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                              EMPLOYMENT AGREEMENT



         THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of
August 26, 1996, by and between Metal Management, Inc., a Delaware corporation
(the "Corporation"), and Robert C. Larry (the "Employee").


                                   WITNESSETH:

         WHEREAS, the Employee desires to serve the Corporation in a position of
substantial responsibility; and

         WHEREAS, the Board of Directors of the Corporation recognizes that the
efforts of certain employees identified by the Board as key management employees
will contribute to the growth and success of the Corporation; and

         WHEREAS, the Board of Directors of the Corporation believes that, in
the best interests of the Corporation, it is essential that key management
employees, including Employee, be retained and that the Corporation be in a
position to rely on their dedication and commitment to render services to the
Corporation, irrespective of whether the Corporation is or may be acquired or
merged with or into another corporation;

         NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Corporation and Employee agree as follows:

         1. Employment. The Corporation shall employ Employee and Employee shall
serve as an employee of the Corporation for a term of forty-eight (48) months
from the date hereof (the "Employment Period"). Employee shall serve as Vice
President and Chief Financial Officer of the Corporation and shall perform the
functions typically associated with such offices. Employee shall also perform
such other managerial, administrative, technical, and other services as may be
designated from time to time by the Board of Directors of the Corporation
appropriate for such officer position. Corporation shall not require Employee to
be based at an office location other than downtown Chicago, Illinois. Employee
shall devote time and attention to matters of the Corporation such that
Employee's services to the Corporation constitute his primary business activity.

         2.       Compensation.

                  (a) Employee shall receive as compensation for all services
performed by him hereunder (i) an annual base salary of not less than One
Hundred Ten Thousand and No/100 Dollars ($110,000) during the first twelve (12)
months of the Employment Period and (ii) an annual base salary of not less than
One Hundred Twenty Thousand and No/100 Dollars ($120,000) during the remaining
thirty-six (36) months of the Employment Period. Employee's salary hereunder
shall be


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reviewed and may be increased by the Board of Directors of the Corporation from
time to time. In addition to such annual base salary, Employee shall be eligible
to receive a cash bonus of up to 25% of Employee's then base salary as
determined in the sole discretion of the Executive Compensation Committee,
payable following each calendar year end. Employee's salary shall be paid
semi-monthly.

            (b) The Corporation shall recommend that the Board of Directors or
its Committee grant Employee an incentive stock option under the Corporation's
1995 Stock Option Plan to purchase an aggregate of 25,000 shares of Common Stock
pursuant to an option agreement in the form attached as Exhibit A hereto.

         3. Fringe Benefits. Employee shall be entitled to not less than four
(4) weeks paid vacation per year. Employee shall receive sick leave and
short-term disability compensation pursuant to the Corporation's standard sick
leave and short-term disability policy. The Corporation shall reimburse Employee
for other ordinary and necessary business expenses incurred by Employee in the
course of his employment, as approved by the Chief Executive Officer. Employee
shall also receive such other fringe benefits as the Corporation's Board of
Directors may deem appropriate, including not less than those fringe benefits
set forth on Exhibit B attached hereto.

         4. Termination Following a Change in Control of the Corporation.

            (a) If following a Change in Control of the Corporation, Employee
shall terminate his employment with the Corporation for Good Reason or the
Corporation shall terminate Employee without Cause, Employee shall be entitled
to the benefits provided in Section 7 hereof.

            (b) For purposes of this Agreement "Good Reason" shall mean, without
Employee's express written consent, the assignment to Employee of titles,
duties, responsibilities or status inconsistent with his present duties and
responsibilities as Vice President and Chief Financial Officer of the
Corporation or a material reduction or alteration in the nature or status of
Employee's duties and responsibilities from those in effect as of the date
hereof or a requirement that Employee be based at an office location other than
downtown Chicago, Illinois;

            (c) For purposes of this Agreement, "Cause" shall mean any one of
the following:

                       (i) The willful and continued failure by Employee to
substantially perform his duties with the Corporation (other than any such
failure resulting from termination for Good Reason or Disability) after a demand
for substantial performance is delivered to Employee that specifically
identifies the manner in which the Corporation believes that Employee has not
substantially performed his duties, and Employee failing to resume substantial
performance of his duties on a continuous basis within fourteen (14) days of
receiving such demand; provided, that if it is not reasonably possible for
Employee to resume such substantial performance within such fourteen (14) days,
then such fourteen (14) day time period shall be extended to that minimum period
of time during which it is reasonably possible for Employee to resume such
substantial performance;


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                       (ii)  The willful engaging by Employee in conduct which 
is demonstrably and materially injurious to the Corporation, monetarily or
otherwise and Employee's failure to cease engaging in such conduct within
fourteen (14) days after a demand for such cessation is delivered to Employee by
the Corporation that specifically identifies such conduct; provided, however,
that if it is not reasonably possible for Employee to cease such conduct within
such fourteen (14) days, then such fourteen (14) day time period shall be
extended to that minimum period of time during which it is reasonably possible
for Employee to cease such conduct; or

                       (iii) Employee's conviction of a felony or conviction of
a misdemeanor which materially impairs Employee's ability substantially to
perform his duties with the Corporation. For purposes of this subsection, no
act, or failure to act, on Employee's part shall be deemed "willful" unless
done, or omitted to be done, by Employee not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Corporation.

            (d) For purposes of this Agreement a "Change of Control" shall have
occurred if:

                (i) Any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act")), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing fifty percent (50%)
or more of the combined voting power of the Corporation's then outstanding
securities computed on a fully diluted basis and entitled to vote in the
election of directors; or

                (ii) The Board of Directors of the Corporation approves a plan
of dissolution or liquidation or sale of all or substantially all of the
Corporation's assets; or

                (iii) As a result of a merger or consolidation of the
Corporation with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least fifty percent (50%) of the combined voting power of the voting
securities of the Corporation or such surviving entity outstanding immediately
after such merger or consolidation, T. Benjamin Jennings and Gerard M. Jacobs
cease to serve as Chairman of the Board and Chief Executive Officer and members
of the Board of Directors of the Corporation.

         5. Termination Generally. This Agreement and Employee's employment may
be terminated by the Corporation prior to its expiration in accordance with this
Section 5 as follows:

            (a) Disability: Retirement. If, as a result of Employee's incapacity
due to physical or mental illness, Employee shall have been absent from the
performance of his duties with the Corporation for six (6) consecutive months
and, within thirty (30) days after written notice of termination is given,
Employee shall not have returned to the full-time performance of his duties, the
Corporation may terminate Employee's employment for "Disability."


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            (b) Notice of Termination. Any termination by the Corporation for
Cause or by Employee for Good Reason shall be communicated by Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Employee's employment under the provision so indicated.

            (c) Date of Termination. "Date of Termination" shall mean the date
specified in the Notice of Termination where required or, in any other case, the
date upon which Employee ceases to perform services to the Corporation; provided
that if within thirty (30) days after any Notice of Termination one party
notifies the other party that a dispute exists concerning the termination, the
Date of Termination shall be the date finally determined to be the Date of
Termination, either by mutual written agreement of the parties or by the final,
nonappealable determination of a court of competent jurisdiction.

         6. Compensation Upon Termination Prior to a Change in Control. Prior to
a Change in Control, Employee shall be entitled to the following benefits upon
termination and as compensation for the Covenant Not to Compete set forth in
Section 8 hereof as follows:

            (a) During any portion of the Employment Period that Employee fails
to perform his full-term duties with the Corporation as a result of incapacity
due to physical or mental illness or other disability, Employee shall continue
to receive his Base Salary at the rate in effect at the commencement of any such
portion of the Employment Period, until Employee's employment is terminated
pursuant to subsection 5(a) hereof. Thereafter, Employee's benefits shall be
determined in accordance with the Corporation's retirement, insurance and other
applicable programs and plans then in effect.

            (b) If Employee's employment shall be terminated by the Corporation
for Cause or if Employee voluntarily terminates his employment for any reason
other than for Good Reason, the Corporation shall pay Employee his full Base
Salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given or on the Date of Termination if no Notice of
Termination is required hereunder, plus all other amounts to which Employee is
entitled under any compensation plan of the Corporation at the time such
payments are due, and the Corporation shall have no further obligations to
Employee under this Agreement.

            (c) If Employee terminates his employment for Good Reason or the
Corporation terminates Employee without Cause, then Employee shall continue to
receive the amounts set forth in Section 1 for the remainder of the Employment
Period.

         7. Compensation Upon Termination Following Change of Control. Following
a Change in Control, Employee shall be entitled to the following benefits upon
termination and as compensation for the Covenant Not to Compete set forth in
Section 8 hereof as follows:


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            (a) During any portion of the Employment Period that Employee fails
to perform his full-term duties with the Corporation as a result of incapacity
due to physical or mental illness or other disability, Employee shall continue
to receive his Base Salary at the rate in effect at the commencement of any such
portion of the Employment Period, until Employee's employment is terminated
pursuant to subsection 5(a) hereof. Thereafter, Employee's benefits shall be
determined in accordance with the Corporation's retirement, insurance and other
applicable programs and plans then in effect.

            (b) The Corporation shall pay Employee his full Base Salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, or the Date of Termination where no Notice of Termination is required
hereunder.

            (c) In the event Employee terminates for Good Reason or the
Corporation terminates his employment without Cause, then Employee shall receive
the following benefits:

                (i)   The Corporation shall pay to Employee as Severance 
Benefits, and as compensation for the Covenant Not to Compete, not later than
the tenth day following the Date of Termination, the benefits listed on Exhibit
B hereto and a lump sum severance payment equal to twice (2x) the Employee's
annual Base Salary in effect immediately prior to the occurrence of the
circumstances giving rise to such termination.

                (ii)  All options and warrants to purchase common stock or other
securities of the Corporation, if any, granted to Employee under the
Corporation's Stock Option Plans or otherwise, together with any additional,
substitute or successor option program or plan as may be in effect from time to
time then held by Employee shall fully vest as of the Date of Termination and
shall remain outstanding and exercisable until the expiration date of such
options and warrants (without regard to any early termination of such option or
warrant resulting from Employee's termination of employment).

                (iii) For a sixty (60) month period after such termination, the
Corporation will arrange to provide Employee, at the Corporation's expense, with
benefits under the Corporation's applicable employee fringe benefit plans, which
benefits shall be the same or substantially as those enjoyed by Employee
immediately prior to the Notice of Termination, but in no event shall Employee
be provided the benefits described herein after his Normal Retirement Date and
provided further that benefits otherwise receivable by Employee pursuant to this
subsection (iii) shall be reduced to the extent comparable benefits are actually
received by Employee during the sixty (60) month period following Employee's
termination, and any such benefits actually received by Employee shall be
reported to the Corporation.

                (iv)  In the event the amount of Severance Payments that 
Employee would be entitled to receive hereunder upon termination of Employee's
employment would, under any applicable provision of law, render the validity,
legality or enforceability of this Agreement and the Severance Payments made
hereunder contingent upon this Agreement having first been approved by the
affirmative vote of a majority of the aggregate outstanding voting securities of
the Corporation:

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                       (A) The Severance Payments due Employee hereunder shall
be reduced to the extent necessary to avoid rendering this Agreement subject,
under any applicable provision of law, to prior shareholder approval as
specified above; or

                       (B) If Severance Payments have previously been made to
Employee hereunder, the amount of which Severance Payments would render this
Agreement subject to prior shareholder approval, as specified above, as a
condition precedent to its validity, legality or enforceability, Employee shall
immediately repay to the Corporation that portion of the Severance Payments
which served to render this Agreement subject to said prior shareholder
approval.

                (v)    The payments provided for in subsection (i) above shall 
be made not later than the tenth day following the Date of Termination;
provided, however, that if the amounts of such payments cannot be finally
determined on or before such day, the Corporation shall pay to Employee on such
day an estimate as determined in good faith by the Corporation of the minimum
amount of such payments and shall pay the remainder of such payments (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Internal
Revenue Code of 1986, as amended (the "Code") as soon as the amount thereof can
be determined but in no event later than the thirtieth day after the Date of
Termination. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Corporation to Employee payable on the tenth day after demand by the
Corporation (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).

                (vi)   The Severance Payments to be paid pursuant to subsection
(i) above are not intended as stipulated or liquidated damages for breach of any
promise of a term of employment, no such promise being made herein, but are
payments which shall be fully earned as of the Date of Termination and shall be
compensation for Employee's continued services rendered to the Corporation after
the date hereof and prior to such Date of Termination; for the Covenant Not to
Compete provision of Section 8 hereof; for the foregoing of other, possibly more
secure employment; for consequential losses which may result from such
termination, including, but not limited to, permanent injury to reputation, loss
of career development opportunities, and emotional stress; and for actual losses
which may result from such termination, including, but not limited to, lost
wages and expenses of securing other employment.

                (vii)  The Corporation shall have no obligation to provide or
cause to be provided to Employee the benefits described in this Agreement, other
than those provided in Section 6 hereof, if the Corporation or Employee shall
terminate Employee's employment prior to a Change of Control.

                (viii) In the event that Employee becomes entitled to the
Severance Payments, if it is determined that any of the Severance Payments will
be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or
any similar tax that may hereafter be imposed), the Employee shall have the
option, but not the obligation, to reduce the amount of the Severance Payments
to an amount which will result in the Severance Payments not being subject to

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<PAGE>   7
the Excise Tax. The Corporation will cooperate with Employee in every way
possible to restructure the Severance Payments to achieve such result.

            (d) In the event the Corporation shall terminate Employee for Cause
or Employee shall terminate without Good Reason, the compensation of Employee
shall be as set forth in Section 6(b) hereof.

         8. Restrictive Covenants. Employee agrees with the Corporation that he
will not for a period of five years from the date he ceases to be an officer,
director, employee or consultant of the Corporation:

            (a) directly or indirectly, alone or as a partner, joint venturer,
officer, director, employee, consultant, agent, independent contractor or
stockholder of any company or business, engage in any business activity that is
directly in Competition with the Business conducted by EMCO Recycling Corp.
("EMCO") or the Corporation as of the date hereof; provided, however, that the
beneficial ownership of less than five percent (5 %) of the shares of stock of
any corporation having a class of equity securities actively traded on a
national securities exchange or over-the-counter market shall not be deemed, in
and of itself, to violate the prohibitions of this Section;

            (b) directly or indirectly (i) induce any Person that is a customer
of EMCO or the Corporation as of date hereof to patronize any business directly
in Competition with the Business conducted by EMCO or the Corporation; (ii)
canvass, solicit or accept from any Person that is a customer of EMCO or the
Corporation, any such Competitive business, or (iii) request or advise any
Person that is a customer of EMCO or the Corporation as of the date hereof to
withdraw, curtail or cancel any such customer's business with EMCO or the
Corporation;

            (c) directly or indirectly employ, or knowingly permit any company
or business directly or indirectly controlled by him, to employ, any Person who
was employed by EMCO or the Corporation at or within six months prior to the
date hereof, or in any manner seek to induce any such Person to leave his or her
employment;

            For purposes of this Agreement, the term "Business" shall mean metal
recycling and the terms "Competitive" and "Competition" shall mean a business
whose primary activity is metal recycling.

            Employee agrees and acknowledges that the restrictions contained
herein are reasonable in scope and duration and are necessary to protect EMCO
and the Corporation. If any provision of this Section, as applied to any party
or to any circumstance is adjudged by a court to be invalid or unenforceable,
the same will in no way affect any other circumstance or the validity or
enforceability of this Agreement. If any such provision, or any part thereof, is
held to be unenforceable because of the duration of such provision or the area
covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration and/or area of such provision,
and/or to delete specific words or phrases, and in its reduced form, such
provision shall then be enforceable and shall be enforced. The parties agree and
acknowledge that the breach of

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<PAGE>   8
this Section will cause irreparable damage to EMCO and the Corporation and upon
breach of any provision of this Section, EMCO and the Corporation shall be
entitled to injunctive relief, specific performance or other equitable relief,
provided, however, that, this shall in no way limit any other remedies which
EMCO and the Corporation may have (including, without limitation, the right to
seek monetary damages). For purposes of this Section, "Person" means an
individual, partnership, corporation, business trust, joint stock company,
estate, trust, unincorporated association, joint venture, governmental authority
or other entity, of whatever nature.

         9. Confidential Information. Employee shall not, during the Employment
Period or thereafter, disclose to any person any confidential information
obtained from or regarding the Corporation or its affiliates, including, without
limitation, contracts, business plans, forms, lists, manuals, or any budgetary,
sales, marketing, financial, procedural or operations materials or information,
or any other nonpublic information intended to be confidential prepared by or
for the benefit of the Corporation or its affiliates. If Employee shall leave
the employment of the Corporation for any reason, the Employee agrees not to
take with him any such documents, materials or information or other data of any
description or any copy or reproduction of any of the foregoing.

         10. Enforceability. The failure of either party at any time to require
performance by the other party of any provision hereunder shall in no way affect
the right of that party thereafter to enforce the same, nor shall it affect any
other party's right to enforce the same, or to enforce any of the other
provisions in this Agreement; nor shall the waiver by either party of the breach
of any provision hereof be taken or held to be a waiver of any subsequent breach
of such provision or as a waiver of the provision itself.

         11. Successors: Binding Agreement.

            (a) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation or of any
division or subsidiary thereof employing Employee to expressly 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 if no such succession had taken
place. Failure of the Corporation to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this Agreement
and shall entitle Employee to compensation from the Corporation in the same
amount and on the same terms as Employee would be entitled hereunder if Employee
terminated his employment for Good Reason prior to a Change of Control, except
that, for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination.

            (b) This Agreement shall inure to the benefit of and be enforceable
by Employee's personal or legal representatives, executors, administrator,
successors, heirs, distributees, devisees and legatees. If Employee should die
while any amount would still be payable to him hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Employee's devisee, legatee or
other designees or, if there is no such designee, to Employee's estate.

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<PAGE>   9
         12. Modification. This Agreement may not be canceled, changed, modified
or amended, and no cancellation, change, modification or amendment will be
effective or binding unless in writing and signed by both parties to this
Agreement.

         13. Severability; Survival. In the event any provision of this
Agreement is found to be void and unenforceable by a court of competent
jurisdiction, the remaining provisions of this Agreement shall nevertheless be
binding upon the parties with the same effect as though the void or
unenforceable part had been severed and deleted.

         14. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to the
conflicts of laws principles thereof.

         15. Counterparts. This Agreement may be executed simultaneously in
several counterparts, each of which will be an original, but all of which
together will constitute one and the same original.

         16. Entire Agreement. This Agreement represents the entire agreement
between the Corporation and the Employee with respect to the subject matter
hereof, and all prior agreements relating to the relationship between the
Employee and the Corporation, written or oral, are nullified and superseded
hereby.

         17. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.



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         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.


                                       METAL MANAGEMENT, INC.


                                       By: /s/ Gerard M. Jacobs
                                          --------------------------------

                                       Name: Gerard M. Jacobs
                                            ------------------------------


                                       Title: President and Chief Executive 
                                              Officer
                                              -----------------------------

                                       EMPLOYEE:


                                       /s/ Robert C. Larry
                                       ------------------------------------
                                       Robert C. Larry



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<PAGE>   11
                                    EXHIBIT A

                         FORM OF STOCK OPTION AGREEMENT





<PAGE>   12
                                    EXHIBIT B


1.       $500 per month car allowance, plus one parking space provided by the
         Company.

2.       Cellular phone.

3.       Eligible for Executive Benefits Package including but not limited to
         health and dental insurance, 401(k) and other benefits as determined by
         the Board of Directors.