Document:

Exhibit 10.3

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Agreement”)
dated this 18th day of February, 2003 by and between Metals USA, Inc., a
Delaware corporation (the “Company”), and Celso Lourenço Gonçalves
(“Executive”).

 

RECITALS

 

A.            As
of the date hereof, the Company is engaged primarily in the business of
providing metals processing, metals fabricating, and/or specialty metals
services; and

 

B.            Executive
and the Company desire that Executive shall be employed by the Company under
the terms and provisions of this Agreement.

 

NOW,
THEREFORE, in consideration of the mutual promises and
covenants set forth herein, it is hereby agreed as follows:

 

1.             Employment
and Duties.

 

(a)           The
Company hereby employs Executive as President and Chief Executive Officer of
the Company.  As such, Executive shall
have the responsibilities, duties and authority reasonably accorded to and
expected of, and consistent with Executive’s position(s) and will report
directly to the Board of Directors of the Company (the “Board”).  Executive hereby accepts employment by the
Company upon the terms and conditions herein contained and, subject to Section
3 hereof, agrees to devote Executive’s full business time, attention and
efforts to promote and further the business of the Company.

 

(b)           Executive
shall faithfully adhere to, execute and fulfill all policies established by the
Company, as such policies may be changed from time to time by the Company,
including the Company’s Code of Conduct.

 

2.             Compensation.  For all services rendered by Executive, the
Company shall compensate Executive as follows as of February 24, 2003 (the
“Effective Date”):

 

(a)           Base Salary.  The initial base salary payable to Executive
shall be $375,000 per year, payable on a regular basis in accordance with the
Company’s standard payroll procedures. 
On an annual basis, the Company will review Executive’s performance and
may make increases to such base salary if, in its discretion, any such increase
is warranted.

 

(b)           Executive
Perquisites, Benefits, Annual Bonus and Other Compensation.  Executive shall be entitled to receive
additional benefits and compensation from the Company in such form and to such
extent as specified below:

 

 

(i)            In
the discretion of the Compensation Committee of the Board, (the “Compensation
Committee”), Executive shall be eligible for an annual bonus which may be
payable in either cash or shares of the Company’s common stock (“Company
Stock”).  Payment of a bonus shall be
contingent upon such terms and conditions as the Compensation Committee shall
decide in its sole discretion.

 

(ii)           The
Company shall pay Executive a one-time sign-on bonus of $50,000.

 

(iii)          Upon
the Effective Date, the Compensation Committee shall grant Executive an option
to purchase 100,000 shares of Common Stock at a strike price of $4.75 per
share, an option to purchase 100,000 shares of Common Stock at a strike price
of $9.50 per share, and an option to purchase 100,000 shares of Common Stock at
a strike price of $14.25 per share (the “Options”).  The Options will each have a five-year term and one-third of the
shares subject to the Options will vest on each of the first three
anniversaries of the Effective Date.  To
the extent not previously vested, the Options shall become completely vested
upon a termination of employment or other service by the Company without Cause
or upon a termination by Executive for Good Reason or upon a Change in
Control.  Upon termination of employment
or other service with the Company and its subsidiaries for any reason other
than Cause, Executive may exercise the vested portion of the Options during the
three-month period following such termination of employment or other service;
the portions of the Options that are not vested on or prior to the date of
termination shall be forfeited upon the date of termination.  Upon a termination for Cause, all Options,
vested and unvested, shall be forfeited on the date of termination.

 

(iv)          The
Company will cover all reasonable relocation costs including, but not limited
to, broker fees, movers, appraisal costs, inspections, and all other reasonable
costs related to the sale of Executive’s current home in California and
purchase of a new home.  To the extent
that the Company’s coverage of these expenses or those under clause (viii) is
taxable to Executive, the Company shall provide Executive with a complete
gross-up payment to cover the taxes on the reimbursement amount.  For the avoidance of doubt, the purpose of
this provision is to make Executive “whole” such that Executive is in the same
position as he would have been in if the Company’s coverage of relocation costs
were not taxable.

 

(v)           Executive
and Executive’s dependent family members shall participate in the health,
hospitalization, disability, dental, life and other insurance plans that the
Company may have in effect from time to time, with benefits provided to
Executive under this clause (v) to be at least equal to such benefits provided
to Company employees generally, and shall participate in any senior executive
health plans established by the Company.

 

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(vi)          The
Company shall reimburse Executive for all business travel and other
out-of-pocket expenses reasonably incurred by Executive in the performance of
Executive’s services pursuant to this Agreement.  All reimbursable expenses shall be appropriately documented in
reasonable detail by Executive upon submission of any request for
reimbursement, and in a format and manner consistent with the Company’s expense
reporting policy.

 

(vii)         The
Company shall provide Executive with executive perquisites as may be available
to or deemed appropriate for Executive by the Compensation Committee, including
participation in all other Company-wide employee benefits, including equity
incentive plans and programs as are available from time to time.

 

(viii)        Until
the Company has established its permanent corporate headquarters or has
affirmatively elected to retain its headquarters in Houston (either such action
is subsequently referred to herein as the “Relocation Action,” the Company
shall provide Executive with a fully furnished corporate apartment in Houston,
Texas at a monthly cost to the Company of no more than $2,500; and until the
earlier of such time that the Company has effected its Relocation Action or
Executive’s family has moved to join Executive, the Company shall reimburse
Executive for airfare to visit his family in California on weekends, it being
understood that Executive shall use his best efforts to relocate his family as
quickly as possible.

 

(ix)           The
Company shall provide Executive a monthly car allowance of $1,250.

 

(x)            During
the sixty (60) days from the date the Board has effected its Relocation Action,
Executive shall make reasonable efforts to sell his current home.  If he is unsuccessful at doing so, the
Company shall contract for the services of a relocation firm which firm shall
purchase or sell Executive’s home in California.  From the Effective Date until Executive has purchased or rented a
home near the Company’s new corporate headquarters, the Company shall reimburse
Executive for reasonable expenses associated with Executive’s family’s travel
to Texas to look for a home, visit schools and other activities related to
relocation.

 

(xi)           Executive
shall be entitled to four weeks of paid vacation on an annual basis, to be
taken in accordance with Company policy.

 

(xii)          Subject
to Executive’s insurability, the Company shall provide a life insurance policy
with a benefit equal to no less than two times Executive’s current base salary.

 

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3.             Non-Competition
Agreement.

 

(a)           Executive
shall not, during the term of Executive’s employment hereunder, be engaged in
any other business activity pursued for gain, profit or other pecuniary advantage
unless, in its sole discretion, the Company has determined that such business
activity will not interfere with Executive’s duties and responsibilities
hereunder.  The foregoing limitations
shall not be construed as prohibiting Executive from making personal
investments in such form or manner as will neither require Executive’s services
in the operation or affairs of the companies or enterprises in which such
investments are made nor violate the terms of this Section 3.  In addition, Executive shall not, during the
period of Executive’s employment by or with the Company, and for a period of
twenty-four (24) months immediately following the termination of Executive’s
employment for any reason including non-renewal under this Agreement (the
“Restricted Period”), directly or indirectly, alone, or on behalf of, or in
conjunction with any other person, persons, company, partnership, corporation
or business of whatever nature:

 

(i)            engage,
as an officer, director, shareholder, owner, partner, joint venturer, or in a
managerial capacity, whether as an employee, independent contractor, consultant
or advisor, or as a sales representative, in any business in competition with
the Company or any of its subsidiaries, within 200 miles of the Company or
where the Company or any of the Company’s subsidiaries conduct business,
including any territory serviced by the Company or any of such subsidiaries
(the “Territory”);

 

(ii)           call
upon any person who is, at that time, within the Territory, an employee of the
Company or any of its subsidiaries in a managerial capacity for the purpose or
with the intent of enticing such employee away from or out of the employ of the
Company or any of its subsidiaries;

 

(iii)          call
upon any person or entity which is, at that time, or which has been, within
twenty-four (24) months prior to that time, a customer of the Company or any of
its subsidiaries within the Territory for the purpose of soliciting or selling
products or services in competition with the Company or its subsidiaries within
the Territory; or

 

(iv)          call
upon any prospective acquisition candidate, on Executive’s own behalf or on
behalf of any competitor, which candidate was, to Executive’s actual knowledge
after due inquiry, either called upon by the Company or any of its subsidiaries
or for which the Company or any of its subsidiaries made an acquisition
analysis, for the purpose of acquiring such entity.

 

Notwithstanding the above, the foregoing
covenant shall not be deemed to prohibit Executive from acquiring as an
investment not more than one percent (1%) of the capital stock of a competing
business, whose stock is traded on a national securities exchange or
over-the-counter.

 

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(b)           Because
of the difficulty of measuring economic losses to the Company as a result of a
breach of the covenants in this Section 3, and because of the immediate and
irreparable damage that could be caused to the Company for which it would have
no other adequate remedy, Executive agrees that the foregoing covenant may be
enforced by the Company in the event of breach by Executive, by injunctions and
restraining orders.

 

(c)           It
is agreed by the parties that the foregoing covenants in this Section 3 impose
a reasonable restraint on Executive in light of the activities and business of
the Company and its subsidiaries on the date of the execution of this Agreement
and the current plans of the Company and its subsidiaries, but it is also the
intent of the Company and Executive that such covenants be construed and enforced
in accordance with the changing activities, business and locations of the
Company and its subsidiaries throughout the term of this covenant, whether
before or after the date of termination of the employment of Executive.  For example, if, during the term of this
Agreement, the Company or any of its subsidiaries engages in new and different
activities, enters a new business or establishes new locations for its current
activities or business in addition to or other than the activities or business
enumerated under the recitals above or the locations currently established
therefor, then Executive will be precluded from soliciting the customers or
employees of such new activities or business or from such new location and from
directly competing with such new business within 200 miles of its
then-established operating location(s) through the term of this covenant.  It is further agreed by the parties hereto
that, in the event that Executive shall cease to be employed hereunder, and
shall enter into a business or pursue other activities not in competition with
the Company or any of its subsidiaries, or similar activities or business in
locations the operation of which, under such circumstances, does not violate
clause (a) of this Section 3, and in any event such new business, activities or
location are not in violation of this Section 3 or of Executive’s obligations
under this Section 3, if any, Executive shall not be chargeable with a
violation of this Section 3 if the Company or any of its subsidiaries shall
thereafter enter the same, similar or a competitive (i) business, (ii) course
of activities or (iii) location, as applicable unless the business plans of the
Company or any of its subsidiaries known to Executive at the time of
Executive’s termination of employment include similar lines of business or
activities.  Executive further expressly
agrees that employment by the Company and the compensation Executive receives
from the Company pursuant to this Agreement is adequate consideration for the
obligations of Executive under this Section 3.

 

(d)           The
covenants in this Section 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of
any other covenant.  Moreover, in the
event any court of competent jurisdiction shall determine that the scope, time
or territorial restrictions set forth are too broad or unreasonable, then it is
the intention of the parties that such restrictions be enforced to the fullest
extent which the court deems reasonable, and the Agreement shall thereby be
reformed.  If any portion of this
Section 3 shall be invalid or unenforceable, such invalidity or
unenforceability shall in no way be deemed or construed to affect in any way
the enforceability of any other portion of this Section 3.

 

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(e)           All
of the covenants in this Section 3 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of Executive against the Company, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of such covenants. 
It is specifically agreed that the period of twenty-four (24) months
following termination of employment stated at the beginning of this Section 3,
during which the agreements and covenants of Executive made in this Section 3
shall continue to be effective, shall be computed by excluding from such
computation any time during which Executive is in violation of any provision of
this Section 3.  Executive specifically
agrees that the restrictions in this Section 3 are reasonable, and that none of
the restrictions shall cause any unreasonable hardship to Executive.

 

4.             Term;
Termination; Rights on Termination.

 

(a)           The
initial term of this Agreement shall begin on the Effective Date and shall
continue for three years through the last day of February, 2006 unless it is
terminated earlier as provided herein. 
The term of this Agreement shall automatically be extended through the
last day of February, 2007 unless either party gives the other party at least
ninety (90) days written notice prior to the last day of February, 2006 that
such party does not agree to the extension of the term.  The term of this Agreement shall continue to
be extended for additional one-year periods unless, at least ninety (90) days
prior to the last day of any February, either party gives the other party
written notice that such party does not agree to the extension of the term of
this Agreement.

 

(b)           Termination,.  This Agreement and Executive’s employment
may be terminated during the Term in any one of the following ways:

 

(i)            Death.  The death of Executive shall immediately
terminate this Agreement with no severance compensation due to Executive’s
estate.

 

(ii)           Disability.  If, as a result of incapacity due to
physical or mental illness or injury, Executive shall have been absent from
full-time duties hereunder for four (4) consecutive months, or one hundred
twenty (120) days in any rolling one-year period, then thirty (30) days after
receiving written notice (which notice may occur before or after the end of
such four (4) month or one hundred twenty (120) day period, but which shall not
be effective earlier than the last day of either such period), the Company may
terminate Executive’s employment hereunder provided Executive is unable to
resume full-time duties with or without reasonable accommodation at the
conclusion of such notice period.  Also,
Executive may terminate Executive’s employment hereunder if Executive’s health
should become impaired to an extent that makes the continued performance of
Executive’s duties hereunder hazardous to Executive’s physical or mental health
or life, provided that Executive shall have furnished the Company with a
written statement from a qualified doctor to such effect and provided, further,
that, at the Company’s request made within thirty (30) days of the date of such
written statement, Executive shall submit to an examination by a doctor
selected by the Company who is reasonably acceptable to Executive or
Executive’s doctor.  In the

 

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event this Agreement is terminated as a
result of Executive’s disability, Executive shall receive from the Company, in
a lump-sum payment due within ten (10) days of the effective date of
termination, the base salary at the rate then in effect for whatever time
period is remaining under the Term or for one (1) year, whichever amount is
greater; provided, however, that any such payments shall be reduced by the
amount of any disability insurance payments payable to the Executive as a
result of such disability.

 

(iii)          Cause.  The Company may terminate this Agreement
immediately for Cause (defined below). 
In the event of a termination for Cause, Executive shall have no right
to any severance compensation.

 

(iv)          Without
Cause or by Executive for Good Reason.  At any time after the commencement of employment, the Company may
terminate this Agreement without Cause or Executive may terminate this
Agreement for Good Reason (defined below), effective thirty (30) days after
written notice is provided to the other party. 
Should Executive be terminated by the Company without Cause or should
Executive terminate with Good Reason under this Agreement, Executive shall
receive from the Company continuation of his current base salary for two years
payable in accordance with the Company’s normal payroll practices; provided,
however that the second year of salary continuation payments hereunder shall be
offset on a payroll basis against any amounts Executive may earn from
employment with another company or from self-employment after one year from the
date of termination.

 

(v)           Resignation
or Termination without Good Reason or Nonrenewal.  If Executive resigns or otherwise terminates
his employment without Good Reason, or if either party decides not to renew
this Agreement, Executive shall receive no severance compensation.

 

(c)           Certain
Terminations.  If Executive
is terminated without Cause or terminates his employment hereunder with Good
Reason, (1) the Company shall make the insurance premium payments contemplated
by COBRA until the earlier of such time that Executive and his dependents are
no longer entitled to continuation coverage under COBRA, or a period of twelve
(12) months after such termination provided that Executive has timely elected
COBRA coverage, and (2) all of Executive’s unvested stock grants or stock
options  (if any are then outstanding)
shall vest upon the date of termination of employment and, with respect to any
stock options, shall remain outstanding and exercisable for the period set
forth in the applicable option agreement or option plan.

 

(d)           Effect of
Any Termination of Employment. 
Upon termination of this Agreement for any reason including non-renewal,
Executive shall be entitled to receive all earned and unpaid compensation and
all benefits and reimbursements due through the effective date of termination
and shall remain subject to the provisions set forth in Section 3 for the
entire Restricted Period.  Additional
compensation subsequent to

 

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termination, if any, will be due and payable
to Executive only to the extent and in the manner expressly provided
herein.  Except with respect to any
benefits or payments to which Executive may be entitled under the terms and
conditions of any benefit plan or applicable law, all other rights and
obligations of the Company and Executive under this Agreement shall cease as of
the effective date of termination; provided, however, that the parties agree
that their respective obligations under Sections 3, 4, 5, 6, 7, 8, 14 and 16
herein shall survive such termination in accordance with their terms unless
otherwise provided herein.

 

(e)           Definitions.

 

(i)            “Cause”
shall mean any of the following:  (a)
Executive’s material breach of this Agreement, including any of Company’s
policies included or applicable under Section 1(b) above; (b) Executive’s
negligence in the performance or nonperformance of any of Executive’s material
duties and responsibilities hereunder after ten (10) days written notice during
which Executive has not cured such negligence or nonperformance; (c)
Executive’s dishonesty, fraud or misconduct with respect to the business or affairs
of the Company which  adversely affect
the operations or reputation of the Company.

 

(ii)           “Good
Reason” shall mean any of the following: 
(a) Executive is demoted by means of an absolute reduction in authority,
responsibilities or duties to a position of less stature or importance within
the Company than the position described in Section 1 hereof; or (b) Executive’s
annual base salary as determined pursuant to Section 2 hereof is reduced,
unless Executive has agreed in writing to that demotion or reduction or (c)
Company materially breaches this Agreement with respect to payment of
compensation hereunder; or (d) at any time after (but only after) the Board has
effected its Relocation Action (it being understood that the location of the
corporate headquarters may be anywhere in the continental United States and
shall be determined in the discretion of the Board without the consent of
Executive being required), the relocation of Executive’s office more than fifty
(50) miles from the corporate headquarters without Executive’s written
concurrence; provided, however, that if any office relocation in excess of
fifty (50) miles should result in Executive’s home at the time of the
relocation being closer to the new office than prior to the relocation, such
relocation shall not be an occurrence of Good Reason.

 

5.             Return
of Company Property.  All records,
designs, patents, business plans, financial statements, client lists, manuals,
memoranda, lists and other property delivered to or compiled by Executive by or
on behalf of the Company, its subsidiaries or their representatives, vendors or
customers which pertain to the business of the Company shall be and remain the
property of the Company and be subject at all times to its discretion and
control.  Likewise, all correspondence,
reports, records, charts, advertising materials and other similar data
pertaining to the business, activities or future plans of the Company which is
collected by Executive shall be delivered promptly to the Company without
request by it upon termination of Executive’s employment.

 

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6.             Inventions.  Executive shall disclose promptly to the
Company any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, which are
conceived or made by Executive, solely or jointly with another, during the
period of employment or within one (1) year thereafter, and which are directly
related to the business or activities of the Company or its subsidiaries and
which Executive conceives as a result of Executive’s employment by the
Company.  Executive hereby assigns and
agrees to assign all Executive’s interests therein to the Company or its
nominee.  Whenever requested to do so by
the Company, Executive shall execute any and all applications, assignments or
other instruments that the Company shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect the Company’s interest therein.

 

7.             Confidentiality.  During the Restricted Period and thereafter,
except as provided below, Executive shall not, without the written consent of
the Board or a person authorized thereby, disclose to any person, other than an
employee of the Company or any of its subsidiaries or a person to whom
disclosure is reasonably necessary or appropriate in connection with the
performance by Executive of his duties as an executive of the Company, any
confidential information learned by him while in the employ of the Company with
respect to the Company’s business, including but not limited to trade secrets,
technology, know-how, processes, any business data, information regarding any
of the Company’s or its subsidiaries’ customers, practices, or operations, and
other proprietary information, the disclosure of which Executive knows or
should know will be damaging to the business, strategy or reputation of the
Company or any of its subsidiaries; provided however, that confidential
information shall not include any information known generally to the public
(other than as a result of unauthorized disclosure by Executive), any
information of a type not reasonably considered confidential by persons engaged
in the same business or a business similar to that conducted by the Company or
any subsidiary, or any information which Executive may be required to disclose
by any applicable law, order, or judicial or administrative proceeding.

 

8.             Indemnification.  In the event Executive is made a party to
any threatened, pending or contemplated action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by the
Company against Executive or by Executive against the Company), by reason of
the fact that Executive is or was performing services under this Agreement,
then the Company, to the extent permitted by law, shall indemnify Executive
against all expenses (including attorneys’ fees), judgments, fines and amounts
paid in settlement, as actually and reasonably incurred by Executive in
connection therewith.  In the event that
both Executive and the Company are made a party to the same third party action,
complaint, suit or proceeding, the Company agrees to engage counsel, and
Executive agrees to use the same counsel, provided that if counsel selected by
the Company shall have a conflict of interest that prevents such counsel from
representing Executive, Executive may engage separate counsel and the Company
shall pay all reasonable attorneys’ fees of such separate counsel.  The Company shall not be required to pay the
fees of more than one law firm except as described in the

 

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preceding sentence, and shall not be required
to pay the fees of more than two law firms under any circumstances.  Further, while Executive is expected at all
times to use Executive’s best efforts to faithfully discharge Executive’s
duties under this Agreement, Executive cannot be held liable to the Company for
errors or omissions made in good faith where Executive has not exhibited gross
negligence, intentional nonperformance of his duties hereunder, willful
dishonesty, fraud or misconduct, or performed criminal or fraudulent acts which
materially damage the business of the Company.

 

9.             No
Prior Agreements.  Executive hereby
represents and warrants to the Company that the execution of this Agreement by
Executive and Executive’s employment by the Company and the performance of
Executive’s duties hereunder will not violate or be a breach of any agreement
with a former employer, client or any other person or entity.  Further, Executive agrees to indemnify the
Company for any claim, including, but not limited to, attorneys’ fees and
expenses of investigation, by any such third party that such third party may
now have or may hereafter come to have against the Company based upon or
arising out of any non-competition agreement, invention or secrecy agreement
between Executive and such third party which was in existence as of the date of
this Agreement.

 

10.           Assignment;
Binding Effect.  Executive
understands that Executive has been selected for employment by the Company on
the basis of Executive’s personal qualifications, experience and skills.  Executive agrees, therefore, that Executive
cannot assign all or any portion of Executive’s performance under this
Agreement.  Subject to the preceding,
this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.

 

11.           Change
in Control.

 

(a)           Executive
understands and acknowledges that the Company may be sold, merged or
consolidated with or into another entity or that the Company may undergo
another type of Change in Control.  In
the event such a sale, merger or consolidation or other Change in Control is
initiated and consummated prior to the end of the Term (or any extension
thereof), then the provisions of this Section 11 shall be applicable.

 

(b)           In
the event of termination of Executive’s employment without Cause within twelve
(12) months after or three (3) months prior to a Change in Control, or
Executive’s termination of his employment for any Good Reason within twelve
(12) months after a Change in Control, then the Company shall pay Executive a
lump sum payment equal to the greater of (a) the base salary to which Executive
is entitled for the remainder of the term of this Agreement, or (b) two years
of Executive’s current base salary, and shall provide Executive the benefits
set forth in Section 4(c) above.

 

(c)           Further,
Executive will be given sufficient time and opportunity to elect whether to
exercise all or any of his vested options/grants, such that he may convert the

 

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options/grants to shares of the Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if he so desires.

 

(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 Securities Exchange Act of 1934, as amended) 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% 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 of Directors of the Company:  (A)
the individuals who, as of November 1, 2002, constitute the Board of Directors
of the Company (the “Original Directors”); (B) the individuals who thereafter
are elected to the Board of Directors of the Company and whose election or
nomination for election, to the Board of Directors of the Company 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 of Directors of the Company and whose election or nomination for
election, to the Board of Directors of the Company 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); or

 

(iii)          the
stockholders of the Company shall approve a plan of complete liquidation of the
Company or an agreement to sell or otherwise dispose of the three product
groups (“Flat Roll Group,” “Plates and Shapes Group,” and the “Building
Products Group”) and

 

(e)           (i)            Anything in this Agreement to the
contrary notwithstanding, in the event it shall be determined that any payment,
award, benefit or distribution (or any acceleration of any payment, award,
benefit or distribution) by the Company or any entity which effectuates a
change in ownership or effective control of the Company, in either case, within
the meaning of Section 280G of the Code and the regulations promulgated
thereunder to or for the benefit of Executive (the “Payments”) would be subject
to the excise tax imposed by Section 4999 of the Code, or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the “Excise Tax”), whether before or after the
execution of this Agreement, then the Company shall pay to Executive an additional
payment (a “Gross-Up Payment”) in an amount such that after payment by
Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up
Payment, Executive retains an amount of the Gross-Up Payment equal to the sum

 

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of (x) the Excise Tax imposed upon the
Payments and (y) the product of any deductions disallowed because of the
inclusion of the Gross-Up Payment in Executive’s adjusted gross income and the
highest applicable marginal rate of federal income taxation for the calendar
year in which the Gross-Up Payment is to be made.  For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to (A) pay federal income taxes at the highest
marginal rates of federal income taxes at the highest marginal rate of taxation
for the calendar year in which the Gross-Up Payment is to be made, (B) pay
applicable state and local income taxes at the highest marginal rate of
taxation for the calendar year in which the Gross-Up Payment is to be made, net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes and (C) have otherwise allowable
deductions for federal income tax purposes at least equal to those which could
be disallowed because of the inclusion of the Gross-Up Payment in Executive’s
adjusted gross income.

 

(ii)           Subject
to the provisions of Section11(f)(i), all determinations required to be made
under this Section 11(f), including whether and when a Gross-Up Payment is
required, the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determinations, shall be made by a nationally
recognized public accounting firm that is selected by the Company (the
“Accounting Firm”) which shall provide detailed supporting calculations both to
the Company and Executive at such time as is requested by the Company or the
Executive (collectively, the “Determination”). 
All fees and expenses of the Accounting Firm shall be borne solely by
the Company and the Company shall enter into any agreement requested by the
Accounting Firm in connection with the performance of the services
hereunder.  The Gross-Up Payment under
this Section 11(f) with respect to any Payments made to Executive shall be made
no later than thirty (30) days following the Determination.  If the Accounting Firm determines that no
Excise Tax is payable by Executive, it shall furnish Executive with a written
opinion to such effect, and to the effect that failure to report the Excise
Tax, if any, on Executive’s applicable federal income tax return should not
result in the imposition of a negligence or similar penalty.

 

(iii)          As
a result of the uncertainty in the application of Section 4999 of the Code at
the time of the Determination, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made (“Underpayment”) or
Gross-Up Payments are made by the Company which should not have been made
(“Overpayment”), consistent with the calculations required to be made
hereunder.  In the event that Executive
thereafter is required to make payment of any Excise Tax or additional Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the
Company to or for the benefit of Executive. 
In the event the amount of the Gross-Up Payment exceeds the amount necessary
to reimburse Executive for his Excise Tax, the Accounting Firm shall determine
the amount of the Overpayment that has been made and any

 

12

 

such Overpayment (together with interest at
the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid by
Executive (to the extent he has received a refund if the applicable Excise Tax
has been paid to the Internal Revenue Service) to or for the benefit of the
Company.  Executive shall cooperate, to
the extent his expenses are fully reimbursed by the Company, with any
reasonable requests by the Company in connection with any contest or disputes
with the Internal Revenue Service in connection with the Excise Tax.

 

12.           Legal
Review:  The Company shall reimburse
Executive for reasonable attorney’s fees in connection with the review of this
Agreement provided that reimbursement shall not exceed $5,000.

 

13.           Complete
Agreement.  This Agreement sets
forth the entire agreement of the parties hereto relating to the subject matter
hereof and supersedes any other employment agreements or understandings,
written or oral, between the Company and Executive.  This Agreement is not a promise of future employment.  Executive has no oral representations,
understanding or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement.  This written Agreement is the final,
complete and exclusive statement and expression of the agreement between the
Company and Executive and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or
contemporaneous oral or written agreement. 
This written Agreement may not be later modified except by written
agreement signed by a duly authorized officer of the Company and Executive, and
no term of this Agreement may be waived except by a writing signed by the party
waiving the benefit of such term.

 

14.           Notice.  Whenever any notice is required hereunder,
it shall be given in writing addressed as follows:

 

	
  To The
  Company:

  	
   

  	
  Metals USA,
  Inc.

  
	
   

  	
   

  	
  Attn:  Chairman of the Board

  
	
   

  	
   

  	
  Three
  Riverway, Suite 600

  
	
   

  	
   

  	
  Houston,
  Texas  77056

  
	
   

  	
   

  	
  Telephone:
  713/965-0990

  
	
   

  	
   

  	
  Fax:  713/965-0067

  
	
   

  	
   

  	
   

  
	
  with a copy
  to:

  	
   

  	
  John
  Hageman, General Counsel

  
	
   

  	
   

  	
   

  
	
  To
  Executive:

  	
   

  	
  Celso
  Lourenço Gonçalves

  
	
   

  	
   

  	
  c/o George
  M. Reyes

  
	
   

  	
   

  	
  Best Best
  & Krieger LLP

  
	
   

  	
   

  	
  3750
  University Avenue

  
	
   

  	
   

  	
  Riverside,
  CA 92502

  

 

13

 

	
  with a copy
  to:

  	
   

  	
  George M.
  Reyes

  
	
   

  	
   

  	
  Best Best
  & Krieger LLP

  
	
   

  	
   

  	
  3750
  University Avenue

  
	
   

  	
   

  	
  Riverside,
  CA 92502

  

 

Notice shall be deemed given and effective on
the earlier of three (3) days after the deposit in the U.S. mail of a writing
addressed as above and sent first class mail, certified, return receipt
requested, or when actually received by means of hand delivery, delivery by
Federal Express or other courier service, or by facsimile transmission.  Either party may change the address for
notice by notifying the other party of such change in accordance with this
Section 14.

 

15.           Severability;
Headings.  If any portion of this
Agreement is held invalid or inoperative, the other portions of this Agreement
shall be deemed valid and operative and, so far as is reasonable and possible,
effect shall be given to the intent manifested by the portion held invalid or
inoperative.  The Section headings
herein are for reference purposes only and are not intended in any way to
describe, interpret, define or limit the extent or intent of the Agreement or
of any part hereof.

 

16.           Arbitration.  With the exception of Sections 3, 6 and 7,
any unresolved dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three (3) arbitrators in Houston, Texas, or such other venue as the parties
may agree in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association (“AAA”) then in
effect, provided that Executive shall comply with the Company’s grievance
procedures in an effort to resolve such dispute or controversy before resorting
to arbitration, and provided further that the parties may agree to use
arbitrators other than those provided by the AAA.  The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof not to award punitive damages to any
injured party.  The arbitrators shall
have the authority to order back-pay, severance compensation, vesting of
options (or cash compensation in lieu of vesting of options), reimbursement of
costs, including those incurred to enforce this Agreement, and interest thereon
in the event the arbitrators determine that Executive was terminated without
disability or Cause, or that the Company has otherwise materially breached this
Agreement.  A decision by a majority of
the arbitration panel shall be final and binding.  Judgment may be entered on the arbitrator’s award in any court
having jurisdiction.  The direct expense
of any arbitration proceeding shall be divided equally between the parties and
each party shall pay its own attorneys’ fees regardless of the outcome of the
arbitration.

 

17.           Governing
Law.  This Agreement shall in all
respects be construed according to the laws of the State of Texas.

 

14

 

18.           Counterparts.  This Agreement may be executed
simultaneously in two (2) or more counterparts, each of which shall be deemed
an original and all of which together shall constitute but one and the same
instrument.

 

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

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  METALS USA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JOHN A. HAGEMAN

  
	
   

  	
  Name:  John A. Hageman

  
	
   

  	
  Title:  Sr. Vice President
  & General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ CELSO LOURENCO GONCALVES

  
	
   

  	
  Celso Lourenço Gonçalves

  

 

15Exhibit 10.4

 

EXECUTION
COPY

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Agreement”)
dated as of this 5th day of March, 2003 by and between Metals USA,
Inc., a Delaware corporation (the “Company”), and William R. Bennett
(“Executive”).

 

RECITALS

 

A.            As
of the Effective Date, the Company is engaged primarily in the business of
providing metals processing, metals fabricating, and/or specialty metals
services; and

 

B.            Executive
is employed by the Company in a confidential relationship wherein Executive, in
the course of Executive’s employment with the Company, has and will continue to
become familiar with and aware of information as to the Company’s customers,
specific manner of doing business, including the processes, techniques and
trade secrets utilized by the Company, and future plans with respect thereto,
all of which has been and will be established and maintained at great expense
to the Company; this information is a trade secret and constitutes the valuable
good will of the Company; and

 

C.            The
parties desire to agree to the various matters described herein and to
memorialize those agreements herein.

 

NOW,
THEREFORE, in consideration of the mutual promises and
covenants set forth herein, it is hereby agreed as follows:

 

1.             Employment
and Duties.

 

(a)           Effective
November 1, 2002 (the “Effective Date”), the Company hereby employs Executive
as Senior Vice President of the Company and President of the Plates &
Shapes Group.  As such, Executive shall
have responsibilities, duties and authority reasonably accorded to and expected
of, and consistent with Executive’s positions and will report directly to the
Office of the Chairman of the Company until a President has been hired by the
Board of Directors of the Company (the “Board”) and then to the President,
unless otherwise ordered by the Board. 
Executive hereby accepts this employment upon the terms and conditions
herein contained and, subject to Section 3 hereof, agrees to devote Executive’s
full business time, attention and efforts to promote and further the business
of the Company.

 

(b)           Executive
shall faithfully adhere to, execute and fulfill all policies established by the
Company, as such policies may be changed from time to time by the Company,
including the Company’s Code of Conduct.

 

2.             Compensation.  For all services rendered by Executive, the
Company shall compensate Executive as follows:

 

 

(a)           Base Salary.  As of the Effective Date, the base salary
payable to Executive shall be $280,000 per year, payable on a regular basis in
accordance with the Company’s standard payroll procedures.  On an annual basis, the Company will review
Executive’s performance and may make increases to such base salary if, in its
discretion, any such increase is warranted.

 

(b)           Executive
Perquisites, Benefits, Annual Bonus and Other Compensation.  Executive shall be entitled to receive
additional benefits and compensation from the Company in such form and to such
extent as specified below:

 

(i)            For
calendar years 2003 and 2004, Company shall pay Executive a minimum annual
bonus of $70,000, each year, pro rated for any partial year that Executive
works and payable at the same time that the Company customarily pays annual
bonuses.

 

(ii)           Admittance
for participation for Executive and Executive’s dependent family members under
health, hospitalization, disability, dental, life and other insurance plans
that the Company may have in effect from time to time, with benefits provided
to Executive under this clause (ii) to be at least equal to such benefits
provided to Company employees generally, and participation in any senior
executive health plans established by the Company.

 

(iii)          Reimbursement
for all business travel and other out-of-pocket expenses reasonably incurred by
Executive in the performance of Executive’s services pursuant to this
Agreement.  All reimbursable expenses
shall be appropriately documented in reasonable detail by Executive upon
submission of any request for reimbursement, and in a format and manner
consistent with the Company’s expense reporting policy.

 

(iv)          The
Company shall provide Executive with executive perquisites as may be available
to or deemed appropriate for Executive by the Board, including participation in
all other Company-wide employee benefits, including equity incentive plans and
programs at levels comparable to the President of the Flat Rolled Group as are
available from time to time.

 

3.             Non-Competition
Agreement.

 

(a)           Executive
shall not, during the term of Executive’s employment hereunder, be engaged in
any other business activity pursued for gain, profit or other pecuniary
advantage unless, in its sole discretion, the Company has determined that such
business activity will not interfere with Executive’s duties and
responsibilities hereunder.  The
foregoing limitations shall not be construed as prohibiting Executive from
making personal investments in such form or manner as will neither require
Executive’s services in the operation or affairs of the companies or
enterprises in which such investments are made nor violate the terms of this Section
3.  In addition, Executive shall not,
during the period of Executive’s employment by or with the Company, and for a
period of twelve

 

2

 

(12) months immediately following termination
of Executive’s employment pursuant to Sections 4(b)(ii), (iii), (iv) or (v) of
this Agreement (such period to be referred to as the “Restricted Period”),
directly or indirectly, for Executive or on behalf of or in conjunction with
any other person, persons, company, partnership, corporation or business of
whatever nature:

 

(i)            engage,
as an officer, director, shareholder, owner, partner, joint venturer, or in a
managerial capacity, whether as an employee, independent contractor, consultant
or advisor, or as a sales representative, in the business of a metal service
center as currently operated by the Company’s Plates and Shapes Group (“Plates
& Shapes”), within 200 miles of where any Plates & Shapes entity
conducts business, including any territory serviced by Plates & Shapes (the
“Territory”);

 

(ii)           call
upon any person who is, at that time, an employee of the Company (including its
subsidiaries) in a managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of the Company (including
its subsidiaries);

 

(iii)          call
upon any person or entity which is, at that time, or which has been, within
twelve (12) months prior to that time, a customer of Plates & Shapes within
the Territory for the purpose of soliciting or selling products or services in
competition with Plates & Shapes within the Territory; or

 

(iv)          call
upon any prospective acquisition candidate, on Executive’s own behalf or on
behalf of any competitor, which candidate was, to Executive’s actual knowledge
after due inquiry, either called upon by the Company (including its
subsidiaries) or for which the Company made an acquisition analysis, for the
purpose of acquiring such entity.

 

Notwithstanding the above, the foregoing
covenant shall not be deemed to prohibit Executive from acquiring as an
investment not more than one percent (1%) of the capital stock of a competing
business, whose stock is traded on a national securities exchange or
over-the-counter.

 

(b)           Because
of the difficulty of measuring economic losses to the Company as a result of a
breach of the covenants in this Section 3, and because of the immediate and
irreparable damage that could be caused to the Company for which it would have
no other adequate remedy, Executive agrees that the foregoing covenant may be
enforced by the Company in the event of breach by Executive, by injunctions and
restraining orders.

 

(c)           It
is agreed by the parties that the foregoing covenants in this Section 3 impose
a reasonable restraint on Executive in light of the activities and business of
the Company on the date of the execution of this Agreement and the current
plans of the Company but it is also the intent of the Company and Executive
that such covenants be construed and enforced in accordance with the changing
activities, business and locations

 

3

 

of the Company throughout the term of this
covenant, whether before or after the date of termination of the employment of
Executive.  For example, if, during the
term of this Agreement, the Company engages in new and different activities,
enters a new business or establishes new locations for its current activities
or business in addition to or other than the activities or business enumerated
under the Recitals above or the locations currently established therefore, then
Executive will be precluded from soliciting the customers or employees of such
new activities or business or from such new location and from directly
competing with such new business within 200 miles of its then-established
operating location(s) through the term of this covenant.  It is further agreed by the parties hereto
that, in the event that Executive shall cease to be employed hereunder, and
shall enter into a business or pursue other activities not in competition with
the Company, or similar activities or business in locations the operation of
which, under such circumstances, does not violate clause (a) of this Section 3,
and in any event such new business, activities or location are not in violation
of this Section 3 or of Executive’s obligations under this Section 3, if any,
Executive shall not be chargeable with a violation of this Section 3 if the
Company shall thereafter enter the same, similar or a competitive (i) business,
(ii) course of activities or (iii) location, as applicable unless the business
plans of the Company or any of its subsidiaries at the time of Executive’s
termination of employment include similar lines of business or activities..

 

(d)           The
covenants in this Section 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of
any other covenant.  Moreover, in the
event any court of competent jurisdiction shall determine that the scope, time
or territorial restrictions set forth are too broad or unreasonable, then it is
the intention of the parties that such restrictions be enforced to the fullest
extent which the court deems reasonable, and the Agreement shall thereby be
reformed.  If any portion of this
Section 3 shall be invalid or unenforceable, such invalidity or
unenforceability shall in no way be deemed or construed to affect in any way
the enforceability of any other portion of this Section 3.

 

(e)           All
of the covenants in this Section 3 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of Executive against the Company, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of such covenants. 
It is specifically agreed that the period of twelve (12) months
following termination of employment stated at the beginning of this Section 3,
during which the agreements and covenants of Executive made in this Section 3
shall continue to be effective, shall be computed by excluding from such
computation any time during which Executive is in violation of any provision of
this Section 3.  Executive specifically
agrees that the restrictions in this Section 3 are reasonable, and that none of
the restrictions shall cause any unreasonable hardship to Executive.

 

4.             Term;
Termination; Rights on Termination.

 

(a)           General.  Executive’s employment under this Agreement
shall begin on the Effective Date and continue for twenty six (26) months until
December 31, 2004 (the “Term”) unless it is terminated earlier pursuant to the
provisions of this Section 4.  Either

 

4

 

party may elect to not renew this Agreement
for one additional year by giving the other party at least ninety (90) days
written notice prior to December 31, 2004 that such party will not renew this
Agreement.  Unless Executive elects not
to renew this Agreement as provided above, Company shall have the option to extend
the term of this Agreement for one (1) year, on the same terms as then in
existence, provided that Company gives Executive at least ninety (90) days
written notice prior to December 31, 2004 (the “Renewal Term”).

 

(b)           Termination, Non-Renewal.  This Agreement and Executive’s employment may be
terminated in any one of the following ways

 

(i)            Death.  The death of Executive shall immediately
terminate this Agreement with no severance compensation due to Executive’s
estate.

 

(ii)           Disability.  If, as a result of incapacity due to
physical or mental illness or injury, Executive shall have been absent from
full-time duties hereunder for four (4) consecutive months, or one hundred
twenty (120) days in any rolling one-year period, then thirty (30) days after
receiving written notice (which notice may occur before or after the end of
such four (4) month or one hundred twenty (120) day period, but which shall not
be effective earlier than the last day of either such period), the Company may
terminate Executive’s employment hereunder provided Executive is unable to
resume full-time duties with or without reasonable accommodation at the
conclusion of such notice period.  Also,
Executive may terminate Executive’s employment hereunder if Executive’s health
should become impaired to an extent that makes the continued performance of
Executive’s duties hereunder hazardous to Executive’s physical or mental health
or life, provided that Executive shall have furnished the Company with a
written statement from a qualified doctor to such effect and provided, further,
that, at the Company’s request made within thirty (30) days of the date of such
written statement, Executive shall submit to an examination by a doctor
selected by the Company who is reasonably acceptable to Executive or
Executive’s doctor.  In the event this
Agreement is terminated as a result of Executive’s disability, Executive shall
receive from the Company, in a lump-sum payment due within ten (10) days of the
effective date of termination, the base salary at the rate then in effect for
whatever time period is remaining under the Term or Renewal Term (as the case
may be) for one (1) year, whichever amount is greater; provided, however, that
any such payments shall be reduced by the amount of any disability insurance
payments payable to the Executive as a result of such disability.

 

(iii)          Cause.  The Company may terminate this Agreement
immediately for Cause (defined below). 
In the event of a termination for Cause, Executive shall have no right
to any severance compensation.

 

(iv)          Without
Cause or by Executive for Good Reason.  At any time after the commencement of employment, the Company may
terminate this Agreement without Cause or Executive may terminate this
Agreement for Good Reason (defined below), effective thirty (30) days after
written notice is provided to the

 

5

 

other party. 
Should Executive be terminated by the Company without Cause or should
Executive terminate with Good Reason during the Term or the Renewal Term (as
the case may be), Executive shall receive from the Company, within fourteen
(14) days of the effective date of termination, the greater of (a) the base
salary and bonus to be paid for the remaining Term or (b) $350,000.

 

(v)           Resignation
or Termination without Good Reason. 
If Executive resigns or otherwise terminates his employment without Good
Reason, Executive shall receive no severance compensation.

 

(vi)          Non-Renewal, Extension of Non-Compete after Renewal
Term.  In the event either
the Company or Executive elects not to renew this Agreement for the one-year
Renewal Term as provided herein, then Executive shall not be bound by the
non-competition terms set forth in Section 3 above after the end of the
Term.  However, in the event of:  (1) a non-renewal election by either party
at the end of the Term, or (2) a termination of employment by the Company
without Cause or by Executive for Good Reason during the Renewal Term, the
Company shall have the exclusive right to elect to pay Executive an aggregate
amount of $100,000 in cash over twelve (12) months from the end of the Term or
Renewal Term (as the case may be), payable in installments as determined by the
parties, plus Executive shall also receive twelve (12) months of Company health
benefits and other perquisites commencing at the end of the Term or Renewal
Term (as the case may be), on an uninterrupted basis, and Executive shall be
subject to the terms and conditions of Section 3 for an additional twelve (12)
months commencing at the end of the Term or Renewal Term (as the case may be).

 

(c)           Certain
Terminations.  If Executive
is terminated without Cause or terminates his employment hereunder with Good
Reason, (1) Executive shall receive twelve (12) months of Company health
benefits and other perquisites commencing at the end of the Term or Renewal
Term (as the case may be), on an uninterrupted basis, and (2) the vesting
of all of Executive’s unvested stock grants or stock options (if any are then
outstanding) shall be immediately accelerated upon the date of termination of employment
and, with respect to any stock options, shall remain outstanding and
exercisable for the period set forth in the applicable option agreement or
option plan.

 

(d)           Effect of
Any Termination of Employment. 
Upon termination of this Agreement for any reason, Executive shall be
entitled to receive all earned and unpaid compensation and all benefits and
reimbursements due through the effective date of termination.  Additional compensation subsequent to
termination, if any, will be due and payable to Executive only to the extent
and in the manner expressly provided herein. 
Except with respect to any benefits or payments to which Executive may
be entitled under the terms and conditions of any benefit plan or applicable law,
all other rights and obligations of the Company and Executive under this
Agreement shall cease as of the effective date of termination; provided,
however, that the parties agree that the Company’s obligations under this
Section 4 and Section 8, and Executive’s obligations

 

6

 

under Sections 3, 5, 6, 7 and 15 herein shall
survive such termination in accordance with their terms unless otherwise
provided herein.

 

(e)           Definitions.

 

(i)            “Cause”
shall mean any of the following:  (a)
Executive’s material breach of this Agreement, including any of Company’s
policies included or applicable under Section 1(b) above; (b) Executive’s
negligence in the performance or intentional nonperformance of any of
Executive’s material duties and responsibilities hereunder after ten (10) days
written notice during which Executive has not cured such negligence or
intentional nonperformance; (c) Executive’s dishonesty, fraud or misconduct
with respect to the business or affairs of the Company which  adversely affect the operations or
reputation of the Company.

 

(ii)           “Good
Reason” shall mean any of the following: 
(a) Executive is demoted by means of an absolute reduction in authority,
responsibilities or duties to a position of less stature or importance within
the Company than the position described in Section 1 hereof; or (b) Executive’s
annual base salary as determined pursuant to Section 2 hereof is reduced,
unless Executive has agreed in writing to that demotion or reduction or (c)
Company materially breaches this Agreement with respect to payment of
compensation hereunder; or (d) the relocation of Executive’s office more than
fifty (50) miles from its location on the Effective Date without Executive’s
written concurrence; provided, however, that if any office relocation in excess
of fifty (50) miles should result in Executive’s home at the time of the
relocation being closer to the new office than prior to the relocation, such
relocation shall not be an occurrence of “Good Reason.”

 

5.             Return
of Company Property.  All records,
designs, patents, business plans, financial statements, manuals, memoranda,
lists and other property delivered to or compiled by Executive by or on behalf
of the Company, its subsidiaries or their representatives, vendors or customers
which pertain to the business of the Company shall be and remain the property
of the Company and be subject at all times to its discretion and control.  Likewise, all correspondence, reports,
records, charts, advertising materials and other similar data pertaining to the
business, activities or future plans of the Company which is collected by
Executive shall be delivered promptly to the Company without request by it upon
termination of Executive’s employment.

 

6.             Inventions.  Executive shall disclose promptly to the
Company any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, which are
conceived or made by Executive, solely or jointly with another, during the
period of employment or within one (1) year thereafter, and which are directly
related to the business or activities of the Company or its subsidiaries and
which Executive conceives as a result of Executive’s employment by the
Company.  Executive hereby assigns and
agrees to assign all Executive’s interests therein to the Company or its
nominee.  Whenever requested to do so by
the Company, Executive shall

 

7

 

execute any and all applications, assignments
or other instruments that the Company shall deem necessary to apply for and
obtain Letters Patent of the United States or any foreign country or to
otherwise protect the Company’s interest therein.

 

7.             Confidentiality.  During the Restricted Period and thereafter,
except as provided below, Executive shall not, without the written consent of
the Board or a person authorized thereby, disclose to any person, other than an
employee of the Company or any of its subsidiaries or a person to whom
disclosure is reasonably necessary or appropriate in connection with the
performance by Executive of his duties as an executive of the Company, any
confidential information learned by him while in the employ of the Company with
respect to the Company’s business, including but not limited to trade secrets,
technology, know-how, processes, any business data, information regarding any
of the Company’s or its subsidiaries’ customers, practices, or operations, and
other proprietary information, the disclosure of which Executive knows or
should know will be damaging to the business, strategy or reputation of the
Company or any of its subsidiaries; provided however, that confidential
information shall not include any information (i) known to Executive or in
Executive’s lawful possession at the Effective Date of this Agreement, (ii)
known generally to the public (other than as a result of unauthorized
disclosure by Executive), (iii) of a type not reasonably considered
confidential by persons engaged in the same business or a business similar to
that conducted by the Company or any subsidiary, or (iv) which Executive may be
required to disclose by any applicable law, order, or judicial or
administrative proceeding.

 

8.             Indemnification.  In the event Executive is made a party to
any threatened, pending or contemplated action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by the
Company against Executive or by Executive against the Company), by reason of
the fact that Executive is or was performing services under this Agreement, then
the Company shall indemnify Executive against all expenses (including
attorneys’ fees), judgments, fines and amounts paid in settlement, as actually
and reasonably incurred by Executive in connection therewith.  In the event that both Executive and the
Company are made a party to the same third party action, complaint, suit or
proceeding, the Company agrees to engage counsel, and Executive agrees to use
the same counsel, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Executive,
Executive may engage separate counsel and the Company shall pay all reasonable
attorneys’ fees of such separate counsel. 
The Company shall not be required to pay the fees of more than one law
firm except as described in the preceding sentence, and shall not be required
to pay the fees of more than two law firms under any circumstances.  Further, while Executive is expected at all
times to use Executive’s best efforts to faithfully discharge Executive’s
duties under this Agreement, Executive cannot be held liable to the Company for
errors or omissions made in good faith where Executive has not exhibited gross
negligence, intentional nonperformance of his duties hereunder, willful
dishonesty, fraud or misconduct, or performed criminal or fraudulent acts which
materially damage the business of the Company.

 

8

 

9.             No
Prior Agreements.  Executive hereby
represents and warrants to the Company that the execution of this Agreement by
Executive and Executive’s employment by the Company and the performance of
Executive’s duties hereunder will not violate or be a breach of any agreement
with a former employer, client or any other person or entity.  Further, Executive agrees to indemnify the
Company for any claim, including, but not limited to, attorneys’ fees and
expenses of investigation, by any such third party that such third party may
now have or may hereafter come to have against the Company based upon or arising
out of any non-competition agreement, invention or secrecy agreement between
Executive and such third party which was in existence as of the date of this
Agreement.

 

10.           Assignment;
Binding Effect.  Executive
understands that Executive has been selected for employment by the Company on
the basis of Executive’s personal qualifications, experience and skills.  Executive agrees, therefore, that Executive
cannot assign all or any portion of Executive’s performance under this
Agreement.  Subject to the preceding,
this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.

 

11.           Change
in Control.

 

(a)           Executive
understands and acknowledges that the Company or Plates & Shapes may be
sold, merged or consolidated with or into another entity or that the Company
may undergo another type of Change in Control. 
In the event such a sale, merger or consolidation or other Change in
Control is initiated and consummated prior to the end of the Term or the
Renewal Term, then the provisions of this Section 11 shall be applicable.

 

(b)           In
the event of a Change in Control, then such Change in Control shall be deemed
to be a termination of this Agreement by the Company without Cause during the
Term or the Renewal Term and Executive shall be paid a lump sum payment equal
to the greater of (a) the remaining amount due under this Agreement (base
salary plus bonus) as if the Term had continued; or (b) the total compensation
(base salary plus one year’s bonus) paid to Executive over the previous twelve
(12) months; plus Executive shall receive the benefits set forth in Section
4(c) above, and Executive shall be bound by the terms of Section 3 for twelve
(12) months beyond December 31, 2004 or December 31, 2005, as the case may
be.  In addition, the Company, or its
successor, shall retain the right until the date upon which Executive’s
employment would otherwise have ended on the last day of the Term or the
Renewal Term, as the case may be, to elect to extend the non-competition terms
of Section 3 for (twelve) 12 months by electing to compensate Executive as
provided in Section 4(b)(vi) during the twelve-month period following the end
of the Term or Renewal Term, as the case may be.

 

(c)           The
effective date of termination will be the closing date of the transaction
giving rise to the Change in Control and all compensation, reimbursements and
lump-sum payments due Executive must be paid in full by the Company at or prior
to such

 

9

 

closing. 
The vesting of all unvested options and grants of stock shall be
immediately accelerated upon the Change in Control, and Executive will be given
sufficient time and opportunity to elect whether to exercise all or any of his
vested options and stock grants, such that he may convert the options and stock
grants to shares of the Company’s Common Stock at or prior to the closing of
the transaction giving rise to the Change in Control, if he so desires.

 

(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 Securities Exchange Act of 1934, as amended) 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% 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 of Directors of the Company:  (A)
the individuals who, as of November 1, 2002, constitute the Board of Directors
of the Company (the “Original Directors”); (B) the individuals who thereafter
are elected to the Board of Directors of the Company and whose election or
nomination for election, to the Board of Directors of the Company 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 of Directors of the Company and whose election or nomination for
election, to the Board of Directors of the Company 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
Board and/or the Stockholders of the Company shall approve the sale or
liquidation distribution of more than 50% of the “Plates and Shapes Group”
operations to an entity not owned or controlled by the Company; 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% or more of the total
assets of the Company).

 

(e)           Executive
must be notified in writing by the Company at any time that the Company or any
member of its Board anticipates that a Change in Control may take place.

 

(f)            Executive
shall be reimbursed by the Company or its successor for any excise taxes that
Executive incurs under Section 4999 of the Internal Revenue Code of

 

10

 

1986, as a result of any Change in
Control.  Such amount will be due and
payable by the Company or its successor within ten (10) days after Executive
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Executive.

 

12.           Complete
Agreement.  This Agreement sets
forth the entire agreement of the parties hereto relating to the subject matter
hereof and supersedes any other employment agreements or understandings,
written or oral, between the Company and Executive.  This Agreement is not a promise of future employment.  Executive has no oral representations,
understanding or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement.  This written Agreement is the final,
complete and exclusive statement and expression of the agreement between the
Company and Executive and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or
contemporaneous oral or written agreement. 
This written Agreement may not be later modified except by written
agreement signed by a duly authorized officer of the Company and Executive, and
no term of this Agreement may be waived except by a writing signed by the party
waiving the benefit of such term.

 

13.           Notice.  Whenever any notice is required hereunder,
it shall be given in writing addressed as follows:

 

	
  To The
  Company:

  	
   

  	
  Metals USA,
  Inc.

  
	
   

  	
   

  	
  Attn:  John Hageman, General Counsel

  
	
   

  	
   

  	
  Three
  Riverway, Suite 600

  
	
   

  	
   

  	
  Houston,
  Texas  77056

  
	
   

  	
   

  	
  Telephone:
  713/965-0990

  
	
   

  	
   

  	
  Fax:  713/965-0067

  
	
   

  	
   

  	
   

  
	
  To
  Executive:

  	
   

  	
  William R.
  Bennett

  
	
   

  	
   

  	
  709 Planters
  Row

  
	
   

  	
   

  	
  Wilmington,
  N.C. 28405

  

 

Notice shall be deemed given and effective on
the earlier of three (3) days after the deposit in the U.S. mail of a writing
addressed as above and sent first class mail, certified, return receipt
requested, or when actually received by means of hand delivery, delivery by
Federal Express or other courier service, or by facsimile transmission.  Either party may change the address for
notice by notifying the other party of such change in accordance with this
Section 13.

 

14.           Severability;
Headings.  If any portion of this
Agreement is held invalid or inoperative, the other portions of this Agreement
shall be deemed valid and operative and, so far as is reasonable and possible,
effect shall be given to the intent manifested by the portion held invalid or
inoperative.  The Section headings
herein are for reference purposes only and are not intended in any way to
describe, interpret, define or limit the extent or intent of the Agreement or
of any part hereof.

 

11

 

15.           Arbitration.  With the exception of Sections 3, 6 and 7,
any unresolved dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three (3) arbitrators in Wilmington, North Carolina  in accordance with the National Rules for
the Resolution of Employment Disputes of the American Arbitration Association
(“AAA”) then in effect, provided that Executive shall comply with the Company’s
grievance procedures in an effort to resolve such dispute or controversy before
resorting to arbitration, and provided further that the parties may agree to
use arbitrators other than those provided by the AAA.  The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof not to award punitive damages to any
injured party.  The arbitrators shall
have the authority to order back-pay, severance compensation, vesting of
options (or cash compensation in lieu of vesting of options), reimbursement of
costs, including those incurred to enforce this Agreement, and interest thereon
in the event the arbitrators determine that Executive was terminated without
disability or Cause, or that the Company has otherwise materially breached this
Agreement.  A decision by a majority of
the arbitration panel shall be final and binding.  Judgment may be entered on the arbitrator’s award in any court
having jurisdiction.  The direct expense
of any arbitration proceeding shall be divided equally between the parties and
each party shall pay its own attorneys’ fees regardless of the outcome of the
arbitration.

 

16.           Governing
Law.  This Agreement shall in all
respects be construed according to the laws of the State of North Carolina.

 

17.           Counterparts.  This Agreement may be executed
simultaneously in two (2) or more counterparts, each of which shall be deemed
an original and all of which together shall constitute but one and the same
instrument.

 

-
SIGNATURE PAGE FOLLOWS -

 

12

 

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

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  METALS USA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JOHN A HAGEMAN

  
	
   

  	
  Name:

  	
  John A Hageman

  
	
   

  	
  Title:

  	
  Sr. Vice President & General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ WILLIAM R. BENNETT

  
	
   

  	
  William R. Bennett

  
					

 

13

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