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



 1
 









(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 



 2
 









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:



 3
 









(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 



 4
 









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.



 5
 









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 



 6
 









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, 



 7
 









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.



 8
 









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 



 9
 









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.



 10
 









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 



 11
 









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.



 12
 









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



 13
 









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 



 14
 









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 



 15
 









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



 16















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



 17
 









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.



 18
 









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



 19
 









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.



 20
 









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



 21
 









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



 22
 









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,



 23
 









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;



 24
 









(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



 25
 









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,



 26
 









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.



 27
 









(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,



 28
 









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
 









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



 30
 









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.



 31
 









(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.



 32
 









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,



 33
 









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



 34
 









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



 35
 









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



 36















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
 









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
 









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
 









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
 









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
 









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
 









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
 









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
 









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
 









 


	
  

  	
   

  	
  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
 









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
 









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
 









(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
 









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
 









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



 51
 









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



 52
 









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.



 53
 









(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



 54
 









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



 55















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,



 56
 









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



 57
 









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



 58
 









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,



 59
 









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



 60
 









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



 61
 









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



 62
 









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



 63
 









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



 64
 









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



 65
 









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



 66
 









(“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



 67
 









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.



 68
 









(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.



 69
 









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

  	
   

  



 



 70















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















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.



 C-1
 









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
 









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
 









 


	
  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















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:



 71
 









“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.



 72
 









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



 73
 









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



 74
 









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):



 75
 









 


	
  

  	
  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

  



 



 76
 









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.



 77
 









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

  
				



 



 78
 









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.



 79
 









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



 80
 









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.



 81
 









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



 82
 









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



 83
 









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



 84
 









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]



 85
 









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

  	
   

  	
   

  
					



 


 



 86
 









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

  
					



 



 87















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



 88
 









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



 89
 









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



 90
 









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



 91
 









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
 









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.



 93
 









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
 









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
 









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
 









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
 









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
 









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.



 99
 









(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















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
 









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
 









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
 









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
 









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
 









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
 









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
 









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
 









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















Schedule
5.1.15              Litigation


None.


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



 12
 









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
 









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



 14
 









Schedule
5.1.20              Collective Bargaining Agreements


None



 15
 









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



 16
 









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

  



 



 17
 









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.



 18
 









Schedule
5.1.24(b)                                               Underground Storage Tanks


None.



 19
 









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.



 20