EMPLOYMENT AGREEMENT
                              --------------------


         THIS  AGREEMENT  is made and entered into as of January 3, 2000 between
Envirosource, Inc., a Delaware corporation having its principal executive office
at Horsham, Pennsylvania (the "Company"), and John C. Heenan (the "Employee").

                                    RECITALS

         WHEREAS,  the  Company  desires to employ the  Employee in an executive
capacity and the Employee desires to be in 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,  or cause one of its  subsidiaries to
employ,  the Employee,  and the Employee agrees to accept such  employment.  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  President of
the Company or by the Board of Directors. 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 (i) serve on
civic or charitable boards or committees,  (ii) manage personal investments,  or
(iii)  with  the  prior  approval  of the  President  of the  Company,  serve on
corporate boards, 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 3, 2000 and terminating on
January 2, 2003. 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.

2.       Compensation and Benefits.
         -------------------------

         2.1 Base Salary.  As initial  compensation  for his  services  provided
             -----------
hereunder,  the Company shall pay to the Employee an initial  annual base salary

<PAGE>

equal to the Employee's  annual base salary in effect as of the date hereof (the
"Base  Salary").  The  Compensation  Committee of the Board of  Directors  shall
annually  during the term of this Agreement  review the  Employee's  Base Salary
and,  in its  discretion  if  deemed  appropriate,  increase  the  same.  If the
Employee's  Base Salary is increased,  it shall not  thereafter be reduced below
the  new  Base  Salary  level.  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, under the Company's Management Incentive
Compensation  Plan or otherwise,  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 such percentage of his Base
Salary as the  Compensation  Committee of the Board of Directors shall designate
on an annual basis;  provided however,  that if a Change in Control occurs,  the
                     ----------------
Compensation  Committee  of  the  Board  of  Directors  shall  not  designate  a
percentage  of less than 30%  thereafter.  If such  targets  are  exceeded,  the
Employee's annual incentive bonus will be higher than the designated percentage,
calculated in accordance with a formula to be set by the Compensation  Committee
of the Board of  Directors.  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 year 2000, if any, shall be paid no
later than March 31, 2001.

         2.3  Incentive,  Savings and  Retirement  Plans.  The Employee shall be
              ------------------------------------------
eligible to  participate  in and shall receive all benefits  under all executive
incentive,  savings and retirement plans and programs  maintained by the Company
for the benefit of its executive  officers and/or employees.  The Employee shall
be eligible to be considered for option grants under the Company's  stock option
plans, but the  determination of whether the Employee shall receive grants,  and
the amount and terms of any such  grants  that may be  awarded,  shall be in the
sole discretion of the Compensation Committee of the Board of Directors.

         2.4 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, including vacation.

         2.5  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.

                                       2

<PAGE>


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
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      Termination by Employee.  (a) The  Employee may terminate this
                  -----------------------
Agreement, upon written notice to the Company inaccordance with Sections 3.7 and
9.2 hereof.

         (b) If such  notice  is  delivered  within  six  months  of a Change in
Control,  then the Company  shall pay to the  Employee  the amounts set forth in
Section 4.3 hereof if:

                (i)        the Employee has not been offered a position  similar
                           to his  position at the time of the Change in Control
                           with  similar  responsibilities  and equal or greater
                           compensation  than he was  being  paid at the time of
                           the Change in Control; or

                                       3

<PAGE>

               (ii)        the  Employee has  been  asked to  move his principal
                           office  beyond  35  miles  from  the Employee's then-
                           current principal office location; or
               (iii)       the  successor to the Company or the purchaser of its
                           assets has not assumed the obligations of the Company
                           under  this  Agreement  at the time of the  Change in
                           Control.

         3.6 Release.  If the Employee's  employment  shall terminate during the
             -------
Employment  Period,  or if the Company does not propose to renew this  Agreement
pursuant  to Section  1.2  hereof,  the  Employee  agrees,  upon  payment to the
Employee  of  all  amounts  due  under  Sections  4.2,  4.3 or  4.4  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(b) 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,
         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 (as in effect on the Date of Termination) 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

                                       4

<PAGE>

         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
         (Notwithstanding   the   foregoing,   unless  the  Company  shall  have
         terminated  this Agreement  Without Cause within six months of a Change
         in  Control,  the amount  provided  in clause  (B) may be paid,  at the
         Company's option,  over a twelve-month period commencing on the Date of
         Termination  in 24 equal  semi-monthly  installments,  rather than in a
         lump sum.); 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; and

                  (iii)   the   Company   will   provide   the   Employee   with
         executive-level   outplacement  services  through  Manchester  Partners
         International or a comparable  outplacement services company;  provided
                                                                        --------
         however,  that the  Company  shall not be  required  to spend more than
         -------
        $15,000 for such services.

         The Company's obligations under this Section 4.2 shall terminate if the
Employee  violates  his  obligations  under  Sections 6, 7 or 8 hereof,  and the
Company shall have no obligation to make any remaining  payments to the Employee
after  the date of any such  violation.  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(b) 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 (as in effect on the Date of Termination) 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

                                       5

<PAGE>

                  (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; and

                  (iii)   the   Company   will   provide   the   Employee   with
         executive-level   outplacement  services  through  Manchester  Partners
         International or a comparable  outplacement services company;  provided
                                                                        --------
         however,  that the  Company  shall not be  required  to spend more than
         ------
         $15,000 for such services.

                  The  Company's   obligations  under  this  Section  4.3  shall
         terminate if the Employee  violates his obligations under Sections 6, 7
         or 8 hereof,  and the  Company  shall  have no  obligation  to make any
         remaining  payments  to  the  Employee  after  the  date  of  any  such
         violation.

         4.4      Non-renewal by the Company.  If the  Company does  not propose
                  --------------------------
 to renew this Agreement in accordance with Section 1.2 hereof:

                  (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 (as in effect on the
         Expiration  Date);  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   (Notwithstanding   the
         foregoing,  unless the  Expiration  Date occurs  within six months of a
         Change in Control,  the amount  provided in clause (B) may be paid,  at
         the Company's  option,  over a  twelve-month  period  commencing on the
         Expiration Date in 24 equal semi-monthly installments, rather than in a
         lump sum.); 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; and

                  (iii)   the   Company   will   provide   the   Employee   with
         executive-level   outplacement  services  through  Manchester  Partners

                                       6

<PAGE>

         International or a comparable  outplacement services company;  provided
         however,  that the  Company  shall not be  required  to spend more than
         $15,000 for such services.

         The Company's obligations under this Section 4.4 shall terminate if the
Employee  violates  his  obligations  under  Sections 6, 7 or 8 hereof,  and the
Company shall have no obligation to make any remaining  payments to the Employee
after  the date of any such  violation.  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 6. The Employee  acknowledges
that all such Confidential Information is in the nature of a trade secret.

         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

                                       7

<PAGE>

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
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

                                       8

<PAGE>

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.  The Employee's  noncompetition  obligation as set forth in
this Section 8 shall  supercede  and replace any  noncompetition  agreement  the
Employee may have entered into with the Company or any of its subsidiaries prior
to the date of this Agreement.

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
shares of Voting  Stock of such  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

                                       9

<PAGE>

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 3, 2000.

                  "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,
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 19044
                           Attention:  President
                           Telephone:  (215) 956-5400
                           Facsimile:  (215) 956-5415

                                       10

<PAGE>

                  If to the Employee to:

                           John C. Heenan
                           138 Highspire Road
                           Richboro, PA 18954
                           Telephone:  (215) 355-9339

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.

         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

                                       11

<PAGE>

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 Commonwealth 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/John T. DiLacqua
                                                        ------------------------
                                                        Its: President


                                                     "EMPLOYEE":

                                                     /s/John C. Heenan
                                                     ---------------------------
                                                     John C. Heenan

                                       12

<PAGE>
                                    EXHIBIT A

                                 GENERAL RELEASE
                                 ---------------


                   1.  I,  John  C.  Heenan,  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 3, 2000 (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.ss.621 et seq.,  Title  VII of the Civil Rights Act of
                                 -- ---
1964, 42  U.S.C.ss.2000e  et seq.,  the  Pennsylvania  Human  Relations  Act, 43
                          -- ---
P.S.ss.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 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 1155 Business Center Drive, Horsham, PA 19044.

                  Intending to be legally bound hereby, I execute the  foregoing
General Release this      day of             ,           .
                    -----       -------------  ----------




------------------------                              --------------------------
Witness                                               John C. Heenan