UNITED STATES BANKRUPTCY COURT

                           SOUTHERN DISTRICT OF TEXAS

                                HOUSTON DIVISION



In re:                                   )

                                         )   Jointly Admin. Under Case No.

PHILIP SERVICES CORPORATION, et al.      )   03-37718-H2-11

                                         )

                  Debtors.               )   (Chapter 11)



                      EXPEDITED MOTION TO APPROVE EMPLOYEE

                    RETENTION, INCENTIVE AND SEVERANCE PLANS



          A HEARING WILL BE CONDUCTED ON THIS MATTER ON JUNE 23, 2002 AT 2:00

          P.M. IN COURTROOM 400, 515 RUSK AVENUE, HOUSTON, TEXAS. IF YOU OBJECT

          TO THE RELIEF REQUESTED, YOU MUST RESPOND IN WRITING SPECIFICALLY

          ANSWERING EACH PARAGRAPH OF THIS PLEADING. YOU MUST FILE YOUR RESPONSE

          WITH THE CLERK OF THE BANKRUPTCY COURT WITHIN TWENTY DAYS FROM THE

          DATE YOU WERE SERVED WITH THIS PLEADING UNLESS YOU DID NOT RECEIVE

          THIS NOTICE IN TIME TO DO SO. IN THAT SITUATION, FILE YOUR RESPONSE AS

          SOON AS POSSIBLE. IN ADDITION TO FILING YOUR RESPONSE WITH THE CLERK,

          YOU MUST GIVE A COPY OF YOUR RESPONSE TO THE PERSON WHO SENT YOU THE

          NOTICE; OTHERWISE, THE COURT MAY TREAT THE PLEADING AS UNOPPOSED AND

          GRANT THE RELIEF REQUESTED.



          TO THE HONORABLE UNITED STATES BANKRUPTCY JUDGE:



         Philip Services Corporation ("Philip Services") and its affiliated

debtors (collectively, the "Debtors"), as debtors-in-possession, file this

Expedited Motion to Approve Employee Retention, Incentive and Severance Plans

(the "Motion") in support of which, the Debtors respectfully state as follows:



                                   I. SUMMARY



         1.       The proposed employee program is necessary and pressing given

that (i) this is the Debtors' second chapter 11 filing in four years, (ii) to

date, there is no long term DIP financing or other long-term liquidity source

and (iii) the Debtors have proposed an auction







{PAGE}



process with a sale in three months which cannot guarantee that particular

business units will be purchased or that employees within such business units

will be offered employment. The Debtors' businesses are primarily service

businesses and retention of knowledgeable employees is necessary to maintain

customer and vendor relationships and collect the receivables which are the

heart of the value of each business either to going concern buyers or in a

standalone reorganization. Debtors are concerned that absent prompt ratification

of this program by the Court, key individuals will be lost.



         2.       The four elements of the program (the "Retention Program") are

                  as follows:



                  1.       Key Employee Retention Plan: This program was under

                  discussion pre-petition and is designed to address (i) certain

                  2002 target bonus payments which ultimately were never paid

                  after a review of 2002 overall performance despite the fact

                  that certain business units met or exceeded their unit's goals

                  and (ii) to provide an incentive for key management personnel

                  to remain with the Company through uncertain times going

                  forward. The aggregate retention bonuses for the 89 key

                  managers is $2.2 million. The Debtors have specific

                  allocations of these amounts among the 89 individuals which it

                  is sharing on a confidential basis with Wells Fargo/Foothill,

                  Inc., as Agent, CIBC, as Agent, and the Official Committee of

                  Unsecured Creditors (the "Committee"), but which do not exceed

                  $65,000 to any one individual. This list was carefully

                  compiled and reduced after several levels of review and

                  generally covers key personnel in the following categories:



                           Key Operations Managers

                           Sales & Marketing

                           Finance

                           Information Technology

                           Treasury and Collections

                           Risk Management

                           Health, Safety & Environment

                           Human Resources



                  The payments are payable in three installments ((a) June 30,

                  2003, (b) October 31, 2003, and (c) March 31, 2003) with the

                  final two payments paid on an accelerated basis upon an asset

                  sale of the business unit for the applicable employee.



                  2.       Severance Program: The Debtors previously had a

                  severance program in place which allowed two weeks of

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