exv10w8



 





[EXECUTION
VERSON]


Exhibit 10.8





     MANAGEMENT AGREEMENT, dated as of November 30,
2005, between METALS USA, INC., a Delaware
corporation (the “Company”), Flag Holdings
Corporation, a Delaware corporation (“Flag
Holdings”), and APOLLO MANAGEMENT V, L.P., a
Delaware limited partnership (“Apollo”).



     Each of Flag Holdings and the Company desires to avail itself of Apollo’s expertise and
consequently has requested that Apollo make such expertise available from time to time in rendering
certain management consulting and advisory services related to the business and affairs of the
Company and its subsidiaries and affiliates and the review and analysis of certain financial and
other transactions. Apollo, Flag Holdings and the Company agree that it is in their respective
best interests to enter into this Agreement whereby, for the consideration specified herein, Apollo
shall provide such services as independent consultant to the Company.



     NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the Company,
Flag Holdings and Apollo agree as follows:



     Section 1. Retention of Apollo.



     The Company hereby retains Apollo, and Apollo accepts such retention, upon the terms and
conditions set forth in this Agreement.



     Section 2. Term.



     This Agreement shall commence on the date hereof and, unless otherwise extended pursuant to
the second sentence of this Section 2, shall terminate on December 31, 2012 (the
“Term”). Upon December 31, 2012, and at the end of each year thereafter (each of December
31, 2012 and the end of each year thereafter being a “Year End”), the Term shall
automatically be extended for an additional year unless notice to the contrary is given by either
party at least 30, but no more than 60, days prior to such Year End, as applicable. Notwithstanding
anything to the contrary in this Section 2, this Agreement may be terminated at any time upon
written notice to the Company from Apollo. The provisions of Section 3(c), the last sentence of
Section 4(a) Section 4(b), Section 4(c), Section 4(d), Section 5 and Sections 7 though 14 shall
survive the termination of this Agreement.



     Section 3. Management Consulting Services.



          (a) Apollo shall advise the Company concerning such management matters that relate to proposed
financial transactions, acquisitions and other senior management




 









 







matters related to the business, administration and policies of the Company and its
subsidiaries and affiliates, in each case as the Company shall reasonably and specifically request
by way of written notice to Apollo, which notice shall specify the services required of Apollo and
shall include all background material necessary for Apollo to complete such services. If requested
to provide such services, Apollo shall devote such time to any such written request as Apollo shall
deem, in its sole discretion, necessary. Such consulting services, in Apollo’s sole discretion,
shall be rendered in person or by telephone or other communication. Apollo shall have no
obligation to the Company as to the manner and time of rendering its services hereunder, and the
Company shall not have any right to dictate or direct the details of the services rendered
hereunder.




          (b) Apollo shall perform all services to be provided hereunder as an independent contractor to
the Company and not as an employee, agent or representative of the Company. Apollo shall have no
authority to act for or to bind the Company without its prior written consent.




          (c) This Agreement shall in no way prohibit Apollo or any of its partners or Affiliates or any
director, officer, partner, agent or employee of Apollo or any of its partners or Affiliates from
engaging in other activities, whether or not competitive with any business of the Company or any of
its respective subsidiaries or affiliates.




     Section 4. Compensation.



          (a) As consideration for Apollo’s agreement to render the services set forth in Section
3(a) of this Agreement and as compensation for any such services rendered by Apollo, the
Company agrees to pay to Apollo an annual fee equal to $2 million, payable on March 15 of each year
(it being understood and agreed that the first such payment shall be made to Apollo on March 15,
2006). If Apollo elects to terminate this Agreement upon written notice to the Company pursuant to
Section 2 herein, as consideration for the termination of Apollo’s services under this Agreement
and any additional compensation to be received hereunder, the Company agrees to pay, or cause its
subsidiaries to pay, to Apollo the present value (as reasonably determined by Apollo) of (x) $14
million, less (y) any amounts Apollo has received from the Company prior to the termination date
pursuant to the first sentence of this Section 4(a).




          (b) Upon presentation by Apollo to the Company of such documentation as may be reasonably
requested by the Company, the Company shall reimburse Apollo for all out-of-pocket expenses,
including, without limitation, legal fees and expenses, and other disbursements incurred by Apollo
or any of its partners or Affiliates or any director, officer, partner, agent or employee of Apollo
or any of its partners or Affiliates in the performance of Apollo’s obligations hereunder, whether
incurred on or prior to the date hereof, including, without limitation, out-of-pocket expenses
incurred in connection with the transactions contemplated by the Agreement and Plan of Merger by
and among Flag Holdings Corporation, Flag Acquisition Corporation and the Company, dated May 18,
2005 (the “Merger Agreement”), and each of the documents referred to therein.




          (c) Nothing in this Agreement shall have the effect of prohibiting Apollo or any of its
Affiliates from receiving from the Company or any of its subsidiaries or




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affiliates any other fees, including any fee payable pursuant to Section 6 or the
Transaction Fee Agreement dated as of the date hereof between Apollo and the Company.




          (d) Reference is made to (i) the Credit Agreement, to be entered into simultaneously with
consummation of the transactions contemplated by the Merger Agreement (as amended, restated,
modified or supplemented and in effect from time to time, the “Credit Agreement”), dated as
of November 30, 2005 and entered into by and among the Company, Credit Suisse First Boston LLC and
Bank of America, N.A., and (ii) the Indenture dated as of the date hereof among the Company, Flag
Holdings, Flag Acquisition Corporation and Wells Fargo Bank, N.A., as trustee, and the other
documents related thereto (the Indenture and such related documents collectively being the
“Debt Instruments”). Any portion of the fees payable to Apollo under this Agreement which
the Company is prohibited from paying to Apollo under the Credit Agreement or the Debt Instruments
shall be deferred, shall accrue and shall be payable at the earliest time permitted under the
Credit Agreement and the Debt Instruments or upon the payment in full of all obligations under the
Credit Agreement and the Debt Instruments. The Company shall notify Apollo if the Company shall be
unable to pay any fees pursuant to the Credit Agreement or the Debt Instruments on each date on
which the Company would otherwise make a payment of fees under this Agreement to Apollo.




     Section 5. Indemnification.



     The Company agrees that it shall indemnify and hold harmless Apollo, its partners and
Affiliates and any director, officer, partner, agent or employee of Apollo or any of its partners
or Affiliates (collectively, the “Indemnified Persons”) on demand from and against any and
all liabilities, costs, expenses and disbursements (including reasonable fees and expenses of
counsel and other advisors) (collectively, “Claims”) of any kind with respect to or arising
from this Agreement or the performance by any Indemnified Person of any services in connection
herewith. Notwithstanding the foregoing provision, the Company shall not be liable for any Claim
under this Section 5 arising from the willful misconduct of any Indemnified Person.




     Section 6. Other Services.



     If Flag Holdings, the Company or any of their respective subsidiaries or affiliates (other
than Apollo) shall determine that it is advisable for any such entity to hire a financial advisor,
consultant, investment banker or any similar agent in connection with any merger, acquisition,
disposition, recapitalization, issuance of securities, financing or any similar transaction, it
shall notify Apollo of such determination in writing. Promptly thereafter, upon the request of
Apollo, the parties shall negotiate in good faith to agree upon appropriate services, compensation
and indemnification for such entity to hire Apollo or its Affiliates for such services. Such entity
may not hire any person, other than Apollo or its Affiliates, for any services, unless (a) the
parties are unable to agree after 30 days following receipt by Apollo of such written notice, (b)
such other person has a reputation that is at least equal to the reputation of Apollo in respect of
such services, (c) ten business days shall have elapsed after such entity provides a written notice
to Apollo of its intention to hire such other person, which notice shall identify such other person
and shall describe in reasonable detail the nature of the services to be




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provided, the compensation to be paid and the indemnification to be provided, (d) the
compensation to be paid is not more than Apollo was willing to accept in the negotiations described
above, and (e) the indemnification to be provided is not more favorable to such other person than
the indemnification that Apollo was willing to accept in the negotiations described above. In the
absence of an express agreement to the contrary, at the closing of any merger, acquisition,
financing or similar transaction with an aggregate value (as reasonably determined by Apollo) of
$25 million or more, Apollo shall receive a fee equal to 1% of the aggregate transaction enterprise
value paid to or provided by such entity or its shareholders (including the aggregate value of (x)
equity securities, warrants, rights and options acquired or retained, (y) indebtedness acquired,
assumed or refinanced and (z) any other consideration or compensation paid in connection with such
transaction).




     Section 7. Notices.



     All notices, requests, consents and other communications hereunder shall be in writing and
shall be deemed sufficient if personally delivered, sent by nationally-recognized overnight
courier, by telecopy, or by registered or certified mail, return receipt requested and postage
prepaid, addressed as follows:



	 	 	 	 	 	 	 
	 	 	if to Apollo, to:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	Apollo Management V, L.P.
	 	 	 	 	9 West 57th Street
	 	 	 	 	New York, New York 10019
	 

	 	 	 	Attention:
	 	Marc Becker
	 

	 	 	 	Telecopier:
	 	(212) 515-3251
	 
	 	 	 	 	 	 
	 	 	if to the Company or Flag Holdings, to it at:
	 
	 	 	 	 	 	 
	 	 	 	 	Metals USA, Inc.
	 	 	 	 	One Riverway, Suite 1100
	 	 	 	 	Houston, Texas 77056
	 

	 	 	 	Attention:
	 	John A. Hageman
	 

	 	 	 	 	 	Senior Vice President, Chief Legal Officer and Secretary
	 

	 	 	 	Telecopier:
	 	(713) 585-6404





or to such other address as the party to whom notice is to be given may have furnished to each
other party in writing in accordance herewith. Any such notice or communication shall be deemed to
have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the
case of nationally-recognized overnight courier, on the next business day after the date when sent,
(c) in the case of telecopy transmission, when received, and (d) in the case of mailing, on the
third business day following that on which the piece of mail containing such communication is
posted.




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     Section 8. Benefits of Agreement.



     This Agreement shall bind and inure to the benefit of Apollo, the Company, the Indemnified
Persons and any successors to or assigns of Apollo and the Company; provided,
however, that this Agreement may not be assigned by either party hereto without the prior
written consent of the other party, which consent will not be unreasonably withheld in the case of
any assignment by Apollo.



     Section 9. Governing Law.



     This Agreement shall be governed by and construed and enforced in accordance with the laws of
the State of New York (without giving effect to principles of conflicts of laws).



     Section 10. Headings.



     Section headings are used for convenience only and shall in no way affect the construction of
this Agreement.



     Section 11. Entire Agreement; Amendments.



     This Agreement contains the entire understanding of the parties with respect to its subject
matter and supersedes any and all prior agreements, and neither it nor any part of it may in any
way be altered, amended, extended, waived, discharged or terminated except by a written agreement
signed by each of the parties hereto.



     Section 12. Counterparts.



     This Agreement may be executed in counterparts, and each such counterpart shall be deemed to
be an original instrument, but all such counterparts together shall constitute but one agreement.



     Section 13. Waivers.



     Any party to this Agreement may, by written notice to the other party, waive any provision of
this Agreement. The waiver by any party of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.



     Section 14. Affiliates.



     For purposes of this Agreement, the term “Affiliate,” with respect to Apollo, shall include,
without limitation, Apollo Investment Fund V, L.P., L.P., Apollo Netherlands Partners V(A), L.P.,
Apollo Netherlands Partners V(B), L.P., Apollo German Partners V GMBH & Co., Apollo Overseas
Partners V, L.P. and Apollo Advisors V, L.P. (collectively, the “Funds”), the general
partner of Apollo, the general partner of each of the Funds and each person controlling, controlled
by or under common control with any of the foregoing persons.



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     IN WITNESS WHEREOF, the parties have duly executed this Management Agreement as of the date
first above written.



	 	 	 	 	 	 
	 	 	METALS USA, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:
	 
	 	 	 	 
	 	 	FLAG HOLDINGS CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:
	 
	 	 	 	 
	 	 	APOLLO MANAGEMENT V, L.P.
	 	 	By: Apollo Management V, LP, its Manager
	 	 	By: AIF V Management, Inc., its General Partner
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title: