to be eligible to participate in the medical benefit plans and
arrangements of the Company, on the same terms and conditions
(including the amount of Employee's required contributory premium
payments) in effect for the Employee and the Employee's dependents
immediately prior to the Date of Termination.
The parties agree that the benefits provided in this Section 4.2 are
the sole and exclusive remedies available to the Employee in the event of
termination Without Cause.
4.3 By Employee upon Change in Control. If this Agreement shall
----------------------------------
be terminated by the Employee pursuant to Section 3.5 hereof:
(i) The Company shall pay to the Employee, in a lump sum in
cash within 30 days after the Date of Termination, the sum of (A) the
aggregate of the Employee's Base Salary (as in effect on the Date of
Termination) through the Date of Termination, if not theretofore paid,
and, in the case of compensation previously deferred by the Employee,
all amounts of such compensation previously deferred and not yet paid
by the Company, (B) a severance payment equal to one year of Base
Salary plus the amount of the target bonus that would be payable to the
Employee for the year in which the termination occurs (such target
bonus amount to be payable regardless of the Company's actual results
for such year); and (C) if the same has not been previously paid to the
Employee, the incentive bonus, if any, earned by the Employee as
provided in Section 2.2 of this Agreement for the year preceding the
year of termination; and
(ii) for the 12-month period following the Date of
Termination, the Employee and the Employee's dependents shall continue
to be eligible to participate in the medical benefit plans and
arrangements of the Company, on the same terms and conditions
(including the amount of Employee's required contributory premium
payments) in effect for the Employee and the Employee's dependents
immediately prior to the Date of Termination.
4.4 Non-renewal by the Company. If the Company does not propose
--------------------------
to renew this Agreement in accordance with Section 1.2 hereof:
<PAGE>
(i) The Company shall pay to the Employee, in a lump sum in
cash within 30 days after the date of the expiration of this Agreement
(the "Expiration Date"), the sum of (A) the aggregate of the Employee's
Base Salary (as in effect on the Expiration Date) through the
Expiration Date, if not theretofore paid, and, in the case of
compensation previously deferred by the Employee, all amounts of such
compensation previously deferred and not yet paid by the Company, (B) a
severance payment equal to one year of Base Salary; and (C) if the same
has not been previously paid to the Employee, the incentive bonus, if
any, earned by the Employee as provided in Section 2.2 of this
Agreement for the year preceding the year in which the Expiration Date
occurs; and
(ii) for the 12-month period following the Expiration Date,
the Employee and the Employee's dependents shall continue to be
eligible to participate in the medical benefit plans and arrangements
of the Company, on the same terms and conditions (including the amount
of Employee's required contributory premium payments) in effect for the
Employee and the Employee's dependents immediately prior to the
Expiration Date.
The parties agree that the benefits provided in this Section 4.4 are
the sole and exclusive remedies available to the Employee in the event the
Company does not propose to renew this Agreement pursuant to Section 1.2 hereof.
5. General Duties of the Employee.
------------------------------
5.1 The Employee agrees and acknowledges that he owes a duty of
loyalty, fidelity and allegiance to act at all times in the best interests of
the Company, to not knowingly become involved in a conflict of interest and to
not knowingly do any act or knowingly make any statement, oral or written, which
would injure the Company's business, its interests or its reputation unless
required to do so in any legal proceeding by a competent court with proper
jurisdiction.
5.2 The Employee agrees to comply at all times during the Employment
Period with all applicable policies, rules and regulations of the Company,
including, without limitation, the Company's policy regarding trading in the
Common Stock, as is in effect from time to time during the Employment Period.
6. Employee's Confidentiality Obligation.
-------------------------------------
6.1 The Employee hereby acknowledges, understands and agrees that all
Confidential Information is the exclusive and confidential property of the
Company and its Affiliates which shall at all times be regarded, treated and
protected as such in accordance with this Section 8. The Employee acknowledges
that all such Confidential Information is in the nature of a trade secret.
<PAGE>
6.2 For purposes of this Agreement, "Confidential Information" means
information, which is used in the business of the Company or its Affiliates and
(a) is proprietary to, about or created by the Company or its Affiliates, (b)
gives the Company or its Affiliates some competitive business advantage or the
opportunity of obtaining such advantage or the disclosure of which could be
detrimental to the interests of the Company or its Affiliates, (c) is designated
as Confidential Information by the Company or its Affiliates, is known by the
Employee to be considered confidential by the Company or its Affiliates, or from
all the relevant circumstances should reasonably be assumed by the Employee to
be confidential and proprietary to the Company or its Affiliates or (d) is not
generally known by non-Company personnel.
6.3 As a consequence of the Employee's acquisition or anticipated
acquisition of Confidential Information, the Employee shall occupy a position of
trust and confidence with respect to the affairs and business of the Company and
its Affiliates. In view of the foregoing and of the consideration to be provided
to the Employee, the Employee agrees that it is reasonable and necessary that
the Employee make each of the following covenants:
(a) At any time during the Employment Period and thereafter,
the Employee shall not disclose Confidential Information to any person or
entity, either inside or outside of the Company, other than as necessary in
carrying out his duties and responsibilities as set forth in Section 5 hereof,
without first obtaining the Company's prior written consent (unless such
disclosure is compelled pursuant to court orders or subpoena, and at which time
the Employee shall give notice of such proceedings to the Company and provide
the Company with an opportunity to resolve such disclosure in a manner
reasonably acceptable to the Company).
(b) At any time during the Employment Period and thereafter,
the Employee shall not use, copy or transfer Confidential Information other than
as necessary in carrying out his duties and responsibilities as set forth in
Section 5 hereof, without first obtaining the Company's prior written consent.
(c) On the Date of Termination, the Employee shall promptly
deliver to the Company (or its designee) all written materials, records and
documents made by the Employee or which came into his possession prior to or
during the Employment Period concerning the business or affairs of the Company
or its Affiliates, including, without limitation, all materials containing
Confidential Information.
7. Employee's Nonsolicitation Obligation. The Employee agrees that he shall not,
-------------------------------------
during the Employment Period and for one year following the Date of Termination,
directly or indirectly, on behalf of the Employee or any other person, (i)
solicit for employment by other than the Company any person known by the
Employee to be employed by the Company or its Affiliates at the Date of
Termination or within the six-month period prior thereto; or (ii) induce,
attempt to induce or knowingly encourage any Customer (as defined below) to
divert any business or income from the Company or any of its Affiliates or to
<PAGE>
stop or alter the manner in which they are then doing business with the Company
or any of its Affiliates. The term "Customer" small mean any individual or
business firm that was or is a customer or client of, or whose business was
actively solicited by, the Company or any of its Affiliates at any time,
regardless of whether such customer was generated, in whole or in part, by the
Employee's efforts.
8. Employee's Noncompetition Obligation. The Employee agrees that he shall not,
-------------------------------------
for a period of one year following the Date of Termination, directly or
indirectly: (a) own or control any debt, equity or other interest in (except as
a passive investor of less than 1% of the capital stock or publicly traded notes
or debentures of a publicly held company), or (b)(1) act as a director, officer,
manager, employee, participant or consultant to or accept or solicit any office
to act as any of the foregoing or (2) be obligated to or connected in any
advisory, business or ownership capacity, in each case with respect to any
business engaged in by the Company or any of its subsidiaries at the Date of
Termination or which is being actively pursued by the Company or any of its
subsidiaries at that time. Notwithstanding the foregoing, if the Company is
obligated to make payments to the Employee under any of Sections 4.2, 4.3 or
4.4, the Employee's obligations under this Section 8 shall terminate immediately
if the Company fails to timely perform its obligations under Section 4.2, 4.3 or
4.4, as applicable.
9. Miscellaneous.
-------------
9.1 Certain Definitions. As used in this Agreement, the following
-------------------
terms have the meanings set forth below:
"Affiliate" is used in this Agreement to define a relationship
to a person or entity and means a person or entity who, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such person or entity.
"Base Salary" shall have the meaning assigned thereto in
Section 2.1 hereof.
"Cause" shall have the meaning assigned thereto in Section 3.3
hereof.
"Change in Control" of the Company shall be deemed to have
occurred if (a) the Company merges or consolidates with any other corporation
(other than a wholly-owned direct or indirect subsidiary of the Company) and is
not the surviving corporation (or survives as a subsidiary of another
corporation) and, after such merger or consolidation, the Company's shareholders
immediately prior to such merger or consolidation do not own Voting Stock
representing a majority of the outstanding shares of Voting Stock of the
surviving corporation or do not otherwise have the right to elect a majority of
the board of directors of the surviving corporation, (b) the Company sells or
agrees to sell all or substantially all of its assets to any other person or
entity and, after such sale, the Company's shareholders immediately prior to
such sale do not own Voting Stock representing a majority of the outstanding
<PAGE>
shares of Voting Stock of the person or entity or do not otherwise have the
right to elect a majority of the board of directors of such person or entity,
(c) any third person or entity (other than a person or entity, or an Affiliate
thereof, that is a shareholder of the Company on the Effective Date, a trustee
or committee of any qualified employee benefit plan of the Company) together
with its Affiliates shall become, directly or indirectly, the beneficial owner
(as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, and the regulations promulgated thereunder) of at least 50% of the
Voting Stock of the Company or (d) the individuals who constitute the Board of
Directors of the Company as of the Effective Date (the "Incumbent Board") shall
cease for any reason to constitute at least a majority of the Board of
Directors; provided, that any person becoming a director whose election or
nomination for election was approved by a majority of the members of the
Incumbent Board shall be considered, for the purposes of this Agreement, a
member of the Incumbent Board.
"Common Stock" means the Company's common stock, par value
$0.05 per share.
"Confidential Information" shall have the meaning assigned
thereto in Section 6.2 hereof.
"Date of Termination" means the earliest to occur of (a) the
date of the Employee's death, (b) the date on which the Employee terminates his
employment with the Company for any reason or (c) the date of receipt of the
Notice of Termination, or such later date as may be prescribed in the Notice of
Termination in accordance with Section 3.7 hereof.
"Disability" means an illness or other disability which
prevents the Employee from discharging his responsibilities under this Agreement
for a period 180 consecutive calendar days, or an aggregate of 180 calendar days
in any calendar year, during the Employment Period, all as determined in good
faith by the Board of Directors of the Company (or a committee thereof).
"Effective Date" means January 20, 1999.
"Employment Period" shall have the meaning assigned thereto in
Section 1.2 hereof.
"Expiration Date" shall have the meaning assigned thereto in
Section 4.4 hereof.
"Notice of Termination" shall have the meaning assigned
thereto in Section 3.7 hereof.
"Voting Stock" means all outstanding shares of capital stock
of the Company entitled to vote generally in an election of directors; provided,
<PAGE>
however, that if the Company has shares of Voting Stock entitled to more or less
than one vote per share, each reference to a proportion of the issued and
outstanding shares of Voting Stock shall be deemed to refer to the proportion of
the aggregate votes entitled to be cast by the issued and outstanding shares of
Voting Stock.
"Without Cause" shall have the meaning assigned thereto in
Section 3.4 hereof.
9.2 Notices. All notices and other communications required or permitted
-------
hereunder or necessary or convenient in connection herewith shall be in writing
and, if given by telegram, telecopy or telex, shall be deemed to have been
validly served, given or delivered when sent, if given by personal delivery,
shall be deemed to have been validly served, given or delivered upon actual
delivery and, if mailed, shall be deemed to have been validly served, given or
delivered three business days after deposit in the United States mail, as
registered or certified mail, with proper postage prepaid and addressed to the
party or parties to be notified, at the following addresses:
If to the Company to:
Envirosource, Inc.
1155 Business Center Drive
Horsham, PA 29-44-3454
Attention: Chairman
Telephone: (215) 956-5502
Facsimile: (215) 956-5415
<PAGE>
If to the Employee to:
John T. DiLacqua
1051 Balmoral Way
Maple Glen, PA 19002
Telephone: (215) 793-3347
Facsimile: (215) 793-3349
With a copy to:
Donald S. Scherzer, Esq.
Roetzel & Andress
One Cleveland Center, Suite 1650
1375 E. 9th Street
Cleveland, OH 44114
Attention: Donald S. Scherzer
Telephone: (216) 615-7418
Facsimile: (216) 623-0134
or to such other names, addresses, telephone and fax numbers as the Company or
the Employee, as the case may be, shall designate by notice to the other party
hereto in the manner specified in this Section 9.2.
9.3 Waiver of Breach. The waiver by any party hereto of a breach of any
----------------
provision of this Agreement shall neither operate nor be construed as a waiver
of the breach of any other provision or of any subsequent breach by any party.
9.4 Assignment. This Agreement shall be binding upon and inure to the
---------
benefit of the Company, its successors, legal representatives and assigns, and
upon the Employee, his heirs, executors, administrators, representatives and
assigns; provided, however, that (i) the Employee agrees that his rights and
obligations hereunder are personal to him and may not be assigned without the
express written consent of the Company, and (ii) the Company may not assign its
rights and obligations hereunder without Employee's express written consent
except to the acquiring entity in connection with the transfer, exchange or sale
of all or substantially all of the Company's assets.
9.5 Entire Agreement; No Oral Amendments. This Agreement constitutes
-------------------------------------
the entire agreement between the Employee and the Company with respect to the
subject matter of this Agreement. This Agreement may not be modified in any
respect by any oral statement, representation or agreement made by any employee,
officer, or representative of the Company or by any written agreement unless
signed by an officer of the Company who is expressly authorized by the Company
to execute such document.
<PAGE>
9.6 Enforceability. If any provision of this Agreement or application
--------------
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
9.7 Jurisdiction. The laws of the State of Pennsylvania shall govern
------------
the interpretation, validity and effect of this Agreement without regard to the
place of execution or the place for performance thereof.
9.8 Injunctive Relief. The Company and the Employee agree that a breach
-----------------
of any term of this Agreement by the Employee would cause irreparable damage to
the Company and that, in the event of such breach, the Company shall have, in
addition to any and all remedies of law, the right to any injunction, specific
performance and other equitable relief to prevent or to redress the violation of
the Employee's duties or responsibilities hereunder.
9.9 Employee's Representation. Employee shall be, and he represents
--------------------------
that he is, free to enter into this Agreement and is not and will not become to
a party to agreement which would prohibit the Employee from accepting employment
with the Company or from performing his duties and obligations to the Company
hereunder.
9.10 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and both of which
together shall be deemed one Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY":
ENVIROSOURCE, INC.
By: /s/ROBERT N. GURNITZ
---------------------
Its: Chairman
"EMPLOYEE":
/s/JOHN T. DILACQUA
-------------------
John T. DiLacqua
<PAGE>
Exhibit A
GENERAL RELEASE
1. I, John T. DiLacqua, for and in consideration of the
benefits to be received by me pursuant to the provisions of that certain
Employment Agreement by and between me and Envirosource, Inc. ("Envirosource")
entered into as of January 20, 1999 (the "Agreement"), and in connection with
the termination of my employment with Envirosource effective _________________,
do hereby REMISE, RELEASE, AND FOREVER DISCHARGE Envirosource and its
subsidiaries and affiliates, their officers, directors, shareholders, partners,
employees and agents, their respective successors and assigns, heirs, executors
and administrators (hereinafter collectively referred to as "ENSO"), acting in
any capacity whatsoever, of and from any and all manner of actions and causes of
actions, suits, debts, claims and demands whatsoever in law or in equity, which
I ever had, now have, or hereafter may have, or which my heirs, executors or
administrators hereafter may have, by reason of any matter, cause or thing
whatsoever from the beginning of my employment with ENSO to the date of these
presents and particularly, but without limitation of the foregoing general
terms, any claims arising from or relating in any way to my employment
relationship and the termination of my employment relationship with ENSO,
including but not limited to, any claims which have been asserted, could have
been asserted, or could be asserted now or in the future under any federal,
state or local laws, including any claims under the Age Discrimination in
Employment Act, 29 U.S.C. '621 et seq., Title VII of the Civil Rights Act of
1964, 42 U.S.C. '2000e et seq., the Pennsylvania Human Relations Act, 43 P.S.
'951 et seq., or the human relations laws of any other State any contracts
between ENSO and me and any common law claims now or hereafter recognized and
all claims for counsel fees and costs.
2. I further agree and covenant that neither I, nor any
person, organization or other entity on my behalf, will file, charge, claim, sue
or cause or permit to be filed, charged, or claimed, any action for personal
equitable, monetary or other similar relief against Envirosource, involving any
matter occurring at any time in the past up to the date of this General Release,
or involving any continuing effects of any actions or practices which may have
arisen or occurred prior to the date of this General Release, including any
charge of discrimination under Title VII, the ADEA, the Pennsylvania Human
Relations Act or the human relations laws of any other State. In addition, I
also agree and covenant that should I, or any other person, organization or
entity on my behalf, file, charge, claim, sue or cause or permit to be filed,
charged, or claimed, any action for damages, including injunctive, declaratory,
monetary or other relief, despite my agreement not to do so hereunder, then I
will pay all of the costs and expenses of the ENSO (including reasonable
attorneys' fees) incurred in the defense of any such action or undertaking.
3. I agree, covenant and promise that I will not in any way
communicate the terms of this General Release to any person other than my
immediate family and my attorney.
<PAGE>
4. I hereby certify that I have read the terms of this General
Release, that I have been advised by Envirosource to discuss it with my
attorney, and that I understand its terms and effects. I acknowledge, further,
that I am executing this General Release of my own volition with a full
understanding of its terms and effects and with the intention of releasing all
claims recited herein in exchange for the consideration described in the
Agreement, which I acknowledge is adequate and satisfactory to me. None of the
above-named parties, nor their agents, representatives, or attorneys have made
any representations to me concerning the terms or effects of this General
Release other than those contained herein.
6. I hereby acknowledge that I have been informed that I have
the right to consider this General Release for a period of 21 days prior to
execution. I also understand that I have the right to revoke this General
Release for a period of seven days following execution by giving written notice
to Envirosource at
-----------------------------.
Intending to be legally bound hereby, I execute the foregoing
General Release this day of , .
--------- ---------------- -------
Witness John T. DiLacqua
- ----------------------------- -----------------------------
CONFIDENTIAL SEVERANCE AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into as of
February 12, 1999 by and between GEORGE E. FUEHRER ("Fuehrer") and ENVIROSOURCE,
INC., a Delaware corporation (the "Corporation").
R E C I T A L S:
- - - - - - - -
A. Fuehrer has tendered his resignation as an employee and
officer of the Corporation and each of its subsidiary and affiliated companies,
effective February 12, 1999.
B. The Corporation desires to enter into this Agreement with
Fuehrer to obtain certain benefits as more fully set forth herein.
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing recitals and
the covenants contained herein, the parties agree as follows:
1. Consulting Relationship. The Corporation agrees to continue
-----------------------
to utilize the services of Fuehrer, and Fuehrer agrees to continue to serve the
Corporation as a consultant for nine months commencing on March 1, 1999 (the
"Consulting Term") on an as-needed, non-exclusive basis on the terms set forth
in this Agreement. In particular, to fulfill his obligations as a consultant,
Fuehrer shall be available, when requested, at reasonable times and places, upon
reasonable notice, but in any event no more than five days per month. The
Corporation and Fuehrer agree to cooperate in good faith in the scheduling of
Fuehrer's duties so that such duties will not interfere with any full time
employment accepted by Fuehrer in compliance with Section 6(a).
2. Compensation and Benefits.
-------------------------
(a) In return for Fuehrer=s execution of this
Agreement and the Waiver and Release attached hereto as Exhibit "A" (the
"Release"), Fuehrer shall receive compensation at the rate of $15,250.00 per
month during the Consulting Term for consulting services, which shall be paid
monthly. The Corporation shall deduct from the compensation paid to Fuehrer
under this Section 2(a) any appropriate deductions contemplated by this
Agreement.
(b) If Fuehrer accepts full time employment with a
new employer prior to the end of the Consulting Term, and the Corporation
asserts that by accepting such new employment Fuehrer would violate Section 6(a)
<PAGE>
below, the remaining payments due hereunder shall be suspended pending
determination of the Corporation's assertion. In the event Fuehrer advises the
Corporation in writing that he disputes the Corporation's assertion, the
Corporation and Fuehrer shall as promptly as practicable submit the dispute to
expedited arbitration in the manner provided in Section 8.1. If the
Corporation's position is sustained in the arbitration, the provisions of
Section 8.2 shall apply. If the arbitration is determined in Fuehrer's favor,
the suspended payments shall be paid to Fuehrer promptly and any remaining
payments due to Fuehrer under this Agreement shall be paid as set forth in
Section 2(a).
(c) In the event Fuehrer dies or becomes disabled
during the Consulting Term, the Corporation shall nevertheless pay the full
amount of the payments specified in Section 2(a) to Fuehrer or his estate or
legal representatives in accordance with the terms of Section 2(a). For purposes
of this Section 2(c), Fuehrer shall be deemed disabled if, according to the
determination of a physician approved by the Corporation in its reasonable
discretion, he is unable to engage in any substantial gainful employment
substantially comparable to that in which he was engaged as an employee of the
Corporation, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than six months.
(d) Fuehrer shall not incur any reimbursable
expenses in rendering his services hereunder unless such expenses have received
the prior approval of the CEO. The Corporation shall from time to time promptly
reimburse Fuehrer, upon receipt of proper documentation, for all reasonable
out-of-pocket pre-approved expenses that are incurred by Fuehrer during the
Consulting Term.
(e) Fuehrer shall not be entitled to receive any
compensation or benefits from the Corporation for his services during the
Consulting Term except as expressly set forth herein.
3. Other Agreements. The Corporation and Fuehrer further
----------------
agree as follows:
(a) Effective as of the date hereof, during the
Consulting Term and only until the acceptance by Fuehrer of full time
employment, the Corporation will continue to pay for Fuehrer's current group
medical and dental benefits. The employee contribution, if applicable, toward
the cost of the coverage will continue to be deducted from Fuehrer's
compensation during this period. Fuehrer will be entitled to convert his group
health insurance coverage under the provisions of COBRA, if he so desires, for
the statutory period provided under COBRA. A COBRA letter and the appropriate
forms will be sent to Fuehrer from The Loomis Company.
(b) The Corporation will pay Fuehrer for all accrued
salary and unused accrued vacation pay through the date hereof, such payment to
be made promptly after the effective date of this Agreement.
<PAGE>
(c) The parties agree that, as of the date hereof, a
certain relocation loan made by the Corporation to Fuehrer in September 1997,
the outstanding principal amount of which is currently $43,325, is hereby
forgiven. Further, in connection with this forgiveness, the Corporation agrees
to deposit an aggregate of $34,018 into Fuehrer's income tax and FICA
withholding accounts.
(d) The Corporation will provide, at no expense to
Fuehrer, EXALT program outplacement services through Manchester Partners
International in accordance with the program description that has been delivered
to Fuehrer.
4. Return of Property. Fuehrer represents that he has
--------------------
delivered to the Corporation all property of the Corporation, or any subsidiary
or affiliate thereof, and all documents and materials (and copies thereof), of
whatever nature in his possession, relating to the Corporation or any subsidiary
or affiliate thereof, or any of their products and/or services, including
(without limitation) information contained in or on computer files, disks or
other data storage mediums.
5. Relationship of the Parties; Certain Information and
----------------------------------------------------------
Statements. Fuehrer shall have no power hereunder to act in the name of, or on
- ----------
behalf of, the Corporation or in any way to bind the Corporation in any regard,
except as authorized in writing by the CEO of the Corporation. Fuehrer agrees
not to divulge to anyone any negative, untrue or defamatory information, whether
or not proprietary or confidential, concerning Envirosource. The Corporation
shall not make any statement which disparages the personal or business
reputation of Fuehrer.
6. Noncompetition and Related Covenants.
------------------------------------
(a) Fuehrer agrees that during the Consulting Term
(the "Applicable Period"), he will not directly or indirectly: (a) own or
control any debt, equity or other interest in (except as a passive investor of
less than 1% of the capital stock or publicly traded notes or debentures of a
publicly held company), or (b) (1) act as a director, officer, manager,
employee, participant or consultant to or accept or solicit any office to act as
any of the foregoing or (2) be obligated to or connected in any advisory,
business or ownership capacity, in each case with respect to any business that
is engaged in K061 processing, slag processing, scrap yard management, slab
hauling or other related steel mill services currently engaged in by the
Corporation or any of its subsidiaries (collectively "Envirosource").
(b) During the Applicable Period, Fuehrer will not,
directly or indirectly, and shall not cause or assist any other person or entity
to solicit any person who was employed by the Corporation or any of its
subsidiaries (collectively, "Envirosource") on the date hereof for any purpose,
including to hire or employ such person, whether on Fuehrer's own behalf or on
behalf of a supplier, competitor or customer of Envirosource. As used herein the
word "indirectly" includes but is not limited to, attempting to induce any
employee of Envirosource to leave Envirosource for any purpose.
<PAGE>
(c) Fuehrer shall cooperate in good faith with the
Corporation and the Corporation's counsel in connection with any pending
administrative proceeding, arbitration, mediation or litigation or subsequent
administrative proceeding, arbitration, mediation or litigation relating to the
time of his employment with the Corporation, including but not limited to
providing information and /or documents, participating in informal interviews(s)
and appearing for depositions(s) and/or testimony if deemed necessary by the
Corporation. Notwithstanding the foregoing, nothing in this paragraph shall
obligate Fuehrer to expend any sum or incur any liability in connection with
such cooperation. In the event such cooperation requires a commitment of time
beyond the limits set forth in Section 1 above, the parties shall mutually agree
on compensation to be provided Fuehrer for such services.
7. Confidential Information. Fuehrer shall not in any manner
-------------------------
use (other than in the performance of services under this Agreement) or disclose
any material trade secret information with respect to customers, suppliers or
products, prices, call lists or other confidential plans, processes, procedures,
business concepts, forecasts, drawings, ideas, discoveries, material or
information concerning the operations, business or financial affairs of the
Corporation, or any subsidiary or affiliate thereof, gained during or as a
result of his employment by the Corporation. Fuehrer agrees that he shall not in
any manner use (other than in the performance of services under this Agreement)
or disclose any confidential third party information gained during or as a
result of his employment by the Corporation. The parties agree that the terms
and conditions of this Agreement, except with respect to Section 6(a) and 8.1,
shall remain confidential and shall not be disclosed to any other person (other
than Fuehrer's family members, attorneys, and accountants who shall be informed
of and bound by the confidentiality provisions of this Agreement) other than as
required by court order, legal process or applicable law or as otherwise agreed
to by Fuehrer and the Corporation. Any disclosures permitted hereunder shall not
be made in a manner derogatory to any other party hereto. The provisions of this
Section 7 shall not apply to any information which becomes generally available
to the public, other than as a result of any disclosure, direct or indirect, by
Fuehrer.
8. Miscellaneous.
-------------
8.1 Arbitration; Injunctive Relief; Attorneys Fees.
-----------------------------------------------
All controversies, claims, disputes, and matters in question arising out of, or
relating to, this Agreement or the breach thereof, shall be decided by
arbitration in accordance with the provisions of this paragraph. The arbitration
proceedings shall be conducted under the applicable rules of the American
Arbitration Association or its successor in effect at the time a demand for
arbitration under the rules is made. The arbitration board will consist of a
single arbitrator. The decision of the arbitrator, including determination of
amount of any damages suffered, shall be conclusive, final, and binding the
parties hereto, and their respective heirs, legal representatives, successors,
and assigns. The fees and costs associated with the arbitration proceeding shall
be shared equally by the parties. Such fees and costs shall not include the fees
and costs of the parties' respective attorneys and witnesses, which shall be
<PAGE>
borne by the party incurring such fees and costs. Notwithstanding the foregoing,
and in addition to the remedy of arbitration, the parties agree that a violation
of the provisions of Section 6 and/or 7 cannot be reasonably or adequately
compensated in damages and, in addition to any other relief to which the
Corporation may be entitled by reason of such violation, the Corporation shall
also be entitled to seek permanent and temporary injunctive and equitable relief
in a court of competent jurisdiction.
8.2 Certain Breaches of Agreement. In the event
--------------------------------
Fuehrer breaches Sections 6 and/or 7 hereof, the Corporation shall have no
further obligations under Section 2 of this Agreement. This Agreement shall be
null and void if Fuehrer cancels the Release.
8.3 Notices. Except as otherwise provided herein,
-------
any notice or demand which, by the provisions hereof, is required or which may
be given to or served upon the parties hereto shall be in writing and, if by
telegram, facsimile or telex, shall be deemed to have been validly served, given
or delivered when sent, if by personal delivery, shall be deemed to have been
validly served, given or delivered upon actual delivery and, if mailed, shall be
deemed to have been validly served, given or delivered three business days after
deposit in the United States mails, as registered or certified mail, with proper
postage prepaid and addressed to the party or parties to be notified, at the
following addresses (or such other address(es) as a party may designate for
itself by like notice):
If to the Corporation: Envirosource, Inc.
1155 Business Center Drive
Horsham, Pennsylvania 19044
Attention: Chief Executive Officer
If to Fuehrer: George E. Fuehrer
118 Sumter Place
Maple Glen, PA 19002
8.4 Successors and Assigns. The parties hereto
------------------------
acknowledge that the Corporation shall have the right to assign, with absolute
discretion, any or all of its rights and obligations under this Agreement to any
of its affiliates, successors and assigns, and this Agreement shall inure to the
benefit of, and be binding upon, such respective affiliates, successors and
assigns of the Corporation, in the same manner and to the same extent as if such
affiliates, successors and assigns were original parties hereto. In the event of
a failure to perform by an assignee, the Corporation shall remain liable
hereunder. The Corporation will require any successor (whether direct or
indirect, by purchase, merger consolidation or otherwise) to all or
substantially all of the business and assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it whether or not such
succession had taken place. In the event of an assignment, the non-solicitation
provision of Section 6(b) shall be deemed to apply only with respect to
<PAGE>
employees of Envirosource and its subsidiaries and the non-disparagement and
confidentiality provisions of Sections 5 and 7, respectively, shall be deemed to
apply only with respect to Envirosource and its subsidiaries. This Agreement
shall be deemed to be personal to Fuehrer and shall not be assignable by
Fuehrer.
8.5 Governing Law. This Agreement shall be governed
-------------
by, and construed and interpreted in accordance with, the laws of the
Commonwealth of Pennsylvania (without regard to choice of law principles). The
arbitrator or parties agree that all actions and proceedings arising directly or
indirectly hereunder shall be litigated or otherwise resolved in the
Commonwealth of Pennsylvania and hereby waive any objection based on forum non
conveniens and any objection to venue of any action instituted hereunder.
8.6 Amendment; Waiver. This Agreement may be amended
-----------------
only by an instrument in writing executed by the parties hereto. No waiver,
expressed or implied, of any breach of any covenant, agreement or duty shall be
held or construed as a waiver of any other breach of the same or any other
covenant, agreement or duty.
8.7 Entire Agreement. This Agreement and the Release
----------------
constitute the entire agreements of the parties hereto and fully supersede and
replace any and all prior agreements and understandings, whether oral or
written, express or implied, between the parties pertaining to the subject
matter of this Agreement and the Release.
8.8 Severability. Should any provision of this
------------
Agreement be declared or be determined by any arbitrator or court to be illegal
or invalid, the validity of the remaining parts, terms or provisions shall not
be affected thereby and the illegal or invalid part, term or provisions shall be
deemed not to be part of this Agreement. The parties intend this Agreement to be
enforced as written. However, if any provision, or any part thereof, is held to
be unenforceable because of the scope or duration of such provision, Fuehrer and
the Corporation agree that the arbitrator or court making such determination
shall have the power to reduce the scope, duration and/or area of such
provisions in order to make such provision enforceable to the fullest extent
permitted by law, and/or to delete specific words and phrases
("blue-penciling"), and in its reduced or blue-penciled form such provision
shall then be enforceable and shall be enforced.
8.9 Captions. The captions of the several sections
--------
and paragraphs of this Agreement are used for convenience only and shall not be
considered or referred to in resolving questions of interpretation with respect
to this Agreement.
8.10 Counterparts. This Agreement may be executed in
------------
counterparts, each of which will be deemed an original, and both of which
together shall constitute one and the same Agreement.
<PAGE>
8.11 Negotiation. Fuehrer acknowledges that he has
-----------
had an opportunity to negotiate with regard to the terms of this Agreement and
to receive advice of counsel with regard to it and has carefully read and
considered this Agreement and fully understands the extent and impact of its
provisions, and has executed this Agreement voluntarily and without coercion,
undue influence, threats, or intimidation of any kind or type whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
The Corporation:
ENVIROSOURCE, INC.
By: /s/LEON Z. HELLER
--------------------------
Its: Vice President, General Counsel and Secretary
Fuehrer:
/s/GEORGE E. FUEHRER
-----------------------------
George E. Fuehrer
<PAGE>
EXHIBIT "A"
WAIVER AND RELEASE AGREEMENT
This Release is given
By the Releasor(s): George E. Fuehrer
Address: 118 Sumter Place
Maple Glen, PA 19002
hereinafter referred to as "I",
To the Releasee(s): ENVIROSOURCE, INC. and its parent, divisions, subsidiary and
affiliated corporations (including predecessors and
successors) and their Officers, Directors, Employees and
Representatives
sometimes hereinafter referred to as "You."
1. Release. I hereby release and give up any and all actions, causes of actions,
-------
claims and rights (hereinafter "Claims") which I may have against You. This
releases all claims, including those of which I am not aware and those not
mentioned herein. This Waiver and Release Agreement ("Release") applies to
Claims resulting from anything that has happened up to now. I specifically
release any and all Claims relating in any way to my employment relationship, or
resignation from employment effective February 12, 1999, with You, including but
not limited to any Claims arising under the Age Discrimination in Employment
Act, the Older Workers Benefit Protection Act of 1990, Title VII of the Civil
Rights Act of 1964, the Equal Pay Act, the Employee Retirement Income Security
Act, the Fair Labor Standards Act, the Consolidated Omnibus Budget
Reconciliation Act of 1986, the Pennsylvania Human Relations Act, or any other
federal, state or local laws or ordinances and any common law claims under tort,
contract, or any other theories now or hereafter recognized. This Release
specifically includes, but without limitation, all Claims arising out of my
employment relationship with You.
2. Waiver. I hereby acknowledge and assume all risks or chances that the
------
injuries claimed to have resulted from the above stated matter may become
greater or more extensive than now known, anticipated or expected. I understand
that this instrument shall be effective as a full and final release of all
Claims. In connection with the above waiver, I am aware that I may hereafter
discover Claims or facts in addition to or different from those I now know or
<PAGE>
believe to exist with respect to the subject matter of this instrument or You.
However, I and my successors and assigns hereby settle and release all of the
Claims which I may have against You.
3. No Admissions. I agree and acknowledge that this Release is not to be
--------------
construed as an admission of any violation of any federal, state or local
statutes, ordinance or regulation or any duty allegedly owed by You to me. You
specifically disclaim any liability to me on any basis.
4. Time Periods. I have been given the opportunity to take a period of at least
------------
twenty-one (21) days within which to consider this Release. If I choose to sign
this Release before that time period expires, I do so knowingly and voluntarily.
I also understand that I have the right to change my mind and cancel this
Release within seven (7) days following the date that I have signed it. This
Release will not be effective until the end of this seven (7) day period.
5. Consideration. In exchange for, consideration of and reliance on my execution
-------------
of this Release, You and I have (a) executed and agreed to perform that certain
Confidential Severance Agreement dated as of February 12, 1999 ("Agreement") and
(b) You agree to commence payment to me upon the expiration of the seven (7) day
time period referred to in Paragraph 4 above, the payments pursuant to Section 2
of the Agreement. I agree that I will not seek anything further, including any
other payment from You. I further agree, in return for receipt of the foregoing
payments, to abide by all of your rules, policies and procedures applicable to
current and former employees.
6. Confidentiality. I agree that the terms and conditions of this Release shall
---------------
remain confidential and shall not be disclosed to any other person (other than
my family members, attorneys, and accountants who shall be informed of and bound
by the confidentiality provisions of this Release) other than as required by
court order, legal process or applicable law or as otherwise agreed to by You
and me. I understand that this provision regarding confidentiality constitutes a
substantial inducement for You to enter into this Release.
7. Who is Bound. I am bound by this Release. Anyone who succeeds to my rights
------------
and responsibilities, such as my heirs or the executor of my estate, is also
bound by this Release. This Release is made for your benefit and that of anyone
who succeeds to your rights and responsibilities.
8. No Inducements. I further warrant that no promise or inducement for this
---------------
Release has been made except as set forth herein, that this Release is executed
without reliance upon any statement or representation by any person or parties
released, their officers, directors, employees, agents or representatives,
concerning any fact material to my act in releasing them, and that I am legally
competent to execute this Release and accept full responsibility therefor.
9. Representations. I understand and agree that I understand the contents,
---------------
implications, and consequences of this Release, and that I agree to the terms of
this Release and have executed it voluntarily. I have had an opportunity to
discuss the terms of this Release with individuals of my own choosing who are
<PAGE>
not associated with You. I have been advised by You to consult with an attorney
of my own choosing.
10. Entire Agreement. This Release and the Agreement constitute the entire
-----------------
agreements between You and I concerning the subject matter hereof and supersede
all prior agreements between You and I. This Release may not be modified orally.
I understand and agree to the terms of this Release.
11. Governing Law. This Release is made and entered into in the Commonwealth of
-------------
Pennsylvania and shall in all respects be interpreted, enforced and governed
under the laws of said Commonwealth. The language of all parts of this Release
shall cause to be construed as a whole, according to its fair meaning, and not
strictly for or against You or I.
12. Invalidity. Should any provisions of this Release be determined by any court
----------
to be illegal or invalid, the validity of the remaining parts, terms or
provisions shall not be affected thereby and said illegal or invalid part, term
or provision shall be deemed not to be a part of this Release.
13. Arbitration. All controversies, claims, disputes, and matters in question
-----------
arising out of, or relating to, this Release or the breach thereof, shall be
decided by arbitration in accordance with the provisions of Section 8.1 of the
Agreement.
I ACKNOWLEDGE AND AGREE THAT I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY
PRIOR TO EXECUTING THIS RELEASE; THAT TO THE EXTENT I HAVE DESIRED I HAVE
AVAILED MYSELF OF THAT RIGHT; THAT I HAVE CAREFULLY READ AND UNDERSTAND ALL OF
THE PROVISIONS OF THIS RELEASE; THAT I MAY REVOKE THIS RELEASE WITHIN SEVEN (7)
DAYS AFTER YOU HAVE EXECUTED IT; AND THAT I AM VOLUNTARILY ENTERING INTO THIS
RELEASE.
IN WITNESS WHEREOF, the undersigned has executed this Release
as of the date written freely and voluntarily.
DATED AS OF: February 12, 1999 ENVIROSOURCE, INC.
By:
----------------------
DATED AS OF: February 12, 1999 ACKNOWLEDGED AND AGREED:
-------------------------
GEORGE E. FUEHRER
February 15, 1999
Mr. John C. Heenan
138 Highspire Road
Richboro, PA 18954
Dear John:
This letter will confirm our offer of employment as Senior Vice
President, Finance and Administration of Envirosource, Inc., reporting directly
to John DiLacqua, President and Chief Executive Officer.
Your initial base salary will be $192,000 annually, payable in
semi-monthly increments. In addition, you will be eligible for an annual
incentive award equal to 45% of your base salary if certain financial and
individual performance targets are achieved. For the first year of your
employment, your minimum bonus will be 22.5% of your base salary.
Information regarding the benefit package for which you will be
eligible is enclosed. Our "flexible" benefits options should permit you to
design a plan which meets your particular needs. After a one-year eligibility
period, you will automatically enter the Envirosource Profit Sharing Plan, and
be eligible to join the 401(k) Savings Plan if you so desire. This plan has the
unusual feature of providing a dollar for dollar match up to 6% of your salary
if you elect to invest in Company stock. Otherwise, the Plan matches alternative
investments available to you at $.50 on the dollar.
You will also be eligible for three (3) weeks vacation annually. Upon
completing three years of service you will be eligible for four (4) weeks
vacation.
Following commencement of your employment, we will recommend to our
directors that you be granted an option to purchase 15,000 shares of common
stock of Envirosource, Inc. under our stock option plan. Specific information
regarding this stock option will be forwarded to you by Leon Heller, Vice
President, General Counsel & Secretary of Envirosource, under separate cover.
If you are terminated without cause you will receive nine (9) months of
salary continuation at your current base salary plus continuance of medical
benefits through the severance pay period. We have provided you with a
Non-compete and Non-disclosure agreement which you should sign and return to me
at your earliest convenience.
I believe this encompasses the major aspects of the employment offer we
discussed. If I've missed anything, please let me know.
<PAGE>
I want to wish you well in your new career at Envirosource and I look
forward to working with you. If you have any questions, please feel free to
contact me.
Yours very truly,
/s/JOHN P. CARROLL
John P. Carroll
Vice President, Human Resources
JPC/wd
Understood and Agreed to: /s/JOHN C. HEENAN March 25, 1999
----------------- --------------
John C. Heenan Date
March 23, 1999
Mr. James C. Hull
3575 Byron Drive
Doylestown, PA 18901
Dear Jim,
I am writing to confirm that in the event you terminate your employment
with the Company on June 30, 1999 the Company will continue your current salary
for twelve months. Furthermore, should the Company terminate your employment
without cause on or after July 1, 1999, the Company will continue your salary
for twelve months at your base salary at the time of termination. In addition,
the Company will continue your medical benefits through the last day of the
severance pay period, or until you become reemployed, whichever comes first.
Very truly yours,
/s/JOHN P. CARROLL
John P. Carroll
Vice President, Human Resources
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included in Envirosource's Form 10-Q for the quarterly
period ended March 31, 1999 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,837
<SECURITIES> 0
<RECEIVABLES> 37,188
<ALLOWANCES> 1,196
<INVENTORY> 0
<CURRENT-ASSETS> 42,232
<PP&E> 283,478
<DEPRECIATION> 138,695
<TOTAL-ASSETS> 383,686
<CURRENT-LIABILITIES> 48,236
<BONDS> 296,791
0
0
<COMMON> 291
<OTHER-SE> 583
<TOTAL-LIABILITY-AND-EQUITY> 383,686
<SALES> 0
<TOTAL-REVENUES> 48,283
<CGS> 0
<TOTAL-COSTS> 40,236
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,807
<INCOME-PRETAX> (8,795)
<INCOME-TAX> 269
<INCOME-CONTINUING> (9,064)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,064)
<EPS-PRIMARY> (1.56)
<EPS-DILUTED> (1.56)
</TABLE>
