EXHIBIT 10.1

STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT is made as of July 23, 2007, by and between Hobart
K. Swan (“HKS”) and Reliance Trust Company, solely in its capacity as
independent trustee (“Reliance”), of the Swan Secure Products, Inc. Employee
Stock Ownership Plan and Trust (“the ESOP” and, together with HKS, the
“Sellers”), on the one hand, and Simpson Strong-Tie Company Inc., a California
corporation (“Buyer”), and Simpson Manufacturing Co., Inc., a Delaware
corporation (“Guarantor”), on the other hand, with reference to the following
facts:

Sellers own of record and beneficially all of the outstanding shares (the
“Shares”) of the common stock, par value $0.001 per share, of Swan Secure
Products, Inc., a Maryland corporation (the “Company”).  The Company is engaged
principally in the business of developing, designing, manufacturing, marketing,
distributing and selling stainless steel and non-ferrous nails and screws for
building construction.  Buyer is engaged principally in the business of
developing, designing, manufacturing, marketing, distributing and selling
connectors, fasteners and other products used in the building construction
industry.  Sellers desire to sell all of the Shares to Buyer, and Buyer desires
to purchase all of the Shares, on the terms and conditions in this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements herein, Buyer and Sellers agree as follows:

1.                                      Purchase and Sale.  Subject to and in
reliance on the representations, warranties and agreements of Sellers and Buyer
and subject to the terms and conditions provided in this Agreement:

1.1                                 Shares.  At the Closing (as that term is
defined in section 2.5), Buyer shall purchase all of the Shares from Sellers,
and Sellers shall sell and transfer all of the Shares to Buyer.

1.2                                 Lease.  At the Closing, the Company shall,
and HKS shall cause Swan Secure, L.L.C., a Maryland limited liability company
(“SSLLC”), to, execute and deliver a lease (the “Lease”) of the premises owned
by SSLLC and currently occupied by the Company at 7525 Perryman Court,
Baltimore, Maryland, in substantially the form of Exhibit A attached hereto.

2.                                      Payment and Delivery.  Subject to and in
reliance on the representations, warranties and agreements of Buyer and Sellers
and subject to the terms and conditions provided in this Agreement:

2.1                                 Shares.  At the Closing, Sellers shall
deliver to Buyer certificates representing all of the Shares together with duly
executed stock powers, in form satisfactory to Buyer, assigning and transferring
the Shares to Buyer.

2.2                                 Purchase Price.  The aggregate purchase
price for the Shares shall be $43,210,000 (the “Base Purchase Price”),

(a)                                  plus an amount equal to the sum of all
cash, cash equivalents and marketable securities held by the Company at the
Closing Date (as that term is defined in section 2.5); and

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(b)                                 minus the amount of the Stockholder Loan (as
that term is defined in section 4.6.2) at the Closing Date; and

(c)                                  minus the amount, if any, of the McFarland
Deferred Compensation (as that term is defined in section 4.6.1) immediately
after the Closing Date; and

(d)                                 minus or plus the amount (the “Net
Asset-Liability Change”), if any, by which (1) the Company’s total assets,
excluding cash, cash equivalents and marketable securities, minus the Company’s
total liabilities, excluding the Stockholder Loan and the McFarland Deferred
Compensation, at the Closing Date, as shown on the Closing Date Balance Sheet,
is less or more, respectively, than (2) the Company’s total assets, excluding
cash, cash equivalents and marketable securities, minus the Company’s total
liabilities, excluding the Stockholder Loan and the McFarland Deferred
Compensation, shown on the balance sheet of the Company as of December 31, 2006,
a copy of which is attached hereto as Schedule 2.2(d) (the “December Balance
Sheet”).

The net amount of the adjustments pursuant to the preceding clauses (a), (b),
(c) and (d) is hereinafter called the “Surplus” if it is a positive number or
the “Shortfall” if it is a negative number.

2.3                               Determination of Surplus or Shortfall.

2.3.1                        Within ninety days from the Closing Date, Buyer
shall prepare and deliver to HKS a balance sheet of the Company as of the
Closing Date (the “Closing Date Balance Sheet”) in accordance with generally
accepted accounting principles (“GAAP”), except that principles governing
depreciation and inventory valuation shall be the principles applied by the
Company in preparing the December Balance Sheet (and GAAP as modified by the
application of such principles governing depreciation and inventory valuation is
hereinafter called “Modified GAAP”).  Based on the Closing Date Balance Sheet,
Buyer shall calculate, and shall promptly notify HKS of its calculations of, the
Stockholder Loan, the McFarland Deferred Compensation, the Net Asset-Liability
Change and the Surplus or the Shortfall as of the Closing Date; provided that,
for purposes of calculating the Company’s total assets, the following shall be
excluded from the calculation or accrual:  (1) accounts receivable that are more
than 135 days past due from the date of invoice (“Doubtful Accounts”) (except
that any amounts actually received from any Doubtful Accounts within sixty days
from the Closing Date shall be included in the calculation), and (2) damaged,
obsolete and other inventory not saleable as new (except that any amounts
actually received from the sale of any such inventory within sixty days from the
Closing Date shall be included in the calculation), and for this purpose HKS
shall, within fifteen days from the Closing Date, determine in good faith, and
notify Buyer, of the inventory, by type and amount, that shall be deemed to be
damaged or obsolete or to be not saleable as new, which determination shall be
subject to the approval of Buyer, which approval shall not be unreasonably
withheld.

2.3.2                        If, within thirty days following delivery of the
Closing Date Balance Sheet, HKS does not notify Buyer of his objection to the
Shortfall or the Surplus calculation (which notice shall state in reasonable
detail the basis of Sellers’ objection), the Closing Date Balance Sheet prepared
by Buyer shall be final, binding and conclusive.  If HKS so notifies Buyer of
objection, and if HKS and Buyer do not resolve the outstanding issues with
respect to the Closing Date Balance

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Sheet and the calculation of the Surplus or Shortfall within thirty days of
Buyer’s receipt of HKS’ objection notice, HKS and Buyer shall submit the issues
remaining in dispute to an independent public accounting firm to be selected
with the agreement of Buyer and HKS (the “Arbiter”) for resolution in accordance
with Modified GAAP.  If issues are submitted to the Arbiter for resolution:  (1)
in making such determination, the Arbiter shall function as an expert and not as
an arbitrator; (2) each of HKS and Buyer shall furnish or cause to be furnished
to the Arbiter such work papers and other documents and information relating to
such issues as the Arbiter may request and are available to such party or such
party’s agents and shall be afforded the opportunity to present to the Arbiter
any material relating to such issues and to discuss such issues with the
Arbiter; (3) the Arbiter shall base its review and determination solely on
written submissions by Buyer and HKS and shall not conduct any independent
review; (4) the Arbiter shall consider only those issues in dispute, shall be
bound by this section 2 and shall not assign a value to any item greater than
the greater value or less than the smaller value for such item claimed by either
Buyer or HKS; (5) the Arbiter shall render a written report as to the resolution
of the dispute and the resulting computations of the issues in dispute and shall
furnish a copy thereof to each of HKS and Buyer within sixty days of the
submission of such issues to the Arbiter; and (6) such report shall be final,
binding and conclusive and shall be used in the calculation of the Surplus or
the Shortfall.

2.3.3                        The fees and expenses of the Arbiter shall be
allocated between Buyer and HKS so that the amount of fees and expenses paid by
HKS shall equal the product of the aggregate amount of such fees and expenses
multiplied by a fraction, the numerator of which is the amount in dispute that
is unsuccessfully disputed by HKS (as determined by the Arbiter), and the
denominator of which is the total amount in dispute.  On the resolution of such
dispute, the Closing Date Balance Sheet shall be revised to reflect such
resolution, and HKS and Buyer shall execute a mutual release, in form and
substance reasonably satisfactory to each of them, relating only to the
resolution of such dispute.

2.3.4                        HKS and Buyer shall (at no charge to the other
party) make available to the accountants and other representatives of the other
party, such information, books, records and personnel of the Company and provide
such assistance as such other party shall reasonably request at any time during
the determination or the resolution of any dispute relating to the Closing Date
Balance Sheet, the Surplus or the Shortfall.

2.3.5                        GAAP shall not be determinative with respect to any
dispute over whether any inventory is damaged, obsolete or otherwise not
saleable as new, but the Arbiter shall resolve such dispute based on prudent
business practices in the fastener industry, taking into account the Company’s
historical practices and current values in the scrap metals markets.

2.4                               Payment Terms.  Subject to and in reliance on
the representations, warranties and agreements of the parties and to the terms
and conditions herein:

2.4.1                        Deposit.  The parties acknowledge that Buyer has
deposited in trust with HKS’ counsel, Gordon, Feinblatt, Rothman, Hoffberger &
Hollander, LLC (“GFRHH”), the sum of $300,000 (the “Deposit”), which shall be
held by such counsel pursuant to this Agreement and the Escrow Agreement (as
that term is defined in section 2.4.2(c)).

2.4.2                        Closing Payments.  Subject to the other provisions
of this section 2.4, at the Closing Buyer shall pay the following amounts to the
following persons:

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(a)                        to the ESOP, $12,451,412.50 (the “ESOP Payment”);

(b)                       to HKS, an amount equal to the Base Purchase Price
minus the sum of (1) the amount of the ESOP Payment, (2) the unpaid amount of
the Stockholder Loan (which Buyer shall pay to HKS on behalf of the Company
pursuant to section 4.6), (3) the unpaid amount, if any, of the McFarland
Deferred Compensation and (4) $500,000;

(c)                        to GFRHH, $200,000 to be held and disbursed together
with the Deposit pursuant to an Escrow Agreement in substantially the form of
Exhibit B attached hereto (the “Escrow Agreement”); provided that, promptly
after the Closing, GFRHH shall pay to the Buyer, out of the funds held by GFRHH
pursuant to the Escrow Agreement, all interest earned on the Deposit before the
Closing, and such interest shall be reported to Buyer for income Tax purposes;
and

(d)                       to HKS, $290,000 for the covenant in section 4.15.

2.4.3                        Post-Closing Adjustment.  Within ten days after the
determination of the Surplus or the Shortfall, either (a) HKS shall immediately
pay in cash to Buyer an amount equal to the Shortfall, if any, or (b) Buyer
shall immediately pay in cash to HKS an amount equal to the Surplus, if any;
provided that any amount required to be paid pursuant to this section 2.4.3
shall bear interest at the annual rate of six percent from the Closing Date to
the date that such amount is paid.

2.4.4                        Payments by Wire Transfer.  Each payment under
section 2.4.2 to a Seller shall be made by wire transfer in accordance with such
written instructions as such Seller shall have furnished to Buyer before the
Closing Date.  In the case of any payment to be made by Buyer to a Seller after
the Closing under any provision of this Agreement, Buyer shall make such payment
by wire transfer in accordance with such written instructions as such Seller
shall have most recently furnished to Buyer not later than three business days
before the date that Buyer makes such payment.  Any payment to be made by either
Seller to Buyer under any provision of this Agreement shall be made by wire
transfer in accordance with such written instructions as Buyer may furnish to
such Seller at least three business days before the date that such Seller is
required to make such payment.

2.5                                 The Closing.  The consummation of the sale
and purchase of the Shares and the other transactions contemplated hereby (the
“Closing”) shall take place at the offices of Shartsis Friese LLP, counsel for
Buyer, at One Maritime Plaza, 18th Floor, San Francisco, California, at 10:00
a.m., California time, on July 23, 2007, or at such other place, time and date
as shall be mutually satisfactory to the parties; provided that the date of the
Closing may be extended as provided in section 3.3 to any date not later than
September 30, 2007.  The date of the Closing as so determined is herein called
the “Closing Date.”  At the Closing, Sellers shall deliver to Buyer, in addition
to the matter otherwise required hereby, such other certificates, instruments
and documents as Buyer may reasonably request to evidence or perfect Buyer’s
ownership of the Shares and consummation of the other transactions contemplated
hereby.

2.6                                 Allocation of Purchase Price.  If Buyer
determines to make an election under section 338(h)(10) of the Internal Revenue
Code of 1986, as amended (the “Tax Code”), as contemplated by section 4.13, of
the total purchase price that Buyer pays for the Shares, the

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parties shall allocate (a) to the assets of the Company shown or reflected on
the Closing Date Balance Sheet, the respective amounts thereof shown or
reflected thereon, in accordance with Tax Code section 338(h)(10) and the
regulations thereunder, and (b) any remainder to goodwill and other tangible and
intangible assets of the Company; provided that, subject to section 4.13, Buyer
may revise the allocations in the preceding clauses (a) and (b) according to the
advice to Buyer of PricewaterhouseCoopers LLP or another firm of certified
public accountants.  The parties agree to state or report consistently the
allocation pursuant to the preceding sentence on all Tax and information returns
and statements and other statements, notices or other documents furnished or
submitted to or filed with any governmental bureau, agency or instrumentality of
the United States or any state, territory, protectorate, possession or other
jurisdiction of the United States or any political subdivision thereof.

3.                                      Conditions to Parties’ Obligations.

3.1                               Conditions to Buyer’s Obligations.  The
obligation of Buyer to purchase the Shares and all other obligations of Buyer
hereunder shall be subject to the satisfaction at or before the Closing of the
following conditions precedent:

3.1.1                        Due Diligence.  Buyer shall have completed Buyer’s
review, examination and inspection of the Company’s assets, business, operations
and affairs, as Buyer may consider advisable; provided that Buyer may only
terminate this Agreement on account of failure of the condition in this section
3.1.1, if either (a) Buyer is not satisfied with the results of any and all
interviews it may undertake pursuant to the last sentence of section 4.5.1, or
(b) in Buyer’s due diligence investigation, Buyer discovers an event or
condition that Buyer believes in good faith could have a Material Adverse
Effect.  “Material Adverse Effect” means a material adverse effect on (a) the
business, results of operations or financial condition of the Company, (b) any
substantial part of the assets of the Company, (c) the Company’s ability to
conduct its business after the Closing, or (d) the ability of the Company to
perform its obligations under this Agreement; provided that none of the
following shall be deemed to constitute, and none of the following shall be
taken into account in determining whether there has been, a Material Adverse
Effect:  (1) any adverse effect arising (A) from general business or economic
conditions that does not disproportionately affect the Company, (B) directly
from any action taken by Buyer or its affiliates with respect to the
transactions contemplated hereby or with respect to the Company, or (C) from the
public announcement of this Agreement or any of the transactions contemplated
hereby, compliance with the terms and conditions of this Agreement or the
consummation of any of the transactions contemplated hereby.

3.1.2                        Representations and Warranties.  The
representations and warranties of Sellers in this Agreement shall be true and
complete, in all material respects (except that representations and warranties
that by their terms are qualified as to materiality shall be true and complete
in all respects), on and as of the Closing Date with the same effect as if those
representations and warranties had been made on and as of the Closing Date, and
each Seller shall have delivered to Buyer a certificate to that effect dated the
Closing Date and signed by such Seller.

3.1.3                        Conditions and Covenants.  Each Seller shall have
performed or satisfied all covenants, agreements and conditions to be performed
or satisfied at or before the Closing by such Seller hereunder, and such Seller
shall have delivered to Buyer a certificate to that effect dated the Closing
Date and signed by such Seller.

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3.1.4                        UCC Certificates.  HKS shall have delivered to
Buyer a certificate from the Department of Assessments and Taxation of the State
of Maryland and other governmental officials designated by Buyer, confirming
that as of a date not earlier than one week before the Closing Date there were
no filings against the Company or any of its assets in the office of said
Secretary of State or such other governmental officials under any applicable
Uniform Commercial Code or similar law that would be a lien on any of the assets
of the Company (other than such filings, if any, as are being released at the
time of the Closing).

3.1.5                        Consents and Waivers.  Sellers shall have obtained
all necessary consents and waivers with respect to the sale, conveyance,
transfer and delivery of the Shares from all parties to any contract to which
the Company is a party, with regard to which any such consent or waiver is
required to effect any of transactions contemplated hereby, to prevent
acceleration of the maturity of any indebtedness secured by a lien on real or
personal property, or to prevent the termination of any such contract, except in
any instance in which Buyer in its exclusive discretion deems the obtaining of
such consents or waivers not material.

3.1.6                        Permits.  Buyer shall have obtained such licenses,
permits, authorizations and approvals from all United States, state, local and
other governmental agencies, instrumentalities and authorities that Buyer may
reasonably consider necessary for Buyer’s purchase of the Shares and for the
conduct by the Company of its business from and after the Closing Date as the
Company has heretofore conducted its business.

3.1.7                        Licenses and Contracts.  HKS shall have furnished
to Buyer and Buyer shall have reviewed and approved all licenses, permits and
authorizations applicable to the Company and all contracts, agreements, purchase
orders, leases, commitments or understandings, whether written or oral, to which
the Company is a party or by which it or any of its assets are bound or
affected.

3.1.8                        Inventory.  Buyer shall have inspected the
Company’s inventory, whether held for sale or held for demonstration or as
samples, and found it to be substantially in good and marketable condition and
otherwise satisfactory.

3.1.9                        Books and Records.  HKS shall have caused the
Company to make available to Buyer and Buyer shall have reviewed and approved to
Buyer’s satisfaction all of the books and records of the Company.

3.1.10                  Board Approval.  The Board of Directors of Buyer shall
have duly approved and authorized this Agreement and the transactions
contemplated hereby.

3.1.11                  Business Relationships.  HKS shall have caused the
Company to furnish to Buyer or to have made available for Buyer’s inspection the
names and addresses and all pertinent information regarding all employees,
suppliers, distributors, customers and others who have business relationships
with the Company, but in the case of information regarding employees only to the
extent permitted by applicable law, and shall have introduced Buyer to each of
them, as Buyer may request, and Buyer shall have satisfied itself that each of
such relationships may reasonably be expected to be continued by the Company
from and after the Closing Date.

3.1.12                  Independent Trustee Finding.  Reliance, as the
independent trustee acting for and on behalf of the ESOP, shall have notified
Buyer and Sellers, in writing, in form and

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substance satisfactory to Buyer and Sellers, (a) that, based on the opinion of
Advanced Valuation Analytics, Inc. that the terms and conditions of the
transactions contemplated by this Agreement are fair to the ESOP from a
financial point of view, Reliance has determined that the ESOP’s participation
in this Agreement and the transactions contemplated by this Agreement complies
with all applicable fiduciary standards under the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”), (b) that the actions specified in
section 4.20 are satisfactory to Reliance, and (c) of Reliance’s qualifications
and independence to make such determinations.

3.1.13                  Shares.  Sellers shall have delivered to Buyer the
Shares and the stock powers, dated the Closing Date, to which section 2.1
refers.

3.1.14                  Lease.  The Company and SSLLC shall have duly executed
and delivered the Lease.

3.1.15                  Escrow Agreement.  HKS and GFRHH shall have duly
executed and delivered the Escrow Agreement.

3.1.16                  Consulting Agreements.  Each of HKS and Janis F. Swan
shall have duly executed and delivered a written consulting agreement with the
Company in substantially the form of Exhibit C attached hereto, mutatis mutandis
(each, a “Consulting Agreement”).

3.1.17                  Employment Agreement.  Michael J. McFarland shall have
duly executed and delivered a written employment agreement with the Company in
substantially the form of Exhibit D attached hereto.

3.1.18                  Certificate of Non-Foreign Status.  Each Seller shall
have furnished to Buyer a Transferor’s Certificate of Non-Foreign Status in
substantially the form of Exhibit E attached hereto, setting forth such Seller’s
address and federal Tax identification number, dated the Closing Date and duly
executed by such Seller under penalty of perjury.

3.1.19                  Certificates, Etc.  Sellers shall have delivered or
caused to be delivered to Buyer the following in form and substance reasonably
satisfactory to Buyer:

(a)                        all resolutions of the shareholders and the board of
directors of the Company that may be required in connection with this Agreement
and the transactions contemplated hereby;

(b)                       a certificate of status, compliance, good standing or
the like with respect to the Company issued by the appropriate government
officials of each jurisdiction in which the Company is organized or conducts
business or has a presence; and

(c)                        an estoppel certificate or landlord’s consent and
acknowledgement from the lessor under each lease, if any, to which the Company
is a party as lessee, confirming that such lease is in full force and effect,
without amendment except as noted therein, all rents and additional rents have
been paid, no waivers, indulgences or postponement of the lessee’s obligations
have been granted by the lessor, to the best of the landlord’s knowledge there
exists no event of default or event, occurrence condition or act which, with the
giving of notice,

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the lapse of time or the happening of any other event or condition would become
a default under any such lease, and, to Seller’s knowledge, all of the covenants
to be performed by any other party under such lease have been fully performed.

3.1.20                  Opinion of Counsel.  Sellers shall have delivered to
Buyer the opinion of GFRHH, as counsel for HKS, and the opinion of Sheppard,
Mullin, Richter & Hampton, LLP, as counsel for the ESOP, both dated the Closing
Date and to the effects set forth in Exhibit F attached hereto.

3.1.21                  No Changes in Law.  During the period from the date
hereof to the Closing, no law, change in any law, or interpretation or
enforcement of any law shall have been enacted (including, without limitation,
the enactment of any law or interpretation regarding Taxes or environmental
matters), which could prevent or increase materially the cost of (a) completing
the transactions contemplated by this Agreement, or (b) operating the Company’s
business after the Closing on substantially the same basis as currently
operated.

3.1.22                  No Legal Action.  No action or proceeding shall be
pending or threatened in writing by any person (other than Buyer or an affiliate
of Buyer) in any jurisdiction, to enjoin, restrict or prohibit any of the
transactions contemplated by this Agreement or the right or power of the Company
to conduct its business from and after the Closing on substantially the same
basis as currently operated.

3.2                                 Conditions to Sellers’ Obligations.  The
obligation of Sellers to sell the Shares and all other obligations of Sellers
hereunder shall be subject to the satisfaction on or before the Closing Date of
the following conditions precedent:

3.2.1                        Representations and Warranties.  The
representations and warranties of Buyer in this Agreement shall be true and
complete, in all material respects (except that representations and warranties
that by their terms are qualified as to materiality shall be true and complete
in all respects), on and as of the Closing Date with the same effect as if those
representations and warranties had been made on and as of the Closing Date, and
Buyer shall have delivered to Sellers a certificate to that effect dated the
Closing Date and signed by its President or Chief Financial Officer and by its
Secretary.

3.2.2                        Conditions and Covenants.  Buyer shall have
performed or satisfied all covenants, agreements and conditions to be performed
or satisfied at or before the Closing by Buyer hereunder, and Buyer shall have
delivered to Sellers a certificate to that effect dated the Closing Date and
signed by its President or Chief Financial Officer and by its Secretary.

3.2.3                        Independent Trustee Finding. Reliance, as the
independent trustee acting for and on behalf of the ESOP, shall have notified
Buyer and Sellers, in writing, in form and substance satisfactory to Buyer and
Sellers, (a) that, based upon the opinion of Advanced Valuation Analytics, Inc.
that the terms and conditions of the transactions contemplated by this Agreement
are fair to the ESOP from a financial point of view, Reliance has determined
that the ESOP’s participation in this Agreement and the transactions
contemplated by this Agreement complies with all applicable fiduciary standards
under the ERISA, (b) that the actions specified in section 4.20 are satisfactory
to Reliance, and (c) of Reliance’s qualifications and independence to make such
determinations.

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3.2.4                        Payments.  Buyer shall have made payments to
Sellers and the Escrow Agent in accordance with section 2.4.2.

3.2.5                        Consulting Agreements.  The Company shall have duly
executed and delivered to HKS and Janis F. Swan their respective Consulting
Agreements.

3.2.6                        Escrow Agreement.  Buyer and GFRHH shall have duly
executed and delivered the Escrow Agreement.

3.2.7                        No Legal Action.  No action or proceeding shall be
pending or threatened in writing by any person (other than either Seller or any
affiliate of either Seller) in any jurisdiction, to enjoin, restrict or prohibit
any of the transactions contemplated by this Agreement.

3.3                                 Failure of Condition.

3.3.1                        Buyer’s Remedies.  If any condition specified in
section 3.1 is not satisfied, Buyer shall have the right, in its exclusive
discretion, either to waive such condition and proceed with the purchase of the
Shares or to terminate this Agreement; provided that the Closing Date may be
extended to any date not later than September 30, 2007, at Buyer’s exclusive
election, for a reasonable period to allow all of such conditions to be
satisfied, subject to Buyer’s further right to terminate this Agreement on the
expiration of the period of the extension if all of such conditions shall not
then have been satisfied.  HKS shall cause GFRHH to refund the Deposit in full
(together with all interest or other earnings thereon, if any) to Buyer, if
Buyer so elects to terminate this Agreement based on (a) discovery of a material
liability that is not disclosed in the December Balance Sheet, (b) any statement
or information supplied by HKS or the Company to Buyer, including the
consolidated financial statements of the Company for the year ended December 31,
2006, as heretofore delivered to Buyer, being materially incorrect, (c) HKS
materially failing or refusing to cooperate (or to cause the Company to
cooperate), after written notice and a five-day opportunity to cure, with
Buyer’s due diligence process contemplated by section 4.5, (d) any other breach
by either Seller of any provision of this Agreement, or (e) failure of any
condition to the obligations of Buyer (which Buyer does not waive); provided
that, if Buyer so elects to terminate this Agreement and Sellers shall not have
committed any wrongful act or omission (such as, but not limited to, those
referred to in clauses (a) through (e) of this sentence), the portion of the
Deposit that is refunded to Buyer shall be reduced by the actual out-of-pocket
costs incurred by Sellers or the Company in connection with the transactions
contemplated by this Agreement, and the remaining portion of the Deposit shall
be paid to the Company.  If Buyer elects to terminate this Agreement pursuant to
this section 3.3.1, neither Buyer nor Sellers shall have any rights or
obligations under this Agreement, except as provided in this section 3.3.1 and
section 3.3.3.

3.3.2                        Sellers’ Remedies.  If any condition in section 3.2
is not satisfied, Sellers shall have the right, in Sellers’ exclusive
discretion, either to waive such condition and proceed with the sale or to
terminate this Agreement; provided that the Closing Date may be extended to any
date not later than September 30, 2007, at Sellers’ exclusive election, for a
reasonable period to allow all of such conditions to be satisfied, subject to
Sellers’ further right to terminate this Agreement on the expiration of the
period of the extension if all of such conditions shall not then have been
satisfied.  If Sellers so elect to terminate this Agreement, neither Buyer nor
Sellers shall have any further rights or obligations under this Agreement;
provided that, unless Buyer is entitled to a refund of part or all of the
Deposit pursuant to the second sentence of section 3.3.1, but otherwise
notwithstanding any of the foregoing provisions of this section 3.3.2 to the
contrary, in

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the event of any material breach by Buyer of any representation, warranty,
covenant or agreement herein or hereunder, and if the sale of the Shares is not
consummated hereunder because of such breach, HKS may direct GFRHH to remit the
Deposit to the Company as liquidated damages.

3.3.3                        Surviving Covenants.  Notwithstanding any provision
to the contrary in this Agreement or any termination, expiration, cancellation
or rescission of this Agreement, the covenants and agreements in sections 4.5.4,
4.10 and 6 through 16 shall survive any termination of this Agreement.

4.                                      Covenants.

4.1                                 Contracts.  Sellers shall cause the Company
promptly to apply for and diligently pursue the granting of all waivers and
consents of parties to contracts with the Company, to which section 3.1.5
refers.  Sellers shall cause the Company to take all reasonable actions to apply
for the same and diligently and in good faith to process such applications and
to avoid taking any action that would delay the investigation and processing
thereof by the appropriate contracting parties.  Buyer shall cooperate fully and
in good faith with Sellers, as and to the extent that Sellers may reasonably
request, in obtaining the same, and Buyer shall execute and deliver all such
certificates, instruments and other documents as Sellers may reasonably request
in connection therewith.

4.2                                 Permits.  Sellers shall cause the Company to
apply for and diligently pursue the issuance of the licenses, permits,
authorizations and approvals to which section 3.1.6 refers.  Sellers shall cause
the Company to take all reasonable actions to apply for the same and diligently
and in good faith to process such applications and to avoid taking any action
that would delay the investigation and processing thereof by the appropriate
governmental authorities.  Buyer shall cooperate fully and in good faith with
Sellers and the Company, as and to the extent that Sellers may reasonably
request, in making and processing such applications, and Buyer shall execute and
deliver all such certificates, instruments and documents as Sellers or the
Company may reasonably request in connection therewith.

4.3                                 Indemnity.

4.3.1                        By Buyer.  Subject to sections 4.3.4 through 4.3.8,
Buyer agrees to indemnify and defend Sellers and to hold them harmless from and
against any and all claims, liabilities, losses, damages and expenses
(including, without limitation, the reasonable fees and expenses of attorneys
and expert witnesses, the costs of investigation and court costs) (collectively,
“Losses”) suffered or incurred by them, when and as suffered or incurred,
directly or indirectly in connection with any breach of any covenant, agreement,
representation or warranty by Buyer herein or hereunder.

4.3.2                        By HKS.  Subject to sections 4.3.4 through 4.3.8,
HKS agrees to indemnify and defend Buyer and its directors, officers,
affiliates, employees and agents and to hold them harmless from and against any
and all Losses suffered or incurred by any of them, when and as suffered or
incurred, directly or indirectly in connection with (a) any breach of any
covenant, agreement, representation or warranty by either Seller herein or
hereunder, or (b) the ESOP or the establishment, management, operation,
amendment or termination thereof at or before the Closing.

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4.3.3                        By ESOP.  Subject to sections 4.3.4 through 4.3.8,
the ESOP agrees to indemnify and defend Buyer and its directors, officers,
affiliates, employees and agents and to hold them harmless from and against any
and all Losses suffered or incurred by any of them, when and as suffered or
incurred, directly or indirectly in connection with any breach by the ESOP of
any of the representations and warranties in section 5.1.3, 5.1.6 or 5.1.7.

4.3.4                        Joint Liability.  HKS shall be jointly liable with
the ESOP for any Loss for which the ESOP is obligated to provide indemnification
pursuant to sections 4.3.3.

4.3.5                        Limitations.  Anything herein to the contrary
notwithstanding, neither party (deeming Sellers to be a single party for this
purpose) shall have any liability or obligation under section 4.3.1, 4.3.2 or
4.3.3, as applicable, with respect to any Losses suffered or incurred by the
other party unless and until the aggregate of all such Losses by such other
party exceeds $50,000; provided that this limitation shall not apply to (a) any
of such Losses if the aggregate of all such Losses exceeds $50,000, or (b) any
Loss arising directly or indirectly from any breach or violation of any of
sections 2, 4.4, 4.5, 4.6, 4.12 through 4.16, 4.21, 5.1.1, 5.1.2, 5.1.3, 5.1.6,
5.1.7, 5.1.8, 5.1.14, 5.1.16, 5.1.17, 5.1.18 and 5.1.19 or any fraud, willful
misconduct or criminal wrongdoing.

4.3.6                        Materiality.  In determining whether the
limitations under section 4.3.5 on a party’s indemnification obligation have
been exceeded, the words “material,” “Material Adverse Effect” and variations
thereof shall be disregarded.

4.3.7                        Further Limitations.  With respect only to any
claims not involving or relating to any claim by any third party or any breach
of section 4.14, 4.15 or 4.16, no party shall be entitled to recover or seek any
remedy under section 4.3.1, 4.3.2 or 4.3.3, as applicable, with respect to any
consequential damages or punitive damages (it being agreed that the term
“consequential damages” shall include, without limitation, any multiple of lost
profits reflecting a decrease in the value of the Shares or the business of the
Company).  No party shall be entitled to indemnification under this section 4.3
to the extent that the amount of and the basis for such indemnification claim
has already been taken into account in the determination of the Surplus or
Shortfall under section 2.  Any indemnification obligation under this section
4.3 shall be net of any recoveries under insurance policies with respect to the
matter for which indemnification is sought.

4.3.8                        Procedure.  The indemnified party shall notify the
indemnifying party of any claim, demand, action or proceeding for which
indemnification will be sought under section 4.3.1, 4.3.2 or 4.3.3; provided
that (a) failure to give such notice shall not relieve the indemnifying party of
its indemnification obligations under this section 4.3, except to the extent, if
at all, that the indemnifying party shall have been prejudiced thereby; (b) if
such claim, demand, action or proceeding is a third party claim, demand, action
or proceeding, the indemnifying party will have the right at its expense to
assume the defense thereof using counsel reasonably acceptable to the
indemnified party; and (c) if the indemnifying party fails to assume the defense
of such third party claim within a reasonable time after notice thereof, the
indemnified party shall have the right to assume the defense of such third party
claim using counsel of its choice, and shall be entitled to full reimbursement
from the indemnifying party for any Loss incurred in connection with the defense
of such claim.  The indemnified party shall have the right to participate, at
its own expense, with respect to any such third party claim, demand, action or
proceeding.  In connection with any such third party claim, demand, action or
proceeding, Sellers and Buyer shall cooperate with each other and provide each
other with access to relevant books and records in their possession.  No such
third

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party claim, demand, action or proceeding shall be settled without the prior
written consent of the indemnified party.

4.4                                 Operation Prior to Closing.  HKS covenants
and agrees that, until the Closing (unless Buyer shall otherwise approve in
writing, unless otherwise expressly permitted by this Agreement, or unless
required by a contract to which the Company is a party at the date hereof or by
law):

4.4.1                        Ordinary Business.  The Company’s business shall be
conducted in all respects in the ordinary and usual course and, to the extent
consistent therewith, HKS shall use commercially reasonable efforts to cause the
Company to preserve its business organization intact, keep available the
services of its officers and employees (subject to changes in the ordinary
course) and maintain its existing relations and goodwill with customers,
suppliers, distributors, creditors, lessors, regulatory authorities and others
having dealings with it.

4.4.2                        No Charter Change; Dividends; Stock; etc.  The
Company shall not (a) amend its articles of incorporation or bylaws, (b) adopt
any shareholder rights plan or enter into any agreement with any of its
shareholders, (c) split, combine, subdivide or reclassify its outstanding shares
of common stock, (d) declare, set aside or pay any dividend or distribution that
is payable otherwise than in cash on any of its capital stock, (e) repurchase,
redeem or otherwise acquire any shares of its capital stock, or (f) offer,
issue, deliver, sell or encumber any shares of any class of its capital stock or
any securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such shares.

4.4.3                        Employee Matters.  The Company shall not:  (a)
increase the salary of or pay any bonus to any employee, except only in
accordance with valid contracts that bind and are enforceable against the
Company immediately before the date hereof, (b) enter into, adopt or amend
(except for renewals on substantially identical terms) any agreement or
arrangement relating to severance, or (c) enter into, adopt or amend (except for
renewals on substantially identical terms) any employee benefit plan or
employment or consulting agreement, except as expressly provided in this
Agreement.

4.4.4                        No Borrowing.  The Company shall not incur any
debt, liability or obligation other than trade payables incurred in the ordinary
course of business consistent with past practice.

4.4.5                        Capital Expenditures.  The Company shall not make
any capital expenditures in an aggregate amount in excess of $25,000, except
only in accordance with valid contracts that bind and are enforceable against
the Company immediately before the date hereof.

4.4.6                        Assets.  The Company shall maintain all of its
tangible assets in good condition and repair, normal wear and tear excepted, and
in accordance with all applicable laws, rules and regulations, as is reasonable
in the ordinary course of business.

4.4.7                        No Asset Transfer.  Other than in the ordinary
course of business consistent with past practice, the Company shall not
transfer, lease, license, sell, mortgage, pledge, encumber or otherwise dispose
of any of its property or assets.

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4.4.8                        No Business Acquisition.  The Company shall not
acquire any business, whether by merger, consolidation, purchase of property or
assets or otherwise.

4.4.9                        Accounting Matters.  The Company shall comply with
Modified GAAP and shall not change its accounting policies, practices or methods
except as required by GAAP.

4.4.10                  Contracts.  The Company shall not enter into or amend
any written or oral supply, inventory, purchase, franchise, license, sales
agency, distribution, advertising, credit, loan or other contract or lease or
any written or oral promissory note, debenture, indenture or understanding, such
that annual expenditures or liabilities thereunder are or increase by more than
$10,000 or such that any restriction on Sellers’s ability to cancel or terminate
such contract is or is extended by more than six months, except that the Company
may continue to make commitments and purchases in the ordinary course of its
business consistent with its past practices.

4.4.11                  Obligations.  The Company shall pay its debts when due
and pay or perform all other obligations when due.

4.4.12                  Tax Matters.  The Company shall file when due all Tax
(as that term is defined in section 5.1.14) returns for all Tax periods ending
on or before the Closing Date and shall pay or cause to be paid when due all
Taxes relating to such returns.  Neither the Company nor Sellers shall make or
change any material election with respect to Taxes, file an amended Tax return
or claim for refund of Taxes, adopt or change any accounting method with respect
to Taxes, enter into any agreement with respect to Taxes with any governmental
authority, settle any claim or assessment with respect to Taxes, or consent to
any extension or waiver of the limitation period applicable to any claim or
assessment with respect to Taxes.

4.4.13                  Intellectual Property.  The Company shall not sell,
transfer, license, abandon, let lapse, disclose, misuse, misappropriate,
diminish, destroy or otherwise dispose of or encumber any Intellectual Property
(as that term is defined in section 5.1.13) in any manner or assert or threaten
to assert any rights with respect to Intellectual Property against any third
party.

4.4.14                  Litigation.  The Company shall not commence or settle
any litigation, action or claim.

4.4.15                  Commitments.  The Company shall not authorize, enter
into or adopt any plan, arrangement, commitment or agreement to do any of the
foregoing.

4.5                                 Buyer’s Investigation.

4.5.1                        Entry and Inspection.  HKS shall cause the Company
to (a) make available to Buyer and its officers, attorneys, accountants and
other authorized representatives reasonable access during regular business hours
to all of the assets of the Company and related properties, operations, books
and financial records, contracts, commitments and purchasing, sales, production
and maintenance records, (b) to permit Buyer and such representatives to enter
any real property occupied by the Company, (c) to make available to Buyer and
such representatives the Company’s chief executive officer, president, chief
operating officer, consultants, auditors and counsel, so that Buyer may make
such inquiries as Buyer may deem appropriate, and (d) furnish Buyer with all
information concerning the assets, operations, affairs and business of the
Company as

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is required hereby or as Buyer may reasonably request.  Notwithstanding any of
the foregoing provisions of this section 4.5.1 to the contrary, Buyer shall not
have the right, without the consent of HKS, to interview key personnel of the
Company (other than HKS, Michael J. McFarland, Hobart F. Swan and Colin K. Swan)
in sales, manufacturing and administration and the Company’s top ten vendors and
customers, until such time as Buyer notifies HKS in writing that Buyer has
completed all of its other due diligence to its satisfaction, but thereafter
Buyer may, after notice to HKS identifying the persons to be contacted,
interview any or all of such persons.

4.5.2                        No Waiver.  Anything in this Agreement to the
contrary notwithstanding, no inquiry or investigation by or on behalf of Buyer
shall constitute a waiver of, negate, abrogate or otherwise affect the validity
of any representation, warranty or covenant of Sellers in, pursuant to or in
connection with this Agreement or modify or affect any of Sellers’ obligations
or Buyer’s rights herein or hereunder in the event of any breach of any such
representation, warranty or covenant.

4.5.3                        Indemnity.  Buyer agrees to indemnify and defend
Sellers and hold Sellers harmless from and against any and all mechanics’ liens
and physical damage to property or persons and claims arising therefrom
resulting directly from entry by Buyer or such representatives on premises
occupied by Sellers pursuant to section 4.5.1.

4.5.4                        Return of Materials.  On any termination of this
Agreement without consummation of the transactions contemplated hereby, Buyer
shall return to Sellers all documents, work papers and other materials
(including all copies thereof) in connection with the transactions contemplated
hereby and shall use all reasonable efforts to keep confidential any information
obtained pursuant to this Agreement, unless disclosure is required by law or
unless such information has otherwise been obtained by third parties without any
obligation of confidentiality to Sellers through no fault of Buyer.

4.6                                 Payments of McFarland Deferred Compensation
and Stockholder Loan.

4.6.1                        McFarland Deferred Compensation.  On or before the
Closing Date, the Company shall pay in full the amount (the “McFarland Deferred
Compensation”) that shall then have accrued and be owing to Michael J. McFarland
by the Company pursuant to the Employment Agreement between the Company and
Michael J. McFarland dated January 8, 2004, as amended by a First Amendment to
Employment Agreement dated January 16, 2007, and a Second Amendment to
Employment Agreement dated July        , 2007, and if the Company makes such
payment on the Closing Date, the McFarland Deferred Compensation shall be deemed
to have been paid by the Company before the conclusion of the Closing and the
termination of the Company’s status as an S corporation.

4.6.2                        Stockholder Loan.  On the Closing Date, with an
agreed effective time immediately after the Closing, Buyer shall cause the
Company to pay to HKS the remaining balance, if any, that shall then have
accrued and be owing to HKS by the Company (whether or not then due) as
repayment of the Stockholder Loan owed to HKS as shown on the December Balance
Sheet, including principal and interest; provided that such balance is not more
than $6,000,000 (the “Stockholder Loan”)

4.7                                 Further Assurances.  After the Closing Date,
Sellers shall cooperate with Buyer, at Buyer’s request and without further
consideration, (a) to execute, deliver, record and

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publish as Buyer considers appropriate such other certificates, instruments and
documents of sale, assignment and transfer of the Shares, and take such other
action, as Buyer may reasonably request more effectively to assign, sell and
transfer the Shares to or vest the Shares in Buyer, (b) in the case of any
contract to which the Company is a party and which may require the consent or
waiver of any third party that has not been received at the Closing Date, to
continue to endeavor to obtain such consent or waiver promptly, (c) to assist
the Company in connection with any actions, proceedings or arrangements or
disputes relating to the Company or its assets, and (d) to assist the Company
and Buyer in effecting an orderly transition of ownership and operation of the
Company as contemplated hereby.  Sellers shall disclose to the Company, promptly
on Buyer’s or the Company’s request at any time at or after the Closing, all
trade secrets, confidential information, technology and know-how included in the
Intellectual Property.  The parties shall each do or perform such further acts
and things and execute and deliver such further certificates, instruments and
other documents as may be reasonably necessary and proper to implement the
intent of the parties as expressed in this Agreement.

4.8                                 Proceedings.  Each party shall promptly
inform the other of the happening of any event that may be or result in a
Material Adverse Effect, or the making of any threat or claim or the
commencement of any investigation, litigation or proceeding against or affecting
Sellers, the Company or its business or operations, any of its assets or any of
the transactions contemplated hereby.

4.9                                 Sales Tax.  Except as otherwise provided in
section 4.13, Sellers shall pay when due, to the appropriate governmental
authority or authorities, all sales, use, personal property and excise Taxes and
levies, if any, arising from the sale of the Shares hereunder.

4.10                           Expenses.

4.10.1                  Sellers.  All costs, expenses and fees of the Sellers’
attorneys, accountants, auditors, advisers and consultants, including, without
limitation, the costs, expenses and fees of Reliance as independent trustee and
the costs, expenses and fees of its counsel and valuation consultants, incurred
in negotiating the terms and conditions of this Agreement, making any
investigation in connection herewith, preparing and executing this Agreement and
any certificates, instruments and documents necessary in connection herewith and
consummating the transactions contemplated hereby, have been paid by the Company
to the extent that invoices for such expenses have been received by the Company
prior to the date hereof.  All future invoices for any of such Expenses shall be
addressed or forwarded to HKS, who shall pay the same and who shall defend,
indemnify and hold the Company and Buyer harmless from the same.

4.10.2                  Buyer.  All costs, expenses and fees of Buyer’s
attorneys, accountants, auditors, advisers and consultants incurred in
negotiating the terms and conditions of this Agreement, making any investigation
in connection herewith, preparing and executing this Agreement and any
certificates, instruments and documents necessary in connection herewith and
consummating the transactions contemplated hereby, shall be paid by Buyer and
Buyer shall defend, indemnify and hold the Sellers harmless from the same.

4.11                           Casualty and Condemnation.  If, before the
Closing, any material part of the assets of the Company is destroyed or
materially damaged, or if condemnation proceedings are commenced against any of
the assets of the Company, Buyer shall have the right, exercisable by notice to
Sellers within fifteen days after receiving actual notice of such damage,
destruction

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or condemnation proceedings (if the Closing shall not yet have occurred), to
terminate this Agreement, in which event neither Sellers nor Buyer shall have
any further rights or obligations hereunder, except as provided in section
3.3.3.  In the event of any immaterial damage to assets of the Company that the
Company does not promptly repair or replace, Buyer shall have the right,
exercisable by notice within fifteen days after receiving actual notice of such
damage (if the Closing shall not yet have occurred), either (a) to terminate
this Agreement as provided above in this section 4.11 or (b) to proceed with the
purchase of the Shares hereunder, in which event Buyer shall be entitled to a
reasonable reduction of the Base Purchase Price to offset the cost of repairing
or replacing the damaged assets, after application of all available insurance
proceeds and to the extent any reduction in value of the Company’s assets is not
reflected on the Closing Balance Sheet.

4.12                           Brokers and Finders.  Buyer represents and
warrants to Sellers that it has not had any contact or dealings regarding the
Shares or any sale of the assets or business of the Company, or any business
combination involving the Company, or communications in connection with the
subject matter of this Agreement, with or through any broker or finder other
than EuroConsult, all charges of which for services in connection with the
transactions contemplated hereby will be paid by Buyer.  Sellers represent and
warrant to Buyer that they have not had any contact or dealings regarding the
Shares or any sale of the assets or business of the Company, or any business
combination involving the Company, or communications in connection with the
subject matter of this Agreement, with or through any broker or finder.  If any
such broker or finder perfects a claim for any commission or fee based on any
such contact, dealings or communications, the party through whom or by whose
authority such broker or finder makes such claim shall be responsible for such
commission or fee and all costs and expenses (including reasonable attorneys’
fees) incurred by the other party in defending the same.

4.13                           338(h)(10) Election.

4.13.1                  Election.  The parties contemplate that Buyer will make
an election under Tax Code section 338(h)(10) and under equivalent provisions of
applicable state income Tax laws.  Sellers agree to cooperate with Buyer and
consent to such elections.  Buyer shall be authorized to complete and file such
forms and documents as Buyer considers appropriate in connection therewith,
including Form 8023, and Sellers shall sign any such form or document, if
requested by Buyer to do so.

4.13.2                  Indemnification.  Anything herein to the contrary
notwithstanding, from and after the Closing, on a continuing basis, Buyer shall
indemnify, defend and hold each Seller harmless from and against (a) all income
or other Tax liability and interest and penalties thereon (net of any Tax
benefit) which results from the making of such elections, the same being, as to
each Seller, the excess of such Seller’s Tax liability over the amount of Tax
liability that such Seller would have had, had such elections not been made, and
(b) the costs and expenses (including reasonable attorneys’ and accountants’
fees) incurred in connection with defending or prosecuting any audit or
proceeding in which the amount of or liability for such income or other Tax is
at issue.

4.13.3                  Determination.  Pursuant to section 4.13.2, Buyer shall
pay to each Seller, promptly after the following amounts are determined, the
amount by which (a) the sum of the amount, if any, of any additional income or
other Tax that the Sellers’ and Buyer’s accountants

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mutually determine will be incurred by such Seller as a result of such
elections, plus (b)(1) any additional income or other Tax that the Sellers’ and
Buyer’s accountants mutually determine will result from the payments pursuant to
the preceding clause (a) and this clause (b), as mutually determined by Sellers’
and Buyer’s accountants, less (2) the sum of amounts paid by the Buyer or the
Company to any state pursuant to section 4.13.4.

4.13.4                  Payment of Non-Resident Tax.  Buyer shall cause the
Company to pay, after the Closing and by the due dates established by law, all
amounts required to be paid pursuant to the Annotated Code of Maryland,
Tax-General Article, Section 10-102.1 and other applicable state income Tax laws
that require the Company to make any payment as a result of such election.

4.13.5                  Payment from Escrow.  If any amount owed to HKS under
Section 4.13.3 remains unpaid ten days after written demand, HKS shall have the
right to withdraw from the escrow account maintained pursuant to the Escrow
Agreement, the amount that is due and unpaid.  If any amount owed to the ESOP
under section 4.13.3 remains unpaid ten days after written demand, HKS shall
have the right to withdraw from the escrow account maintained pursuant to the
Escrow Agreement, the amount that is due to the ESOP and unpaid, and HKS shall
immediately remit the same to the ESOP.

4.13.6                  Over-Payment.  If the amount paid pursuant to section
4.13.4 exceeds the amount determined to be payable to HKS pursuant to section
4.13.3, HKS shall pay to Buyer, immediately on demand, the amount of such
excess.

4.13.7                  Coordinated Filings.  Buyer and Sellers shall coordinate
their filing positions regarding whether Taxable income generated by the Tax
Code section 338(h)(10) election creates business or non-business income and the
amounts that are apportionable to a particular state for its state income Tax
purposes.  Sellers shall take filing positions in conformity with instructions
from Buyer.

4.13.8                  Dispute Resolution.  If Buyer’s and Sellers’ accountants
are unable to agree on any determination to be made by them jointly pursuant to
this section 4.13, the matter shall be submitted to a neutral accountant or tax
attorney, in either case licensed to practice in Maryland, who shall determine
the matter upon consideration of submissions by Buyer’s and Sellers’
accountants, and whose determination shall be final and binding on the parties. 
Such neutral accountant or tax attorney shall be selected jointly by Buyer and
Sellers, and shall be paid one-half by Buyer and one-half by HKS.  If Buyer and
Sellers are unable to agree upon a neutral accountant or tax attorney, Buyer
shall select one and Sellers shall select one, and the two so selected shall
select a third accountant or tax attorney, who shall make the determination.

4.14                           No Solicitation.  Until the Closing, neither
Seller shall, or shall suffer or permit the Company or any of its agents to,
contact, or commence or continue negotiations with, or otherwise discuss with,
any other person or party any merger, consolidation or business combination,
sale of stock, joint venture, strategic alliance outside the ordinary course of
business, or sale or other disposition of the Company’s assets outside the
ordinary course of business.  If the Company or either Seller is contacted by a
third party regarding any such transaction on or prior to the Closing Date,
Sellers shall immediately inform Buyer in writing of the proposed terms and
conditions of such transaction and furnish to Buyer any documents and

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materials provided by such third party to any of Sellers and the Company (or any
of their respective representatives or counsel).

4.15                           No Competition.  HKS shall not, and shall not
suffer or permit Janis F. Swan to, at any time within five years after the
Closing Date, directly or indirectly own an interest in, join, operate, control
or participate in, or be connected as an officer, employee, agent, independent
contractor, consultant, partner, member, manager, shareholder (except as holder
of not more than one percent of the outstanding stock of any corporation, which
stock is listed and publicly traded on a national securities exchange), owner or
principal of or with any corporation, limited liability company, partnership,
joint venture, proprietorship, association, firm or other entity or person, a
significant part of whose business consists of developing, designing,
manufacturing, marketing, distributing or selling stainless steel and
non-ferrous nails and screws for building construction or consists of
developing, designing, manufacturing, marketing, distributing or selling
connectors, fasteners and other products used in the building construction
industry, in any state, province or other jurisdiction in the United States of
America or Canada, or directly or indirectly take or permit any action in
preparation for doing any of the foregoing.

4.16                           Confidential Matter.

4.16.1                  Confidentiality Covenant.  Sellers acknowledge and agree
that, from and after the Closing, Sellers shall regard and protect as trade
secrets owned by the Company or its affiliates all Confidential Matter, which is
an asset of the Company.  For this purpose, “Confidential Matter” means and
includes any and all of the following owned by the Company immediately before
the Closing:  financial and operating data and other proprietary and
confidential information; marketing data; equipment; devices; patterns;
electronically recordable data or concepts; computer programs, software and
hardware; software and hardware enhancements, modifications and improvements;
databases; mask works; inventions; designs; formulas; processes; compilations of
information; books; papers; records; documents; files; specifications; names,
addresses, names of agents and employees, buying habits, practices and needs
(and the Company’s assessment thereof) of the Company’s existing and potential
clients, customers, distributors, dealers and representatives; marketing data
and methods, operating practices and related data and information; costs of
materials; prices the Company obtains or has obtained or at which it sells, has
sold or intends to sell its products or services; information relevant to
pricing or bidding, including methods or procedures for preparing bids;
manufacturing methods; tooling; product performance information; quality control
procedures and information; manufacturing or field operating processes or
procedures; manufacturing and sales costs; information regarding the financial
condition of the Company; compensation paid to the Company’s consultants and
employees and other terms of engagement or employment; names, addresses,
practices, methods and other information regarding the Company’s existing and
potential joint venture partners, licensees, licensors, vendors and suppliers;
and any of the foregoing that may have been or may be conceived, originated,
discovered or developed on the basis of or using any Confidential Matter. 
Nevertheless, “Confidential Matter” excludes any of the foregoing that is now
publicly known or hereafter becomes publicly known without any breach of this
Agreement, that an authorized executive officer of the Company authorizes for
public dissemination, or that is learned or obtained from sources having no duty
of confidentiality to the Company or Buyer or any of their respective
affiliates.  Sellers represent, warrant and agree that they will not at any
time, directly or indirectly, use or permit others to use, or disclose or
communicate to any person, any Confidential Matter, without the prior written
consent of an executive officer of Buyer in the particular case, except only for
the exclusive benefit of the Company.

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If either Seller is required by law to disclose any Confidential Matter, Sellers
shall immediately notify Buyer thereof, so that Buyer and the Company may seek
an appropriate protective order or other remedy or waive compliance with this
section 4.16.1 with respect to such Confidential Matter, and Sellers shall
cooperate with Buyer and the Company to obtain such protective order.  If Buyer
and the Company are unable to obtain such protective order or other remedy,
Sellers shall furnish only such Confidential Matter as is legally required to be
disclosed.

4.16.2                  Property.  Sellers agree that they will not make or
retain any originals, copies or reproductions of or excerpts from any of the
Confidential Matter for the use of either of them or the use of any person other
than the Company and its affiliates, and Sellers will deliver to the Company at
the Closing, and immediately on request thereafter, all tangible property that
is or embodies any of the Confidential Matter, whether prepared or developed by
or with the assistance of either Seller or otherwise coming into either Seller’s
possession, control or knowledge.

4.16.3                  Nondisclosure.  Sellers further represent, warrant and
agree that neither of them has disclosed to the Company, Buyer or any of their
respective affiliates or will disclose to the Company, Buyer or any of their
respective affiliates any trade secrets or other proprietary or confidential
information that may not lawfully be so disclosed by Sellers, by virtue of the
ownership of the same by a person other than the Company or otherwise.

4.17                           Injunctive Relief.  Sellers acknowledge and agree
that the failure of either of them to perform any of his or its covenants in
section 4.13, 4.14, 4.15, 4.16 or 4.21 would cause irreparable injury to the
Company, Buyer and their respective affiliates and cause damages to the Company,
Buyer and their respective affiliates that would be difficult or impossible to
ascertain or quantify.  Accordingly, without limiting any remedies that may be
available with respect to any breach of this Agreement, Sellers consent to the
entry of an injunction to restrain any breach or to require specific performance
of section 4.13, 4.14, 4.15, 4.16 or 4.21, without any necessity to post any
bond or provide any security in connection therewith.

4.18                           Records Inspection.  So long as the accounting
books and records relating of the Company are retained by the Company, Buyer
shall cause the Company to permit Sellers to inspect and make copies (at their
own expense) of such books and records, on reasonable request during normal
business hours and without undue interference with the business operations of
the Company, to enable Sellers to prepare financial statements or Tax returns or
deal with Tax audits; provided that the Company shall not have any obligation to
Sellers to retain any of such books or records.  The Company shall have the
right to have its representatives present during any such inspection.  To the
extent that the Company elects to discard any such records which would be
pertinent to a Tax or legal proceeding relating to a period before the Closing,
Buyer shall offer such records to HKS, to be removed at the expense of HKS and
kept confidential by HKS.

4.19                           Employment of Hobart F. Swan and Colin K. Swan. 
Buyer agrees to cause the Company to continue the employment of Hobart F. Swan
and Colin K. Swan for at least two years after the Closing, at their current
annual compensation levels of $136,500 and $99,251, respectively, or higher;
provided that the Company shall have the right to terminate the employment of
either of such persons at any time for “Cause,” defined as continued or repeated
substance abuse or insobriety; conviction of a misdemeanor involving moral
turpitude or a

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felony; illegal business practices in connection with the Company’s business;
misappropriation of the Company’s assets; excessive absence from employment
during usual working hours for reasons other than vacation, disability or
sickness; or any material breach or violation of the code of ethics, policies
and procedures of the Company or Buyer as in effect from time to time.

4.20                           Payment of ESOP Indebtedness; ESOP Provisions. 
In connection with and at the Closing, the ESOP shall pay in full all of the
then outstanding indebtedness of the ESOP with an amount of the ESOP Payment
necessary to make such payment.  Schedule 4.20 attached hereto sets forth the
agreed acts and transactions that will be taken with respect to the ESOP in
connection with the Closing, including a form of amendment to the ESOP to allow
for and implement such acts and transactions.  Buyer agrees to cause the Company
to abide by the terms set forth in such Schedule; provided that the persons who
are the trustees and plan administrator of the ESOP immediately before the
Closing shall remain in those positions until all of the acts and transactions
set forth in Schedule 4.20 are completed and shall have the authority and
responsibility to carry out and complete those acts and transactions.  No person
who is not a participant in the ESOP as of the Closing shall become a
participant in the ESOP, and no participant in the ESOP shall accrue any benefit
under the ESOP with respect to any employment or compensation earned after the
Closing.

4.21                           No Disparagement.  From and after the date
hereof, neither Seller shall, in any way or to any person or entity or
governmental or regulatory body or agency, denigrate or derogate Buyer or any of
its affiliates, or any officer, director, employee, product, service or
procedure of Buyer or any of its affiliates, whether or not such denigrating or
derogatory statements shall be true and whether or not such statements are based
on acts or omissions that become known to either Seller after the date hereof,
on acts or omissions that occur after the date hereof, or otherwise.  A
statement shall be deemed denigrating or derogatory to any person or entity if
it adversely affects the regard or esteem in which such person or entity is held
by others.  This section 4.21 shall not apply to the extent that testimony is
required by legal process.

4.22                           Notice of Developments.  Sellers may elect at any
time to notify Buyer of any development causing a breach of any of Sellers’
representations and warranties in section 5.1.  Unless Buyer has the right to
terminate this Agreement pursuant to section 3.3.1 by reason of the development
and exercises that right within a period of forty-five days (but not later than
the Closing), the notice pursuant to this section 4.22 will be deemed to have
amended the applicable Schedule or Schedules (if it specifies the Schedule or
Schedules so to be amended), to have qualified the applicable representations
and warranties in section 5.1 and to have cured any misrepresentation or breach
of warranty that otherwise might have existed hereunder by reason of the
development.

4.23                           Swan Secure, L.L.C. Name Change.  Within ten days
from the Closing Date, HKS shall cause the name of SSLLC to be changed to a name
that does not include any of the words in the Company’s name or any variation,
abbreviation or derivative thereof, which new name is not similar to the
Company’s name.

4.24                           Guaranty.  Guarantor, as the owner of record and
beneficially of all of the outstanding capital stock of Buyer, hereby
irrevocably guarantees the full and timely payment and performance of all
obligations of Buyer hereunder.

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4.25                           Company’s Profit Sharing Plan.  As soon as
administratively practicable after the Closing, the Company’s profit sharing
plan shall be terminated and its assets shall be distributed to its participants
and beneficiaries.  The persons who are the trustees and plan administrator of
the Company’s profit sharing plan immediately before the Closing shall remain in
those positions until all acts and transactions in connection with that plan’s
termination and distribution of assets are completed and shall have the
authority and responsibility to carry out and complete all such acts and
transactions.  Buyer shall cause the Company to pay or reimburse the reasonable
and necessary expenses to carry out such termination and distribution.

5.                                       Representations and Warranties.

5.1                                 Of Sellers.  HKS hereby represents and
warrants to and agrees with Buyer, without limitation, as set forth in all of
sections 5.1.1 through 5.1.29, and the ESOP hereby represents and warrants to
and agrees with Buyer (with respect only to the Company, the ESOP and the Shares
to be sold hereunder by the ESOP) as set forth in sections 5.1.3, 5.1.6 and
5.1.7:

5.1.1                        Organization.  The Company is duly organized,
validly existing and in good standing as a corporation under the laws of the
State of Maryland.  The Company has the requisite corporate power and authority
to own, operate or lease its properties and to carry on its business as it is
now being conducted.  The Company is qualified to conduct business and is in
good standing as a foreign corporation in each jurisdiction where, by virtue of
its business conducted therein, it is required to be so qualified, except where
the failure to be so qualified will not have a Material Adverse Effect.  Copies
of the articles of incorporation, bylaws and other charter documents of the
Company have been delivered by Sellers to Buyer, and the same are true and
complete copies thereof as in effect on the date hereof.  The minute books of
the Company, true and complete copies of which have been delivered by Sellers to
Buyer, contain substantially accurate records of all meetings of the board of
directors of the Company, all committees of such board of directors, and the
Company’s shareholders since inception and accurately reflect all material
transactions to which such minutes refer.

5.1.2                        Capitalization.  The authorized capital stock of
the Company consists of 5,000,000 shares, par value $0.001 per share, of common
stock and no shares of any other class or series.  Of such common stock,
2,125,000 Shares are issued and outstanding, of which 1,423,750 Shares are owned
of record and beneficially by HKS and 701,250 Shares are owned of record and
beneficially by the ESOP.  No shares of such common stock are reserved for
issuance for any purpose.  Neither the Company nor either Seller is a party to
any voting agreement, voting trust, shareholders’ agreement or other agreement
or arrangement that might affect or involve any of such common stock, the
ownership thereof or any rights or obligations appurtenant thereto, except as
reflected in the documents establishing the ESOP and the ESOP’s acquisition of
Shares, true and complete copies of which have been provided to Buyer.  The
Company has no agreement, commitment or obligation, whatsoever, to repurchase,
redeem or otherwise acquire any shares of such common stock.  All of the Shares
are validly issued, fully paid and non-assessable.  The Company has not issued
any other securities and no other securities of the Company are outstanding. 
There are no outstanding options, rights, warrants, convertible securities,
commitments or agreements calling for the issuance or the transfer, sale or
disposition by any person of any shares of stock of or other ownership interest
in the Company or of any securities convertible into or exchangeable for any
thereof.  None of the Company and Sellers has adopted or become a party to any
plan, contract, agreement or commitment for the sale, transfer, assignment,
distribution or

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issuance of any interest in the Company or its business or any of its assets to
any person (other than as provided herein and except as reflected in the
documents establishing the ESOP and the ESOP’s acquisition of Shares, true and
complete copies of which have been provided to Buyer).

5.1.3                        Title to Be Conveyed.  On consummation of the
transactions contemplated hereby at the Closing, Buyer will acquire good and
marketable indefeasible title to all of the Shares, and thereupon will own all
of the Shares, of record and beneficially, and all right, title and interest in
and to all of the Shares, subject to no mortgage, pledge, lien, claim, charge,
encumbrance, security interest or other restriction or defect in title,
whatsoever.

5.1.4                        Subsidiaries.  The Company has no subsidiaries and
does not own of record or beneficially any capital stock or other equity
securities issued by any other person.

5.1.5                        Directors and Officers.  The directors and officers
of the Company are as set forth in Schedule 5.1.5 attached hereto.  No other
person is a director or officer of the Company.

5.1.6                        No Restriction on Transaction.  Except as set forth
in Schedule 5.1.6, neither Seller, and none of the properties, business or
operations of the Company, is subject to any mortgage, pledge, hypothecation,
lien, claim, charge, encumbrance, security interest or other restriction or
defect in title (each, a “Lien”), or any charter provision, bylaw, indenture,
lease, agreement, instrument, law, statute, code, ordinance, rule, regulation,
order, judgment or decree, or any other restriction, that would interfere with
consummation of the transactions contemplated by this Agreement or with the
conduct by the Company of its business and operations hereafter in substantially
the same manner in which such business shall have been conducted before the date
hereof.  None of the Sellers and the Company is required to submit or file any
notice, report or other filing with any governmental authority in connection
with the execution, delivery, performance or consummation of this Agreement, and
no waiver, consent, approval or authorization of any governmental authority is
required to be obtained by the Sellers or the Company in connection with the
Sellers’ execution, delivery, performance or consummation of this Agreement or
the transactions contemplated hereby, except for such notices, reports, filings
waivers, consents, approvals or authorizations that, if not made or obtained,
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.  The Trustees of the ESOP have the legal capacity,
power and authority to enter into and execute this Agreement, and to execute and
deliver each other agreement, document, or instrument contemplated by this
Agreement, on behalf of the ESOP and to perform their and the ESOP’s obligations
hereunder and thereunder.  Such Trustees have obtained the approval to enter
into and execute this Agreement from all persons whose approval to do so is
required under applicable law or the terms of the ESOP.  This Agreement has been
duly authorized by, and has been duly executed and delivered by or on behalf of,
each Seller and is the legal, valid and binding agreement of each Seller,
enforceable against each Seller in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws relating to or affecting the
rights of creditors generally and except for limitations imposed by general
principles of equity on the availability of equitable remedies.

5.1.7                        No Conflicts.  Except as set forth in Schedule
5.1.7, the execution and delivery by each Seller of this Agreement, the
performance by each Seller of its or his respective obligations hereunder and
its or his performance of, fulfillment of and compliance with all of the

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terms and conditions hereof, do not and will not conflict with, breach or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, result in the creation of any Lien on any asset of the Company or either
Seller pursuant to, give any third party the right to accelerate any obligation
under, violate or result in a violation of, or require any authorization,
consent, approval, exemption or other action by or notice to any person or any
court or administrative or governmental body or agency pursuant to, any
agreement, indenture, promissory note, lease, mortgage, instrument, law,
statute, code, ordinance, rule, regulation, order, judgment or decree to or by
which the Company or either Seller or any of its or his assets is a party, is
subject or is bound.

5.1.8                        Financial Statements.  Sellers have furnished to
Buyer the financial statements of the Company, consisting in each case of
balance sheets as of December 31, 2006, 2005 and 2004, and the related
statements of earnings and cash flows for the years then ended, and the
financial statements of the Company consisting of the balance sheet as of May
31, 2007, and the related statements of earnings and cash flows for the
five-month period then ended.  All such financial statements are complete and
correct in all material respects and fairly present the financial position and
results of operations of the Company for the periods indicated, in conformity
with Modified GAAP consistently applied throughout such periods, except to the
extent disclosed in such financial statements, including the notes thereto.  At
the respective dates of such financial statements, there were no material
liabilities of the Company (absolute, contingent, accrued or otherwise) which,
in accordance with Modified GAAP, should have been shown or reflected therein or
in the notes thereto, and which are not shown or reflected therein.

5.1.9                        Absence of Changes.  Since December 31, 2006,
except as set forth in Schedule 5.1.9 attached hereto:  (a) the Company has
conducted its business in all material respects in the ordinary and usual course
of its business consistent with past practice; (b) the Company has not incurred
any liabilities (absolute, accrued, contingent or otherwise), except (1)
liabilities incurred in the ordinary course of business consistent with past
practice that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, or (2) liabilities permitted by
section 4.4; and (c) there has not been any (1) change in the assets or
liabilities or condition (financial or other) of the Company from that set forth
in the December Balance Sheet, except changes in the ordinary course of
business, none of which has been material and adverse; (2) development or
combination of developments that, individually or in the aggregate, has had or
would reasonably be expected to have a Material Adverse Effect; (3) damage,
destruction or loss materially and adversely affecting the Company or its
business or any of its assets, whether covered by insurance or not; (4)
significant increase in the compensation paid or payable to any employee of the
Company, including any direct or indirect form of payment made to or with
respect to any such person; (5) execution, adoption or amendment of any
agreement or arrangement relating to severance or any employee benefit plan or
any employment or consulting agreement relating to the Company or any of its
employees, other than adoption of the ESOP; (6) change in the Company’s
accounting principles, policies, practices or methods, except changes required
by GAAP; (7) transfer, lease, license, sale, mortgage, pledge, encumbrance or
other disposition of assets or properties of the Company outside the ordinary
course of its business; or (8) plan, arrangement, agreement or commitment
adopted or entered into with respect to any of the foregoing, other than
adoption of the ESOP.

5.1.10                  Books of Account.  All books of account of the Company
are complete and correct in all material respects and have been made available
to Buyer.  All monies due or to become due from or to or owing by, and all
liabilities (absolute, contingent, accrued or otherwise) of,

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the Company by reason of any transaction, matter, cause or thing that, in
accordance with Modified GAAP should be entered in such books of account, have
been duly, correctly and completely entered therein.

5.1.11                  Contracts.  Each contract to which the Company is a
party is a legal, valid and binding agreement of the Company and each other
party thereto, enforceable against each other party thereto in accordance with
its terms.  Neither the Company nor, to HKS’ knowledge, any other party to any
contractual arrangements with the Company is not in compliance with or is in
default (without regard to any requirement of notice or grace period or both) in
the observance or performance of any term, condition or provision of any such
contractual arrangement relating to or affecting the Company or its business or
any of its assets in any manner so as presently or at any future time to have
any material adverse effect on the Company or its business, operations or
financial condition or any of its assets.  Schedule 5.1.11 attached hereto
accurately and completely lists and describes all contracts to which the Company
is a party or by which the Company is bound, and which (a) are material to the
business or operations of the Company or (b) by their terms seek to limit or
define the activities in which the Company is (or after the Closing will be)
permitted or required to engage or (c) require any consent, approval or waiver
by any other party thereto in connection with this Agreement or the consummation
of the transactions contemplated hereby.  Sellers have caused the Company to
make all such contracts available to Buyer for review.  Except as listed and
described on Schedule 5.1.11 attached hereto, the Company does not have, is not
a party to and is not bound by any written or oral:

(a)               agreement, contract or commitment outside the ordinary course
of business with any present or former employee or consultant or for the
employment of any person, including any consultant, other than in connection
with the transactions contemplated by this Agreement;

(b)              agreement, contract or commitment for the future purchase of or
payment for supplies or products, or for the performance of services by a third
party that supplies products or services, involving in any one case $25,000 or
more, other than routine purchase orders in the ordinary course of business;

(c)               agreement, contract or commitment to sell or supply products
or to perform services (“Services Contract”), involving in any one case $25,000
or more, other than routine purchase orders in the ordinary course of business;

(d)              agreement, contract or commitment continuing over a period of
more than six months from the date hereof or exceeding $25,000 in value;

(e)               distribution, dealer, representative or sales agency
agreement, contract or commitment;

(f)                 lease under which the Company is either lessor or lessee;

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(g)              note, debenture, bond, equipment trust agreement, letter of
credit agreement, credit agreement, loan agreement or other contract or
commitment for the borrowing or lending of money or agreement or arrangement for
a line of credit or guaranty, pledge or undertaking of the indebtedness of any
other person, except as shall be terminated and paid and discharged in full at
or before the Closing;

(h)              agreement, contract or commitment for any charitable or
political contribution;

(i)                  commitment or agreement for any capital expenditure or
leasehold improvement in excess of $25,000;

(j)                  agreement, contract or commitment limiting or restraining
the Company or any successor thereto from engaging or competing in any manner or
in any business,

(k)               license, franchise, distributorship or other agreement that
relates as a whole or in part to any Intellectual Property; or

(l)                  agreement, contract or commitment not made in the ordinary
course of the Company’s business.

No such contract, in the reasonable opinion of HKS, contains any requirement
with which there is a reasonable likelihood that the Company or any other party
thereto will be unable to comply.  Except as stated on Schedule 5.1.11, no such
contract requires the consent or waiver of any party in connection with the
transactions contemplated hereby.  Schedule 5.1.11 accurately discloses with
respect to each Services Contract disclosed therein, the customer name; the form
from which such contract has been derived; whether or not the contract amount is
fixed or may be varied based on services performed; if the contract amount is
fixed, the contract amount, or, if the contract amount is not fixed, a good
faith, reasonable estimate of the contract amount and the estimated contract
amount most recently communicated to the customer; a good faith, reasonable
estimate of the work completed and total costs incurred to the date hereof
thereunder; the total billings as of the date hereof under such Services
Contract, the estimated completion dates therefor, whether or not the Company
has any reason to believe that its profit margin with respect to such contract
might be less than it has customarily achieved in the past for similar
contracts; and whether such contract requires the furnishing of goods or
services by persons other than employees of the Company.  The Company is not a
party to or bound by any contract, agreement or commitment with any person for
the purchase of any properties or assets which requires that payment for such
properties or assets shall be made whether or not delivery is ever made
thereof.  The Company is not a party to or bound by any other contract,
agreement or commitment for the purchase or for the sale of any properties or
assets of any nature, except only such as have been made in the ordinary course
of business.

5.1.12                  Properties.

(a)             Schedule 5.1.12 attached hereto contains a complete and accurate
list and description of all inventory of the Company and all material tangible
assets of the Company (including, without limitation, apparatuses, equipment,
appliances, machines and

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machinery, devices, furniture, furnishings, tools, cloth and synthetic material
goods, vehicles, fuel, spare parts and supplies) (it being understood that a
tangible asset is material if its replacement value exceeds $5,000), specifying
such items as are owned and such as are leased and, with respect to the owned
property, specifying its aggregate cost or original value and the net book value
as of December 31, 2006, and, with respect to the leased property as to which
the Company is lessee, specifying the identity of the lessor, the rental rate
and the unexpired term of the lease.  The Company’s inventory, whether held for
sale or held for demonstration or as samples, including raw materials, work in
process and inventory in transit, is in good and merchantable condition,
reasonably in balance and currently of a usable and saleable quality, except for
obsolete items and items of below standard quality, all of which will be written
down to net realizable value in the Closing Date Balance Sheet.  Except as
stated on Schedule 5.1.12, all tangible assets of the Company are in good
operating condition and repair, normal wear and tear expected, and in compliance
with all applicable laws and regulations.  The use and operation by the Company
of its assets is in full compliance with applicable building codes,
environmental, zoning and land use laws, and all other local, state and federal
laws and regulations.

(b)            Schedule 5.1.12 attached hereto contains a complete and accurate
list and description of all real property and interests in real property owned,
leased or otherwise held by the Company or on which any of its assets are
located, specifying which are owned and which are leased and, (1) with respect
to the owned property, specifying its cost or original value and the net book
value as of June 30, 2007, and reconciling the aggregate value of the assets in
such category to the amount of such category on its balance sheet as of such
date, and (2) with respect to the leased property, specifying the identity of
the lessor, the rental rate, and the unexpired term of the lease.  The Company
does not own any real property.  All leases listed on Schedule 5.1.12 are in
full force and effect and binding on the parties thereto and neither the Company
nor, to Sellers’ knowledge, any other party to any such lease is in breach of
any of the material provisions thereof.  To Sellers’ knowledge, the lessor’s
interest in each such lease(s) has not been assigned to any third party nor has
any such interest been made subject to any Lien, and the Company has not
assigned any such lease or sublet all or any part of the property that is the
subject of any such lease.  To HKS’ knowledge, there are no material physical,
design or mechanical defects existing in any building or improvements located on
any property leased from or to the Company, and each such building or
improvement is in good condition and repair.  Neither the Company nor either
Seller has received written notice that any such building or improvement is in
violation of any applicable law, and, to Sellers’ knowledge, each of such
buildings and improvements is in compliance with all applicable laws.

(c)             Schedule 5.1.12 attached hereto accurately lists all accounts
(including, without limitation, accounts and notes receivable), chattel paper
and contract rights (excluding routine purchase orders in the ordinary course of
business) of the Company as of the date stated thereon, all of which have arisen
or accrued in the ordinary course of business, and which will at the Closing
Date represent legal, valid and binding obligations due to the Company and at
the Closing Date will not be subject to offset or counterclaim and, to HKS’
knowledge, will be collectible in the ordinary course of business in the full
recorded amounts thereof (except only for any thereof for which, in accordance
with GAAP, reserves are established on the Closing Date Balance Sheet).

(d)            The Company has all requisite power, capacity and authority to
own and hold, and has good and marketable indefeasible title to, all of its
assets,

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which are all of the assets and properties used or useful in or in connection
with the business of the Company, subject to no Lien, excepting only such as
will be discharged or released on or before the Closing Date, and minor
easements and exceptions, none of which will interfere with the use by the
Company of its assets after the Closing.

(e)             No condemnation proceeding or eminent domain proceeding of any
kind is pending or, to Sellers’ knowledge, contemplated or threatened, against
the Shares or any of the assets of the Company, including, without limitation,
any real property that is the subject of any lease listed in Schedule 5.1.12.

(f)               No permits, licenses or certificates pertaining to the
ownership or operation of any of the assets of the Company are required by any
governmental agency or authority having jurisdiction over the Company, any of
the assets of the Company or the Company’s business or operations, other than
ordinary business licenses and occupancy permits, all of which have been issued
to the Company and are valid and in full force and effect.

(g)            All water, sewer, gas, electric, telephone and drainage
facilities and all other utilities required by law or by the normal use and
operation of the assets of the Company are installed to the property lines of
the premises on which such assets are located, are connected pursuant to valid
permits and are adequate to service such premises and the assets of the Company
and to permit full compliance with all requirements of law and normal usage of
the assets of the Company by licensees and invitees of the Company.

(h)            The Company has obtained, and its assets include, all licenses,
permits, easements and rights of way required from all governmental authorities
having jurisdiction over the Company or any of its assets or from private
parties, for the normal use and operation of such assets and the Company’s
business and to insure vehicular and pedestrian ingress to and egress from the
premises where any of such assets are located.

(i)                Except as set forth in Schedule 5.1.12 attached hereto, the
Company is not a party to any contract, agreement or commitment for any
additions, repairs or improvements to any of its assets for which payment has
not been made in full.

5.1.13                  Intellectual Property.

(a)             “Intellectual Property” means all letters patent, patent
applications, trademarks, service marks, trade names, fictitious business names,
copyrights, trade secrets, secret inventions, know-how, technologies, designs,
protections, software programs, processes, ideas and algorithms, and all rights
and licenses relating thereto, and all other tangible or intangible proprietary
information and materials used or useful in the business of the Company, as well
as all registrations and pending applications for registration of any of the
foregoing in any jurisdiction, and including each license, sublicense or other
contract relating thereto, but excluding mass-market off-the-shelf commercially
available software programs.  Sellers have fully disclosed to Buyer all material
information regarding the Company’s Intellectual Property, all of which is
accurately listed and described in Schedule 5.1.13 attached hereto.  None of the
Intellectual Property is subject to or affected by any license or other
agreement or arrangement affording any person (other than the Company) any
right, title or interest whatsoever, except as listed in Schedule 5.1.13
attached hereto.

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(b)            Schedule 5.1.13 attached hereto sets forth a complete and correct
list and description of all of the following Intellectual Property owned by the
Company:  (1) letters patent and patent applications, (2) trademarks, service
marks, trade names and fictitious business names, (3) copyrights, and (4) all
registrations and registration applications for any of the foregoing filed in
any jurisdiction.  Each item set forth in Schedule 5.1.13 that is registered is
registered exclusively in the name of the Company.

(c)             The Company has sole and exclusive rights to all of the
Intellectual Property, free of Liens, except as set forth in Schedule 5.1.13 or
where the failure to have such rights would have a Material Adverse Effect on
the Company.  Except as set forth on Schedule 5.1.13, no other person or entity
has any claim of ownership, whether joint or individual, with respect to any of
the Intellectual Property.  Each patent and each registration (except as
otherwise stated in Schedule 5.1.13) listed in Schedule 5.1.13, is valid,
enforceable, subsisting and in full force and effect and has been duly
prosecuted, registered and maintained by the Company in each jurisdiction
listed.  No pending application for a patent or for registration of a trademark
(except as otherwise stated in Schedule 5.1.13) has been rejected, suspended,
made a subject of an office action or other challenge by the agency with which
such application has been filed or by any third party, except as disclosed in
Schedule 5.1.13.  Except as otherwise stated in Schedule 5.1.13, (1) no patent
has been claimed or adjudicated to be invalid or unenforceable as a whole or in
part, (2) no trademark or service mark has been the subject of any claim of
abandonment or otherwise challenged as invalid, (3) no copyright has been
invalidated or alleged to be in the public domain, (4) no patent or registration
is subject to any Tax, maintenance fee or renewal fee due before August 31,
2007, which has not been paid, and (5) all trademarks, service marks and trade
names set forth in Schedule 5.1.13 have been used continuously by the Company
since adoption by the Company.

(d)            All trade secrets and confidential information of the Company are
valid and protectable, are not publicly known and have not been disclosed or
otherwise made available to any person outside the ordinary course of business,
except pursuant to a written confidentiality agreement.  The Company has taken
all reasonable and appropriate steps to protect and preserve all trade secrets
and confidential information of the Company and all other Intellectual Property
that is not otherwise protected by patents or by copyright registrations.  Each
item of Intellectual Property disclosed or identified, or to be disclosed, to
Buyer as a trade secret, if any, of the Company qualifies as such under the
Uniform Trade Secrets Act as enacted as part of the California Civil Code, which
states as follows:

“Trade Secret” means information, including a formula, pattern, compilation,
program, device, method, technique, or process, that (1) derives independent
economic value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who can obtain
economic value from its disclosure or use, and (2) is a subject of efforts that
are reasonable under the circumstances to maintain its secrecy.

None of the Company and Sellers possesses or has used in the business of the
Company any confidential information or trade secrets owned by any other person,
except in strict compliance with the terms and conditions of a valid and
enforceable agreement between the Company and the owner or owners of such trade
secret or confidential information.  Sellers have furnished to Buyer a true and
complete copy of each written agreement to which this section 5.1.13(d) refers,

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and each such agreement is a legal, valid, binding and subsisting agreement of
each party thereto, enforceable against such party in accordance with its terms.

(e)             Except where the failure to do so would have a Material Adverse
Effect, the Company owns or is licensed or otherwise possesses legally
enforceable rights to use all Intellectual Property that is used or useful in
its business, and no license, consent or other authorization is required from
any third party with respect to any Intellectual Property used or useful in the
business of the Company or, if so required, each such license or consent has
been obtained or will be obtained before the Closing, is valid and enforceable
in accordance with its terms, is in full force and effect, is not the subject of
any notice of termination or non-renewal, and is included in the assets of the
Company, and there is no default or alleged or threatened default with respect
to any such license or consent.

(f)               The possession and use of the Intellectual Property used in
the business of the Company does not conflict with, infringe, violate, interfere
with or constitute a misappropriation of any right, title, interest or goodwill
of any other person, in any case in a manner that would have a Material Adverse
Effect.  No Seller possesses any information or otherwise has any knowledge of
any basis for any claim against the Company with respect to any infringement,
misappropriation or other misuse of any intellectual property of any third
party, except that the Company makes no claim to exclusive or superior use of
any of the Company’s trademarks.  The Company has not infringed, misappropriated
or misused and is not now infringing, misappropriating or misusing any
intellectual property belonging to any other person, in any case where doing so
would have a Material Adverse Effect.

5.1.14                  Tax Matters.  The Company has duly and properly elected
to be treated as an S Corporation pursuant to subchapter S of the Tax Code, and
such election is in full force and effect, subject only to termination at the
Closing by virtue of the consummation of the transactions contemplated by this
Agreement.  The Company has filed all Tax and information returns and reports
required by law to be filed by the Company, including those with respect to
receipts, income, sales, use, personal property, goods and services, franchise,
capital, value added, ad valorem, excise, payroll, withholding, social security
and unemployment Taxes and payments required under applicable workers’
compensation laws and regulations (“Taxes”).  All returns are proper, complete
and accurate, and all Taxes shown to be due and all additional levies,
assessments and charges on the Company or measured by properties, assets,
receipts, income, sales or payroll of the Company have been paid.  The reserves
for current Taxes accrued on the books of the Company are reasonable and
substantially adequate in amount.  Except as listed and described on Schedule
5.1.14 attached hereto, (a) the Company has not received any notice of
assessment or proposed assessment of any United States, state, municipal or
other Tax on or measured by income, receipts or sales, and, to Sellers’
knowledge, there is no basis for any additional assessment of any such Tax, and
(b) there are not pending or, to Sellers’ knowledge, threatened, any audits,
examinations, investigations or other proceedings with respect to Taxes or Tax
matters.  Sellers have caused the Company to furnish or make available to Buyer
for inspection true and complete copies of the United States federal income and
all state income or franchise Tax returns filed by the Company for each of its
fiscal years ended on December 31, 2001, 2002, 2003, 2004, 2005 and 2006.  The
Company has not been a member of any affiliated group filing a consolidated
federal income Tax return or a member of a combined, consolidated or unitary
group for state, local or foreign Tax purposes and has no liability for the
Taxes of any other person under Treasury Regulations section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by

29

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contract, or otherwise.  The Company has not agreed to and is not required to
make any adjustment pursuant to Tax Code section 481(a) by reason of a change in
accounting method, and the Company has no knowledge that the Internal Revenue
Service has proposed any such adjustment or a change in any accounting method
used by the Company.  The Company uses the accrual method of accounting for
federal income Tax purposes.  The Company has not taken any action inconsistent
with its practices in prior years that would have the effect of deferring a
liability for Taxes from a period prior to Closing to a period following
Closing.  Schedule 5.1.14 sets forth whether the Company is engaged in business,
has a permanent establishment (as defined in an applicable Tax treaty between
the United States and such other jurisdiction) or is otherwise subject to Tax,
in a jurisdiction other than the United States, and identifies each such
jurisdiction.  The Company does not have any deferred compensation plans that
are not in compliance with Tax Code section 409A, or could give rise to an
imposition of penalty on the recipient of such compensation pursuant to Tax Code
section 409A.  HKS is a resident of the State of Florida for purposes of the Tax
laws and regulations of the States of Florida and Maryland.

5.1.15                  Litigation.  Except as described in Schedule 5.1.15
attached hereto, which is complete and correct, none of Sellers and the Company
is a party to any pending, or has received any notice of any threatened, or has
any knowledge of any basis for any, action, suit, proceeding or investigation,
at law or in equity or otherwise, in, before or by any court or arbitrator or
any governmental board, commission, agency, department or officer, in which an
adverse determination could have a Material Adverse Effect.

5.1.16                  Employment Matters.  The Company has complied and is
complying with all applicable laws, orders, rules and regulations relating to
labor, employment and employment practices.  No present or former employee or
consultant of the Company has asserted any claim directly or indirectly against
the Company or its business or any of its assets on account of or for (a)
overtime pay, other than overtime pay for work done in the current payroll
period, (b) wages or salary for any period other than the current payroll
period, (c) any material amount of vacation time off or pay in lieu of vacation
time off, other than vacation time off (or pay in lieu thereof) earned in or
with respect to the current fiscal year, or (d) any violation of any law, order,
rule or regulation relating to minimum wages, maximum hours of work, pay equity
or occupational health and safety.  No person or party (including, but not
limited to, any governmental agency or authority of any kind) has asserted any
claim, or to Sellers’ knowledge has any basis for any action or proceeding,
against the Company under or arising out of any law, order, rule or regulation
relating to discrimination in employment or employment practices.  No employee
of or consultant to the Company has, or will have any claim or right whatsoever
against the Company or Buyer with respect to any matter or matters occurring
during or arising out of such person’s employment or engagement by the Company
on or before the Closing Date.

5.1.17                  Contracts for Personal Services.  Schedule 5.1.17
attached hereto contains a complete and accurate list and description of the
names and titles of and current annual base salaries or hourly rates for all
employees of the Company, together with a statement of the full amount and
nature of any other remuneration, whether in cash or kind, paid to each such
person during the past and current fiscal years and payable to each such person
in the future and the bonuses accrued for, and the vacation and severance
benefits to which, each such person is entitled.  Except as set forth in
Schedule 5.1.17 attached hereto, the Company is not a party or subject to any
contract, agreement or commitment, written or oral, for or relating to personal
services rendered or to be

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rendered to the Company, and the assets of the Company do not include, and after
the Closing will not be affected by, any such contract, agreement or commitment.

5.1.18                  Employee Benefit Plans and Arrangements.

(a)             Schedule 5.1.18 attached hereto lists each written or oral
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, stock appreciation right or other stock-based incentive, severance,
change-in-control or termination pay, hospitalization or other medical,
disability, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension or retirement plan, program, agreement or arrangement
and each other employee benefit plan, program, agreement or arrangement,
sponsored, maintained or contributed to or required to be contributed to by the
Company, or by any trade or business, whether or not incorporated (an “ERISA
Affiliate”), that, together with the Company, is treated as a single employer
under Tax Code section 414(b), (c) or (m), for the benefit of any current or
former employee, independent contractor or director of the Company or any ERISA
Affiliate (the “Plans”).  A true and correct copy of each Plan currently in
effect (or for any Plan for which no copy exists, a complete and accurate
written description of the material provisions of such Plan as currently in
effect), and, with respect to each Plan if applicable, the three most recent
annual reports, three most recent Share appraisals, three most recent actuarial
reports, evidence of outstanding indebtedness and security agreements, records
of payments on such indebtedness, contracts, summary plan description and all
summaries of material modifications, most recent determination letter issued by
the Internal Revenue Service, and the most recent application for any such
determination submitted to the Internal Revenue Service for which a letter has
not yet been issued, have been delivered to or made available for review by
Buyer.  None of the Plans promises or provides retiree medical or other retiree
welfare benefits, except as required by applicable law.  Except as shown on
Schedule 5.1.18, neither the Company nor any ERISA Affiliate maintains,
sponsors, participates in or contributes to, or has ever maintained,
established, sponsored, participated in, or contributed to, any pension plan
(within the meaning of ERISA section 3(2)) that is subject to ERISA section 302,
ERISA Title IV or Tax Code section 412, or any “multi-employer plan” as defined
in ERISA section 3(37).  Except for amendments that are required for the Plans
to meet the requirements of applicable law, Tax-qualified status under Tax Code
section 401(a), if applicable, or Tax Code section 409A, if applicable, or
applicable regulatory guidance, and except as provided in sections 4.20 and
4.25, neither the Company nor any ERISA Affiliate has any formal plan or
commitment, whether legally binding or not, to create any additional Plan or
modify or change any existing Plan that would affect any current or former
employee, independent contractor or director of the Company or any ERISA
Affiliate.

(b)            Each Plan that is intended to be “qualified” within the meaning
of Tax Code section 401(a) is so qualified.  The ESOP remains within the
remedial amendment period to be submitted to the Internal Revenue Service for a
determination of its tax qualification.

(c)             No amounts payable under any of the Plans or any other contract,
agreement or arrangement with respect to which the Company may have any
liability could fail to be deductible for federal income Tax purposes by virtue
of Tax Code section 162(m) or 280G.

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(d)            Each Plan has been administered in compliance in all material
respects with the requirements provided by any and all laws currently in effect
and applicable to the Plan, including, but not limited to, ERISA and the Tax
Code.

(e)             With respect to each Plan:  (1) no prohibited transaction (as
defined in ERISA section 406 or 407 or Tax Code section 4975) has occurred for
which a statutory or administrative exemption is not available; and (2) no
action or claims (other than routine claims for benefits made in the ordinary
course of administration of such Plan for which administrative review procedures
of such Plan have not been exhausted) are pending or, to Sellers’ knowledge,
threatened or imminent against or with respect to such Plan, the Company, any
ERISA Affiliate or any fiduciary (as defined in ERISA section 3(21)) of such
Plan.

(f)     All reports, forms and other documents required to be filed with any
government entity or furnished to employees, former employees or beneficiaries
with respect to any Plan (including summary plan descriptions, Forms 5500 and
summary annual reports) have been timely filed and furnished and are accurate.

(g)    All required contributions to each Plan for all periods ending on or
before the Closing Date (including, without limitation, the period from the
first day of the current plan year of such Plan to the Closing Date) have been
made.

(h)    All insurance premiums required for insurance coverage under each Plan
have been paid in full, subject only to normal retrospective adjustments in the
ordinary course, with regard to such Plan for plan years of such Plan ending on
or before the Closing Date.

(i)                All expenses and liabilities relating to any of the Plans
have been fully and properly accrued on the Company’s books and records and
disclosed in accordance with the Company’s historical accounting practices and
in the financial statements of the respective Plans.

5.1.19                  Payment of ESOP Indebtedness and Termination of ESOP. 
The amount of the ESOP Payment to be paid to the ESOP as provided in section
2.4.2 is not less than the amount of the outstanding indebtedness of the ESOP to
be paid in accordance with section 4.20.  Each provision of section 4.20
relating to the payment of the indebtedness and termination of the ESOP complies
with all applicable provisions of the Tax Code, ERISA and the terms of the ESOP,
and the ESOP may make distributions in the form of cash, and not Shares, by
virtue of Tax Code sections 409(h)(2)(B)(i) and 409(h)(2)(B)(ii)(II).

5.1.20                  Collective Bargaining Agreements.  Except as is fully
and accurately described in Schedule 5.1.20 attached hereto, the Company is not
a party to or bound by any collective bargaining agreement or other labor
agreement with any bargaining agent (exclusive or otherwise) of any of its
employees, except only for such collective bargaining agreements as shall have
been terminated and fully performed and discharged by the Company at or before
the Closing.  The Company is not involved in or, to Sellers’ knowledge,
threatened with any labor dispute, grievance or arbitration or union organizing
activity (by it or any of its employees) involving any person that may have
performed any services for or on behalf of or for the benefit of the Company.

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5.1.21                  Insurance.  All tangible assets of the Company are
insured with reputable, financially responsible insurers.  Schedule 5.1.21
attached hereto contains a true and complete list and description of all
insurance policies of which the Company is an owner or beneficiary, and a true
and complete copy of each such insurance policy has been furnished to Buyer.

5.1.22                  Bank Accounts.  Schedule 5.1.22 attached hereto
accurately lists the name and address of every bank and other financial
institution in which the Company maintains an account (whether checking,
savings, brokerage or otherwise), lock box or safe deposit box, and the account
numbers and names of persons having signing authority or other access thereto.

5.1.23                  Compliance with Laws.  The Company has complied with all
statutes, laws, codes, ordinances, rules, regulations, judgments, orders or
decrees applicable to the Company or any of its assets, and the Company is not
in violation of or in default under any thereof or in violation of any permit,
franchise, license, authorization or consent granted by any governmental
authority.  To Sellers’ knowledge, the Company has obtained all permits,
franchises, licenses, authorizations and consents necessary for the conduct of
its businesses, except such as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.  The Company is not
subject to any cease and desist or other order, judgment, injunction or decree
issued by, and is not a party to any agreement, consent order or memorandum of
understanding with, and is not a party to any commitment letter or similar
undertaking to, and is not subject to any order or directive by, and has not
adopted any board of directors resolution at the request of, any governmental
authority, which, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect.  To Sellers’ knowledge, the Company has not
been advised orally or in writing that any governmental authority has proposed
issuing or requesting any of the foregoing.  To Sellers’ knowledge, (a) the sale
and assignment of the Shares to Buyer hereunder will include all rights
necessary to ensure compliance with all statutes, laws, codes, ordinances,
rules, regulations, judgments, orders or decrees applicable to Sellers or to the
Company or any of its assets, and (b) since December 31, 2006, no statute, law,
code, ordinance, rule, regulation, judgment, order or decree has been adopted or
is pending before a legislative or administrative body, or any non-governmental
code agency, in any jurisdiction where the Company conducts business, which
would, if enacted, materially and adversely affect such business.

5.1.24                  Environmental Matters.

(a)             The Company has complied and is presently in compliance with all
United States, state, local and other laws, ordinances, codes, rules,
regulations, permits, orders, judgments, awards, decrees, consent judgments,
consent orders and requirements applicable to the Company relating to the public
health, safety or protection of the environment (collectively, “Environmental
Laws”).  No party has asserted that the Company has violated, or is in violation
of, any Environmental Law.  Specifically and without limiting the generality of
the foregoing:

(1)                                  Except as permitted under applicable
Environmental Laws, including, without limitation, the Resource Conservation
Recovery Act, 42 US §6901 et seq. (“RCRA”), the Company has not accepted,
processed, handled, transferred, generated, treated, stored or disposed of any
Hazardous Material, and the Company has not accepted, processed, handled,
transferred, generated, treated, stored or disposed of asbestos,

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medical waste, radioactive waste or municipal waste, except in compliance with
Environmental Laws.  As used in this Agreement, “Hazardous Material” means the
substances (i) defined as “Hazardous Waste” in 40 CFR 261, and substances
defined in any comparable statute or regulation of any state; (ii) any substance
the presence of which requires remediation pursuant to any Environmental Laws;
and (iii) any substance required to be disposed of in a manner expressly
prescribed by Environmental Laws.

(2)                                  During the Company’s ownership or leasing
of its assets (including, without limitation, its interest as tenant under
leases listed in Schedule 5.1.12) (“Corporate Property”), and, to Sellers’
knowledge, before the Company’s ownership or leasing of any Corporate Property,
no Hazardous Material, other than that allowed under Environmental Laws,
including, without limitation, RCRA, has been disposed of, or otherwise
released, on any Corporate Property.

(3)                                  During the Company’s ownership or leasing
of any Corporate Property and, to Sellers’ knowledge, before the Company’s
ownership or leasing of any Corporate Property, no Corporate Property has ever
been subject to or received any notice of any private, administrative or
judicial action, or notice of any intended private, administrative or judicial
action relating to the presence or alleged presence of Hazardous Material in,
under, on or emanating from any of the Corporate Property or any real property
now or previously owned or leased by the Company.  There are no pending and, to
Sellers’ knowledge, no threatened actions or proceedings from any governmental
agency or any other entity involving remediation of any condition of the
Corporate Property, including, without limitation, petroleum contamination,
pursuant to any Environmental Law.

(4)                                  Except as allowed under Environmental Laws,
the Company has not knowingly sent, transported or arranged for the
transportation or disposal of any Hazardous Material to any site, location or
facility.

(5)                                  Schedule 5.1.24(a) attached hereto includes
true and complete copies of:  (A) all records, notifications, reports, permit or
license applications, engineering or geologic studies, and environmental impact
reports, tests or assessments (collectively, “Permits and Reports”) that relate
to or affect any of the Corporate Property and (i) relate to the discharge or
release by the Company of materials into the environment or the handling or
transportation by the Company of waste materials or hazardous or toxic
substances or otherwise relate to the protection of the public health or the
environment, or (ii) were filed with or submitted to appropriate governmental
agencies at any time since January 1, 2005, by the Company or any agent of the
Company; and (B) all material notifications from such governmental agencies to
the Company or any agent of the Company in response to or relating to any of
such Permits and Reports.

(b)            Except as set forth in Schedule 5.1.24(b) attached hereto, no
underground storage tanks containing petroleum products or Hazardous Materials
are currently or have been located on any Corporate Property or on any other
real property previously leased or owned by the Company.  As to each such
underground storage tank (“UST”) identified in Schedule 5.1.24(b), Schedule
5.1.24(b) states (1) the location of the UST, information and material,
including any available drawings and photographs, showing the location, and
whether the Company currently owns or leases the property on which the UST is

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located, and (2) the date of installation and specific use or uses of the UST. 
Sellers have caused the Company to provide to Buyer copies of tank and piping
tightness tests and cathodic protection tests and similar studies or reports for
each UST, a copy of each notice to or from a governmental body or agency
relating to the UST, other material records with regard to the UST, including,
without limitation, repair records, financial assurance compliance records and
records of ownership in the Company’s or either Seller’s custody, possession or
control.  Except to the extent set forth in Schedule 5.1.24(b), the Company has
complied with Environmental Laws regarding the installation, use, testing,
monitoring, operation and closure of each UST described in Schedule 5.1.24(b).

5.1.25                  Payables.  Schedule 5.1.25 attached hereto contains a
complete and accurate list as of July 5, 2007, of all accounts and debts payable
of the Company and the respective amounts thereof, including, without
limitation, late charges, penalties and interest thereon.  Other than as set
forth in Schedule 5.1.25, the Company has no account payable or debt in any
amount, regardless of whether past due, now due or becoming due in the future
(other than the note payable to HKS and other than accounts payable incurred in
the ordinary course of business since the date of such Schedule, which are not
material in the aggregate).  All of the accounts and debts payable of the
Company (other than the note payable to HKS) were incurred in the ordinary
course of the business of the Company pursuant to arm’s length transactions.

5.1.26                  Transactions with Affiliates.  No shareholder, director,
officer or employee of the Company, or any member of his or her immediate family
or any other of its, his or her affiliates, owns or has a five percent or more
ownership interest in any person that is or was since January 1, 2004, a party
to, or in any property which is or was since that date the subject of, any
material contract, agreement or understanding, business arrangement or
relationship with the Company, other than the Company’s lease with SSLLC and the
Stockholder Loan.

5.1.27                  Foreign Corrupt Practices Act Compliance.  Neither the
Company nor any person on its behalf has made any offer, gift, promise, loan,
payment or other transfer of value to any governmental agency or official
anywhere in the world, nor has the Company or any person on its behalf received
any offer, gift, promise, loan, payment or other transfer of value from any
governmental agency or official anywhere in the world, nor has any such offer,
gift, promise, loan, payment or other transfer of value been authorized by any
person; provided that no offer or sale of inventory and services by the Company
at the same prices and on the same terms and conditions as transactions with
private parties, and no payment therefor, in the ordinary course of business
shall be deemed to be such an offer, gift, promise, loan, payment or other
transfer of value.

5.1.28                  Anti-Money-Laundering Compliance.  Neither the Company
nor any person for which the Company has acted as an agent, representative,
nominee or intermediary nor any person that has acted as an agent,
representative, nominee or intermediary for the Company nor any shareholder,
director, officer or affiliate of the Company is a suspected terrorist or
terrorist organization (including any person, entity or organization that is
included on any so-called “watch list” maintained by any governmental agency of
the United States (including, but not limited to, the United States Central
Intelligence Agency, the United States Department of the Treasury, the United
States Federal Bureau of Investigation, the United States Internal Revenue
Service, the United States Office of Foreign Assets Control and the United
States Securities and Exchange Commission)) or a senior foreign political
figure, an immediate family member of a senior foreign political figure or a
close associate of a senior foreign political figure.  For this purpose, (a) a
“senior foreign political

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figure” is a senior official in the executive, legislative, administrative,
military or judicial branch of a foreign government (whether elected or not), a
senior official of a major foreign political party, a senior executive of a
foreign government-owned corporation, or a corporation, business or other entity
that has been formed by, or for the benefit of, a senior foreign political
figure, (b) the “immediate family of a senior foreign political figure”
includes, without limitation, the figure’s parents, siblings, spouse, children
and in-laws, and (c) a “close associate of a senior foreign political figure” is
a person who is widely and publicly known to maintain an unusually close
relationship with the senior foreign political figure, and includes a person who
is in a position to conduct substantial domestic and international financial
transactions on behalf of the senior foreign political figure.  No asset of the
Company was derived, directly or indirectly, from any illegal activity or
source.

5.1.29                  Disclosure.  Neither this Agreement nor the financial
statements delivered as provided in section 5.1.8 nor any exhibit or schedule
hereto nor any other certificate, instrument, document or information furnished
by any of Sellers and the Company to Buyer hereunder or in connection herewith
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements contained therein or herein not
misleading.

5.2                                 Of Buyer.  Buyer hereby represents and
warrants to and agrees with Sellers, as follows:

5.2.1                        Organization.  Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California.  Buyer has full corporate power and authority to carry on its
business as now conducted and to own its assets.

5.2.2                        No Restrictions on Transaction.  Buyer is not
subject to any charter provision, bylaw, Lien, indenture, lease, agreement,
instrument, law, statute, code, ordinance, rule, regulation, order, judgment or
decree, or any other restriction, that would interfere with consummation of the
transactions contemplated by this Agreement.  This Agreement has been duly
authorized, executed and delivered by Buyer.  This Agreement is the legal, valid
and binding agreement of Buyer, enforceable against Buyer in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar law relating to or
affecting the rights of creditors generally and except for limitations imposed
by general principles of equity on the availability of equitable remedies.

5.2.3                        No Conflicts.  The execution and delivery by Buyer
of this Agreement, the performance by Buyer of its obligations hereunder and its
performance of, fulfillment of and compliance with all of the terms and
conditions hereof, do not and will not conflict with, breach or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
result in the creation of any Lien on any of its properties pursuant to, give
any third party the right to accelerate any obligation under, violate or result
in a violation of, or require any authorization, consent, approval, exemption or
other action by or notice to any person or any court or administrative or
governmental body or agency pursuant to, any agreement, indenture, mortgage,
instrument, law, statute, code, ordinance, rule, regulation, order, judgment or
decree to or by which Buyer is a party, is subject or is bound.

5.2.4                        Litigation.  Buyer is not a party to any pending,
and has not received any notice of any threatened, and has no knowledge of any
basis for any, action, suit, proceeding or investigation, at law or in equity or
otherwise, in, before or by any court or arbitrator or any

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governmental board, commission, agency, department or officer, in which an
adverse determination could have a material adverse effect on the execution,
delivery or performance by Buyer of this Agreement.

5.3                                 Survival.  All representations, warranties
and agreements in this Agreement shall survive any investigation made by or on
behalf of any party.  All such representations, warranties and agreements shall
also survive the consummation of the transactions contemplated by this
Agreement:  (a) indefinitely and without limit in the case of the
representations and warranties in sections 5.1.1, 5.1.2, 5.1.3, 5.1.6, 5.1.7,
5.1.12(d), 5.1.14, 5.1.15, 5.1.16, 5.1.18, 5.1.19, 5.1.23, 5.1.24, 5.1.27 and
5.1.28; and (b) for a period of two years from the Closing Date in the case of
all other representations and warranties in this Agreement.

6.                                       Time.  Time is of the essence of this
Agreement.

7.                                       Entire Agreement.  This Agreement
contains the entire agreement of the parties and supersedes any and all prior or
contemporaneous negotiations, correspondence, understandings and agreements
between or among the parties, written or oral (including, without limitation,
the letter of intent dated June 14, 2007, which is hereby cancelled), regarding
the subject matter hereof; provided that the Confidentiality Agreement dated as
of April    , 2007, and signed on May 2 and 3, 2007, between the Company and
Buyer, shall continue in effect until the Closing, when it shall expire and
terminate.

8.                                       Modification and Waiver.  This
Agreement may be amended or modified at any time only by a written instrument
executed by Sellers and Buyer.  Any of the terms, covenants, representations,
warranties or conditions hereof may be waived by a written instrument executed
by the party waiving compliance.  The failure of any party at any time or times
to require performance of any provision hereof shall in no manner affect the
right of such party at a later time to enforce the same.  No waiver by any party
of the breach of any term, agreement, covenant, representation or warranty in
this Agreement as a condition to such party’s obligations hereunder shall
release or affect any liability resulting from such breach, and no waiver of any
nature, whether by conduct or otherwise, in any one or more instances shall be
deemed to be or be construed as a further or continuing waiver of any such
condition or of any breach of any other term, agreement, covenant,
representation or warranty.

9.                                       Notices.  All notices, requests,
waivers, approvals, consents, demands and other communications hereunder shall
be in writing and shall be deemed duly given and received when delivered
personally, when transmitted by facsimile (if transmission is confirmed in
writing by the transmitting machine), one business day after being deposited for
next-day delivery with a nationally recognized overnight delivery service, or
three days after being deposited with the United States Postal Service as first
class mail, with all charges or postage prepaid, properly addressed, as follows
(or to such other address as any such party may designate by a notice given in
accordance with this section 9):

If to either Seller, to:

Hobart K. Swan

P.O. Box 492

233 Waterways Avenue

Boca Grande, FL  33921-0492

Facsimile No. 941-964-3029

37

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and

Hobart K. Swan

1 Riverview Road

Severna Park, MD 21146-4629

Facsimile No. 410-544-8935

with copies to:

Marc Blum, Esq.

Elliott Cowan, Esq.

Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC

233 East Redwood Street

Baltimore, MD  21202

Facsimile No. 410-576-4246

and

Richard W. Love, Vice President

Reliance Trust Company

1100 Abernathy Road

500 Northpark, Suite 400

Atlanta, GA 30328

Facsimile No. 678-274-1878

and

Laurence A. Goldberg, Esq.

Sheppard, Mullin, Richter & Hampton, LLP

Four Embarcadero Ctr., Seventeenth Floor

San Francisco, CA  94111

Facsimile No. 415-434-3947

If to Buyer or Guarantor, at:

5956 W. Las Positas Boulevard

Pleasanton, CA 94588

Facsimile No. 925-833-1496
Attention:  Chief Financial Officer

38

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with a copy to:

Shartsis Friese LLP

One Maritime Plaza, 18th Floor

San Francisco, California 94111

Facsimile No. 415-421-2922
Attention:  Douglas L. Hammer, Esq.

10.                                 Counterparts.  This Agreement may be
executed in any number of counterparts, or by different parties in different
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

11.                                 Successors and Assigns.  This Agreement
shall bind and inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, personal representatives, successors and
permitted assigns; provided that no party shall assign this Agreement or any
rights hereunder or delegate any duties hereunder, without the prior consent of
each other party hereto, and any attempted or purported assignment or delegation
without such consent shall be void.

12.                                 Schedules and Exhibits.  All schedules and
exhibits attached hereto and the documents and instruments delivered at the
Closing are expressly made a part of this Agreement as fully as though
completely set forth herein, and all references to this Agreement herein or in
any of such schedules, exhibits, documents and instruments (whether or not such
references include a specific reference to such documents and instruments) shall
be deemed to refer to and include all such schedules, exhibits, documents and
instruments.  Any breach of or default under any provision of any of such
documents and instruments, shall, for all purposes, constitute a breach or
default under this Agreement.

13.                                 Construction.  The headings herein are for
convenience of reference only, are not part of this Agreement and shall not
affect the construction or interpretation of any provision hereof.  Whenever the
context requires, the use in this Agreement of the singular number shall be
deemed to include the plural and vice versa, and each gender shall be deemed to
include each other gender.  Except as otherwise stated, references herein to
sections refer to sections of this Agreement.  For purposes of this Agreement,
(a) “person” shall be deemed to include, in addition to natural person,
corporation, partnership, limited liability company, trust, association, firm or
other entity or organization, (b) an “affiliate” of, or person “affiliated”
with, a specified person, is a person that directly, or indirectly through one
or more intermediaries, controls or is controlled by, or is under common control
with, the person specified, and (c) “control” (including the terms “controlled
by” and “under common control with”) means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, by contract, or
otherwise.

14.                                 No Third Party Beneficiaries.  Except as
otherwise provided herein, this Agreement is not intended, nor shall it be
construed, to confer any enforceable rights on any person who is not a party
hereto.

15.                                 Governing Law.  This Agreement and the
transactions contemplated hereby, and all disputes between the parties under or
relating to this Agreement or the facts and

39

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circumstances leading to its execution, whether in contract, tort or otherwise,
shall be governed by, and this Agreement shall be construed and interpreted in
accordance with, the laws of the State of California, without reference to
conflict of laws principles.

16.                                 Publicity.  Except as otherwise required by
law or applicable stock exchange rules (a) Sellers shall not, without Buyer’s
prior consent, suffer or permit any person to issue any public notice, press
release or other publicity concerning the existence or any of the terms or
conditions of this Agreement or any transaction contemplated hereby, and (b)
Buyer may issue any public notice, press release or other publicity concerning
this Agreement or any transaction contemplated hereby that Buyer believes in
good faith may be required by the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, by any other applicable law, rule or
regulation or by the rules of the New York Stock Exchange, Inc.

[Signature Page Follows]

40

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IN WITNESS WHEREOF, this Stock Purchase Agreement has been duly executed by or
on behalf of the parties hereto as of the date first above written.

SELLERS:

 

BUYER:

 

 

 

 

 

SIMPSON STRONG-TIE COMPANY INC.

 

 

 

/s/ HOBART K. SWAN

 

 

Hobart K. Swan

 

 

 

 

 

BY:

/s/ MICHAEL J. HERBERT

 

 

 

Michael J. Herbert

SWAN SECURE PRODUCTS INC.

 

 

Chief Financial Officer

EMPLOYEE STOCK OWNERSHIP PLAN

 

 

 

AND TRUST

 

 

 

 

 

 

GUARANTOR:

By Reliance Trust Company, as Independent

 

 

Trustee

 

 

SIMPSON MANUFACTURING CO., INC.

 

 

 

 

 

 

 

 

By

/s/ STEPHEN A. MARTIN

 

BY:

/s/ MICHAEL J. HERBERT

Name:

Stephen A. Martin

 

 

Michael J. Herbert

Title:

Vice President

 

 

Chief Financial Officer

 

41

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EXHIBITS AND SCHEDULES ATTACHED:

Exhibit A

 

Form of Lease

Exhibit B

 

Form of Escrow Agreement

Exhibit C

 

Form of Consulting Agreement with Hobart K. Swan or Janis F. Swan

Exhibit D

 

Form of Employment Agreement with Michael J. McFarland

Exhibit E

 

Form of Transferor’s Certificate of Non-Foreign Status

Exhibit F

 

Form of Opinion of Counsel for Sellers

 

 

 

Schedule 2.2(d)

 

December Balance Sheet

Schedule 4.20

 

ESOP Provisions

Schedule 5.1.5

 

Directors and Officers of the Company

Schedule 5.1.6

 

Restrictions on Transaction

Schedule 5.1.7

 

Conflicts

Schedule 5.1.9

 

Changes

Schedule 5.1.11

 

Contracts

Schedule 5.1.12

 

Properties

Schedule 5.1.13

 

Intellectual Property

Schedule 5.1.14

 

Tax Matters

Schedule 5.1.15

 

Litigation

Schedule 5.1.17

 

Personal Services Contracts

Schedule 5.1.18

 

Employee Benefit Plans

Schedule 5.1.20

 

Collective Bargaining Agreements

Schedule 5.1.21

 

Insurance Policies

Schedule 5.1.22

 

Bank Accounts

Schedule 5.1.24(a)

 

Permits and Reports

Schedule 5.1.24(b)

 

Underground Storage Tanks

Schedule 5.1.25

 

Payables

 

42

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CONSENT OF SPOUSE

I acknowledge that I have read the foregoing Stock Purchase Agreement and I know
its contents.  I am aware that by its provisions my spouse, Hobart K. Swan, will
sell all of his shares of capital stock of Swan Secure Products, Inc., including
any interest I may have in any of such shares, and will agree to restrict his
right, and will not permit me, to compete with Swan Secure Products, Inc. for a
period of five years after such sale is completed, as more particularly set
forth in the foregoing Stock Purchase Agreement.  I hereby consent to such sale
and such agreement, approve of all of the provisions of the foregoing Stock
Purchase Agreement, and agree that I will at all times cooperate in Hobart K.
Swan’s performance of, and will take no action at any time to hinder operation
of, the foregoing Stock Purchase Agreement.  I agree that the foregoing Stock
Purchase Agreement shall bind me and my successors, assigns, heirs, devisees,
legatees, legal representatives, executors and administrators and shall bind and
inure to the benefit of and be enforceable by all of the parties thereto and
their respective successors, assigns, heirs, devisees, legatees, legal
representatives, executors and administrators.

Dated:

July 23, 2007

/s/ JANIS F. SWAN

 

Janis F. Swan

 

 

43

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Exhibit A

Form of Lease

LEASE

 

SWAN SECURE LLC, a Maryland limited liability company (LANDLORD)

 

and

 

SIMPSON MANUFACTURING CO., INC., a Delaware corporation (TENANT)

 

7525 Perryman Court, Baltimore, Maryland

44

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LEASE

BASIC LEASE INFORMATION

In the event of any conflict between the Basic Lease Information and any other
Lease provision, such other Lease provision shall control.

DATE OF LEASE:

 

 

,

2007

 

 

 

 

 

PREMISES, BUILDING AND
PROPERTY:

 

7525 Perryman Court, Brandon Woods Business
Park, Anne Arundel County, Maryland

The Building (including the 1998 addition area)
consists of 60,760 square feet, more or less, of
rentable area

 

 

 

BUSINESS COMMUNITY:

 

Brandon Woods Energy Business Park

 

 

 

LANDLORD AND ADDRESS:

 

Swan Secure, LLC
c/o Hobart K. Swan
P.O. Box 492
233 Waterways Avenue
Boca Grande, FL 33921-0492

and

Swan Secure, LLC
c/o Hobart K. Swan
1 Riverview Road
Severna Park, MD 21146-4629

with a copy to:

Gordon, Feinblatt, Rothman, Hoffberger &
            Hollander, LLC
233 East Redwood Street
Baltimore, MD 21202
Attention: Marc Blum, Esq. and Elliott Cowan, Esq.

 

 

 

TENANT AND ADDRESS FOR
NOTICES:

 

Simpson Manufacturing Co., Inc.
5956 West Las Positas Boulevard
Pleasanton, California 94588

Attention: Mr. Michael J. Herbert

With a copy to:

Shartsis, Friese LLP

 

45

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One Maritime Plaza, 18th Floor
San Francisco, California 94111

Attention: Alan Robin, Esq.

 

 

 

TERM:

 

Sixty (60) months

 

 

 

RENEWAL OPTION:

 

One option of five (5) years

 

 

 

COMMENCEMENT DATE:

 

The delivery of the Premises to Tenant which is estimated to be the Date of
Lease.

 

 

 

EXPIRATION DATE:

 

The Expiration Date shall be on the last day of the sixtieth (60th) calendar
month following the Commencement Date.

 

 

 

INITIAL BASE RENT:

 

Months

 

Monthly Base Rent

 

 

 

 

 

 

 

 

 

 

 

1-60

 

$

28,531.25

 

 

 

 

 

 

 

 

The Base Rent for the first month of the Term in the amount of $28,531.25 shall
be paid upon execution of this Lease by Tenant and Landlord.

 

 

 

TENANT’S PERCENTAGE SHARE:

 

100%

 

 

 

USE:

 

Any lawful use including office, administration, manufacturing, warehouse
research and development. Tenant shall be responsible for obtaining all
necessary and requisite government approvals and permits for the Use.

 

 

 

PROTECTIVE COVENANTS:

 

The Business Community Covenants of record in the Land Records of Anne Arundel
County, Maryland at Liber 5041, Folio 876.

 

46

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LEASE

THIS LEASE, which is effective as of the date set forth in the Basic Lease
Information, is entered by Landlord and Tenant, as set forth in the Basic Lease
Information.  Terms, which are capitalized in this Lease, shall have the
meanings set forth in the Basic Lease Information.

1.                                       PREMISES AND PARKING

(a)                                  Premises.  Subject to and upon the terms
and condition of this Lease, Landlord leases to Tenant, and Tenant leases from
Landlord, the Premises described in the Basic Lease Information and more
particularly shown in Exhibit A attached hereto.  Reference herein to the
“Building”, “Premises” or “Property” includes all leaseable space located
therein.

(b)                                 Parking.  Tenant shall have the exclusive
right to use the paved parking area identified on Exhibit A.  There shall be no
charge for any portion of the parking facilities.

2.                                       TERM

(a)                                  Lease Term.  The term of this Lease (the
“Term”) shall commence on the date of delivery of the Premises to Tenant and,
unless terminated or extended in accordance with the terms of this Lease, shall
end on the Expiration Date.

(b)                                 Condition of Premises.  Except as set forth
herein, the Premises shall be delivered to Tenant on the Commencement Date in
its then “as-is” condition, without representation or warranty except as
expressly set forth herein or in the STOCK PURCHASE AGREEMENT made as of
         , 2007, by and between Hobart K. Swan (“HKS”) and Reliance Trust
Company, solely in its capacity as independent trustee (“Reliance”), of the Swan
Secure Products, Inc. Employee Stock Ownership Plan and Trust (“the ESOP” and,
together with HKS, the “Sellers”), on the one hand, and Simpson Strong-Tie
Company Inc., a California corporation (“Buyer”), and Simpson Manufacturing Co.,
Inc., a Delaware corporation (“Guarantor”), on the other hand.

(c)                                  Commencement Date Memorandum.  If the
Commencement Date is not the Date of Lease, when the Commencement Date is
determined, the parties shall execute a Commencement Date Memorandum, in the
form attached hereto as Exhibit A, setting forth the Commencement Dates and the
Expiration Date and confirming the other information set forth therein.

3.                                       RENT

(a)                                  Rent.  As used in this Lease, the term
“Rent” shall include:  (i) Base Rent; (ii)  Taxes; and (iii) all other amounts
which Tenant is obligated to pay under the terms of this Lease.  All amounts of
money payable by Tenant to Landlord shall be paid without prior notice or
demand, deduction or offset, except as expressly provided herein. Tenant shall
pay monthly Rent for the Premises in advance on the first day of each month of
the Term, to Landlord (or other entity designated by Landlord), in advance, at
Landlord’s address for notices (as set forth in the Basic Lease Information) or
at such other address as Landlord may from time to time designate,

47

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or by electronic funds transfer to an account designated in writing by Landlord
if Landlord shall so determine.  The initial Base Rent shall be the amount set
forth in the Basic Lease Information.

(b)                                 Proration of Rent.  If the Commencement Date
is not the first day of a calendar month, or if the end of the Term is not the
last day of a calendar month, Base Rent and Taxes payable by Tenant shall be
prorated on a daily basis (based upon a thirty (30) day month) for such
fractional month.  If any date on which Base Rent is to be adjusted hereunder is
not the first day of a calendar month, Base Rent payable by Tenant for such
calendar month shall be prorated on a daily basis (based on the number of days
in such month) to take into account the differing Base Rent rates.  The
termination of this Lease shall not affect the obligations of Landlord and
Tenant hereunder for amounts accrued as of the date of termination.

(c)                                  Late Charge; Interest Rate.

(i)                                     If any installment of Base Rent or Taxes
is not paid by Tenant within five (5) days after written notice of non-payment,
Tenant shall pay to Landlord a late payment charge equal to five percent (5%) of
such amount, in addition to the amount of Rent then owing, regardless of whether
a notice of default or notice of termination has been given by Landlord.

(ii)                                  In addition to the late charge, any Base
Rent, Taxes or other amounts owing hereunder which are not paid within five (5)
days after written notice of non-payment, shall thereafter bear interest at the
rate (“Interest Rate”) which is the lesser of five percent (5%) above the
publicly announced prime rate (sometimes referred to as such bank’s reference
rate) charged on such due date by Citibank (or any successor bank thereto) (or
if there is no such publicly announced rate, the rate quoted by such bank in
pricing ninety (90) day commercial loans to substantial commercial borrowers) or
the maximum rate permitted by applicable law.

(d)                                 Net Rent.  It is the intent of the parties
that the Base Rent shall be net to Landlord and that all costs, expenses and
other obligations with respect to the Property are assumed and shall be payable
by Tenant as Rent.                                Notwithstanding the forgoing,
Tenant shall not be responsible for (i) except as expressly provided in Section
8(c), payment for any Capital Improvements (as defined in Section 8(c)); (ii)
any costs of Landlord reimbursed by insurance proceeds (excluding deductible
amounts), (iii)  costs incurred due to violations by Landlord of this Lease or
any Legal Requirements (as hereinafter defined), (iv) property management fees,
(v) costs incurred by Landlord with respect to building code violations existing
as of the Commencement Date or the remediation of any Hazardous Materials at the
Property preexisting the Commencement Date (provided that such exclusion from
Operating Expenses shall not limit Tenant’s obligation or liability with respect
to any Hazardous Materials brought onto the Property by Tenant or used or
released by Tenant on the Property).

4.                                       TAXES

(a)                                  Payment of Taxes.  Tenant shall pay
promptly when due, directly to the applicable taxing authority and prior to the
last date for payment of any installment before a late charge is assessed, all
Taxes.  Tenant shall provide Landlord with a concurrent copy of each paid
installment of Taxes.  Landlord shall cause a copy of all Tax bills received by
Landlord to be forwarded promptly to Tenant.

48

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(b)                                 Definition of Taxes.  All federal, state and
local governmental taxes, assessments and charges of every kind or nature,
whether general, special, ordinary or extraordinary, which Landlord shall pay or
become obligated to pay because of or in connection with the ownership, leasing,
management, control or operation of the Property or any of its components
(including any personal property used in connection therewith), which may also
include any rental or similar taxes levied in lieu of or in addition to general
real and/or personal property taxes.  For purposes hereof, Taxes for any year
shall be Taxes that are assessed for any period of such year, whether or not
such Taxes are billed and payable in a subsequent calendar year.  There shall be
included in Taxes for any year the amount of all fees, costs and expenses
(including reasonable attorneys’ fees) paid by Landlord during such year in
seeking or obtaining any refund or reduction of Taxes.  Taxes for any year shall
be reduced by the net amount of any tax refund received by Landlord attributable
to such year.  Notwithstanding the foregoing, Taxes shall not include any gross
receipts tax or other tax on Landlord’s gross or net income from the Property,
federal or state inheritance, general income, gift or estate taxes, except that
if a change occurs in the method of taxation resulting in whole or in part in
the substitution of any such taxes, or any other assessment, for any Taxes as
above defined, such substituted taxes or assessments shall be included in the
Taxes to the extent attributable to the Property.  Tenant shall pay, prior to
delinquency, all taxes assessed or levied against Tenant’s personal property,
equipment, furniture or trade fixtures (collectively, “Personal Property”) in,
on or about the Premises.  When possible, Tenant shall cause its Personal
Property to be assessed and billed separately from the real or personal property
of Landlord.  Notwithstanding the foregoing, it is expressly understood and
agreed that in no event shall Taxes include any taxes allocated to any other
property if the Premises are not a separate tax parcel.  If the Property is not
a separate tax parcel, Taxes shall be equitably prorated between the Property
and any other property included within such parcel.

5.                                       USE OF THE PREMISES; COMPLIANCE WITH
LAWS

(a)                                  Use.  Subject to compliance with applicable
laws, governmental requirements and the Protective Covenants, the Premises shall
be used for the use described in the Basic Lease Information and this Article. 
Landlord makes no representations or warranties regarding the Use.  Tenant may
use the Premises and the parking area seven (7) days a week, twenty-four (24)
hours a day, three hundred sixty-five (365) days a year.

(b)                                 Rooftop Antennae.  Subject to compliance
with applicable laws, governmental requirements and the Protective Covenants,
Tenant may, at its sole cost and expense, install in a good and workmanlike
manner and in accordance with the requirements of Landlord’s roofing consultant
a roof top antennae or satellite dish on the Building.  Tenant shall obtain all
necessary permits and approvals for such antennae and shall remove such antennae
or satellite dish, in a good and workmanlike manner and in accordance with the
requirements of Landlord’s roofing consultant, on the expiration of the Term. 
Tenant shall repair any damage to the roof caused by the installation,
maintenance and/or removal of such equipment and shall indemnify Landlord from
any cost and expense incurred by Landlord with respect to the roof resulting
from such installation, maintenance and removal.

(c)                                  Security.  Tenant shall provide, at its
sole cost and expense, such security personnel as are necessary to maintain and
secure the Premises and all exterior areas

49

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immediately adjacent thereto in a safe condition and to ensure that the
activities conducted thereon by Tenant’s patrons and customers are done so in an
orderly and lawful manner.

(d)                                 Nuisance.  Tenant shall not permit the
Premises to be used for any immoral or unlawful purpose, nor shall Tenant cause,
maintain, suffer or permit any nuisance in, on or about the Premises or
Property.

(e)                                  Compliance.  Tenant shall not permit the
Premises to be used in violation of or in conflict with, and at its sole cost
and expense shall promptly comply with, all laws, statutes, ordinances and
governmental rules, regulations or requirements now in force or which
hereinafter may be in force, with the requirements of any board of fire
underwriters or other similar board now or hereafter constituted, with any
direction or occupancy certificate issued pursuant to any law by any public
officer or officers, as well as the provisions of the Protective Covenants and
all other recorded documents affecting the Premises, collectively, “Legal
Requirements” or “Laws”), insofar as any thereof relate to or affect the
condition, use or occupancy of the Premises (including Alterations (as defined
in Section 10) with respect thereto.  Tenant shall perform all work to the
Premises required to effect such compliance.  Landlord represents that as of the
Commencement Date, to Landlord’s actual knowledge, without independent
investigation, the Premises and the parking lot are in compliance with all Legal
Requirements and may be used for the existing use and Landlord shall be
responsible for costs, if any, required to place the Premises and parking lot
into compliance with all Legal Requirements in effect as of the Commencement
Date.

(f)                                    Hazardous Materials.

(i)                                     For purposes of this Lease, “Hazardous
Materials” means any explosive, radioactive materials, hazardous wastes, or
hazardous substances, including without limitation asbestos containing
materials, PCBs, CFCs, or substances defined as “hazardous substances” in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601-9657; the Hazardous Materials Transportation Act
of 1975, 49 U.S.C. Section 1801-1812; the Resource Conservation and Recovery Act
of 1976, 42 U.S.C. Section 6901-6987; or any other Legal Requirement regulating,
relating to, or imposing liability or standards of conduct concerning any such
materials or substances now or at any time hereafter in effect (collectively,
“Hazardous Materials Laws”).

(ii)                                  In the event of any release of Hazardous
Materials upon the Property after the Commencement Date, if caused by Tenant or
any other Tenant Party, Tenant shall promptly remedy the problem in accordance
with all applicable Hazardous Materials Laws.  Except as and to the extent
provided in subsections (iii) and (iv) below, Tenant shall not cause or permit
the storage, use, generation, release, handling or disposal (collectively,
“Handling”) of any Hazardous Materials (as defined below), in, on, or about the
Premises or the Property by Tenant or any agents, employees, contractors,
licensees, subtenants, or customers of Tenant (collectively with Tenant, “Tenant
Parties”) in violation of Hazardous Materials Laws (as defined below). Tenant
shall be solely responsible for and shall indemnify, defend and hold Landlord
harmless from and against all claims, actions, liabilities, damages and costs
(including reasonable attorneys’ fees and other costs of suit) arising out of or
in connection with, or otherwise relating to (x) any Handling of Hazardous
Materials by any Tenant Party or Tenant’s breach of its

50

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obligations hereunder, or (y) any removal, cleanup, or restoration work and
materials necessary to return the Property or any other property of whatever
nature located on the Property to their condition existing prior to the Handling
of Hazardous Materials in, on or about the Premises by any Tenant Party.

(iii)                               Landlord shall be solely responsible for and
shall indemnify, defend and hold Tenant harmless from and against all claims,
arising out of or in connection with, or otherwise relating to (i) any Hazardous
Materials existing on the Property as of the Commencement Date or (ii) any
removal, cleanup, or restoration work and materials necessary with respect to
Hazardous Material existing on the Property immediately prior to the
Commencement Date.

(iv)                              Landlord represents and warrants that (i)
Landlord has provided Tenant with a copy of any and all reports and notices in
Landlord’s possession or control pertaining to Hazardous Materials at the
Property, (ii) except as disclosed in such reports to the actual knowledge of
Landlord, without independent investigation, there are no Hazardous Materials in
or about the Premises or the Property except as used in accordance with all
Hazardous Material Laws.

(v)                                 Each party shall promptly provide the other
party with copies of all notices received by it in connection with the presence
of Hazardous Materials in or about the Property.

6.                                       UTILITIES AND SERVICES

(a)                                  Utilities and Services.

(i)                                     Ventilation.  Tenant shall have sole
responsibility for repairing and maintaining the HVAC systems serving the
Property.  Tenant shall cooperate to the best of its ability at all times with
Landlord and shall abide by all reasonable regulations and requirements which
Landlord may prescribe for the proper functioning and protection of the
air-conditioning system.

(ii)                                  Electricity.  Tenant shall contract
directly for electricity service.

(iii)                               Water.  Tenant shall contract directly with
the utility provider for water.

(iv)                              Refuse and Rubbish.  Tenant shall contract
directly with the refuse and rubbish removal companies to remove its refuse and
rubbish from the Premises on a regular schedule so as to maintain the Premises
in a clean and orderly manner.  All refuse and rubbish shall be placed and
stored in closed containers or compactors.

(v)                                 Telecommunications.  Tenant shall have the
right to select a telecommunications provider of its choice.  If required by
Landlord, no later than the Termination Date Tenant shall remove all telephone
cables and communication wiring installed by Tenant for and during Tenant’s
occupancy.

(b)                                 Interruption in Services.  Landlord shall
not be liable for, and, except to the extent that Landlord receives rent
interruption insurance proceeds, Tenant shall not be entitled to any

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abatement or reduction of Rent by reason of, no eviction of Tenant shall result
from and, further, Tenant shall not be relieved from the performance of any
covenant or agreement in this Lease because of any interruption of any of the
foregoing services or utilities.

7.                                       ALTERATIONS

(a)                                  Alterations.

(i)                                     Tenant shall not make any alteration,
addition or improvement in, to or upon the Premises (“Alteration”) without the
prior written consent of Landlord in each instance, which consent shall not be
unreasonably withheld or delayed.  Tenant shall give Landlord not less than ten
(10) days’ prior written notice of any Alteration Tenant desires to make.  Any
Alterations as to which Landlord shall consent shall be made only by contractors
approved in advance, in writing by Landlord, which approval shall not be
unreasonably withheld.  Tenant shall comply with all Legal Requirements
applicable to each Alteration.  Tenant shall be solely responsible for
maintenance and repair of all Alterations made by Tenant.  All Alterations shall
be performed and completed diligently and in a first-class workmanlike manner. 
Landlord may further condition its consent upon Tenant furnishing to Landlord
and Landlord approving prior to the commencement of any work or delivery of
materials to the Premises related to the Tenant Alterations such of the
following as specified by Landlord: architectural plans and specifications,
necessary permits and licenses, certificates of insurance, and such other
documents in such form reasonably requested by Landlord.  Upon completion of the
Tenant Alterations, Tenant shall deliver to Landlord an as-built set of plans
and specifications for the Tenant Alterations and contractors’ affidavits and
full and final waivers of lien and receipted bills covering all labor and
materials expended and used in connection therewith and such other documentation
reasonably requested by Landlord.  Tenant shall notify Landlord immediately if
Tenant receives any notice of violation of any Law in connection with completion
of any Tenant Alterations and shall immediately take such steps as are necessary
to remedy such violation.  In no event shall such supervision or right to
supervise by Landlord nor shall any approvals given by Landlord under this Lease
constitute any warranty by Landlord to Tenant of the adequacy of the design,
workmanship or quality of such work or materials for Tenant’s intended use or
impose any liability upon Landlord in connection with the performance of such
work.  Landlord hereby approves the plans submitted by Tenant for any initial
alterations, if any, which Tenant may construct after the Commencement Date.

(ii)                                  Notwithstanding the foregoing, Tenant
shall have the right, without Landlord’s consent, to make any Alteration to the
Premises (“Cosmetic Alterations”) that (a) is decorative in nature (such as
paint, carpet or other wall or floor finishes, movable partitions or other such
work), does not affect the Building plumbing, electrical, mechanical, HVAC or
other systems, and (b) is not structural in nature.  All such work shall be
performed in a workman-like manner and in accordance with all applicable Legal
Requirements.

(b)                                 Liens.  If, because of any act or omission
of Tenant or anyone claiming by, through, or under Tenant, any mechanic’s lien
or other lien is filed against the Premises or any other portion of the Property
or against other property of Landlord (whether or not the lien is valid or
enforceable), Tenant shall, at its own expense, cause it to be discharged of
record within a reasonable time, not to exceed thirty (30) days, after the date
of the filing or deliver to Landlord

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a bond, in form, content, amount, and issued by surety, satisfactory to
Landlord, holding Landlord harmless from all costs and liabilities resulting
from such lien and the foreclosure or attempted foreclosure of such lien.  In
addition. Tenant shall defend and indemnify Landlord and hold it harmless from
any and all claims, actions, damages, liabilities, costs and expenses (including
reasonable attorneys’ fees and other costs of suit) resulting from the lien. 
Without limitation of Landlord’s other remedies by reason of such Event of
Default, if Tenant does not remove such lien, Landlord shall have the right to
pay or discharge the same and Tenant shall reimburse Landlord upon demand for
the amount so paid, including Landlord’s reasonable costs and expenses.

(c)                                  Request Regarding Removal Obligation.  At
the time that Tenant requests Landlord’s consent to any Alteration, Tenant may
request that Landlord notify Tenant at the time of such approval of the plans if
Landlord will require Tenant, at Tenant’s sole expense, to remove any or all of
the Alteration by the end of the Term, and to restore the Premises to its
condition prior to the Alteration.

8.                                       REPAIRS

(a)                                  Tenant, at all times during the Term and at
Tenant’s sole cost and expense, subject to ordinary wear and tear and damage by
fire or other casualty governed by Section 9 below, shall keep and maintain in
good condition and repair (including replacement when necessary and in
compliance with all applicable Laws), (i) the exterior and structure of the
Premises and the Building, including the building foundation, the roof
structure, the exterior walls of the Building and the parking areas, and (ii)
the interior of the Premises and every part thereof, including the interior
walls and ceilings, lighting and relamping, and plate glass.    Notwithstanding
the foregoing, Tenant shall not be responsible for repairs to the extent such
repairs are (i) necessitated by fire, earthquake, acts of God or the elements,
or (ii) necessitated by the negligence or willful misconduct of Landlord or
Landlord’s agents, employees or contractors or the breach of this Lease by
Landlord. Tenant shall be responsible, at Tenant’s sole cost and expense, for
the maintenance and repair of the HVAC system and equipment serving the Premises
and any components and equipment used in connection therewith. Tenant, at its
sole cost and expense, shall procure and maintain in full force and effect a
contract for the maintenance and repair of such equipment, with a service and
maintenance firm reasonably acceptable to Landlord.

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(b)                                 In the event that any capital improvements
or replacements are required to be made to the Premises during the term of the
Lease to the building foundation, the roof structure, the exterior walls of the
Building and any major mechanical, structural, plumbing or HVAC systems serving
the Premises (“Capital Improvements”) (i) Landlord and Tenant shall each have
the right to reasonably approve or disapprove such Capital Improvements;  (ii)
Landlord and Tenant shall mutually determine whether such Capital Improvements
are to be performed by Landlord or Tenant and (iii) the Capital Improvements
shall be amortized over their useful life and Tenant shall pay a portion of such
amortized costs equal to the balance of the Term (or renewal term if exercised)
plus five (5) years and Landlord shall pay the balance.  For example if the roof
is replaced during the 5th year of the Term, and such roof has a useful life of
20 years, Tenant shall pay an amount equal to six (6) years of such amortized
payments and Landlord shall pay an amount equal to fourteen (14) years of such
amortized payments and if Tenant exercises the option to renew, Tenant shall pay
an amount equal to eleven (11) years of such amortized payments and Landlord
shall pay an amount equal to nine (9) years of such amortized payments.

9.                                       DAMAGE OR DESTRUCTION

(a)                                  Landlord’s Obligation to Rebuild.  If the
Premises are damaged or destroyed, Landlord shall promptly and diligently repair
the Premises to substantially the condition existing as of the date of delivery
of the Premises to Tenant, unless Landlord has the option to terminate this
Lease as provided herein, and Landlord elects to terminate.

(b)                                 Rights to Terminate.  Landlord shall have
the option to terminate this Lease if the Premises is destroyed or damaged by
fire or other casualty, regardless of whether the casualty is insured against
under this Lease, if Landlord reasonably estimates that the repair of the
Premises cannot be completed within one year after the date of the casualty. 
Landlord shall also have the right to terminate this Lease if the repair is not
fully covered by insurance maintained (or required to be maintained) by Tenant
pursuant to this Lease other than by reason of the deductible amounts under
such  insurance policies.  Tenant shall have the option to terminate this Lease
if the Premises is damaged or destroyed by fire or other casualty that cannot be
repaired or restored within one year after the date of the casualty, as
reasonably estimated by Landlord and Tenant.  Landlord shall notify Tenant of
Landlord’s estimate for such repair within ninety (90) days after the casualty. 
If a party desires to exercise the right to terminate this Lease as a result of
a casualty, the party shall exercise the right by giving the other party written
notice of its election to terminate within thirty (30) days after delivery of
Landlord’s repair period estimate, in which event this Lease shall terminate
fifteen (15) days after the date of the terminating party’s notice.  If neither
Landlord nor Tenant exercises the right to terminate this Lease, this Lease
shall continue in full force and effect and Landlord shall promptly commence the
process of obtaining necessary permits and approvals, and shall commence repair
of the Premises or the Building as soon as practicable and thereafter prosecute
the repair diligently to completion.  Notwithstanding the foregoing, Tenant
shall have the right to terminate, exercisable in its sole discretion, if more
than 25% of the Premises are destroyed or rendered unusable by fire or other
casualty during the last year of the term of the Lease, or the last year of the
Renewal Term.

(c)                                  Limited Obligation to Repair.  Landlord’s
obligation, should Landlord elect or be obligated to repair or rebuild, shall
exclude any and all improvements constructed or installed by Tenant in the
Premises.  Upon such restoration by Landlord, if the Lease has not been

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terminated, Tenant, at its expense, shall replace or fully repair all trade
fixtures, equipment, Alterations and other improvements installed by Tenant and
existing at the time of the damage or destruction.

(d)                                 Abatement of Rent.  In the event of any
damage or destruction to the Premises which does not result in termination of
this Lease, the Base Rent shall be temporarily abated proportionately to the
degree the Premises are untenantable as a result of the damage or destruction,
commencing from the date of the damage or destruction and continuing during the
period required by Landlord to substantially complete its repair and restoration
of the Premises; provided, however, that nothing herein shall preclude Landlord
from being entitled to collect the full amount of any rent loss insurance
proceeds.

(e)                                  Insurance Proceeds.  If this Lease is
terminated, Landlord may keep all the insurance proceeds resulting from the
damage to the Property payable pursuant to insurance coverage maintained by
Landlord or Tenant, and Tenant shall have no claims thereto and Tenant may keep
all the insurance proceeds pursuant to insurance coverage it maintains on
Tenant’s Personal Property.

(f)                                    Statutory Waivers.  The provisions of
this Lease, including this section, constitute an express agreement between
Landlord and Tenant with respect to any and all damage to, or destruction of,
the Premises or the Property or any part of either, and supersede any provision
of Maryland law to the contrary.

10.                                 EMINENT DOMAIN

If all or any material part of the Premises or the parking lot is taken for
public or quasi-public use by a governmental authority under the power of
eminent domain or is conveyed to a governmental authority in lieu of such taking
(a “taking”), Landlord may terminate this Lease by written notice to Tenant
within thirty (30) days after the taking.  If all or any material part of the
Premises is taken, and if in any such case the taking causes the remaining part
of the Premises to be materially untenantable and inadequate for use by Tenant
for the purpose for which they were leased, in Tenant’s reasonable opinion, then
Tenant, at its option and by giving notice within thirty (30) days after the
taking, may terminate this Lease as of the date Tenant is required to surrender
possession of the Premises.  If part of the Premises is taken but the remaining
part is tenantable and adequate for Tenant’s use, then this Lease shall be
terminated as to the part taken as of the date Tenant is required to surrender
possession, and, unless Landlord shall have terminated this Lease pursuant to
the foregoing provisions, Landlord shall make such repairs, alterations and
improvements as may be necessary to render the part not taken tenantable, and
the Rent shall be reduced in proportion to the part of the Premises taken.  If
all or any material part of the Premises is taken, and if in any such case the
taking causes the remaining part of the Premises to be untenantable and
inadequate for use by Tenant for the purpose for which they were leased, then
Tenant, at its option and by giving notice within thirty (30) days after the
taking, may terminate this Lease as of the date Tenant is required to surrender
possession of the Premises.

All compensation awarded for the taking shall be the property of Landlord
without any deduction therefrom for any estate of Tenant, and Tenant hereby
assigns to Landlord

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all its right, title and interest in and to the award.  Tenant shall have the
right, however, to recover from the governmental authority, but not from
Landlord, only such compensation as may be awarded to Tenant on account of any
improvements made to the Premises at Tenant’s cost, moving and relocation
expenses, loss of good will and the business as a going concern and removal of
Tenant’s Personal Property, provided that any such award to Tenant will not
reduce the award which would otherwise be made to Landlord.

11.                                 INSURANCE

(a)                                  Public Liability.  Tenant, at its own cost
and expense, shall keep and maintain in full force and effect during the Term
the following insurance coverages, (i) commercial general liability insurance,
including contractual liability coverage, insuring Tenant’s activities with
respect to the Premises and/or the Building against loss, damage or liability
for personal injury or death of any person or loss or damage to property
occurring in, upon or about the Premises, with a minimum coverage of One Million
Dollars ($1,000,000) per occurrence/Two Million Dollars ($2,000,000) general
aggregate, (ii) fire damage legal liability insurance and personal/advertising
injury insurance (which shall not be subject to the contractual liability
exclusion), each in the minimum amount of One Million Dollars ($1,000,000), and
(iii) worker’s compensation insurance in statutory amounts; provided, however,
that if, at any time during the Term, Tenant shall have in full force and effect
a blanket policy of public liability insurance with the same coverage for the
Premises as described above, as well as coverage of other premises and
properties of Tenant, or in which Tenant has some interest, the blanket
insurance shall satisfy the requirement hereof and be endorsed to separately
apply to the Premises.

(b)                                 Fire and Extended Coverage.  Tenant shall,
at Tenant’s expense, procure and maintain in full force and effect with respect
to the Building a policy or policies of all risk insurance (including sprinkler,
vandalism and malicious mischief coverage, and any other endorsements reasonably
desired by the Landlord or required by the holder of any mortgage on the
Property), in an amount equal the full replacement cost (including debris
removal, and demolition, but excluding the land and the footings, foundations
and installations below the basement level) thereof.  Such insurance shall be
for the benefit of Landlord, and the proceeds therefrom shall be subject to
Landlord’s control but shall be applied as and to the extent required under the
terms of this Lease.  Such policy shall not include earthquake damage.

(c)                                  Insurance Companies.  All insurance
policies obtained by Tenant shall be written by an insurance company licensed by
and admitted to issue insurance in the State of Maryland, and shall be subject
to the prior written approval of Landlord, which approval shall not be
unreasonably withheld.

(d)                                 Insurance Certificates.  Tenant shall
furnish to Landlord, on or before the Commencement Date and thereafter thirty
(30) days prior to the expiration of each policy, an original policy of
insurance issued by the insurance carrier of each policy of insurance carried by
Tenant pursuant to this Section.  The policies shall expressly provide that the
policies shall not be cancelable or subject to reduction of coverage or
otherwise be subject to modification except after thirty (30) days’ prior
written notice to the parties named as insureds.  Landlord, its successors and
assigns, and any nominee of Landlord holding any interest in the Premises,
including, without limitation, any ground lessor or the holder of any fee or
leasehold mortgage,

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shall be named as the insured under the fire and extended coverage policy and as
an additional insured with Tenant under the public liability policy of insurance
maintained by Tenant pursuant to this Lease.  The policies and certificates
shall further provide that the coverage shall be primary, and that any coverage
carried by Landlord shall be secondary and noncontributory with respect to
Tenant’s policy.

(e)                                  Waiver of Subrogation.  Any policy or
policies of fire, extended coverage or similar casualty insurance which either
party obtains in connection with the Building, the Premises, or Tenant’s
Personal Property shall include a clause or endorsement denying the insurer any
rights of subrogation against the other party (and the other parties named as
additional insureds pursuant to this Article).  Landlord and Tenant each waives
any rights of recovery against the other (and the other parties named as
additional insureds) for injury or loss due to hazards insurable by policies of
fire, extended coverage or similar casualty insurance, regardless of whether
such insurance policies or coverage shall actually have been obtained by the
party granting such waiver, and regardless of the cause of such fire or
casualty, including the negligence of the party benefiting from such waiver. 
Because this Section will preclude the assignment of any claim mentioned in it
by way of subrogation or otherwise to an insurance company or any other person.
each party to this Lease agrees immediately to give to each of its insurance
companies written notice of the terms of the mutual waivers contained in this
Section and to have the insurance policies properly endorsed, if necessary, to
prevent the invalidation of the insurance coverages by reason of the mutual
waivers contained herein.

(f)                                    Landlord’s Public Liability.  Landlord
shall, at Landlord’s expense, procure and maintain in full force and effect
during the Term, commercial general liability insurance, including contractual
liability coverage, insuring Tenant’s activities with respect to the Premises
and/or the Building against loss, damage or liability for personal injury or
death of any person or loss or damage to property occurring in, upon or about
the Premises, with a minimum coverage of One Million Dollars ($1,000,000) per
occurrence/Two Million Dollars ($2,000,000) general aggregate.

12.                                 ASSIGNMENT OR SUBLET

(a)                                  Prohibitions.  Tenant shall not assign this
Lease or sublet the Premises or any portion thereof without the prior written
consent of Landlord in each instance, which consent shall not be unreasonably
withheld.  If Tenant desires to assign this Lease or to sublet the Premises, or
any part thereof, Tenant shall give to Landlord written notice of its intent at
least thirty (30) days in advance of the date on which Tenant desires to assign
or sublet the Premises, which notice shall designate the terms of the proposed
assignment or sublet, the identity of the proposed assignee or sublessee, and
shall be accompanied by financial statements of such proposed assignee or
sublessee and such other information regarding such party and its business and
reputation as shall be required by Landlord to evaluate the proposed assignment
or sublet.  Landlord shall have twenty (20) days after receipt of Tenant’s
written notice and the above specified information within which to notify Tenant
in writing that Landlord elects to (i) consent to the proposed assignment or
sublet as described in Tenant’s notice, or (ii) refuse to consent to Tenant’s
proposed assignment or sublet, stating the reasons for such refusal.  If
Landlord fails to notify Tenant in writing of its election within the thirty
(30) day period, Landlord shall be deemed to have made the election in clause
(ii) above; provided that Tenant may provide

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Landlord with a second notice and five (5) days in which to respond and if
Landlord does not respond within five (5) days after receipt of the second
notice, Landlord shall be deemed to have made the election in clause (i) above.

(b)                                 Affiliates.  Tenant may assign this Lease or
sublet the Premises or any portion thereof, without Landlord’s consent, to any
partnership, corporation or other entity which controls, is controlled by, or is
under common control with Tenant, or to any partnership, corporation or other
entity resulting from a merger or consolidation with Tenant or which acquires
all or substantially all of Tenant’s assets (through a transfer of assets or
equity interests in Tenant) as a going concern and such assets include
substantial assets other than this Lease (collectively “Affiliates”), provided
that (i) Landlord receives written notice of the assignment or subletting no
later than five (5) days prior to the effective date thereof, in which notice
Tenant shall expressly confirm that Tenant remains primarily liable (together
with the assignee in the event of an assignment) for all of the obligations of
the Tenant under this Lease, and (ii) Landlord receives a fully executed copy of
the assignment or sublease agreement between Tenant and the Affiliate no later
than five (5) days prior to the effective date of such assignment or sublease,
in which the Affiliate assumes (in the event of an assignment) all of Tenant’s
obligations under this Lease, and agrees (in the event of a sublease) that such
subtenant will, at Landlord’s election, attorn directly to Landlord in the event
that this Lease is terminated for any reason.

(c)                                  Tenant Liability.  In the event of any
sublease or assignment, whether or not with Landlord’s consent, Tenant shall not
be released or discharged from any liability, whether past, present or future,
under this Lease, including any liability arising from the exercise of any
renewal or expansion option, to the extent such exercise is expressly permitted
by Landlord.  Tenant’s liability shall remain primary, and in the event of
default by any subtenant, assignee or successor of Tenant in performance or
observance of any of the covenants or conditions of this Lease, Landlord may
proceed directly against Tenant without the necessity of exhausting remedies
against said subtenant, assignee or successor.  After any assignment, Landlord
shall not consent to subsequent assignments or subletting of this Lease, or
amendments or modifications of this Lease with assignees of Tenant, without
notifying Tenant, or any successor of Tenant, and without obtaining its or their
consent thereto, provided however that such action shall not relieve Tenant or
any successor of Tenant of liability under this Lease.

(d)                                 Documentation.  No permitted assignment or
subletting by Tenant shall be effective until there has been delivered to
Landlord a fully executed counterpart of the assignment or sublease which
expressly provides that (i) in the case of a sublease, the subtenant may not
assign its sublease or further sublet the sublet space without Landlord’s prior
written consent, (ii) in the case of an assignment, the assignee assumes, for
the benefit of Landlord, and without releasing Tenant, all of Tenant’s
obligations under this Lease arising on or after the date of the assignment, and
(iii) in the case of a sublease, the subtenant agrees to be and remain jointly
and severally liable with Tenant to Landlord for the payment of Rent pertaining
to the sublet space in the amount set forth in the sublease, and for the
performance of all of the terms and provisions of this Lease pertaining to the
sublet space.  In addition to the foregoing, no assignment or sublease by Tenant
shall be effective until there has been delivered to Landlord a fully executed
counterpart of Landlord’s consent to assignment or sublease form, as
applicable.  The failure or refusal of a subtenant or assignee to execute any
such instrument shall not release

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or discharge the subtenant or assignee from its liability as set forth above. 
Notwithstanding the foregoing, no subtenant or assignee shall be permitted to
occupy the Premises unless and until such subtenant or assignee provides
Landlord with certificates evidencing that such subtenant or assignee is
carrying all insurance coverage required of it under this Lease.

(e)                                  Processing Expenses.  Tenant shall pay to
Landlord, as Landlord’s cost of processing each proposed assignment or
subletting, an amount equal to the sum of Landlord’s reasonable attorneys’ fees,
but in no event more than $1,000.00 (“Processing Costs”).

13.                                 DEFAULT

(a)                                  Tenant’s Default.  The occurrence or
existence of any one or more of the following shall constitute an “Event of
Default” (or, collectively, “Events of Default”) by Tenant under this Lease: 
(i) if Tenant shall have failed to pay Base Rent, Tenant’s Percentage Share of
Taxes, or any other sum required to be paid hereunder within (5) after written
notice that such amount is unpaid; (ii) if Tenant shall have failed to perform
any term, covenant or condition of this Lease except those requiring the payment
of money, and Tenant shall have failed to cure the breach within thirty (30)
days after written notice from Landlord if the breach could reasonably be cured
within the thirty (30) day period; provided, however, that if the nature of
Tenant’s obligation is such that more than thirty (30) days are required for its
performance, then Tenant shall not be deemed to be in default if Tenant shall
commence the performance of such obligation within the thirty (30) day period
and thereafter shall diligently prosecute the same to completion; (iii) the
interest of Tenant in this Lease is levied upon under execution or other legal
process; or (iv) a petition is filed by or against Tenant to declare Tenant
bankrupt or seeking a plan of reorganization or arrangement under any Chapter of
the Bankruptcy Code, or any amendment, replacement or substitution therefor, or
to delay payment of, reduce or modify Tenant’s debts, which in the case of an
involuntary action is not discharged within thirty (30) days.

(b)                                 Remedies Upon Tenant’s Default.  Upon an
Event of Default, Landlord shall have the following remedies, in addition to all
other rights and remedies provided by law, equity, statute or otherwise provided
in this Lease, to which Landlord may resort cumulatively or in the alternative:

(i)                                     Landlord may continue the Lease in full
force and effect, and this Lease shall continue in full force and effect as long
as Landlord does not terminate Tenant’s right to possession, and Landlord shall
have the right to collect Rent when due.

(ii)                                  Landlord may terminate Tenant’s right to
possession of the Premises as provided under Maryland law.  No act by Landlord
other than giving written notice to Tenant of such termination shall terminate
this Lease.  Acts of maintenance, efforts to relet the Premises or the
appointment of a receiver on Landlord’s initiative to protect Landlord’s
interest under this Lease shall not constitute a termination of Tenant’s right
to possession.  On termination, Tenant shall vacate and surrender possession of
the Premises to Landlord and Landlord shall have the right to remove all
personal property of Tenant and store it at Tenant’s cost and Tenant hereby
waives all claims for damages that may be caused by Landlord’s removing or
storing such Personal Property.  Upon such termination of Tenant’s right to
possession and this Lease,

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Landlord shall have the right to recover from Tenant damages (a) the worth at
the time of award of unpaid Rent and other sums due and payable which had been
earned at the time of termination; plus (b) the worth at the time of award of
the amount by which the unpaid Rent and other sums due and payable which would
have been payable after termination until the time of award exceeds the amount
of the Rent loss that Tenant proves could have been reasonably avoided; plus (c)
the worth at the time of award of the amount by which the unpaid Rent and other
sums due and payable for the balance of the Term after the time of award exceeds
the amount of the Rent loss that Tenant proves could be reasonably avoided; plus
(d) any other amount reasonably necessary to compensate Landlord for all the
detriment proximately caused by Tenant’s failure to perform Tenant’s obligations
under this Lease.

The “worth at the time of award” of the amounts referred to in Subsections
(ii)(a) and (ii)(b) is computed by allowing interest at the Interest Rate on the
unpaid Rent and other sums due and payable from the date due through the date of
award.  The “worth at the time of award” of the amount referred to in Subsection
(ii)(c) is computed by discounting the amount at the discount rate of the
Federal Reserve Bank at the time of award, plus one percent (1 %).

(c)                                  Bankruptcy.  The following provisions shall
apply in the event of the bankruptcy or insolvency of Tenant:

(i)                                     In connection with any proceeding under
Chapter 7 of the Bankruptcy Code where the trustee of Tenant elects to assume
this Lease for the purposes of assigning it, such election or assignment, may
only be made upon compliance with the following provisions which conditions
Landlord and Tenant acknowledge to be commercially reasonable.  In the event the
trustee elects to reject this Lease then Landlord shall immediately be entitled
to possession of the Premises without further obligation to Tenant or the
trustee.

(ii)                                  Any election to assume this Lease under
Chapter 11 or 13 of the Bankruptcy Code by Tenant as debtor-in-possession or by
Tenant’s trustee (the “Electing Party”) must provide for the Electing Party to
cure or provide to Landlord adequate assurance that (i) it will cure all
monetary defaults under this Lease within fifteen (15) days from the date of
assumption, and (ii) that it will cure all nonmonetary defaults under this Lease
within thirty (30) days from the date of assumption.  Landlord and Tenant
acknowledge such condition to be commercially reasonable.

(iii)                               Landlord’s acceptance of rent or any other
payment from any trustee, receiver, assignee, person, or other entity will not
be deemed to have waived, or waive, the requirement of Landlord’s consent,
Landlord’s right to terminate this Lease for any transfer of Tenant’s interest
under this Lease without such consent, or Landlord’s claim for any amount of
Rent due from Tenant.

(d)                                 Landlord’s Default.  Landlord shall not be
deemed to be in default in the performance of any obligation required to be
performed by Landlord hereunder unless and until Landlord has failed to perform
the obligation within thirty (30) days after receipt of written notice by Tenant
to Landlord specifying the obligation Landlord has failed to perform; provided,
however, that if the nature of Landlord’s obligation is such that more than
thirty (30) days are required for its performance, then Landlord shall not be
deemed to be in default if Landlord shall

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commence the performance of such obligation within the thirty (30) day period
and thereafter shall diligently prosecute the same to completion.

14.                                 LANDLORD’S RIGHT TO PERFORM TENANT’S
COVENANTS

If Tenant shall at any time fail to make any payment or perform any other act on
its part to be made or performed under this Lease after notice and cure periods
if applicable, Landlord may, but shall not be obligated to, make the payment or
perform any other act to the extent Landlord may deem desirable and, in
connection therewith, pay expenses and employ counsel.  Any payment or
performance by Landlord shall not waive or release Tenant from any obligations
of Tenant under this Lease.  All sums so paid by Landlord, and all penalties,
interest and costs in connection therewith, shall be due and payable by Tenant
on the fifth (5th) business day after notice of any payment by Landlord,
together with interest thereon at the Interest Rate, from that date to the date
of payment thereof by Tenant to Landlord, plus collection costs and attorneys’
fees.  Landlord shall have the same rights and remedies for the nonpayment
thereof as in the case of default in the payment of Base Rent.

15.                                 SURRENDER OF PREMISES AND HOLDOVER

(a)                                  End of Term.  On the Expiration Date or
earlier termination of this Lease, Tenant shall surrender the Premises to
Landlord in its condition as of the Commencement Date, normal wear and tear and
damage by fire or other casualty excepted.  Tenant shall remove from the
Premises all of Tenant’s Personal Property and any Alterations required to be
removed pursuant to Section 8 of this Lease.  Tenant shall repair any damage or
perform any restoration work required by the removal, including closing all
floor, ceiling, stairwell and roof openings.  If Tenant fails to timely remove
any Personal Property or Alterations as aforesaid, such items shall be
conclusively deemed to have been abandoned by Tenant and Landlord may remove the
property and store and/or dispose of the same at Tenant’s expense, including
interest at the Interest Rate.

(b)                                 Holdover.  If Tenant remains in possession
of all or any part of the Premises after the expiration of the Term or the
earlier termination of this Lease with Landlord’s prior written consent, such
holdover shall be for the period and at the rent agreed upon by Landlord and
Tenant.  If Tenant remains in possession of all or any part of the Premises
after the expiration of the Term or the earlier termination of this Lease
without Landlord’s prior written consent, the tenancy shall be a month to month
tenancy only and shall not constitute a renewal or extension for any further
term, regardless of whether Landlord shall accept Rent for any such period.  In
such event, and without prejudice to Landlord’s rights and remedies to evict
Tenant, Base Rent shall be increased in an amount equal to one hundred
twenty-five percent (125%) of the Base Rent during the last month of the Term
(including any extensions), and any other sums due under this Lease shall be
payable in the amount, and at the times, specified in this Lease.  The tenancy
shall be subject to every other term, condition, covenant and agreement
contained in this Lease, except that any renewal or extension option or right of
first negotiation in favor of Tenant shall not be applicable.  No such increase
shall impair Landlord’s other rights and remedies against Tenant by reason of
such holding over by Tenant, and Tenant shall vacate the Premises immediately
upon Landlord’s request.  In addition to the foregoing, if Tenant remains in
possession of all or any part of the Premises without Landlord’s prior written
consent, Tenant

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shall indemnify, defend and hold Landlord harmless from and against all claims,
actions, liabilities, damages, costs and expenses (including reasonable
attorneys’ fees and other costs of suit) incurred by or asserted against
Landlord and arising directly or indirectly from Tenant’s failure to timely
surrender the Premises, including but not limited to (i) any rent payable by or
any loss, cost, or damages claimed by any new tenant of the Premises or any
portion thereof, and (ii) Landlord’s damages as a result of any prospective
tenant rescinding or refusing to enter into the prospective lease of the
Premises or any portion thereof by reason of such failure to timely surrender
the Premises.

16.                                 ACCESS TO PREMISES

Tenant shall permit Landlord and its agents to enter the Premises at all
reasonable times upon reasonable notice (which shall be given at least
forty-eight (48) hours prior to the date and time of the intended entry), except
in the case of an emergency (in which event entry may be made when necessary and
without notice), to inspect the Premises, to post Notices of Nonresponsibility
and similar notices, to show the Premises to interested parties such as
prospective mortgagees and purchasers and tenants (with respect to tenants,
during the last six (6) months of the term of the Lease or the Renewal Term) to
provide any services required of Landlord hereunder, to make necessary
alterations, additions, improvements or repairs either to the Premises or the
Building.  No such entry shall constitute a constructive eviction or give rise
to an abatement of Rent hereunder, constitute a constructive eviction, or
otherwise diminish Tenant’s obligations under this Lease.  Tenant shall have the
right to have a representative of Tenant accompany Landlord or its agents in
connection with any such entry, provided that such representative does not
interfere with the permitted activities of Landlord or its agents.  In
exercising its rights under this Section, Landlord shall at all times minimize
interference with Tenant’s operations, to the extent practicable.

17.                                 SIGNS

Tenant may place and maintain in good condition and repair on any exterior door,
roof, wall or window of the Building or on the parking lot any sign, awning or
canopy, or advertising matter with respect to the Use.  The installation,
maintenance and removal of Tenant’s signage pursuant to this Section shall be
performed by Tenant at Tenant’s expense, but in coordination with Landlord and
its reasonable installation procedures and requirements.  All signage of Tenant
shall be subject to compliance with all Legal Requirements.  Upon the expiration
or earlier termination of this Lease, Tenant shall, at Tenant’s expense, remove
Tenant’s signage and repair any damage to the Building caused by such removal.

18.                                 SUBORDINATION AND NON-DISTURBANCE

(a)                                  Subordination and Non-Disturbance.  Except
as provided below, this Lease is subject and subordinate to all mortgages and
deeds of trust which now or may hereafter affect the Property or any portion
thereof, to all covenants, conditions, and restrictions and other matters of
record pertaining to the Property, and to all renewals, modifications,
consolidations, replacements and extensions of the foregoing, without the
necessity of any further documentation evidencing such subordination. 
Notwithstanding the foregoing, on the Commencement Date, Landlord covenants and
agrees to obtain a subordination, non-disturbance

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and attornment agreement (i) from any holder of a deed of trust or mortgage on
the Property (“Holder”) in place as of the date of this Lease with respect to
the Property in recordable form, and Tenant agrees to execute and shall have the
right to record, a subordination, non-disturbance and attornment agreement in
such lender’s then customary form recognizing Tenant’s rights under this Lease,
including its option to extend and its option to purchase and (ii) as a
condition to the subordination of this Lease to any mortgage, deed of trust or
ground or underlying lease arising after the date of this Lease, Landlord shall
deliver to Tenant in recordable form, and Tenant agrees to execute and shall
have the right to record, a subordination, non-disturbance and attornment
agreement in such lender’s then customary form recognizing Tenant’s rights under
this Lease, including its option to extend and its option to purchase.

(b)                                 Liability of Holder.  If the interest of
Landlord in the Real Property or the Building is transferred to any Holder
pursuant to or in lieu of proceedings for enforcement of any such lease,
mortgage, or deed of trust, upon request of such Holder, Tenant shall
immediately and automatically attorn to the Holder and such Holder shall
recognize Tenant’s rights hereunder, provided, however, that such purchaser
shall not be (i) bound by any payment of Rent for more than one month in advance
except payments in the nature of security for the performance by Tenant of its
obligations under this Lease, (ii) subject to any offset, defense or damages
arising out of a default of any obligations of any preceding Landlord, or (iii)
bound by any amendment or modification of this Lease made without the written
consent of the Mortgagee.

(c)                                  Possible Priority of Lease.  If a Holder
advises Landlord that it requires this Lease to be prior and superior to a
mortgage or deed of trust, within ten (10) days of Landlord’s notice, Tenant
shall execute, have acknowledged and deliver to Landlord any and all documents
or instruments, in the reasonable form presented to Tenant, which are necessary
to make this Lease prior and superior to the mortgage or deed of trust.

(d)                                 Holder Rights.  Tenant agrees to give any
Holder, by registered or certified mail, a copy of any notice of default served
upon the Landlord by Tenant, provided that prior to such notice Tenant has
received notice (by way of service on Tenant of a copy of an assignment of rents
and leases, or otherwise) of the address of such Holder.  Tenant further agrees
that if Landlord shall have failed to cure such default within the time provided
for in this Lease, then the Holder shall have an additional thirty (30) days
after receipt of notice thereof within which to cure such default.  This Lease
may not be modified or amended so as to reduce the Rent or shorten the Term, or
so as to adversely affect in any other respect to any material extent the rights
of the Landlord, nor shall this Lease be canceled or surrendered, without the
prior written consent, in each instance, of the Holder.

19.                                 ESTOPPEL CERTIFICATES

(a)                                  Tenant Estoppel Certificates.  Within
thirty (30) days after request therefor by Landlord or Holder or any prospective
mortgagee or owner, Tenant agrees to execute an Estoppel Certificate, binding
upon Tenant, certifying (i) that this Lease is unmodified and in full force and
effect (or if there have been modifications, a description of such modifications
and that this Lease as modified is in full force and effect), (ii) the dates to
which Rent has been paid, (iii) that Tenant is in the possession of the Premises
if that is the case, (iv) that, to Tenant’s

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knowledge, Landlord is not in default under this Lease, or, if Tenant believes
Landlord is in default, the nature thereof in detail, (v) that, to Tenant’s
knowledge, Tenant has no offsets or defenses to the performance of its
obligations under this Lease (or if Tenant believes there are any offsets or
defenses, an explanation thereof), (vi) that if an assignment of rents or leases
has been served upon the Tenant by a Holder, Tenant will acknowledge receipt
thereof and agree to be bound by the provisions thereof, and (vii) that Tenant
will give to the Holder copies of all notices required or permitted to be given
by Tenant to Landlord.  The failure of Tenant to deliver such certificate shall
be an Event of Default.

(b)                                 Landlord Estoppel Certificate.  At the
request of Tenant from time to time during the Term, within thirty (30) days
after request therefore by Tenant, Landlord shall provide an estoppel
certificate similar to the Tenant Estoppel Certificate which Tenant may use in
connection with a financing or sale of Tenant.

20.                                 ATTORNEYS’ FEES

In the event any party brings any suit or other proceeding with respect to the
subject matter or enforcement of this Lease, the prevailing party (as determined
by the court, agency or other authority before which such suit or proceeding is
commenced) shall, in addition to such other relief as may be awarded, be
entitled to recover reasonable attorneys’ fees, expenses and costs of
investigation as actually incurred, including court costs, expert witness fees,
costs and expenses of investigation, and all attorneys’ fees, costs and expenses
in any such suit or proceeding (including in any action or participation in or
in connection with any case or proceeding under the Bankruptcy Code, 11 United
States Code Sections 101 et seq., or any successor statutes, in establishing or
enforcing the right to indemnification, in appellate proceedings, or in
connection with the enforcement or collection of any judgment obtained in any
such suit or proceeding).

21.                                 BROKERS

Each party warrants and represents that it has had no dealings with any real
estate broker or agent in connection with the negotiation of this Lease, and
that it knows of no real estate broker or agent who is or might be entitled to a
fee, commission or other compensation in connection with this Lease.  Each party
shall indemnify and hold harmless the other party from and against any and all
claims (including reasonable attorneys’ fees and costs) arising out such party’s
conversations or other dealings with any other broker or individual regarding
this Lease.

22.                                 NOTICES

Unless otherwise agreed by the parties on a case by case basis, any notice,
demand or request required or desired to be given under this Lease shall be in
writing sent to the address of the party specified in this Lease, and shall be
given by nationally recognized overnight courier service (e.g., Federal
Express), or the United States mail, registered or certified, return receipt
requested, postage prepaid.  All notices shall be deemed to have been given when
received at the address of the party to which it has been sent (or when such
receipt is refused as indicated by advice from Federal Express or other
overnight courier service or by mail return receipt). As of the date of
execution of this Lease, the addresses of Landlord and Tenant are as

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specified in the Basic Lease Information.  Either party may, upon ten (10) days
prior written notice, change its address by giving notice of the change in
accordance with this Section.

23.                                 QUIET ENJOYMENT

Landlord covenants, in lieu of any implied covenant of quiet possession or quiet
enjoyment, that so long as Tenant is in compliance with the covenants and
conditions set forth in this Lease, Tenant shall have the right to quiet
enjoyment of the Premises without hindrance or interference from Landlord or
those claiming through Landlord, and subject to the covenants and conditions set
forth in this Lease and to the rights of any Holder.

24.                                 RENEWAL OPTION

(a)                                  Tenant shall have the option to renew this
Lease (the “Renewal Option”) for one (1) additional term of five (5) years,
commencing upon expiration of the Term (“Renewal Term”).  The Renewal Option
shall be null and void and Tenant shall have no right to renew this Lease if on
the date Tenant exercises the Renewal Option or on the date immediately
preceding the commencement date of the Renewal Term an Event of Default shall
have occurred and be continuing beyond the applicable cure period hereunder. 
The Renewal Option must be exercised, if at all, by written notice given by
Tenant to Landlord on or before the first day of the 49th month of the Term.  If
Tenant properly exercises the Renewal Option, references in the Lease to the
Term shall be deemed to mean the Renewal Term, unless the context clearly
provides otherwise, provided that this sentence shall not confer any additional
renewal options after the first Renewal Option conferred under this Section.

(b)                                 If Tenant properly exercises the Renewal
Option, then during the Renewal Term all of the terms and conditions set forth
in this Lease as applicable to the Premises during the initial Term shall apply
during the Renewal Term, including without limitation the obligation to pay
Taxes, except that (i) Tenant shall take the Premises in their then “as-is”
state and condition and Landlord shall have no obligation to make or pay for any
improvements to the Premises, and (ii) during the Renewal Term, the Base Rent
payable by Tenant shall be the Fair Market Rent (as hereinafter defined) during
the Renewal Term.

(c)                                  For purposes of this Section, the term
“Fair Market Rent” shall mean the prevailing rental rate and other charges and
increases, if any, for comparable space under a new primary lease (and not a
sublease) for the Property, taking into consideration the amenities and existing
improvements on the Property and the amenities and improvements in comparable
properties in comparable locations in Anne Arundel County, Maryland, and also
taking into consideration the then-prevailing ordinary rental market practices
with respect to monetary consideration, rent concessions, tenant improvement
allowances, and other tenant concessions (if any).

(d)                                 If Tenant properly exercises the Renewal
Option, the Base Rent shall be adjusted to an amount equal to the rent for the
Premises as specified by Landlord by notice to Tenant not less than ninety (90)
days prior to commencement of the Renewal Term.  Tenant, within thirty (30) days
after date on which Landlord provides such notice shall either (i) give Landlord
final binding written notice (“Binding Notice”) of Tenant’s acceptance of
Landlord’s determination of

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such rent, or (ii) if Tenant disagrees with Landlords’ determination, provide
Landlord with written notice of Tenant’s election to submit the Fair Market Rent
to binding arbitration (the “Arbitration Notice”).  If Tenant fails to provide
Landlord with either a Binding Notice or Arbitration Notice within such thirty
(30) day period, Tenant shall have been deemed to have given the Arbitration
Notice.

(e)                                  If the parties are unable to agree upon the
rent for the Premises within twenty (20) days after Landlord’s receipt of the
Arbitration Notice, Fair Market Rent as of commencement of the Renewal Term
shall be determined as follows:

(i)                                     Each party shall, at its sole expense,
within thirty (30) days obtain and deliver in writing to the other party a
determination of the Fair Market Rent for the Premises for a term equal to the
Renewal Term from a broker or appraiser licensed in the State of Maryland and
engaged in the office and manufacturing rental market in Anne Arundel County and
the Baltimore, Maryland metropolitan area for at least the immediately preceding
five (5) years.

(ii)                                  Within twenty (20) days, Landlord’s broker
or appraiser and Tenant’s broker or appraiser shall name a third broker or
appraiser, similarly qualified.  The third broker or appraiser shall choose the
determination of the Landlord’s broker or appraiser or the Tenant’s broker or
appraiser which is closest to its own determination of Fair Market Rent.  The
Base Rent payable by Tenant effective as of the commencement of the respective
Renewal Term shall be the rent proposed by either Landlord’s broker or appraiser
or Tenant’s broker or appraiser which is closest to the determination of fair
market rent by the third broker or appraiser.

(iii)                               Landlord shall pay the costs and fees of
Landlord’s broker or appraiser in connection with any determination hereunder,
and Tenant shall pay the costs and fees of Tenant’s broker or appraiser in
connection with such determination.  The costs and fees of any third broker or
appraiser shall be paid one-half by Landlord and one-half by Tenant.

(iv)                              If the amount of the Fair Market Rent is not
known as of the commencement of the Renewal Term, then Tenant shall continue to
pay the Base Rent in effect at the expiration of the Term until the amount of
the Fair Market Rent is determined.  When such determination is made, Tenant
shall pay any deficiency to Landlord upon demand.

(f)                                    If Tenant is entitled to and properly
exercises its Renewal Option, Landlord shall prepare an amendment (the “Renewal
Amendment”) to reflect changes in the Base Rent, Term, Expiration Date and other
appropriate terms.  The Renewal Amendment shall be sent to Tenant within a
reasonable time after receipt of the Binding Notice and, if acceptable to
Tenant, Tenant shall execute and return the Renewal Amendment to Landlord within
thirty (30) days after its receipt of same.  Notwithstanding the foregoing, upon
final determination of the Fair Market Rent as applicable, an otherwise valid
exercise of the Renewal Option shall be fully effective whether or not the
Renewal Amendment is executed.

25.                                 OPTION TO PURCHASE

(a)                                  Option to Purchase.  Tenant shall also have
the right and option to purchase the Property (“Option to Purchase”).  If Tenant
elects to exercise the Option to Purchase, it shall provide written notice of
the exercise on or before the first day of the 49th month of the Term

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(“Exercise Notice”).  If exercised, the closing sale of the Property shall occur
on the Expiration Date of the Term (“Closing Date”).  The Option to Purchase is
personal to Tenant and any Affiliate of Tenant and may not be exercised by an
assignee of the Lease which is not an affiliate of Tenant.

(b)                                 Option Price.  The Option Price shall be the
fair market value of the Property as of the Closing Date (“Fair Market Value”). 
The Fair Market Value of the Property shall be determined free and clear of the
Lease.

(c)                                  Fair Market Value.  If the parties are
unable to agree upon the Fair Market Value of the Property within sixty (60)
days after Landlord’s receipt of the Exercise Notice, Fair Market Value shall be
determined as follows:

(i)                                     Landlord shall provide its notice
specifying Fair Market Value.

(ii)                                  Within twenty (20) days after receipt of
Landlord’s notice specifying Fair Market Value, if Tenant does not agree with
such value, Tenant, at its sole expense, shall obtain and deliver in writing to
Landlord a determination of the Fair Market Value for the Property from a broker
or appraiser (“Tenant’s broker”) licensed in the State of Maryland and engaged
in the office and manufacturing market in Anne Arundel County and the Baltimore,
Maryland metropolitan area, for at least the immediately preceding five (5)
years. If Landlord accepts such determination, the Fair Market Value shall be
the amount determined by Tenant’s broker.

(iii)                               If Landlord does not accept such
determination, within twenty (20) days after receipt of the determination of
Tenant’s broker, Landlord shall designate a broker or appraiser (“Landlord’s
broker”) licensed in the State of Maryland and possessing the qualifications set
forth in (i) above.

(iv)                              Landlord’s broker and Tenant’s broker shall
name a third broker or appraiser (the “third broker”), similarly qualified,
within five (5) days after the appointment of Landlord’s broker.  The third
broker shall choose the determination of the Landlord’s broker or the Tenant’s
broker which is closest to its own determination of Fair Market Value.

(v)                                 Subject to Section 25(b), the Purchase Price
to be paid by Tenant shall be the Fair Market Value proposed by either
Landlord’s broker or Tenant’s broker which is closest to the determination of
Fair Market Value by the third broker.

(vi)                              Landlord shall pay the costs and fees of
Landlord’s broker in connection with any determination hereunder, and Tenant
shall pay the costs and fees of Tenant’s broker in connection with such
determination.  The costs and fees of any third broker shall be paid one-half by
Landlord and one-half by Tenant.

(d)                                 Closing.  The closing in respect of the sale
of the Property (“Closing”) shall be held on the Closing Date.

(e)                                  Closing Procedure and Prorations.  At the
Closing, a special warranty deed from Landlord to Tenant, together with such
other instruments and documents as may be necessary to effectuate the sale and
transfer of the Property to Tenant, shall be deposited in escrow with an

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escrow agreement and with a title company mutually approved by Tenant and
Landlord.  The instruments and documents to be deposited in escrow at the
Closing shall be legally sufficient to convey all of the applicable property to
Tenant free and clear of all loans, mortgages, deeds of trust, liens and
encumbrances.  The purchase price and all other sums due at the time of closing
shall be paid by delivery of funds in escrow which are immediately available to
Landlord upon closing.  All prorations of items of income and expense will be
prorated as of the Closing Date and closing costs (including recording fees,
transfer taxes, escrow costs, title insurance premiums, etc) shall be allocated
between Landlord and Tenant in the manner that is customary for the county in
which the Property is located.  Without limiting the generality of the
foregoing, all recordation and transfer taxes on the deed to the Property shall
be shared equally by Landlord and Tenant.  Landlord’s obligation to convey title
to the applicable property in accordance herewith shall be fully satisfied upon
the willingness of the title company to issue to Tenant upon payment by Landlord
of its regularly scheduled premium its policy of ALTA title insurance,
(containing such endorsements as Tenant may reasonably request provided that
Tenant shall pay for such endorsements), insuring that Tenant is vested as the
owner of the applicable property subject only to the exceptions allowed by this
Section.

(f)                                    Memorandum.  Promptly following the
mutual execution and delivery of this Lease, Landlord will execute, acknowledge,
and cause to be recorded in the official records of the county recorder, at
Tenant’s expenses, a Memorandum of the Option to Purchase in the form of Exhibit
C attached hereto.

26.                                 GENERAL

(a)                                  Captions.  The captions and headings used
in this Lease are for the purpose of convenience only and shall not be construed
to limit or extend the meaning of any part of this Lease.

(b)                                 Time.  Time is of the essence for the
performance of each term of this Lease.

(c)                                  Severability.  If any provision of this
Lease is held to be invalid, illegal or unenforceable, the invalidity,
illegality, or unenforceability shall not affect any other provision of this
Lease, but this Lease shall be construed as if the invalid, illegal or
unenforceable provision had not been contained herein.

(d)                                 Choice of Law; Construction; Jurisdiction
and Venue.  This Lease shall be construed and enforced in accordance with the
laws of the State of Maryland.  The language in all parts of this Lease shall in
all cases be construed as a whole according to its fair meaning and not strictly
for or against either Landlord or Tenant.  In the event of any litigation
relating to this Lease, the parties (i) WAIVE TRIAL BY JURY, and (ii) consent to
the exclusive personal jurisdiction and venue in the District Court for Anne
Arundel County, Maryland, the Circuit Court for Anne Arundel County, Maryland
and the United States federal courts located in Maryland.

(e)                                  Binding Effect.  The covenants and
agreements contained in this Lease shall be binding on the parties hereto and,
on their respective successors and permitted assigns.

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(f)                                    Waiver.  The waiver by either party of
any breach of any term, condition or covenant of this Lease shall not be deemed
to be a waiver of the provision or any subsequent breach of the same or any
other term, condition or covenant of this Lease.  No covenant, term or condition
of this Lease shall be deemed to have been waived by either party unless the
waiver is in writing signed by such party.  No payment by Tenant or receipt by
Landlord of a lesser amount than any installment or payment of Rent due shall be
deemed to be other than on account of the amount due, and no endorsement or
statement on any check or any letter accompanying any check or payment of Rent
shall be deemed an accord and satisfaction, and Landlord may accept such check
or payment without prejudice to Landlord’s right to recover the balance of such
installment or payment of Rent or pursue any other remedies available to
Landlord.

(g)                                 Entire Agreement.  This Lease is the entire
agreement between the parties, and supersedes all prior agreements, including
letters of intent, between them, and there are no agreements or representations
between the parties except as expressly set forth herein.  Except as otherwise
provided herein, no subsequent change or addition to this Lease shall be binding
unless in writing and signed by the parties hereto.

(h)                                 Counterparts.  This Lease may be executed in
counterparts, each of which shall be an original, and all of which together
shall constitute but one instrument.

(i)                                     Consents and Approvals.  The review
and/or approval by Landlord of any item shall not impose upon Landlord any
liability for accuracy or sufficiency of any such item or the quality or
suitability of such item for its intended use.

(j)                                     Authority.  If either party hereto is a
corporation, partnership, trust, association, limited liability company or other
entity, such party hereby covenants and warrants that (i) it is duly
incorporated or otherwise established or formed and validly existing under the
laws of its state of incorporation, establishment or formation, (ii) it has and
is duly qualified to do business in the state in which the Property is located,
(iii) it has full corporate, partnership, trust, association or other
appropriate power and authority to enter into this Lease and to perform all its
obligations hereunder, and (iv) each person (and all of the persons if more than
one signs) signing this Lease on behalf of such party is duly and validly
authorized to do so.

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IN WITNESS WHEREOF, the parties, each being authorized to do so, have executed
this Lease on the dates set forth below, effective as of the date first above
written.

TENANT:

 

LANDLORD:

 

 

 

SIMPSON MANUFACTURING CO. INC.,

 

SWAN SECURE LLC,

a Delaware corporation

 

a Maryland limited liability company

 

 

 

 

 

 

By:

 

Seal

 

By:

 

Seal

 

Michael J. Herbert

 

 

 

Hobart K. Swan

 

 

Chief Financial Officer

 

 

 

General Manager

 

 

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EXHIBIT A

PREMISES AND PARKING

A-1-1

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

EXHIBIT B

COMMENCEMENT DATE MEMORANDUM

SWAN SECURE LLC, a Maryland limited liability company (“Landlord”) and SIMPSON
MANUFACTURING CO. INC., a Delaware corporation (“Tenant’) have entered into a
certain Lease, dated as of          ,       2007 (the “Lease”).

WHEREAS, Landlord and Tenant wish to confirm and memorialize the Commencement
Date and Expiration Date of the Lease as provided for in the Lease;

NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, receipt of which is hereby acknowledged, Landlord and Tenant
agree as follows:

1.                                       Unless otherwise defined herein, all
capitalized terms shall have the same meaning ascribed to them in the Lease.

2.                                       The Commencement Date (as defined in
the Lease) of the Lease is             

3.                                       The Expiration Date (as defined in the
Lease) of the Lease is                 

4.                                       Tenant hereby confirms the following: 
(A) That it has accepted possession of the premises pursuant to the terms of the
Lease; and, (B) That the Lease is in full force and effect.

5.                                       Except as expressly modified hereby,
all terms and provisions of the Lease are hereby ratified and confirmed and
shall remain in full force and effect and binding on the parties hereto.

TENANT:

 

LANDLORD:

 

 

 

SIMPSON MANUFACTURING CO. INC.,

 

SWAN SECURE LLC,

a Delaware corporation

 

a Maryland limited liability company

 

 

 

 

 

 

By:

 

 

 

By:

 

 

 

Michael J. Herbert

 

 

Name:

 

 

 

Chief Financial Officer

 

 

Its:

 

 

 

B-1

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EXHIBIT C

MEMORANDUM OF PURCHASE OPTION

WHEN RECORDED RETURN TO:

 

Alan J. Robin, Esq.

Shartsis Friese LLP

One Maritime Plaza, 18th Floor

San Francisco, California 94118

THIS MEMORANDUM OF PURCHASE OPTION is entered into as of the       day of
        , 2007 (the “Effective Date”), by and between SWAN SECURE LLC, a
Maryland limited liability company (“Landlord”), and SIMPSON MANUFACTURING CO.
INC., a Delaware corporation (“Purchaser”) with reference to the following
facts:

RECITALS

A.            Landlord owns the land and improvements known as 7525 Perryman
Court, Baltimore, Maryland (the “Property”) which is more particularly described
in Exhibit A attached hereto and made a part hereof.

B:            Tenant is currently the primary tenant of the Property, pursuant
to a Lease dated as of the Effective Date that, among other terms, provides
Tenant with the right and option to purchase the Property (the “Lease’).

NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, receipt of which is hereby acknowledged, Landlord and Tenant
agree as follows:

1.             Landlord hereby covenants and agrees that Tenant has the right
and option to purchase the Property upon and subject to the terms and conditions
and covenants contained in that certain unrecorded Lease, which Lease is
incorporated herein by this reference, including without limitation the
following:

2.             The option to purchase shall be exercisable at any time prior to
the first day of the 49th month of the term of the Lease.

3.             This Memorandum is not intended to change any of the terms of the
Lease and in the event of any inconsistency between the terms of this Memorandum
and the terms of the Lease, the terms of the Lease shall prevail. The Lease is
available at the offices of Landlord and Tenant.

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IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of Purchase
Option dated as of the date first set forth above.

TENANT:

 

LANDLORD:

 

 

 

SIMPSON MANUFACTURING CO. INC.,

 

SWAN SECURE LLC,

a Delaware corporation

 

a Maryland limited liability company

 

 

 

 

 

 

By:

 

 

 

By:

 

 

 

Michael J. Herbert

 

 

Name:

 

 

 

Chief Financial Officer

 

 

Its:

 

 

 

C-2

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EXHIBIT A

THE PROPERTY

7525 PERRYMAN CT

BRANDON WOODS BUS PARK

 

Map

 

Grid

 

Parcel

 

Sub District

 

Subdivision

 

Section

 

Block

 

Lot

 

Assessment Area

 

Plat No:
Plat Ref:

 

 

 

11

 

7

 

154

 

 

 

137

 

2

 

 

 

11A

 

1

 

 

 

5949/ 113

 

 

C-3

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STATE OF

 

)

 

 

 

)

ss.

COUNTY OF

 

)

 

 

On                        , 2007, before me,                               , a
Notary Public, personally appeared
                                               , personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

 

 

 

 

Signature

 

 

 

(Seal)

 

 

 

 

STATE OF

 

)

 

 

 

)

ss.

COUNTY OF

 

)

 

 

On                        , 2007, before me,                               , a
Notary Public, personally appeared
                                               , personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

 

 

 

 

Signature

 

 

 

(Seal)

 

 

 

C-4

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Exhibit B

Form of Indemnity Escrow Agreement

INDEMNITY ESCROW AGREEMENT

THIS INDEMNITY ESCROW AGREEMENT (this “Agreement”) dated as of
                            ,  2007, is made by and among:

(i)            Hobart K. Swan, a Florida resident (“HKS”);

(ii)           Simpson Manufacturing Co., Inc., a Delaware corporation
(“Guarantor”),

(iii)          Simpson Strong-Tie Company, Inc., a California corporation
(“Buyer”); and

(iv)          Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC, a
Maryland limited liability company, as escrow agent (the “Escrow Agent”).

RECITALS

A.            HKS, Buyer and Guarantor are parties to a Stock Purchase Agreement
dated as of                             , 2007 (the “Purchase Agreement”). 
Pursuant to the Purchase Agreement,   Buyer is purchasing concurrently herewith
from HKS and the Swan Secure Products, Inc. Employee Stock Ownership Plan and
Trust (the “ESOP”), all of the issued and outstanding stock of Swan Secure
Products, Inc., a Maryland corporation.

B.            The Purchase Agreement provides that HKS shall indemnify Buyer
with respect to certain matters upon the terms and subject to the conditions
provided in the Purchase Agreement and that as security for such indemnification
obligation, a portion of the consideration payable to HKS under the Purchase
Agreement shall be placed in escrow for the protection of the Buyer.  Under the
terms of the Purchase Agreement, the ESOP is not required to participate in the
indemnity escrow established pursuant to this Agreement, and accordingly the
ESOP shall have no rights or obligations under this Agreement.

C.            The Escrow Agent has agreed to hold, safeguard and disburse the
Escrow Fund (as defined below) in accordance with the terms and provisions
contained herein.

AGREEMENT

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

1.             Definitions.  Except as hereinafter defined, capitalized terms
used in this Agreement will have the respective meanings assigned to such terms
in the Purchase Agreement.  As used herein, the following terms shall have the
following respective meanings:

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“Claim” means a claim for indemnification made by Buyer under the Purchase
Agreement.

“Claim Notice” is defined in Section 6 hereof.

“Dispute Notice” is defined in Section 6 hereof.

“Escrow Fund” shall mean all funds held in escrow from time to time pursuant to
this Agreement.

“First Release Date” means the date that is 183 days after the date on which the
Closing occurs.

“Indemnifiable Amount” means, with respect to any Claim, the amount of
indemnification to which Buyer is entitled pursuant to the Purchase Agreement.

“Indemnity Escrow Amount” means Five Hundred Thousand Dollars ($500,000.00).

“Second Release Date” means the date that is 365 days after the date on which
the Closing occurs under the Purchase Agreement.

2.             Appointment of the Escrow Agent.

(a)           Buyer and HKS hereby designate and appoint Gordon, Feinblatt,
Rothman, Hoffberger & Hollander, LLC as the Escrow Agent for the purposes set
forth herein, and the Escrow Agent hereby accepts such appointment on the terms
herein provided.

(b)           Escrow Agent shall charge HKS for services rendered hereunder as
part of HKS’s engagement of Escrow Agent as counsel to HKS.  Buyer shall not be
obligated to pay Escrow Agent’s legal or any other fees for providing services
hereunder; provided that this sentence shall not negate or reduce any party’s
obligation under the provisions of Section 8 of this Agreement which pertains to
indemnification of the Escrow Agent.

3.             Deposit of Indemnity Escrow Amount; Maintenance of Escrow Fund.

(a)           The Escrow Agent acknowledges possession of the sum of Three
Hundred Thousand Dollars ($300,000.00) as the Deposit under the Purchase
Agreement.  At the Closing, Buyer shall deliver to the Escrow Agent the
additional sum of Two Hundred Thousand Dollars ($200,000.00) by wire transfer of
immediately available funds to the Escrow Agent’s attorney’s trust account
pursuant to written wire instructions given by the Escrow Agent, and the Escrow
Agent shall accept such funds and shall hold the entire Five Hundred Thousand
Dollars ($500,000.00) in the Escrow Agent’s possession as the “Indemnity Escrow
Amount” subject to and in accordance with the terms and conditions of this
Agreement.

(b)           During the term of this Agreement, the Escrow Agent shall hold and
safeguard the Escrow Fund in accordance with this Agreement and shall make
disbursements from the Escrow Fund only in accordance with this Agreement.

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4.             Disbursements from Escrow Fund.  The Escrow Agent shall disburse
funds from the Escrow Fund as follows:

(a)           Promptly after the First Release Date, the Escrow Agent shall
disburse to HKS, from the Escrow Funds, the amount of Two Hundred Fifty Thousand
Dollars ($250,000.00) plus all interest earned on the Escrow Funds after the
Closing; provided that if Buyer makes any Claim by the close of business on the
First Release Date that remains unresolved, the amount distributable to HKS
under this Section 4(a) shall be reduced by the aggregate amount of all such
unresolved Claims.

(b)           Promptly after the Second Release Date, the Escrow Agent shall
disburse to HKS, from the Escrow Funds, the entire amount of Escrow Funds then
remaining, including earned interest; provided that if as of the close of
business on the Second Release Date Buyer makes any Claim that is not finally
resolved at that time, the amount distributable to HKS under this Section 4(b)
shall be reduced by the aggregate amount of all such unresolved Claims.

(c)           The Escrow Agent also shall release Escrow Funds in accordance
with any joint written instructions signed by Buyer and HKS (a “Joint
Disbursement Instruction”).

(d)           The Escrow Agent also shall release Escrow Funds pursuant to (i) a
final and unappealable order issued by a court of competent jurisdiction, or
(ii) a final and unappealable order issued by an arbitrator who has resolved a
disputed Claim (in either case, a “Disbursement Order”) .

(e)           The Escrow Agent shall also release Escrow Funds in accordance
with the provisions of Section 4.13 of the Purchase Agreement.

5.             Investment of Escrow Fund; Tax Reporting.

(a)           The Escrow Fund shall be invested promptly by the Escrow Agent in
an interest bearing account at Bank of America in Baltimore, Maryland, or
another investment approved in writing by Buyer, HKS and Escrow Agent.  If at
any time such investment is impracticable, the Escrow Fund shall be retained in
the Escrow Agent’s attorney trust account, which the parties acknowledge would
not result in interest being earned for the benefit of Buyer due to a
requirement of Maryland law that interest earned on lawyers trust accounts
(“IOLTA Interest”) be paid to a fund used to provide legal services to
indigents.

(b)           All interest or other income earned from the investment of the
Escrow Fund (other than IOLTA Interest) shall be allocated to, and shall be
deemed part of the Escrow Funds.

(c)           Each party entitled to be paid interest from the Escrow Funds
shall provide the Escrow Agent with a certified tax identification number by
returning a duly executed Form W-9 to the Escrow Agent.

6.             Claims on Escrow Fund.

(a)           Subject to the terms and conditions of the Purchase Agreement,
Buyer shall have the right to make one or more Claims on the Escrow Fund by
delivering a notice of

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such Claim (a “Claim Notice”) to HKS and the Escrow Agent prior to the Second
Release Date.  Each Claim Notice shall include Buyer’s good faith estimate of
the Indemnifiable Amount relating to such Claim and shall state what portion of
the Indemnity Escrow Amount is requested by Buyer to be released to Buyer in
connection with such Claim, which estimate and statement may be amended or
modified from time to time by Buyer.  Upon receipt of a Claim, the Indemnifiable
Amount of such Claim as stated by Buyer shall be deemed frozen and not
distributable to HKS under this Agreement until such Claim is finally resolved.

(b)           HKS shall have a period of thirty (30) calendar days after receipt
of a Claim Notice to notify Buyer and Escrow Agent in writing of any good faith
dispute as to the validity, amount and/or calculation of the Claim and/or the
related Indemnifiable Amount (a “Dispute Notice”).

(c)           If HKS does not timely dispute the Claim or the Indemnifiable
Amount of the Claim by giving a timely Dispute Notice, the Escrow Agent shall
promptly disburse to Buyer the full Indemnifiable Amount of the Claim as stated
by Buyer.

(d)           If HKS gives a timely Dispute Notice with respect to any Claim,
upon motion made or action filed by Buyer or HKS, the matter in dispute shall be
submitted to a court of competent jurisdiction (or arbitrator if the parties
agree to arbitrate the dispute) for final determination and issuance of a
Disbursement Order; provided that the Escrow Agent shall disburse to the Buyer
any portion of the Indemnifiable Amount of the Claim which has not been timely
disputed by HKS.

(e)           In the event that any disputed Claim is settled by agreement of
the parties prior to issuance of a Disbursement Order, Buyer and HKS shall give
the Escrow Agent a Joint  Disbursement Instruction in accordance with the agreed
upon settlement.

7.             Reliance by the Escrow Agent.  The Escrow Agent may rely upon any
written notice, request, waiver, consent, certificate, receipt, authorization or
other paper or document that the Escrow Agent reasonably believes to be genuine
and what it purports to be.  The Escrow Agent may confer with counsel in the
event of any dispute or question as to the construction of any of the provisions
hereof, or its duties hereunder, and shall incur no liability and shall be fully
protected in acting in accordance with the written opinions of such counsel. 
The duties of the Escrow Agent hereunder will be limited to the observance of
the express provisions of this Agreement.  The Escrow Agent will not be subject
to, or be obliged or entitled to recognize, any other agreement between the
parties hereto or directions or instructions not specifically referenced
herein.  The Escrow Agent shall not make any distribution of any portion of the
Escrow Fund that is not expressly authorized pursuant to this Agreement.  The
Escrow Agent will not be liable to any party hereto for any action taken or not
taken by it under the terms hereof in the absence of gross negligence or willful
misconduct on its part.

8.             Indemnification of the Escrow Agent.  Buyer and HKS jointly and
severally agree to indemnify and hold the Escrow Agent harmless from and against
any and all losses, liabilities, claims, demands, damages, costs and expenses
(including, but not limited to, reasonable attorneys’ fees and expenses)
incurred without gross negligence or willful misconduct on the part of the
Escrow Agent, arising out of or in connection with this Agreement, including the
amount of any outside attorneys fees and expenses incurred by the Escrow Agent
in seeking advice with respect to this Agreement.  All such amounts shall be
payable upon written demand by the

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Escrow Agent, and if not so paid shall constitute a lien on the Escrow Fund
which must be satisfied before further disbursements from the Escrow Fund shall
be required hereunder.

9.             Resignation of the Escrow Agent.  The Escrow Agent may resign
from its duties hereunder by giving Buyer and HKS not less than thirty (30)
calendar days prior written notice.  Upon such resignation Buyer and HKS shall
appoint a substitute Escrow Agent.  Upon selection of a substitute Escrow Agent,
Buyer and HKS shall give the Escrow Agent a Joint Disbursement Instruction to
pay the Escrow Fund to the substitute Escrow Agent.  In the absence of such a
Joint Disbursement Instruction, the Escrow Agent may interplead the Escrow Fund
into a court of competent jurisdiction.

10.           Interpleader.  The Escrow Agent may at any time pay the Escrow
Fund into a court of competent jurisdiction and upon such payment and provision
of an accounting of all transactions in the Escrow Fund, the Escrow Agent shall
have no further duty or obligation under this Agreement.

11.           Continuation as Counsel.  Buyer, Guarantor and HKS acknowledge
that Escrow Agent is counsel to HKS, and Buyer, Guarantor and HKS consent to the
continuation of such representation, including with respect to all matters in
connection with the Purchase Agreement and the transactions contemplated
therein, notwithstanding Escrow Agent’s service under this Agreement or any
dispute which may arise in connection with this Agreement or the Purchase
Agreement or the transactions contemplated therein.  HKS represents that it was
advised that the Escrow Agent represented HKS and continues to represent HKS as
legal counsel in connection with this Agreement and other matters, and Buyer and
Guarantor hereby acknowledge and waive any actual or potential conflict of
interest arising from the Escrow Agent’s continuing to act as legal counsel for
HKS in connection with any dispute hereunder or pursuant to this Agreement or
any other matter, or as the Escrow Agent hereunder.  The parties acknowledge
that they have asked Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC to
serve as the Escrow Agent as a convenience and accommodation to them. 
Notwithstanding anything to the contrary in this Agreement or the Purchase
Agreement, by accepting the terms hereof, Buyer and Guarantor agree that such
counsel will not under any circumstances whatsoever be deemed to be disqualified
from representing either Seller in any dispute involving either or both of Buyer
and Guarantor and either or both of Sellers, and agree that Buyer and Guarantor
will not at any time file any motion or initiate or maintain any action or
proceeding whatsoever with the purpose or effect of disqualifying such counsel
from representing Sellers on account of such counsel’s acting as the Escrow
Agent hereunder.

12.           Notices.  All notices, requests, waivers, approvals, consents,
demands and other communications hereunder shall be in writing and shall be
deemed duly given and received when delivered personally, when transmitted by
facsimile (if transmission is confirmed in writing by the transmitting machine),
one business day after being deposited for next-day delivery with a nationally
recognized overnight delivery service, or three days after being deposited with
the United States Postal Service as first class mail, with all charges or
postage prepaid, properly addressed, as follows (or to such other address as any
such party may designate by a notice given in accordance with the provisions of
this Section 12):

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If to Buyer or Guarantor to:

 

 

 

 

5956 W. Las Positas Boulevard

 

 

Pleasanton, CA 94588

 

 

Facsimile No. 925-833-1496

 

 

Attention: Chief Financial Officer

 

 

 

 

 

with a copy to:

 

 

 

 

 

Shartsis Friese LLP

 

 

One Maritime Plaza, 18th Floor

 

 

San Francisco, California 94111

 

 

Facsimile No. 415-421-2922

 

 

Attention: Douglas L. Hammer, Esq.

 

 

 

 

If to HKS:

 

 

 

 

Hobart K. Swan

 

 

P.O. Box 492

 

 

233 Waterways Avenue

 

 

Boca Grande, FL 33921-0492

 

 

Facsimile No. 941-964-3029

 

 

 

 

 

and

 

 

 

 

 

Hobart K. Swan

 

 

1 Riverview Road

 

 

Severna Park, MD 21146-4629

 

 

Facsimile No. 410-544-8935

 

 

 

 

 

with a copy to:

 

 

 

 

 

Gordon, Feinblatt, Rothman, Hoffberger &

 

 

           Hollander, LLC

 

 

233 East Redwood Street

 

 

Baltimore, MD 21202

 

 

Attention: Marc Blum, Esq. and Elliott Cowan, Esq.

 

 

Facsimile No. 410-576-4246

 

 

 

 

If to the Escrow Agent:

 

 

 

 

Gordon Feinblatt Rothman Hoffberger & Hollander, LLC

 

 

233 East Redwood Street

 

 

Baltimore, Maryland 21202

 

 

Attention: Elliott Cowan, Esq. and Marc Blum, Esq.

 

 

Facsimile No. 410-576-4246

 

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13.           Guaranty.  Guarantor, as the owner of record and beneficially of
all of the outstanding capital stock of Buyer, hereby irrevocably guarantees the
full and timely payment and performance of all of the obligations of Buyer
hereunder.

14.           Assignment.  Neither this Agreement nor any or all of the rights
or obligations hereunder may be assigned by any party without the prior written
consent of the other parties.  Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, and no other person shall have any right,
benefit or obligation under this Agreement as a third party beneficiary or
otherwise.

15.           Amendment; Waiver.  This Agreement may be amended only by written
agreement of Buyer, HKS and Escrow Agent.  No waiver by any party with respect
to any condition, default or breach of covenant hereunder shall be deemed to
extend to any prior or subsequent condition, default or breach of covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.

16.           Multiple Counterparts.  This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

17.           Invalidity.  In the event that any one or more of the provisions
contained in this Agreement, shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, then to the maximum extent permitted by
law, such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement.

18.           Titles.  The titles, captions or headings of the sections herein
are for convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.

19.           Cumulative Remedies.  All rights and remedies of any party hereto
are cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.

20.           Governing Law.  This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the internal laws of the
State of Maryland (without reference to choice of law provisions of Maryland
law), and applicable United States federal law.

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IN WITNESS WHEREOF, the parties hereto have executed this Indemnity Escrow
Agreement as of the date first written above.

BUYER:

 

SIMPSON STRONG-TIE COMPANY INC.

 

 

By:

 

 

 

Michael J. Herbert, Chief Financial Officer

 

 

 

 

GUARANTOR:

 

SIMPSON MANUFACTURING CO., INC.

 

 

By:

 

 

 

Michael J. Herbert, Chief Financial Officer

 

 

 

 

HKS:

 

 

 

 

HOBART K. SWAN

 

 

ESCROW AGENT:

 

GORDON, FEINBLATT, ROTHMAN, HOFFBERGER & HOLLANDER, LLC

 

 

By:

 

 

 

Elliott Cowan, a Member of the Firm

 

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Exhibit C

Form of Consulting Agreement with Hobart K. Swan or Janis F. Swan

CONSULTING AGREEMENT

This CONSULTING AGREEMENT is made as of                 , 2007, by and between
Swan Secure Products, Inc., a Maryland corporation (the “Company”), and
                 Swan (“Consultant”), with reference to the following facts:

For many years, Consultant has been actively engaged in the management and
operation of the business of the Company.  Pursuant to a Stock Purchase
Agreement dated as of                 , 2007 (the “Stock Purchase Agreement”),
Simpson Strong-Tie Company Inc., a California corporation (“Simpson”), purchased
at the date hereof all of the outstanding shares of capital stock of the
Company, the majority of which were sold to Simpson by [Consultant / Hobart K.
Swan, Consultant’s spouse].  The Company desires to engage Consultant to assist
the Company in managing and operating the Company’s business, and Consultant
desires to provide such assistance, on the terms and conditions provided in this
Agreement.

In consideration of the premises and the mutual covenants and conditions herein,
the parties agree as follows:

1.             Engagement; Acceptance.  The Company hereby engages Consultant to
provide consulting services to the Company, and Consultant hereby accepts such
engagement by the Company, on the terms and conditions hereinafter set forth.

2.             Services.  The Company hereby engages Consultant as a consultant
and independent contractor to provide such assistance as the Company may
reasonably request from time to time in the management and operation of the
Company’s business, subject to the conditions set forth in this section 2.  The
parties agree that, except as expressly set forth below, Consultant shall not be
required to devote a minimum amount of time to the performance of Consultant’s
duties hereunder and that the performance of such duties will be consistent with
the other commitments that Consultant has from time to time, it being understood
that Consultant may be engaged in other endeavors that do not compete with the
business of the Company, Simpson or any of their affiliates.  The parties hereby
agree that the Company shall give Consultant reasonable advance notice of its
request for Consultant’s services hereunder, and Consultant shall use reasonable
efforts to provide the requested services.  Consultant shall have only such
power and authority, subject to the overall direction of the Company, as the
Company may determine from time to time.  Under no circumstances shall
Consultant be an employee or partner of the Company while this Agreement is in
effect.  During the first two years of this Agreement, the Company shall provide
Consultant with use of the office space that Consultant formerly used as an
employee of the Company, which Consultant may use in the course of providing
services hereunder and for conducting Consultant’s personal business that does
not interfere with the operation of the Company.  Subject to section 7.2 and
without limiting or otherwise affecting any representation, warranty, covenant,
agreement or obligation in or under the Stock Purchase Agreement, Consultant may
represent, perform services for, and contract with as many additional clients,
persons or companies as Consultant sees fit.

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3.             Fees and Expenses.  The Company hereby agrees to pay to
Consultant during the term of this Agreement consulting fees at the rate of
$10,416.67 per calendar month.  In addition, the Company will reimburse
Consultant for reasonable travel, entertainment and other business expenses
incurred in connection with the performance of Consultant’s services hereunder,
in accordance with the policy of the Company with respect thereto as in effect
from time to time.  On any termination of Consultant’s engagement hereunder or
this Agreement, Consultant shall be entitled only to Consultant’s fees hereunder
to the last day of the calendar month during which such termination becomes
effective and reimbursement of business expenses so incurred by Consultant
before such termination.

4.             Taxes.  Consultant acknowledges and agrees that Consultant is and
at all times will be fully and solely responsible for, and shall pay and
discharge when due, any and all federal, state and local taxes levied on or
measured by any and all compensation and expenses paid directly or indirectly by
the Company to Consultant at any time.  Consultant represents that Consultant
has properly filed before the due date, and covenants that Consultant will
properly file before the due date, any and all federal, state and local tax
returns relating to any of such compensation, in accordance with all applicable
laws, rules and regulations.  Consultant shall provide to the Company, promptly
on request, written certification that Consultant has paid all taxes due with
respect to amounts paid to Consultant hereunder, which certification shall
include a copy of Consultant’s Schedule C or other appropriate tax form or
schedule reflecting such compensation.  In addition, if the Company’s tax return
for any year is audited or contested, Consultant shall provide to the Company,
promptly on request, a true and complete copy of each such tax return that may
be relevant to such audit or contest; provided that the Company shall maintain
the same in confidence except as necessary to respond to such audit or contest. 
Consultant shall indemnify and defend the Company and its shareholders,
partners, directors, officers, employees, agents and affiliates and hold them
harmless from and against any and all claims, losses, liabilities, damages and
expenses (including, without limitation, reasonable attorneys’ fees) suffered or
incurred by any of them directly or indirectly in connection with any of such
taxes.

5.             No Other Benefits.  Consultant shall not be entitled to any
rights or benefits afforded to the Company’s employees and shall not be entitled
to participate in any medical, dental or other health plan, disability
insurance, unemployment insurance, worker’s compensation, pension plan,
profit-sharing plan or life insurance plan that the Company may have heretofore
adopted or maintained or may hereafter adopt or maintain.  Consultant shall not
be entitled to receive from the Company any sick pay or vacation pay. 
Consultant is responsible for providing, at Consultant’s own expense, worker’s
compensation and any other required insurance, as well as all licenses and
permits, necessary for Consultant to perform services hereunder.

6.             Term and Termination.  The engagement of Consultant by the
Company pursuant to this Agreement shall commence on the date hereof and
continue until the second anniversary of the date hereof.  Thereafter this
Agreement shall be renewed automatically for successive periods of one year
each; provided that, at any time on or after the date that is ninety days before
the second anniversary of the date hereof, this Agreement and Consultant’s
engagement with the Company may be terminated by either party by notice to the
other party given not less than ninety days before the termination date
specified in such notice.  Anything herein to the contrary notwithstanding,
however, the Company shall have the right to terminate this Agreement and

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Consultant’s engagement hereunder immediately, by notice to Consultant, at any
time if Consultant shall have breached or violated any representation, warranty,
covenant, agreement or obligation in or under this Agreement [or the Stock
Purchase Agreement], which breach continues for more than five business days
after Consultant receives written notice describing such breach and the actions
required to cure such breach.

7.             Trade Secrets, Patents, Competition, Conflicts, Etc.  In addition
to and without limiting or otherwise affecting any of the representations,
warranties, covenants, agreements and obligations in or under the Stock Purchase
Agreement:

7.1           Trade Secrets.  Consultant acknowledges and agrees that Consultant
has had and will have access to and has and will become acquainted with various
trade secrets and other proprietary and confidential information of the Company
(“Confidential Matter”).  For this purpose, “Confidential Matter” means and
includes any and all of the following now or hereafter owned by the Company: 
financial and operating data and other proprietary and confidential information;
marketing data; equipment; devices; patterns; electronically recordable data or
concepts; computer programs, software and hardware; software and hardware
enhancements, modifications and improvements; databases; mask works; inventions;
designs; formulas; processes; compilations of information; books; papers;
records; documents; files; specifications; names, addresses, names of agents and
employees, buying habits, practices and needs (and the Company’s assessment
thereof) of the Company’s existing and potential clients, customers,
distributors, dealers and representatives; marketing data and methods, operating
practices and related data and information; costs of materials; prices the
Company obtains or has obtained or at which it sells, has sold or intends to
sell its products or services; information relevant to pricing or bidding,
including methods or procedures for preparing bids; manufacturing methods;
tooling; product performance information; quality control procedures and
information; manufacturing or field operating processes or procedures;
manufacturing and sales costs; information regarding the financial condition of
the Company; compensation paid to the Company’s consultants and employees and
other terms of engagement or employment; names, addresses, practices, methods
and other information regarding the Company’s existing and potential joint
venture partners, licensees, licensors, vendors and suppliers; and any of the
foregoing that may have been or may be conceived, originated, discovered or
developed by the Company or Consultant or any other consultants or employees of
the Company while engaged or employed by the Company or on the basis of or using
any Confidential Matter.

Consultant acknowledges and agrees that the Confidential Matter is regularly
used or contemplated to be used in the business of the Company, is owned by the
Company and is held in strict confidence by the Company and that Consultant will
regard and protect the Confidential Matter as trade secrets and confidential
information owned by the Company.  Nevertheless, “Confidential Matter” excludes
any of the foregoing (a) that is now publicly known or hereafter becomes
publicly known without any breach of this Agreement or the Stock Purchase
Agreement, (b) that an authorized executive officer of the Company has
authorized for public dissemination, (c) that is or hereafter becomes known to
or possessed by Consultant other than through either disclosure or delivery by
the Company or the performance of services to the Company at any time before, on
or after the date hereof, or (d) that is hereafter learned or obtained by
Consultant from sources having no duty of confidentiality to the Company or
Simpson or any of their affiliates.

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Consultant represents, warrants and agrees that, except as required by the
Company in the course of Consultant’s engagement with the Company, Consultant
will not at any time, whether during or after Consultant’s engagement by the
Company, without the specific written consent of the Company in the particular
case, directly or indirectly use or authorize others to use, or disclose or
communicate to any person or entity, any Confidential Matter, for any purpose. 
Consultant further acknowledges and agrees that this section 7 prohibits and
precludes any use of Confidential Matter by Consultant or by any person
obtaining any Confidential Matter directly or indirectly from Consultant in
competition with the Company.  Consultant further agrees that Consultant will
immediately and fully inform the Company of any actual or suspected disclosure
to or use by any third party of any Confidential Matter of which Consultant
gains knowledge.

7.2           No Competition.  Consultant acknowledges and agrees that
Consultant has participated or will participate in important aspects of the
Company’s research, development, creative work, planning, operations and other
activities, and that the use of any Confidential Matter in the conduct of any
business or activity directly or indirectly competing with the Company’s
business necessarily would constitute trading on the Company’s goodwill and
reputation developed through the Company’s expenditure of substantial efforts
and moneys and would unreasonably and unfairly impair the Company’s ability to
conduct its business profitably.

Consultant therefore acknowledges and agrees that Consultant will not, at any
time during Consultant’s engagement with the Company, directly or indirectly own
an interest in, join, operate, control, participate in or be connected, as an
officer, director, manager, employee, agent, independent contractor, consultant,
member, partner, shareholder (except as a holder of less than one percent of the
capital stock of a corporation, which stock is listed and publicly traded on a
national securities exchange), owner or principal of or with any person, a
significant part of whose business consists of developing, designing,
manufacturing, marketing, distributing or selling stainless steel and
non-ferrous nails and screws for building construction or consists of
developing, designing, manufacturing, marketing, distributing or selling
connectors, fasteners and other products used in the building construction
industry, in any state, province or other jurisdiction in the United States of
America or Canada, or directly or indirectly take or permit any action in
preparation for doing any of the foregoing.

7.3           Solicitation.  As further protection for the Confidential Matter,
Consultant agrees that Consultant will not, directly or indirectly, and whether
or not for compensation, (a) during the term of this Agreement, interfere or
attempt to interfere with any contractual or business relationship or
prospective business advantage of the Company, Simpson or any of their
affiliates or (b) during the term of this Agreement and for one year thereafter,
hire or engage or attempt to hire or engage any person who is, at the time of or
at any time within one year before termination of this Agreement, an employee of
or consultant to the Company, Simpson or any of their affiliates. 
Notwithstanding the foregoing, Consultant shall not be prohibited from directly
or indirectly employing either of Consultant’s children; provided that
Consultant shall not solicit or induce either of Consultant’s children to leave
the employ of the Company.

7.4           Property.  Consultant agrees that all written materials,
including, without limitation, files, records, documents, drawings and
specifications, and all equipment and devices and all other items relating to
the business of the Company, whether prepared by or with the assistance of
Consultant or otherwise coming into Consultant’s possession, control or
knowledge

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before or during the term of this Agreement, are and shall remain the exclusive
property of the Company.  Consultant agrees that Consultant will not make or
retain any originals, copies or reproductions of or excerpts from any of the
Confidential Matter for Consultant’s use or the use of others.  On request by
the Company at any time or on termination of Consultant’s engagement with the
Company for any reason, Consultant shall immediately deliver to the Company all
of the foregoing that are or have been in Consultant’s possession or under
Consultant’s control, whether prepared or developed by or with the assistance of
Consultant or otherwise coming into Consultant’s possession, control or
knowledge.

7.5           Inventions, Designs and Patents.  Consultant agrees that
Consultant will promptly and fully disclose to the Company, and the Company
agrees to keep confidential, all inventions, designs, creations, processes,
technical or other developments, improvements, ideas and discoveries
(collectively, “Inventions”), whether patentable or not, and all copyrightable
works of any type or medium (“Works”), of which Consultant obtains knowledge or
information during Consultant’s engagement with the Company and which relate to
the existing or contemplated products, services or business of the Company or to
any research or experimental, developmental or creative work carried on or
contemplated by the Company.  All Inventions and Works are and shall remain the
exclusive property of the Company.  Consultant agrees that Consultant will
assign, and hereby does assign, to the Company or its designee, all of
Consultant’s right, title and interest in and to all Inventions (whether
patentable or not) and all Works, conceived, originated, made, developed or
reduced to practice by Consultant, alone or with others, while Consultant is
engaged by the Company.  All Works are and shall be deemed to be “works for
hire” under 17 U.S.C. §101 of the U.S. Copyright Act of 1976 and all other
applicable laws and regulations.

During the term of this Agreement and for one year thereafter, Consultant agrees
to assist the Company to obtain any and all patents, copyrights, trademarks and
service marks relating to Inventions and Works and to execute all documents and
do all things necessary to obtain letters patent and copyright, trademark and
service mark registrations therefor, to vest the Company or its designee with
full and exclusive title thereto, and to protect the same against infringement
by others, all as and to the extent that the Company may reasonably request and
at the Company’s expense, for no consideration to Consultant other than
Consultant’s fees under section 3.

Notwithstanding any of the foregoing provisions of this section 7.5 to the
contrary, this section 7.5 shall not apply to an Invention or Work developed
entirely on Consultant’s own time without using the Company’s equipment,
supplies, facilities or trade secret information except for those Inventions and
Works that either (a) relate at the time of conception or reduction to practice
of the Invention or Work to the Company’s business or to demonstrably
anticipated research or development of the Company, or (b) result from any work
performed by Consultant for the Company.  Consultant has listed on Attachment A
to this Agreement, which the Company agrees to keep confidential, all unpatented
Inventions owned, conceived, originated, made, developed or reduced to practice
by Consultant (whether before or after Consultant’s engagement with the Company)
qualifying for the exception in the first sentence of this paragraph.

7.6           Injunctive Relief.  Consultant acknowledges and agrees that
Consultant’s failure to perform any of Consultant’s covenants in this section 7
would cause irreparable injury

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to the Company and cause damages to the Company that would be difficult or
impossible to ascertain or quantify.  Accordingly, without limiting any remedies
that may be available with respect to any breach of this Agreement, Consultant
consents to the Company seeking the entry of an injunction to restrain any
breach of this section 7, without any necessity to post any bond or provide any
security in connection therewith.

7.7           Nondisclosure to the Company.  Consultant represents, warrants and
agrees that Consultant does not possess and will not use, in connection with
Consultant’s engagement by the Company, and will not disclose to the Company,
any trade secrets or other confidential or proprietary information or
intellectual property in which any other person has any right, title or
interest, without the express authorization of such other person.  Consultant
represents and warrants that Consultant’s engagement by the Company as
contemplated hereby will not infringe or violate the rights of any other person.

7.8           Trade Secrets of Third Parties.  Consultant acknowledges and
understands that, in dealing with existing and potential suppliers, contracting
parties and other third parties with which the Company has business relations or
potential business relations, the Company may receive confidential and
proprietary information and materials from such third parties subject to the
Company’s understanding that the Company will maintain the confidentiality
thereof and will require its employees and consultants to do so.  Consultant
agrees to treat all such information and materials as Confidential Matter
subject to this Agreement.

7.9           Survival.  The representations, warranties and agreements in this
section 7, except those in section 7.2, shall survive any cancellation,
termination, rescission or expiration of this Agreement and any termination of
Consultant’s engagement with the Company.

8.             Severability.  The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision hereof.

9.             Notices.  Any notice, consent, demand or other communication to
be given under or in connection with this Agreement shall be in writing and
shall be deemed duly given and received when delivered personally, when
transmitted by facsimile (if transmission is confirmed in writing by the
transmitting machine), one business day after being deposited for next-day
delivery with a nationally recognized overnight delivery service, or three days
after being mailed by first class mail, charges or postage prepaid, properly
addressed, if to the Company, at its principal office, with a copy to Simpson at
5956 W. Las Positas Boulevard, Pleasanton, California 94588, Attention Chief
Financial Officer, facsimile No. 925-833-1496, and, if to Consultant, at
Consultant’s address or facsimile number set forth following Consultant’s
signature below.  Either party may change such address from time to time by
notice hereunder to the other.

10.           Governing Law.  This Agreement and the transactions contemplated
hereby, and all disputes between the parties under or relating to this Agreement
or the facts and circumstances leading to its execution, whether in contract,
tort or otherwise, shall be governed by, and this Agreement shall be construed
and interpreted in accordance with, the laws of the State of California, without
reference to conflict of laws principles.

11.           Assignment.  Consultant shall not assign this Agreement or any
rights hereunder or delegate any duties hereunder without the prior consent of
the Company, and any attempted or

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purported assignment or delegation by Consultant without the Company’s consent
shall be void.  This Agreement shall otherwise bind and inure to the benefit of
the parties hereto and their respective successors and assigns.

12.           Counterparts.  This Agreement may be executed in two counterparts,
each of which shall be deemed an original but both of which together shall
constitute one and the same instrument.

13.           Construction.  The headings herein are for convenience of
reference only, are not part of this Agreement and shall not affect the
construction or interpretation of any provision hereof.  Whenever the context
requires, the use in this Agreement of the singular number shall be deemed to
include the plural and vice versa, and each gender shall be deemed to include
each other gender.  Except as otherwise stated, references herein to sections
refer to sections of this Agreement.  For purposes of this Agreement, (a)
“person” shall be deemed to include, in addition to natural person, corporation,
partnership, limited liability company, trust, association, firm or other entity
or organization, (b) an “affiliate” of a specified person is a person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the person specified, and (c)
“control” (including the terms “controlled by” and “under common control with”)
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, by contract, or otherwise.

14.           Entire Agreement.  This Agreement [and the Stock Purchase
Agreement together] contain[s] the entire agreement of the parties and
supersede[s] all prior or contemporaneous negotiations, correspondence,
understandings and agreements, whether written or oral, between the parties,
regarding the subject matter of this Agreement, including, without limitation,
any written or oral employment agreement, understanding or arrangement, which is
hereby superseded and cancelled.  [In case of any inconsistency between any
provision of this Agreement and any provision of the Stock Purchase Agreement,
the Stock Purchase Agreement shall govern.  Nothing in this Agreement shall be
interpreted, construed or applied in any manner that would modify, limit, impair
or otherwise affect any provision of the Stock Purchase Agreement.]  This
Agreement may not be amended or modified except by a written instrument signed
by both parties.

[Signature Page Follows]

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IN WITNESS WHEREOF, this Consulting Agreement has been duly executed by or on
behalf of the parties hereto as of the date first above written.

CONSULTANT:

 

THE COMPANY:

 

 

 

 

 

SWAN SECURE PRODUCTS, INC.

 

 

 

 

Swan

 

 

 

 

 

P.O. Box 492

 

By:

 

233 Waterways Avenue

 

Michael J. McFarland

Boca Grande, FL 33921-0492

 

Vice President

Facsimile: 941-964-3029

 

 

 

 

 

and

 

 

 

 

 

1 Riverview Road

 

 

Severna Park, MD 21146

 

 

Facsimile: 410-544-8935

 

 

 

 

 

with a copy to:

 

 

 

 

 

Gordon, Feinblatt, Rothman, Hoffberger &

 

 

Hollander, LLC

 

 

233 East Redwood Street

 

 

Baltimore, MD 21202

 

 

Attention: Marc Blum, Esq. and Elliott
Cowan, Esq.

 

 

Facsimile: 410-576-4246

 

 

 

 

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ATTACHMENT A
TO
CONSULTING AGREEMENT

The undersigned Consultant certifies that Consultant owns the interest indicated
below in the following inventions, designs, processes, technical or other
developments, improvements, ideas and discoveries, as contemplated by section
7.5 of this Agreement:

NONE.

 

 

 

Swan

 

 

 

Date:

 

, 2007

 

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Exhibit D

Form of Employment Agreement with Michael J. McFarland

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT is made as of                       , 2007 by and
between Swan Secure Products, Inc., a Maryland corporation (the “Company”), and
Michael J. McFarland (the “Employee”).  In consideration of the mutual covenants
herein, the parties agree as follows:

1.                                       Employment; Acceptance.  The Company
hereby employs the Employee and the Employee hereby accepts employment by the
Company on the terms and conditions hereinafter set forth.

2.                                       Duties and Powers.  The Employee is
hereby employed as the Vice President and Chief Operating Officer of the Company
and shall devote his full attention, energies and abilities in that capacity to
the proper management and conduct of the Company’s business, to the exclusion of
any other occupation.  As the Company’s Vice President and Chief Operating
Officer, the Employee shall have full power and authority, subject to the Bylaws
of the Company and the direction of the President of the Company and the Board
of Directors of the Company (the “Board”), generally to manage, administer and
conduct the operations of the Company, and shall have such other duties, powers
and authority as are prescribed by the President of the Company and the Board or
the Bylaws of the Company.

3.                                       Term.  The employment of the Employee
by the Company pursuant to this Agreement shall commence on the date hereof and
continue until December 31, 2010, unless earlier terminated as provided in
section 6.

4.                                       Compensation.

4.1                                 Salary.  The Company hereby agrees to pay to
the Employee a salary at the rate of $83,333.33 per month for the period from
the date hereof through December 31, 2007, and at the rate of $125,000 per year
thereafter.  Such salary shall be payable in installments on the Company’s
normal payroll dates; provided that, if the Employee’s employment terminates on
any date other than on the last day of a payroll period, the salary payable
pursuant to this section 4.1 for the payroll period during which the period of
employment is terminated shall be prorated.

4.2                                 Bonuses.  Beginning with the year ending
December 31, 2008, the Employee shall be entitled to annual bonuses each year,
payable (if earned) within thirty days after the end of each quarter based on
the net income as a percentage of sales goals and within thirty days after the
end of the year for the total revenues goal.  For this purpose, such net income
shall be calculated without deducting corporate income tax payable by the
Company and after eliminating home office and inter-company charges (other than
charges of types ordinarily incurred by the Company before July 23, 2007), in
accordance with generally accepted accounting principles.  The Employee may earn
bonuses totaling up to $375,000 for any year when the Company meets the net
income as a percentage of sales goals and up to $500,000 for any year when the
Company meets the total revenues goal.  For each such year, the net income as a
percentage of sales goals and the total revenue goal will be determined jointly
by the

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Employee and the Board within sixty days of the beginning of the year.  If the
net income as a percentage of sales goals are not fully met for all four
quarters of any such year, but are met in the aggregate for such year, the
Company will pay a bonus to the Employee within forty-five days from the end of
such year in an amount equal to the difference between $375,000 and the sum of
the quarterly bonuses paid by the Company for such year based on the net income
as a percentage of sales goals.  Notwithstanding any of the foregoing provisions
of this section 4.2 to the contrary, the Employee shall be entitled to bonuses
for the year ending December 31, 2008, aggregating not less than $375,000,
whether or not any goals for that year are met.

4.3                                 Stock Options.  The Employee may earn the
grant of a stock option under the Simpson Manufacturing Co., Inc. 1994 Stock
Option Plan entitling the Employee to purchase up to 10,000 shares of the common
stock of Simpson Manufacturing Co., Inc. for any year when the Company meets
income and sales goals (which may, but need not be, the same as or similar to
goals to be set pursuant to section 4.2) to be determined jointly by the
Employee and the Board within sixty days of the beginning of such year; provided
that each such stock option shall be subject to the terms and conditions of such
Plan.

4.4                                 Withholding.  All compensation payable under
this Agreement shall be subject to withholding and social security, unemployment
and other taxes, as required by law and regulation.

4.5                                 No Other Bonuses.  Except as expressly
provided herein, the Employee shall not be entitled to participate in the Cash
Profit Sharing Plan or any other bonus plan that may now or hereafter be adopted
or maintained by the Company or any of its affiliates.

5.                                       Benefits.  The Employee shall be
entitled to take an annual vacation in accordance with the policy of the Company
with respect thereto.  The Company will reimburse the Employee for reasonable
travel, entertainment and other business expenses incurred in connection with
the performance of his duties hereunder, in accordance with the policy of the
Company with respect thereto.  The Employee shall be entitled to participate, on
the same terms as other salaried employees of the Company participate, in any
medical, dental or other health plan, pension plan, profit-sharing plan and life
insurance plan that the Company may adopt or maintain, any of which may be
changed, terminated or eliminated by the Company at any time in its exclusive
discretion.  The Employee shall be entitled to an automobile allowance
reasonably comparable to the automobile allowance that Simpson affords to its
managers who have similar responsibility and authority.

6.                                       Termination.

6.1                                 For Cause.  The Company may terminate this
Agreement and the Employee’s employment for cause, effective immediately on the
day it sends notice of such termination to the Employee.  “Cause” for this
purpose shall be defined as continued or repeated substance abuse or insobriety;
conviction of a misdemeanor involving moral turpitude or a felony; illegal
business practices in connection with the Company’s business; misappropriation
of the Company’s assets; excessive absence of the Employee from his employment
during usual working hours for reasons other than vacation, disability or
sickness; any material breach or violation of the code of ethics, policies and
procedures of the Company as in effect from time to time; or any material breach
by the Employee of any provision of this Agreement.  On such termination for
cause, the Employee shall be entitled only to his salary pursuant to section 4.1
to

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the date of such termination, and shall not be entitled to any other
compensation whatsoever, including, without limitation, any severance
compensation.

6.2                                 Without Cause.  The Company may terminate
this Agreement and the Employee’s employment without cause, for any reason,
effective immediately on the day it sends notice of such termination to the
Employee.  Termination of the Employee’s employment as a result of his
disability or death shall be deemed to be termination without cause pursuant to
this section 6.2; provided that, (a) if the Employee becomes disabled, the
Company may terminate this Agreement and the Employee’s employment, effective at
such time (which may be immediately) as the Company may specify by notice to the
Employee, and (b) on the Employee’s death, this Agreement and the Employee’s
employment will terminate immediately, without notice.

6.3                                 By the Employee.  The Employee may terminate
this Agreement and his employment, effective not earlier than the fifteenth day
after the Company receives his notice of such termination.  On such termination
by the Employee, he shall be entitled only to his salary pursuant to section 4.1
to the date of such termination, and shall not be entitled to any other
compensation whatsoever, including, without limitation, any severance
compensation.

6.4                                 Merger; Sale of Assets.  This Agreement
shall not be terminated by any voluntary or involuntary dissolution,
reorganization, merger, consolidation or transfer of assets of the Company, or
by any other act or event of or suffered by the Company, if a surviving or
resulting corporation or other entity or person continues (or resumes after a
period of not more than sixty days) the business of the Company.  In any such
event, if the business of the Company is so continued or so resumed, this
Agreement shall be binding on and shall inure to the benefit of the corporation
or other entity or person surviving or resulting or to which such assets shall
have been transferred and the Employee shall be assigned duties and
responsibilities comparable to his duties and responsibilities immediately prior
to such transaction.  If, in any such event, the business of the Company is not
so continued or so resumed, such event shall be deemed to constitute termination
without cause by the Company as provided in section 6.2.

6.5                                 Severance Compensation.  If the Employee’s
employment hereunder or this Agreement is terminated without cause as provided
in section 6.2 or 6.4, in addition to his salary pursuant to section 4.1 to the
date of such termination, the Employee shall be entitled to severance
compensation in an amount equal to two times his annual salary for any year
ending after the year ending December 31, 2007, payable on the same terms as his
salary under section 4.1, less all amounts required by law to be withheld and
deducted; provided that, if the Employee’s employment hereunder is terminated
without cause before July 23, 2008, as provided in section 6.2 but not as a
result of his death or disability, the Company shall pay the Employee, within
thirty days from such termination, additional severance compensation in the
amount of $200,000, less all amounts required by law to be withheld and
deducted.  Except as specifically provided in this section 6.5, the Employee
shall not be entitled to any severance compensation.

6.6                                 No Limitation on Company’s Right to
Terminate.  Any other provision of section 3 or this section 6 or otherwise in
this Agreement to the contrary notwithstanding, the Company shall have the
right, in its absolute discretion, to terminate this Agreement and the
Employee’s employment hereunder at any time in accordance with the foregoing
provisions of

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this section 6, it being the intent and purpose of the foregoing provisions of
this section 6 only to set forth the consequences of termination with respect to
severance or other compensation payable to the Employee on termination in the
circumstances indicated.

7.                                    Trade Secrets, Patents, Competition, Etc.

7.1                                 Trade Secrets.  The Employee acknowledges
and agrees that the Employee has had and will have access to and has and will
become acquainted with various trade secrets and other proprietary and
confidential information of the Company (“Confidential Matter”).  For this
purpose, “Confidential Matter” means and includes any and all of the following
now or hereafter owned by the Company:  financial and operating data and other
proprietary and confidential information; marketing data; equipment; devices;
patterns; electronically recordable data or concepts; computer programs,
software and hardware; software and hardware enhancements, modifications and
improvements; databases; mask works; inventions; designs; formulas; processes;
compilations of information; books; papers; records; documents; files;
specifications; names, addresses, names of agents and employees, buying habits,
practices and needs (and the Company’s assessment thereof) of the Company’s
existing and potential clients, customers, distributors, dealers and
representatives; marketing data and methods, operating practices and related
data and information; costs of materials; prices the Company obtains or has
obtained or at which it sells, has sold or intends to sell its products or
services; information relevant to pricing or bidding, including methods or
procedures for preparing bids; manufacturing methods; tooling; product
performance information; quality control procedures and information;
manufacturing or field operating processes or procedures; manufacturing and
sales costs; information regarding the financial condition of the Company;
compensation paid to the Company’s consultants and employees and other terms of
engagement or employment; names, addresses, practices, methods and other
information regarding the Company’s existing and potential joint venture
partners, licensees, licensors, vendors and suppliers; and any of the foregoing
that may have been or may be conceived, originated, discovered or developed by
the Company or the Employee or any other consultants or employees of the Company
while engaged or employed by the Company or on the basis of or using any
Confidential Matter.

The Employee acknowledges and agrees that the Confidential Matter is regularly
used or contemplated to be used in the business of the Company, is owned by the
Company and is held in strict confidence by the Company and that the Employee
will regard and protect the Confidential Matter as trade secrets and
confidential information owned by the Company.  Nevertheless, “Confidential
Matter” excludes any of the foregoing (a) that is now publicly known or
hereafter becomes publicly known without any breach of this Agreement, (b) that
an authorized executive officer of the Company has authorized for public
dissemination, (c) that hereafter becomes known to or possessed by the Employee
other than through either disclosure or delivery by the Company or the
performance, at any time, of services to the Company, or (d) that is hereafter
learned or obtained by the Employee from sources having no duty of
confidentiality to the Company or any of its affiliates.

The Employee represents, warrants and agrees that, except as required by the
Company in the course of the Employee’s employment with the Company, the
Employee will not at any time, whether during or after the Employee’s employment
by the Company, without the specific written consent of the Company in the
particular case, directly or indirectly use or

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authorize others to use, or disclose or communicate to any person or entity, any
Confidential Matter, for any purpose.  The Employee further acknowledges and
agrees that this section 7 prohibits and precludes any use of Confidential
Matter by the Employee or by any person obtaining any Confidential Matter
directly or indirectly from the Employee in competition with the Company.  The
Employee further agrees that the Employee will immediately and fully inform the
Company of any actual or suspected disclosure to or use by any third party of
any Confidential Matter of which the Employee gains knowledge.

7.2                                 No Competition.  The Employee acknowledges
and agrees that the Employee has participated or will participate in important
aspects of the Company’s research, development, creative work, planning,
operations and other activities, and that the use of any Confidential Matter in
the conduct of any business or activity directly or indirectly competing with
the Company’s business necessarily would constitute trading on the Company’s
goodwill and reputation developed through the Company’s expenditure of
substantial efforts and moneys and would unreasonably and unfairly impair the
Company’s ability to conduct its business profitably.

The Employee therefore acknowledges and agrees that the Employee will not, at
any time during the Employee’s employment with the Company and for a period of
one year after any termination for any reason of such employment, directly or
indirectly own an interest in, join, operate, control, participate in or be
connected, as an officer, director, manager, employee, agent, independent
contractor, consultant, member, partner, shareholder (except as a holder of less
than one percent of the capital stock of a corporation, which stock is listed
and publicly traded on a national securities exchange), owner or principal with
any person engaged in developing, producing, designing, providing, soliciting
orders for, selling, distributing or marketing products or services that
directly or indirectly compete with any business of the Company or any of its
affiliates in any markets in which any of the Company and its affiliates is now
doing business or does business during the Employee’s employment, or directly or
indirectly take or permit any action in preparation for doing any of the
foregoing.  In consideration for such covenant during such period of one year
after any termination for any reason of such employment, the Company shall pay
to the Employee during such period, in addition to any amount payable under
section 4 or 6, $25,000 per month during such one-year period, less all amounts
required by law to be withheld and deducted.

7.3                                 Solicitation.  As further protection for the
Confidential Matter, the Employee agrees that the Employee will not, directly or
indirectly, and whether or not for compensation, at any time during the
Employee’s employment with the Company and for a period of one year after any
termination for any reason of such employment, (a) interfere or attempt to
interfere with any contractual or business relationship or prospective business
advantage of the Company or any of its affiliates or (b) hire or engage or
attempt to hire or engage any person who is, at the time of or at any time
within one year before termination of this Agreement, an employee of or
consultant to the Company or any of its affiliates.

7.4                                 Property.  The Employee agrees that all
written materials, including, without limitation, files, records, documents,
drawings and specifications, and all equipment and devices and all other items
relating to the business of the Company, whether prepared by or with the
assistance of the Employee or otherwise coming into the Employee’s possession,
control or knowledge before or during the term of this Agreement, are and shall
remain the exclusive

92

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property of the Company.  The Employee agrees that the Employee will not make or
retain any originals, copies or reproductions of or excerpts from any of the
Confidential Matter for the Employee’s use or the use of others.  On request by
the Company at any time or on termination of the Employee’s employment with the
Company for any reason, the Employee shall immediately deliver to the Company
all of the foregoing that are or have been in the Employee’s possession or under
the Employee’s control, whether prepared or developed by or with the assistance
of the Employee or otherwise coming into the Employee’s possession, control or
knowledge.

7.5                                 Inventions, Designs and Patents.  The
Employee agrees that the Employee will promptly and fully disclose to the
Company, and the Company agrees to keep confidential, all inventions, designs,
creations, processes, technical or other developments, improvements, ideas and
discoveries (collectively, “Inventions”), whether patentable or not, and all
copyrightable works of any type or medium (“Works”), of which the Employee
obtains knowledge or information during the Employee’s employment with the
Company and which relate to the existing or contemplated products, services or
business of the Company or to any research or experimental, developmental or
creative work carried on or contemplated by the Company.  All Inventions and
Works are and shall remain the exclusive property of the Company.  The Employee
agrees that the Employee will assign, and hereby does assign, to the Company or
its designee, all of the Employee’s right, title and interest in and to all
Inventions (whether patentable or not) and all Works, conceived, originated,
made, developed or reduced to practice by the Employee, alone or with others,
while the Employee is employed by the Company.  All Works are and shall be
deemed to be “works for hire” under 17 U.S.C. §101 of the U.S. Copyright Act of
1976 and all other applicable laws and regulations.

During the Employee’s employment with the Company and for a period of one year
after any termination for any reason of such employment, the Employee agrees to
assist the Company to obtain any and all patents, copyrights, trademarks and
service marks relating to Inventions and Works and to execute all documents and
do all things necessary to obtain letters patent and copyright, trademark and
service mark registrations therefor, to vest the Company or its designee with
full and exclusive title thereto, and to protect the same against infringement
by others, all as and to the extent that the Company may reasonably request and
at the Company’s expense, for no consideration to the Employee other than the
Employee’s compensation, if any, under section 4.

Notwithstanding any of the foregoing provisions of this section 7.5 to the
contrary, this section 7.5 shall not apply to an Invention or Work developed
entirely on the Employee’s own time without using the Company’s equipment,
supplies, facilities or trade secret information except for those Inventions and
Works that either (a) relate at the time of conception or reduction to practice
of the Invention or Work to the Company’s business or to demonstrably
anticipated research or development of the Company, or (b) result from any work
performed by the Employee for the Company.  The Employee has listed on
Attachment A to this Agreement, which the Company agrees to keep confidential,
all unpatented Inventions owned, conceived, originated, made, developed or
reduced to practice by the Employee (whether before or after the Employee’s
employment with the Company) qualifying for the exception in the first sentence
of this paragraph.

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7.6                                 Injunctive Relief.  The Employee
acknowledges and agrees that the Employee’s failure to perform any of the
Employee’s covenants in this section 7 would cause irreparable injury to the
Company and cause damages to the Company that would be difficult or impossible
to ascertain or quantify.  Accordingly, without limiting any remedies that may
be available with respect to any breach of this Agreement, the Employee consents
to the Company seeking the entry of an injunction to restrain any breach of this
section 7, without any necessity to post any bond or provide any security in
connection therewith.

7.7                                 Nondisclosure to the Company.  The Employee
represents, warrants and agrees that the Employee does not possess and will not
use, in connection with the Employee’s employment by the Company, and will not
disclose to the Company, any trade secrets or other confidential or proprietary
information or intellectual property in which any other person has any right,
title or interest, without the express authorization of such other person.  The
Employee represents and warrants that the Employee’s employment by the Company
as contemplated hereby will not infringe or violate the rights of any other
person.

7.8                                 Trade Secrets of Third Parties.  The
Employee acknowledges and understands that, in dealing with existing and
potential suppliers, contracting parties and other third parties with which the
Company has business relations or potential business relations, the Company may
receive confidential and proprietary information and materials from such third
parties subject to the Company’s understanding that the Company will maintain
the confidentiality thereof and will require its employees and consultants to do
so.  The Employee agrees to treat all such information and materials as
Confidential Matter subject to this Agreement.

7.9                                 Survival.  The representations, warranties
and agreements in this section 7 shall survive any cancellation, termination,
rescission or expiration of this Agreement and any termination of the Employee’s
employment with the Company.

8.                                       Severability.  The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision hereof.

9.                                       Notices.  Any notice, consent, demand
or other communication to be given under or in connection with this Agreement
shall be in writing and shall be deemed duly given and received when delivered
personally, when transmitted by facsimile (if transmission is confirmed in
writing by the transmitting machine), one business day after being deposited for
next-day delivery with a nationally recognized overnight delivery service, or
three days after being mailed by first class mail, charges or postage prepaid,
properly addressed, if to the Company, at its principal office, with a copy to
Simpson Strong-Tie Company Inc. at 5956 W. Las Positas Boulevard, Pleasanton,
California 94588, Attention Chief Financial Officer, facsimile No. 925-833-1496,
and, if to the Employee, at his address or facsimile number set forth following
his signature below.  Either party may change such address from time to time by
notice hereunder to the other.

10.                                 Governing Law.  This Agreement and the
transactions contemplated hereby, and all disputes between the parties under or
relating to this Agreement or the facts and circumstances leading to its
execution, whether in contract, tort or otherwise, shall be governed by, and
this Agreement shall be construed and interpreted in accordance with, the laws
of the State of Maryland, without reference to conflict of laws principles.

94

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11.                                 Assignment.  Except as otherwise
specifically provided herein, neither party shall assign this Agreement or any
rights hereunder without the prior consent of the other party, and any attempted
or purported assignment without such consent shall be void; provided that the
Employee’s consent shall not be required hereby for any of the transactions to
which section 6.4 refers or for any assignment by the Company to any affiliate
of the Company.  This Agreement shall otherwise bind and inure to the benefit of
the parties hereto and their respective successors, assigns, heirs, legatees,
devisees, executors, administrators and legal representatives.

12.                                 Counterparts.  This Agreement may be
executed in two counterparts, each of which shall be deemed an original but both
of which together shall constitute one and the same instrument.

13.                                 Construction.  The headings herein are for
convenience of reference only, are not part of this Agreement and shall not
affect the construction or interpretation of any provision hereof.  Whenever the
context requires, the use in this Agreement of the singular number shall be
deemed to include the plural and vice versa, and each gender shall be deemed to
include each other gender.  Except as otherwise stated, references herein to
sections refer to sections of this Agreement.  For purposes of this Agreement,
(a) “person” shall be deemed to include, in addition to natural person,
corporation, partnership, limited liability company, trust, association, firm or
other entity or organization, (b) an “affiliate” of a specified person is a
person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the person specified, and
(c) “control” (including the terms “controlled by” and “under common control
with”) means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a person, whether through the
ownership of voting securities, by contract, or otherwise.  The parties
acknowledge that each of Simpson Manufacturing Co., Inc. and its direct and
indirect subsidiaries (including, without limitation, Simpson Strong-Tie Company
Inc.) is an affiliate of the Company.

14.                                 Entire Agreement.  This Agreement contains
the entire agreement of the parties and supersedes all prior or contemporaneous
negotiations, correspondence, understandings and agreements, whether written or
oral, between the parties, regarding the subject matter of this Agreement,
including, without limitation, the Employment Agreement dated January 8, 2004,
as amended, which is hereby superseded and cancelled.  This Agreement may not be
amended or modified except by a written instrument signed by both parties.

[Signature Page Follows]

95

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IN WITNESS WHEREOF, this Employment Agreement has been duly executed by or on
behalf of the parties hereto as of the date first above written.

 

SWAN SECURE PRODUCTS, INC.

 

 

 

 

 

 

Michael J. McFarland

 

By:

 

Address:

 

 

 

Print Name:

 

 

 

 

Title:

 

Facsimile:

 

 

 

 

96

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ATTACHMENT A

TO

EMPLOYMENT AGREEMENT

The undersigned Employee certifies that the Employee owns the interest indicated
below in the following inventions, designs, processes, technical or other
developments, improvements, ideas and discoveries, as contemplated by section
7.5 of this Agreement:

 

 

Michael J. McFarland

 

 

 

Date:

 

, 2007

 

97

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Exhibit E

Form of Transferor’s Certificate of Non-Foreign Status

TRANSFEROR’S CERTIFICATE OF NON-FOREIGN STATUS

The undersigned, [Hobart K. Swan / Swan Secure Products, Inc. Employee Stock
Ownership Plan and Trust] hereby certifies that:

1.                                       The undersigned is not a nonresident
alien for purposes of U.S. income taxation;

2.                                       The U.S. taxpayer identifying number of
the undersigned is                                ; and

3.                                       The home or official address of the
undersigned is                                                                

The undersigned understands that this certification may be disclosed to the
Internal Revenue Service by the transferee and that any false statement that the
undersigned has made here could be punished by fine, imprisonment or both.

Under penalties of perjury the undersigned declares that the undersigned has
examined this certification and to the best knowledge and belief of the
undersigned it is true, correct and complete.

 

[Swan Secure Products, Inc., Employee

 

 

Stock Ownership Plan and Trust]

 

 

 

 

 

 

Dated:

 

, 2007

 

[By ]

 

 

 

[Hobart K. Swan /

 

,

 

 

Trustee]

 

98

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Exhibit F

Form of Opinion of Counsel for Sellers

Capitalized terms used and not otherwise defined herein have the meanings
respectively ascribed to them in the Stock Purchase Agreement.

(a)                                  The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland and is duly qualified to conduct business and is in good standing as a
foreign corporation under the laws of each jurisdiction where, by virtue of its
business conducted therein, it is required to be so qualified, except where the
failure to be so qualified will not have a Material Adverse Effect.

(b)                                 The authorized capital stock of the Company
consists of 5,000,000 shares of common stock, par value $0.001 per share, of
which 2,125,000 shares have been issued and are outstanding, and no shares of
any other class or series are issued and outstanding.  All shares that are
issued and outstanding were duly and validly issued and to our knowledge were
offered and sold in compliance with federal securities laws and all applicable
state securities laws, and are fully paid and non-assessable.  To our knowledge,
the Company has not issued any other capital stock or securities or instruments
convertible into, exchangeable for or exercisable to purchase or otherwise
acquire any capital stock of the Company.

(c)                                  Each Seller has all necessary power,
authority and capacity to sell his or its Shares to Buyer as contemplated by the
Agreement, to execute and deliver the Agreement and the other agreements,
assignments, instruments, certificates and documents contemplated thereby
(collectively, the “Transaction Documents”) and to perform his or its
obligations thereunder, and all necessary action and other proceedings,
including obtaining all necessary waivers, approvals and consents from third
parties and others, required to be taken by either Seller or the Company to
authorize and carry out the Agreement and the other Transaction Documents and
the transactions contemplated thereby have been duly and properly taken or
obtained.

(d)                                 The Agreement and the other Transaction
Documents have been duly executed and delivered by the respective Sellers party
thereto, and constitute legal, valid and binding agreements of Sellers,
enforceable against them in accordance with their respective terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws relating to or affecting the
rights of creditors generally and except for limitations imposed by general
principles of equity on the availability of equitable remedies.

(e)                                  The execution and delivery by Sellers of
the Transaction Documents, the performance by them of their respective
obligations thereunder and their performance of, fulfillment of and compliance
with all of the terms and conditions thereof, do not and will not conflict with,
breach or result in a breach of, constitute a default under, result in the
creation of any Lien on any of their respective properties pursuant to, violate
or result in a violation of any Lien, agreement, indenture or instrument known
to us, or, to our knowledge, any law, statute, code, ordinance, rule,
regulation, order, judgment or decree, to or by which any of the Company and
Sellers is a party, is subject or is bound.

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(f)                                    We do not know, after reasonable inquiry,
of any litigation, proceeding or governmental investigation pending or
threatened against or relating to any of the Company and Sellers, any of the
Shares, any assets of the Company or any of the transactions contemplated by the
Transaction Documents or of any legal impediment to the continued operation by
the Company of its business in the ordinary course in the manner in which such
business has heretofore been conducted.

100

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SCHEDULES

to

STOCK PURCHASE AGREEMENT

among

SIMPSON STRONG-TIE COMPANY, INC.,

as Buyer,

SIMPSON MANUFACTURING CO., INC.,

as Guarantor

and

HOBART K. SWAN

and

THE SWAN SECURE PRODUCTS, INC.
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST,

as Sellers

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

Schedule 2.2(d)     December Balance Sheet

See attached December 31, 2006 Balance Sheet of Swan Secure Products, Inc.

2

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Schedule 4.20        ESOP Provisions

In connection with the Closing:

The ESOP will be terminated effective as of the Closing Date.

The ESOP will be amended effective as of the Closing Date, in the form
substantially as attached hereto as Amendment 1 to the ESOP, to provide as
follows:

1.             For the 2007 Plan Year, the Allocation Date will be the Closing
Date, and each Participant who is an Employee on the Closing Date will share in
the allocations of Employer Contributions for the 2007 Plan Year even if he is
not credited with 1,000 Hours of Service on the Closing Date.

2.             For the 2007 Plan Year, Compensation will not include any
Compensation paid to any Participant after the Closing Date.

3.             Any cash proceeds resulting from the sale of unallocated Financed
Shares remaining following payment in full of the ESOP Acquisition Loan (“excess
sales proceeds”), will be allocated per capita to each Participant’s Other
Investments Account.

4.             No Employee will become a Participant in the ESOP after the
Closing Date.

5.             No Employer Contributions will be made to the ESOP Trust after
the Closing Date.

6.             Effective as of the Closing Date, Trust Assets will be invested
by the Trustee solely in principal-preserving investments.

7.             Each Participant who has not received a complete distribution of
his ESOP account balance will have a 100% vested and nonforfeitable interest in
his ESOP account balance.

8.             Distributions to Participants and Beneficiaries will be made as
soon as administratively practicable following the Closing Date.

9.             All distributions will be made in a lump sum of cash and no
Participant will have the right to a distribution in the form of shares of
Company Stock.

10.           After termination of the Plan, the Trust will be maintained until
the ESOP accounts of all Participants have been distributed.

Defined terms not defined in the Agreement shall have the meaning ascribed to
them in the ESOP.

3

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Schedule 5.1.5       Directors and Officers of the Company

Directors:

Hobart K. Swan

Janis F. Swan

Michael J. McFarland

Officers:

Chairman of the Board and

 

 

 

 

Chief Executive Officer

 

-

 

Hobart K. Swan

 

 

 

 

 

President and

 

 

 

 

Chief Operating Officer

 

-

 

Michael J. McFarland

 

 

 

 

 

Vice President and Secretary

 

-

 

Janis F. Swan

 

 

 

 

 

Treasurer and

 

 

 

 

Chief Financial Officer

 

-

 

Teresa D. Heath

 

4

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Schedule 5.1.6       Restrictions on Transaction

A change in control which results from a sale of the Company’s stock constitutes
a prohibited assignment under each of the three leases disclosed in Schedule
5.1.12 and other Schedules, unless consent of the respective landlords is
obtained.  HKS has made a written request to each landlord that such landlord
consent in writing to the change in control and complete an estoppel
certificate.

5

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

Schedule 5.1.7       Conflicts

A change in control which results from a sale of the Company’s stock constitutes
a prohibited assignment under each of the three leases disclosed in Schedule
5.1.12 and other Schedules, unless consent of the respective landlords is
obtained.  HKS has made a written request to each landlord that such landlord
consent in writing to the change in control and complete an estoppel
certificate.

6

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Schedule 5.1.9       Changes

On January 17, 2007 the Company adopted the Swan Secure Products, Inc. Employee
Stock Ownership Plan (ESOP), effective as of January 1, 2007.  On January 17,
2007, the ESOP Trust purchased 701,250 shares of the Company’s stock from HKS
for a Promissory Note in the original principal amount of $11,451,412.50,
pursuant to the terms of a Stock Purchase Agreement dated January 17, 2007.  In
the Stock Purchase Agreement, the Company guaranteed the ESOP Trust’s
obligations under such Promissory Note, and the Company agreed to indemnify the
ESOP Trust against any breach by HKS of his obligations, representations or
warranties under the Stock Purchase Agreement.  The Company’s guaranty of the
ESOP Trust’s obligations under such Promissory Note will be satisfied at Closing
upon the ESOP’s payment in full of such Promissory Note.

Effective April 2, 2007, the Company established a sales and marketing presence
in the Toronto, Ontario, Canada area through the employment of Jamie Dillon, a
veteran of 22 years of fastener sales and warehouse management experience with
specific expertise in the marketing of stainless steel and non-ferrous threaded
products.  Initially Jamie Dillon will work from his home to develop the market
for the Company’s products in Eastern Canada with the longer term objective of
opening a branch warehouse in Toronto to serve that market directly.  On April
18, 2007, the Company was assigned Business Number BN: 89078 9951 by the Canada
Revenue Agency authorizing the Company to do business in Canada.

Michael J. McFarland and the Company have or will, prior to the Closing, execute
a Second Amendment to Employment Agreement in form approved by Buyer, in
connection with the transactions contemplated by this Agreement.

Effective as of the Closing, considering that HKS and Janis F. Swan will enter
into Consulting Agreements with the Company, such individuals will resign as
employees of the Company.

Prior to the Closing, the Company will receive a refund from Swan Secure, LLC of
the $30,000 security deposit paid by the Company to Swan Secure, LLC under the
lease in effect prior to the Closing.

7

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Schedule 5.1.11     Material Contracts

See copies of Michael J. McFarland Employment Agreement, as amended, attached to
Schedule 5.1.17.

Promissory Note dated January 16, 2007 made by the Company and payable to HKS in
the original principal amount of $6,000,000 (copy attached).

Loan Agreement dated  March 21, 2000 made by the Company and Allfirst Bank (copy
attached) establishing a $600,000 credit facility for equipment financing, and
related loan documents, which credit facility has a zero outstanding balance and
shall be closed and terminated as of the Closing.

Demand Business Purpose Promissory Note dated September 1, 2000 made by the
Company and payable to Allfirst Bank in the original principal amount of
$1,000,000 (copy attached), and related loan documents establishing a working
capital line of credit, which credit facility has a zero outstanding balance and
shall be closed and terminated as of the Closing.

Board policy to pay salary to Hobart K. Swan and Janis F. Swan, each in the
amount of $125,000 per annum (copy attached), which policy shall be terminated
as of the Closing.

See the three leases disclosed in Schedule 5.1.12 and other Schedules.

The Company has entered into engagement letters with the following firms in
connection with the transactions contemplated by this Agreement (copies
attached); pursuant to Section 4.10.1 of the Agreement, HKS is responsible for
all fees and expenses under these engagements to the extent not paid by the
Company as of the Closing:

ESOP Services, Inc.
Reliance Trust Company
Advanced Valuation Analytics, Inc.
Sheppard Mullin Richter & Hampton

8

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Schedule 5.1.12     Properties

See attached depreciation schedule from the Company’s 2006 federal income tax
return.  All items of equipment are owned.  There have been additions and
retirements of equipment since December 31, 2006 in the ordinary course.  (Added
equipment had cost values of approximately $86,000  in the aggregate, and
retired equipment had cost values under $25,000 in the aggregate.)

See attached inventory report (dated July 3, 2007 as to Baltimore and dated July
5, 2007 as to Oregon, Florida and Massachusetts facilities).

See attached accounts receivable report as of July 5, 2007.

The Company does not own any real property.  The Company leases the following
four real properties:

ADDRESS OF PROPERTY

 

NAME OF LESSOR

 

CURRENT RENT

 

LEASE
EXPIRATON
DATE

 

7525 Perryman Court

 

Swan Secure, LLC

 

$

27,500.00/Month

 

7 September 2009

 

Curtis Bay, MD 21226

 

1Riverview Road

 

 

 

 

 

 

Severna Park, MD 21146

 

 

 

 

 

 

 

 

 

 

 

 

 

Building 5

 

Eastern Western Corporation

 

$

2,175.00/Month

 

31 July 2010

 

12911 N.E. David Circle

 

P.O. Box 3228

 

 

 

 

 

Portland, OR 97230

 

Portland, OR 97208

 

 

 

 

 

 

 

 

 

 

 

 

 

7859 Bayberry Road

 

G.F. Florida Operating Alpha, Inc.

 

$

2,537.50/Month

 

30 November 2007

 

Jacksonville, FL 32256

 

8186 Baymeadows Way ‘West

 

 

 

 

 

 

Jacksonville, FL 32256

 

 

 

 

 

 

 

 

 

 

 

 

 

960 Turnpike Street

 

Foxwood Business Center, LLC

 

$

2,187.50/Month

 

31 May 2010

 

Canton, MA 02021

 

c/o The Naughton Company

 

 

 

 

 

 

Three Summer Street

 

 

 

 

 

 

Hingham, MA 02043

 

 

 

 

 

 

9

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Schedule 5.1.13     Intellectual Property

The Company claims common law trademark protection for the names Swan Secure,
Swan Secure Products, Everlasting Fastening, and the various unique product
names indicated in the Company’s online catalog, such as Dexxter, Timber Tamers,
Woodpeckers, Swaneze, Beaver Bite, Srudinis, Billy Goats and Sharx.  See
www.swansecure.com and http://www.swansecure.com/unique_fastener_products.html. 
However, the Company has not registered its trademarks, nor has the Company done
exhaustive or definitive research on any of the names used by the Company, to
ascertain whether the names are available or infringing or can be protected. 
Product names are selected after an informal internet search done in-house. 
Therefore no representation or warranty is made as to whether the Company’s
trademarks or trade names infringe on the rights of third persons or can be
protected.   However, HKS does not believe that any individual product name is
material to the Company.

On one occasion several years ago, the Company ceased manufacturing a
double-threaded screw product after another manufacturer claimed patent
infringement, even though HKS believes that the Company was manufacturing the
product prior to issuance of the patent.  No other claims for infringement of
intellectual property rights of others have been made against the Company.

10

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Schedule 5.1.14     Tax Matters

The Company has received correspondence from the States of Ohio and Michigan
(copies attached) seeking payment of a tax based on business done in those
states.  This has resulted in the Company paying a “nexus tax” (called the
“Commercial Activity Tax”) to Ohio.  The Company’s accountant communicated with
the State of Michigan and determined that no tax is due to the State of
Michigan.

Copies of the Company’s sales and use tax certificates, or business licenses,
for Maryland, Oregon, Florida, Massachussetts  are attached.

A copy of the Company’s S election confirmation letter is attached.

A Second Amendment to Michael J. McFarland’s Employment Agreement, in form
approved by the Buyer, will be entered into to assure that payment of deferred
compensation to Mr. McFarland immediately prior to the Closing complies with
Internal Revenue Code Section 409A.

See the description of the Company’s Canadian activities in Schedule 5.1.9.  A
copy of a letter from the Canada Revenue Agency assigning the Company’s Canada
Business Number is attached.

The Company has not yet determined an appropriate reserve for Canadian taxes.

11

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Schedule 5.1.15              Litigation

None.

The Company routinely receives notices of garnishments of its employees’ wages.

12

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Schedule 5.1.17              Personal Services Contracts

Michael J. McFarland Employment Agreement dated January 8, 2004, as modified by
a First Amendment to Employment Agreement dated January 16, 2007, and as
modified by a Second Amendment to Employment Agreement in form approved by Buyer
shortly before the date of this Agreement.  (copies attached).  See also
attached copy of schedule of deferred compensation earned by Michael J.
McFarland.

See attached copies of Company policy for the payment of salary to HKS and Janis
F. Swan, which policy will be terminated as of the Closing.

See attached copies of payroll records as follows:

2006

Summary
Officers
Office
Sales
Manufacturing
Warehouse, Shipping and Packing
Florida
Oregon

January to June 2007

Summary
Officers
Office
Sales
Manufacturing
Warehouse, Shipping and Packing
Massachussetts
Florida
Oregon

13

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Schedule 5.1.18              Employee Benefit Plans

The Company sponsors the following “Plans” as defined in Section 5.1.18:

1.               Coventry Health Care of Delaware Diamond 10 Upgrade Plus
(health insurance, prescription drug coverage, vision discount for Maryland
employees)

2.               Coventry Health Care of Delaware C-1 Plan (health insurance,
prescription drug coverage, vision discount for non-Maryland employees)

3.               DentaQuest Classic DHMO and Choice PPO (dental insurance)

4.               United Legal Benefits Group Legal Protection Plan (legal
services for Maryland employees only)

5.               Ft. Dearborn Life Insurance Company (also known as Medical Life
Insurance Company) (short-term disability insurance)

6.               Jefferson Pilot Life Insurance Company (life and AD&D
insurance)

7.               Profit Sharing Plan (Plan Number 002)

8.               Employee Stock Ownership Plan (Plan Number 003)

9.               Deferred Bonus arrangement for Michael McFarland, contained in
his employment agreement.

10.         Discretionary Bonus Program, for employees with at least one year of
employment (unwritten) (not committed in advance)

11.         Sales Staff Bonus Program – see attached description

12.         Hourly Employee Bonus Program – see attached description

13.         Swan Secure Products, Inc. Flexible Benefits Plan (healthcare and
dependent care flexible spending accounts, and pre-tax contributions for health
and dental insurance)

14.         Tuition reimbursement program – see item 16

15.         Vacation pay program – see item 16 and 17

16.         See attached “Employee Benefit Summary” (Maryland and Out-of-State
employee versions)

17.         See attached Employee Handbook

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Schedule 5.1.20              Collective Bargaining Agreements

None

15

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Schedule 5.1.21              Insurance Policies

See attached copies of insurance policies, as follows:

Life Insurance policy on Michael McFarland in the face amount of $250,000 issued
by American General Life Insurance Company (policy number YME0248842)

Property Insurance Policy issued by Valley Forge Insurance Company (policy
number C 1022983390)

General Liability Insurance Policy issued by Valley Forge Insurance Company
(policy number C 1022983390)

Crime Insurance Policy issued by Valley Forge Insurance Company (policy number C
1022983390)

Inland Marine Insurance Policy issued by Valley Forge Insurance Company (policy
number C 1022983390)

Workers Compensation Insurance Policy issued by Transportation Insurance Co.
(policy number WC 1 22983437)

Fiduciary Liability Insurance Policy issued by Great American Insurance
Companies (policy number FDP 6660695)

Employment Practices Liability Insurance Policy issued by Continental Casualty
Company

Umbrella Insurance Policy Issued by Continental Casualty Company (policy number
C 1022983423)

See also insurance policies referenced in Schedule 5.1.18, Employee Benefits

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Schedule 5.1.22              Bank Accounts

1.

 

M & T Bank

 

Checking Account No. 17599603

 

 

Annapolis, MD Branch

 

Authorized Signatories:

 

 

900 Bestgate Road, Suite 102

 

Hobart K. Swan, Janis F. Swan

 

 

Annapolis, MD 21401

 

Michael J. McFarland, Hobart F. Swan

 

 

Phone: (410)280-5717

 

 

 

 

 

 

 

2.

 

T. Rowe Price Funds, Inc.

 

Money Market Fund Acct. No. 670561501-1

 

 

P.O. Box 17300

 

Authorized Signatories:

 

 

Baltimore, MD 21297-1300

 

Hobart K. Swan, Janis F. Swan

 

 

Phone:(800)225-5132

 

Teresa D. Heath

 

 

 

 

 

3.

 

Brown Advisory Securities, LLC

 

Money Market Fund Acct. No. 8215-0374

 

 

901 South Bond Street, Suite 400

 

Brokerage Account No. 8215-0376

 

 

Baltimore, MD 21231-3340

 

Authorized Signatories:

 

 

Phone:(410)537-5528

 

Hobart K. Swan & Janis F. Swan

 

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Schedule 5.1.24(a)                                                Permits and
Reports

See attached copy of Phase One Environmental and Architectural/Engineering
Assessment of the Georg USA Inc. Building, dated June 26, 1995 prepared by
CONNOR Environmental Services & Engineering Assessments, with respect to the
7525 Perryman Court property.   This report was prepared for a prior owner of
the property.

See attached copy of Historic Map Search Report dated May 31, 1995, prepared by
Environmental Risk Information & Imaging Services, with respect to the 7525
Perryman Court property.  This report was prepared for a prior owner of the
property.

HKS believes that the Brandon Woods Energy Business Park, including the 7525
Perryman Court property, is built over approximately 35 feet of compacted
scrubbed fly ash deposited by a former owner of the property, Constellation
Property, Inc., which makes the property susceptible to erosion upon water
incursion.

At the 7525 Perryman Court property:

The Company stores waste oil in barrels, and such barrels are then pumped out by
Lacato Waste Oil, which removes the waste oil from the premises.

The Company uses one dumpster for scrap metals, discarded racks and strapping,
which is provided and emptied by Owl Metals.

The Company uses one dumpster for general trash, sawdust, paper and plastic,
which is provided and emptied by Allied Waste Services.

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Schedule 5.1.24(b)                                               Underground
Storage Tanks

None.

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Schedule 5.1.25              Payables

See attached payables report as of July 5, 2007.

See reference to the Company’s obligations under the January 17, 2007 Stock
Purchase Agreement between HKS and the ESOP Trust, referenced in Schedule 5.1.9,
and see the Company’s credit facility documents with M&T Bank described in
Schedule 5.1.11.

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