<PAGE>

                                                                 Exhibit 10.16

                   SEVERANCE AGREEMENT AND MUTUAL RELEASE

     This Severance Agreement and Mutual Release (the "Agreement") is entered
into by and between Harvey Casey ("CASEY") and RXI Plastics, Inc. ("RXI").

     For purposes of this Agreement, CASEY shall be defined to include Harvey 
Casey, and anyone claiming or liable through him including, but not limited 
to, his past, present, and future agents, attorneys, representatives, heirs, 
executors, administrators, spouses, family, and the predecessors, successors, 
and assigns of each of them.

     For purposes of this Agreement, RXI shall be defined to include RXI 
Plastics, Inc., and anyone claiming or liable through RXI Plastics, Inc. 
including, but not limited to, any and all parents, divisions, subsidiaries,
affiliates, and/or other related entities of RXI Plastics, Inc. (whether or 
not such entities are wholly-owned).

     The EFFECTIVE DATE of this Agreement shall be seven (7) days after the 
Agreement is signed by CASEY, on which date this Agreement becomes binding on 
CASEY. In the event RXI signs this Agreement more than seven days after 
CASEY signs this Agreement, then the EFFECTIVE DATE of this Agreement shall 
be the date upon which RXI signs this Agreement.

                                   RECITALS

     WHEREAS, CASEY will, effective July 1, 1996, leave the employ of RXI and 
RXI Holdings, Inc. and will no longer serve as an officer or director of 
either entity as of said date;

     WHEREAS, CASEY and RXI seek amicably to resolve and settle potential 
disputes and/or potential claims between them;

     WHEREAS, the execution, delivery and performance of this Agreement by RXI 
has been duly and validly authorized by all necessary corporate action;

     NOW THEREFORE, in return for the promises, consideration, mutual 
covenants, agreements, and conditions provided for in this Agreement, which 
CASEY and RXI acknowledge constitute the receipt of valuable consideration by 
each of them, and intending to be legally bound, the parties agree as follows:

                                   AGREEMENT

     1.   Provided CASEY complies with the provisions in Paragraphs 5.1 
through 5.5 hereof through December 31, 1999, RXI hereby agrees to pay 
CASEY the sum of $15,513.00 on the last day of each month commencing July
31, 1996 through and including June 30, 2002 (the "Payment Term"). In 
the event of CASEY's death on or prior to December 31, 1998, RXI's 
obligations under this Paragraph 1 shall cease 12 months after such death. In 
the event of CASEY's death after December 31, 1998, RXI will continue to 
make payments hereunder to CASEY's estate for the balance of the Payment 
Term. In the event of CASEY's breach of this Agreement on or prior to 
December 31, 1999, RXI's obligations under this

<PAGE>
Agreement will immediately cease. A breach of this Agreement subsequent to 
December 31, 1999 will not cause RXI's obligations, under this Section 1, 
to be terminated or suspended. The aforesaid sum is being paid in 
settlement of the compensation obligations of RXI and is fully subject to 
applicable taxes. RXI shall withhold all applicable taxes.

     2.   CASEY shall cease to be employed by RXI as of July 1, 1996 and 
shall cease on such date to be a participant in all plans including health 
and life insurance plans. 

     3.   CASEY agrees to the cancellation in full of the Stock Option 
Agreement with RXI Holdings, Inc., dated as of January 1, 1995 without 
exercise of any options.

     4.   CASEY agrees not to bring any action against RXI which relates to,
arise out of, or results from CASEY's employment with RXI or the termination 
thereof, whether under the Employment Agreement dated as of January 1, 
1995, the Assignment and Assumption Agreement dated as of May 31, 1996, or 
otherwise, except claims arising under this Agreement.

     5.1  Except as permitted by RXI's Board, CASEY shall not divulge, 
furnish, disclose or make accessible to anyone for use in any way any 
confidential or secret knowledge or information of RXI or RXI Holdings, Inc., 
or any subsidiary of RXI Holdings, Inc., (collectively "Company") which 
CASEY has acquired or become acquainted with while employed by RXI or 
Texberry Container Corporation ("Texberry"), whether developed by himself 
or by others, concerning any trade secrets, confidential or secret designs, 
processes, formulae, software or computer programs, plans, devices or 
material (whether or not patented or patentable, copyrighted or 
copyrightable) directly or indirectly useful in any aspect of Company's 
business, any confidential customer or supplier lists of the Company, any 
confidential or secret development or research work of the Company, or any 
other confidential, secret or nonpublic aspects of the business of the 
Company.

     5.2  Upon the request of the Company and without further compensation 
therefor, but at no expense to CASEY, CASEY will provide reasonable 
assistance, including but not limited to, the execution of papers and lawful 
oaths and the giving of testimony, that in the opinion of RXI, its successors 
and assigns, may be necessary or desirable (i) in obtaining, sustaining, 
reissuing, extending and enforcing United States and foreign Letters Patents, 
including, but not limited to , design patents, on any inventions or 
trademark of RXI, (ii) for perfecting, affirming and recording RXI's complete 
ownership and title of its assets, and (iii) in prosecuting or defending 
litigation relating to matters as to which CASEY has knowledge, and CASEY 
agrees otherwise to cooperate fully in all proceedings and matters relating 
to the Company.

     5.3  CASEY agrees that he shall not, during the period July 1, 
1996 and through and including December 31, 1999 (the "Term"), engage in 
competition with RXI Container within the States of Texas or Louisiana (the 
"Territory") in any manner or capacity (e.g. as a management consultant, 
principal, partner, officer, director, stockholder or management employee) in 
any phase of RXI Container's business as presently being conducted. Ownership 
by CASEY, as a passive investment, of less than 2% of the outstanding shares 
of capital stock of any corporation listed on a national securities exchange 
or publicly traded in the over-the-counter market shall not constitute a 
breach of this Paragraph 5. Casey further agrees

                                      -2-
<PAGE>

that he will not, assist or encourage any other person in carrying out, 
any activity that would be prohibited by the above provisions of this 
Paragraph 5 if such activity were carried out by CASEY, either, and in 
particular CASEY agrees that he will not induce any employee of the 
Company to carry out, any such activity.

     5.4  CASEY agrees that, during the Term, he will not on his own behalf 
or in the service or on behalf of others, solicit, divert or appropriate, or 
attempt to solicit, divert or appropriate, to any competing business (i) any 
person or entity whose account with the Company was sold or serviced by or 
under the supervision of CASEY while employed by RXI or Texberry, or (ii) any 
person or entity whose account with RXI Container (or its predecessor, 
Texberry Container Corporation) has been directly solicited at least twice by 
the Company within the eighteen (18) month period prior to the date hereof.

     5.5  CASEY agrees that he will not, during the Term, on his own behalf 
or in the service or on behalf of others solicit, divert or hire away, or 
attempt to solicit, divert or hire away any person then employed by RXI 
Container or then serving as a sales representative of RXI Container.

     6.   CASEY hereby releases. forever discharges, and agrees not to sue 
RXI and/or its parents, divisions, subsidiaries, affiliates, and related 
entitles, and its or their past, present, and future owners, trustees, 
fiduciaries, administrators, agents, directors, officers, employees and 
attorneys, and the predecessors, successors, and assigns of each of them (the 
"RXI RELEASED PARTIES") from and for any and all claims (except claims 
arising from this Agreement), demands, damages, debts, controversies, 
liabilities, accounts, reckonings, obligations, costs, expenses, attorneys' 
fees, actions, liens, and/or causes of action, whether known or unknown, 
which CASEY now has, has ever had, or may have in the future against the RXI 
RELEASED PARTIES based upon, arising out of, or concerning or pertaining to 
or by virtue of any act, omission, matter, fact, occurrence, transaction, 
thing, state of facts, claim, contention, statement, or event occurring or 
existing at any time from the beginning of the world up to and including the 
EFFECTIVE DATE of this Agreement, excluding, however, any claims arising 
under this Agreement. Without limiting the generality of the foregoing, this 
General Release applies to any and all claims which in any way relate to, 
arise out of, or result from CASEY's employment with Texberry or RXI 
including, but not limited to, any claims which could have been raised under 
any state's Fair Employment and Housing Act, Title VII of the  Civil Rights 
Act of 1964 as amended, the American's with Disabilities Act (ADA), the Age 
Discrimination in Employment Act (ADEA), and the Employees Retirement Income 
Security Act (ERISA), or any other federal, state, or local law, regulation, 
ordinance, or common law claim.  However, the release in this paragraph 
specifically excepts and does not apply to claims which are based upon, 
relate to, arise out of fraud, willfull violations of law (except only those 
statutes relating to employment, employment practices and employee benefit 
plans, claims under which are waived in full), embezzlement, willful 
misconduct or breach of fiduciary duty, all of which are expressly reserved. 
CASEY represents that he is presently unaware of the existence of any such 
excluded claims against any RXI Released Party.

     7.   RXI hereby releases, forever discharges, and agrees not to sue CASEY 
from and for any claims (except for claims arising under this Agreement), 
demands, damages,

                                      -3-
<PAGE>

debts, controversies, liabilities, accounts, reckonings, obligations, costs, 
expenses, attorneys' fees, actions, liens, and/or causes of action, whether 
known or unknown, which RXI or RXI Holdings now has, has ever had, or may 
have in the future against CASEY based upon, arising out of, or concerning or 
pertaining to or by virtue of any act, omission, matter, fact, occurrence, 
transaction, thing, state of facts, claim, contention, statement, or event 
occurring or existing at any time from the beginning of the world up to and 
including the EFFECTIVE DATE of this Agreement, excluding, however, any 
claims arising under this Agreement.  However, the release in this paragraph 
specifically excepts and does not apply to any claims which are based upon, 
relate to, or arise out of fraud, willful violation of law (except only those 
statutes relating to employment, employment practices and employee benefit 
plans, claims under which are waived in full), embezzlement, willful 
misconduct, or breach of fiduciary duty, all of which are expressly reserved. 
The person executing this document on behalf of RXI represents that he is 
presently unaware of the existence of any such excluded claims against CASEY.

     8.   CASEY and RXI have each read and understood the following language 
contained in Section 1542 of the California Civil Code:

          "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH 
          THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXISTS IN 
          HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH 
          IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS 
          SETTLEMENT WITH THE DEBTOR."

Having reviewed this provision, CASEY and RXI nevertheless hereby voluntarily 
waive the benefits of this provision and release each other from all 
liability for unknown claims.

                     REPRESENTATIONS AND ACKNOWLEDGEMENTS

     9.   CASEY expressly warrants and represents that he has not transferred 
or assigned to any other person, firm, corporation, or other legal entity any 
claims, rights, or causes of action against the RXI RELEASED PARTIES, or any 
of them.

     10.  CASEY hereby covenants and represents that he has not brought any 
legal or administrative action against the RXI RELEASED PARTIES in connection 
with or relating to his employment with RXI.

     11.  CASEY hereby acknowledges to RXI that no other party nor any agent 
or attorney of any other party has made any promise, representation or 
warranty whatsoever, express or implied, written or oral, not contained 
herein concerning the subject matter hereof to induce CASEY to execute this 
Agreement, and CASEY acknowledges that he has not executed this Agreement in 
reliance on any promise, representation or warranty not contained herein.

     12.  The parties, and both of them, represent and warrant that they 
have read this Agreement and fully understand and appreciate the terms of 
this Agreement and their effect.

                                      -4-
<PAGE>

                              MISCELLANEOUS TERMS

     13.  In compliance with the requirements of the Age Discrimination In 
Employment Act as amended by the Older Workers' Benefit Protection Act of 
1990, CASEY acknowledges by his signature below that he has read and 
understands this Agreement and specifically understands the following:

          a.  That he may consult with an attorney before signing this Agreement
and that RXI advises him to do so;

          b.  That he is releasing RXI from, among other things, any claims 
which he might have against it pursuant to the Age Discrimination In Employment
Act as amended;

          c.  That this Agreement does not cover the rights or claims that may 
arise under the Age Discrimination In Employment Act after the date of 
execution of this Agreement;

          d.  That he has been given by RXI a period of twenty-one (21) days in 
which to consider this Agreement; and

          e.  That he may revoke this Agreement during the seven (7) day period 
following the execution of this Agreement and that the agreed Agreement will 
not be become binding and effective until the seven (7) day revocation period 
has expired.  In the event of any such revocation, CASEY shall repay any 
amount paid CASEY under Paragraph 1 herein.

     14.  In the event that either of the parties must resort to legal 
action in order to enforce any provision or right under this Agreement or to 
defend such suit, the prevailing party shall be entitled to receive 
reimbursement from the non-prevailing party or parties for all reasonable 
attorneys' fees and costs incurred in the litigation of such suit.

     15.  This Agreement effects the settlement of potential claims and 
nothing contained herein shall be construed as an admission by either party 
hereto of any wrongdoing of any kind.

     16.  This Agreement constitutes the entire agreement and understanding 
between the parties with respect to the subject matter hereof and all prior 
negotiations, agreements, understandings, written or oral, between the 
parties are deemed superseded and are replaced hereby.  No provision may be 
changed, waived or modified, except in writing, signed by the parties hereto.

                                      -5-
<PAGE>

     17.  THIS AGREEMENT SHALL IN ALL RESPECTS BE INTERPRETED, ENFORCED, AND 
GOVERNED BY AND UNDER THE LAWS OF THE STATE OF CALIFORNIA. ANY AND ALL CLAIMS 
ARISING FROM OR IN CONNECTION WITH THIS AGREEMENT SHALL BE SUBJECT TO THE 
EXCLUSIVE JURISDICTION OF THE COURTS OF CALIFORNIA. THE LANGUAGE OF THIS 
AGREEMENT SHALL BE CONSTRUED AS A WHOLE ACCORDING TO ITS FAIR MEANING, AND 
NOT STRICTLY FOR OR AGAINST EITHER OF THE PARTIES HERETO.

                                                   /s/ HC  INITIALS  /s/ ML
                                                   -------          --------
                                                      HC                ML

     18.  CASEY and RXI agree that they will execute and deliver all such 
further documents and instruments and shall carry out all such further acts as 
may be reasonably necessary and appropriate to effectuate or implement the 
terms hereof.

     19.  No waiver of any of the provisions of this Agreement shall be 
deemed or shall constitute a waiver of any other provisions hereof, nor shall 
such waiver constitute a continuing waiver.  The parties hereto may amend or 
modify this Agreement only in such manner as may be agreed upon by written 
instrument executed by all parties hereto.

     20.  This Agreement may be executed in parts or counterparts, and a 
facsimile signature will have the same force and effect as an original 
signature penned in ink.  When each of the parties hereto has signed and 
delivered at least one such counterpart, each counterpart shall be deemed an 
original and when taken together with other signed counterparts, shall 
constitute one fully executed Agreement which shall be binding upon and 
effective as to all parties in accordance with the terms stated above.

     IN WITNESS WHEREOF, now the parties hereto have caused this Agreement to 
be executed as of the day and year indicated below.



Date:  7/12 , 1996                     /s/ Harvey Casey
      ------                           ---------------------------------------
                                       HARVEY CASEY
                                       7330 Greatwood Lake Drive
                                       Sugarland, Texas 77479



Date: July 10, 1996                    RXI PLASTICS, INC.
      -------



                                  By:  /s/ Marvin Liebman
                                       ---------------------------------------
                                       Marvin Liebman
                                       Chief Financial Officer


                                      -6-