Document:

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                                                                    EXHIBIT 10.7

         THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
         1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY HAVE BEEN ACQUIRED
         SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
         THE SALE OR DISTRIBUTION THEREOF. THEY MAY NOT BE SOLD, OFFERED FOR
         SALE, PLEDGED, HYPOTHECATED OR OTHERWISE DISTRIBUTED IN THE ABSENCE OF
         AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN EXEMPTION
         FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ANY
         APPLICABLE STATE SECURITIES LAWS.

                                    WARRANT                    December 3, 1999
                  To Purchase 50,000 Shares of Common Stock of
                     Metal Management, Inc. (the "Company")

         1. Number of Shares: Exercise Price: Term. This certifies that James R.
Thompson ("Holder") is entitled, upon the terms and subject to the vesting
requirements and other conditions set forth herein, to acquire from the Company,
in whole or in part, from time to time up to 50,000 fully paid and nonassessable
shares (the "Shares") of common stock $.01 par value of the Company ("Common
Stock") at a purchase price per Share equal to $2.50. The right to purchase the
shares of Common Stock under this Warrant shall vest on the first anniversary of
the date of grant and shall remain exerciseable until the earlier of (i) 11:59
p.m. Central Time on the six month anniversary of the date of termination of the
Holder's status as a Director of the Company or (ii) 11:59 p.m. Central Time on
December 3, 2004 (the "Exercise Period").

         2. Exercise of Warrant. The purchase rights represented by this Warrant
are exercisable by the Holder, in whole or in part, at any time during the
Exercise Period by the surrender of this Warrant and the Notice of Exercise
annexed hereto, all duly completed and executed on behalf of the Holder, at the
office of the Company in Chicago, Illinois (or such other office or agency of
the Company as it may designate by notice in writing to the Holder at the
address of the Holder appearing on the books of the Company). Payment of the
Exercise Price for the Shares thereby purchased shall be made by cash, certified
or cashier's check or wire transfer payable to the order of the Company, at
10:00 a.m., Central Standard Time, on the day following surrender of this
Warrant and the Notice of Exercise, in an amount equal to the purchase price of
the Shares thereby purchased. Thereupon, the Holder as the holder of this
Warrant, shall be entitled to receive from the Company a stock certificate in
proper form representing the number of Shares so purchased, and a new Warrant in
substantially identical form and dated as of such exercise for the purchase of
that number of Shares equal to the difference, if any, between the number of
Shares subject hereto and the number of Shares as to which this Warrant is so
exercised.

         3. Issuance of Shares. Certificates for Shares purchased hereunder
shall be delivered to the Holder promptly after the date on which this Warrant
shall have been exercised in accordance with the terms hereof. The Company
hereby represents and warrants that all Shares that may be issued upon the
exercise of this Warrant will, upon such exercise, be duly and validly
authorized and issued, fully paid and nonassessable and free from all taxes,
liens and charges in respect of the issuance thereof (other than liens or
charges created by or imposed upon the Holder as the holder of the Warrant or
taxes in respect of any transfer occurring contemporaneously or otherwise
specified herein). The Company agrees that the Shares so issued shall be and
shall for all purposes be deemed to have been issued to the Holder as the record
owner of such Shares as of the close of business on the date on which this
Warrant shall have been exercised or converted in accordance with the terms
hereof.

         4. No Fractional Shares or Scrip. No fractional Shares or scrip
representing fractional Shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional Share to which the Holder as the holder would
otherwise be entitled, the Holder shall be entitled, at his option, to receive
either (i) a cash payment equal to the excess of fair market value for such
fractional Share above the Exercise Price for such fractional share (as
determined in good faith by the Company) or (ii) a whole Share if the Holder
tenders the Exercise Price for one whole share.

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         5. No Rights as Shareholders. This Warrant does not entitle the Holder
as a holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof.

         6. Charges. Taxes and Expenses. Certificates for Shares issued upon
exercise of this Warrant shall be issued in the name of the Holder as the holder
of this Warrant. Issuance of certificates for Shares upon the exercise of this
Warrant shall be made without charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificates, all
of which taxes and expenses shall be paid by the Company.

         7. No Transfer. This Warrant and any rights hereunder are not
transferable by the Holder as the holder hereof, in whole or in part.

         8. Exchange and Registry of Warrant. This Warrant is exchangeable, upon
the surrender hereof by the Holder as the registered holder at the
above-mentioned office or agency of the Company, for a new Warrant on
substantially identical form and dated as of such exchange. The Company shall
maintain at the above-mentioned office or agency a registry showing the name and
address of the Holder as the registered holder of this Warrant. This Warrant may
be surrendered for exchange or exercise, in accordance with its terms, at the
office of the Company, and the Company shall be entitled to rely in all
respects, prior to written notice to the contrary, upon such registry.

         9. Loss. Theft. Destruction or Mutilation of Warrant. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in the case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation
and reissuance, in lieu of this Warrant.

         10. Reservation of Common Stock. The Company will at all times reserve
and keep available, solely for issuance, sale and delivery upon the exercise of
this Warrant, such number of Shares, equal to the number of such Shares
purchasable upon the exercise of this Warrant. All such Shares shall be duly
authorized and, when issued upon exercise of this Warrant in accordance with the
terms hereof, will be validly issued and fully paid and nonassessable, with no
liability on the part of the Holder. Such Shares will not be subject to any
preemptive rights.

         11. Listing on Securities Exchanges, Etc. The Company will maintain the
listing of all Shares issuable or issued from time to time upon exercise of this
Warrant on each securities exchange or market or trading system on which any
shares of Common Stock are then or at any time thereafter listed or traded, but
only to the extent and for such period of time as such shares of Common Stock
are so listed.

         12. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday or a Sunday or a legal holiday.

         13. Adjustments and Termination of Rights. The purchase price per Share
and the number of Shares purchasable hereunder are subject to adjustment from
time to time as follows:

                  (a) Merger or Consolidation. If at any time there shall be a
merger or a consolidation of the Company with or into another corporation when
the Company is not the surviving corporation, then, as part of such merger or
consolidation, lawful provision shall be made so that the Holder as the holder
of this Warrant shall thereafter be entitled to receive upon exercise of this
Warrant, during the period specified herein and upon

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<PAGE>   3

payment of the aggregate Exercise Price then in effect, the number of shares of
stock or other securities or property (including cash) of the successor
corporation resulting from such merger or consolidation, to which the Holder as
the holder of the stock deliverable upon exercise of this Warrant would have
been entitled in such merger or consolidation if this Warrant had been exercised
immediately before such merger or consolidation. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder as the holder of this
Warrant after the merger or consolidation. This provision shall apply to
successive mergers or consolidations.

                  (b) Reclassification, Recapitalization, etc. If the Company at
any time shall, by subdivision, combination or reclassification of securities,
recapitalization, automatic conversion, or other similar event affecting the
number or character of outstanding Shares, or otherwise, change any of the
securities as to which purchase rights under this Warrant exist into the same or
a different number of securities of any other class or classes, this Warrant
shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the securities that were subject to the purchase rights under this Warrant
immediately prior to such subdivision, combination, reclassification or other
change.

                  (c) Split, Subdivision or Combination of Shares. If the
Company at any time while this Warrant remains outstanding and unexpired shall
split, subdivide or combine the securities as to which purchase rights under
this Warrant exist, the Exercise Price shall be proportionately decreased in the
case of a split or subdivision or proportionately increased in the case of a
combination.

                  (d) Common Stock Dividends. If the Company at any time while
this Warrant is outstanding and unexpired shall pay a dividend with respect to
Common Stock payable in Shares, or make any other distribution with respect to
Common Stock of Shares, then the Exercise Price shall be adjusted, from and
after the date of determination of the shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Exercise
Price in effect immediately prior to such date of determination by a fraction
(i) the numerator of which shall be the total number of Shares outstanding
immediately prior to such dividend or distribution, and (ii) the denominator of
which shall be the total number of Shares outstanding immediately after such
dividend or distribution. This paragraph shall apply only if and to the extent
that, at the time of such event, this Warrant is then exercisable for Common
Stock.

                  (e) Adjustment of Number of Shares. Upon each adjustment in
the Exercise Price pursuant to 13(c) or 13(d) hereof, the number of Shares
purchasable hereunder shall be adjusted, to the nearest whole Share, to the
product obtained by multiplying the number of Shares purchasable immediately
prior to such adjustment in the Exercise Price by a fraction (i) the numerator
of which shall be the Exercise Price immediately prior to such adjustment, and
(ii) the denominator of which shall be the Exercise Price immediately after such
adjustment.

         14. Notice of Adjustments: Notices. Whenever the Exercise Price or
number or type of securities issuable hereunder shall be adjusted pursuant to
Section 13 hereof, the Company shall issue and provide to the Holder as the
holder of this Warrant a certificate signed by an officer of the Company setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated and the
Exercise Price and number of Shares purchasable hereunder after giving effect to
such adjustment.

         15. Governing Law. This Warrant shall be binding upon any successors or
assigns of the Company. This Warrant shall constitute a contract under the laws
of Delaware and for all purposes shall be construed in accordance with and
governed by the laws of said state without giving effect to the conflict of laws
principles.

         16. Attorneys' Fees. In any litigation, arbitration or court proceeding
between the Company and the Holder as the holder of this Warrant relating
hereto, the prevailing party shall be entitled to reasonable attorneys' fees and
expenses incurred in enforcing this Warrant.

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         17. Amendments. This Warrant may be amended and the observance of any
term of this Warrant may be waived only with the written consent of the Company
and the Holder as the holder hereof.

         18. Notice. All notices hereunder shall be in writing and shall be
effective (a) on the day on which delivered if delivered personally or
transmitted by telex or telegram or telecopier with evidence of receipt, (b) one
business day after the date on which the same is delivered to a nationally
recognized overnight courier service with evidence of receipt, or (c) five
business days after the date on which the same is deposited, postage prepaid, in
the U.S. mail, sent by certified or registered mail, return receipt requested,
and addressed to the party to be notified at the address indicated below for the
Company, or at the address for the Holder as the holder set forth in the
registry maintained by the Company pursuant to Section 8, or at such other
address and/or telecopy or telex number and/or to the attention of such other
person as the Company or the Holder as the holder may designate by ten-day
advance written notice.

         19. Entire Agreement. This Warrant and the forms attached hereto
contain the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior and contemporaneous arrangements or
undertakings with respect thereto.

         IN WITNESS WHEREOF, Metal Management, Inc. has caused this Warrant to
be executed by its duly authorized officer.

Dated:  December 3, 1999

                                    METAL MANAGEMENT, INC.

                                    By: /s/ David A. Carpenter
                                        -------------------------------
                                    Name:    David A. Carpenter
                                    Title:   Executive Vice President, General
                                             Counsel and Secretary
                                    Address: 500 N. Dearborn Street
                                                      Suite 400
                                                      Chicago, IL  60610

                                       4
<PAGE>   5

                               NOTICE OF EXERCISE

To: Metal Management, Inc.

         1. The undersigned hereby elects to purchase ____________ shares (the
"Shares") of common stock $.01 par value of Metal Management, Inc. (the
"Company") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price and any transfer taxes payable pursuant to the
terms of the Warrant, together with an investment Representation Statement in
form and substance satisfactory to legal counsel to the Company.

         2. The Shares to be received by the undersigned upon exercise of the
Warrant are being acquired for its own account, not as a nominee or agent, and
not with a view to resale or distribution of any part thereof, and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same, except in compliance with applicable federal
and state securities laws. The undersigned further represents that it does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to such person or to any third person,
with respect to the Shares. The undersigned believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Shares.

         3. The undersigned understands that the Shares are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in transactions not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with Rule 144 of the Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.

         4. The undersigned understands the certificates evidencing the Shares
may bear one or all of the following legends:

                  (a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
                  SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
                  LAWS. THEY HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND NOT
                  WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
                  DISTRIBUTION THEREOF. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
                  PLEDGED, HYPOTHECATED OR OTHERWISE DISTRIBUTED IN THE ABSENCE
                  OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
                  EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
                  AS AMENDED AND ANY APPLICABLE STATE SECURITIES LAWS."

                  (b)Any legend required by applicable state law.

         5. Please issue a certificate or certificates representing said Shares
in the name of the undersigned.

                                                 ------------------------------
                                                 James R. Thompson

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6. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned.

                                                  James R. Thompson

-----------------------                           -----------------------------
         [Date]                                         [Signature]

                                       2<PAGE>   1
                                                                    EXHIBIT 10.8

         THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
         1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY HAVE BEEN ACQUIRED
         SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
         THE SALE OR DISTRIBUTION THEREOF. THEY MAY NOT BE SOLD, OFFERED FOR
         SALE, PLEDGED, HYPOTHECATED OR OTHERWISE DISTRIBUTED IN THE ABSENCE OF
         AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN EXEMPTION
         FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ANY
         APPLICABLE STATE SECURITIES LAWS.

                                   WARRANT                     December 3, 1999
                  To Purchase 50,000 Shares of Common Stock of
                     Metal Management, Inc. (the "Company")

          1. Number of Shares: Exercise Price: Term. This certifies that James
R. Thompson ("Holder") is entitled, upon the terms and subject to the vesting
requirements and other conditions set forth herein, to acquire from the Company,
in whole or in part, from time to time up to 50,000 fully paid and nonassessable
shares (the "Shares") of common stock $.01 par value of the Company ("Common
Stock") at a purchase price per Share equal to $2.00. The right to purchase the
shares of Common Stock under this Warrant shall vest as of the date of grant and
shall remain exerciseable until the earlier of (i) 11:59 p.m. Central Time on
the six month anniversary of the date of termination of the Holder's status as a
Director of the Company or (ii) 11:59 p.m. Central Time on December 3, 2004 (the
"Exercise Period").

          2. Exercise of Warrant. The purchase rights represented by this
Warrant are exercisable by the Holder, in whole or in part, at any during the
Exercise Period by the surrender of this Warrant and the Notice of Exercise
annexed hereto, all duly completed and executed on behalf of the Holder, at the
office of the Company in Chicago, Illinois (or such other office or agency of
the Company as it may designate by notice in writing to the Holder at the
address of the Holder appearing on the books of the Company). Payment of the
Exercise Price for the Shares thereby purchased shall be made by cash, certified
or cashier's check or wire transfer payable to the order of the Company, at
10:00 a.m., Central Standard Time, on the day following surrender of this
Warrant and the Notice of Exercise, in an amount equal to the purchase price of
the Shares thereby purchased. Thereupon, the Holder as the holder of this
Warrant, shall be entitled to receive from the Company a stock certificate in
proper form representing the number of Shares so purchased, and a new Warrant in
substantially identical form and dated as of such exercise for the purchase of
that number of Shares equal to the difference, if any, between the number of
Shares subject hereto and the number of Shares as to which this Warrant is so
exercised.

         3. Issuance of Shares. Certificates for Shares purchased hereunder
shall be delivered to the Holder promptly after the date on which this Warrant
shall have been exercised in accordance with the terms hereof. The Company
hereby represents and warrants that all Shares that may be issued upon the
exercise of this Warrant will, upon such exercise, be duly and validly
authorized and issued, fully paid and nonassessable and free from all taxes,
liens and charges in respect of the issuance thereof (other than liens or
charges created by or imposed upon the Holder as the holder of the Warrant or
taxes in respect of any transfer occurring contemporaneously or otherwise
specified herein). The Company agrees that the Shares so issued shall be and
shall for all purposes be deemed to have been issued to the Holder as the record
owner of such Shares as of the close of business on the date on which this
Warrant shall have been exercised or converted in accordance with the terms
hereof.

         4. No Fractional Shares or Scrip. No fractional Shares or scrip
representing fractional Shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional Share to which the Holder as the holder would
otherwise be entitled, the Holder shall be entitled, at his option, to receive
either (i) a cash payment equal to the excess of fair market value for such
fractional Share above the Exercise Price for such fractional share (as
determined in good faith by the Company) or (ii) a whole Share if the Holder
tenders the Exercise Price for one whole share.

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<PAGE>   2

         5. No Rights as Shareholders. This Warrant does not entitle the Holder
as a holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof.

         6. Charges. Taxes and Expenses. Certificates for Shares issued upon
exercise of this Warrant shall be issued in the name of the Holder as the holder
of this Warrant. Issuance of certificates for Shares upon the exercise of this
Warrant shall be made without charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificates, all
of which taxes and expenses shall be paid by the Company.

         7. No Transfer. This Warrant and any rights hereunder are not
transferable by the Holder as the holder hereof, in whole or in part.

         8. Exchange and Registry of Warrant. This Warrant is exchangeable, upon
the surrender hereof by the Holder as the registered holder at the
above-mentioned office or agency of the Company, for a new Warrant on
substantially identical form and dated as of such exchange. The Company shall
maintain at the above-mentioned office or agency a registry showing the name and
address of the Holder as the registered holder of this Warrant. This Warrant may
be surrendered for exchange or exercise, in accordance with its terms, at the
office of the Company, and the Company shall be entitled to rely in all
respects, prior to written notice to the contrary, upon such registry.

         9. Loss. Theft. Destruction or Mutilation of Warrant. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in the case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation
and reissuance, in lieu of this Warrant.

          10. Reservation of Common Stock. The Company will at all times reserve
and keep available, solely for issuance, sale and delivery upon the exercise of
this Warrant, such number of Shares, equal to the number of such Shares
purchasable upon the exercise of this Warrant. All such Shares shall be duly
authorized and, when issued upon exercise of this Warrant in accordance with the
terms hereof, will be validly issued and fully paid and nonassessable, with no
liability on the part of the Holder. Such Shares will not be subject to any
preemptive rights.

         11. Listing on Securities Exchanges, Etc. The Company will maintain the
listing of all Shares issuable or issued from time to time upon exercise of this
Warrant on each securities exchange or market or trading system on which any
shares of Common Stock are then or at any time thereafter listed or traded, but
only to the extent and for such period of time as such shares of Common Stock
are so listed.

         12. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday or a Sunday or a legal holiday.

         13. Adjustments and Termination of Rights. The purchase price per Share
and the number of Shares purchasable hereunder are subject to adjustment from
time to time as follows:

                  (a) Merger or Consolidation. If at any time there shall be a
merger or a consolidation of the Company with or into another corporation when
the Company is not the surviving corporation, then, as part of such merger or
consolidation, lawful provision shall be made so that the Holder as the holder
of this Warrant shall thereafter be entitled to receive upon exercise of this
Warrant, during the period specified herein and upon

                                       2
<PAGE>   3

payment of the aggregate Exercise Price then in effect, the number of shares of
stock or other securities or property (including cash) of the successor
corporation resulting from such merger or consolidation, to which the Holder as
the holder of the stock deliverable upon exercise of this Warrant would have
been entitled in such merger or consolidation if this Warrant had been exercised
immediately before such merger or consolidation. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder as the holder of this
Warrant after the merger or consolidation. This provision shall apply to
successive mergers or consolidations.

                  (b) Reclassification, Recapitalization, etc. If the Company at
any time shall, by subdivision, combination or reclassification of securities,
recapitalization, automatic conversion, or other similar event affecting the
number or character of outstanding Shares, or otherwise, change any of the
securities as to which purchase rights under this Warrant exist into the same or
a different number of securities of any other class or classes, this Warrant
shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the securities that were subject to the purchase rights under this Warrant
immediately prior to such subdivision, combination, reclassification or other
change.

                  (c) Split, Subdivision or Combination of Shares. If the
Company at any time while this Warrant remains outstanding and unexpired shall
split, subdivide or combine the securities as to which purchase rights under
this Warrant exist, the Exercise Price shall be proportionately decreased in the
case of a split or subdivision or proportionately increased in the case of a
combination.

                  (d) Common Stock Dividends. If the Company at any time while
this Warrant is outstanding and unexpired shall pay a dividend with respect to
Common Stock payable in Shares, or make any other distribution with respect to
Common Stock of Shares, then the Exercise Price shall be adjusted, from and
after the date of determination of the shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Exercise
Price in effect immediately prior to such date of determination by a fraction
(i) the numerator of which shall be the total number of Shares outstanding
immediately prior to such dividend or distribution, and (ii) the denominator of
which shall be the total number of Shares outstanding immediately after such
dividend or distribution. This paragraph shall apply only if and to the extent
that, at the time of such event, this Warrant is then exercisable for Common
Stock.

                  (e) Adjustment of Number of Shares. Upon each adjustment in
the Exercise Price pursuant to 13(c) or 13(d) hereof, the number of Shares
purchasable hereunder shall be adjusted, to the nearest whole Share, to the
product obtained by multiplying the number of Shares purchasable immediately
prior to such adjustment in the Exercise Price by a fraction (i) the numerator
of which shall be the Exercise Price immediately prior to such adjustment, and
(ii) the denominator of which shall be the Exercise Price immediately after such
adjustment.

         14. Notice of Adjustments: Notices. Whenever the Exercise Price or
number or type of securities issuable hereunder shall be adjusted pursuant to
Section 13 hereof, the Company shall issue and provide to the Holder as the
holder of this Warrant a certificate signed by an officer of the Company setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated and the
Exercise Price and number of Shares purchasable hereunder after giving effect to
such adjustment.

          15. Governing Law. This Warrant shall be binding upon any successors
or assigns of the Company. This Warrant shall constitute a contract under the
laws of Delaware and for all purposes shall be construed in accordance with and
governed by the laws of said state without giving effect to the conflict of laws
principles.

          16. Attorneys' Fees. In any litigation, arbitration or court
proceeding between the Company and the Holder as the holder of this Warrant
relating hereto, the prevailing party shall be entitled to reasonable attorneys'
fees and expenses incurred in enforcing this Warrant.

                                       3
<PAGE>   4

         17. Amendments. This Warrant may be amended and the observance of any
term of this Warrant may be waived only with the written consent of the Company
and the Holder as the holder hereof.

         18. Notice. All notices hereunder shall be in writing and shall be
effective (a) on the day on which delivered if delivered personally or
transmitted by telex or telegram or telecopier with evidence of receipt, (b) one
business day after the date on which the same is delivered to a nationally
recognized overnight courier service with evidence of receipt, or (c) five
business days after the date on which the same is deposited, postage prepaid, in
the U.S. mail, sent by certified or registered mail, return receipt requested,
and addressed to the party to be notified at the address indicated below for the
Company, or at the address for the Holder as the holder set forth in the
registry maintained by the Company pursuant to Section 8, or at such other
address and/or telecopy or telex number and/or to the attention of such other
person as the Company or the Holder as the holder may designate by ten-day
advance written notice.

         19. Entire Agreement. This Warrant and the forms attached hereto
contain the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior and contemporaneous arrangements or
undertakings with respect thereto.

         IN WITNESS WHEREOF, Metal Management, Inc. has caused this Warrant to
be executed by its duly authorized officer.

Dated:  December 3, 1999

                                      METAL MANAGEMENT, INC.

                                      By: /s/ David A. Carpenter
                                          ------------------------------
                                      Name:    David A. Carpenter
                                      Title:   Executive Vice President, General
                                               Counsel and Secretary
                                      Address: 500 N. Dearborn Street
                                                        Suite 400
                                                        Chicago, IL  60610

                                       4
<PAGE>   5

                               NOTICE OF EXERCISE

To: Metal Management, Inc.

         1. The undersigned hereby elects to purchase ____________ shares (the
"Shares") of common stock $.01 par value of Metal Management, Inc. (the
"Company") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price and any transfer taxes payable pursuant to the
terms of the Warrant, together with an investment Representation Statement in
form and substance satisfactory to legal counsel to the Company.

         2. The Shares to be received by the undersigned upon exercise of the
Warrant are being acquired for its own account, not as a nominee or agent, and
not with a view to resale or distribution of any part thereof, and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same, except in compliance with applicable federal
and state securities laws. The undersigned further represents that it does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to such person or to any third person,
with respect to the Shares. The undersigned believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Shares.

         3. The undersigned understands that the Shares are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in transactions not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with Rule 144 of the Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.

         4. The undersigned understands the certificates evidencing the Shares
may bear one or all of the following legends:

                  (a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
                  SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
                  LAWS. THEY HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND NOT
                  WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
                  DISTRIBUTION THEREOF. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
                  PLEDGED, HYPOTHECATED OR OTHERWISE DISTRIBUTED IN THE ABSENCE
                  OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
                  EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
                  AS AMENDED AND ANY APPLICABLE STATE SECURITIES LAWS."

                  (b)Any legend required by applicable state law.

         5. Please issue a certificate or certificates representing said Shares
in the name of the undersigned.

                                                ------------------------------
                                                James R. Thompson

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<PAGE>   6

6. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned.

                                                  James R. Thompson

-----------------------                           -----------------------------
         [Date]                                          [Signature]

                                       2

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