EMPLOYMENT AGREEMENT



      This Agreement (herein so called) is made and entered into as of the 3rd

day of May, 2004 by and between Metalico, Inc., a Delaware corporation

(hereinafter referred to as "Employer"), and Arnold S. Graber (hereinafter

referred to as "Employee").



                              W I T N E S S E T H:



      WHEREAS, Employer desires to employ Employee, and Employee desires to be

employed by Employer, as Executive Vice President and General Counsel subject to

the direction and control of Employer, upon the terms and conditions hereinafter

set forth;



      NOW, THEREFORE, in consideration of the premises, and of the mutual

covenants hereinafter set forth, the parties hereto agree as follows:



            1.    EMPLOYMENT, DUTIES AND ACCEPTANCE.



                  1.1   EMPLOYMENT BY EMPLOYER. Employer employs Employee, as of

the date hereof (the "Effective Date") to render full-time services as Executive

Vice President and General Counsel, and to serve in such capacity for the

benefit of Employer and its subsidiaries. Employee will perform the duties that

are consistent with such position as he shall reasonably be directed to perform

by Employer.



                  1.2   ACCEPTANCE OF EMPLOYMENT. Employee accepts such

employment and shall render the services described above.



                  1.3   PLACE OF EMPLOYMENT. Employee's principal place of

employment shall be Employer's business location in Union County, NJ, subject to

reasonable travel as the rendering of the services hereunder may require.



            2.    TERM. The term of Employee's employment by Employer hereunder

(the "Employment Period") shall be for a period from the Effective Date through

December 31, 2006, subject to the termination provisions of Sections 6.1 through

6.5 hereof. There shall be automatic one (1) year extensions of the Employment

Period thereafter unless this Agreement is terminated upon 30 days written

notice by Employee or Employer, unless superseded by subsequent Agreement by the

parties.



            3.    COMPENSATION. During the Employment Period, for all services

rendered by Employee under this Agreement, Employer shall pay Employee an annual

salary at the rate of $180,000 ("Base Salary") for the calendar year ending

December 31, 2004, $189,000 ("Base Salary") for calendar year 2005, and $198,450

("Base Salary") for calendar year 2006 ("Base Salary") payable in accordance

with the customary payroll policy of Employer in effect at the time such payment

is



<PAGE>



made, or as may otherwise be mutually agreed upon by the parties. The base

salary may be increased from time to time at the discretion of the Board of

Directors, taking into account the Company's growth and earnings. In addition,

Employer shall provide to Employee an automobile with applicable insurance

comparable with other senior management.



                  3.1   INCENTIVE STOCK OPTIONS AND BONUS PLAN. You will be

eligible to participate in the Executive Management Stock Option and Bonus Plan.

Grants will be made semi-annually with amounts based on individual and Company

performance at the discretion of the Compensation Committee of the Board of

Directors. Stock option grants will have vesting requirements and the strike

price will be based on the fair market value on the date of grant. Bonuses will

be distributed annually at the discretion of the Compensation Committee.



                  3.2   CHANGES IN COMMON STOCK OF EMPLOYER. If from time to

time during the term of this Agreement:



                        3.2.1 There is a dividend of any security, stock split

or other change in the character or amount of any of the outstanding securities

of Employer; or



                        3.2.2 There is any consolidation, merger or sale of all,

or substantially all, of the assets of Employer,



then, in such event, any and all new, substituted or additional securities or

other property to which Employee is entitled by reason of his ownership of the

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