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                                                                    EXHIBIT 10.7

                                 METALICO, INC.
                          1997 LONG-TERM INCENTIVE PLAN

   1. PURPOSE. The purpose of this 1997 Long-Term Incentive Plan (the "Plan") of
Metalico, Inc., a Delaware corporation (the "Company"), is to advance the
interests of the Company and its stockholders by providing a means to attract,
retain and reward executive officers and other key employees and consultants of
and service providers to the Company and its subsidiaries (including consultants
and others providing services of substantial value) and to enable such persons
to acquire or increase a proprietary interest in the Company, thereby promoting
a closer identity of interests between such persons and the Company's
stockholders.

   2. DEFINITIONS. The definitions of awards under the Plan, including Options,
SARs (including Limited SARs), Restricted Stock, Deferred Stock, Stock granted
as a bonus or in lieu of other awards, Dividend Equivalents and Other
Stock-Based Awards are set forth in Section 6 of the Plan. Such awards, together
with any other right or interest granted to a Participant under the Plan, are
termed "Awards." For purposes of the Plan, the following additional terms shall
be defined as set forth below:

      (a) "AWARD AGREEMENT" means any written agreement, contract, notice or
other instrument or document evidencing an Award.

      (b) "BENEFICIARY" shall mean the person, persons, trust or trusts which
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or, if there is no
designated Beneficiary or surviving designated Beneficiary, then the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.

      (c) "BOARD" means the Board of Directors of the Company.

      (d) A "CHANGE IN CONTROL" shall be deemed to have occurred if:

            (i) any person, other than the Company or an employee benefit plan
      of the Company, acquires directly or indirectly the Beneficial Ownership
      (as defined in Section 13(d) of the Exchange Act) of any voting security
      of the Company and immediately after such acquisition such Person is,
      directly or indirectly, the Beneficial Owner of voting securities
      representing 50 percent or more of the total voting power of all of the
      then-outstanding voting securities of the Company;

            (ii) the following individuals no longer constitute a majority of
      the members of the Board: (A) the individuals who, as of the date of this
      document, constitute the Board (the "Original Directors"); (B) the
      individuals who thereafter are elected to the Board and whose election, or
      nomination for election, to the Board was approved by a vote of at least
      two-thirds (2/3) of the Original Directors then still in office (such
      directors becoming "Additional Original Directors" immediately following
      their election); and (C) the individuals who are elected to the Board and
      whose election, or nomination for election, to

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      the Board was approved by a vote of at least two-thirds (2/3) of the
      Original Directors and Additional Original Directors then still in office
      (such directors also becoming "Additional Original Directors" immediately
      following their election);

            (iii) the stockholders of the Company approve a merger,
      consolidation, recapitalization or reorganization of the Company, or a
      reverse stock split of outstanding voting securities, or consummation of
      any such transaction if stockholder approval is not obtained, other than
      any such transaction which would result in at least 51 percent of the
      total voting power represented by the voting securities of the surviving
      entity outstanding immediately after such transaction being Beneficially
      Owned by at least 51 percent of the holders of outstanding voting
      securities of the Company immediately prior to the transaction, with the
      voting power of each such continuing holder relative to other such
      continuing holders not substantially altered in the transaction; or

            (iv) the stockholders of the Company shall approve a plan of
      complete liquidation of the Company or an agreement for the sale or
      disposition by the Company of all or a substantial portion of the
      Company's assets (i.e., 50 percent or more of the total assets of the
      Company).

      (e) "CODE" means the Internal Revenue Code of 1986, as amended from time
to time. References to any provision of the Code shall be deemed to include
regulations thereunder and successor provisions and regulations thereto.

      (f) "COMMITTEE" means the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the Plan.

      (g) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time. References to any provision of the Exchange Act shall be
deemed to include rules thereunder and successor provisions and rules thereto.

      (h) "FAIR MARKET VALUE" means, with respect to Stock, Awards, or other
property, the fair market value of such Stock, Awards, or other property
determined by such methods or procedures as shall be established from time to
time by the Committee, PROVIDED, HOWEVER, that (i) if the Stock is listed on a
national securities exchange or quoted in an interdealer quotation system, the
Fair Market Value of such Stock on a given date shall be based upon the last
sales price or, if unavailable, the average of the closing bid and asked prices
per share of the Stock on such date (or, if there was no trading or quotation in
the Stock on such date, on the next preceding date on which there was trading or
quotation) as reported in the WALL STREET JOURNAL (or other reporting service
approved by the Committee), (ii) the "Fair Market Value" of Stock subject to
Options granted effective upon commencement of the Initial Public Offering shall
be the Initial Public Offering price of the shares so issued and sold in the
Initial Public Offering, as set forth in the first final prospectus used in such
offering (the provisions of clause (i) notwithstanding) and (iii) the "Fair
Market Value" of Stock prior to the date of the Initial Public Offering shall be
as determined by the Board of Directors.

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      (i) "INITIAL PUBLIC OFFERING" shall mean an initial public offering of
shares of Stock in a firm commitment underwriting registered with the Securities
and Exchange Commission in compliance with the provisions of the Securities Act
of 1933, as amended.

      (j) "ISO" means any Option intended to be and designated as an incentive
stock option within the meaning of Section 422 of the Code.

      (k) "PARTICIPANT" means a person who, at a time when eligible under
Section 5 hereof, has been granted an Award under the Plan.

      (l) "RULE 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.

      (m) "STOCK" means the Common Stock, $.001 par value, of the Company and
such other securities as may be substituted for Stock or such other securities
pursuant to Section 4.

3. ADMINISTRATION.

      (a) AUTHORITY OF THE COMMITTEE. The Plan shall be administered by the
Committee. The Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the provisions of
the Plan:

            (i) to select persons to whom Awards may be granted;

            (ii) to determine the type or types of Awards to be granted to each
      such person;

            (iii) to determine the number of Awards to be granted, the number of
      shares of Stock to which an Award will relate, the terms and conditions of
      any Award granted under the Plan (including, but not limited to, any
      exercise price, grant price or purchase price, any restriction or
      condition, any schedule for lapse of restrictions or conditions relating
      to transferability or forfeiture, exercisability or settlement of an
      Award, and waivers or accelerations thereof, performance conditions
      relating to an Award (including performance conditions relating to Awards
      not intended to be governed by Section 7(f) and waivers and modifications
      thereof), based in each case on such considerations as the Committee shall
      determine), and all other matters to be determined in connection with an
      Award;

            (iv) to determine whether, to what extent and under what
      circumstances an Award may be settled, or the exercise price of an Award
      may be paid, in cash, Stock, other Awards, or other property, or an Award
      may be canceled, forfeited, or surrendered;

            (v) to determine whether, to what extent and under what
      circumstances cash, Stock, other Awards or other property payable with
      respect to an Award will be deferred either automatically, at the election
      of the Committee or at the election of the Participant;

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            (vi) to prescribe the form of each Award Agreement, which need not
      be identical for each Participant;

            (vii) to adopt, amend, suspend, waive and rescind such rules and
      regulations and appoint such agents as the Committee may deem necessary or
      advisable to administer the Plan;

            (viii) to correct any defect or supply any omission or reconcile any
      inconsistency in the Plan and to construe and interpret the Plan and any
      Award, rules and regulations, Award Agreement or other instrument
      hereunder; and

            (ix) to make all other decisions and determinations as may be
      required under the terms of the Plan or as the Committee may deem
      necessary or advisable for the administration of the Plan;

      (b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. Unless authority is
specifically reserved to the Board under the terms of the Plan, the Company's
Certificate of Incorporation or Bylaws, or applicable law, the Committee shall
have sole discretion in exercising authority under the Plan. Any action of the
Committee with respect to the Plan shall be final, conclusive and binding on all
persons, including the Company, subsidiaries of the Company, Participants, any
person claiming any rights under the Plan from or through any Participant and
stockholders, except to the extent the Committee may subsequently modify, or
take further action not consistent with, its prior action. If not specified in
the Plan, the time at which the Committee must or may make any determination
shall be determined by the Committee, and any such determination may thereafter
by modified by the Committee (subject to Section 8(e)). The express grant of any
specific power to the Committee, and the taking of any action by the Committee,
shall not be construed as limiting any power or authority of the Committee. The
Committee may delegate to officers or managers of the Company or any subsidiary
of the Company the authority, subject to such terms as the Committee shall
determine, to perform administrative functions and, with respect to Participants
not subject to Section 16 of the Exchange Act, to perform such other functions
as the Committee may determine, to the extent permitted under Rule 16b-3, if
applicable, and other applicable law.

      (c) LIMITATION OF LIABILITY. Each member of the Committee shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him by any officer or other employee of the Company or any
subsidiary, the Company's independent certified public accountants or any
executive compensation consultant, legal counsel or other professional retained
by the Company to assist in the administration of the Plan. No member of the
Committee, nor any officer or employee of the Company acting on behalf of the
Committee, shall be personally liable for any action, determination or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Committee and any officer or employee of the Company acting on
its behalf shall, to the extent permitted by law, be fully indemnified and
protected by the Company with respect to any such action, determination or
interpretation.

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4. STOCK SUBJECT TO PLAN.

      (a) AMOUNT OF STOCK RESERVED. The total amount of Stock that may be
subject to outstanding awards, determined immediately after the grant of any
Award, shall not exceed the greater of 105,000 shares of Stock or 10% of the
total number of shares of Stock outstanding at the time of such grant.
Notwithstanding the foregoing, the number of shares that may be delivered upon
the exercise of ISOs shall not exceed 105,000, subject in each case to
adjustment as provided in Section 4(c), and the number of shares that may be
delivered as Restricted Stock and Deferred Stock (other than pursuant to an
Award granted under Section 7(f)) shall not in the aggregate exceed 105,000,
provided, however, that shares subject to ISOs, Restricted Stock or Deferred
Stock Awards shall not be deemed delivered if such Awards are forfeited, expire
or otherwise terminate without delivery of shares to the Participant. To the
extent that an Award is only to be paid in cash or is paid in cash, any shares
of Stock subject to such Award shall again be available for the grant of an
Award. Any shares of Stock delivered pursuant to an Award may consist, in whole
or in part, of authorized and unissued shares, treasury shares or shares
acquired in the market for a Participant's Account.

      (b) ANNUAL PER-PARTICIPANT LIMITATIONS. During any calendar year, no
participant may be granted Awards that may be settled by delivery of more than
25,000 shares of Stock, subject to adjustment as provided in Section 4(c). In
addition, with respect to Awards that may be settled in cash (in whole or in
part), no Participant may be paid during any calendar year cash amounts relating
to such Awards that exceed the greater of the Fair Market Value of the number of
shares of Stock set forth in the preceding sentence at the date of grant or the
date of settlement of Award. This provision sets forth two separate limitations,
so that Awards that may be settled solely by delivery of Stock will not operate
to reduce the amount of cash-only Awards, and vice versa; nevertheless, Awards
that may be settled in Stock or cash must not exceed either limitation.

      (c) ADJUSTMENTS. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Stock or other
property), recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase or exchange of Stock or other
securities, liquidation, dissolution, or other similar corporate transaction or
event, affects the Stock such that an adjustment is appropriate in order to
prevent dilution or enlargement of the rights of Participants under the Plan,
then the Committee shall, in such manner as it may deem equitable, adjust any or
all of (i) the number and kind of shares of Stock reserved and available for
Awards under Section 4(a), including shares reserved for the ISOs and Restricted
and Deferred Stock, (ii) the number and kind of shares of Stock specified in the
Annual Per-Participant Limitations under Section 4(b), (iii) the number and kind
of shares of outstanding Restricted Stock or other outstanding Award in
connection with which shares have been issued, (iv) the number and kind of
shares that may be issued in respect of other outstanding Awards and (v) the
exercise price, grant price or purchase price relating to any Award (or, if
deemed appropriate, the Committee may make provision for a cash payment with
respect to any outstanding Award). In addition, the Committee is authorized to
make adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence) affecting the Company or
any subsidiary or the financial statements of the Company or any subsidiary, or
in response to changes in applicable laws, regulations, or accounting
principles. The foregoing notwithstanding, no adjustments shall be

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authorized under this Section 4(c) with respect to ISOs or SARs in tandem
therewith to the extent that such authority would cause the Plan to fail to
comply with Section 422(b)(1) of the Code, and no such adjustment shall be
authorized with respect to Options, SARs or other Awards subject to Section
7(f) to the extent that such authority would cause such Awards to fail to
qualify as "qualified performance-based compensation" under Section 162(m)(4)(C)
of the Code.

5. ELIGIBILITY. Executive officers and other key employees of the Company and
its subsidiaries, including any director or officer who is also such an
employee, and persons who provide consulting or other services to the Company
deemed by the Committee to be of substantial value to the Company, are eligible
to be granted Awards under the Plan. In addition, a person who has been offered
employment by the Company or its subsidiaries is eligible to be granted an Award
under the Plan, provided that such Award shall be canceled if such person fails
to commence such employment, and no payment of value may be made in connection
with such Award until such person has commenced such employment. The foregoing
notwithstanding, no member of the Committee shall be eligible to be granted
Awards under the Plan.

6. SPECIFIC TERMS OF AWARDS.

      (a) GENERAL. Awards may be granted on the terms and conditions set forth
in this Section 6. In addition, the Committee may impose on any Award or the
exercise thereof such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of employment or
service of the Participant. Except as provided in Section 6(f), 6(h), or 7(a),
or to the extent required to comply with requirements of the Delaware General
Corporation Law that lawful consideration be paid for Stock, only services may
be required as consideration for the grant (but not the exercise) of any Award.

      (b) OPTIONS. The Committee is authorized to grant Options (including
"reload" options automatically granted to offset specified exercises of
Options) on the following terms and conditions ("Options"):

            (i) EXERCISE PRICE. The exercise price per share of Stock
      purchasable under an Option shall be determined by the Committee;
      PROVIDED, HOWEVER, that, except as provided in Section 7(a), such exercise
      price shall be not less than the Fair Market Value of a share on the date
      of grant of such Option.

            (ii) TIME AND METHOD OF EXERCISE. The Committee shall determine the
      time or times at which an Option may be exercised in whole or in part, the
      methods by which such exercise price may be paid or deemed to be paid, the
      form of such payment, including, without limitation, cash, Stock, other
      Awards or awards granted under other Company plans or other property
      (including notes or other contractual obligations of Participants to make
      payment on a deferred basis, such as through "cashless exercise"
      arrangements, to the extent permitted by applicable law), and the methods
      by which Stock will be delivered or deemed to be delivered to
      Participants.

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            (iii) ISOS. The terms of any ISO granted under the Plan shall comply
      in all respects with the provisions of Section 422 of the Code, including
      but not limited to the requirement that no ISO shall be granted more than
      ten years after the effective date of the Plan. Anything in the Plan to
      the contrary notwithstanding, no term of the Plan relating to ISOs shall
      be interpreted, amended, or altered, nor shall any discretion or authority
      granted under the Plan be exercised, so as to disqualify either the Plan
      or any ISO under Section 422 of the Code, unless requested by the affected
      Participant.

            (iv) TERMINATION OF EMPLOYMENT. Unless otherwise determined by the
      Committee, upon termination of a Participant's employment with the Company
      and its subsidiaries, such Participant may exercise any Options during the
      three-month period following such termination of employment, but only to
      the extent such Option was exercisable immediately prior to such
      termination of employment. Notwithstanding the foregoing, if the Committee
      determines that such termination is for cause, all Options held by the
      Participant shall terminate as of the termination of employment.

      (c) STOCK APPRECIATION RIGHTS. The Committee is authorized to grant SARs
on the following terms and conditions ("SARs"):

            (i) RIGHT TO PAYMENT. An SAR shall confer on the Participant to whom
      it is granted a right to receive, upon exercise thereof, the excess of (A)
      the Fair Market Value of one share of Stock on the date of exercise (or,
      if the Committee shall so determine in the case of any such right other
      than one related to an ISO, the Fair Market Value of one share at any time
      during a specified period before or after the date of exercise), over (B)
      the grant price of the SAR as determined by the Committee as of the date
      of grant of the SAR, which, except as provided in Section 7(a), shall be
      not less than the Fair Market Value of one share of Stock on the date of
      grant.

            (ii) OTHER TERMS. The Committee shall determine the time or times at
      which an SAR may be exercised in whole or in part, the method of exercise,
      method of settlement, form of consideration payable in settlement, method
      by which Stock will be delivered or deemed to be delivered to
      Participants, whether or not an SAR shall be in tandem with any other
      Award, and any other terms and conditions of any SAR. Limited SARs that
      may only be exercised upon the occurrence of a Change in Control may be
      granted on such terms, not inconsistent with this Section 6(c), as the
      Committee may determine. Limited SARs may be either freestanding or in
      tandem with other Awards.

      (d) RESTRICTED STOCK. The Committee is authorized to grant Restricted
Stock on the following terms and conditions ("Restricted Stock"):

            (i) GRANT AND RESTRICTIONS. Restricted Stock shall be subject to
      such restrictions on transferability and other restrictions, if any, as
      the Committee may impose, which restrictions may lapse separately or in
      combination at such times, under such circumstances, in such installments,
      or otherwise, as the Committee may determine. Except to the extent
      restricted under the terms of the Plan and any Award Agreement relating to
      the Restricted Stock, a

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      Participant granted Restricted Stock shall have all of the rights of a
      stockholder including, without limitation, the right to vote Restricted
      Stock or the right to receive dividends thereon.

            (ii) FORFEITURE. Except as otherwise determined by the Committee,
      upon termination of employment or service (as determined under criteria
      established by the Committee) during the applicable restriction period,
      Restricted Stock that is at that time subject to restrictions shall be
      forfeited and reacquired by the Company; PROVIDED, HOWEVER, that the
      Committee may provide, by rule or regulation or in any Award Agreement, or
      may determine in any individual case, that restrictions or forfeiture
      conditions relating to Restricted Stock will be waived in whole or in part
      in the event of termination resulting from specified causes.

            (iii) CERTIFICATES FOR STOCK. Restricted Stock granted under the
      Plan may be evidenced in such manner as the Committee shall determine. If
      certificates representing Restricted Stock are registered in the name of
      the Participant, such certificates may bear an appropriate legend
      referring to the terms, conditions, and restrictions applicable to such
      Restricted Stock, the Company may retain physical possession of the
      certificate, and the Participant shall have delivered a stock power to the
      Company, endorsed in blank, relating to the Restricted Stock.

            (iv) DIVIDENDS. Dividends paid on Restricted Stock shall be either
      paid at the dividend payment date in cash or in shares of unrestricted
      Stock having a Fair Market Value equal to the amount of such dividends, or
      the payment of such dividends shall be deferred and/or the amount or value
      thereof automatically reinvested in additional Restricted Stock, other
      Awards, or other investment vehicles, as the Committee shall determine or
      permit the Participant to elect. Stock distributed in connection with a
      Stock split or Stock dividend, and other property distributed as a
      dividend, shall be subject to restrictions and a risk of forfeiture to the
      same extent as the Restricted Stock with respect to which such Stock or
      other property has been distributed, unless otherwise determined by the
      Committee.

      (e) DEFERRED STOCK. The Committee is authorized to grant Deferred Stock
subject to the following terms and conditions ("Deferred Stock"):

            (i) AWARD AND RESTRICTIONS. Delivery of Stock will occur upon
      expiration of the deferral period specified for an Award of Deferred Stock
      by the Committee (or, if permitted by the Committee, as elected by the
      Participant). In addition, Deferred Stock shall be subject to such
      restrictions as the Committee may impose, if any, which restrictions may
      lapse at the expiration of the deferral period or at earlier specified
      times, separately or in combination, in installments or otherwise, as the
      Committee may determine.

            (ii) FORFEITURE. Except as otherwise determined by the Committee,
      upon termination of employment or service (as determined under criteria
      established by the Committee) during the applicable deferral period or
      portion thereof to which forfeiture conditions apply (as provided in the
      Award Agreement evidencing the Deferred Stock), all Deferred Stock that is
      at that time subject to such forfeiture conditions shall be forfeited;
      PROVIDED, HOWEVER that the Committee may provide, by rule or regulation or
      in any Award Agreement, or may determine in any individual case, that
      restrictions or forfeiture conditions

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      relating to Deferred Stock will be waived in whole or in part in the event
      of termination resulting from specified causes.

      (f) BONUS STOCK AND AWARDS IN LIEU OF CASH OBLIGATIONS. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu
of Company obligations to pay cash under other plans or compensatory
arrangements. Stock or Awards granted hereunder shall be subject to such other
terms as shall be determined by the Committee.

      (g) DIVIDEND EQUIVALENTS. The Committee is authorized to grant Dividend
Equivalents entitling the Participant to receive cash, Stock, other Awards or
other property equal in value to dividends paid with respect to a specified
number of shares of Stock ("Dividend Equivalents"). Dividend Equivalents may be
awarded on a free-standing basis or in connection with another Award. The
Committee may provide that Dividend Equivalents shall be paid or distributed
when accrued or shall be deemed to have been reinvested in additional Stock,
Awards or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee may specify.

      (h) OTHER STOCK-BASED AWARDS. The Committee is authorized, subject to
limitations under applicable law, to grant such other Awards that may be
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on, or related to, Stock and factors that may influence the
value of Stock, as deemed by the Committee to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase rights
for Stock, Awards with value and payment contingent upon performance of the
Company or any other factors designated by the Committee and Awards valued by
reference to the book value of Stock or the value of securities of or the
performance of specified subsidiaries ("Other Stock Based Awards"). The
Committee shall determine the terms and conditions of such Awards. Stock issued
pursuant to an Award in the nature of a purchase right granted under this
Section 6(h) shall be purchased for such consideration, paid for at such times,
by such methods, and in such forms, including, without limitation, cash, Stock,
other Awards, or other property, as the Committee shall determine. Cash awards,
as an element of or supplement to any other Award under the Plan, may be granted
pursuant to this Section 6(h).

7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.

      (a) STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS. Awards granted
under the Plan may, in the discretion of the Committee, he granted either alone
or in addition to, in tandem with or in substitution for any other Award granted
under the Plan or any award granted under any other plan of the Company, any
subsidiary or any business entity to be acquired by the Company or a subsidiary,
or any other right of a Participant to receive payment from the Company or any
subsidiary. Awards granted in addition to or in tandem with other Awards or
awards may be granted either as of the same time as or a different time from the
grant of such other Awards or awards.

      (b) TERM OF AWARDS. The term of each Award shall be for such period as may
be determined by the Committee; PROVIDED, HOWEVER, that in no event shall the
term of any ISO or an SAR

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granted in tandem therewith exceed a period of ten years from the date of its
grant (or such shorter period as may be applicable under Section 422 of the
Code).

      (c) FORM OF PAYMENT UNDER AWARDS. Subject to the terms of the Plan and any
applicable Award Agreement, payments to be made by the Company or a subsidiary
upon the grant, exercise or settlement of an Award may be made in such forms as
the Committee shall determine, including, without limitation, cash, Stock, other
Awards or other property, and may be made in a single payment or transfer, in
installments or on a deferred basis. Such payments may include, without
limitation, provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of Dividend
Equivalents in respect of installment or deferred payments denominated in Stock.

      (d) LOAN PROVISIONS. With the consent of the Committee, and subject at all
times to, and only to the extent, if any, permitted under and in accordance
with, laws and regulations and other binding obligations or provisions
applicable to the Company, the Company may make, guarantee or arrange for a loan
or loans to a Participant with respect to the exercise of any Option or other
payment in connection with any Award, including the payment by a Participant of
any or all Federal, state or local income or other taxes due in connection with
any Award. Subject to such limitations, the Committee shall have full authority
to decide whether to make a loan or loans hereunder and to determine the
amount, terms and provisions of any such loan or loans, including the interest
rate to be charged in respect of any such loan or loans, whether the loan or
loans are to be with or without recourse against the borrower, the terms on
which the loan is to be repaid and conditions, if any, under which the loan or
loans may be forgiven.

      (e) PERFORMANCE-BASED AWARDS. The Committee may, in its discretion,
designate any Award the exercisability or settlement of which is subject to the
achievement of performance conditions as a performance-based Award subject to
this Section 7(f), in order to qualify such Award as "qualified
performance-based compensation" within the meaning of Code Section 162(m) and
regulations thereunder. The performance objectives for an Award subject to this
Section 7(f) shall consist of one or more business criteria and a targeted level
or levels of performance with respect to such criteria, as specified by the
Committee but subject to this Section 7(f). Performance objectives shall be
objective and shall otherwise meet the requirements of Section 162(m)(4)(C) of
the Code. Business criteria used by the Committee in establishing performance
objectives for Awards subject to this Section 7(f) shall be selected exclusively
from among the following:

            (1) Annual return on capital;

            (2) Annual earnings per share;

            (3) Annual cash flow provided by operations;

            (4) Changes in annual revenues; and/or

            (5) Strategic business criteria, consisting of one or more
      objectives based on meeting specified revenue, market penetration,
      geographic business expansion goals, cost

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      targets, and goals relating to acquisitions or divestitures.

The levels of performance required with respect to such business criteria may be
expressed in absolute or relative levels. Achievement of performance objectives
with respect to such Awards shall be measured over a period of not less than one
year nor more than five years, as the Committee may specify. Performance
objectives may differ for such Awards to different Participants. The Committee
shall specify the weighting to be given to each performance objective for
purposes of determining the final amount payable with respect to any such Award.
The Committee may, in its discretion, reduce the amount of a payout otherwise to
be made in connection with an Award subject to this Section 7(f), but may not
exercise discretion to increase such amount, and the Committee may consider
other performance criteria in exercising such discretion. All determinations by
the Committee as to the achievement of performance objectives shall be in
writing. The Committee may not delegate any responsibility with respect to an
Award subject to this Section 7(f).

      (f) ACCELERATION UPON A CHANGE OF CONTROL. Notwithstanding anything
contained herein to the contrary, unless otherwise provided by the Committee in
an Award Agreement, all conditions and restrictions relating to an Award,
including limitations on exercisability, risks of forfeiture and conditions and
restrictions requiring the continued performance of services or the achievement
of performance objectives with respect to the exercisability or settlement of
such Award, shall immediately lapse upon a Change in Control.

8. GENERAL PROVISIONS.

      (a) COMPLIANCE WITH LAWS AND OBLIGATIONS. The Company shall not be
obligated to issue or deliver Stock in connection with any Award or take any
other action under the Plan in a transaction subject to the registration
requirements of the Securities Act of 1933, as amended, or any other Federal or
state securities law, any requirement under any listing agreement between the
Company and any national securities exchange or automated quotation system or
any other law, regulation or contractual obligation of the Company until the
Company is satisfied that such laws, regulations, and other obligations of the
Company have been complied with in full. Certificates representing shares of
Stock issued under the Plan will be subject to such stop-transfer orders and
other restrictions as may be applicable under such laws, regulations and other
obligations of the Company, including any requirement that a legend or legends
be placed thereon.

      (b) LIMITATIONS ON TRANSFERABILITY. Awards and other rights under the Plan
will not be transferable by a Participant except by will or the laws of descent
and distribution or to a Beneficiary in the event of the Participant's death,
and, if exercisable, shall be exercisable during the lifetime of a Participant
only by such Participant or his guardian or legal representative; PROVIDED,
HOWEVER, that such Awards and other rights (other than ISOs and SARs in tandem
therewith) may be transferred to one or more transferees during the lifetime of
the Participant, and may be exercised by such transferees in accordance with the
terms of such Award consistent with the registration of the offer and sale of
Stock on Form S-8 or Form S-3 or a successor registration form of the Securities
and Exchange Commission, and permitted by the Committee. Awards and other rights
under the Plan may not be pledged, mortgaged, hypothecated or otherwise
encumbered, and shall not be subject to the claims of creditors.

                                                                              11
<PAGE>

      (c) NO RIGHT TO CONTINUED EMPLOYMENT OR SERVICE. Neither the Plan nor any
action taken hereunder shall be construed as giving any employee or other person
the right to be retained in the employ or service of the Company or any of its
subsidiaries, nor shall it interfere in any way with the right of the Company or
any of its subsidiaries to terminate any employee's employment or other person's
service at any time.

      (d) TAXES. The Company and any subsidiary is authorized to withhold from
any Award granted or to be settled, any delivery of Stock in connection with an
Award, any other payment relating to an Award or any payroll or other payment to
a Participant amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations.

      (e) CHANGES TO THE PLAN AND AWARDS. The Board may amend, alter, suspend,
discontinue or terminate the Plan or the Committee's authority to grant Awards
under the Plan without the consent of stockholders or Participants, except that
any such action shall be subject to the approval of the Company's stockholders
at or before the next annual meeting of stockholders for which the record date
is after such Board action if such stockholder approval is required by any
Federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the Stock may then be listed or quoted, and
the Board may otherwise, in its discretion, determine to submit other such
changes to the Plan to stockholders for approval; PROVIDED, HOWEVER, that,
without the consent of an affected Participant, no such action may materially
impair the rights of such Participant under any Award theretofore granted to
him. The Committee may waive any conditions or rights under, or amend, alter,
suspend, discontinue, or terminate, any Award theretofore granted and any Award
Agreement relating thereto; PROVIDED, HOWEVER, that, without the consent of an
affected Participant, no such action may materially impair the rights of such
Participant under such Award.

      (f) NO RIGHTS TO AWARDS; NO STOCKHOLDER RIGHTS. No Participant or employee
shall have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Participants and employees. No Award
shall confer on any participant any of the rights of a stockholder of the
Company unless and until Stock is duly issued or transferred and delivered to
the Participant in accordance with the terms of the Award or, in the case of an
Option, the Option is duly exercised.

      (g) UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant pursuant to an Award,
nothing contained in the Plan or any Award shall give any such Participant any
rights that are greater than those of a general creditor of the Company;
PROVIDED, HOWEVER, that the Committee may authorize the creation of trusts or
make other arrangements to meet the Company's obligations under the Plan to
deliver cash, Stock, other Awards,

                                                                              12
<PAGE>

or other property pursuant to any Award, which trusts or other arrangements
shall be consistent with the "unfunded" status of the Plan unless the Committee
otherwise determines with the consent of each affected Participant.

      (h) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the
Board nor its submission to the stockholders of the Company for approval shall
be construed as creating any limitations on the power of the Board to adopt such
other compensatory arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Plan, and
such arrangements may be either applicable generally or only in specific cases.

      (i) NO FRACTIONAL SHARES. No fractional shares of Stock shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards, or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.

      (j) COMPLIANCE WITH CODE SECTION 162(m). It is the intent of the Company
that employee Options, SARs and other Awards designated as Awards subject to
Section 7(f) shall constitute "qualified performance-based compensation" within
the meaning of Code Section 162(m). Accordingly, if any provision of the Plan
or any Award Agreement relating to such an Award does not comply or is
inconsistent with the requirements of Code Section 162(m), such provision shall
be construed or deemed amended to the extent necessary to conform to such
requirements, and no provision shall be deemed to confer upon the Committee or
any other person discretion to increase the amount of compensation otherwise
payable in connection with any such Award upon attainment of the performance
objectives.

      (k) GOVERNING LAW. The validity, construction and effect of the Plan, any
rules and regulations relating to the Plan and any Award Agreement shall be
determined in accordance with the laws of the State of Delaware, without giving
effect to principles of conflicts of laws, and applicable Federal law.

      (l) EFFECTIVE DATE; PLAN TERMINATION. The Plan shall become effective as
of the date of its adoption by the Board, subject to stockholder approval, and
shall continue in effect until terminated by the Board.

                                                                              13EXHIBIT 10.8

                             [METALICO, INC. LOGO]

To:     EXECUTIVE OFFICERS OF METALICO, INC.

From:   THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

Date:   AS OF AUGUST 4, 2004

Re:     METALICO, INC. EXECUTIVE BONUS PLAN

      In recognition of your continuing contributions to the success of
Metalico, Inc. (the "Corporation") and in order to provide additional incentive
and compensation for your efforts on behalf of the Corporation, the Compensation
Committee (the "Committee") of the Corporation's Board of Directors (the
"Board") hereby establishes the Metalico, Inc. Executive Bonus Plan (the "Plan")
on the terms set forth herein.

      1.    ADMINISTRATION. The Plan shall be administered by the Committee in
consultation with the Chief Executive Officer of the Corporation (the "CEO") on
the terms set forth herein, provided that all actions and decisions of the
Committee other than those of an essentially ministerial nature shall be subject
to the ratification or approval of the Board.

      2.    ELIGIBILITY. All officers appointed by the Board of Directors or as
otherwise determined by the CEO (collectively, "Eligible Officers") shall be
eligible for participation in the Plan at all times during their employment by
the Corporation.

      3.    COMPONENTS OF COMPENSATION. Compensation to be provided under the
Plan shall include, in the discretion of the Compensation Committee, (a) cash
payments and (b) awards of stock options made available to employees of the
Corporation under the Corporation's 1997 Long Term Incentive Plan as in effect
from time to time or any successor thereto or replacement thereof.

      4.    PLAN CRITERIA AND APPLICATIONS. Bonuses shall be determined as
follows:

            (a)   BONUS BASE. For each calendar year (each a "Performance
      Year"), the Compensation Committee shall establish, with the approval of
      the Board, a uniform percentage for all Eligible Officers (the "Bonus
      Percentage") of Eligible Officers' base salaries to be used to calculate
      the maximum amount of, separately,

                                     Page 1
<PAGE>

      both the cash component and the stock option component to be potentially
      available to any Eligible Officer under the Plan for such Performance
      Year. The exercise price per share for options awarded under the Plan (the
      "Award Price") shall be the average closing price for the Corporation's
      common stock for the month ending on the date as of which such options are
      awarded.

            For Performance Year 2004, the Bonus Percentage shall be sixty
      percent (60%). The amount determined by multiplying an Eligible Officer's
      base salary for a Performance Year by the Bonus Percentage for such
      Performance Year shall be referred to under the Plan as such Eligible
      Officer's "Bonus Base."

            EXAMPLE: If an Eligible Officer's base salary for Performance Year
      2004 is $100,000, such Eligible Officer's Bonus Base shall be $100,000
      (the base salary) x 60% (the applicable Bonus Percentage) or $60,000. The
      maximum cash bonus payment available to such Eligible Officer shall be
      $60,000 and the maximum number of stock options available to such Eligible
      Officer shall be equivalent to the number obtained by dividing $60,000 by
      the Award Price, in all cases adjusted pursuant to the provisions of the
      Plan stated below.

            (b)   TARGET. For each Performance Year the Committee shall also
      establish a scale of multipliers (each an "EBITDA Factor") to reflect the
      Corporation's success in achieving EBITDA budgeted for such Performance
      Year as adjusted for significant corporate events ("Budgeted EBITDA"). For
      Performance Year 2004 the scale of EBITDA Factors shall apply as follows:

                  -     If the Corporation achieves less than ninety percent
                        (90%) of Budgeted EBITDA, the EBITDA Factor shall be
                        zero percent (0%).

                  -     If the Corporation achieves ninety percent (90%) or more
                        but less than ninety-five percent (95%) of Budgeted
                        EBITDA, the applicable EBITDA Factor shall be
                        twenty-five percent (25%).

                  -     If the Corporation achieves ninety-five percent (95%) or
                        more but less than one hundred percent (100%) of
                        Budgeted EBITDA, the applicable EBITDA Factor shall be
                        fifty percent (50%).

                  -     If the Corporation achieves one hundred percent (100%)
                        or more of Budgeted EBITDA, the applicable EBITDA Factor
                        shall be one hundred percent (100%).

      The amount determined by multiplying a Bonus Base by an applicable EBITDA
      Factor shall be referred to under the Plan as a "Target." Subject to the
      discretion of the Committee and the application of other provisions of the
      Plan stated below, the amount of each Eligible Officer's Target for any
      Performance Year shall represent the maximum amount of, separately, both
      the cash component payable

                                     Page 2
<PAGE>

      and the stock option component to be awarded to any Eligible Officer under
      the Plan for such Performance Year.

            If the applicable EBITDA Factor is 0%, no bonuses shall be awarded
      in respect of the EBITDA performance and Personal Objectives bonus
      segments described in Paragraph 4(d) below and all awards shall be made in
      the discretion of the Committee and the Board.

            EXAMPLE: For Performance Year 2004, if an Eligible Officer's Bonus
      Base is $60,000 and the Corporation achieves ninety-nine percent (99%) of
      Budgeted EBITDA, such Eligible Officer's Target shall be $60,000 (the
      Bonus Base) x 50% (the applicable EBITDA Factor) or $30,000. Such Eligible
      Officer shall be eligible for a cash bonus payment of up to $30,000 and an
      award of stock options equivalent to the number obtained by dividing
      $30,000 by the Award Price, in all cases subject to the application of
      other provisions of the Plan stated below.

            (c)   PERSONAL OBJECTIVES. For each Performance Year the Committee
      shall, in its discretion and in consultation with the CEO, establish goals
      and objectives ("Objectives") for the Eligible Officers. The Committee
      shall allocate a reasonable number of appropriate Objectives to the
      Corporation's CEO and shall, in consultation with the CEO, allocate a
      reasonable number of appropriate Objectives to the other Eligible Officers
      (such allocated Objectives hereinafter referred to as "Personal
      Objectives" of the Eligible Officer to whom allocated). One or more
      Eligible Officers may be allocated the same Personal Objectives for the
      same Performance Year. At or near the conclusion of each Performance Year,
      (1) the Committee shall evaluate the progress of the CEO is accomplishing
      his Personal Objectives and (2) the CEO shall evaluate the progress of
      each of the other Eligible Officers in accomplishing their respective
      Personal Objectives and report his evaluations to the Committee. The
      Personal Objectives are intended as guidelines only and the Committee and
      the CEO, as applicable, may consider any circumstances, conditions and
      additional factors it or he may choose in evaluating an Eligible Officer's
      progress.

            (d)   BONUS SEGMENTS; DETERMINATION. For each of the cash payment
      component and the stock option component, each Eligible Officer's bonus
      shall be determined as the sum of three segments in the proportions set
      forth below:

                  (1)   The Corporation's EBITDA performance for the
                        applicable Performance Year                       45%

                  (2)   Progress on Personal Objectives                   35%

                  (3)   Discretionary award in the judgment of the
                        Committee                                         20%

            -     The amount allotted as Segment (1) (EBITDA performance) shall
                  be a

                                     Page 3
<PAGE>

                  fixed amount calculated by multiplying the Target by
                  forty-five percent (45%).

            -     The amount allotted as Segment (2) (Personal Objectives) shall
                  be calculated by multiplying the Target by a percentage of
                  from 0% to 35% reflecting the Eligible Officer's progress in
                  achieving his or her Personal Objectives for the applicable
                  Performance Year as determined (1) by the Committee with
                  respect to the CEO and (2) by the CEO with the approval of the
                  Committee with respect to the other Eligible Officers.

            -     The amount allotted as Segment (3) (Discretionary Award) shall
                  be calculated by multiplying the Target by a percentage of
                  from 0% to 20% as determined in the discretion of (1) the
                  Committee with respect to the CEO and (2) the CEO with the
                  approval of the Committee with respect to the other Eligible
                  Officers, in each case using whatever factors or
                  considerations either the Committee or the CEO, as applicable,
                  deems appropriate.

            EXAMPLE: If: an Eligible Officer's Target is $30,000; the Eligible
      Officer has achieved two-thirds (-2/3) progress on Personal Objectives for
      the applicable Performance Year in the determination of the Committee or
      the CEO, as appropriate; and the Committee or CEO, as appropriate, has
      elected to make a discretionary award of ten percent (10%), the amount of
      such Eligible Officer's cash and stock option bonuses shall be calculated
      as follows:

                        (1)   EBITDA performance for the Performance
                              Year:  45% x $30,000 (Target)             $13,500

                        (2)   Progress on Personal Objectives: 24%
                              (2/3 of 35%, rounded for the sake of
                              this Example) x $30,000 (Target)          $ 7,200

                        (3)   Discretionary award: 10% x $30,000
                              (Target)                                  $ 3,000

                              BONUS AMOUNT (SUM OF THREE SEGMENTS)      $23,700

      The Eligible Officer would therefore receive a cash bonus payment of
      $23,700 and an award of options equivalent to $23,700 divided by the Award
      Price, in all cases subject to the application of other provisions of the
      Plan stated below.

      At the Board's discretion, the maximum bonus amount may be exceeded for
      any or all participants in the plan.

                                     Page 4
<PAGE>

      5.    PAYMENT AND ISSUANCE. The Committee reserves the right to defer
payment of cash bonuses and issuance of bonus stock options for any Performance
Year until such time as the Corporation's final EBITDA for such Performance Year
is available and confirmed to the reasonable satisfaction of the Committee.
Stock options shall be deemed granted as of December 31 of the Performance Year
for which they are awarded unless such deeming is prohibited by law or
materially disadvantageous to the Corporation for legal or accounting reasons,
in which event bonus stock options shall be deemed granted as of the earliest
date in the next year following the Performance Year in which they can legally
and/or practicably be granted.

      6.    SPECIAL OPTION TERMS. Stock options granted to Eligible Officers
under the Plan shall vest quarterly over a period of four years commencing on
the first day of the year immediately following the Performance Year for which
such options are awarded, the first such vesting to occur on the last day of the
first calendar quarter immediately following such Performance Year. Such bonus
stock options shall be exercisable for a period of ten years from the earlier of
the date issued and the date deemed issued. In all other respects bonus stock
options awarded under the Plan shall be subject to the Corporation's 1997 Long
Term Incentive Plan as in effect from time to time or any successor thereto or
replacement thereof.

      7.    COMMUNICATIONS. The Committee shall deliver to each Eligible
Officer, as soon as reasonably available, copies of the Plan and, for each
Performance Year, the Bonus Percentage, the Corporation's Objectives, and the
Personal Objectives allocated to such Eligible Officer.

      8.    RESERVATIONS; DEFERRALS. All awards of bonuses under the Plan are
subject to availability and to the performance of the Corporation, economically
and otherwise. Although the Corporation intends to make such payments and awards
of options as are provided under the Plan, the Corporation reserves the right to
defer or delay any payment or award in the event that, in the opinion of the
Committee or the Board of Directors, circumstances make such payments and awards
materially disadvantageous to the Corporation or the Corporation lacks the
resources to provide such bonuses. Administration of the Plan is at all times
subject to the supervision of the Committee and the Board of Directors.

                                     Page 5

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