EXECUTION VERSION AGREEMENT AND PLAN OF MERGER BY AND AMONG FLAG HOLDINGS CORPORATION, FLAG ACQUISITION CORPORATION

 

 

                                                               EXECUTION VERSION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                          AGREEMENT AND PLAN OF MERGER

 

                                  BY AND AMONG

 

                           FLAG HOLDINGS CORPORATION,

 

                          FLAG ACQUISITION CORPORATION,

 

             a wholly owned subsidiary of Flag Holdings Corporation,

 

                                       and

 

                                METALS USA, INC.

 

 

 

 

 

                                   May 18, 2005

 

 

 

 

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                                TABLE OF CONTENTS

 

 

                                                                            Page

                                                                            ----

 

ARTICLE I          THE MERGER...................................................2

 

    1.1       The Merger.......................................................2

    1.2       Closing; Effective Time..........................................2

    1.3       Effects of the Merger............................................2

    1.4       Certificate of Incorporation and Bylaws..........................2

    1.5       Directors and Officers of the Surviving Corporation..............2

    1.6       MUSA Stockholders Meeting........................................3

    1.7       Additional Actions...............................................4

 

ARTICLE II        CONVERSION OF SECURITIES.....................................4

 

    2.1       Effect on Capital Stock..........................................4

    2.2       Surrender and Payment............................................5

    2.3       Treatment of Stock Options; Deferred Stock; Warrants.............7

    2.4       Adjustments to Prevent Dilution..................................9

 

ARTICLE III       REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB......9

 

    3.1       Organization and Standing........................................9

    3.2       Corporate Power and Authority...................................10

    3.3       Conflicts; Consents and Approvals...............................10

    3.4       Brokerage and Finders' Fees.....................................11

    3.5       Information Supplied............................................11

    3.6       Financing.......................................................11

    3.7       Capitalization of Merger Sub....................................12

    3.8       Section 203 of the DGCL.........................................12

    3.9       Solvency........................................................12

 

ARTICLE IV        REPRESENTATIONS AND WARRANTIES OF MUSA......................13

 

    4.1       Organization and Standing.......................................13

    4.2       Subsidiaries....................................................13

    4.3       Corporate Power and Authority...................................14

    4.4       Capitalization of MUSA..........................................14

    4.5       Conflicts; Consents and Approvals...............................15

    4.6       Brokerage and Finders' Fees; Expenses...........................16

    4.7       MUSA SEC Documents..............................................16

    4.8       Undisclosed Liabilities.........................................17

    4.9       Disclosure Documents............................................17

    4.10      Compliance with Law.............................................18

    4.11      Litigation......................................................18

 

 

                                       -i-

 

 

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    4.12      Absence of Certain Changes or Events............................19

    4.13      Taxes...........................................................19

    4.14      Intellectual Property...........................................21

    4.15      Employee Benefit Plans..........................................21

    4.16      Contracts; Indebtedness.........................................24

    4.17      Labor Matters...................................................26

    4.18      Customer/Supplier Relationships.................................26

    4.19      Environmental Matters...........................................27

    4.20      Insurance.......................................................28

    4.21      Properties and Assets...........................................28

    4.22      Real Property...................................................29

    4.23      Inventory.......................................................29

    4.24      Accounts Receivable.............................................30

    4.25      Books and Records...............................................30

    4.26      Related Party Transactions......................................30

    4.27      Opinion of Jefferies & Co. Inc. ................................30

    4.28      Board Recommendation; Required Vote.............................30

    4.29      Section 203 of the DGCL.........................................31

 

ARTICLE V         COVENANTS OF THE PARTIES....................................31

 

    5.1       Mutual Covenants................................................31

             (a)       Reasonable Best Efforts................................31

             (b)       HSR Act................................................31

             (c)       Public Announcements...................................32

             (d)       Conveyance Taxes.......................................32

             (e)       Notice of Certain Events...............................32

             (f)       Repayment of Certain Existing Indebtedness of MUSA.....33

             (g)       Actions and Proceedings................................33

    5.2       Covenants of Parent.............................................34

             (a)       Indemnification; Directors' and Officers' Insurance....34

             (b)       Financing..............................................35

             (c)       Disclosure Documents...................................36

    5.3       Covenants of MUSA...............................................36

             (a)       Conduct of MUSA's Operations...........................36

             (b)       Acquisition Proposals..................................39

             (c)       Third Party Standstill Agreements......................42

             (d)       Access.................................................42

             (e)       Financing Assistance...................................43

             (f)       Expense Certificates...................................44

             (g)       Consents Cooperation...................................44

 

ARTICLE VI        CONDITIONS TO THE MERGER....................................45

 

    6.1       Conditions to the Obligations of Each Party.....................45

    6.2        Conditions to Obligations of Parent and Merger Sub..............45

    6.3       Conditions to Obligation of MUSA................................47

 

 

                                      -ii-

 

 

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ARTICLE VII       TERMINATION; FEES AND EXPENSES..............................47

 

    7.1       Termination by Mutual Consent...................................47

    7.2       Termination by Either Parent or MUSA............................48

    7.3       Termination by MUSA.............................................48

    7.4       Termination by Parent...........................................48

    7.5       Effect of Termination and Abandonment...........................49

    7.6       Fees and Expenses...............................................49

 

ARTICLE VIII      MISCELLANEOUS...............................................51

 

    8.1       Non-Survival of Representations and Warranties..................51

    8.2       Notices.........................................................51

    8.3       Interpretation..................................................52

    8.4       Counterparts....................................................53

    8.5       Entire Agreement................................................53

    8.6       Third-Party Beneficiaries.......................................53

    8.7       Governing Law...................................................53

    8.8       Consent to Jurisdiction; Venue; Jury Trial......................53

    8.9       Assignment......................................................54

    8.10      Amendment.......................................................54

    8.11      Extension; Waiver...............................................55

    8.12      No Presumption Against Drafter..................................55

    8.13      Severability....................................................55

 

 

                                      -iii-

 

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                             INDEX OF DEFINED TERMS

 

Defined Term                                                     Section

------------                                                    -------

 

2002 Plan......................................................2.3(a)

Acquisition Proposal...........................................5.3(b)(ix)(A)

Action.........................................................4.11

Agreement......................................................Preamble

Applicable Laws................................................1.6(a)

Appraisal Shares...............................................2.1(d)

Board..........................................................Recitals

Certificate....................................................2.1(b)

Certificate of Merger..........................................1.2

Change in the MUSA Board Recommendation........................5.3(b)(iv)

Closing........................................................1.2

Closing Date...................................................1.2

Code...........................................................2.2(g)

Commission.....................................................1.6(b)

Committee......................................................2.3(a)

Confidentiality Agreement......................................5.3(b)(iii)

Controlled Group Liability.....................................4.15(a)(i)

Costs..........................................................4.15(a)(i)

Covered Proposal...............................................7.6(a)(i)

Debt Financing.................................................3.6

Debt Financing Agreement.......................................3.6

Delaware Secretary of State....................................1.2

DGCL...........................................................1.1

Effective Time.................................................1.2

Employment Agreement...........................................Recitals

Encumbrance....................................................3.3(b)

Environmental Law..............................................4.19

Environmental Permit...........................................4.19

Equity Financing...............................................3.6

Equity Financing Letter........................................3.6

ERISA..........................................................4.15(a)(ii)

ERISA Affiliate................................................4.15(a)(iii)

Exchange Act...................................................1.6(b)

Exchange Fund..................................................2.2(a)

Expenses.......................................................7.6(b)(iv)

Financing......................................................3.6

Financing Agreements...........................................3.6

Foreign Antitrust Laws.........................................3.3(d)

Foreign Antitrust Laws.........................................3.3(d)(i)

GAAP...........................................................4.7(a)

Governmental Authority.........................................3.3(d)

Hazardous Material.............................................4.19

HSR Act........................................................3.3(d)(i)

 

                                      -iv-

 

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Defined Term                                                    Section

------------                                                    -------

 

Indemnified Directors and Officers.............................5.2(a)(i)

Insurance Amount...............................................5.2(a)(ii)

Intellectual Property Right....................................4.14(a)(i)

Key MUSA Individuals...........................................5.3(a)(viii)

Lease Agreement................................................4.22

Leased Real Property...........................................4.22

Loan Agreement.................................................5.1(f)(i)

Material Adverse Effect........................................8.3

Material Contracts.............................................4.16(a)

Merger.........................................................Recitals

Merger Consideration...........................................2.1(b)

Merger Sub.....................................................Preamble

Multiemployer Plan.............................................4.15(f)

Multiple Employer Plan.........................................4.15(f)

MUSA...........................................................Preamble

MUSA Board Recommendation......................................4.28

MUSA Bylaws....................................................1.6(a)

MUSA Certificate...............................................1.6(a)

MUSA Common Stock..............................................Recitals

MUSA Deferred Stock Right......................................Error! Reference

                                                               source not found.

MUSA Disclosure Documents......................................1.6(b)

MUSA Disclosure Schedule.......................................4.2

MUSA Intellectual Property Right...............................4.14(a)(ii)

MUSA Option....................................................2.3(a)

MUSA Permits...................................................4.10

MUSA SEC Documents.............................................4.7(a)

MUSA Stockholders..............................................1.6(a)

MUSA Stockholders Meeting......................................1.6(a)

MUSA Warrants..................................................2.3(d)

Note...........................................................5.1(f)(ii)

Owned Real Property............................................4.22

Parent.........................................................Preamble

Parent Disclosure Documents....................................5.2(c)

Paying Agent...................................................2.2(a)

Paying Party...................................................7.6(d)

Permitted Encumbrances.........................................4.22

Person.........................................................5.3(b)(i)

Plans..........................................................4.15(a)(iv)

Proxy Statement................................................1.6(b)

Qualified Plan.................................................4.15(c)

RCRA...........................................................4.19

Real Property..................................................4.22

 

                                       -v-

 

<PAGE>

 

Defined Term                                                    Section

------------                                                    -------

 

Receiving Party................................................7.6(d)

Release........................................................4.19

Representatives................................................5.3(b)(i)

Required Amounts...............................................3.6

Section 262....................................................2.1(b)

Securities Act.................................................4.4(c)

subsidiary.....................................................8.3

Superior Proposal..............................................5.3(b)(ix)(B)

Superior Proposal Notice.......................................5.3(b)(iii)

Support Agreement..............................................Recitals

Surviving Corporation..........................................1.1

Tax Returns....................................................4.13(b)

Taxes..........................................................4.13(c)

Termination Date...............................................7.2(a)

Termination Fee................................................7.6(a)

Transaction Fees...............................................4.6

Transaction Statement..........................................5.2(c)

Transfers......................................................5.3(a)(ii)

Waiting Period.................................................5.3(b)(iii)

Warrant Agreement..............................................2.3(d)

 

                                      -vi-

 

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                          AGREEMENT AND PLAN OF MERGER

 

          This Agreement and Plan of Merger (this "Agreement") is made and

entered into as of the 18th day of May, 2005, by and among Flag Holdings

Corporation, a Delaware corporation ("Parent"), Flag Acquisition Corporation, a

Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and

Metals USA, Inc., a Delaware corporation ("MUSA").

 

 

                                    RECITALS

 

          WHEREAS, Parent, Merger Sub and MUSA desire that Parent acquire all of

the capital stock of MUSA through the merger of Merger Sub with and into MUSA,

with MUSA as the surviving corporation (the "Merger"), pursuant to which each

share of Common Stock of MUSA, par value $.01 per share ("MUSA Common Stock"),

issued and outstanding at the Effective Time, excluding shares of MUSA Common

Stock owned by Parent, Merger Sub or MUSA (or any of their respective direct or

indirect wholly owned subsidiaries) and other than the Appraisal Shares, will be

converted into the right to receive the Merger Consideration, all as more fully

provided in this Agreement; and

 

          WHEREAS, concurrently with the execution of this Agreement, as a

condition and inducement to Parent's and Merger Sub's willingness to enter into

this Agreement, Parent and certain MUSA Stockholders are entering into a Support

Agreement, of even date herewith, in respect of shares of MUSA Common Stock

beneficially owned by such stockholders (the "Support Agreement"); and

 

          WHEREAS, concurrently with the execution of this Agreement, as a

condition and inducement to Parent's and Merger Sub's willingness to enter into

this Agreement, Merger Sub and Lourenco Goncalves are entering into an

employment agreement, of even date herewith (the "Employment Agreement"); and

 

          WHEREAS, it is Parent's current expectation that one or more members

of the management of MUSA will have equity interests in Parent or the Surviving

Corporation from and after the consummation of the Merger; and

 

          WHEREAS, the board of directors (the "Board") of each of Merger Sub

and MUSA has determined that the Merger, upon the terms and subject to the

conditions set forth in this Agreement, is advisable, fair to and in the best

interests of their respective stockholders; and

 

          WHEREAS, Parent, Merger Sub and MUSA desire to make those

representations, warranties, covenants and agreements specified herein in

connection with this Agreement.

 

          NOW, THEREFORE, in consideration of the premises, and of the

representations, warranties, covenants and agreements contained herein, Parent,

Merger Sub and MUSA agree as follows:

 

                                       -1-

 

<PAGE>

 

 

 

                                   ARTICLE I

 

                                   THE MERGER

 

          1.1. The Merger. Upon the terms and subject to the conditions of this

Agreement, and in accordance with the provisions of the Delaware General

Corporation Law (the "DGCL"), Merger Sub ---- shall be merged with and into MUSA

at the Effective Time. As a result of the Merger, the separate corporate

existence of Merger Sub shall cease and MUSA shall continue its existence as a

wholly owned subsidiary of Parent under the laws of the State of Delaware. MUSA,

in its capacity as the corporation surviving the Merger, is hereinafter

sometimes referred to as the "Surviving Corporation."

 

          1.2. Closing; Effective Time. A closing (the "Closing") shall be held

at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York,

NY 10019, or such other place as the parties hereto may agree, as soon as

practicable but no later than the second business day following the date upon

which all conditions set forth in Article VI (other than those conditions that

by their nature are to be satisfied or waived at the Closing, but subject to the

satisfaction or waiver of those conditions) are satisfied or waived, or at such

other date as Parent and MUSA may agree (such date, the "Closing Date"). As

promptly as possible on the Closing Date, the parties hereto shall cause the

filing with the Secretary of State of the State of Delaware (the "Delaware

Secretary of State") of a certificate of merger (the "Certificate of Merger") in

such form as is required by and executed in accordance with Section 251 of the

DGCL. The Merger shall become effective when the Certificate of Merger has been

filed with the Delaware Secretary of State or at such later time as shall be

agreed upon by Parent and MUSA and specified in the Certificate of Merger (the

"Effective Time").

 

          1.3. Effects of the Merger. From and after the Effective Time, the

Merger shall have the effects set forth in Section 259 of the DGCL.

 

          1.4. Certificate of Incorporation and Bylaws. The Certificate of

Merger shall provide that, at the Effective Time, (a) the Surviving

Corporation's Certificate of Incorporation as in effect immediately prior to the

Effective Time shall be amended as of the Effective Time so as to contain the

provisions, and only the provisions, contained immediately prior thereto in

Merger Sub's Certificate of Incorporation, except that the Surviving

Corporation's Certificate of Incorporation also shall be amended to provide that

the name of the Surviving Corporation shall be "Metals USA, Inc." and (b) Merger

Sub's Bylaws in effect immediately prior to the Effective Time shall be the

Surviving Corporation's Bylaws; in each case, until amended in accordance with

the DGCL and subject to the provisions of Section 5.2(a)(iii).

 

          1.5. Directors and Officers of the Surviving Corporation. From and

after the Effective Time, the officers of MUSA shall be the officers of the

Surviving Corporation and the directors of Merger Sub shall be the directors of

the Surviving Corporation, in each case, until their respective successors are

duly elected and qualified. On or prior to the Closing Date, MUSA shall deliver

to Parent evidence satisfactory to Parent of the resignations of the directors

of MUSA, such resignations to be effective as of the Effective Time.

 

 

                                      -2-

 

 

<PAGE>

 

 

          1.6. MUSA Stockholders Meeting.

 

          (a) As promptly as practicable following the date of this Agreement,

MUSA shall, in accordance with all applicable laws, statutes, orders, rules or

regulations promulgated, or judgments, decisions or orders entered by any

Governmental Authority, in each case, to the extent applicable (collectively,

"Applicable Laws") and MUSA's Amended and Restated Certificate of Incorporation

as in effect on the date of this Agreement (the "MUSA Certificate") and MUSA's

Amended and Restated Bylaws as in effect on the date of this Agreement (the

"MUSA Bylaws"), duly call, give notice of, convene and hold a meeting of the

holders of shares of MUSA Common Stock (the "MUSA Stockholders") to consider and

vote upon the adoption and approval of this Agreement and the Merger (the "MUSA

Stockholders Meeting"). MUSA shall ensure that the MUSA Stockholders Meeting is

called, noticed, convened, held and conducted, and that all proxies solicited in

connection with the MUSA Stockholders Meeting are solicited in compliance with

Applicable Laws.

 

          (b) As promptly as reasonably practicable following the date of this

Agreement, MUSA shall prepare and file with the Securities and Exchange

Commission (the "Commission") a proxy statement (together with any amendments

thereof or supplements thereto, the "Proxy Statement," and together with each

other document required to be filed by MUSA with the Commission relating to the

transactions contemplated hereby, including the Merger, the "MUSA Disclosure

Documents") that meets the requirements of Applicable Laws to seek the approval

of this Agreement and the Merger. MUSA shall respond promptly to any comments

made by the Commission with respect to the Proxy Statement and any preliminary

version thereof filed by it, and shall cause such Proxy Statement to be mailed

to the MUSA Stockholders as promptly as reasonably practicable. MUSA shall

promptly notify Parent of the receipt of any comments of the Commission with

respect to the Proxy Statement and any other MUSA Disclosure Document, and shall

provide to Parent copies of any comments received from the Commission in

connection with the Proxy Statement and any other MUSA Disclosure Document.

Parent will cooperate with MUSA at its reasonable request in the preparation of

the Proxy Statement, including furnishing to MUSA the information relating to it

and Merger Sub required by the Securities Exchange Act of 1934, as amended

(together with the rules and regulations promulgated thereunder, the "Exchange

Act") to be set forth in the Proxy Statement. Parent and its counsel shall be

given a reasonable opportunity to review and comment on all MUSA Disclosure

Documents, including the Proxy Statement and all mailings to the MUSA

Stockholders in connection with the Merger prior to their being filed with the

Commission or mailed, as applicable, and MUSA shall give reasonable

consideration to all comments proposed by Parent or its counsel.

 

          (c) The MUSA Board shall make the MUSA Board Recommendation. The MUSA

Board Recommendation shall be included in the Proxy Statement, and the MUSA

Board shall use its reasonable best efforts to obtain the necessary approval and

adoption of this Agreement and the Merger by the MUSA Stockholders. In the event

that subsequent to the date of this Agreement, the MUSA Board determines, after

consultation with outside counsel, that its fiduciary duties under Applicable

Laws require it to withdraw, modify or qualify the MUSA Board Recommendation in

a manner adverse to Parent, the MUSA Board may so withdraw, modify or qualify

the MUSA Board Recommendation; provided, however, that the MUSA Board may not

recommend any Acquisition Proposal (other than this Agreement and the

transactions

 

 

                                      -3-

 

 

<PAGE>

 

 

contemplated hereby, including the Merger), except as specifically contemplated

by, and in accordance with, Section 5.3(b)(iii); provided, further, however,

that unless this Agreement is theretofore terminated, MUSA shall nevertheless

submit this Agreement to the MUSA Stockholders for adoption at the MUSA

Stockholders Meeting.

 

          1.7. Additional Actions. If, at any time after the Effective Time, the

Surviving Corporation shall consider or be advised that any further deeds,

assignments or assurances in law or any other acts are necessary or desirable to

(a) vest, perfect or confirm, of record or otherwise, in the Surviving

Corporation its right, title or interest in, to or under any of the rights,

properties or assets of MUSA or (b) otherwise carry out the provisions of this

Agreement, MUSA and its officers and directors shall be deemed to have granted

to the Surviving Corporation an irrevocable power of attorney to execute and

deliver all such deeds, assignments or assurances in law and to take all acts

necessary, proper or desirable to vest, perfect or confirm title to and

possession of such rights, properties or assets in the Surviving Corporation and

otherwise to carry out the provisions of this Agreement, and the officers and

directors of the Surviving Corporation are authorized in the name of MUSA or

otherwise to take any and all such action.

 

                                    ARTICLE II

 

                            CONVERSION OF SECURITIES

 

          2.1. Effect on Capital Stock. At the Effective Time, by virtue of the

Merger and without any action on the part of Parent, Merger Sub or MUSA or their

respective stockholders:

 

          (a) Each share of common stock, $0.01 par value, of Merger Sub issued

     and outstanding immediately prior to the Effective Time shall be converted

     into one fully paid and nonassessable share of common stock, $0.01 par

     value, of the Surviving Corporation. Such newly issued shares shall

     thereafter constitute all of the issued and outstanding Surviving

     Corporation capital stock.

 

          (b) Subject to the other provisions of this Article II, each share of

     MUSA Common Stock issued and outstanding immediately prior to the Effective

     Time (excluding any shares of MUSA Common Stock owned by Parent, Merger Sub

     or MUSA or any of their respective direct or indirect wholly owned

     subsidiaries (which shares shall be cancelled and shall cease to exist with

     no payment being made with respect thereto) and any shares of MUSA Common

     Stock owned by stockholders properly exercising appraisal rights pursuant

     to Section 262 of the DGCL ("Section 262") (which shares shall have the

     rights as provided in Section 2.1(d))) shall be converted into and

     represent the right to receive $22.00 in cash, without interest (the

     "Merger Consideration"). At the Effective Time, all shares of MUSA Common

     Stock shall no longer be outstanding and automatically shall be cancelled

     and shall cease to exist, and each holder of a certificate that immediately

     prior to the Effective Time represented such shares of MUSA Common Stock (a

     "Certificate") shall cease to have any rights with respect thereto, except

     the right to receive the Merger Consideration or, in the case of holders of

     Appraisal Shares, the right to receive the applicable payments set forth in

     Section 2.1(d).

 

 

                                      -4-

 

<PAGE>

 

 

          (c) Each share of MUSA capital stock held in the treasury of MUSA

     automatically shall be cancelled and retired and no payment shall be made

     in respect thereof.

 

          (d) Notwithstanding anything in this Agreement to the contrary, the

     shares of MUSA Common Stock issued and outstanding immediately prior to the

     Effective Time that are held by any MUSA Stockholder that is entitled to

     demand and properly demands appraisal of shares of MUSA Common Stock

     pursuant to, and complies in all respects with, the provisions of Section

     262 (the "Appraisal Shares") shall not be converted into the right to

     receive the Merger Consideration as provided in Section 2.1(b), but,

     instead, such MUSA Stockholder shall be entitled to such rights (but only

     such rights) as are granted by Section 262. At the Effective Time, all

     Appraisal Shares shall no longer be outstanding and automatically shall be

      cancelled and shall cease to exist, and, except as otherwise provided by

     Applicable Laws, each holder of Appraisal Shares shall cease to have any

     rights with respect to the Appraisal Shares, other than such rights as are

     granted by Section 262. Notwithstanding the foregoing, if any such MUSA

     Stockholder shall fail to validly perfect or shall otherwise waive,

     withdraw or lose the right to appraisal under Section 262 or if a court of

     competent jurisdiction shall determine that such MUSA Stockholder is not

     entitled to the relief provided by Section 262, then the rights of such

     MUSA Stockholder under Section 262 shall cease, and such Appraisal Shares

     shall be deemed to have been converted at the Effective Time into, and

     shall have become, the right to receive the Merger Consideration as

     provided in Section 2.1(b) without interest. MUSA shall give prompt notice

     to Parent of any demands for appraisal of any shares of MUSA Common Stock,

     and Parent shall have the opportunity to reasonably participate in all

     negotiations and proceedings with respect to such demands. MUSA shall not,

     without the prior written consent of Parent, make any payment with respect

     to, or settle or offer to settle, any such demands, or agree to do any of

     the foregoing.

 

          2.2. Surrender and Payment.

 

          (a) Paying Agent; Exchange Fund. Prior to the Effective Time, for the

benefit of the MUSA Stockholders, Parent shall designate, or shall cause to be

designated (pursuant to an agreement in form and substance reasonably acceptable

to MUSA), a bank or trust company that is reasonably satisfactory to MUSA to act

as agent for the payment of the Merger Consideration in respect of Certificates

upon surrender of such Certificates in accordance with this Article II from time

to time after the Effective Time (the "Paying Agent"). At or prior to the

Effective Time, Parent shall deposit, or cause Merger Sub to deposit, with the

Paying Agent cash in an amount sufficient for the payment of the aggregate

Merger Consideration pursuant to Section 2.1(b) (assuming no Appraisal Shares

but taking into account any MUSA securities to be rolled over or otherwise

converted into Parent equity after the Effective Time) upon surrender of such

Certificates (such cash, the "Exchange Fund"); provided, however, the portion of

such aggregate Merger Consideration allocable to Appraisal Shares shall be

returned to Parent or the Surviving Corporation, upon demand by and at the

direction of Parent. The Paying Agent shall invest any cash included in the

Exchange Fund, as directed by Parent, on a daily basis.

 

          (b) Exchange Procedure. As soon as reasonably practicable after the

Effective Time, the Paying Agent shall mail to each holder of record of a

Certificate (i) a form of

 

 

                                      -5-

 

 

<PAGE>

 

 

letter of transmittal (which shall specify that delivery shall be effected, and

risk of loss and title to the Certificates held by such MUSA Stockholder shall

pass, only upon proper delivery of the Certificates to the Paying Agent and

shall be in such form and have such other customary provisions as Parent may

reasonably specify), and (ii) instructions for use in effecting the surrender of

the Certificates in exchange for the Merger Consideration. Upon surrender of a

Certificate for cancellation to the Paying Agent or to such other agent or

agents as may be appointed by Parent, together with such letter of transmittal,

duly completed and validly executed, and such other documents as may reasonably

be required by the Paying Agent, the holder of such Certificate shall be

entitled to receive in exchange therefor the amount of cash into which the

shares of MUSA Common Stock formerly represented by the Certificate shall have

been converted pursuant to Section 2.1(b), and the Certificate so surrendered

shall be cancelled. In the event of a transfer of ownership of MUSA Common Stock

that is not registered in the stock transfer books of MUSA, the proper amount of

cash may be paid in exchange therefor to a Person other than the Person in whose

name the Certificate so surrendered is registered if the Certificate shall be

properly endorsed or otherwise be in proper form for transfer and the Person

requesting such payment shall pay any transfer or other Taxes required by reason

of the payment to a Person other than the registered holder of the Certificate

or establish to the satisfaction of Parent that the Tax has been paid or is not

applicable. No interest shall be paid or shall accrue on the cash payable upon

surrender of any Certificate.

 

          (c) Stock Transfer Books. At the close of business on the day on which

the Effective Time occurs, the stock transfer books of MUSA shall be closed, and

there shall be no further registration of transfers on the stock transfer books

of the Surviving Corporation of the shares of MUSA Common Stock that were

outstanding immediately prior to the Effective Time. If, after the Effective

Time, Certificates are presented to the Surviving Corporation or the Paying

Agent for transfer or any other reason, they shall be cancelled and exchanged as

provided in this Article II.

 

          (d) No Liability. None of Parent, Merger Sub, MUSA or the Paying Agent

shall be liable to any Person in respect of any cash properly delivered to a

public official pursuant to any applicable abandoned property, escheat or

similar law. All funds held by the Paying Agent for payment to the holders of

unsurrendered Certificates and unclaimed six months after the Effective Time

shall be returned to Parent (along with all other funds in the Exchange Fund,

including any interest and other income resulting from investments of the

Exchange Fund), after which time any holder of unsurrendered Certificates shall

look as a general creditor only to Parent for payment of the funds to which the

holder of unsurrendered Certificates may be due, subject to Applicable Laws. If

any Certificates shall not have been surrendered prior to six years after the

Effective Time (or such earlier date immediately prior to such date as such

amounts would otherwise escheat to or become property of any Governmental

Authority), any such cash, dividends or distributions in respect of such

Certificate shall, to the extent permitted by Applicable Laws, become the

property of Parent, free and clear of all claims or interest of any Person

previously entitled thereto.

 

          (e) Lost Certificates. If any Certificate shall have been lost, stolen

or destroyed, upon the making of an affidavit of that fact by the Person

claiming a Certificate to be lost, stolen or destroyed and, if required by

Parent or the Surviving Corporation, the posting by such Person of a bond in

such reasonable amount as Parent or the Surviving Corporation may

 

 

                                       -6-

 

<PAGE>

 

 

reasonably direct as indemnity against any claim that may be made against it

with respect to the Certificate, the Paying Agent shall pay in respect of the

lost, stolen or destroyed Certificate the Merger Consideration.

 

           (f) No Further Ownership Rights in MUSA Common Stock. The Merger

Consideration paid in accordance with the terms of this Article II in respect of

Certificates that have been surrendered in accordance with the terms of this

Agreement shall be deemed to have been paid in full satisfaction of all rights

pertaining to the shares of MUSA Common Stock represented thereby.

 

          (g) Withholding Rights. Each of the Surviving Corporation and Parent

shall be entitled to deduct and withhold, or cause the Paying Agent to deduct

and withhold, from the consideration otherwise payable pursuant to this

Agreement to any MUSA Stockholders or holders of MUSA Options or MUSA Deferred

Stock Rights such amounts as it may be required to deduct and withhold with

respect to the making of such payment under the Internal Revenue Code of 1986,

as amended (the "Code"), or any provision of state, local or foreign Tax law. To

the extent that amounts are so withheld by the Surviving Corporation, Parent or

the Paying Agent, as the case may be, the withheld amounts shall be treated for

all purposes of this Agreement as having been paid to the MUSA Stockholders or

holders of MUSA Options or MUSA Deferred Stock Rights, as the case may be, in

respect of which the deduction and withholding was made by the Surviving

Corporation, Parent or the Paying Agent, as the case may be.

 

          2.3. Treatment of Stock Options; Deferred Stock; Warrants.

 

          (a) Subject to the terms and upon the conditions herein, as of the

Effective Time, each option to purchase shares of MUSA Common Stock (a "MUSA

Option") granted under the Metals USA, Inc. 2002 Long-Term Incentive Plan (the

"2002 Plan") or otherwise that is outstanding immediately prior to the Effective

Time (whether or not vested) (which MUSA Options, in the aggregate, shall not be

exercisable for a number of shares of MUSA Common Stock exceeding that number

set forth in Section 4.4(a)) shall, by virtue of the Merger and without any

action on the part of the holder thereof, MUSA, Parent or Merger Sub, be

cancelled and converted into the right to receive, from Parent or the Surviving

Corporation, as soon as practicable following the Effective Time, an amount in

cash (less any applicable withholding taxes and without interest) equal to the

product of (i) the excess, if any, of (A) the Merger Consideration over (B) the

per share exercise price of MUSA Common Stock subject to such MUSA Option,

multiplied by (ii) the number of shares of MUSA Common Stock subject to such

MUSA Option immediately prior to the Effective Time. As of the Effective Time,

all MUSA Options shall no longer be outstanding and shall automatically cease to

exist, and each holder of a MUSA Option shall cease to have any rights with

respect thereto, except the right to receive the payment described in the

immediately preceding sentence. Notwithstanding the foregoing, at the election

of Parent, all or any portion of the MUSA Options held by any employee of MUSA

or its subsidiaries that enters into an employment agreement or other

arrangement with Merger Sub or Parent shall not be cancelled and converted into

the right to receive cash as provided above, but shall instead be converted into

options to purchase the stock of either Parent or Surviving Corporation in

compliance with the requirements of Section 409 of the Code and any regulations

thereunder; provided, however, if Parent desires to make such an election, it

must do

 

 

                                      -7-

 

 

<PAGE>

 

 

so no later than three business days prior to the Closing Date by delivering

written notice to MUSA listing the names of the holders of MUSA Options (and the

number of such holders' MUSA Options to be converted into Parent's or the

Surviving Corporation's options, the exercise price of such new options and the

number and type of shares of Parent or the Surviving Corporation subject to such

new options) whose MUSA Options shall be converted, in whole or in part, into

options to purchase the stock of Parent or the Surviving Corporation. Prior to

the Effective Time, MUSA, the MUSA Board and the compensation committee of the

MUSA Board (the "Committee") shall take any and all actions necessary under the

2002 Plan, the award agreements thereunder and otherwise to effectuate this

Section 2.3(a), including amending the 2002 Plan.

 

          (b) Subject to the terms and upon the conditions herein, as of the

Effective Time, each outstanding and unvested right to receive one share of MUSA

Common Stock ("MUSA Deferred Stock Right") granted under the 2002 Plan or

otherwise (which MUSA Deferred Stock Rights, in the aggregate, shall not exceed

that number set forth in Section 4.4(a)), shall, without any action on the part

of the holder thereof, MUSA, Parent or Merger Sub, be cancelled and converted

into the right to receive, from Parent or from the Surviving Corporation, as

soon as practicable following the Effective Time, an amount in cash (less any

applicable withholding taxes and without interest) equal to the Merger

Consideration. As of the Effective Time, all MUSA Deferred Stock Rights shall no

longer be outstanding and shall automatically cease to exist, and each holder of

MUSA Deferred Stock Rights shall cease to have any rights with respect thereto,

except the right to receive the payment described in the immediately preceding

sentence. Prior to the Effective Time, MUSA, the MUSA Board and the Committee

shall take any and all actions necessary under the 2002 Plan, the award

agreements thereunder and otherwise to effectuate this Section 2.3(b), including

amending the 2002 Plan.

 

          (c) Prior to the Effective Time, MUSA shall ensure that, except with

respect to the portion of MUSA Options for which Parent has made an election in

accordance to Section 2.3(a), following the Effective Time, no holder of a MUSA

Option, holder of a MUSA Deferred Stock Right or participant in the 2002 Plan or

other employee benefit arrangement of MUSA shall have any right thereunder to

acquire or receive any capital stock (including payment of cash in settlement of

any unit award, "phantom" stock or stock appreciation rights) of MUSA or the

Surviving Corporation. Prior to the Effective Time, MUSA shall deliver to the

holders of MUSA Options, holders of MUSA Deferred Stock Rights and other

participants in the 2002 Plan appropriate notices, in form and substance

reasonably acceptable to Parent, setting forth such holders' or participants'

rights pursuant to this Agreement.

 

          (d) Subject to the terms and upon the conditions set forth herein, as

of the Effective Time, each warrant to purchase MUSA Common Stock ("MUSA

Warrants") issued pursuant to the Warrant Agreement by and between MUSA and

Equiserve Trust Company, N.A., dated as of October 31, 2002 (the "Warrant

Agreement"), or otherwise, shall, in accordance with the Warrant Agreement and

without any action on the part of the holder thereof, MUSA, Parent or Merger

Sub, no longer represent the right to receive shares of MUSA Common Stock upon

the due exercise thereof, and shall thereafter represent the right to receive

(upon surrender of such MUSA Warrant and the payment to the Surviving

Corporation of the exercise price thereunder) an amount in cash equal to the

product of (i) the number of shares of MUSA Common Stock subject to such MUSA

Warrant immediately prior to the Effective Time,

 

 

                                      -8-

 

<PAGE>

 

 

multiplied by (ii) the Merger Consideration. Prior to the Effective Time, MUSA

shall take any and all actions necessary to effectuate this Section 2.3(d),

including (x) no later than twenty (20) days prior to the Effective Time,

delivering to the holders of MUSA Warrants and the warrant agent under the

Warrant Agreement the notice required to be given by it pursuant to Section 12.2

of the Warrant Agreement and (y) executing and delivering to the warrant agent

under the Warrant Agreement the written instrument required to be executed and

delivered by it pursuant to Section 5.1(h) of the Warrant Agreement. On the

Closing Date, MUSA shall, in accordance with Sections 3.2(b)(ii) and 12.1 of the

Warrant Agreement, give notice to the Warrant Agent (as defined in the Warrant

Agreement) and the holders of MUSA Warrants that MUSA has elected to accelerate

the expiration of the MUSA Warrants to the 60th day following the Closing Date.

 

          2.4. Adjustments to Prevent Dilution. In the event that MUSA changes

the number of shares of MUSA Common Stock, or securities convertible or

exchangeable into or exercisable for shares of MUSA Common Stock, issued and

outstanding prior to the Effective Time as a result of a reclassification, stock

split (including a reverse stock split), stock dividend or distribution,

recapitalization, merger, subdivision, issuer tender or exchange offer, or other

similar transaction, the Merger Consideration shall be equitably adjusted to

reflect such change and as so adjusted shall, from and after the date of such

event, be the Merger Consideration, subject to further adjustment in accordance

with this sentence.

 

                                  ARTICLE III

 

             REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

 

          In order to induce MUSA to enter into this Agreement, Parent and

Merger Sub represent and warrant to MUSA that the statements contained in this

Article III are true, correct and complete.

 

          3.1. Organization and Standing. Each of Parent and Merger Sub is a

corporation duly organized, validly existing and in good standing under the laws

of the state of Delaware with full corporate power and authority to own, lease,

use and operate its properties and to conduct its business as and where now

owned, leased, used, operated and conducted.

 

          3.2. Corporate Power and Authority. Each of Parent and Merger Sub has

all requisite corporate power and authority to enter into and deliver this

Agreement, to perform its obligations under this Agreement, and to consummate

the transactions contemplated by this Agreement. The execution, performance and

delivery of this Agreement and the consummation of the transactions contemplated

by this Agreement by Parent and Merger Sub have been duly authorized by all

necessary corporate action on the part of each of Parent and Merger Sub. No

other corporate proceedings on the part of Parent or Merger Sub are necessary to

authorize or approve this Agreement or to consummate the transactions

contemplated hereby. This Agreement has been duly and validly executed and

delivered by each of Parent and Merger Sub, and, assuming the due authorization,

execution and delivery by MUSA, constitutes a legal, valid and binding

obligation of each of Merger Sub and Parent enforceable against each of them in

accordance with its terms, except that such enforceability (a) may be limited by

bankruptcy, insolvency, moratorium or other similar laws affecting or relating

to the enforcement of creditors' rights generally and (b) is subject to general

principles of equity.

 

 

                                      -9-

 

<PAGE>

 

 

          3.3. Conflicts; Consents and Approvals. Neither the execution and

delivery of this Agreement by Parent or Merger Sub nor the consummation of the

transactions contemplated by this Agreement will:

 

          (a) conflict with, or result in a breach of any provision of Parent's

     Certificate of Incorporation, or Parent's Bylaws, or Merger Sub's

     Certificate of Incorporation or Merger Sub's Bylaws;

 

          (b) violate, or conflict with, or result in a breach of any provision

     of, or constitute a default (or an event that, with the giving of notice,

     the passage of time or otherwise, would constitute a default) under, or

     entitle any Person (with the giving of notice, the passage of time or

     otherwise) to terminate, accelerate, modify or call a default under, or

     result in the creation of any lien, security interest, pledge, mortgage,

     charge, option, hypothecation, easement, restriction or other encumbrance

     (an "Encumbrance") upon any of the properties or assets of Parent or any of

     its subsidiaries under, any of the terms, conditions or provisions of any

     note, bond, mortgage, indenture, deed of trust, license, contract,

     undertaking, agreement, lease or other instrument or obligation to which

     Parent or any of its subsidiaries is a party;

 

          (c) violate any order, writ, injunction, decree, statute, rule or

     regulation applicable to Parent or any of its subsidiaries or their

     respective properties or assets; or

 

          (d) require any action or consent or approval of, or review by, or

     registration or filing by Parent or any of its subsidiaries with, any third

     party or any local, domestic, foreign or multinational court, arbitral

     tribunal, administrative agency or commission or other governmental or

     regulatory body, agency, instrumentality or authority (each of the

     foregoing, a "Governmental Authority"), other than (i) actions required by

     the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended

     (together with the rules and regulations thereunder, the "HSR Act") and

     applicable laws, rules and regulations in foreign jurisdictions governing

     antitrust or merger control matters ("Foreign Antitrust Laws"), (ii)

     compliance with any United States federal and state securities laws and any

     other applicable takeover laws and (iii) the filing with the Delaware

     Secretary of State of the Certificate of Merger;

 

except in the case of clauses (b), (c) and (d) above for any of the foregoing

that would not, individually or in the aggregate, have or reasonably be expected

to have a Material Adverse Effect on Parent.

 

          3.4. Brokerage and Finders' Fees. Except for Parent's obligations to

Credit Suisse First Boston LLC, neither Parent, Merger Sub nor any of their

respective directors, officers or employees has incurred or will incur on behalf

of Parent or Merger Sub any brokerage, finders', advisory or similar fee in

connection with the transactions contemplated by this Agreement.

 

          3.5. Information Supplied.

 

          (a) The information with respect to Parent and its subsidiaries that

Parent, Merger Sub or any affiliate thereof furnishes to MUSA in writing

specifically for use in any

 

 

                                      -10-

 

 

<PAGE>

 

 

MUSA Disclosure Document will not contain any untrue

statement of a material fact or omit to state any material fact necessary in

order to make the statements made therein, in the light of the circumstances

under which they were made, not misleading (i) in the case of the Proxy

Statement, at the time the Proxy Statement is first mailed to MUSA Stockholders,

at the time the MUSA Stockholders vote on adoption of this Agreement and at the

Effective Time, and (ii) in the case of any MUSA Disclosure Document other than

the Proxy Statement, at the time of the filing thereof, at the time of any

distribution thereof and at the time of the MUSA Stockholders Meeting.

 

          (b) The Parent Disclosure Documents, if and when filed, will comply as

to form in all material respects with the applicable requirements of the

Exchange Act and will not at the time of the filing thereof or at the time of

any distribution thereof, contain any untrue statement of a material fact or

omit to state any material fact necessary to make the statements made therein,

in the light of the circumstances under which they were made, not misleading;

provided, however, that this representation and warranty will not apply to

statements or omissions in the Parent Disclosure Documents based upon (i)

information in the Proxy Statement (other than information with respect to

Parent and its subsidiaries furnished by Parent, Merger Sub or any affiliate

thereof to MUSA in writing specifically for use in the Proxy Statement) or (ii)

information furnished to Parent in writing by MUSA specifically for use therein.

 

          3.6. Financing. Parent has delivered to MUSA copies of (a) a

commitment letter, dated May 18, 2005 (the "Equity Financing Letter"), pursuant

to which Apollo Management V, L.P. has committed, subject to the terms and

conditions set forth therein, to contribute (or cause to be contributed) capital

to Parent (the "Equity Financing"), and (b) a commitment letter dated May 13,

2005 (the "Debt Financing Agreement" and, together with the Equity Financing

Letter, the "Financing Agreements"), pursuant to which Credit Suisse First

Boston and CIBC World Markets Corp. have committed, subject to the terms and

conditions set forth therein, to (i) make senior secured increasing rate bridge

loans to Merger Sub, and (ii) enter into a credit agreement providing for senior

secured asset-based revolving loans to Merger Sub (the "Debt Financing"). As

used in this Agreement, the financing to be provided under clause (a) above

shall be referred to as the "Equity Financing", the financing to be provided

under clause (b) above shall be referred to as the "Debt Financing", and the

Equity Financing and Debt Financing shall collectively be referred to as the

"Financing." The aggregate proceeds of the Financing are in an amount sufficient

to consummate the transactions contemplated hereby, including to pay the

aggregate Merger Consideration, to pay the amounts required under Section 2.3(a)

and 2.3(b), to pay the amounts required to holders of MUSA Warrants if such

holders exercise such MUSA Warrants on or after the Closing Date (taking into

account the payment of the exercise price by such holders to MUSA or the

Surviving Corporation), to repay certain existing indebtedness of MUSA and its

subsidiaries in accordance with Section 5.1(f) and to pay related fees and

expenses (such amounts, the "Required Amounts"). As of the date hereof, none of

the Financing Agreements has been withdrawn and Parent does not know of any

facts or circumstances that may reasonably be expected to result in any of the

conditions set forth in the Financing Agreements not being satisfied.

 

          3.7. Capitalization of Merger Sub. As of the date of this Agreement,

the authorized capital stock of Merger Sub consists of 100 shares of common

stock, par value $0.01 per share, all of which shares are validly issued and

outstanding. All of the issued and

 

 

                                       -11-

 

 

<PAGE>

 

 

outstanding capital stock of Merger Sub is, and at the Effective Time will be,

owned by Parent or a direct or indirect wholly owned subsidiary of Parent.

Merger Sub has not conducted any business prior to the date hereof and has no,

and prior to the Effective Time will have no, assets, liabilities or obligations

of any nature other than those incident to its formation and pursuant to this

Agreement and the Merger and the other transactions contemplated by this

Agreement (including the Financing).

 

          3.8. Section 203 of the DGCL. Neither Parent nor Merger Sub is, and at

no time during the last three years has been, an "interested stockholder" of

MUSA (as defined in Section 203 of the DGCL). Neither Parent nor Merger Sub owns

(directly or indirectly, beneficially or of record), or is a party to any

agreement, arrangement or understanding for the purpose of acquiring, holding,

voting or disposing of, in each case, any shares of capital stock of MUSA (other

than as contemplated by this Agreement and the Support Agreement).

 

          3.9. Solvency. As of the date hereof, Parent believes, based upon its

current understanding of the business, results of operations, assets,

liabilities, operations, prospects and condition (financial and otherwise) of

MUSA and its subsidiaries, and assuming that (a) the representations and

warranties of MUSA set forth in Article IV are true and correct as of the date

hereof and will be true and correct as of the Closing Date, (b) the projections

of the performance (financial and otherwise) of MUSA and its subsidiaries

provided by MUSA to Parent are accurate and correct and reflect the actual

future performance of MUSA, (c) the due diligence materials provided to Parent

prior to the date hereof by or on behalf of MUSA are true, correct and complete

as of the date hereof and will be so true, correct and complete as of the

Closing Date, (d) prior to the Closing Date, there shall not have been any

event, change, circumstance, effect or state of facts that is or has a material

adverse effect on the business, assets, liabilities, results of operations or

financial condition of MUSA and its subsidiaries taken as a whole, and (e)

assuming the Financing shall have been obtained on terms substantially

comparable to those reflected in the Financing Agreements that, upon

consummation of the Merger, the Surviving Corporation will not have unreasonably

small capital to conduct its business, and will generally be able to pay its

obligations as they become due in the ordinary course.

 

                                   ARTICLE IV

 

                     REPRESENTATIONS AND WARRANTIES OF MUSA

 

          In order to induce Merger Sub and Parent to enter into this Agreement,

MUSA hereby represents and warrants to Parent and Merger Sub that the statements

contained in this Article IV are true, correct and complete.

 

          4.1. Organization and Standing. MUSA is a corporation duly organized,

validly existing and in good standing under the laws of the State of Delaware

with full corporate power and authority to own, lease, use and operate its

properties and to conduct its business as and where now owned, leased, used,

operated and conducted. Each of MUSA's subsidiaries is an organization duly

incorporated or organized, validly existing, and in good standing under the laws

of its jurisdiction of incorporation with full corporate power and authority to

own, lease, use and operate its properties and to conduct its business as and

where now owned, leased, used, operated and conducted. Each of MUSA and its

subsidiaries is duly qualified to do business and

 

 

                                      -12-

 

 

<PAGE>

 

 

is in good standing in each jurisdiction in which the nature of the business

conducted by it or the property it owns, leases or operates requires it to so

qualify, except where the failure to be so qualified or in good standing in such

jurisdiction would not, individually or in the aggregate, have or reasonably be

expected to have a Material Adverse Effect on MUSA. MUSA is not in default in

the performance, observance or fulfillment of any provision of the MUSA

Certificate or the MUSA Bylaws. MUSA has heretofore furnished to Parent complete

and correct copies of the MUSA Certificate and the MUSA Bylaws and the

certificates of incorporation and bylaws or similar organizational documents for

each of MUSA's subsidiaries.

 

          4.2. Subsidiaries. MUSA does not own, directly or indirectly, any

equity or other ownership interest in any corporation, partnership, joint

venture or other entity or enterprise, except for the subsidiaries set forth in

Section 4.2 of the disclosure schedule delivered by MUSA to Parent and dated the

date of this Agreement (the "MUSA Disclosure Schedule"). MUSA is not subject to

any obligation or requirement to provide funds to or make any investment (in the

form of a loan, capital contribution or otherwise) in any such entity or any

other Person. MUSA owns, directly or indirectly, each of the outstanding shares

of capital stock (or other ownership interests having by their terms ordinary

voting power to elect a majority of directors or others performing similar

functions with respect to such subsidiary) of each of its subsidiaries. Each of

the outstanding shares of capital stock or other ownership interests of each of

MUSA's subsidiaries is duly authorized, validly issued, fully paid and

nonassessable, and is owned, directly or indirectly, by MUSA free and clear of

all Encumbrances. The following information for each of MUSA's subsidiaries is

set forth in Section 4.2 of the MUSA Disclosure Schedule, as applicable: (a) its

name and jurisdiction of incorporation or organization; (b) its authorized

capital stock or share capital; and (c) the number of issued and outstanding

shares of capital stock or share capital and the record owner(s) thereof. There

are no outstanding subscriptions, options, warrants, puts, calls, agreements,

understandings, claims or other commitments or rights of any type relating to

the issuance, sale or transfer of any securities of any of MUSA's subsidiaries,

nor are there outstanding any securities that are convertible into or

exchangeable for any shares of capital stock or other voting securities or

ownership interests of any of MUSA's subsidiaries.

 

          4.3. Corporate Power and Authority. MUSA has all requisite corporate

power and authority to enter into and deliver this Agreement, to perform its

obligations under this Agreement, and, subject to approval and adoption of this

Agreement and the transactions contemplated by this Agreement by the MUSA

Stockholders, to consummate the transactions contemplated by this Agreement. The

execution, performance and delivery of this Agreement by MUSA have been duly

authorized by all necessary corporate action on the part of MUSA, subject to

adoption of this Agreement and the transactions contemplated by this Agreement

by the MUSA Stockholders, and no other corporate proceedings on the part of MUSA

are necessary to authorize or approve this Agreement or to consummate the

transactions contemplated hereby. This Agreement has been duly and validly

executed and delivered by MUSA, and, assuming the due authorization, execution

and delivery by Parent and Merger Sub, constitutes the legal, valid and binding

obligation of MUSA enforceable against it in accordance with its terms, except

that such enforceability (a) may be limited by bankruptcy, insolvency,

moratorium or other similar laws affecting or relating to the enforcement of

creditors' rights generally and (b) is subject to general principles of equity.

 

 

                                      -13-

 

<PAGE>

 

 

          4.4. Capitalization of MUSA.

 

          (a) As of the date hereof, MUSA's authorized capital stock consisted

solely of (i) 200,000,000 shares of MUSA Common Stock, of which 20,282,790

shares are issued and outstanding, and (ii) 5,000,000 shares of preferred stock,

par value $.01 per share, of which no shares were issued and outstanding or

reserved for future issuance under any agreement, arrangement or understanding.

As of the date hereof, there are outstanding MUSA Options to purchase an

aggregate of 1,081,270 shares of MUSA Common Stock, there are outstanding 45,437

MUSA Deferred Stock Rights and there are outstanding MUSA Warrants to purchase

an aggregate of 3,556,703 shares of MUSA Common Stock.

 

          (b) Other than as set forth in Section 4.4(a), there are no

outstanding (i) shares of MUSA capital stock or MUSA voting securities, (ii)

subscriptions, options, warrants, puts, calls, agreements, understandings,

claims or other commitments or rights of any type relating to the issuance,

sale, repurchase or transfer of any securities of MUSA, or (iii) securities that

are convertible into or exchangeable for any shares of MUSA capital stock or

MUSA voting securities, and neither MUSA nor any of its subsidiaries has any

obligation of any kind to issue any additional securities or to pay for,

repurchase, redeem or otherwise acquire any securities of MUSA or any of its

subsidiaries or any of their respective predecessors. No subsidiary of MUSA owns

any MUSA capital stock, option or warrant to acquire MUSA capital stock or other

interest determined by reference to the value of MUSA capital stock.

 

          (c) Each outstanding share of MUSA capital stock is, and each share of

MUSA capital stock that may be issued will be, when issued, duly authorized and

validly issued, fully paid and nonassessable, and not subject to any preemptive

or similar rights. The issuance and sale of all of the shares of capital stock

described in this Section 4.4 have been in compliance with United States federal

and state securities laws. Section 4.4 of the MUSA Disclosure Schedule states

the number of shares of MUSA Common Stock issuable to each holder of MUSA

Options as of the date of this Agreement, including the applicable vesting

schedule, exercise price and whether the MUSA Option is intended to qualify as

an "incentive stock option" (within the meaning of Section 422 of the Code).

Section 4.4 of the MUSA Disclosure Schedule states the number of shares of MUSA

Common Stock issuable to each holder of MUSA Warrants as of the date of this

Agreement, including the exercise price and scheduled expiration thereof.

Section 4.4 to the MUSA Disclosure Schedule accurately sets forth the names of

all holders of MUSA Deferred Stock Rights and holders of MUSA capital stock

subject to any transfer restrictions, including the number of shares of each

class of MUSA capital stock held by that holder and the vesting schedule with

respect to such MUSA capital stock. Neither MUSA nor any of its subsidiaries has

agreed to register any securities under the Securities Act of 1933, as amended

(together with the rules and regulations thereunder, the "Securities Act") or

under any state securities law or granted registration rights to any individual

or entity.

 

          4.5. Conflicts; Consents and Approvals. Neither the execution and

delivery of this Agreement nor the consummation of the transactions contemplated

by this Agreement will:

 

          (a) conflict with, or result in a breach of any provision of, the MUSA

     Certificate or the MUSA Bylaws;

 

 

                                      -14-

 

 

<PAGE>

 

 

          (b) except as set forth in Section 4.5(b) of the MUSA Disclosure

     Schedule, violate, or conflict with, or result in a breach of any provision

     of, or constitute a default (or an event that, with the giving of notice,

     the passage of time or otherwise, would constitute a default) under, or

     entitle any Person (with the giving of notice, the passage of time or

     otherwise) to terminate, accelerate, modify or call a default under, or

     result in the creation of any Encumbrance upon any of the properties or

     assets of MUSA or any of its subsidiaries under, any of the terms,

     conditions or provisions of any note, bond, mortgage, indenture, deed of

     trust, license, contract, undertaking, agreement, lease or other instrument

     or obligation to which MUSA or any of its subsidiaries is a party;

 

          (c) violate any order, writ, injunction, decree, statute, rule or

     regulation applicable to MUSA or any of its subsidiaries or any of their

     respective properties or assets; or

 

          (d) require any action or consent or approval of, or review by, or

     registration or filing by MUSA or any of its affiliates with, any third

     party or any Governmental Authority, other than (i) approval of this

     Agreement and the transactions contemplated by this Agreement by MUSA

     Stockholders, (ii) actions required by the HSR Act and Foreign Antitrust

     Laws, (iii) registrations or other actions required under United States

     federal and state securities laws, (iv) consents or approvals of any

     Governmental Authority set forth in Section 4.5(d) of the MUSA Disclosure

     Schedule, and (v) the filing with the Delaware Secretary of State of the

     Certificate of Merger;

 

other than in the case of Sections 4.5(b), 4.5(c) and 4.5(d) those exceptions

that would not, individually or in the aggregate, have or reasonably be expected

to have a Material Adverse Effect on MUSA.

 

          4.6. Brokerage and Finders' Fees; Expenses. Except for MUSA's

obligations to CIBC World Markets Corp. and Jefferies & Co., Inc. (true and

complete copies of all agreements relating to such obligations having previously

been provided to Parent), neither MUSA nor any stockholder, director, officer,

employee or affiliate of MUSA, has incurred or will incur on behalf of MUSA or

its subsidiaries, any brokerage, finders', advisory or similar fee in connection

with the transactions contemplated by this Agreement. MUSA's good faith estimate

of the aggregate amount of all fees and expenses that will be paid or will be

payable by MUSA and its subsidiaries to all attorneys, accountants and

investment bankers in connection with the Merger and the transactions

contemplated by this Agreement, and the negotiation of the related agreements

(excluding any reasonable out-of-pocket third party costs that are solely and

directly attributable to the cooperation required of MUSA and its subsidiaries

pursuant to Section 5.3(e)) (the "Transaction Fees") is set forth on Section 4.6

of the MUSA Disclosure Schedule.

 

          4.7. MUSA SEC Documents.

 

          (a) MUSA and its subsidiaries have timely filed with the Commission

all registration statements, prospectuses, forms, reports, schedules, statements

and other documents (as supplemented and amended since the time of filing,

collectively, the "MUSA SEC Documents") required to be filed by them since

January 1, 2002 under the Exchange Act or the Securities Act. The MUSA SEC

Documents, including any financial statements or schedules

 

 

                                      -15-

 

 

<PAGE>

 

 

included in the MUSA SEC Documents, at the time filed (and, in the case of

registration statements and proxy statements, on the dates of effectiveness and

the dates of mailing, respectively, and, in the case of any MUSA SEC Document

amended or superseded by a filing prior to the date of this Agreement, then on

the date of such amending or superseding filing) (i) did not contain any untrue

statement of a material fact or omit to state a material fact required to be

stated therein or necessary in order to make the statements therein, in light of

the circumstances under which they were made, not misleading, and (ii) complied

in all material respects with the applicable requirements of the Exchange Act

and the Securities Act, as the case may be. The financial statements of MUSA and

its subsidiaries included in the MUSA SEC Documents (i) have been prepared from,

and are in accordance with, the books and records of MUSA and its subsidiaries,

(ii) at the time filed (and, in the case of registration statements and proxy

statements, on the dates of effectiveness and the dates of mailing,

respectively, and, in the case of any MUSA SEC Document amended or superseded by

a filing prior to the date of this Agreement, then on the date of such amending

or superseding filing) complied as to form in all material respects with

applicable accounting requirements and with the published rules and regulations

of the Commission with respect thereto, (iii) were prepared in accordance with

United States generally accepted accounting principles ("GAAP") applied on a

consistent basis during the periods involved (except as may be indicated in the

notes thereto, or, in the case of unaudited statements, as permitted by Form

10-Q of the Commission), and (iv) fairly present in all material respects

(subject, in the case of unaudited statements, to normal, recurring audit

adjustments) the consolidated financial position of MUSA and its subsidiaries as

at the dates thereof and the consolidated results of their operations and cash

flows for the periods then ended. None of MUSA's subsidiaries is subject to the

periodic reporting requirements of the Exchange Act or required to file any

form, report or other document with the Commission, The Nasdaq Stock Market, any

stock exchange or any other comparable Governmental Authority.

 

          (b) With respect to each Annual Report on Form 10-K and each Quarterly

Report on Form 10-Q included in the MUSA SEC Documents filed since August 29,

2002, the financial statements and other financial information included in such

reports fairly present (within the meaning of the Sarbanes-Oxley Act of 2002) in

all material respects the financial condition and results of operations of MUSA

as of, and for, the periods presented in the MUSA SEC Documents. Since August

29, 2002, MUSA's principal executive officer and its principal financial officer

have disclosed to MUSA's auditors and the audit committee of the MUSA Board (i)

all significant deficiencies and material weaknesses in the design or operation

of internal controls over financial reporting that could adversely affect MUSA's

ability to record, process, summarize and report financial information and (ii)

any fraud, whether or not material, that involves management or other employees

who have a significant role in MUSA's internal controls and MUSA has provided to

Parent copies of any written materials relating to the foregoing. MUSA has

established and maintains disclosure controls and procedures (as such term is

defined in Rule 13a-14 under the Exchange Act); such disclosure controls and

procedures are designed to ensure that material information relating to MUSA,

including its consolidated subsidiaries, is made known to MUSA's principal

executive officer and its principal financial officer by others within those

entities, particularly during the periods in which the periodic reports required

under the Exchange Act are being prepared; and, to the knowledge of MUSA, such

disclosure controls and procedures are effective in timely alerting MUSA's

principal executive officer and its principal financial officer to material

information required to be included in MUSA's periodic reports required under

the Exchange Act. Except as set forth in

 

 

                                      -16-

 

 

<PAGE>

 

 

Section 4.7(b) of the MUSA Disclosure Schedule, there are no outstanding loans

made by MUSA or any of its subsidiaries to any executive officer (as defined in

Rule 3b-7 under the Exchange Act) or director of MUSA. Since the enactment of

the Sarbanes-Oxley Act of 2002, neither MUSA nor any of its subsidiaries has

made any loans to any executive officer (as defined in Rule 3b-7 under the

Exchange Act) or director of MUSA or any of its subsidiaries.

 

          4.8. Undisclosed Liabilities. Except (a) as and to the extent

disclosed or reserved against on the balance sheet of MUSA as of December 31,

2004 included in the MUSA SEC Documents or (b) as incurred since the date

thereof in the ordinary course of business consistent with prior practice,

neither MUSA nor any of its subsidiaries has any liabilities or obligations of

any nature, whether known or unknown, absolute, accrued, contingent or otherwise

and whether due or to become due, that would (i) be required by GAAP to be

reflected on a consolidated balance sheet of MUSA and its subsidiaries (or

disclosed in the notes thereto) or (ii) otherwise reasonably be expected to be

material to MUSA and its subsidiaries taken as a whole.

 

          4.9. Disclosure Documents.

 

          (a) The information with respect to MUSA and its subsidiaries that

MUSA furnishes in writing to Parent specifically for use in the Parent

Disclosure Documents will not, at the time of the filing thereof, at the time of

any distribution thereof and at the time of the MUSA Stockholders Meeting,

contain any untrue statement of a material fact or omit to state any material

fact required to be stated therein or necessary in order to make the statements

made therein, in the light of the circumstances under which they were made, not

misleading.

 

          (b) Each MUSA Disclosure Document will, when filed, comply as to form

in all material respects with the applicable requirements of the Exchange Act.

Each MUSA Disclosure Document will not contain any untrue statement of a

material fact or omit to state any material fact necessary in order to make the

statements made therein, in the light of the circumstances under which they were

made, not misleading (i) in the case of the Proxy Statement, at the time the

Proxy Statement is first mailed to stockholders of MUSA, at the time the

stockholders vote on adoption of this Agreement and at the Effective Time, and

(ii) in the case of any MUSA Disclosure Document other than the Proxy Statement,

at the time of the filing thereof, at the time of any distribution thereof and

at the time of the MUSA Stockholders Meeting; provided, however, that this

representation and warranty will not apply to statements or omissions in the

MUSA Disclosure Documents based upon information with respect to Parent and its

subsidiaries furnished to MUSA in writing by Parent specifically for use

therein.

 

          4.10. Compliance with Law. MUSA and its subsidiaries hold all

franchises, grants, authorizations, licenses, permits, easements, variances,

exemptions, consents, certificates, approvals and orders of all Governmental

Authorities necessary for the lawful conduct of their respective businesses (the

"MUSA Permits"), except for failures to hold such MUSA Permits that would not,

individually or in the aggregate, have or reasonably be expected to have a

Material Adverse Effect on MUSA. MUSA and its subsidiaries are in compliance

with the terms of the MUSA Permits, except where the failure so to comply would

not, individually or in the aggregate, have or reasonably be expected to have a

Material Adverse Effect on MUSA. The businesses of MUSA and its subsidiaries are

not being conducted in violation of any Applicable

 

 

                                      -17-

 

 

<PAGE>

 

 

Laws, except for violations that would not, individually or in the aggregate,

have or reasonably be expected to have a Material Adverse Effect on MUSA. No

investigation or review by any Governmental Authority with respect to MUSA or

any of its subsidiaries is pending or, to the knowledge of MUSA, threatened, nor

has any Governmental Authority indicated in writing an intention to conduct any

such investigation or review, other than, in each case, those the outcome of

which would not, individually or in the aggregate, have or reasonably be

expected to have a Material Adverse Effect on MUSA.

 

          4.11. Litigation. Except as set forth in Section 4.11 of the MUSA

Disclosure Schedule, there is no suit, claim, action, proceeding, hearing,

notice of violation, investigation or demand letter (an "Action") pending or, to

the knowledge of MUSA, threatened, against MUSA or any of its subsidiaries or

any executive officer or director of MUSA or any of its subsidiaries that would,

individually or in the aggregate, have or reasonably be expected to have a

Material Adverse Effect on MUSA. There is no outstanding order, writ,

injunction, judgment, award, rule or decree against MUSA or any of its

subsidiaries or by which any property, asset or operation of MUSA or any of its

subsidiaries is bound or affected that would, individually or in the aggregate,

have or reasonably be expected to have a Material Adverse Effect on MUSA.

 

          4.12. Absence of Certain Changes or Events.

 

          (a) From December 31, 2004 through the date of this Agreement, there

has not been any Material Adverse Effect on MUSA or any event, change, effect or

development that would, individually or in the aggregate, have or reasonably be

expected to have a Material Adverse Effect on MUSA.

 

          (b) Since December 31, 2004, MUSA and its subsidiaries have conducted

their business and operated their properties in the ordinary course of business

consistent with past practice.

 

          (c) There has not been any action taken by MUSA or any of its

subsidiaries from December 31, 2004 through the date of this Agreement that, if

taken during the period from the date of this Agreement through the Effective

Time, would constitute a breach of Section 5.3(a).

 

          4.13. Taxes.

 

          (a) Except as set forth in Section 4.13 of the MUSA Disclosure

Schedule: (i) MUSA and each of its subsidiaries have timely filed all United

States federal, state, local and foreign income Tax Returns required to be filed

by it, and all other Tax Returns required to be filed by it, except where the

failure to file such Tax Returns would not, individually or in the aggregate,

have or reasonably be expected to have a Material Adverse Effect on MUSA; (ii)

all such Tax Returns were true, correct and complete in all material respects;

(iii) MUSA and each of its subsidiaries have paid or caused to be paid all Taxes

in respect of the periods covered by such Tax Returns, except where the failure

to pay such Taxes would not, individually or in the aggregate, have or

reasonably be expected to have a Material Adverse Effect on MUSA; (iv) the most

recent consolidated financial statements of MUSA included in the MUSA SEC

Documents filed prior to the date of this Agreement reflect an adequate reserve

in accordance with GAAP

 

 

                                      -18-

 

 

<PAGE>

 

 

or all Tax liabilities of MUSA and its subsidiaries through the date thereof;

(v) each of MUSA and its subsidiaries has timely withheld and paid all Taxes

required to have been withheld and paid in connection with amounts paid or owing

to any employee, creditor, independent contractor, MUSA Stockholder or other

third party, except where the failure to withhold and pay such amounts would

not, individually or in the aggregate, have or reasonably be expected to have a

Material Adverse Effect on MUSA; (vi) neither MUSA nor any of its subsidiaries

is currently the beneficiary of any extension of time within which to file any

material Tax Return; (vii) there are no security interests on any of the assets

of MUSA or any of its subsidiaries that arose in connection with any failure to

pay any Tax, excep