EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (this “Agreement”) dated as
of September 29, 2005, between FLAG ACQUISITION
CORPORATION, a Delaware corporation, (the “ Merger
Sub ”), and ROBERT C. MCPHERSON III (“McPherson”).

      WHEREAS , pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) made and entered into as of the 18th day of May, 2005, by and among Flag Holdings Corporation, a Delaware corporation (“ Parent ”), the Merger Sub, a wholly owned subsidiary of Parent, and Metals USA, Inc. (the “Company”), Parent will acquire all of the capital stock of the Company by merging (the “Merger”) Merger Sub with and into the Company (the “Transaction”);

      WHEREAS , as a further inducement to Parent’s and the Merger Sub’s entry into the Merger Agreement, the Merger Sub is entering into this Agreement;

      WHEREAS, in connection with the Transaction, the Company desires, as the Surviving Corporation (as that term is defined in the Merger Agreement) in the Merger, to employ McPherson and McPherson desires to be employed by the Company; and

      WHEREAS , McPherson, as a condition of his employment, will make a substantial investment in Parent concurrently with the closing of the Transaction by purchasing 27,000 shares of common stock of Parent, par value $0.01, at a price of $10 per share;

      NOW THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

     Section 1. Employment Period .

     The initial term of McPherson’s employment hereunder shall be for a period of two (2) years (the “Initial Term”) commencing on the closing of the Transaction (the “ Effective Date ”) and ending on the second anniversary of the Effective Date, unless terminated earlier pursuant to Section 3 of this Agreement (the ‘ Employment Period ”); provided, however, that the Employment Period shall automatically be renewed for successive one (1) year terms upon the Expiration of the Initial Term unless either party gives at least ninety (90) days written notice of its intention not to renew the Employment Period. Upon McPherson’s termination of employment with the Company for any reason, he shall immediately resign all positions with the Company or any of its subsidiaries or affiliates.

     Section 2. Terms of Employment .

          (a) Position . During the term of McPherson’s employment, McPherson shall serve as Senior Vice President and Chief Financial Officer of the Company and perform such duties and responsibilities customary to such position.

          (b) Duties . During the term of McPherson’s employment, McPherson agrees to devote all of his business time to the business and affairs of the Company and to use McPherson’s reasonable best efforts to perform faithfully, effectively and efficiently his responsibilities and obligations hereunder. Notwithstanding the foregoing, nothing herein shall prohibit McPherson from (i) serving on civic or charitable boards or committees, (ii) delivering lectures or fulfilling speaking engagements and (iii) managing personal investments, so long as such activities do not materially interfere with the performance of McPherson’s responsibilities hereunder.

          (c) Compensation .

               (i)  Base Salary . During the term of McPherson’s employment, McPherson shall receive an initial annual base salary in an amount equal to $300,000 (the “ Annual Base Salary ”), less all applicable withholdings, which shall be paid in accordance with the customary payroll practices of the Company. Notwithstanding anything herein, the Annual Base Salary will not be reduced without McPherson’s consent, unless the reduction is related to a broader compensation reduction that is not limited to McPherson and does not exceed 10% of his Annual Base Salary.

               (ii)  Bonuses . For fiscal year 2005, McPherson shall be eligible to receive a bonus pursuant to the plan as in existence prior to the Effective Date in an amount to be determined by the Company’s Board of Directors (the “ Board ”) in good faith. Thereafter, during the Employment Period, the Company shall establish a bonus plan for each fiscal year (the “ Plan ”) pursuant to which McPherson will be eligible to receive an annual bonus (the “ Bonus ”). The Board or the Compensation Committee of the Board will administer the Plan and establish performance objectives for each year to be mutually agreed upon with McPherson. In the event that the Company achieves target based on actual performance, McPherson shall be entitled to receive a Bonus in an amount equal to 70 percent of the Annual Base Salary. McPherson will be entitled to receive the Bonus only upon the Company’s achievement of the specified performance objectives and if McPherson is employed on the last day of the applicable performance period (subject to Section 4). The Bonus shall become payable on or before March 15 following the end of the applicable fiscal year provided that the Board or Compensation Committee finally determines (x) that the Company has achieved the applicable performance objectives and (y) the amount of bonuses that shall be paid to each executive entitled to receive a bonus for the applicable bonus year. Notwithstanding the immediately preceding sentence, in the event McPherson’s employment is terminated: (A) by the Company without Cause; or (B) by McPherson for Good Reason, McPherson shall be entitled to receive a prorated Bonus for the year in which termination occurs, based on actual performance for such year, the amount of which prorated bonus, if any, shall be determined and paid promptly following the end of the year to which such bonus relates.

               (iii)  Compensation Consultant . Following the Effective Date, the Company shall retain a compensation consulting firm to conduct a comprehensive review, following which the Board shall consider, in its sole discretion, increasing McPherson’s Annual Base Salary and bonus target retroactively to the Effective Date.

               (iv)  Benefits . During the term of McPherson’s employment hereunder, he shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other senior executives of the Company and shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company to the extent applicable generally to other senior executives of the Company. The benefits provided to McPherson shall be in the aggregate equal to those benefits that McPherson was receiving at the Company immediately prior to the Effective Date. The benefits provided to McPherson shall be in the aggregate equal to those benefits that McPherson was receiving at the Company immediately prior to the Effective Date. Notwithstanding anything in this Section 2(c)(iv) to the contrary, all benefit obligations are subject to guidance issued by the U.S. Department of Treasury under Section 409A of the Code. To the extent required, the Company may modify the benefits provided under this Section 2(c)(iv) to comply with such guidance; provided, however, that the aggregate value of benefits provided to McPherson after such modification shall not be less than the aggregate value of the benefits provided to him prior to the modification.

               (v)  Expenses . During the term of McPherson’s employment, McPherson shall be entitled to receive reimbursement for all reasonable expenses incurred by McPherson in performance of his duties hereunder provided that McPherson provides all necessary documentation in accordance with Company policy.

               (vi)  Vacation and Holidays . During the term of McPherson’s employment, McPherson shall be entitled to five weeks of paid vacation.

               (vii)  Stock Options . Concurrent with the closing of the Transaction, Parent shall grant McPherson stock options (the “ Executive Options ”) to purchase 49,500 shares of common stock of the Parent at an exercise price of $10 per share pursuant to the terms and conditions set forth in the Parent’s 2005 Stock Incentive Plan (the “ Stock Incentive Plan ”). The Executive Options shall be subject to the terms of the Stock Incentive Plan and McPherson’s Non-Qualified Stock Option Agreement.

               (viii)  Restricted Stock. Concurrent with the closing of the Transaction, the Parent shall grant McPherson 5,500 shares of its common stock, par value $.01 (the “Stock Grant”). The Stock Grant will be pursuant to the terms and conditions set forth in the Stock Incentive Plan and will be subject to the terms of the Stock Incentive Plan and McPherson’s Restricted Stock Agreement.

          (d) Investment . Concurrent with the closing of the Transaction, McPherson shall purchase 27,000 shares of common stock of the Parent, par value $0.01, at a price of $10 per share.

     Section 3. Termination of Employment .

          (a) Death or Disability . McPherson’s employment shall terminate automatically upon McPherson’s death. If McPherson becomes subject to a Disability during the Term of Employment (pursuant to the definition of Disability set forth below), the Company may give McPherson written notice in accordance with Sections 3(e) and 10(h) of its intention to terminate McPherson’s employment. For purposes of this Agreement, “ Disability ” means (i)

McPherson’s inability to engage in any substantial gainful activity by reason of any medically determinable physical of mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident or health plan covering employees of the Company.

          (b) Cause . McPherson’s employment may be terminated at any time by the Company for Cause. For purposes of this Agreement, “Cause” shall mean (i) the commission of a felony or a crime of moral turpitude; (ii) a willful commission of a material act of dishonesty involving the Company; (iii) a material non-curable breach of McPherson’s obligations hereunder or any other agreement entered into between McPherson and the Company or any of its subsidiaries or affiliates; (iv) any material breach of the Company’s policies or procedures that is not reasonably curable in the Company’s sole discretion; (v) any other willful misconduct which causes material harm to the Company or its business reputation, including due to any adverse publicity; (vi) a failure by McPherson to cure a material breach of his obligations under this Agreement, the Investor Rights Agreement among the shareholders of Parent, the Subscription Agreement between McPherson and Parent or the Non-Qualified Stock Option Agreement between McPherson and Parent within 30 days after written notice of such breach; or (vii) a material breach of any of McPherson’s representations contained in this Agreement.

          (c) Termination Without Cause . The Company may terminate McPherson’s employment hereunder without cause at any time.

          (d) Good Reason . McPherson’s employment may be terminated at any time by McPherson for Good Reason or without Good Reason upon ninety (90) days prior written notice. For purposes of this Agreement, “Good Reason” means voluntary resignation after any of the following actions are taken by the Company or any of its subsidiaries without McPherson’s consent: (i) a reduction in McPherson’s Annual Base Salary or Bonus potential described in Section 2(c)(ii) of this Agreement (but not including any diminution related to a broader compensation reduction that is not limited to any particular employee or executive); (ii) a material diminution of McPherson’s responsibilities as Senior Vice President and Chief Financial Officer; (iii) relocation of McPherson’s primary work place, as assigned to him by the Company, beyond a fifty (50) mile radius from Houston, Texas; or (iv) a material breach by the Company of this Agreement; provided, however, that none of the events described in the foregoing clauses (i), (ii), (iii) or (iv) shall constitute Good Reason unless McPherson shall have notified the Company in writing describing the events which constitute Good Reason and then only if the Company shall have failed to cure such events within thirty (30) days after the Company’s receipt of such written notice.

          (e) Notice of Termination . Any termination by the Company for Cause or without Cause, or by McPherson for Good Reason or without Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 10(h). For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to

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provide a basis for termination of McPherson’s employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date. The failure by McPherson or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of McPherson or the Company hereunder or preclude McPherson or the Company from asserting such fact or circumstance in enforcing McPherson’s or the Company’s rights hereunder.

          (f) Date of Termination . “Date of Termination” means (i) if McPherson’s employment is terminated by the Company for Cause, without Cause or by reason of Disability, or by McPherson for Good Reason or without Good Reason, the date of receipt of the Notice of Termination or any later date specified therein pursuant to Section 3(e), as the case may be and (ii) if McPherson’s employment is terminated by reason of death, the date of death.

     Section 4. Obligations of the Company upon Termination .

          (a) With Good Reason; Other Than for Cause, Death, Disability or Upon the Company’s Election Not to Renew the Employment Period . If during the Employment Period, the Company shall terminate McPherson’s employment other than for Cause, McPherson shall terminate his employment for Good Reason, the termination of McPherson’s employment in any case is not due to his death or Disability or upon the Company’s election not to renew the Employment Period, then the Company will provide McPherson with the following severance payments and/or benefits:

               (i) The Company shall pay to McPherson in a lump sum (i) the Annual Base Salary through the Date of Termination to the extent not paid, and (ii) to the extent not previously paid, the Bonus earned for any year prior to the year in which the Date of Termination occurs to the extent that McPherson is employed on the last day of the applicable performance period such Bonus to be paid in accordance with the terms of the Plan. (“ Accrued Obligations ”);

               (ii) After the Date of Termination, the Company will, in its sole discretion, either (a) continue to pay McPherson his Annual Base Salary until the earlier of (i) the end of the eighteenth month following the Date of Termination (the “ Severance Period ”), and (ii) the date, if any, McPherson violates the terms of this Agreement ; or (b) a lump sum equal to eighteen months of McPherson’s Annual Base Salary; provided, however, that in the event that such payment is made in a lump sum and McPherson subsequently violates the terms of this Agreement in any material respect, in addition to any other remedy that the Company may have at law or in equity, McPherson shall immediately return such payment.

               (iii) The Company will pay McPherson a prorated Bonus for the year in which termination occurs, based on actual performance for such year, the amount of which prorated bonus, if any, shall be determined and paid on or before March 15 of the year immediately following the end of the year to which such bonus relates.

               (iv) After the Date of Termination, provided McPherson elects to continue his and his beneficiaries’ participation in the Company’s medical benefit plan in which they participated prior to the Date of Termination pursuant to the Consolidated Omnibus Budget

Reconciliation Act of 1986 (“COBRA”), the Company will reimburse McPherson for the monthly cost of continuing such coverage within 10 business days of each payment by McPherson for the lesser of: (x) eighteen months followi