-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KpnlqfctedGev3dohN92nMmetj/SsWDTvdlzmPIHnjtXgr1X9GUwZ9FmzB46xuMH gXN47uy3sBLXew8vbyYHpg== 0000920371-00-000006.txt : 20000516 0000920371-00-000006.hdr.sgml : 20000516 ACCESSION NUMBER: 0000920371-00-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIMPSON MANUFACTURING CO INC /CA/ CENTRAL INDEX KEY: 0000920371 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 943196943 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13429 FILM NUMBER: 635057 BUSINESS ADDRESS: STREET 1: 4637 CHABOT DR STREET 2: STE 200 CITY: PLEASANTON STATE: CA ZIP: 94588 BUSINESS PHONE: 5106099912 MAIL ADDRESS: STREET 1: 4637 CHABOT DR STREET 2: STE 200 CITY: PLEASANTON STATE: CA ZIP: 94588 10-Q 1 > UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly period ended: March 31, 2000 -------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----- ----- Commission file number: 0-23804 ------- Simpson Manufacturing Co., Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 94-3196943 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4637 Chabot Drive, Suite 200, Pleasanton, CA 94588 ------------------------------------------------------ (Address of principal executive offices) (Registrant's telephone number, including area code): (925)460-9912 ------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares of the Registrant's Common Stock outstanding as of March 31, 2000: 12,025,423 ---------- PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, ---------------------------- (Unaudited) December 31, 2000 1999 1999 ------------ ------------ ------------ ASSETS Current assets Cash and cash equivalents $ 45,551,211 $ 33,642,222 $ 54,509,610 Trade accounts receivable, net 52,893,480 44,724,610 42,420,223 Inventories 78,380,347 59,564,149 72,751,245 Deferred income taxes 5,102,306 4,046,027 4,745,534 Other current assets 2,156,309 1,713,334 1,323,215 ------------ ------------ ------------ Total current assets 184,083,653 143,690,342 175,749,827 Property, plant and equipment, net 60,662,207 56,557,645 61,143,524 Investments 363,646 514,155 374,455 Other noncurrent assets 12,255,670 3,048,198 9,986,187 ------------ ------------ ------------ Total assets $257,365,176 $203,810,340 $247,253,993 ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable and current portion of long-term debt $ 487,549 $ 327,477 $ 349,541 Trade accounts payable 10,192,763 12,371,463 12,780,621 Accrued liabilities 7,436,206 5,223,706 7,819,155 Income taxes payable 7,482,869 5,356,866 3,362,254 Accrued profit sharing trust contributions 1,135,525 4,128,707 3,504,286 Accrued cash profit sharing and commissions 4,808,670 3,732,724 4,531,861 Accrued workers' compensation 1,445,764 879,272 1,345,764 ------------ ------------ ------------ Total current liabilities 32,989,346 32,020,215 33,693,482 Long-term debt, net of current portion 2,398,651 2,557,020 2,414,562 Deferred income taxes and long-term liabilities 423,932 434,607 556,783 ------------ ------------ ------------ Total liabilities 35,811,929 35,011,842 36,664,827 ------------ ------------ ------------ Minority interest in consolidated subsidiaries 1,804,040 - - ------------ ------------ ------------ Commitments and contingencies (Notes 5 and 6) Stockholders' equity Common stock 44,901,418 33,871,198 44,716,488 Retained earnings 175,733,364 135,638,611 166,457,600 Accumulated other comprehensive income (885,575) (711,311) (584,922) ------------ ------------ ------------ Total stockholders' equity 219,749,207 168,798,498 210,589,166 ------------ ------------ ------------ Total liabilities and stockholders' equity $257,365,176 $203,810,340 $247,253,993 ============ ============ ============
The accompanying notes are an integral part of these condensed consolidated financial statements. Simpson Manufacturing Co., Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, ---------------------------- 2000 1999 ------------ ------------ Net sales $ 84,615,539 $ 74,661,590 Cost of sales 50,800,161 46,212,976 ------------ ------------ Gross profit 33,815,378 28,448,614 ------------ ------------ Operating expenses: Selling 8,553,122 7,897,807 General and administrative 10,648,327 8,121,761 ------------ ------------ 19,201,449 16,019,568 ------------ ------------ Income from operations 14,613,929 12,429,046 Interest income, net 643,875 348,357 ------------ ------------ Income before income taxes 15,257,804 12,777,403 Provision for income taxes 6,178,000 5,129,000 Minority interest (195,960) - ------------ ------------ Net income $ 9,275,764 $ 7,648,403 ============ ============ Net income per common share Basic $ 0.77 $ 0.66 Diluted $ 0.76 $ 0.63 Number of shares outstanding Basic 12,020,446 11,580,828 Diluted 12,277,453 12,093,225
Simpson Manufacturing Co., Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (Unaudited)
Three Months Ended March 31, ---------------------------- 2000 1999 ------------ ------------ Net income $ 9,275,764 $ 7,648,403 Other comprehensive income, net of tax: Foreign currency translation adjustments (300,653) (279,621) ------------ ------------ Comprehensive income $ 8,975,111 $ 7,368,782 ============ ============
The accompanying notes are an integral part of these condensed consolidated financial statements. Simpson Manufacturing Co., Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, ---------------------------- 2000 1999 ------------ ------------ Cash flows from operating activities Net income $ 9,275,764 $ 7,648,403 ------------ ------------ Adjustments to reconcile net income to net cash provided by operating activities: Gain on sale of capital equipment (1,700) (20,219) Depreciation and amortization 3,248,640 2,540,621 Minority interest (195,960) - Deferred income taxes and long-term liabilities (480,718) (392,970) Changes in operating assets and liabilities, net of effects of acquisitions: Trade accounts receivable (10,571,756) (10,824,803) Inventories (5,721,118) (3,281,486) Trade accounts payable (2,519,618) 610,226 Income taxes payable 4,179,992 3,959,444 Accrued profit sharing trust contributions (2,367,051) 955,345 Accrued cash profit sharing and commissions 276,818 (287,082) Other current assets (868,559) (430,522) Accrued liabilities (356,846) (367,586) Accrued workers' compensation 100,000 - Other noncurrent assets (623,264) 57,966 ------------ ------------ Total adjustments (15,901,140) (7,481,066) ------------ ------------ Net cash provided by (used in) operating activities (6,625,376) 167,337 ------------ ------------ Cash flows from investing activities Capital expenditures (2,548,553) (4,064,037) Asset acquisitions, net of cash acquired (54,698) - Proceeds from sale of equipment 8,376 68,467 ------------ ------------ Net cash used in investing activities (2,594,875) (3,995,570) ------------ ------------ Cash flows from financing activities Issuance of debt 149,785 - Repayment of debt (15,551) (11,389) Issuance of common stock 127,618 79,394 ------------ ------------ Net cash provided by financing activities 261,852 68,005 ------------ ------------ Net decrease in cash and cash equivalents (8,958,399) (3,760,228) Cash and cash equivalents at beginning of period 54,509,610 37,402,450 ------------ ------------ Cash and cash equivalents at end of period $ 45,551,211 $ 33,642,222 ============ ============
The accompanying notes are an integral part of these condensed consolidated financial statements. Simpson Manufacturing Co., Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 1. Basis of Presentation Interim Period Reporting The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnotes required by generally accepted accounting principles have been condensed or omitted. These interim statements should be read in conjunction with the consolidated financial statements and the notes thereto included in Simpson Manufacturing Co., Inc.'s (the "Company's") 1999 Annual Report on Form 10-K (the "1999 Annual Report"). The unaudited quarterly condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements, and in the opinion of management, contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial information set forth therein, in accordance with generally accepted accounting principles. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The Company's quarterly results may be subject to fluctuations. As a result, the Company believes the results of operations for the interim periods are not necessarily indicative of the results to be expected for any future period. Net Income Per Common Share Basic net income per common share is computed based upon the weighted average number of common shares outstanding. Common equivalent shares, using the treasury stock method, are included in the diluted per-share calculations for all periods when the effect of their inclusion is dilutive. The following is a reconciliation of basic earnings per share ("EPS") to diluted EPS:
Three Months Ended Three Months Ended March 31, 2000 March 31, 1999 ---------------------------------- ---------------------------------- Per Per Income Shares Share Income Shares Share ------------ ------------ ------ ------------ ------------ ------ Basic EPS Income available to common stockholders $ 9,275,764 12,020,446 $ 0.77 $ 7,648,403 11,580,828 $ 0.66 Effect of Dilutive Securities Stock options - 257,007 (0.01) - 512,397 (0.03) ------------ ------------ ------ ------------ ------------ ------ Diluted EPS Income available to common stockholders $ 9,275,764 12,277,453 $ 0.76 $ 7,648,403 12,093,225 $ 0.63 ============ ============ ====== ============ ============ ======
2. Trade Accounts Receivable Trade accounts receivable consist of the following:
At March 31, ---------------------------- (Unaudited) At December 31, 2000 1999 1999 ------------ ------------ ------------ Trade accounts receivable $ 54,461,542 $ 46,501,014 $ 43,952,137 Allowance for doubtful accounts (1,088,601) (1,326,334) (1,203,147) Allowance for sales discounts (479,461) (450,070) (328,767) ------------ ------------ ------------ $ 52,893,480 $ 44,724,610 $ 42,420,223 ============ ============ ============
3. Inventories The components of inventories consist of the following:
At March 31, ---------------------------- (Unaudited) At December 31, 2000 1999 1999 ------------ ------------ ------------ Raw materials $ 24,432,755 $ 19,372,470 $ 22,816,584 In-process products 8,664,328 5,256,131 7,593,038 Finished products 45,283,264 34,935,548 42,341,623 ------------ ------------ ------------ $ 78,380,347 $ 59,564,149 $ 72,751,245 ============ ============ ============
Approximately 88% of the Company's inventories are valued using the LIFO (last-in, first-out) method. Because inventory determination under the LIFO method is only made at the end of each year based on the inventory levels and costs at that time, interim LIFO determinations must necessarily be based on management's estimates of expected year-end inventory levels and costs. Since future estimates of inventory levels and costs are subject to change, interim financial results reflect the Company's most recent estimate of the effect of LIFO and are subject to adjustment based upon final year-end inventory amounts. At March 31, 2000, and December 31, 1999, LIFO cost exceeded the replacement value of LIFO inventories by approximately $1,482,000 and $1,503,000, respectively. At March 31, 1999, the replacement value of LIFO inventories exceeded LIFO cost by approximately $284,000. 4. Net Property, Plant and Equipment Net property, plant and equipment consists of the following:
At March 31, ---------------------------- (Unaudited) At December 31, 2000 1999 1999 ------------ ------------ ------------ Land $ 4,311,743 $ 3,891,519 $ 4,316,015 Buildings and site improvements 26,715,204 25,675,093 26,724,935 Leasehold improvements 3,938,741 3,448,358 3,942,613 Machinery and equipment 81,968,262 67,015,178 81,147,265 ------------ ------------ ------------ 116,933,950 100,030,148 116,130,828 Less accumulated depreciation and amortization (61,783,333) (51,851,356) (58,949,908) ------------ ------------ ------------ 55,150,617 48,178,792 57,180,920 Capital projects in progress 5,511,590 8,378,853 3,962,604 ------------ ------------ ------------ $ 60,662,207 $ 56,557,645 $ 61,143,524 ============ ============ ============
5. Debt Outstanding debt at March 31, 2000 and 1999, and December 31, 1999, and the available credit at March 31, 2000, consisted of the following:
Debt Outstanding Available -------------------------------------------- Credit at at March 31, at March 31, ---------------------------- December 31, 2000 2000 1999 1999 ------------ ------------ ------------ ------------ Revolving line of credit, interest at bank's reference rate (at March 31, 2000, the bank's reference rate was 9.00%), expires June 2000 $ 12,466,545 $ - $ - $ - Revolving term commitment, interest at bank's prime rate (at March 31, 2000, the bank's prime rate was 9.00%), expires June 2000 8,616,628 - - - Revolving line of credit, interest rate at the bank's base rate of interest plus 2%, expires July 2000 398,979 - - - Term loan, fixed interest rate of 5.3%, expires September 2006 - 148,651 - 164,562 Standby letter of credit facilities 1,916,828 - - - Term loan, interest at LIBOR plus 1.375% (at March 31, 2000, LIBOR plus 1.375% was 7.2938%), expires May 2008 - 2,550,000 2,850,000 2,550,000 Other notes payable and long-term debt - 187,549 34,497 49,541 ------------ ------------ ------------ ------------ 23,398,980 2,886,200 2,884,497 2,764,103 Less current portion - (487,549) (327,477) (349,541) ------------ ------------ ------------ ------------ 23,398,980 $ 2,398,651 $ 2,557,020 $ 2,414,562 ============ ============ ============ Standby letters of credit issued and outstanding (1,916,828) ------------ $ 21,482,152 ============
As of March 31, 2000, the Company had three outstanding standby letters of credit. Two of these letters of credit, in the aggregate amount of $1,166,748, are used to support the Company's self-insured workers' compensation insurance requirements. These letters of credit were increased to an aggregate amount of $1,710,324 in April 2000. The third, in the amount of $750,080, is used to guarantee performance on the Company's leased facility in the United Kingdom. Other notes payable represent debt associated with foreign businesses. 6. Commitments and Contingencies Note 9 to the consolidated financial statements in the Company's 1999 Annual Report provides information concerning commitments and contingencies. From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business. 7. Segment Information The Company is organized into two primary segments. The segments are defined by types of products manufactured, marketed and distributed to the Company's customers. The two product segments are connector products and venting products. These segments are differentiated in several ways, including the types of materials used, the production process, the distribution channels used and the applications in which the products are used. Transactions between the two segments were immaterial for each of the periods presented. The following table illustrates certain measurements used by management to assess the performance of the segments described above as of or for the three months ended:
Three Months Ended March 31, ---------------------------- 2000 1999 ------------ ------------ Net Sales Connector products $ 69,515,000 $ 59,839,000 Venting products 15,101,000 14,823,000 ------------ ------------ Total $ 84,616,000 $ 74,662,000 ============ ============ Income from Operations Connector products $ 12,602,000 $ 10,276,000 Venting products 2,081,000 2,132,000 All other (69,000) 21,000 ------------ ------------ Total $ 14,614,000 $ 12,429,000 ============ ============ At March 31, ---------------------------- 2000 1999 ------------ ------------ Total Assets Connector products $166,045,000 $128,957,000 Venting products 42,462,000 37,147,000 All other 48,858,000 37,706,000 ------------ ------------ Total $257,365,000 $203,810,000 ============ ============
Cash collected by the Company's subsidiaries is routinely transferred into the Company's cash management accounts and, therefore, has been included in the total assets of the segment entitled "All other." Cash and cash equivalent balances in this segment were approximately $41,172,000 and $32,573,000 as of March 31, 2000 and 1999, respectively. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Certain matters discussed below are forward-looking statements that involve risks and uncertainties, certain of which are discussed in this report and in other reports filed by the Company with the Securities and Exchange Commission. Actual results might differ materially from results suggested by any forward-looking statements in this report. The following is a discussion and analysis of the consolidated financial condition and results of operations for the Company for the three months ended March 31, 2000 and 1999. The following should be read in conjunction with the interim Condensed Consolidated Financial Statements and related Notes appearing elsewhere herein. Results of Operations for the Three Months Ended March 31, 2000, Compared with the Three Months Ended March 31, 1999 Net sales increased 13.3% in the first quarter of 2000 as compared to the first quarter of 1999. Most of the sales growth occurred domestically, particularly in California. International sales also contributed to the increase, due in large part to the acquisition of Furfix Products Limited in the third quarter of 1999. Simpson Strong-Tie's first quarter sales increased 16.2% over the same quarter last year, while Simpson Dura-Vent's sales increased 1.9%. Contractor distributors were the fastest growing connector sales channel. The sales increase was broad based across most of Simpson Strong-Tie's major product lines. The Strong-Wall and Anchoring Systems products had the highest growth rates in sales. Sales of Simpson Dura-Vent's Direct-Vent and chimney product lines increased compared to the first quarter of 1999, while its other product lines declined slightly relative to the first quarter of 1999. Income from operations increased 17.6% from $12,429,046 in the first quarter of 1999 to $14,613,929 in the first quarter of 2000 as a result of higher sales and gross margins. Gross margins increased from 38.1% in the first quarter of 1999 to 40.0% in the first quarter of 2000 primarily due to better absorption of fixed overhead costs as a result of the increased production. Selling expenses increased 8.3% from $7,897,807 in the first quarter of 1999 to $8,553,122 in the first quarter of 2000. The increase was primarily due to higher personnel costs, particularly those associated with the increase in the number of sales and merchandising personnel. General and administrative expenses increased 31.1% from $8,121,761 in the first quarter of 1999 to $10,648,327 in the first quarter of 2000 primarily due to increased cash profit sharing resulting from higher operating income, and higher personnel and other administrative overhead costs, including those associated with the operation of Keybuilder.com, LLC ("Keybuilder.com"). Keybuilder.com is a joint venture 60% owned by the Company and 40% owned by Keymark Enterprises, Inc. ("Keymark"), a software developer based in Boulder, Colorado. The effective tax rate was 40.0%, after adding back the minority interest to income before income taxes, in the first quarter of 2000, a slight decrease from 40.1% in the first quarter of 1999. A large homebuilder has signed a letter of intent to investigate the feasibility of investing in Keybuilder.com. Keybuilder.com was formed to develop and market precise residential construction information accessible over the internet by architects, engineers, building material suppliers, and subcontractors. The Company has consolidated Keybuilder.com's losses for the quarter ended March 31, 2000, in its financial statements, net of Keymark's minority interest. Liquidity and Sources of Capital As of March 31, 2000, working capital was $151.1 million as compared to $111.7 million at March 31, 1999, and $142.1 million at December 31, 1999. The principal components of the increase in working capital from December 31, 1999, were increases in the Company's trade accounts receivable and inventories totaling approximately $16.1 million, primarily due to higher sales levels and seasonal buying programs. In addition, trade accounts payable and accrued profit sharing trust contributions, primarily due to an early payment of the Company's 1999 trust obligation, decreased by an aggregate of approximately $5.0 million. Offsetting these increases was an increase in income taxes payable of approximately $4.1 million. The balance of the change in working capital was due to the fluctuation of various other asset and liability accounts. The working capital change and changes in noncurrent assets and liabilities combined with net income and noncash expenses, primarily depreciation and amortization, totaling approximately $12.5 million, resulted in net cash used in operating activities of approximately $6.6 million. As of March 31, 2000, the Company had unused credit facilities available of approximately $21.5 million. The Company used approximately $2.6 million in its investing activities, primarily to purchase the capital equipment and property needed to expand its capacity. The Company plans to continue this expansion throughout the remainder of the year and into 2001. The Company believes that cash generated by operations and borrowings available under its existing credit agreements, will be sufficient for the Company's working capital needs and planned capital expenditures through the remainder of 2000 and into 2001. Depending on the Company's future growth, it may become necessary to secure additional sources of financing. The Company believes that the effect of inflation on the Company has not been material in recent years, as inflation rates have remained relatively low. PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business. ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits. EXHIBIT NO DESCRIPTION ------- ------------------------------------------------------ 10.1 Office Building Lease, dated April 21, 2000, between Koll Dublin Corporate Center, L.P., a Delaware limited partnership, and Simpson Manufacturing Co., Inc., a Delaware corporation. 10.2 Operating Agreement for Keybuilder.com, LLC, a California limited liability company, dated March 6, 2000. 11. Statements re computation of earnings per share b. Reports on Form 8-K No reports on Form 8-K were filed during the quarter for which this report is filed.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Simpson Manufacturing Co., Inc. ------------------------------- (Registrant) DATE: MAY 15, 2000 By: /s/Stephen B. Lamson ------------ ------------------------------- Stephen B. Lamson Chief Financial Officer EX-10 2 OFFICE BUILDING LEASE Exhibit 10.1 ------------ OFFICE BUILDING LEASE BETWEEN KOLL DUBLIN CORPORATE CENTER, L.P., A DELAWARE LIMITED PARTNERSHIP LANDLORD AND SIMPSON MANUFACTURING CO., INC., A DELAWARE CORPORATION TENANT TABLE OF CONTENTS 1. BASIC LEASE TERMS....................................................1 2. PREMISES AND COMMON AREAS............................................3 3. TERM.................................................................3 4. POSSESSION...........................................................3 5. RENT.................................................................4 6. OPERATING EXPENSES...................................................4 7. SECURITY DEPOSIT.....................................................5 8. USE..................................................................6 9. NOTICES..............................................................7 10. BROKERS..............................................................7 11. SURRENDER; HOLDING OVER..............................................7 12. TAXES ON TENANT'S PROPERTY...........................................7 13. ALTERATIONS..........................................................8 14. REPAIRS..............................................................9 15. LIENS...............................................................10 16. ENTRY BY LANDLORD...................................................10 17. UTILITIES AND SERVICES..............................................10 18. ASSUMPTION OF RISK AND INDEMNIFICATION..............................11 19. INSURANCE...........................................................11 20. DAMAGE OR DESTRUCTION...............................................13 21. EMINENT DOMAIN......................................................14 22. DEFAULTS AND REMEDIES...............................................14 23. LANDLORD'S DEFAULT..................................................16 24. ASSIGNMENT AND SUBLETTING...........................................16 25. SUBORDINATION.......................................................18 26. ESTOPPEL CERTIFICATE................................................19 27. BUILDING PLANNING...................................................19 28. RULES AND REGULATIONS...............................................19 29. MODIFICATION AND CURE RIGHTS OF LANDLORD'S MORTGAGEES AND LESSORS...20 30. DEFINITION OF LANDLORD..............................................20 31. WAIVER..............................................................20 32. PARKING.............................................................20 33. FORCE MAJEURE.......................................................21 34. SIGNS...............................................................21 35. LIMITATION ON LIABILITY.............................................22 36. FINANCIAL STATEMENTS................................................22 37. QUIET ENJOYMENT.....................................................22 38. MISCELLANEOUS.......................................................22 39. EXECUTION OF LEASE..................................................23 40. UNION LABOR.........................................................24 41. OPTION TERM.........................................................24 42. SECURITY MEASURES...................................................25 43. NON-DISTURBANCE AGREEMENT...........................................25 EXHIBITS: A-I Site Plan A-II Outline of Floor Plan of Premises B Rentable Square Feet C Work Letter Agreement D Notice of Lease Term Dates and Tenant's Percentage E Definition of Operating Expenses F Standards for Utilities and Services G Estoppel Certificate H Rules and Regulations OFFICE BUILDING LEASE This OFFICE BUILDING LEASE ("Lease") is entered into as of April 21, 2000 by and between KOLL DUBLIN CORPORATE CENTER, L.P., a Delaware limited partnership ("Landlord"), and SIMPSON MANUFACTURING CO., INC., a Delaware corporation ("Tenant"). 1. BASIC LEASE TERMS. For purposes of this Lease, the following terms have the following definitions and meanings: (a) Landlord: KOLL DUBLIN CORPORATE CENTER, L.P., a Delaware limited partnership. (b) Landlord's Address (For Notices): 4125 Blackhawk Plaza Circle, Suite 200 Danville, CA 94506 Attention: Michael G. Parker or such other place as Landlord may from time to time designate by notice to Tenant. (c) Tenant: SIMPSON MANUFACTURING CO., INC., a Delaware corporation. (d) Tenant's Address (For Notices): Before the Commencement Date: 4637 Chabot Drive, Suite 200 Pleasanton, CA 94588 Attention: Stephen B. Lamson and after the Commencement Date, to the Premises, Attention: Stephen B. Lamson, or such other place as Tenant may from time to time designate by notice to Landlord. (e) Development: The parcel(s) of real property commonly known as the Koll Dublin Corporate Center and located in the City of Dublin (the "City"), County of Alameda (the "County"), State of California ("State"), as shown on the site plan attached hereto as Exhibit "A-I". (f) Building: A four-story office building located within the Development, which Building contains approximately 138,136 Rentable Square Feet (subject to adjustment as provided in Exhibit "B"), with the street address of 4120 Dublin Boulevard, Dublin, California. (g) Premises: Those certain premises consisting of the entire 4th floor of the Building, as generally shown on the floor plan(s) attached hereto as Exhibit "A-II", which Premises contain approximately 35,424 Rentable Square Feet and 31,521 Usable Square Feet (subject to adjustment as provided in Exhibit "B" and Exhibit "D"). (h) Tenant's Percentage: Tenant's percentage of the Building on a Rentable Square Foot basis, which initially is 25.64%, subject to final determination as provided in Exhibit "B" and Exhibit "D". (i) Term: Seven (7) Lease Years and -0- Months. (j) Estimated Commencement Date: November 1, 2000. Estimated Expiration Date: October 31, 2007. (k) Commencement Date: The date on which the Term of this Lease will commence as determined in accordance with the provisions of Exhibit "C" and as stated on Exhibit "D". (l) Initial Monthly Base Rent: $2.50 per Rentable Square Foot, subject to adjustment as provided in Subparagraph 1(m) below and as otherwise provided in this Lease. (m) Adjustment to Monthly Base Rent: Monthly Base Rent will be adjusted in accordance with the following: LEASE MONTHS MONTHLY BASE RENT 31-60 $2.60 per Rentable Square Foot 61-84 $2.75 per Rentable Square Foot (n) Operating Expense Allowance: Operating Expense Allowance means that portion of Tenant's Percentage of Operating Expenses as described in Paragraph 6 below which Landlord has included in Monthly Base Rent, which, for purposes of this Lease, will be an amount equal to $7.65 per Rentable Square Foot per year. (o) Security Deposit: -0-. (p) Tenant Improvements: All tenant improvements installed or to be installed by Landlord or Tenant within the Premises to prepare the Premises for occupancy pursuant to the terms of the Work Letter Agreement attached hereto as Exhibit "C". (q) Tenant Improvement Allowance: $25.75 per Rentable Square Foot of the Premises, to be applied as provided in the Work Letter Agreement attached hereto as Exhibit "C". (r) Permitted Use: General office space. (s) Initial After-Hours Charge: $50.00 per zone per hour for after- hours HVAC use. (Landlord represents to Tenant that Tenant will not be charged for any zone that services any tenant space other than the Premises.) (t) Parking: 141 unreserved employee parking spaces, initially at no charge, but subject to Landlord's establishing a standard parking rate at any time or from time to time, subject to the terms and conditions of Paragraph 32 below and the Rules and Regulations regarding parking contained in Exhibit "H". (u) Broker(s): Cornish & Carey, CB Richard Ellis. (v) Guarantor(s): N/A. (w) Interest Rate: shall mean the greater of ten percent (10%) per annum or two percent (2%) in excess of the prime lending or reference rate of Wells Fargo Bank N.A. or any successor bank in effect on the twenty-fifth (25th) day of the calendar month immediately prior to the event giving rise to the Interest Rate imposition; provided, however, the Interest Rate will in no event exceed the maximum interest rate permitted to be charged by applicable law. (x) Exhibits: A through H, inclusive, which Exhibits are attached to this Lease and incorporated herein by this reference. As provided in Paragraph 3 below, a completed version of Exhibit "D" will be delivered to Tenant after Landlord delivers possession of the Premises to Tenant. (y) Addendum Paragraphs: 41 through 44, inclusive, which Addendum Paragraphs are attached to this Lease and incorporated herein by this reference. This Paragraph 1 represents a summary of the basic terms and definitions of this Lease. In the event of any inconsistency between the terms contained in this Paragraph 1 and any specific provision of this Lease, the terms of the more specific provision shall prevail. 2. PREMISES AND COMMON AREAS. (a) Premises. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the Premises as improved or to be improved with the Tenant Improvements described in the Work Letter Agreement, a copy of which is attached hereto as Exhibit "C". (b) Mutual Covenants. Landlord and Tenant agree that the letting and hiring of the Premises is upon and subject to the terms, covenants and conditions contained in this Lease and each party covenants as a material part of the consideration for this Lease to keep and perform their respective obligations under this Lease. (c) Tenant's Use of Common Areas. During the Term of this Lease, Tenant shall have the nonexclusive right to use in common with Landlord and all persons, firms and corporations conducting business in the Development and their respective customers, guests, licensees, invitees, subtenants, employees and agents (collectively, "Development Occupants"), subject to the terms of this Lease, the Rules and Regulations referenced in Paragraph 32 below and all covenants, conditions and restrictions now or hereafter affecting the Development, the following common areas of the Building and/or the Development (collectively, the "Common Areas"): (i) The Building's common entrances, hallways, lobbies, public restrooms on multi-tenant floors, elevators, stairways and accessways, loading docks, ramps, drives and platforms and any passageways and serviceways thereto, and the common pipes, conduits, wires and appurtenant equipment within the Building which serve the Premises (collectively, "Building Common Areas"); and (ii) The parking facilities of the Development which serve the Building (subject to the provisions of Exhibit "H"), loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways, landscaped areas, plaza areas, fountains and similar areas and facilities situated within the Development and appurtenant to the Building which are not reserved for the exclusive use of any Development Occupants (collectively, "Development Common Areas"). (d) Landlord's Reservation of Rights. Provided Tenant's use of and access to the Premises and parking to be provided to Tenant under this Lease is not interfered with in an unreasonable manner, Landlord reserves for itself and for all other owner(s) and operator(s) of the Development Common Areas and the balance of the Development, the right from time to time to: (i) install, use, maintain, repair, replace and relocate pipes, ducts, conduits, wires and appurtenant meters and equipment above the ceiling surfaces, below the floor surfaces, within the walls and in the central core areas of the Building; (ii) make changes to the design and layout of the Development, including, without limitation, changes to buildings, driveways, entrances, loading and unloading areas, direction of traffic, landscaped areas and walkways, and, subject to the parking provisions contained in Paragraph 32 and Exhibit "H", parking spaces and parking areas; and (iii) use or close temporarily the Building Common Areas, the Development Common Areas and/or other portions of the Development while engaged in making improvements, repairs or alterations to the Building, the Development, or any portion thereof. 3. TERM. The term of this Lease ("Term") will be for the period designated in Subparagraph 1(i), commencing on the Commencement Date, and ending on the last day of the month in which the expiration of such period occurs, including any extensions of the Term pursuant to any provision of this Lease or written agreement of the parties. Each consecutive twelve (12) month period of the Term of this Lease, commencing on the Commencement Date, will be referred to herein as a "Lease Year". Landlord's Notice of Lease Term Dates and Tenant's Percentage ("Notice"), in the form of Exhibit "D" attached hereto, will set forth the Commencement Date, the date upon which the Term of this Lease shall end, the Rentable Square Feet within the Premises and the Building, and Tenant's Percentage and will be delivered to Tenant after Landlord delivers possession of the Premises to Tenant. The Notice will be binding upon Tenant unless Tenant objects to the Notice in writing within five (5) days of Tenant's receipt of the Notice. 4. POSSESSION. (a) Delivery of Possession. Landlord agrees to deliver possession of the Premises to Tenant in accordance with the terms of the Work Letter Agreement attached hereto as Exhibit "C", or, if no Work Letter Agreement is required for this Lease, then Landlord agrees to deliver possession of the Premises to Tenant on the Commencement Date. Notwithstanding the foregoing, Landlord will not be obligated to deliver possession of the Premises to Tenant (but Tenant will be liable for rent if Landlord can otherwise deliver the Premises to Tenant) until Landlord has received from Tenant all of the following: (i) a copy of this Lease fully executed by Tenant and the guaranty of Tenant's obligations under this Lease, if any, executed by the Guarantor(s); (ii) the Security Deposit and the first installment of Monthly Base Rent; (iii) executed copies of policies of insurance or certificates thereof as required under Paragraph 19 of this Lease; (iv) copies of all governmental permits and authorizations, if any, required in connection with Tenant's operation of its business within the Premises; and (v) if Tenant is a corporation or partnership, such evidence of due formation, valid existence and authority as Landlord may reasonably require, which may include, without limitation, a certificate of good standing, certificate of secretary, articles of incorporation, statement of partnership, or other similar documentation. (b) Condition of Premises. Prior to the Commencement Date and in accordance with the Work Letter Agreement attached hereto as Exhibit "C", Landlord and Tenant will jointly conduct a walk-through inspection of the Premises and will jointly prepare a punch-list ("Punch-List") of items required to be installed by Landlord under the Work Letter Agreement which require finishing or correction. The Punch-List will not include any items of damage to the Premises caused by Tenant's move- in or early entry, if permitted, which damage will be corrected or repaired by Landlord, at Tenant's expense or, at Landlord's election, by Tenant, at Tenant's expense. Other than the items specified in the Punch-List, by taking possession of the Premises, Tenant will be deemed to have accepted the Premises in its condition on the date of delivery of possession and to have acknowledged that the Tenant Improvements have been installed as required by the Work Letter Agreement and that there are no additional items needing work or repair. Landlord will cause all items in the Punch-List to be repaired or corrected within thirty (30) days following the preparation of the Punch-List or as soon as practicable after the preparation of the Punch-List. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Premises, the Building, the Development or any portions thereof or with respect to the suitability of same for the conduct of Tenant's business and Tenant further acknowledges that Landlord will have no obligation to construct or complete any additional buildings or improvements within the Development. Notwithstanding the foregoing, Landlord warrants to Tenant that on the Commencement Date, the Premises and the Building (including all structural, mechanical, electrical and systems, roof, common areas and restrooms and the parking area for the Building) shall be in good working condition and shall comply with all applicable requirements of building codes, California accessibility codes and the Americans with Disabilities Act [42 U.S.C. sec. 12101 et seq.] (the "ADA") as in effect on the Commencement Date (the "Building Warranty"). The Building Warranty shall not apply to any improvements or alterations made by or at the request of Tenant, except as specifically set forth in the Work Letter Agreement. If the Premises do not comply with the Building Warranty, promptly after Landlord's receipt of written notice from Tenant given within six (6) months after the Commencement Date specifying in detail the nature and extent of such non-compliance, Landlord, at Landlord's sole cost and expense, shall take such action as is reasonably necessary to remedy such non-compliance. 5. RENT. (a) Monthly Base Rent. Tenant agrees to pay Landlord the Monthly Base Rent for the Premises (subject to adjustment as hereinafter provided) in advance on the first day of each calendar month during the Term without prior notice or demand, except that Tenant agrees to pay the Monthly Base Rent for the first month of the Term directly to Landlord concurrently with Tenant's delivery of the executed Lease to Landlord. If the Term of this Lease commences or ends on a day other than the first day of a calendar month, then the rent for such period will be prorated in the proportion that the number of days this Lease is in effect during such period bears to the number of days in such month. All rent must be paid to Landlord, without any deduction or offset, in lawful money of the United States of America, at the address designated by Landlord or to such other person or at such other place as Landlord may from time to time designate in writing. Monthly Base Rent will be adjusted during the Term of this Lease as provided in Subparagraph l(m). (b) Additional Rent. All amounts and charges to be paid by Tenant hereunder, including, without limitation, payments for Operating Expenses, insurance, repairs and parking, will be considered additional rent for purposes of this Lease, and the word "rent" as used in this Lease will include all such additional rent unless the context specifically or clearly implies that only Monthly Base Rent is intended. (c) Late Payments. Late payments of Monthly Base Rent and/or any item of additional rent will be subject to interest and a late charge as provided in Subparagraph 22(f) below. 6. OPERATING EXPENSES. (a) Operating Expenses. In addition to Monthly Base Rent, throughout the Term of this Lease, Tenant agrees to pay Landlord as additional rent in accordance with the terms of this Paragraph 6, Tenant's Percentage of Operating Expenses as defined in Exhibit "E" attached hereto to the extent Tenant's Percentage of Operating Expenses exceeds Tenant's Operating Expense Allowance. (b) Estimate Statement. Prior to the Commencement Date and on or about March 1st of each subsequent calendar year during the Term of this Lease, Landlord will endeavor to deliver to Tenant a statement ("Estimate Statement") wherein Landlord will estimate both the Operating Expenses and Tenant's Percentage of Operating Expenses for the then current calendar year. If the estimate of Tenant's Percentage of Operating Expenses in the Estimate Statement exceeds Tenant's Operating Expense Allowance, Tenant agrees to pay Landlord, as "Additional Rent", one-twelfth (1/12th) of such excess each month thereafter, beginning with the next installment of rent due, until such time as Landlord issues a revised Estimate Statement or the Estimate Statement for the succeeding calendar year; except that, concurrently with the regular monthly rent payment next due following the receipt of each such Estimate Statement, Tenant agrees to pay Landlord an amount equal to one monthly installment of such excess (less any applicable Operating Expenses already paid) multiplied by the number of months from January, in the current calendar year, to the month of such rent payment next due, all months inclusive. If at any time during the Term of this Lease, but not more often than quarterly, Landlord reasonably determines that Tenant's Percentage of Operating Expenses for the current calendar year will be greater than the amount set forth in the then current Estimate Statement, Landlord may issue a revised Estimate Statement and Tenant agrees to pay Landlord, within ten (10) days of receipt of the revised Estimate Statement, the difference between the amount owed by Tenant under such revised Estimate Statement and the amount owed by Tenant under the original Estimate Statement for the portion of the then current calendar year which has expired. Thereafter Tenant agrees to pay Tenant's Percentage of Operating Expenses based on such revised Estimate Statement until Tenant receives the next calendar year's Estimate Statement or a new revised Estimate Statement for the current calendar year. In the event Tenant's Percentage of Operating Expenses for any calendar year is less than Tenant's Operating Expense Allowance, Tenant will not be entitled to a credit against any rent, additional rent or Tenant's Percentage of future Operating Expenses payable hereunder. (c) Actual Statement. By March 1st of each calendar year during the Term of this Lease (commencing March 1 in the calendar year following the base year for Operating Expenses, if applicable), Landlord will also endeavor to deliver to Tenant a statement ("Actual Statement") which states the actual Operating Expenses for the preceding calendar year. If the Actual Statement reveals that Tenant's Percentage of the actual Operating Expenses is more than the total Additional Rent paid by Tenant for Operating Expenses on account of the preceding calendar year, Tenant agrees to pay Landlord the difference in a lump sum within ten (10) days of receipt of the Actual Statement. If the Actual Statement reveals that Tenant's Percentage of the actual Operating Expenses is less than the Additional Rent paid by Tenant for Operating Expenses on account of the preceding calendar year, Landlord will credit any overpayment toward the next monthly installment(s) of Tenant's Percentage of the Operating Expenses due under this Lease. (d) Miscellaneous. Any delay or failure by Landlord in delivering any Estimate Statement or Actual Statement pursuant to this Paragraph 6 will not constitute a waiver of its right to require an increase in rent nor will it relieve Tenant of its obligations pursuant to this Paragraph 6, except that Tenant will not be obligated to make any payments based on such Estimate Statement or Actual Statement until ten (10) days after receipt of such Estimate Statement or Actual Statement. Even though the Term has expired and Tenant has vacated the Premises, when the final determination is made of Tenant's Percentage of the actual Operating Expenses for the year in which this Lease terminates, Tenant agrees to promptly pay any increase due over the estimated expenses paid and, conversely, any overpayment made in the event said expenses decrease shall promptly be rebated by Landlord to Tenant. Such obligation will be a continuing one which will survive the expiration or earlier termination of this Lease. Prior to the expiration or sooner termination of the Lease Term and Landlord's acceptance of Tenant's surrender of the Premises, Landlord will have the right to estimate the actual Operating Expenses for the then current Lease Year and to collect from Tenant prior to Tenant's surrender of the Premises, Tenant's Percentage of any excess of such actual Operating Expenses over the estimated Operating Expenses paid by Tenant in such Lease Year. (e) Tenant's Review Rights. Upon Tenant's written request given not more than ninety (90) days after Tenant's receipt of an Actual Statement for a particular calendar year, and provided that (i) Tenant is not then in default under this Lease beyond any applicable cure period and (ii) Tenant has paid all amounts required to be paid under such Actual Statement, then Tenant and its representatives shall have the right to review and/or audit Landlord's books and records relating to the Operating Expenses reflected on such Actual Statement. Tenant shall pay the costs of such review and/or audit, unless such review and/or audit shows that Landlord overstated Operating Expenses for the applicable calendar year by more than three percent (3%) of the originally reported Operating Expenses, in which event Landlord shall pay the costs and expenses of such audit or review. Landlord shall pay to Tenant the amount of any overpayment made by Tenant as disclosed by such audit or review, and Tenant shall pay to Landlord the amount of any underpayment as disclosed by such audit or review, less the costs and expenses of such audit or review. Tenant shall keep any information gained from its review and/or audit of Landlord's books and records confidential and shall not disclose such information to any other party, except as required by law. 7. SECURITY DEPOSIT. Concurrently with Tenant's execution of this Lease, Tenant will deposit with Landlord the Security Deposit designated in Subparagraph 1(o). The Security Deposit will be held by Landlord as security for the full and faithful performance by Tenant of all of the terms, covenants, and conditions of this Lease to be kept and performed by Tenant during the Term hereof. If Tenant fully and faithfully performs its obligations under this Lease, including, without limitation, surrendering the Premises upon the expiration or sooner termination of this Lease in compliance with Subparagraph 11(a) below, the Security Deposit or any balance thereof will be returned to Tenant (or, at Landlord's option, to the last assignee of Tenant's interest hereunder) within thirty (30) days following the expiration of the Lease Term or as required under applicable law, provided that Landlord may retain the Security Deposit until such time as any outstanding rent or additional rent amount has been determined and paid in full. The Security Deposit is not, and may not be construed by Tenant to constitute, rent for the last month or any portion thereof. If Tenant defaults with respect to any provisions of this Lease including, but not limited to, the provisions relating to the payment of rent or additional rent, Landlord may (but will not be required to) use, apply or retain all or any part of the Security Deposit for the payment of any rent or any other sum in default, or for the payment of any other amount which Landlord may spend or become obligated to spend by reason of Tenant's default or to compensate Landlord for any loss or damage which Landlord may suffer by reason of Tenant's default. If any portion of the Security Deposit is so used or applied, Tenant agrees, within ten (10) days after Landlord's written demand therefor, to deposit cash with Landlord in an amount sufficient to restore the Security Deposit to its original amount and Tenant's failure to do so shall constitute a default under this Lease. Landlord is not required to keep Tenant's Security Deposit separate from its general funds, and Tenant is not entitled to interest on such Security Deposit. Should Landlord sell its interest in the Premises during the Term hereof and deposit with the purchaser thereof the then unappropriated Security Deposit funds, Landlord will be discharged from any further liability with respect to such Security Deposit. 8. USE. (a) Tenant's Use of the Premises. The Premises may be used for the use or uses set forth in Subparagraph 1(r) only, and Tenant will not use or permit the Premises to be used for any other purpose without the prior written consent of Landlord, which consent Landlord may withhold in its sole and absolute discretion. Nothing in this Lease will be deemed to give Tenant any exclusive right to such use in the Building or the Development. (b) Compliance. At Tenant's sole cost and expense, Tenant agrees to procure, maintain and hold available for Landlord's inspection, all governmental licenses and permits required for the proper and lawful conduct of Tenant's business from the Premises, if any. Tenant agrees not to use, alter or occupy the Premises or allow the Premises to be used, altered or occupied in violation of, and Tenant, at its sole cost and expense, agrees to use and occupy the Premises and cause the Premises to be used and occupied in compliance with: (i) any and all laws, statutes, zoning restrictions, ordinances, rules, regulations, orders and rulings now or hereafter in force and any requirements of any insurer, insurance authority or duly constituted public authority having jurisdiction over the Premises, the Building or the Development now or hereafter in force (collectively, "Applicable Laws"), provided that Tenant shall not be required to make any alterations to the Premises to comply with any Applicable Laws, except to the extent required because of Tenant's specific use of the Premises (other than general office use) or unless triggered by Tenant's alteration of the Premises, (ii) the requirements of the Board of Fire Underwriters and any other similar body, (iii) the Certificate of Occupancy issued for the Building, and (iv) any recorded covenants, conditions and restrictions and similar regulatory agreements, if any, which affect the use, occupation or alteration of the Premises, the Building and/or the Development. Tenant agrees to comply with the Rules and Regulations referenced in Paragraph 28 below. Tenant agrees not to do or permit anything to be done in or about the Premises which will in any manner obstruct or interfere with the rights of other tenants or occupants of the Development, or injure or unreasonably annoy them, or use or allow the Premises to be used for any unlawful or unreasonably objectionable purpose. Tenant agrees not to cause, maintain or permit any nuisance or waste in, on, under or about the Premises or elsewhere within the Development. Notwithstanding anything contained in this Lease to the contrary, all transferable development rights related in any way to that portion of the Development owned by Landlord are and will remain vested in Landlord, and Tenant hereby waives any rights thereto. (c) Hazardous Materials. Except for ordinary and general office supplies typically used in the ordinary course of business within office buildings, such as copier toner, liquid paper, glue, ink and common household cleaning materials (some or all of which may constitute "Hazardous Materials" as defined in this Lease), Tenant agrees not to cause or permit any Hazardous Materials to be brought upon, stored, used, handled, generated, released or disposed of on, in, under or about the Premises, the Building, the Common Areas or any other portion of the Development by Tenant, its agents, employees, subtenants, assignees, licensees, contractors or invitees (collectively, "Tenant's Parties"), without the prior written consent of Landlord, which consent Landlord may withhold in its sole and absolute discretion. Upon the expiration or earlier termination of this Lease, Tenant agrees to promptly remove from the Premises, the Building and the Development, at its sole cost and expense, any and all Hazardous Materials, including any equipment or systems containing Hazardous Materials which are installed, brought upon, stored, used, generated or released upon, in, under or about the Premises, the Building and/or the Development or any portion thereof by Tenant or any of Tenant's Parties. To the fullest extent permitted by law, Tenant agrees to promptly indemnify, protect, defend and hold harmless Landlord and Landlord's partners, officers, directors, employees, agents, successors and assigns (collectively, "Landlord Indemnified Parties") from and against any and all claims, damages, judgments, suits, causes of action, losses, liabilities, penalties, fines, expenses and costs (including, without limitation, clean-up, removal, remediation and restoration costs, sums paid in settlement of claims, attorneys' fees, consultant fees and expert fees and court costs) which arise or result from the presence of Hazardous Materials on, in, under or about the Premises, the Building or any other portion of the Development and which are caused or permitted by Tenant or any of Tenant's Parties. Tenant agrees to promptly notify Landlord of any release of Hazardous Materials at the Premises, the Building or any other portion of the Development which Tenant becomes aware of during the Term of this Lease, whether caused by Tenant or any other persons or entities. In the event of any release of Hazardous Materials caused or permitted by Tenant or any of Tenant's Parties, Landlord shall have the right, but not the obligation, to cause Tenant to immediately take all steps Landlord deems necessary or appropriate to remediate such release and prevent any similar future release to the satisfaction of Landlord and Landlord's mortgagee(s). As used in this Lease, the term "Hazardous Materials" shall mean and include any chemical, substance, material, controlled substance, object, condition, waste, living organism or combination thereof, whether solid, semi-solid, liquid or gaseous, which is or may be hazardous to human health or safety or to the environment due to its radioactivity, ignitability, corrosivity, reactivity, explosivity, toxicity, carcinogenicity, mutagenicity, phytotoxicity, infectiousness or other harmful or potentially harmful properties or effects, including, without limitation, tobacco smoke, petroleum and petroleum products, asbestos, radon, polychlorinated biphenyls (PCBs), refrigerants (including those substances defined in the Environmental Protection Agency's "Refrigerant Recycling Rule," as amended from time to time) and all of those chemicals, substances, materials, controlled substances, objects, conditions, wastes, living organisms or combinations thereof which are now or become in the future listed, defined or regulated in any manner by any Environmental Law based upon, directly or indirectly, such properties or effects. As used herein, "Environmental Laws" means any and all federal, state or local environmental, health and/or safety-related laws, regulations, standards, decisions of courts, ordinances, rules, codes, orders, decrees, directives, guidelines, permits or permit conditions, currently existing and as amended, enacted, issued or adopted in the future which are or become applicable to Tenant, the Premises or the Development. The provisions of this Subparagraph 8(c) shall survive the expiration or earlier termination of this Lease. 9. NOTICES. Any notice required or permitted to be given hereunder must be in writing and may be given by personal delivery (including delivery by overnight courier or an express mailing service) or by mail, if sent by registered or certified mail. Notices to Tenant shall be sufficient if delivered to Tenant at the address designated in Subparagraph 1(d) and notices to Landlord shall be sufficient if delivered to Landlord at the address designated in Subparagraph 1(b). Either party may specify a different address for notice purposes by written notice to the other, except that the Landlord may in any event use the Premises as Tenant's address for notice purposes. 10. BROKERS. The parties acknowledge that the broker(s) who negotiated this Lease are stated in Subparagraph 1(u). Each party represents and warrants to the other, that, to its knowledge, no other broker, agent or finder (a) negotiated or was instrumental in negotiating or consummating this Lease on its behalf, and (b) is or might be entitled to a commission or compensation in connection with this Lease. Landlord and Tenant each agree to promptly indemnify, protect, defend and hold harmless the other from and against any and all claims, damages, judgments, suits, causes of action, losses, liabilities, penalties, fines, expenses and costs (including attorneys' fees and court costs) resulting from any breach by the indemnifying party of the foregoing representation, including, without limitation, any claims that may be asserted by any broker, agent or finder undisclosed by the indemnifying party. The foregoing mutual indemnity shall survive the expiration or earlier termination of this Lease. 11. SURRENDER; HOLDING OVER. (a) Surrender. The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not constitute a merger, and shall, at the option of Landlord, operate as an assignment to Landlord of any or all subleases or subtenancies. Upon the expiration or earlier termination of this Lease, Tenant agrees to peaceably surrender the Premises to Landlord broom clean and in a state of first- class order, repair and condition, ordinary wear and tear and casualty damage (if this Lease is terminated as a result thereof pursuant to Paragraph 20) excepted, with all of Tenant's personal property and Alterations (as defined in Paragraph 13) removed from the Premises to the extent required under Paragraph 13 and all damage caused by such removal repaired as required by Paragraph 13. In addition, unless otherwise agreed to in writing by Landlord, upon the expiration or earlier termination of this Lease, Tenant shall, at Tenant's sole cost and expense, (i) remove all computer and telephone wiring and cabling installed in the Premises by or for Tenant and (ii) repair any damage caused by such removal. If any such wiring and/or cabling is not so removed pursuant to this Subparagraph 11(a), then at Landlord's option, either such wiring and/or cabling shall become the property of Landlord (without payment by Landlord) or Landlord may remove such wiring and/or cabling at Tenant's expense (without limiting Landlord's other remedies available under this Lease or applicable law). Prior to the date Tenant is to actually surrender the Premises to Landlord, Tenant agrees to give Landlord reasonable prior notice of the exact date Tenant will surrender the Premises so that Landlord and Tenant can schedule a walk-through of the Premises to review the condition of the Premises and identify the Alterations and personal property which are to remain upon the Premises and which items Tenant is to remove, as well as any repairs Tenant is to make upon surrender of the Premises. The delivery of keys to any employee of Landlord or to Landlord's agent or any employee thereof alone will not be sufficient to constitute a termination of this Lease or a surrender of the Premises. (b) Holding Over. Tenant will not be permitted to hold over possession of the Premises after the expiration or earlier termination of the Term without the express written consent of Landlord, which consent Landlord may withhold in its sole and absolute discretion. If Tenant holds over after the expiration or earlier termination of the Term, Landlord may, at its option, treat Tenant as a tenant at sufferance only, and such continued occupancy by Tenant shall be subject to all of the terms, covenants and conditions of this Lease, so far as applicable, except that the Monthly Base Rent for any such holdover period shall be equal to the greater of (i) one hundred fifty percent (150%) of the Monthly Base Rent in effect under this Lease immediately prior to such holdover, or (ii) the then currently scheduled rental rate for comparable space in the Building, in either event prorated on a monthly basis; provided, however, holdover rent for the first thirty (30) days of the holdover will not be prorated and a minimum of a full month's worth of holdover rent shall be due, whether Tenant holds over one (1) day or all thirty (30) days. Acceptance by Landlord of rent after such expiration or earlier termination will not result in a renewal of this Lease. The foregoing provisions of this Paragraph 11 are in addition to and do not affect Landlord's right of re-entry or any rights of Landlord under this Lease or as otherwise provided by law. If Tenant fails to surrender the Premises upon the expiration of this Lease in accordance with the terms of this Paragraph 11 despite demand to do so by Landlord, Tenant agrees to promptly indemnify, protect, defend and hold Landlord harmless from all claims, damages, judgments, suits, causes of action, losses, liabilities, penalties, fines, expenses and costs (including attorneys' fees and costs), including, without limitation, costs and expenses incurred by Landlord in returning the Premises to the condition in which Tenant was to surrender it and claims made by any succeeding tenant founded on or resulting from Tenant's failure to surrender the Premises. The provisions of this Subparagraph 11(b) will survive the expiration or earlier termination of this Lease. 12. TAXES ON TENANT'S PROPERTY. Tenant agrees to pay before delinquency, all taxes and assessments (real and personal) levied against (a) any personal property or trade fixtures placed by Tenant in or about the Premises (including any increase in the assessed value of the Premises based upon the value of any such personal property or trade fixtures); and (b) any Tenant Improvements or Alterations in the Premises (whether installed and/or paid for by Landlord or Tenant) to the extent such items are assessed at a valuation higher than the valuation at which tenant improvements conforming to Landlord's building standard tenant improvements are assessed. If any such taxes or assessments are levied against Landlord or Landlord's property, Landlord may, after written notice to Tenant (and under proper protest if requested by Tenant) pay such taxes and assessments, in which event Tenant agrees to reimburse Landlord all amounts paid by Landlord within ten (10) business days after demand by Landlord; provided, however, Tenant, at its sole cost and expense, will have the right, with Landlord's cooperation, to bring suit in any court of competent jurisdiction to recover the amount of any such taxes and assessments so paid under protest. 13. ALTERATIONS. After installation of the initial Tenant Improvements for the Premises pursuant to Exhibit "C", Tenant may, at its sole cost and expense, make alterations, additions, improvements and decorations to the Premises (collectively, "Alterations") subject to and upon the following terms and conditions: (a) Prohibited Alterations. Tenant may not make any Alterations which: (i) affect any area outside the Premises; (ii) affect the Building's structure, equipment, services or systems, or the proper functioning thereof, or Landlord's access thereto; (iii) affect the outside appearance, character or use of the Building or the Building Common Areas; (iv) in the reasonable opinion of Landlord, lessen the value of the Building; or (v) will violate or require a change in any occupancy certificate applicable to the Premises. (b) Landlord's Approval. Before proceeding with any Alterations which are not prohibited in Subparagraph 13(a) above, Tenant must first obtain Landlord's written approval of the plans, specifications and working drawings for such Alterations, which approval Landlord will not unreasonably withhold or delay; provided, however, Landlord's prior approval will not be required for any such Alterations which are not prohibited by Subparagraph 13(a) above and which cost less than Two Thousand Five Hundred Dollars ($2,500) as long as (i) Tenant delivers to Landlord notice and a copy of any final plans, specifications and working drawings for any such Alterations at least ten (10) days prior to commencement of the work thereof, and (ii) the other conditions of this Paragraph 13 are satisfied, including, without limitation, conforming to Landlord's rules, regulations and insurance requirements which govern contractors. Landlord's approval of plans, specifications and/or working drawings for Alterations will not create any responsibility or liability on the part of Landlord for their completeness, design sufficiency, or compliance with applicable permits, laws, rules and regulations of governmental agencies or authorities. In approving any Alterations, Landlord reserves the right to require Tenant to increase its Security Deposit to provide Landlord with additional reasonable security for the removal of such Alterations by Tenant as may be required by this Lease. (c) Contractors. Alterations may be made or installed only by contractors and subcontractors which have been approved by Landlord, which approval Landlord will not unreasonably withhold or delay; provided, however, Landlord reserves the right to require that Landlord's contractor for the Building be given the first opportunity to bid for any Alteration work. Before proceeding with any Alterations, Tenant agrees to provide Landlord with ten (10) days prior written notice and Tenant's contractors must obtain and maintain, on behalf of Tenant and at Tenant's sole cost and expense: (i) all necessary governmental permits and approvals for the commencement and completion of such Alterations; and (ii) if requested by Landlord, a completion and lien indemnity bond, or other surety, reasonably satisfactory to Landlord for such Alterations. Throughout the performance of any Alterations, Tenant agrees to obtain, or cause its contractors to obtain, workers compensation insurance and general liability insurance in compliance with the provisions of Paragraph 19 of this Lease. (d) Manner of Performance. All Alterations must be performed: (i) in accordance with the approved plans, specifications and working drawings; (ii) in a lien-free and first-class and workmanlike manner; (iii) in compliance with all applicable permits, laws, statutes, ordinances, rules, regulations, orders and rulings now or hereafter in effect and imposed by any governmental agencies and authorities which assert jurisdiction; (iv) in such a manner so as not to interfere with the occupancy of any other tenant in the Building, nor impose any additional expense upon nor delay Landlord in the maintenance and operation of the Building; and (v) at such times, in such manner, and subject to such rules and regulations as Landlord may from time to time reasonably designate. (e) Ownership. The Tenant Improvements, including, without limitation, all affixed sinks, dishwashers, microwave ovens and other fixtures, and all Alterations will become the property of Landlord and will remain upon and be surrendered with the Premises at the end of the Term of this Lease; provided, however, Landlord may, by written notice delivered to Tenant concurrently with Landlord's approval of the final working drawings for any Alterations, identify those Alterations which Landlord will require Tenant to remove at the end of the Term of this Lease. Landlord may also require Tenant to remove Alterations which Landlord did not have the opportunity to approve as provided in this Paragraph 13. If Landlord requires Tenant to remove any Alterations, Tenant, at its sole cost and expense, agrees to remove the identified Alterations on or before the expiration or earlier termination of this Lease and repair any damage to the Premises caused by such removal (or, at Landlord's option, Tenant agrees to pay to Landlord all of Landlord's costs of such removal and repair). (f) Plan Review. Tenant agrees to pay Landlord, as additional rent, the reasonable costs of professional services and costs for general conditions of Landlord's third party consultants if utilized by Landlord (but not Landlord's "in-house" personnel) for review of all plans, specifications and working drawings for any Alterations, within ten (10) business days after Tenant's receipt of invoices either from Landlord or such consultants. (g) Personal Property. All articles of personal property owned by Tenant or installed by Tenant at its expense in the Premises (including Tenant's business and trade fixtures, furniture, movable partitions and equipment [such as telephones, copy machines, computer terminals, refrigerators and facsimile machines]) will be and remain the property of Tenant, and must be removed by Tenant from the Premises, at Tenant's sole cost and expense, on or before the expiration or earlier termination of this Lease. Tenant agrees to repair any damage caused by such removal at its cost on or before the expiration or earlier termination of this Lease. (h) Removal of Alterations. If Tenant fails to remove by the expiration or earlier termination of this Lease all of its personal property, or any Alterations identified by Landlord for removal, Landlord may, at its option, treat such failure as a hold-over pursuant to Subparagraph 11(b) above, and/or Landlord may (without liability to Tenant for loss thereof) treat such personal property and/or Alterations as abandoned and, at Tenant's sole cost and expense, and in addition to Landlord's other rights and remedies under this Lease, at law or in equity: (a) remove and store such items; and/or (b) upon ten (10) days prior notice to Tenant, sell, discard or otherwise dispose of all or any such items at private or public sale for such price as Landlord may obtain or by other commercially reasonable means. Tenant shall be liable for all costs of disposition of Tenant's abandoned property and Landlord shall have no liability to Tenant with respect to any such abandoned property. Landlord agrees to apply the proceeds of any sale of any such property to any amounts due to Landlord under this Lease from Tenant (including Landlord's attorneys' fees and other costs incurred in the removal, storage and/or sale of such items), with any remainder to be paid to Tenant. (i) Union Labor. Reference is hereby made to Paragraph 40 of this Lease, which relates to Tenant's use of union labor. 14. REPAIRS. (a) Landlord's Obligations. Landlord agrees to repair and maintain the structural portions of the Building and the plumbing, heating, ventilating, air conditioning, elevator and electrical systems installed or furnished by Landlord, unless such maintenance and repairs are (i) attributable to items installed in Tenant's Premises which are above standard interior improvements (such as, for example, custom lighting, special HVAC and/or electrical panels or systems, kitchen or restroom facilities and appliances constructed or installed within Tenant's Premises) or (ii) caused in part or in whole by the act, neglect or omission of any duty by Tenant, its agents, servants, employees or invitees, in which case Tenant will pay to Landlord, as additional rent, the reasonable cost of such maintenance and repairs. Landlord will not be liable for any failure to make any such repairs or to perform any maintenance unless such failure shall persist for an unreasonable time after written notice of the need of such repairs or maintenance is given to Landlord by Tenant. Except as provided in Paragraph 20, Tenant will not be entitled to any abatement of rent and Landlord will not have any liability by reason of any injury to or interference with Tenant's business arising from the making of any repairs, alterations or improvements in or to any portion of the Building or the Premises or in or to fixtures, appurtenances and equipment therein. Notwithstanding the foregoing, if any interruption in the provision of the services described in this Subparagraph 14(a) occurs and such interruption materially interferes with Tenant's use and occupancy of the Premises for more than ten (10) continuous business days, Tenant shall have the right to abate Base Rent payable with respect to the period of interruption following such ten (10) business day period, but only to the extent of any rent loss insurance proceeds received by Landlord in connection with such abatement. Such abatement shall be in the proportion that such interference bears to Tenant's normal operations in the Premises, as agreed to by Landlord and Tenant; provided, however, in no event shall Landlord be liable for damages or any other amounts or expenses attributable to such interruption. Tenant waives the right to make repairs at Landlord's expense under any law, statute, ordinance, rule, regulation, order or ruling (including, without limitation, to the extent the Premises are located in California, the provisions of California Civil Code Sections 1941 and 1942 and any successor statutes or laws of a similar nature). (b) Tenant's Obligations. Tenant agrees to keep, maintain and preserve the Premises in first class condition and repair and, when and if needed, at Tenant's sole cost and expense, to make all repairs to the Premises and every part thereof. Any such maintenance and repairs will be performed by Landlord's contractor, or at Landlord's option, by such contractor or contractors as Tenant may choose from an approved list to be submitted by Landlord. Tenant agrees to pay all costs and expenses incurred in such maintenance and repair within seven (7) days after billing by Landlord or such contractor or contractors. Tenant agrees to cause any mechanics' liens or other liens arising as a result of work performed by Tenant or at Tenant's direction to be eliminated as provided in Paragraph 15 below. Except as provided in Subparagraph 14(a) above, Landlord has no obligation to alter, remodel, improve, repair, decorate or paint the Premises or any part thereof. (c) Tenant's Failure to Repair. If Tenant refuses or neglects to repair and maintain the Premises properly as required hereunder to the reasonable satisfaction of Landlord, Landlord, at any time following ten (10) days from the date on which Landlord makes a written demand on Tenant to effect such repair and maintenance, may enter upon the Premises and make such repairs and/or maintenance, and upon completion thereof, Tenant agrees to pay to Landlord as additional rent, Landlord's costs for making such repairs plus an amount not to exceed ten percent (10%) of such costs for overhead, within ten (10) days of receipt from Landlord of a written itemized bill therefor. Any amounts not reimbursed by Tenant within such ten (10) day period will bear interest at the Interest Rate until paid by Tenant. (d) Union Labor. Reference is hereby made to Paragraph 40 of this Lease, which relates to Tenant's use of union labor. 15. LIENS. Tenant agrees not to permit any mechanic's, materialmen's or other liens to be filed against all or any part of the Development, the Building or the Premises, nor against Tenant's leasehold interest in the Premises, by reason of or in connection with any repairs, alterations, improvements or other work contracted for or undertaken by Tenant or any other act or omission of Tenant or Tenant's agents, employees, contractors, licensees or invitees. At Landlord's request, Tenant agrees to provide Landlord with enforceable, conditional and final lien releases (or other evidence reasonably requested by Landlord to demonstrate protection from liens) from all persons furnishing labor and/or materials at the Premises. Landlord will have the right at all reasonable times to post on the Premises and record any notices of non-responsibility which it deems necessary for protection from such liens. If any such liens are filed, Tenant will, at its sole cost, promptly cause such liens to be released of record or bonded so that it no longer affects title to the Development, the Building or the Premises. If Tenant fails to cause any such liens to be so released or bonded within ten (10) days after filing thereof, such failure will be deemed a material breach by Tenant under this Lease without the benefit of any additional notice or cure period described in Paragraph 22 below, and Landlord may, without waiving its rights and remedies based on such breach, and without releasing Tenant from any of its obligations, cause such liens to be released by any means it shall deem proper, including payment in satisfaction of the claims giving rise to such liens. Tenant agrees to pay to Landlord within ten (10) days after receipt of invoice from Landlord, any sum paid by Landlord to remove such liens, together with interest at the Interest Rate from the date of such payment by Landlord. 16. ENTRY BY LANDLORD. Landlord and its employees and agents will at all times have the right to enter the Premises to inspect the same, to supply janitorial service and any other service to be provided by Landlord to Tenant hereunder, to show the Premises to prospective purchasers or tenants, to post notices of nonresponsibility, and/or to repair the Premises as permitted or required by this Lease. In exercising such entry rights, Landlord will endeavor to minimize, as reasonably practicable, the interference with Tenant's business, and will provide Tenant with reasonable advance notice of any such entry (except in emergency situations). Tenant shall have the right to accompany Landlord or its representative whenever Landlord or Landlord's representative enters the Premises. Landlord may, in order to carry out such purposes, erect scaffolding and other necessary structures where reasonably required by the character of the work to be performed. Landlord will at all times have and retain a key with which to unlock all doors in the Premises, excluding Tenant's vaults and safes. Landlord will have the right to use any and all means which Landlord may reasonably deem proper to open said doors in an emergency in order to obtain entry to the Premises. Any entry to the Premises obtained by Landlord by any of said means, or otherwise, will not be construed or deemed to be a forcible or unlawful entry into the Premises, or an eviction of Tenant from the Premises. Landlord will not be liable to Tenant for any damages or losses for any entry by Landlord. 17. UTILITIES AND SERVICES. Throughout the Term of the Lease so long as the Premises are occupied, Landlord agrees to furnish or cause to be furnished to the Premises the utilities and services described in the Standards for Utilities and Services attached hereto as Exhibit "F", subject to the conditions and in accordance with the standards set forth therein. Landlord may require Tenant from time to time to provide Landlord with a list of Tenant's employees and/or agents which are authorized by Tenant to subscribe on behalf of Tenant for any additional services which may be provided by Landlord. Any such additional services will be provided to Tenant at Tenant's cost. Landlord will not be liable to Tenant for any failure to furnish any of the foregoing utilities and services if such failure is caused by all or any of the following: (i) accident, breakage or repairs; (ii) strikes, lockouts or other labor disturbance or labor dispute of any character; (iii) governmental regulation, moratorium or other governmental action or inaction; (iv) inability despite the exercise of reasonable diligence to obtain electricity, water or fuel; or (v) any other cause beyond Landlord's reasonable control. In addition, in the event of any stoppage or interruption of services or utilities, Tenant shall not be entitled to any abatement or reduction of rent (except as expressly provided in Subparagraphs 20(f) or 21(b) if such failure results from a damage or taking described therein), no eviction of Tenant will result from such failure and Tenant will not be relieved from the performance of any covenant or agreement in this Lease because of such failure. Notwithstanding the foregoing, if any interruption in the supply of utilities to the Premises occurs and such interruption materially interferes with Tenant's use and occupancy of the Premises for more than ten (10) continuous business days, Tenant shall have the right to abate Base Rent payable with respect to the period of interruption following such ten (10) business day period, but only to the extent of any rent loss insurance proceeds received by Landlord in connection with such abatement. Such abatement shall be in the proportion that such interference bears to Tenant's normal operations in the Premises, as agreed to by Landlord and Tenant; provided, however, in no event shall Landlord be liable for damages or any other amounts or expenses attributable to such interruption. In the event of any failure, stoppage or interruption thereof, Landlord agrees to diligently attempt to resume service promptly. If Tenant requires or utilizes more water or electrical power than is considered reasonable or normal by Landlord, Landlord may at its option require Tenant to pay, as additional rent, the cost, as fairly determined by Landlord, incurred by such extraordinary usage and/or Landlord may install separate meter(s) for the Premises, at Tenant's sole expense, and Tenant agrees thereafter to pay all charges of the utility providing service and Landlord will make an appropriate adjustment to Tenant's Operating Expenses calculation to account for the fact Tenant is directly paying such metered charges, provided Tenant will remain obligated to pay its proportionate share of Operating Expenses subject to such adjustment. 18. ASSUMPTION OF RISK AND INDEMNIFICATION. (a) Assumption of Risk. Tenant, as a material part of the consideration to Landlord, hereby agrees that neither Landlord nor any Landlord Indemnified Parties (as defined in Subparagraph 8(c) above) will be liable to Tenant for, and Tenant expressly assumes the risk of and waives any and all claims it may have against Landlord or any Landlord Indemnified Parties with respect to, (i) any and all damage to property or injury to persons in, upon or about the Premises, the Building or the Development resulting from any act or omission (except for the grossly negligent or intentionally wrongful act or omission) of Landlord, (ii) any such damage caused by other tenants or persons in or about the Building or the Development, or caused by quasi-public work, (iii) any damage to property entrusted to employees of the Building, (iv) any loss of or damage to property by theft or otherwise, or (v) any injury or damage to persons or property resulting from any casualty, explosion, falling plaster or other masonry or glass, steam, gas, electricity, water or rain which may leak from any part of the Building or any other portion of the Development or from the pipes, appliances or plumbing works therein or from the roof, street or subsurface or from any other place, or resulting from dampness. Notwithstanding anything to the contrary contained in this Lease, neither Landlord nor any Landlord Indemnified Parties will be liable for consequential damages arising out of any loss of the use of the Premises or any equipment or facilities therein by Tenant or any Tenant Parties or for interference with light or other incorporeal hereditaments. Tenant agrees to give prompt notice to Landlord in case of fire or accidents in the Premises or the Building, or of defects therein or in the fixtures or equipment. (b) Indemnification. Tenant will be liable for, and agrees, to the maximum extent permissible under applicable law, to promptly indemnify, protect, defend and hold harmless Landlord and all Landlord Indemnified Parties, from and against, any and all claims, damages, judgments, suits, causes of action, losses, liabilities, penalties, fines, expenses and costs, including attorneys' fees and court costs (collectively, "Indemnified Claims"), arising or resulting from (i) any act or omission of Tenant or any Tenant Parties (as defined in Subparagraph 8(c) above); (ii) the use of the Premises and Common Areas and conduct of Tenant's business by Tenant or any Tenant Parties, or any other activity, work or thing done, permitted or suffered by Tenant or any Tenant Parties, in or about the Premises, the Building or elsewhere within the Development; and/or (iii) any default by Tenant of any obligations on Tenant's part to be performed under the terms of this Lease. In case any action or proceeding is brought against Landlord or any Landlord Indemnified Parties by reason of any such Indemnified Claims, Tenant, upon notice from Landlord, agrees to promptly defend the same at Tenant's sole cost and expense by counsel approved in writing by Landlord, which approval Landlord will not unreasonably withhold. (c) Survival; No Release of Insurers. Tenant's indemnification obligations under Subparagraph 18(b) will survive the expiration or earlier termination of this Lease. Tenant's covenants, agreements and indemnification obligation in Subparagraphs 18(a) and 18(b) above, are not intended to and will not relieve any insurance carrier of its obligations under policies required to be carried by Tenant pursuant to the provisions of this Lease. 19. INSURANCE. (a) Tenant's Insurance. On or before the earlier to occur of (i) the Commencement Date, or (ii) the date Tenant commences any work of any type in the Premises pursuant to this Lease (which may be prior to the Commencement Date), and continuing throughout the entire Term hereof and any other period of occupancy, Tenant agrees to keep in full force and effect, at its sole cost and expense, the following insurance: (i) "All Risks" property insurance including at least the following perils: fire and extended coverage, smoke damage, vandalism, malicious mischief, sprinkler leakage (including earthquake sprinkler leakage). This insurance policy must be upon all property owned by Tenant, for which Tenant is legally liable, or which is installed at Tenant's expense, and which is located in the Building including, without limitation, any Tenant Improvements which satisfy the foregoing qualification and any Alterations, and all furniture, fittings, installations, fixtures and any other personal property of Tenant, in an amount not less than the full replacement cost thereof. If there is a dispute as to full replacement cost, the decision of Landlord or any mortgagee of Landlord will be presumptive. (ii) One (1) year insurance coverage for business interruption and loss of income and extra expense insuring the same perils described in Subparagraph 19(a)(i) above, in such amounts as will reimburse Tenant for any direct or indirect loss of earnings attributable to any such perils including prevention of access to the Premises, Tenant's parking areas or the Building as a result of any such perils. (iii) Commercial General Liability Insurance or Comprehensive General Liability Insurance (on an occurrence form) insuring bodily injury, personal injury and property damage including the following divisions and extensions of coverage: Premises and Operations; Owners and Contractors protective; blanket contractual liability (including coverage for Tenant's indemnity obligations under this Lease); products and completed operations; and liquor liability (if Tenant serves alcohol on the Premises). Such insurance must have the following minimum limits of liability: bodily injury, personal injury and property damage - $2,000,000 each occurrence, $5,000,000 in the aggregate, provided that if liability coverage is provided by a Commercial General Liability policy the general aggregate limit shall apply separately and in total to this location only (per location general aggregate), and provided further, such minimum limits of liability may be adjusted from year to year to reflect increases in coverages as recommended by Landlord's insurance carrier as being prudent and commercially reasonable for tenants of first class office buildings comparable to the Building, rounded to the nearest five hundred thousand dollars. (iv) Comprehensive Automobile Liability insuring bodily injury and property damage arising from all owned, non-owned and hired vehicles, if any, with minimum limits of liability of $1,000,000 per accident. (v) Worker's Compensation as required by the laws of the State. (vi) Any other form or forms of insurance as Tenant or Landlord or any mortgagees of Landlord may reasonably require from time to time in form, in amounts, and for insurance risks against which, a prudent tenant would protect itself, but only to the extent coverage for such risks and amounts are available in the insurance market at commercially acceptable rates. Landlord makes no representation that the limits of liability required to be carried by Tenant under the terms of this Lease are adequate to protect Tenant's interests and Tenant should obtain such additional insurance or increased liability limits as Tenant deems appropriate. (b) Supplemental Tenant Insurance Requirements. (i) All policies must be in a form reasonably satisfactory to Landlord and issued by an insurer admitted to do business in the State. (ii) All policies must be issued by insurers with a policyholder rating of "A" and a financial rating of "X" in the most recent version of Best's Key Rating Guide. (iii) All policies must contain a requirement to notify Landlord (and Landlord's partners, members and property manager and any mortgagees or ground lessors of Landlord who are named as additional insureds, if any) in writing not less than thirty (30) days prior to any material change, reduction in coverage, cancellation or other termination thereof. Tenant agrees to deliver to Landlord, as soon as practicable after placing the required insurance, but in any event within the time frame specified in Subparagraph 19(a) above, certificate(s) of insurance and/or if required by Landlord, certified copies of each policy evidencing the existence of such insurance and Tenant's compliance with the provisions of this Paragraph 19. Tenant agrees to cause replacement policies or certificates to be delivered to Landlord not less than thirty (30) days prior to the expiration of any such policy or policies. If any such initial or replacement policies or certificates are not furnished within the time(s) specified herein, Tenant will be deemed to be in material default under this Lease without the benefit of any additional notice or cure period provided in Subparagraph 22(a)(iii) below, and Landlord will have the right, but not the obligation, to procure such insurance as Landlord deems necessary to protect Landlord's interests at Tenant's expense. If Landlord obtains any insurance that is the responsibility of Tenant under this Paragraph 19, Landlord agrees to deliver to Tenant a written statement setting forth the cost of any such insurance and showing in reasonable detail the manner in which it has been computed and Tenant agrees to promptly reimburse Landlord for such costs as additional rent. (iv) General Liability and Automobile Liability policies under Subparagraphs 19(a)(iii) and (iv) must name Landlord and Landlord's partners, members and property manager (and at Landlord's request, Landlord's mortgagees and ground lessors of which Tenant has been informed in writing) as additional insureds and must also contain a provision that the insurance afforded by such policy is primary insurance and any insurance carried by Landlord and Landlord's property manager or Landlord's mortgagees or ground lessors, if any, will be excess over and non-contributing with Tenant's insurance. (c) Tenant's Use. Tenant will not keep, use, sell or offer for sale in or upon the Premises any article which may be prohibited by any insurance policy periodically in force covering the Building or the Development Common Areas. If Tenant's occupancy or business in, or on, the Premises, whether or not Landlord has consented to the same, results in any increase in premiums for the insurance periodically carried by Landlord with respect to the Building or the Development Common Areas or results in the need for Landlord to maintain special or additional insurance, Tenant agrees to pay Landlord the cost of any such increase in premiums or special or additional coverage as additional rent within ten (10) days after being billed therefor by Landlord. In determining whether increased premiums are a result of Tenant's use of the Premises, a schedule issued by the organization computing the insurance rate on the Building, the Development Common Areas or the Tenant Improvements showing the various components of such rate, will be conclusive evidence of the several items and charges which make up such rate. Tenant agrees to promptly comply with all reasonable requirements of the insurance authority or any present or future insurer relating to the Premises. (d) Cancellation of Landlord's Policies. If any of Landlord's insurance policies are cancelled or cancellation is threatened or the coverage reduced or threatened to be reduced in any way because of the use of the Premises or any part thereof by Tenant or any assignee or subtenant of Tenant or by anyone Tenant permits on the Premises and, if Tenant fails to remedy the condition giving rise to such cancellation, threatened cancellation, reduction of coverage, threatened reduction of coverage, increase in premiums, or threatened increase in premiums, within forty- eight (48) hours after notice thereof, Tenant will be deemed to be in material default of this Lease and Landlord may, at its option, either terminate this Lease or enter upon the Premises and attempt to remedy such condition, and Tenant shall promptly pay Landlord the reasonable costs of such remedy as additional rent. If Landlord is unable, or elects not to remedy such condition, then Landlord will have all of the remedies provided for in this Lease in the event of a default by Tenant. (e) Waiver of Subrogation. Landlord's and Tenant's property insurance shall each contain a clause whereby the insurer waives all rights of recovery by way of subrogation against the other party. Tenant shall also obtain and furnish evidence to Landlord of the waiver by Tenant's worker's compensation insurance carrier of all rights of recovery by way of subrogation against Landlord. (f) Landlord's Insurance. Landlord shall maintain such insurance with respect to the Building as may be required by the holder of the first priority deed of trust or mortgage on the Building. 20. DAMAGE OR DESTRUCTION. (a) Partial Destruction. If the Premises or the Building are damaged by fire or other casualty to an extent not exceeding twenty-five percent (25%) of the full replacement cost thereof, and Landlord's contractor reasonably estimates in a writing delivered to Landlord and Tenant that the damage thereto may be repaired, reconstructed or restored to substantially its condition immediately prior to such damage within one hundred eighty (180) days from the date of such casualty, and Landlord will receive insurance proceeds sufficient to cover the costs of such repairs, reconstruction and restoration (including proceeds from Tenant and/or Tenant's insurance which Tenant is required to deliver to Landlord pursuant to Subparagraph 20(e) below to cover Tenant's obligation for the costs of repair, reconstruction and restoration of any portion of the Tenant Improvements and any Alterations for which Tenant is responsible under this Lease), then Landlord agrees to commence and proceed diligently with the work of repair, reconstruction and restoration and this Lease will continue in full force and effect. (b) Substantial Destruction. Any damage or destruction to the Premises or the Building which Landlord is not obligated to repair pursuant to Subparagraph 20(a) above will be deemed a substantial destruction. In the event of a substantial destruction, Landlord may elect to either (i) repair, reconstruct and restore the portion of the Building or the Premises damaged by such casualty, in which case this Lease will continue in full force and effect, subject to Tenant's termination right contained in Subparagraph 20(d) below; or (ii) terminate this Lease effective as of the date which is thirty (30) days after Tenant's receipt of Landlord's election to so terminate. (c) Notice. Under any of the conditions of Subparagraph 20(a) or (b) above, Landlord agrees to give written notice to Tenant of its intention to repair or terminate, as permitted in such paragraphs, within the earlier of sixty (60) days after the occurrence of such casualty, or fifteen (15) days after Landlord's receipt of the estimate from Landlord's contractor (the applicable time period to be referred to herein as the "Notice Period"). (d) Tenant's Termination Rights. If Landlord elects to repair, reconstruct and restore pursuant to Subparagraph 20(b)(i) hereinabove, and if Landlord's contractor estimates that as a result of such damage, Tenant cannot be given reasonable use of and access to the Premises within three hundred sixty-five (365) days after the date of such damage, then Tenant may terminate this Lease effective upon delivery of written notice to Landlord within ten (10) days after Landlord delivers notice to Tenant of its election to so repair, reconstruct or restore. (e) Tenant's Costs and Insurance Proceeds. In the event of any damage or destruction of all or any part of the Premises, Tenant agrees to immediately (i) notify Landlord thereof, and (ii) deliver to Landlord all property insurance proceeds received by Tenant with respect to any Tenant Improvements installed by or at the cost of Tenant and any Alterations, but excluding proceeds for Tenant's furniture, fixtures, equipment and other personal property, whether or not this Lease is terminated as permitted in this Paragraph 20, and Tenant hereby assigns to Landlord all rights to receive such insurance proceeds. If due to Tenant's failure to obtain insurance for the full replacement cost of any Tenant Improvements installed by or at the cost of Tenant and any Alterations from any and all casualties, Tenant fails to receive insurance proceeds covering the full replacement cost of any Tenant Improvements installed by or at the cost of Tenant and any Alterations which are damaged, then to the extent of any insurance proceeds that would have been payable under the insurance policies required to be obtained by Tenant under Paragraph 19 above plus any deductible, Tenant will be deemed to have self-insured the replacement cost of such items, and upon any damage or destruction thereto, Tenant agrees to immediately pay to Landlord the full replacement cost of such items, less any insurance proceeds actually received by Landlord from Landlord's or Tenant's insurance with respect to such items. (f) Abatement of Rent. In the event of any damage, repair, reconstruction and/or restoration described in this Paragraph 20, rent will be abated or reduced, as the case may be, from the date of such casualty, in proportion to the degree to which Tenant's use of the Premises is impaired during such period of repair until such use is restored. Except for abatement of rent as provided hereinabove, Tenant will not be entitled to any compensation or damages for loss of, or interference with, Tenant's business or use or access of all or any part of the Premises or for lost profits or any other consequential damages of any kind or nature, which result from any such damage, repair, reconstruction or restoration. (g) Inability to Complete. Notwithstanding anything to the contrary contained in this Paragraph 20, if Landlord is obligated or elects to repair, reconstruct and/or restore the damaged portion of the Building or the Premises pursuant to Subparagraph 20(a) or 20(b)(i) above, but is delayed from completing such repair, reconstruction and/or restoration beyond the date which is ninety (90) days after the date estimated by Landlord's contractor for completion thereof by reason of any causes (other than delays caused by Tenant, its subtenants, employees, agents or contractors or delays which are beyond the reasonable control of Landlord as described in Paragraph 33), then either Landlord or Tenant may elect to terminate this Lease upon ten (10) days prior written notice given to the other after the expiration of such ninety (90) day period. (h) Damage Near End of Term. Landlord and Tenant shall each have the right to terminate this Lease if any damage to the Premises occurs during the last twelve (12) months of the Term of this Lease where Landlord's contractor estimates in a writing delivered to Landlord and Tenant that the repair, reconstruction or restoration of such damage cannot be completed within sixty (60) days after the date of such casualty. If either party desires to terminate this Lease under this Subparagraph (h), it shall provide written notice to the other party of such election within ten (10) days after receipt of Landlord's contractor's repair estimates. (i) Waiver of Termination Right. Landlord and Tenant agree that the foregoing provisions of this Paragraph 20 are to govern their respective rights and obligations in the event of any damage or destruction and supersede and are in lieu of the provisions of any applicable law, statute, ordinance, rule, regulation, order or ruling now or hereafter in force which provide remedies for damage or destruction of leased premises (including, without limitation, to the extent the Premises are located in California, the provisions of California Civil Code Section 1932, Subsection 2, and Section 1933, Subsection 4 and any successor statute or laws of a similar nature). (j) Termination. Upon any termination of this Lease under any of the provisions of this Paragraph 20, the parties will be released without further obligation to the other from the date possession of the Premises is surrendered to Landlord except for items which have accrued and are unpaid as of the date of termination and matters which are to survive any termination of this Lease as provided in this Lease. 21. EMINENT DOMAIN. (a) Substantial Taking. If the whole of the Premises, or such part thereof as shall substantially interfere with Tenant's use and occupancy of the Premises, as contemplated by this Lease, is taken for any public or quasi-public purpose by any lawful power or authority by exercise of the right of appropriation, condemnation or eminent domain, or sold to prevent such taking, either party will have the right to terminate this Lease effective as of the date possession is required to be surrendered to such authority. (b) Partial Taking; Abatement of Rent. In the event of a taking of a portion of the Premises which does not substantially interfere with Tenant's use and occupancy of the Premises, then, neither party will have the right to terminate this Lease and Landlord will thereafter proceed to make a functional unit of the remaining portion of the Premises (but only to the extent Landlord receives proceeds therefor from the condemning authority), and rent will be abated with respect to the part of the Premises which Tenant is deprived of on account of such taking. Notwithstanding the immediately preceding sentence to the contrary, if any material part of the Building or the Development is taken (whether or not such taking substantially interferes with Tenant's use of the Premises), Landlord may terminate this Lease upon thirty (30) days prior written notice to Tenant if Landlord also terminates all other leases of space in the Building that may be terminated by Landlord as a result of such taking. (c) Condemnation Award. In connection with any taking of the Premises or the Building, Landlord will be entitled to receive the entire amount of any award which may be made or given in such taking or condemnation, without deduction or apportionment for any estate or interest of Tenant, it being expressly understood and agreed by Tenant that no portion of any such award will be allowed or paid to Tenant for any so-called bonus or excess value of this Lease, and such bonus or excess value will be the sole property of Landlord. Tenant agrees not to assert any claim against Landlord or the taking authority for any compensation because of such taking (including any claim for bonus or excess value of this Lease); provided, however, if any portion of the Premises is taken, Tenant will have the right to recover from the condemning authority (but not from Landlord) any compensation as may be separately awarded or recoverable by Tenant for the taking of Tenant's furniture, fixtures, equipment and other personal property within the Premises, for Tenant's relocation expenses, and for any loss of goodwill or other damage to Tenant's business by reason of such taking. (d) Temporary Taking. In the event of taking of the Premises or any part thereof for temporary use, (i) this Lease will remain unaffected thereby and rent will abate for the duration of the taking in proportion to the extent Tenant's use of the Premises is interfered with, and (ii) Landlord will be entitled to receive such portion or portions of any award made for such use provided that if such taking remains in force at the expiration or earlier termination of this Lease, Tenant will then pay to Landlord a sum equal to the reasonable cost of performing Tenant's obligations under Paragraph 11 with respect to surrender of the Premises and upon such payment Tenant will be excused from such obligations. For purpose of this Subparagraph 21(d), a temporary taking shall be defined as a taking for a period of ninety (90) days or less. 22. DEFAULTS AND REMEDIES. (a) Defaults. The occurrence of any one or more of the following events will be deemed a default by Tenant: (i) [INTENTIONALLY DELETED] (ii) The failure by Tenant to make any payment of rent or additional rent or any other payment required to be made by Tenant hereunder, as and when due, where such failure continues for a period of three (3) days after written notice thereof from Landlord to Tenant; provided, however, that any such notice will be in lieu of, and not in addition to, any notice required under applicable law (including, without limitation, to the extent the Premises are located in California, the provisions of California Code of Civil Procedure Section 1161 regarding unlawful detainer actions or any successor statute or law of a similar nature). (iii) The failure by Tenant to observe or perform any of the covenants or provisions of this Lease to be observed or performed by Tenant, other than as specified in Subparagraph 22(a)(i) or (ii) above, where such failure continues (where no other period of time is expressly provided) for a period of thirty (30) days after written notice thereof from Landlord to Tenant. The provisions of any such notice will be in lieu of, and not in addition to, any notice required under applicable law (including, without limitation, to the extent the Premises are located in California, California Code of Civil Procedure Section 1161 regarding unlawful detainer actions and any successor statute or similar law). If the nature of Tenant's default is such that more than thirty (30) days are reasonably required for its cure, then Tenant will not be deemed to be in default if Tenant, with Landlord's concurrence, commences such cure within such thirty (30) day period and thereafter diligently prosecutes such cure to completion. (iv) (A) The making by Tenant of any general assignment for the benefit of creditors; (B) the filing by or against Tenant of a petition to have Tenant adjudged a bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Tenant, the same is dismissed within sixty (60) days); (C) the appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where possession is not restored to Tenant within thirty (30) days; or (D) the attachment, execution or other judicial seizure of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease where such seizure is not discharged within thirty (30) days. (b) Landlord's Remedies; Termination. In the event of any default by Tenant, in addition to any other remedies available to Landlord at law or in equity under applicable law (including, without limitation, to the extent the Premises are located in California, the remedies of Civil Code Section 1951.4 and any successor statute or similar law, which provides that Landlord may continue this Lease in effect following Tenant's breach and abandonment and collect rent as it falls due, if Tenant has the right to sublet or assign, subject to reasonable limitations), Landlord will have the immediate right and option to terminate this Lease and all rights of Tenant hereunder. If Landlord elects to terminate this Lease then, to the extent permitted under applicable law, Landlord may recover from Tenant (i) The worth at the time of award of any unpaid rent which had been earned at the time of such termination; plus (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rent loss that Tenant proves could have been reasonably avoided; plus (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the Term after the time of award exceeds the amount of such rent loss that Tenant proves could be reasonably avoided; plus (iv) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which, in the ordinary course of things, results therefrom including, but not limited to: attorneys' fees and costs; brokers' commissions; the costs of refurbishment, alterations, renovation and repair of the Premises, and removal (including the repair of any damage caused by such removal) and storage (or disposal) of Tenant's personal property, equipment, fixtures, Alterations, the Tenant Improvements and any other items which Tenant is required under this Lease to remove but does not remove, as well as the unamortized value of any free rent, reduced rent, free parking, reduced rate parking and any Tenant Improvement Allowance or other costs or economic concessions provided, paid, granted or incurred by Landlord pursuant to this Lease. The unamortized value of such concessions shall be determined by taking the total value of such concessions and multiplying such value by a fraction, the numerator of which is the number of months of the Lease Term not yet elapsed as of the date on which the Lease is terminated, and the denominator of which is the total number of months of the Lease Term. As used in Subparagraphs 22(b)(i) and (ii) above, the "worth at the time of award" is computed by allowing interest at the Interest Rate. As used in Subparagraph 22(b)(iii) above, the "worth at the time of award" is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). (c) Landlord's Remedies; Re-Entry Rights. In the event of any default by Tenant, in addition to any other remedies available to Landlord under this Lease, at law or in equity, Landlord will also have the right, with or without terminating this Lease, to re-enter the Premises and remove all persons and property from the Premises; such property may be removed and stored in a public warehouse or elsewhere and/or disposed of at the sole cost and expense of and for the account of Tenant in accordance with the provisions of Subparagraph 13(h) of this Lease or any other procedures permitted by applicable law. No re-entry or taking possession of the Premises by Landlord pursuant to this Subparagraph 22(c) will be construed as an election to terminate this Lease unless a written notice of such intention is given to Tenant or unless the termination thereof is decreed by a court of competent jurisdiction. (d) Landlord's Remedies; Re-Letting. In the event of the vacation or abandonment of the Premises by Tenant or in the event that Landlord elects to re-enter the Premises or takes possession of the Premises pursuant to legal proceeding or pursuant to any notice provided by law, then if Landlord does not elect to terminate this Lease, Landlord may from time to time, without terminating this Lease, either recover all rent as it becomes due or relet the Premises or any part thereof on terms and conditions as Landlord in its sole and absolute discretion may deem advisable with the right to make alterations and repairs to the Premises in connection with such reletting. If Landlord elects to relet the Premises, then rents received by Landlord from such reletting will be applied: first, to the payment of any indebtedness other than rent due hereunder from Tenant to Landlord; second, to the payment of any cost of such reletting; third, to the payment of the cost of any alterations and repairs to the Premises incurred in connection with such reletting; fourth, to the payment of rent due and unpaid hereunder and the residue, if any, will be held by Landlord and applied to payment of future rent as the same may become due and payable hereunder. Should that portion of such rents received from such reletting during any month, which is applied to the payment of rent hereunder, be less than the rent payable during that month by Tenant hereunder, then Tenant agrees to pay such deficiency to Landlord immediately upon demand therefor by Landlord. Such deficiency will be calculated and paid monthly. (e) Landlord's Remedies; Performance for Tenant. All covenants and agreements to be performed by Tenant under any of the terms of this Lease are to be performed by Tenant at Tenant's sole cost and expense and without any abatement of rent. If Tenant fails to pay any sum of money owed to any party other than Landlord, for which it is liable under this Lease, or if Tenant fails to perform any other act on its part to be performed hereunder, and such failure continues for ten (10) days after notice thereof by Landlord, Landlord may, without waiving or releasing Tenant from its obligations, but shall not be obligated to, make any such payment or perform any such other act to be made or performed by Tenant. Tenant agrees to reimburse Landlord upon demand for all sums so paid by Landlord and all necessary incidental costs, together with interest thereon at the Interest Rate, from the date of such payment by Landlord until reimbursed by Tenant. This remedy shall be in addition to any other right or remedy of Landlord set forth in this Paragraph 22. (f) Late Payment. If Tenant fails to pay any installment of rent within five (5) days of when due or if Tenant fails to make any other payment for which Tenant is obligated under this Lease within five (5) days of when due, such late amount will accrue interest at the Interest Rate and Tenant agrees to pay Landlord as additional rent such interest on such amount from the date such amount becomes due until such amount is paid. In addition, Tenant agrees to pay to Landlord concurrently with such late payment amount, as additional rent, a late charge equal to five percent (5%) of the amount due to compensate Landlord for the extra costs Landlord will incur as a result of such late payment (provided that Landlord shall be entitled to such late charge for the first occurrence of such a delinquency in any twelve (12) month period only if Tenant fails to cure such delinquency within three (3) days after notice from Landlord thereof). The parties agree that (i) it would be impractical and extremely difficult to fix the actual damage Landlord will suffer in the event of Tenant's late payment, (ii) such interest and late charge represents a fair and reasonable estimate of the detriment that Landlord will suffer by reason of late payment by Tenant, and (iii) the payment of interest and late charges are distinct and separate in that the payment of interest is to compensate Landlord for the use of Landlord's money by Tenant, while the payment of late charges is to compensate Landlord for Landlord's processing, administrative and other costs incurred by Landlord as a result of Tenant's delinquent payments. Acceptance of any such interest and late charge will not constitute a waiver of the Tenant's default with respect to the overdue amount, or prevent Landlord from exercising any of the other rights and remedies available to Landlord. If Tenant incurs a late charge more than three (3) times in any period of twelve (12) months during the Lease Term, then, notwithstanding that Tenant cures the late payments for which such late charges are imposed, Landlord will have the right to require Tenant thereafter to pay all installments of Monthly Base Rent quarterly in advance throughout the remainder of the Lease Term. (g) Rights and Remedies Cumulative. All rights, options and remedies of Landlord contained in this Lease will be construed and held to be cumulative, and no one of them will be exclusive of the other, and Landlord shall have the right to pursue any one or all of such remedies or any other remedy or relief which may be provided by law or in equity, whether or not stated in this Lease. Nothing in this Paragraph 22 will be deemed to limit or otherwise affect Tenant's indemnification of Landlord pursuant to any provision of this Lease. 23. LANDLORD'S DEFAULT. Landlord will not be in default in the performance of any obligation required to be performed by Landlord under this Lease unless Landlord fails to perform such obligation within thirty (30) days after the receipt of written notice from Tenant specifying in detail Landlord's failure to perform; provided however, that if the nature of Landlord's obligation is such that more than thirty (30) days are required for performance, then Landlord will not be deemed in default if it commences such performance within such thirty (30) day period and thereafter diligently pursues the same to completion. Upon any default by Landlord, Tenant may exercise any of its rights provided at law or in equity, subject to the limitations on liability set forth in Paragraph 35 of this Lease. 24. ASSIGNMENT AND SUBLETTING. (a) Restriction on Transfer. Except as expressly provided in this Paragraph 24, Tenant will not, either voluntarily or by operation of law, assign or encumber this Lease or any interest herein or sublet the Premises or any part thereof, or permit the use or occupancy of the Premises by any party other than Tenant (any such assignment, encumbrance, sublease or the like will sometimes be referred to as a "Transfer"), without the prior written consent of Landlord, which consent Landlord will not unreasonably withhold. (b) Corporate and Partnership Transfers. For purposes of this Paragraph 24, if Tenant is a corporation, partnership or other entity, any transfer, assignment, encumbrance or hypothecation of twenty-five percent (25%) or more (individually or in the aggregate) of any stock or other ownership interest in such entity, and/or any transfer, assignment, hypothecation or encumbrance of any controlling ownership or voting interest in such entity, will be deemed a Transfer and will be subject to all of the restrictions and provisions contained in this Paragraph 24. Notwithstanding the foregoing, the immediately preceding sentence will not apply to any transfers of stock of Tenant if Tenant is a publicly- held corporation and such stock is transferred publicly over a recognized security exchange or over-the-counter market. (c) Permitted Controlled Transfers. Notwithstanding the provisions of this Paragraph 24 to the contrary, Tenant may assign this Lease or sublet the Premises or any portion thereof ("Permitted Transfer"), without Landlord's consent and without extending any sublease termination option to Landlord, to any parent, subsidiary or affiliate corporation which controls, is controlled by or is under common control with Tenant, or to any corporation resulting from a merger or consolidation with Tenant, or to any person or entity which acquires all the assets of Tenant's business as a going concern, provided that: (i) at least twenty (20) days prior to such assignment or sublease, Tenant delivers to Landlord the financial statements and other financial and background information of the assignee or sublessee described in Subparagraph 24(d) below; (ii) if an assignment, the assignee assumes, in full, the obligations of Tenant under this Lease (or if a sublease, the sublessee of a portion of the Premises or Term assumes, in full, the obligations of Tenant with respect to such portion); (iii) the financial net worth of the assignee or sublessee as of the time of the proposed assignment or sublease is adequate to cover the obligations under this Lease (in the case of a proposed assignment) or under the proposed sublease; (iv) Tenant remains fully liable under this Lease; and (v) the use of the Premises under Paragraph 8 remains unchanged. (d) Transfer Notice. If Tenant desires to effect a Transfer, then at least thirty (30) days prior to the date when Tenant desires the Transfer to be effective (the "Transfer Date"), Tenant agrees to give Landlord a notice (the "Transfer Notice"), stating the name, address and business of the proposed assignee, sublessee or other transferee (sometimes referred to hereinafter as "Transferee"), reasonable information (including references) concerning the character, ownership, and financial condition of the proposed Transferee, the Transfer Date, any ownership or commercial relationship between Tenant and the proposed Transferee, and the consideration and all other material terms and conditions of the proposed Transfer, all in such detail as Landlord may reasonably require. If Landlord reasonably requests additional detail, the Transfer Notice will not be deemed to have been received until Landlord receives such additional detail, and Landlord may withhold consent to any Transfer until such information is provided to it. (e) Landlord's Options. Within fifteen (15) days of Landlord's receipt of any Transfer Notice, and any additional information requested by Landlord concerning the proposed Transferee's financial responsibility, Landlord will elect to do one of the following (i) consent to the proposed Transfer; (ii) refuse such consent, which refusal shall be on reasonable grounds including, without limitation, those set forth in Subparagraph 24(f) below; or (iii) terminate this Lease as to all of the Premises (in the case of a proposed assignment) or as to such portion of the Premises that is proposed to be sublet and recapture all or such portion of the Premises for reletting by Landlord. (f) Reasonable Disapproval. Landlord and Tenant hereby acknowledge that Landlord's disapproval of any proposed Transfer pursuant to Subparagraph 24(e) will be deemed reasonably withheld if based upon any reasonable factor, including, without limitation, any or all of the following factors: (i) if the Building is less than eighty percent (80%) occupied, if the net effective rent payable by the Transferee (adjusted on a rentable square foot basis) is less than the net effective rent then being quoted by Landlord for new leases in the Building for comparable size space for a comparable period of time; (ii) the proposed Transferee is a governmental entity; (iii) the portion of the Premises to be sublet is irregular in shape with inadequate means of ingress and egress; (iv) the use of the Premises by the Transferee (A) is not permitted by the use provisions in Paragraph 8 hereof, (B) violates any exclusive use granted by Landlord to another tenant in the Development, or (C) otherwise poses a risk of increased liability to Landlord; (v) the Transfer would likely result in a significant and inappropriate increase in the use of the parking areas or Development Common Areas by the Transferee's employees or visitors, and/or significantly increase the demand upon utilities and services to be provided by Landlord to the Premises; (vi) the Transferee does not have the financial capability to fulfill the obligations imposed by the Transfer and this Lease; or (vii) the Transferee poses a business or other economic risk which Landlord deems unacceptable. (g) Additional Conditions. A condition to Landlord's consent to any Transfer of this Lease will be the delivery to Landlord of a true copy of the fully executed instrument of assignment, sublease, transfer or hypothecation, and, in the case of an assignment, the delivery to Landlord of an agreement executed by the Transferee in form and substance reasonably satisfactory to Landlord, whereby the Transferee assumes and agrees to be bound by all of the terms and provisions of this Lease and to perform all of the obligations of Tenant hereunder. As a condition for granting its consent to any assignment or sublease, Landlord may require that the assignee or sublessee remit directly to Landlord on a monthly basis, all monies due to Tenant by said assignee or sublessee. As a condition to Landlord's consent to any sublease, such sublease must provide that it is subject and subordinate to this Lease and to all mortgages; that Landlord may enforce the provisions of the sublease, including collection of rent; that in the event of termination of this Lease for any reason, including without limitation a voluntary surrender by Tenant, or in the event of any reentry or repossession of the Premises by Landlord, Landlord may, at its option, either (i) terminate the sublease, or (ii) take over all of the right, title and interest of Tenant, as sublessor, under such sublease, in which case such sublessee will attorn to Landlord, but that nevertheless Landlord will not (1) be liable for any previous act or omission of Tenant under such sublease, (2) be subject to any defense or offset previously accrued in favor of the sublessee against Tenant, or (3) be bound by any previous modification of any sublease made without Landlord's written consent, or by any previous prepayment by sublessee of more than one month's rent. (h) Excess Rent. If Landlord consents to any assignment of this Lease, Tenant agrees to pay to Landlord, as additional rent, fifty percent (50%) of all sums and other consideration payable to and for the benefit of Tenant by the assignee on account of the assignment, as and when such sums and other consideration are due and payable by the assignee to or for the benefit of Tenant (or, if Landlord so requires, and without any release of Tenant's liability for the same, Tenant agrees to instruct the assignee to pay such sums and other consideration directly to Landlord). If for any sublease, Tenant receives rent or other consideration, either initially or over the term of the sublease, in excess of the rent fairly allocable to the portion of the Premises which is subleased based on square footage, Tenant agrees to pay to Landlord as additional rent fifty percent (50%) of the excess of each such payment of rent or other consideration received by Tenant promptly after its receipt. In calculating excess rent or other consideration which may be payable to Landlord under this paragraph, Tenant will be entitled to deduct commercially reasonable third party brokerage commissions and attorneys' fees and other amounts reasonably and actually expended by Tenant in connection with such assignment or subletting if acceptable written evidence of such expenditures is provided to Landlord. (i) Termination Rights. If Tenant requests Landlord's consent to any assignment of this Lease or any subletting of all or a portion of the Premises, Landlord will have the right, as provided in Subparagraph 24(e), to terminate this Lease as to all of the Premises (in the case of a proposed assignment) or as to such portion of the Premises that is proposed to be sublet effective as of the date Tenant proposes to assign this Lease or to sublet all or less than all of the Premises. Landlord's right to terminate this Lease as to less than all of the Premises proposed to be sublet will not be deemed waived as to any future additional subletting or assignment as a result of Landlord's consent to a subletting of less than all of the Premises or Landlord's failure to exercise its termination right with respect to any subletting or assignment. Landlord will exercise such termination right, if at all, by giving written notice to Tenant within fifteen (15) days of receipt by Landlord of the financial responsibility information required by this Paragraph 24. Tenant understands and acknowledges that the option, as provided in this Paragraph 24, to terminate this Lease as to all of the Premises (in the case of a proposed assignment) or as to such portion of the Premises that is proposed to be sublet rather than approve the assignment of this Lease or the subletting of all or a portion of the Premises, is a material inducement for Landlord's agreeing to lease the Premises to Tenant upon the terms and conditions herein set forth. In the event of any such termination with respect to less than all of the Premises, the cost of segregating the recaptured space from the balance of the Premises will be paid by Tenant and Tenant's future monetary obligations under this Lease will be reduced proportionately on a square footage basis to correspond to the balance of the Premises which Tenant continues to lease. (j) No Release. No Transfer will release Tenant of Tenant's obligations under this Lease or alter the primary liability of Tenant to pay the rent and to perform all other obligations to be performed by Tenant hereunder. Landlord may require that any Transferee remit directly to Landlord on a monthly basis, all monies due Tenant by said Transferee. However, the acceptance of rent by Landlord from any other person will not be deemed to be a waiver by Landlord of any provision hereof. Consent by Landlord to one Transfer will not be deemed consent to any subsequent Transfer. In the event of default by any Transferee of Tenant or any successor of Tenant in the performance of any of the terms hereof, Landlord may proceed directly against Tenant without the necessity of exhausting remedies against such Transferee or successor. Landlord may consent to subsequent assignments of this Lease or sublettings or amendments or modifications to this Lease with assignees of Tenant, without notifying Tenant, or any successor of Tenant, and without obtaining its or their consent thereto and any such actions will not relieve Tenant of liability under this Lease. (k) Administrative and Attorneys' Fees. If Tenant effects a Transfer or requests the consent of Landlord to any Transfer (whether or not such Transfer is consummated), then, upon demand, Tenant agrees to pay Landlord a non-refundable administrative fee of Two Hundred Fifty Dollars ($250.00), plus any reasonable attorneys' and paralegal fees incurred by Landlord in connection with such Transfer or request for consent (whether attributable to Landlord's in-house attorneys or paralegals or otherwise) not to exceed One Hundred Dollars ($100.00) for each one thousand (1,000) rentable square feet of area contained within the Premises or portion thereof to be assigned or sublet. Acceptance of the Two Hundred Fifty Dollar ($250.00) administrative fee and/or reimbursement of Landlord's attorneys' and paralegal fees will in no event obligate Landlord to consent to any proposed Transfer. 25. SUBORDINATION. Without the necessity of any additional document being executed by Tenant for the purpose of effecting a subordination, and at the election of Landlord or any mortgagee or beneficiary with a deed of trust encumbering the Building and/or the Development, or any lessor of a ground or underlying lease with respect to the Building, this Lease will be subject and subordinate at all times to: (i) all ground leases or underlying leases which may now exist or hereafter be executed affecting the Building; and (ii) the lien of any mortgage or deed of trust which may now exist or hereafter be executed for which the Building, the Development or any leases thereof, or Landlord's interest and estate in any of said items, is specified as security; provided, however, that the subordination of this Lease to any mortgage or deed of trust or any ground or underlying lease is subject to Tenant's receipt of a commercially reasonable non-disturbance agreement from the holder of such mortgage or deed of trust or such ground or underlying lease in a form reasonably satisfactory to Tenant. Notwithstanding the foregoing, Landlord reserves the right to subordinate any such ground leases or underlying leases or any such liens to this Lease. If any such ground lease or underlying lease terminates for any reason or any such mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for any reason, at the election of Landlord's successor in interest, Tenant agrees to attorn to and become the tenant of such successor in which event Tenant's right to possession of the Premises will not be disturbed as long as Tenant is not in default under this Lease. Tenant hereby waives its rights under any law which gives or purports to give Tenant any right to terminate or otherwise adversely affect this Lease and the obligations of Tenant hereunder in the event of any such foreclosure proceeding or sale. Tenant covenants and agrees to execute and deliver, upon demand by Landlord and in the form reasonably required by Landlord, any additional documents evidencing the priority or subordination of this Lease and Tenant's attornment agreement with respect to any such ground lease or underlying leases or the lien of any such mortgage or deed of trust. If Tenant fails to sign and return any such documents within ten (10) days of receipt, Tenant will be in default hereunder. 26. ESTOPPEL CERTIFICATE. (a) Tenant's Obligations. Within ten (10) days following any written request which Landlord may make from time to time, Tenant agrees to execute and deliver to Landlord a statement, in a form substantially similar to the form of Exhibit "G" attached hereto or as may reasonably be required by Landlord's lender, certifying: (i) the date of commencement of this Lease; (ii) the fact that this Lease is unmodified and in full force and effect (or, if there have been modifications, that this Lease is in full force and effect, and stating the date and nature of such modifications); (iii) the date to which the rent and other sums payable under this Lease have been paid; (iv) that there are no current defaults under this Lease by either Landlord or Tenant except as specified in Tenant's statement; and (v) such other matters reasonably requested by Landlord. Landlord and Tenant intend that any statement delivered pursuant to this Paragraph 26 may be relied upon by any mortgagee, beneficiary, purchaser or prospective purchaser of the Building or any interest therein. (b) Tenant's Failure to Deliver. Tenant's failure to deliver such statement within such time will be conclusive upon Tenant (i) that this Lease is in full force and effect, without modification except as may be represented by Landlord, (ii) that there are no uncured defaults in Landlord's performance, and (iii) that not more than one (1) month's rent has been paid in advance. Without limiting the foregoing, if Tenant fails to deliver any such statement within such ten (10) day period, Landlord may deliver to Tenant an additional request for such statement and Tenant's failure to deliver such statement to Landlord within ten (10) days after delivery of such additional request will constitute a default under this Lease. Tenant agrees to indemnify and protect Landlord from and against any and all claims, damages, losses, liabilities and expenses (including attorneys' fees and costs) attributable to any failure by Tenant to timely deliver any such estoppel certificate to Landlord as required by this Paragraph 26. 27. BUILDING PLANNING. If Landlord requires the Premises for use in conjunction with another suite or for other reasons connected with the planning program for the Building, Landlord will have the right, upon one hundred fifty (150) days prior written notice to Tenant, to move Tenant to other upper floor space in the Development of substantially similar size as the Premises, with similar views, and with tenant improvements of substantially similar quality and layout as then existing in the Premises. The replacement space must be an entire single floor. Any such relocation will be at Landlord's cost and expense, including the cost of providing such substantially similar tenant improvements (but not any furniture or personal property, except as otherwise specifically set forth herein) and Tenant's reasonable moving, telephone and cable installation, modification of furniture modules, if required, and stationery reprinting costs. If Landlord so relocates Tenant, the terms and conditions of this Lease will remain in full force and effect and apply to the new space, except that (a) a revised Exhibit "A-II" will become part of this Lease and will reflect the location of the new space, (b) Paragraph 1 of this Lease will be amended to include and state all correct data as to the new space, (c) the new space will thereafter be deemed to be the "Premises", and (d) all economic terms and conditions (e.g. rent, total Operating Expense Allowance, etc.) will be adjusted on a per square foot basis based on the total number of rentable square feet of area contained in the new space. Landlord and Tenant agree to cooperate fully with one another in order to minimize the inconvenience of Tenant resulting from any such relocation. However, if the new space does not meet with Tenant's reasonable approval, Tenant will have the right to cancel this Lease upon giving Landlord one hundred fifty (150) days notice within ten (10) days of receipt of Landlord's relocation notification accompanied by a description of the replacement space; provided, however, Landlord has the right, by written notice to Tenant given within ten (10) days following receipt of Tenant's cancellation notice to rescind Landlord's relocation notice, in which event Landlord's relocation notice will be rescinded, Tenant's cancellation notice will be cancelled and this Lease will remain in full force and effect. If Tenant cancels this Lease pursuant to this Paragraph 27, Tenant agrees to vacate the Building and the Premises within one hundred fifty (150) days of its delivery to Landlord of the notice of cancellation. 28. RULES AND REGULATIONS. Tenant agrees to faithfully observe and comply with the "Rules and Regulations," a copy of which is attached hereto and incorporated herein by this reference as Exhibit "H", and all reasonable and nondiscriminatory modifications thereof and additions thereto from time to time put into effect by Landlord. Landlord will not be responsible to Tenant for the violation or non-performance by any other tenant or occupant of the Building of any of the Rules and Regulations. 29. MODIFICATION AND CURE RIGHTS OF LANDLORD'S MORTGAGEES AND LESSORS. (a) Modifications. If, in connection with Landlord's obtaining or entering into any financing or ground lease for any portion of the Building or the Development, the lender or ground lessor requests modifications to this Lease, Tenant, within ten (10) days after request therefor, agrees to execute an amendment to this Lease incorporating such modifications, provided such modifications are reasonable and do not increase the obligations of Tenant under this Lease or adversely affect the leasehold estate created by this Lease. (b) Cure Rights. In the event of any default on the part of Landlord, Tenant will give notice by registered or certified mail to any beneficiary of a deed of trust or mortgage covering the Premises or ground lessor of Landlord whose address has been furnished to Tenant, and Tenant agrees to offer such beneficiary, mortgagee or ground lessor a reasonable opportunity to cure the default (including with respect to any such beneficiary or mortgagee, time to obtain possession of the Premises, subject to this Lease and Tenant's rights hereunder, by power of sale or a judicial foreclosure, if such should prove necessary to effect a cure). 30. DEFINITION OF LANDLORD. The term "Landlord," as used in this Lease, so far as covenants or obligations on the part of Landlord are concerned, means and includes only the owner or owners, at the time in question, of the fee title of the Premises or the lessees under any ground lease, if any. In the event of any transfer, assignment or other conveyance or transfers of any such title (other than a transfer for security purposes only), Landlord herein named (and in case of any subsequent transfers or conveyances, the then grantor) will be automatically relieved from and after the date of such transfer, assignment or conveyance of all liability as respects the performance of any covenants or obligations on the part of Landlord contained in this Lease thereafter to be performed, so long as the transferee assumes in writing all such covenants and obligations of Landlord arising after the date of such transfer. Landlord and Landlord's transferees and assignees have the absolute right to transfer all or any portion of their respective title and interest in the Development, the Building, the Premises and/or this Lease without the consent of Tenant, and such transfer or subsequent transfer will not be deemed a violation on Landlord's part of any of the terms and conditions of this Lease. 31. WAIVER. The waiver by either party of any breach of any term, covenant or condition herein contained will not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition herein contained, nor will any custom or practice which may develop between the parties in the administration of the terms hereof be deemed a waiver of or in any way affect the right of either party to insist upon performance in strict accordance with said terms. The subsequent acceptance of rent or any other payment hereunder by Landlord will not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rent so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent. No acceptance by Landlord of a lesser sum than the basic rent and additional rent or other sum then due will be deemed to be other than on account of the earliest installment of such rent or other amount due, nor will any endorsement or statement on any check or any letter accompanying any check 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 other amount or pursue any other remedy provided in this Lease. The consent or approval of Landlord to or of any act by Tenant requiring Landlord's consent or approval will not be deemed to waive or render unnecessary Landlord's consent or approval to or of any subsequent similar acts by Tenant. 32. PARKING. (a) Grant of Parking Rights. So long as this Lease is in effect and provided Tenant is not in default hereunder, Landlord grants to Tenant and Tenant's Authorized Users (as defined below) a license to use the number and type of parking spaces designated in Subparagraph 1(t) subject to the terms and conditions of this Paragraph 32 and the Rules and Regulations regarding parking contained in Exhibit "H" attached hereto. Except as otherwise expressly set forth in Subparagraph 1(t), as consideration for the use of such parking spaces, Tenant agrees to pay to Landlord or, at Landlord's election, directly to Landlord's parking operator, as additional rent under this Lease, the prevailing parking rate for each such parking space as established by Landlord in its discretion from time to time. Tenant agrees that all parking charges will be payable on a monthly basis concurrently with each monthly payment of Monthly Base Rent. Tenant agrees to submit to Landlord or, at Landlord's election, directly to Landlord's parking operator with a copy to Landlord, written notice in a form reasonably specified by Landlord containing the names, home and office addresses and telephone numbers of those persons who are authorized by Tenant to use Tenant's parking spaces on a monthly basis ("Tenant's Authorized Users") and shall use its best efforts to identify each vehicle of Tenant's Authorized Users by make, model and license number. Tenant agrees to deliver such notice prior to the beginning of the Term of this Lease and to periodically update such notice as well as upon specific request by Landlord or Landlord's parking operator to reflect changes to Tenant's Authorized Users or their vehicles. (b) Visitor Parking. So long as this Lease is in effect, Tenant's visitors and guests will be entitled to use those specific parking areas which are designated for short term visitor parking and which are located within the surface parking area(s), if any, and/or within the parking structure(s) which serve the Building. Visitor parking will be made available at a charge to Tenant's visitors and guests, with the rate being established by Landlord in its discretion from time to time. Tenant, at its sole cost and expense, may elect to validate such parking for its visitors and guests. All such visitor parking will be on a non- exclusive, in common basis with all other visitors and guests of the Development. (c) Use of Parking Spaces. Tenant will not use or allow any of Tenant's Authorized Users to use any parking spaces which have been specifically assigned by Landlord to other tenants or occupants or for other uses such as visitor parking or which have been designated by any governmental entity as being restricted to certain uses. Tenant will not be entitled to increase or reduce its parking privileges applicable to the Premises during the Term of the Lease except as follows: If at any time Tenant desires to increase or reduce the number of parking spaces allocated to it under the terms of this Lease, Tenant must notify Landlord in writing of such desire and Landlord will have the right, in its sole and absolute discretion, to either (a) approve such requested increase in the number of parking spaces allocated to Tenant (with an appropriate increase to the additional rent payable by Tenant for such additional spaces based on the then prevailing parking rates), (b) approve such requested decrease in the number of parking spaces allocated to Tenant (with an appropriate reduction in the additional rent payable by Tenant for such eliminated parking spaces based on the then prevailing parking rates), or (c) disapprove such requested increase or decrease in the number of parking spaces allocated to Tenant. Promptly following receipt of Tenant's written request, Landlord will provide Tenant with written notice of its decision including a statement of any adjustments to the additional rent payable by Tenant for parking under the Lease, if applicable. (d) General Provisions. Except as otherwise expressly set forth in Subparagraph 1(t), Landlord reserves the right to set and increase monthly fees and/or daily and hourly rates for parking privileges from time to time during the Term of the Lease. Landlord may assign any unreserved and unassigned parking spaces and/or make all or any portion of such spaces reserved, if Landlord reasonably determines that it is necessary for orderly and efficient parking or for any other reasonable reason. Failure to pay the rent for any particular parking spaces or failure to comply with any terms and conditions of this Lease applicable to parking may be treated by Landlord as a default under this Lease and, in addition to all other remedies available to Landlord under the Lease, at law or in equity, Landlord may elect to recapture such parking spaces for the balance of the Term of this Lease if Tenant does not cure such failure within the applicable cure period set forth in Paragraph 22 of this Lease. In such event, Tenant and Tenant's Authorized Users will be deemed visitors for purposes of parking space use and will be entitled to use only those parking areas specifically designated for visitor parking subject to all provisions of this Lease applicable to such visitor parking use. Except in connection with an assignment or sublease expressly permitted under the terms of this Lease, Tenant's parking rights and privileges described herein are personal to Tenant and may not be assigned or transferred, or otherwise conveyed, without Landlord's prior written consent, which consent Landlord may withhold in its sole and absolute discretion. In any event, under no circumstances may Tenant's parking rights and privileges be transferred, assigned or otherwise conveyed separate and apart from Tenant's interest in this Lease. (e) Cooperation with Traffic Mitigation Measures. Tenant agrees to use its reasonable, good faith efforts to cooperate in traffic mitigation programs which may be undertaken by Landlord independently, or in cooperation with local municipalities or governmental agencies or other property owners in the vicinity of the Building. Such programs may include, but will not be limited to, carpools, vanpools and other ridesharing programs, public and private transit, flexible work hours, preferential assigned parking programs and programs to coordinate tenants within the Development with existing or proposed traffic mitigation programs. (f) Parking Rules and Regulations. Tenant and Tenant's Authorized Users shall comply with all rules and regulations regarding parking set forth in Exhibit "H" attached hereto and Tenant agrees to cause its employees, subtenants, assignees, contractors, suppliers, customers and invitees to comply with such rules and regulations. Landlord reserves the right from time to time to modify and/or adopt such other reasonable and non- discriminatory rules and regulations for the parking facilities as it deems reasonably necessary for the operation of the parking facilities. 33. FORCE MAJEURE. If either Landlord or Tenant is delayed, hindered in or prevented from the performance of any act required under this Lease by reason of strikes, lock-outs, labor troubles, inability to procure standard materials, failure of power, restrictive governmental laws, regulations or orders or governmental action or inaction (including failure, refusal or delay in issuing permits, approvals and/or authorizations which is not the result of the action or inaction of the party claiming such delay), riots, civil unrest or insurrection, war, fire, earthquake, flood or other natural disaster, unusual and unforeseeable delay which results from an interruption of any public utilities (e.g., electricity, gas, water, telephone) or other unusual and unforeseeable delay not within the reasonable control of the party delayed in performing work or doing acts required under the provisions of this Lease, then performance of such act will be excused for the period of the delay and the period for the performance of any such act will be extended for a period equivalent to the period of such delay. The provisions of this Paragraph 33 will not operate to excuse Tenant from prompt payment of rent or any other payments required under the provisions of this Lease. 34. SIGNS. (a) Premises Signage. Landlord will designate the location on the Premises for one Tenant identification sign. Tenant agrees to have Landlord install and maintain Tenant's identification sign in such designated location in accordance with this Paragraph 34 at Tenant's sole cost and expense. (b) Building Parapet Signage. In addition to the identification sign referred to in Paragraph 34(a) above, during the initial Term, Tenant shall have the exclusive right to install and maintain identification signage on the parapet of the Building in a location approved by Landlord, provided that the following conditions precedent have been satisfied: (i) at least seventy-five percent (75%) of the Building shall have been leased, (ii) no other tenant in the Building shall have leased more space than Tenant has leased in the Building, and (iii) Tenant shall not be in default under this Lease beyond any applicable cure period. (c) General. Except as otherwise provided in this Paragraph 34, Tenant has no right to install Tenant identification signs in any other location in, on or about the Premises or the Development and will not display or erect any other signs, displays or other advertising materials that are visible from the exterior of the Building or from within the Building in any interior or exterior common areas. The size, design, color and other physical aspects of any and all permitted sign(s) will be subject to (i) Landlord's written approval prior to installation, which approval may be withheld in Landlord's sole and absolute discretion, (ii) any covenants, conditions or restrictions governing the Premises, and (iii) any applicable municipal or governmental permits, approvals, guidelines and restrictions (including, without limitation, any guidelines issued or restrictions imposed by the City of Dublin or the East Dublin Specific Plan). Tenant will be solely responsible for all costs for installation, maintenance, repair and removal of any Tenant identification sign(s). If Tenant fails to remove Tenant's sign(s) upon termination of this Lease and repair any damage caused by such removal, Landlord may do so at Tenant's sole cost and expense. Tenant agrees to reimburse Landlord for all costs incurred by Landlord to effect any installation, maintenance or removal on Tenant's account, which amount will be deemed additional rent, and may include, without limitation, all sums disbursed, incurred or deposited by Landlord including Landlord's costs, expenses and actual attorneys' fees with interest thereon at the Interest Rate from the date of Landlord's demand until paid by Tenant. Any sign rights granted to Tenant under this Lease are personal to Tenant and may not be assigned, transferred or otherwise conveyed to any assignee or subtenant of Tenant without Landlord's prior written consent, which consent Landlord may withhold in its sole and absolute discretion. 35. LIMITATION ON LIABILITY. In consideration of the benefits accruing hereunder, Tenant on behalf of itself and all successors and assigns of Tenant covenants and agrees that, in the event of any actual or alleged failure, breach or default hereunder by Landlord: (a) Tenant's recourse against Landlord for monetary damages will be limited to Landlord's interest in the Building including, subject to the prior rights of any Mortgagee, Landlord's interest in the rents of the Building and any insurance proceeds payable to Landlord; (b) Except as may be necessary to secure jurisdiction of the partnership or company, no partner or member of Landlord shall be sued or named as a party in any suit or action and no service of process shall be made against any partner or member of Landlord; (c) No partner or member of Landlord shall be required to answer or otherwise plead to any service of process; (d) No judgment will be taken against any partner or member of Landlord and any judgment taken against any partner or member of Landlord may be vacated and set aside at any time after the fact; (e) No writ of execution will be levied against the assets of any partner or member of Landlord; (f) The obligations under this Lease do not constitute personal obligations of the individual members, partners, directors, officers or shareholders of Landlord, and Tenant shall not seek recourse against the individual members, partners, directors, officers or shareholders of Landlord or any of their personal assets for satisfaction of any liability in respect to this Lease; and (g) These covenants and agreements are enforceable both by Landlord and also by any partner or member of Landlord. 36. FINANCIAL STATEMENTS. Prior to the execution of this Lease by Landlord and at any time during the Term of this Lease upon ten (10) days prior written notice from Landlord, Tenant agrees to provide Landlord with a current financial statement for Tenant and any guarantors of Tenant and financial statements for the two (2) years prior to the current financial statement year for Tenant and any guarantors of Tenant. Such statements are to be prepared in accordance with generally accepted accounting principles and, if such is the normal practice of Tenant, audited by an independent certified public accountant. 37. QUIET ENJOYMENT. Landlord covenants and agrees with Tenant that upon Tenant paying the rent required under this Lease and paying all other charges and performing all of the covenants and provisions on Tenant's part to be observed and performed under this Lease, Tenant may peaceably and quietly have, hold and enjoy the Premises in accordance with this Lease without hindrance or molestation by Landlord or its employees or agents. 38. MISCELLANEOUS. (a) Conflict of Laws. This Lease shall be governed by and construed solely pursuant to the laws of the State, without giving effect to choice of law principles thereunder. (b) Successors and Assigns. Except as otherwise provided in this Lease, all of the covenants, conditions and provisions of this Lease shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns. (c) Professional Fees and Costs. If either Landlord or Tenant should bring suit against the other with respect to this Lease, then all costs and expenses, including without limitation, actual professional fees and costs such as appraisers', accountants' and attorneys' fees and costs, incurred by the party which prevails in such action, whether by final judgment or out of court settlement, shall be paid by the other party, which obligation on the part of the other party shall be deemed to have accrued on the date of the commencement of such action and shall be enforceable whether or not the action is prosecuted to judgment. As used herein, attorneys' fees and costs shall include, without limitation, attorneys' fees, costs and expenses incurred in connection with any (i) postjudgment motions; (ii) contempt proceedings; (iii) garnishment, levy, and debtor and third party examination; (iv) discovery; and (v) bankruptcy litigation. (d) Terms and Headings. The words "Landlord" and "Tenant" as used herein shall include the plural as well as the singular. Words used in any gender include other genders. The paragraph headings of this Lease are not a part of this Lease and shall have no effect upon the construction or interpretation of any part hereof. (e) Time. Time is of the essence with respect to the performance of every provision of this Lease in which time of performance is a factor. (f) Prior Agreement; Amendments. This Lease constitutes and is intended by the parties to be a final, complete and exclusive statement of their entire agreement with respect to the subject matter of this Lease. This Lease supersedes any and all prior and contemporaneous agreements and understandings of any kind relating to the subject matter of this Lease. There are no other agreements, understandings, representations, warranties, or statements, either oral or in written form, concerning the subject matter of this Lease. No alteration, modification, amendment or interpretation of this Lease shall be binding on the parties unless contained in a writing which is signed by both parties. (g) Separability. The provisions of this Lease shall be considered separable such that if any provision or part of this Lease is ever held to be invalid, void or illegal under any law or ruling, all remaining provisions of this Lease shall remain in full force and effect to the maximum extent permitted by law. (h) Recording. Neither Landlord nor Tenant shall record this Lease nor a short form memorandum thereof without the consent of the other. (i) Counterparts. This Lease may be executed in one or more counterparts, each of which shall constitute an original and all of which shall be one and the same agreement. (j) Nondisclosure of Lease Terms. Tenant acknowledges and agrees that the terms of this Lease are confidential and constitute proprietary information of Landlord. Disclosure of the terms could adversely affect the ability of Landlord to negotiate other leases and impair Landlord's relationship with other tenants. Accordingly, Tenant agrees that it, and its partners, officers, directors, employees, agents and attorneys, shall not intentionally and voluntarily disclose the terms and conditions of this Lease to any newspaper or other publication or any other tenant or apparent prospective tenant of the Building or other portion of the Development, or real estate agent, either directly or indirectly, without the prior written consent of Landlord, provided, however, that Tenant may disclose the terms to prospective subtenants or assignees under this Lease. (k) Non-Discrimination. Tenant acknowledges and agrees that there shall be no discrimination against, or segregation of, any person, group of persons, or entity on the basis of race, color, creed, religion, age, sex, marital status, national origin, or ancestry in the leasing, subleasing, transferring, assignment, occupancy, tenure, use, or enjoyment of the Premises, or any portion thereof. 39. EXECUTION OF LEASE. (a) Joint and Several Obligations. If more than one person executes this Lease as Tenant, their execution of this Lease will constitute their covenant and agreement that (i) each of them is jointly and severally liable for the keeping, observing and performing of all of the terms, covenants, conditions, provisions and agreements of this Lease to be kept, observed and performed by Tenant, and (ii) the term "Tenant" as used in this Lease means and includes each of them jointly and severally. The act of or notice from, or notice or refund to, or the signature of any one or more of them, with respect to the tenancy of this Lease, including, but not limited to, any renewal, extension, expiration, termination or modification of this Lease, will be binding upon each and all of the persons executing this Lease as Tenant with the same force and effect as if each and all of them had so acted or so given or received such notice or refund or so signed. (b) Tenant as Corporation or Partnership. If Tenant executes this Lease as a corporation or partnership, then Tenant and the persons executing this Lease on behalf of Tenant represent and warrant that such entity is duly qualified and in good standing to do business in California and that the individuals executing this Lease on Tenant's behalf are duly authorized to execute and deliver this Lease on its behalf, and in the case of a corporation, in accordance with a duly adopted resolution of the board of directors of Tenant, a copy of which is to be delivered to Landlord on execution hereof, if requested by Landlord, and in accordance with the by-laws of Tenant, and, in the case of a partnership, in accordance with the partnership agreement and the most current amendments thereto, if any, copies of which are to be delivered to Landlord on execution hereof, if requested by Landlord, and that this Lease is binding upon Tenant in accordance with its terms. (c) Examination of Lease. Submission of this instrument by Landlord to Tenant for examination or signature by Tenant does not constitute a reservation of or option for lease, and it is not effective as a lease or otherwise until execution by and delivery to both Landlord and Tenant. 40. UNION LABOR. Notwithstanding anything herein to the contrary, Tenant covenants and agrees that all contractors and subcontractors at any tier performing any construction, repair, refurbishment or restoration, including, without limitation, tenant improvements, build- outs, alterations, additions, improvements, renovations, repairs, remodeling, painting and installations of fixtures, mechanical, electrical, plumbing, data, security, telecommunication, low voltage or elevator equipment or systems or other equipment, or with respect to any other construction work in, on, or to the Premises shall: (i) be bound by and signatory to a collective bargaining agreement with a labor organization (a) whose jurisdiction covers the type of work to be performed on the Premises, and (b) who is affiliated with the Building and Construction Trades Department of the AFL-CIO; and (ii) each such contractor or subcontractor shall observe area standards for wages and other terms and conditions of employment, including fringe benefits. 41. OPTION TERM. (a) Option Right. Landlord hereby grants the originally named Tenant herein (or any affiliate to which this Lease has been assigned pursuant to Paragraph 24(c) above (a "Permitted Assignee")), one (1) option to extend the Term for a period of five (5) years (the "Option Term"), which option shall be exercisable only by written notice delivered by Tenant to Landlord as provided below, provided that, as of the date of delivery of such notice, Tenant is not in default under this Lease beyond any applicable cure period and Tenant has not previously been in default under this Lease beyond any applicable cure period more than once in the prior twenty-four (24) months. Upon the proper exercise of such option to extend, and provided that, as of the end of the initial Term, Tenant is not in default under this Lease beyond any applicable cure period and Tenant has not previously been in default beyond any applicable cure period under this Lease more than once in the prior twenty-four (24) months, the Term, as it applies to the Premises, shall be extended for a period of five (5) years at the monthly base rent and on the other terms set forth in Paragraph 41(b) below. The rights contained in this Paragraph 41 shall be personal to Tenant or a Permitted Assignee. (b) Option Rent. The monthly base rent payable by Tenant during the Option Term (the "Option Rent") shall be equal to rent at which tenants, as of the commencement of the Option Term, will be leasing non-sublease space comparable in size, location and quality to the Premises, for a comparable term, which comparable space is located in other comparable office buildings in the Cities of Dublin or Pleasanton, California; provided, however, that in no event will Option Rent be less than the Monthly Base Rent payable by Tenant for the last year of the initial term of this Lease. All other terms and conditions of this Lease shall apply throughout the Option Term; however, any obligation of Landlord to construct tenant improvements or provide an allowance (if applicable) shall not apply during the Option Term and Tenant shall, in no event, have the option to extend the Term beyond the Option Term described in Paragraph 41(a) above. (c) Exercise of Option. The option contained in this Paragraph 41 shall be exercised by Tenant, if at all, and only in the following manner: (i) Tenant shall deliver written notice to Landlord not more than eleven (11) months nor less than nine (9) months prior to the expiration of the initial Term, stating that Tenant is exercising its option; (ii) Landlord, after receipt of Tenant's notice, shall deliver notice (the "Option Rent Notice") to Tenant not less than seven (7) months prior to the expiration of the initial Term, setting forth the Option Rent; and (iii) if Tenant wishes to object to the Option Rent, Tenant shall, on or before the earlier of (A) the date occurring six (6) months prior to the expiration of the initial Term and (B) the date occurring thirty (30) days after Tenant's receipt of the Option Rent Notice deliver written notice thereof to Landlord, in which case the parties shall follow the procedure, and the Option Rent shall be determined, as set forth in Paragraph 41(d) below. (d) Determination of Option Rent. In the event Tenant timely and appropriately objects to the Option Rent, Landlord and Tenant shall attempt to agree upon the Option Rent using their best good-faith efforts. If Landlord and Tenant fail to reach agreement within ten (10) days following Tenant's objection to the Option Rent, (the "Outside Agreement Date"), then each party shall make a separate determination of the Option Rent, as the case may be, within five (5) days, and such determinations shall be submitted to arbitration in accordance with Subparagraphs (i) through (vii) below. (i) Landlord and Tenant shall each appoint one arbitrator who shall by profession be a real estate broker who shall have been active over the five (5) year period ending on the date of such appointment in the leasing of commercial properties in the Dublin area. The determination of the arbitrators shall be limited solely to the issue area of whether Landlord's or Tenant's submitted Option Rent, is the closest to the actual Option Rent as determined by the arbitrators, taking into account the requirements of Paragraph 41(b) above. Each such arbitrator shall be appointed within fifteen (15) days after the applicable Outside Agreement Date. (ii) The two arbitrators so appointed shall within ten (10) days of the date of the appointment of the last appointed arbitrator agree upon and appoint a third arbitrator who shall be qualified under the same criteria set forth hereinabove for qualification of the initial two arbitrators. (iii) The three arbitrators shall within thirty (30) days of the appointment of the third arbitrator reach a decision as to whether the parties shall use Landlord's or Tenant's submitted Option Rent, and shall notify Landlord and Tenant thereof. (iv) The decision of the majority of the three arbitrators shall be binding upon Landlord and Tenant. (v) If either Landlord or Tenant fails to appoint an arbitrator within fifteen (15) days after the applicable Outside Agreement Date, the arbitrator appointed by one of them shall reach a decision, notify Landlord and Tenant thereof, and such arbitrator's decision shall be binding upon Landlord and Tenant. (vi) If the two arbitrators fail to agree upon and appoint a third arbitrator, or both parties fail to appoint an arbitrator, then the appointment of the third arbitrator or any arbitrator shall be dismissed and the matter to be decided shall be forthwith submitted to arbitration under the provisions of the American Arbitration Association, but subject to the instruction set forth in this Paragraph 41(d). (vii) The cost of arbitration shall be paid by the non-prevailing party. 42. SECURITY MEASURES. The Building will have a card reader system for Building access during non-business hours. In addition, there will be an on-site roving security guard that will patrol the Development during non-business hours. Tenant hereby acknowledges that Landlord shall have no obligation to provide any other guard service or other security measures for the benefit of the Premises, the Building or the Development. Tenant hereby assumes all responsibility for the protection of Tenant and its agents, employees, contractors, invitees and guests, and the property thereof, from acts of third parties, including keeping doors locked and other means of entry to the Premises closed, whether or not Landlord, at its option, elects to provide security protection for the Development or any portion thereof. Tenant further assumes the risk that any safety and security devices, services and programs which Landlord elects, in its sole discretion, to provide may not be effective, or may malfunction or be circumvented by an unauthorized third party, and Tenant shall, in addition to its other insurance obligations under this Lease, obtain its own insurance coverage to the extent Tenant desires protection against losses related to such occurrences. Tenant shall cooperate in any reasonable safety or security program developed by Landlord or required by law. 43. NON-DISTURBANCE AGREEMENT. Landlord agrees to deliver to Tenant, within ninety (90) days after the execution of this Lease by both parties, a commercially reasonable non-disturbance agreement from the holder of the existing deed of trust against the Building. IN WITNESS WHEREOF, the parties have caused this Lease to be duly executed by their duly authorized representatives as of the date first above written. TENANT: LANDLORD: SIMPSON MANUFACTURING CO., INC., KOLL DUBLIN CORPORATE CENTER, a Delaware corporation L.P., a Delaware limited partnership By: /s/STEVE LAMSON By: KDC-DUBLIN, LLC, a ---------------------- Delaware limited liability Print Name: STEVE LAMSON company, its general partner Print Title: CFO By: KDC-OC, LLC, a Delaware limited liability company, its managing member By: Koll Development Company, LLC, a Delaware limited liability company, its manager By: /s/MICHAEL G. PARNER ------------------------- Print Name: MICHAEL G. PARNER Print Title: SENIOR VP EXHIBIT A-I SITE PLAN EXHIBIT A-II OUTLINE OF FLOOR PLAN OF PREMISES EXHIBIT B RENTABLE SQUARE FEET AND USABLE SQUARE FEET 1. The term "Rentable Square Feet" as used in the Lease will be deemed to include: (a) with respect to the Premises, the usable area of the Premises determined in accordance with the Method for Measuring Floor Area in Office Buildings, ANSI Z65.1-1996 (the "BOMA Standard"), plus a pro rata portion of the main lobby area on the ground floor and all elevator machine rooms, electrical and telephone equipment rooms and mail delivery facilities and other areas used by all tenants of the Building, if any, plus (i) for single tenancy floors, all the area covered by the elevator lobbies, corridors, special stairways, restrooms, mechanical rooms, electrical rooms and telephone closets on such floors, or (ii) for multiple tenancy floors, a pro-rata portion of all of the area covered by the elevator lobbies, corridors, special stairways, restrooms, mechanical rooms, electrical rooms and telephone closets on such floor; and (b) with respect to the Building, the total rentable area for all floors in the Building computed in accordance with the provisions of Subparagraph 1(a) above. In calculating the "Rentable Square Feet" of the Premises or the Building, the area contained within the exterior walls of the Building stairs, fire towers, vertical ducts, elevator shafts, flues, vents, stacks and major pipe shafts will be excluded. 2. The term "Usable Square Feet" as used in Exhibit "C" with respect to the Premises, if applicable, will be deemed to include the usable area of the Premises as determined in accordance with the BOMA Standard. 3. For purposes of establishing Tenant's Percentage, Tenant's Operating Expense Allowance, and Monthly Base Rent as shown in Paragraph 1 of the Lease, the number of Rentable Square Feet of the Premises is deemed to be as set forth in Subparagraph 1(g) of the Lease, and the number of Rentable Square Feet of the Building is deemed to be as set forth in Subparagraph 1(f) of the Lease. From time to time at Landlord's option, Landlord's architect may redetermine the actual number of Rentable Square Feet of the Premises, and the Building, and the actual number of Usable Square Feet of the Premises respectively, based upon the criteria set forth in Paragraph 1 and Paragraph 2 above, which determination will be conclusive, and thereupon Tenant's Percentage, Tenant's Operating Expense Allowance, Monthly Base Rent and (if applicable) the Tenant Improvement Allowance will be adjusted accordingly. EXHIBIT C WORK LETTER AGREEMENT [ALLOWANCE] This WORK LETTER AGREEMENT ("Work Letter Agreement") is entered into as of April 21, 2000, by and between KOLL DUBLIN CORPORATE CENTER, L.P., a Delaware limited partnership ("Landlord"), and SIMPSON MANUFACTURING COMPANY, INC., a California corporation ("Tenant"). R E C I T A L S : A. Concurrently with the execution of this Work Letter Agreement, Landlord and Tenant have entered into a lease (the "Lease") covering certain premises (the "Premises") more particularly described in Exhibit "A" attached to the Lease. All terms not defined herein have the same meaning as set forth in the Lease. To the extent applicable, the provisions of the Lease are incorporated herein by this reference. B. In order to induce Tenant to enter into the Lease and in consideration of the mutual covenants hereinafter contained, Landlord and Tenant agree as follows: 1. BASE BUILDING AND TENANT IMPROVEMENTS. (a) Base Building Shell. The base building shell constructed by Landlord shall include the following: (i) All core areas, elevator lobbies and restrooms on the fourth floor of the Building or in the main lobby of the Building shall be complete. (ii) The main HVAC loop for the fourth floor of the Building shall be in place and ready to receive mixing boxes for zoning. (iii) The main fire sprinkler risers and grid for the fourth floor of the Building shall be in place, ready for drop down. (iv) After Tenant's approval of the Final Plans (as defined below), all perimeter walls of the Premises shall be sheet-rocked and ready for finish. (v) The Tenant-side of the core partitions on the fourth floor of the Building shall be fire taped. (vi) The column furring at exterior columns in the Premises shall be finish taped. (vii) The fourth floor of the Building shall be covered with 3-1/4" concrete. (viii)Electrical service shall be provided to closets on the fourth floor of the Building. (ix) The telephone sleeve shall be provided to closets on the fourth floor of the Building. (b) Tenant Improvements. As used in the Lease and this Work Letter Agreement, the term "Tenant Improvements" or "Tenant Improvement Work" means those items of general tenant improvement construction shown on the Final Plans (described in Paragraph 4 below), more particularly described in Paragraph 5 below. 2. WORK SCHEDULE. Attached hereto as Schedule 1 is a schedule (the "Work Schedule") which sets forth the timetable for the planning and completion of the installation of the Tenant Improvements and the Commencement Date of the Lease. The Work Schedule also sets forth each of the various items of work to be done or approval to be given by Landlord and Tenant in connection with the completion of the Tenant Improvements. The Work Schedule shall be the basis for completing the Tenant Improvements. All plans and drawings required by this Work Letter Agreement and all work performed pursuant thereto are to be prepared and performed in accordance with the Work Schedule. Landlord may, from time to time during construction of the Tenant Improvements, modify the Work Schedule as Landlord reasonably deems appropriate. 3. CONSTRUCTION REPRESENTATIVES. Landlord hereby appoints the following person(s) as Landlord's representative ("Landlord's Representative") to act for Landlord in all matters covered by this Work Letter Agreement: Jeffrey Logan. Tenant hereby appoints the following person(s) as Tenant's representative ("Tenant's Representative") to act for Tenant in all matters covered by this Work Letter Agreement: David Hendricks. All communications with respect to the matters covered by this Work Letter Agreement are to made to Landlord's Representative or Tenant's Representative, as the case may be, in writing in compliance with the notice provisions of the Lease. Either party may change its representative under this Work Letter Agreement at any time by written notice to the other party in compliance with the notice provisions of the Lease. 4. TENANT IMPROVEMENT PLANS. (a) Preparation of Space Plans. In accordance with the Work Schedule, Tenant agrees to meet with Tenant's space planner for the purpose of promptly preparing preliminary space plans for the layout of Premises ("Space Plans"). Tenant's space planner shall be Bill Douglass of Ambiance Associates or such other person or entity as shall be approved by Landlord, which approval shall not be unreasonably withheld. The Space Plans are to be sufficient to convey the architectural design of the Premises and layout of the Tenant Improvements therein and are to be submitted to Landlord in accordance with the Work Schedule for Landlord's approval. If Landlord reasonably disapproves any aspect of the Space Plans, Landlord will advise Tenant in writing of such disapproval and the reasons therefor in accordance with the Work Schedule. Tenant will then submit to Landlord for Landlord's approval, in accordance with the Work Schedule, a redesign of the Space Plans incorporating the revisions reasonably required by Landlord. (b) Preparation of Final Plans. Based on the approved Space Plans, and in accordance with the Work Schedule, Landlord's architect will prepare complete architectural plans, drawings and specifications and complete engineered mechanical, structural and electrical working drawings for all of the Tenant Improvements for the Premises (collectively, the "Final Plans"). The Final Plans will show: (a) the subdivision (including partitions and walls), layout, lighting, finish and decoration work (including carpeting and other floor coverings) for the Premises; (b) all internal and external communications and utility facilities which will require conduiting or other improvements from the base Building shell work and/or within common areas; and (c) all other specifications for the Tenant Improvements. The Final Plans will be submitted to Tenant for signature to confirm that they are consistent with the Space Plans. If Tenant reasonably disapproves any aspect of the Final Plans based on any inconsistency with the Space Plans, Tenant agrees to advise Landlord in writing of such disapproval and the reasons therefor within the time frame set forth in the Work Schedule. In accordance with the Work Schedule, Landlord will then cause Landlord's architect to redesign the Final Plans incorporating the revisions reasonably requested by Tenant so as to make the Final Plans consistent with the Space Plans. (c) Requirements of Tenant's Final Plans. Tenant's Final Plans will include locations and complete dimensions, and the Tenant Improvements, as shown on the Final Plans, will: (i) be compatible with the Building shell and with the design, construction and equipment of the Building; (ii) if not comprised of the Building standards set forth in the written description thereof (the "Standards"), then compatible with and of at least equal quality as the Standards and approved by Landlord; (iii) comply with all applicable laws, ordinances, rules and regulations of all governmental authorities having jurisdiction, and all applicable insurance regulations; (iv) not require Building service beyond the level normally provided to other tenants in the Building and will not overload the Building floors; and (v) be of a nature and quality consistent with the overall objectives of Landlord for the Building, as determined by Landlord in its reasonable but subjective discretion. (d) Submittal of Final Plans. Once approved by Landlord and Tenant, Landlord's architect will submit the Final Plans to the appropriate governmental agencies for plan checking and the issuance of a building permit. Landlord's architect, with Tenant's cooperation, will make any changes to the Final Plans which are requested by the applicable governmental authorities to obtain the building permit. After approval of the Final Plans no further changes may be made without the prior written approval of both Landlord and Tenant, and then only after agreement by Tenant to pay any excess costs resulting from the design and/or construction of such changes. Tenant hereby acknowledges that any such changes will be subject to the terms of Paragraph 10 below. (e) Changes to Shell of Building. If the Final Plans or any amendment thereof or supplement thereto shall require changes in the Building shell, the increased cost of the Building shell work caused by such changes will be paid for by Tenant or charged against the "Allowance" described in Paragraph 5 below. (f) Competitive Bids. Promptly after approval of the Final Plans by Landlord and Tenant, either (i) Landlord shall submit the Final Plans to, and request sealed bids from, at least three (3) general contractors acceptable to both Landlord and Tenant for construction of the Tenant Improvements or (ii) Landlord shall solicit a bid from a mutually agreed upon general contractor which will include a pre-negotiated fee for overhead and profit and which general contractor shall request bids from at least three (3) bidders in each major trade division. Such contractors shall have a time period mutually acceptable to Landlord and Tenant within which to submit their proposals. Landlord shall select the general contractor that submitted the lowest complete, fully qualified and responsible proposal. (g) Work Cost Estimate and Statement. Prior to the commencement of construction of any of the Tenant Improvements shown on the Final Plans, Landlord will submit to Tenant a written estimate of the cost to complete the Tenant Improvement Work, including hard and soft costs as itemized in Paragraph 5(a) below (collectively, the "Work Cost") which written estimate will be based on the bid submitted by the successful general contractor, taking into account any modifications which may be required to reflect changes in the Final Plans required by the City or County in which the Premises are located (the "Work Cost Estimate"). Tenant will either approve the Work Cost Estimate or disapprove specific items and submit to Landlord revisions to the Final Plans to reflect deletions of and/or substitutions for such disapproved items. Submission and approval of the Work Cost Estimate will proceed in accordance with the Work Schedule. Upon Tenant's approval of the Work Cost Estimate (such approved Work Cost Estimate to be hereinafter known as the "Work Cost Statement"), Landlord will have the right to purchase materials and to commence the construction of the items included in the Work Cost Statement pursuant to Paragraph 6 hereof. If the total costs reflected in the Work Cost Statement exceed the Allowance described in Paragraph 5 below, Tenant agrees to pay such excess, as additional rent, within five (5) business days after Tenant's approval of the Work Cost Estimate. Throughout the course of construction, any differences between the estimated Work Cost in the Work Cost Statement and the actual Work Cost will be determined by Landlord and appropriate adjustments and payments by Landlord or Tenant, as the case may be, will be made within five (5) business days thereafter. 5. PAYMENT FOR THE TENANT IMPROVEMENTS. (a) Allowance. Landlord hereby grants to Tenant a tenant improvement allowance of $25.75 per Rentable Square Foot of the Premises (the "Allowance"). The Allowance is to be used only for: (i) Payment of the cost of preparing the Space Plans and the Final Plans, including mechanical, electrical, plumbing and structural drawings and of all other aspects necessary to complete the Final Plans. The Allowance will not be used for the payment of extraordinary design work not consistent with the scope of the Standards (i.e., above-standard design work) or for payments to any other consultants, designers or architects other than Landlord's architect and/or Tenant's architect. (ii) The payment of plan check, permit and license fees relating to construction of the Tenant Improvements. (iii) Construction of the Tenant Improvements, including, without limitation, the following: (aa) Installation within the Premises of all partitioning, doors, floor coverings, ceilings, wall coverings and painting, millwork and similar items; (bb) All electrical wiring, lighting fixtures, outlets and switches, and other electrical work necessary for the Premises; (cc) The furnishing and installation of all duct work, terminal boxes, diffusers and accessories necessary for the heating, ventilation and air conditioning systems within the Premises, including the cost of meter and key control for after-hour air conditioning; (dd) Any additional improvements to the Premises required for Tenant's use of the Premises including, but not limited to, odor control, special heating, ventilation and air conditioning, noise or vibration control or other special systems or improvements; (ee) All fire and life safety control systems such as fire walls, sprinklers, halon, fire alarms, including piping, wiring and accessories, necessary for the Premises; (ff) All plumbing, fixtures, pipes and accessories necessary for the Premises; (gg) Testing and inspection costs; and (hh) Fees for Landlord's tenant improvement coordinator in the amount of five percent (5%) of the actual Work Cost, and fees for the contractor including, but not limited to, fees and costs attributable to general conditions. (iv) All costs expended by Landlord in connection with the preparation of the Space Plans, including those costs incurred by Landlord prior to the execution of this Lease by Landlord and Tenant. (b) Excess Costs. The cost of each item referenced in Paragraph 5(a) above shall be charged against the Allowance. If the Work Cost exceeds the Allowance, Tenant agrees to pay to Landlord such excess including fees for the contractor and Landlord's standard five percent (5%) fee for the tenant improvement coordinator associated with the supervision of such excess work as follows: after the Allowance has been exhausted, Tenant shall make monthly progress payments to Landlord for the Work Cost based on the progress of the Tenant Improvement Work within five (5) days after Landlord's invoice therefor. In no event will the Allowance be used to pay for Tenant's furniture, artifacts, equipment, telephone systems or any other item of personal property which is not affixed to the Premises. (c) Changes. If, after the Final Plans have been prepared and the Work Cost Statement has been established, Tenant requires any changes or substitutions to the Final Plans, any additional costs related thereto including fees for the contractor and Landlord's standard five percent (5%) fee for the tenant improvement coordinator associated with the supervision of such changes or substitutions are to be paid by Tenant to Landlord prior to the commencement of construction of the Tenant Improvements. Any changes to the Final Plans will be approved by Landlord and Tenant in the manner set forth in Paragraph 4 above and will, if necessary, require the Work Cost Statement to be revised and agreed upon between Landlord and Tenant in the manner set forth in Subparagraph 4(f) above. Landlord will have the right to decline Tenant's request for a change to the Final Plans if such changes are inconsistent with the provisions of Paragraph 4 above, or if the change would unreasonably delay construction of the Tenant Improvements and the Commencement Date of the Lease. (d) Governmental Cost Increases. If increases in the cost of the Tenant Improvements as set forth in the Work Cost Statement are due to requirements of any governmental agency, Tenant agrees to pay Landlord the amount of such increase including fees for the contractor and Landlord's standard five percent (5%) fee for the tenant improvement coordinator associated with the supervision of such additional work within five (5) days of Landlord's written notice; provided, however, that Landlord will first apply toward any such increase any remaining balance of the Allowance. (e) Unused Allowance Amounts. Any portion of the Allowance that has not been used within sixty (60) days after the Commencement Date will not be refunded to Tenant or be available to Tenant as a credit against any obligations of Tenant under the Lease unless Tenant has paid for excess costs as described in Subparagraphs 5(b), 5(c) or 5(d), in which case the unused Allowance may be applied toward such excess cost amounts and paid to Tenant. 6. CONSTRUCTION OF TENANT IMPROVEMENTS. Until Tenant approves the Final Plans and Work Cost Statement, Landlord will be under no obligation to cause the construction of any of the Tenant Improvements. Following Tenant's approval of the Work Cost Statement described in Subparagraph 4(f) above and upon Tenant's payment of the total amount by which such Work Cost Statement exceeds the Allowance, if any, Landlord's contractor will commence and diligently proceed with the construction of the Tenant Improvements, subject to Tenant Delays (as described in Paragraph 9 below) and Force Majeure Delays (as described in Paragraph 10 below). 7. FREIGHT/CONSTRUCTION ELEVATOR. Landlord will, consistent with its obligation to other tenants in the Building, if appropriate and necessary, make the freight/construction elevator reasonably available to Tenant in connection with initial decorating, furnishing and moving into the Premises. Tenant agrees to pay for any after-hours staffing of the freight/construction elevator, if needed. 8. COMMENCEMENT DATE AND SUBSTANTIAL COMPLETION. (a) Commencement Date. The Term of the Lease will commence on the date (the "Commencement Date") which is the earlier of: (i) the date Tenant moves into the Premises to commence operation of its business in all or any portion of the Premises; or (ii) the later of (A) the Estimated Completion Date or (B) the date the Tenant Improvements have been "substantially completed" (as defined below); provided, however, that if substantial completion of the Tenant Improvements is delayed as a result of any Tenant Delays described in Paragraph 9 below, then the Commencement Date as would otherwise have been established pursuant to this Subparagraph 8(a)(ii) will be accelerated by the number of days of such Tenant Delays. During the two (2) week period prior to substantial completion of the Tenant Improvements, Tenant may, at Tenant's sole risk, enter the Premises upon such substantial completion for the sole purpose of installing its furniture, fixtures and equipment, provided that (a) Tenant's early entry shall not interfere with Landlord's completion of any punch list items or cause labor difficulties; and (b) Tenant shall comply with all provisions of the Lease other than the obligation to pay Monthly Base Rent. (b) Substantial Completion; Punch-List. For purposes of Subparagraph 8(a)(ii) above, the Tenant Improvements will be deemed to be "substantially completed" when Landlord's contractor certifies in writing to Landlord and Tenant that Landlord: (a) is able to provide Tenant with reasonable access to the Premises; (b) has substantially performed all of the Tenant Improvement Work required to be performed by Landlord under this Work Letter Agreement, other than decoration and minor "punch-list" type items and adjustments which do not materially interfere with Tenant's access to or use of the Premises; and (c) has obtained a temporary certificate of occupancy or other required equivalent approval from the local governmental authority permitting occupancy of the Premises. Within two (2) business days after receipt of such certificate from Landlord's contractor, Tenant will conduct a walk-through inspection of the Premises with Landlord and provide to Landlord a written punch- list specifying those decoration and other punch-list items which require completion, which items Landlord will thereafter diligently complete. (c) Delivery of Possession. Landlord agrees to deliver possession of the Premises to Tenant when the Tenant Improvements have been substantially completed in accordance with Subparagraph (b) above. The parties estimate that Landlord will deliver possession of the Premises to Tenant and the Term of this Lease will commence on or before the estimated commencement date set forth in the Work Schedule delivered to Tenant pursuant to Paragraph 2 above (the "Projected Commencement Date"). Landlord agrees to use its commercially reasonable efforts to cause the Premises to be substantially completed on or before the Projected Commencement Date. Tenant agrees that if Landlord is unable to deliver possession of the Premises to Tenant on or prior to the Projected Commencement Date, the Lease will not be void or voidable, nor will Landlord be liable to Tenant for any loss or damage resulting therefrom, but if such late delivery is due to Landlord's fault or due to any Force Majeure Delay(s), then, as Tenant's sole remedy, the Commencement Date and the Expiration Date of the Term will be extended one (1) day for each day Landlord is delayed in delivering possession of the Premises to Tenant. 9. TENANT DELAYS. For purposes of this Work Letter Agreement, "Tenant Delays" means any delay in the completion of the Tenant Improvements resulting from any or all of the following: (a) Tenant's failure to timely perform any of its obligations pursuant to this Work Letter Agreement, including any failure to complete, on or before the due date therefor, any action item which is Tenant's responsibility pursuant to the Work Schedule delivered by Landlord to Tenant pursuant to this Work Letter Agreement; (b) Tenant's changes to Space Plans or Final Plans after Landlord's approval thereof; (c) Tenant's request for materials, finishes, or installations which are not readily available or which are incompatible with the Standards; (d) any delay of Tenant in making payment to Landlord for Tenant's share of the Work Cost; or (e) any negligent or wrongful act or failure to act by Tenant, Tenant's employees, agents, architects, independent contractors, consultants and/or any other person performing or required to perform services on behalf of Tenant. 10. FORCE MAJEURE DELAYS. For purposes of this Work Letter, "Force Majeure Delays" means any actual delay in the construction of the Tenant Improvements, which is beyond the reasonable control of Landlord or Tenant, as the case may be, as described in Paragraph 33 of the Lease. 11. UNION LABOR. Reference is hereby made to Paragraph 40 of the Lease which requires the use of union labor, which provision in hereby deemed incorporated herein in its entirety. IN WITNESS WHEREOF, the undersigned Landlord and Tenant have caused this Work Letter Agreement to be duly executed by their duly authorized representatives as of the date of the Lease. TENANT: LANDLORD: SIMPSON MANUFACTURING CO., INC., KOLL DUBLIN CORPORATE CENTER, a Delaware corporation L.P., a Delaware limited partnership By: /s/STEVE LAMSON By: KDC-DUBLIN, LLC, a ---------------------- Delaware limited liability Print Name: STEVE LAMSON company, its general partner Print Title: CFO By: KDC-OC, LLC, a Delaware limited liability company, its managing member By: Koll Development Company, LLC, a Delaware limited liability company, its manager By: /s/MICHAEL G. PARNER ------------------------- Print Name: MICHAEL G. PARNER Print Title: SENIOR VP WORK SCHEDULE EXHIBIT D NOTICE OF LEASE TERM DATES AND TENANT'S PERCENTAGE To: Simpson Manufacturing Company, Inc. Date: Re: Lease dated April 21, 2000 (the "Lease"), between KOLL DUBLIN CORPORATE CENTER, L.P., a Delaware limited partnership, Landlord, and SIMPSON MANUFACTURING COMPANY, INC., a California corporation, Tenant, concerning the 4th Floor of the Building located at 4120 Dublin Boulevard, Dublin, California (the "Premises"). To Whom It May Concern: In accordance with the subject Lease, we wish to advise and/or confirm as follows: 1. That the Premises have been accepted by the Tenant as being substantially complete in accordance with the subject Lease and that there is no deficiency in construction except as may be indicated on the "Punch-List" prepared by Landlord and Tenant, a copy of which is attached hereto. 2. That the Tenant has possession of the subject Premises and acknowledges that under the provisions of the Lease the Commencement Date is __________, and the Term of the Lease will expire on _______________. 3. That in accordance with the Lease, rent commenced to accrue on __________. 4. If the Commencement Date of the Lease is other than the first day of the month, the first billing will contain a pro rata adjustment. Each billing thereafter will be for the full amount of the monthly installment as provided for in the Lease. 5. Rent is due and payable in advance on the first day of each and every month during the Term of the Lease. Your rent checks should be made payable to _________________________ at _________________________. 6. The number of Rentable Square Feet within the Premises is __________ square feet as determined by Landlord's architect in accordance with the terms of the Lease. 7. The number of Rentable Square Feet within the Building is __________ square feet as determined by Landlord's architect in accordance with the terms of the Lease. 8. Tenant's Percentage, as adjusted based upon the number of Rentable Square Feet within the Premises, is _____%. LANDLORD: KOLL DUBLIN CORPORATE CENTER, L.P., a Delaware limited partnership By: KDC-DUBLIN, LLC, a Delaware limited liability company, its general partner By: KDC-OC, LLC, a Delaware limited liability company, its managing member By: Koll Development Company, LLC, a Delaware limited liability company, its manager By: ------------------------- Print Name: Print Title: SAMPLE ONLY [NOT FOR EXECUTION] EXHIBIT E DEFINITION OF OPERATING EXPENSES 1. Items Included in Operating Expenses. The term "Operating Expenses" as used in the Lease to which this Exhibit "E" is attached means: all costs and expenses of operation and maintenance of the Building and the Common Areas (as such terms are defined in the Lease), as determined by standard accounting practices, calculated assuming the Building is ninety-five percent (95%) occupied, including the following costs by way of illustration but not limitation, but excluding those items specifically set forth in Paragraph 3 below: (a) Real Property Taxes and Assessments (as defined in Paragraph 2 below) and any taxes or assessments imposed in lieu thereof; (b) any and all assessments imposed with respect to, or allocated to, the Building pursuant to any covenants, conditions and restrictions affecting the Development, the Common Areas or the Building; (c) water and sewer charges and the costs of electricity, heating, ventilating, air conditioning and other utilities; (d) utilities surcharges and any other costs, levies or assessments resulting from statutes or regulations promulgated by any government or quasi-government authority in connection with the use, occupancy or alteration of the Building or the Premises or the parking facilities serving the Building or the Premises; (e) costs of insurance obtained by Landlord; (f) waste disposal and janitorial services; (g) labor; (h) costs incurred in the management of the Building, including, without limitation: (i) supplies, (ii) wages and salaries (and payroll taxes and similar governmental charges related thereto) of employees at the level of property manager or lower used in the management, operation and maintenance of the Building, (iii) Building management office rental, supplies, equipment and related operating expenses, and (iv) a management/administrative fee determined as a percentage of the annual gross revenues of the Building exclusive of the proceeds of financing or a sale of the Building and an administrative fee for the management of the Development Common Area determined as a percentage of Development Common Area Operating Expenses; (i) supplies, materials, equipment and tools including rental of personal property used for maintenance; (j) repair and maintenance of the elevators and the structural portions of the Building, including the plumbing, heating, ventilating, air- conditioning and electrical systems installed or furnished by Landlord; (k) maintenance, costs and upkeep of all parking and Development Common Areas, including, without limitation, the "Park and Ride" parking area located within the Development, regardless of whether or not such parking area has been dedicated to the City of Dublin; (l) depreciation on a straight line basis and rental of personal property used in maintenance; (m) amortization on a straight line basis over the useful life [together with interest at the Interest Rate on the unamortized balance] of all capitalized expenditures which are: (i) reasonably intended to produce a reduction in operating charges or energy consumption; or (ii) required under any governmental law or regulation enacted after the Commencement Date or under any new official interpretation (i.e., by a governmental agency or federal or state court) promulgated after the Commencement Date; or (iii) for replacement of any Building equipment needed to operate the Building at the same quality levels as prior to the replacement; (n) costs and expenses of gardening and landscaping; (o) maintenance of signs (other than signs of tenants of the Building); (p) personal property taxes levied on or attributable to personal property used in connection with the Building or the Common Areas; (q) reasonable accounting, audit, verification, legal and other consulting fees; and (r) costs and expenses of repairs, resurfacing, repairing, maintenance, painting, lighting, cleaning, refuse removal, security and similar items, including appropriate reserves. When calculating Operating Expenses for purposes of establishing Tenant's Operating Expense Allowance, Operating Expenses shall not include Real Property Taxes and Assessments attributable to special assessments, charges, costs, or fees or due to modifications or changes in governmental laws or regulations including, but not limited to, the institution of a split tax roll, and shall exclude market-wide labor-rate increases due to extraordinary circumstances including, but not limited to, boycotts and strikes and utility increases due to extraordinary circumstances including, but not limited to, conservation surcharges, boycotts, embargoes or other shortages. 2. Real Property Taxes and Assessments. The term "Real Property Taxes and Assessments", as used in this Exhibit "E", means: any form of assessment, license fee, license tax, business license fee, commercial rental tax, levy, charge, improvement bond, tax or similar imposition imposed by any authority having the direct power to tax, including any city, county, state or federal government, or any school, agricultural, lighting, drainage or other improvement or special assessment district thereof, as against any legal or equitable interest of Landlord in the Premises, Building, Common Areas or the Development (as such terms are defined in the Lease), adjusted to reflect an assumption that the Building is fully assessed for real property tax purposes as a completed building ready for occupancy, including the following by way of illustration but not limitation: (a) any tax on Landlord's "right" to rent or "right" to other income from the Premises or as against Landlord's business of leasing the Premises; (b) any assessment, tax, fee, levy or charge in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included within the definition of real property tax, it being acknowledged by Tenant and Landlord that Proposition 13 was adopted by the voters of the State of California in the June, 1978 election and that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such services as fire protection, street, sidewalk and road maintenance, refuse removal and for other governmental services formerly provided without charge to property owners or occupants. It is the intention of Tenant and Landlord that all such new and increased assessments, taxes, fees, levies and charges be included within the definition of "real property taxes" for the purposes of this Lease; (c) any assessment, tax, fee, levy or charge allocable to or measured by the area of the Premises or other premises in the Building or the rent payable by Tenant hereunder or other tenants of the Building, including, without limitation, any gross receipts tax or excise tax levied by state, city or federal government, or any political subdivision thereof, with respect to the receipt of such rent, or upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof but not on Landlord's other operations; (d) any assessment, tax, fee, levy or charge upon this transaction or any document to which Tenant is a party, creating or transferring an interest or an estate in the Premises; and/or (e) any assessment, tax, fee, levy or charge by any governmental agency related to any transportation plan, fund or system (including assessment districts) instituted within the geographic area of which the Building is a part. Notwithstanding the foregoing, if at any time after the Commencement Date, the amount of Real Property Taxes and Assessments decreases, then for purposes of all subsequent Lease Years, including the Lease Year in which such decrease in Real Property Taxes and Assessments occurs, Tenant's Operating Expense Allowance shall be decreased by an amount equal to such decrease in Real Property Taxes and Assessments. 3. Items Excluded From Operating Expenses. Notwithstanding the provisions of Paragraphs 1 and 2 above to the contrary, "Operating Expenses" will not include: (a) Landlord's federal or state income, franchise, inheritance or estate taxes; (b) any ground lease rental; (c) costs incurred by Landlord for the repair of damage to the Building to the extent that Landlord is reimbursed by insurance or condemnation proceeds or by tenants, warrantors or other third persons; (d) depreciation, amortization and interest payments, except as specifically provided herein, and except on materials, tools, supplies and vendor-type equipment purchased by Landlord to enable Landlord to supply services Landlord might otherwise contract for with a third party, where such depreciation, amortization and interest payments would otherwise have been included in the charge for such third party's services, all as determined in accordance with standard accounting practices; (e) brokerage commissions, finders' fees, attorneys' fees, space planning costs and other costs incurred by Landlord in leasing or attempting to lease space in the Building; (f) costs of a capital nature, including, without limitation, capital improvements, capital replacements, capital repairs, capital equipment and capital tools, all as determined in accordance with standard accounting practices; provided, however, the capital expenditures set forth in Subparagraph 1(m) above will in any event be included in the definition of Operating Expenses; (g) interest, principal, points and fees on debt or amortization on any mortgage, deed of trust or other debt encumbering the Building or the Development; (h) costs, including permit, license and inspection costs, incurred with respect to the installation of tenant improvements for tenants in the Building (including the original Tenant Improvements for the Premises), or incurred in renovating or otherwise improving, decorating, painting or redecorating space for tenants or other occupants of the Building, including space planning and interior design costs and fees; (i) attorneys' fees and other costs and expenses incurred in connection with negotiations or disputes with present or prospective tenants or other occupants of the Building; provided, however, that Operating Expenses will include those attorneys' fees and other costs and expenses incurred in connection with negotiations, disputes or claims relating to items of Operating Expenses, enforcement of rules and regulations of the Building, and such other matters relating to the maintenance of standards required of Landlord under the Lease; (j) except for the administrative/management fees described in Subparagraph 1(h) above, costs of Landlord's general corporate overhead; (k) all items and services for which Tenant or any other tenant in the Building reimburses Landlord (other than through operating expense pass- through provisions); (l) electric power costs for which any tenant directly contracts with the local public service company; and (m) costs arising from Landlord's charitable or political contributions. EXHIBIT F STANDARDS FOR UTILITIES AND SERVICES The following standards for utilities and services are in effect. Landlord reserves the right to adopt nondiscriminatory modifications and additions hereto. Subject to the terms and conditions of the Lease and provided Tenant remains in occupancy of the Premises, Landlord will provide or make available the following utilities and services: 1. Provide non-attended automatic elevator facilities Monday through Friday, except holidays, from 8 a.m. to 6 p.m., and have one elevator available for Tenant's use at all other times. 2. On Monday through Friday, except holidays, from 7 a.m. to 6 p.m. (and other times for a reasonable additional charge to be fixed by Landlord), ventilate the Premises and furnish air conditioning or heating on such days and hours, when in the reasonable judgment of Landlord it may be required for the comfortable occupancy of the Premises. Landlord's after-hours charge for HVAC as of the date of the Lease is set forth in Subparagraph 1(s) of the Lease. Such charge is subject to change at any time and from time to time by Landlord. The air conditioning system achieves maximum cooling when the window coverings are extended to the full length of the window opening and adjusted to a 45 degree angle upwards. Landlord will not be responsible for room temperatures if Tenant does not keep all window coverings in the Premises extended to the full length of the window opening and adjusted to a 45 degree angle upwards whenever the system is in operation. Tenant agrees to cooperate fully at all times with Landlord, and to abide by all reasonable regulations and requirements which Landlord may prescribe for the proper function and protection of said air conditioning system. Tenant agrees not to connect any apparatus, device, conduit or pipe to the chilled and hot water air conditioning supply lines of the Building. Tenant further agrees that neither Tenant nor its servants, employees, agents, visitors, licensees or contractors shall at any time enter the mechanical installations or facilities of the Building or the Development or adjust, tamper with, touch or otherwise in any manner affect said installations or facilities. The cost of maintenance and service calls to adjust and regulate the air conditioning system will be charged to Tenant if the need for maintenance work results from either Tenant's adjustment of room thermostats or Tenant's failure to comply with its obligations under this Exhibit, including keeping window coverings extended to the full length of the window opening and adjusted to a 45 degree angle upwards. Such work will be charged at hourly rates equal to then-current journeyman's wages for air conditioning mechanics. 3. Landlord will make available to the Premises, 24 hours per day, seven days a week, electric current as required by the Building standard office lighting and fractional horsepower office business machines including copiers, personal computers and word processing equipment in an amount not to exceed six (6) watts per square foot per normal business day (excluding ceiling lights and HVAC). If Landlord reasonably determines that Tenant is using electricity in excess of Tenant's pro rata share to be supplied by Landlord pursuant to the foregoing sentence, Landlord may require Tenant to pay an increased share of the electricity costs, as equitably determined by Landlord, or to install, at Tenant's sole cost and expense, a separate meter for the electricity supplied to the Premises. If a separate meter is not installed at Tenant's cost, such excess cost will be established by an estimate agreed upon by Landlord and Tenant, and if the parties fail to agree, such cost will be established by an independent licensed engineer selected in Landlord's reasonable discretion, whose fee shall be shared equally by Landlord and Tenant. Tenant agrees not to use any apparatus or device in, upon or about the Premises (other than standard office business machines, personal computers and word processing equipment) which may in any way increase the amount of such services usually furnished or supplied to said Premises, and Tenant further agrees not to connect any apparatus or device with wires, conduits or pipes, or other means by which such services are supplied, for the purpose of using additional or unusual amounts of such services without the written consent of Landlord. Should Tenant use the same to excess, the refusal on the part of Tenant to pay upon demand of Landlord the amount established by Landlord for such excess charge will constitute a breach of the obligation to pay rent under this Lease and will entitle Landlord to the rights therein granted for such breach. Tenant's use of electric current will never exceed the capacity of the feeders to the Building, or the risers or wiring installation and Tenants will not install or use or permit the installation or use of any computer or electronic data processing equipment in the Premises (except standard office business machines, personal computers and word processing equipment) without the prior written consent of Landlord. 4. Water will be available in public areas for drinking and lavatory purposes only, but if Tenant requires, uses or consumes water for any purpose in addition to ordinary drinking and lavatory purposes, of which fact Tenant constitutes Landlord to be the sole judge, Landlord may install a water meter and thereby measure Tenant's water consumption for all purposes. Tenant agrees to pay Landlord for the cost of the meter and the cost of the installation thereof and throughout the duration of Tenant's occupancy Tenant will keep said meter and installation equipment in good working order and repair at Tenant's own cost and expense, in default of which Landlord may cause such meter and equipment to be replaced or repaired and collect the cost thereof from Tenant. Tenant agrees to pay for water consumed, as shown on such meter, as and when bills are rendered, and on default in making such payment, Landlord may pay such charges and collect the same from Tenant. Any such costs or expenses incurred, or payments made by Landlord for any of the reasons or purposes hereinabove stated will be deemed to be additional rent payable by Tenant and collectible by Landlord as such. 5. Landlord will provide janitor service to the Premises, provided the same are used exclusively as offices, and are kept reasonably in order by Tenant, and unless otherwise agreed to by Landlord and Tenant no one other than persons approved by Landlord shall be permitted to enter the Premises for such purposes. If the Premises are not used exclusively as offices, they will be kept clean and in order by Tenant, at Tenant's expense, and to the satisfaction of Landlord, and by persons approved by Landlord. Tenant agrees to pay to Landlord the cost of removal of any of Tenant's refuse and rubbish to the extent that the same exceeds the refuse and rubbish usually attendant upon the use of the Premises as offices. 6. Landlord reserves the right to stop service of the elevator, plumbing, ventilation, air conditioning and electrical systems, when necessary, by reason of accident or emergency or for repairs, alterations or improvements, when in the judgment of Landlord such actions are desirable or necessary to be made, until said repairs, alterations or improvements shall have been completed, and Landlord will have no responsibility or liability for failure to supply elevator facilities, plumbing, ventilating, air conditioning or electric service, when prevented from so doing by strike or accident or by any cause beyond Landlord's reasonable control, or by laws, rules, orders, ordinances, directions, regulations or by reason of the requirements of any federal, state, county or municipal authority or failure of gas, oil or other suitable fuel supply or inability by exercise of reasonable diligence to obtain gas, oil or other suitable fuel supply. It is expressly understood and agreed that any covenants on Landlord's part to furnish any services pursuant to any of the terms, covenants, conditions, provisions or agreements of this Lease, or to perform any act or thing for the benefit of Tenant, will not be deemed breached if Landlord is unable to furnish or perform the same by virtue of a strike or labor trouble or any other cause whatsoever beyond Landlord's control. EXHIBIT G ESTOPPEL CERTIFICATE The undersigned, SIMPSON MANUFACTURING COMPANY, INC., a California corporation ("Tenant"), hereby certifies to KOLL DUBLIN CORPORATE CENTER, L.P., a Delaware limited partnership, as follows: 1. Attached hereto is a true, correct and complete copy of that certain lease dated April 21, 2000, between KOLL DUBLIN CORPORATE CENTER, L.P., a Delaware limited partnership ("Landlord") and Tenant (the "Lease"), regarding the premises located at 4120 Dublin Boulevard, Dublin, California (the "Premises"). The Lease is now in full force and effect and has not been amended, modified or supplemented, except as set forth in Paragraph 4 below. 2. The Term of the Lease commenced on _______________, 20__. 3. The Term of the Lease will expire on _______________, 20__. 4. The Lease has: (Initial one) (_____) not been amended, modified, supplemented, extended, renewed or assigned. (_____) been amended, modified, supplemented, extended, renewed or assigned by the following described terms or agreements, copies of which are attached hereto: 5. Tenant has accepted and is now in possession of the Premises. 6. Tenant and Landlord acknowledge that Landlord's interest in the Lease will be assigned to _________________________ and that no modification, adjustment, revision or cancellation of the Lease or amendments thereto shall be effective unless written consent of _______________ is obtained, and that until further notice, payments under the Lease may continue as heretofore. 7. The amount of Monthly Base Rent is $__________. 8. The amount of Security Deposit (if any) is $__________. No other security deposits have been made except as follows: __________________________________________________. 9. Tenant is paying the full lease rental which has been paid in full as of the date hereof. No rent or other charges under the Lease have been paid for more than thirty (30) days in advance of its due date except as follows: 10. All work required to be performed by Landlord under the Lease has been completed except as follows: ______________________________. 11. There are no defaults on the part of the Landlord or Tenant under the Lease except as follows: ______________________________. 12. Neither Landlord nor Tenant has any defense as to its obligations under the Lease and claims no set-off or counterclaim against the other party except as follows: _____________________________________________. 13. Tenant has no right to any concession (rental or otherwise) or similar compensation in connection with renting the space it occupies other than as provided in the Lease except as follows: ___________________________________. 14. All provisions of the Lease and the amendments thereto (if any) referred to above are hereby ratified. The foregoing certification is made with the knowledge that _______________ is relying upon the representations herein made in funding a loan to Landlord in purchasing the Premises. IN WITNESS WHEREOF, this certificate has been duly executed and delivered by the authorized officers of the undersigned as of __________, 20_____. TENANT: SIMPSON MANUFACTURING CO., INC., a Delaware corporation By: Print Name: Print Title: By: Print Name: Print Title: SAMPLE ONLY [NOT FOR EXECUTION] EXHIBIT H RULES AND REGULATIONS A. General Rules and Regulations. The following rules and regulations govern the use of the Building and the Development Common Areas. Tenant will be bound by such rules and regulations and agrees to cause Tenant's Authorized Users, its employees, subtenants, assignees, contractors, suppliers, customers and invitees to observe the same. 1. Except as specifically provided in the Lease to which these Rules and Regulations are attached, no sign, placard, picture, advertisement, name or notice may be installed or displayed on any part of the outside or inside of the Building or the Development without the prior written consent of Landlord. Landlord will have the right to remove, at Tenant's expense and without notice, any sign installed or displayed in violation of this rule. All approved signs or lettering on doors and walls are to be printed, painted, affixed or inscribed at the expense of Tenant and under the direction of Landlord by a person or company designated or approved by Landlord. 2. If Landlord objects in writing to any curtains, blinds, shades, screens or hanging plants or other similar objects attached to or used in connection with any window or door of the Premises, or placed on any windowsill, which is visible from the exterior of the Premises, Tenant will immediately discontinue such use. Tenant agrees not to place anything against or near glass partitions or doors or windows which may appear unsightly from outside the Premises including from within any interior common areas. 3. Tenant will not obstruct any sidewalks, halls, passages, exits, entrances, elevators, escalators, or stairways of the Development. The halls, passages, exits, entrances, elevators and stairways are not open to the general public, but are open, subject to reasonable regulations, to Tenant's business invitees. Landlord will in all cases retain the right to control and prevent access thereto of all persons whose presence in the reasonable judgment of Landlord would be prejudicial to the safety, character, reputation and interest of the Development and its tenants, provided that nothing herein contained will be construed to prevent such access to persons with whom any tenant normally deals in the ordinary course of its business, unless such persons are engaged in illegal or unlawful activities. No tenant and no employee or invitee of any tenant will go upon the roof of the Building. 4. Tenant will not obtain for use on the Premises ice, drinking water, food, food vendors, beverage, towel or other similar services or accept barbering or bootblacking service upon the Premises, except at such reasonable hours and under such reasonable regulations as may be fixed by Landlord. Landlord expressly reserves the right to absolutely prohibit solicitation, canvassing, distribution of handbills or any other written material, peddling, sales and displays of products, goods and wares in all portions of the Development except as may be expressly permitted under the Lease. Landlord reserves the right to restrict and regulate the use of the common areas of the Development and Building by invitees of tenants providing services to tenants on a periodic or daily basis including food and beverage vendors. Such restrictions may include limitations on time, place, manner and duration of access to a tenant's premises for such purposes. Without limiting the foregoing, Landlord may require that such parties use service elevators, halls, passageways and stairways for such purposes to preserve access within the Building for tenants and the general public. 5. Landlord reserves the right to require tenants to periodically provide Landlord with a written list of any and all business invitees which periodically or regularly provide goods and services to such tenants at the premises. Landlord reserves the right to preclude all vendors from entering or conducting business within the Building and the Development if such vendors are not listed on a tenant's list of requested vendors. 6. Landlord reserves the right to exclude from the Building between the hours of 6 p.m. and 8 a.m. the following business day, or such other hours as may be established from time to time by Landlord, and on Sundays and legal holidays, any person unless that person is known to the person or employee in charge of the Building or has a pass or is properly identified. Tenant will be responsible for all persons for whom it requests passes and will be liable to Landlord for all acts of such persons. Landlord will not be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. Landlord reserves the right to prevent access to the Building in case of invasion, mob, riot, public excitement or other commotion by closing the doors or by other appropriate action. 7. The directory of the Building or the Development will be provided exclusively for the display of the name and location of tenants only and Landlord reserves the right to exclude any other names therefrom. 8. All cleaning and janitorial services for the Development and the Premises will be provided exclusively through Landlord, and except with the written consent of Landlord, no person or persons other than those approved by Landlord will be employed by Tenant or permitted to enter the Development for the purpose of cleaning the same. Tenant will not cause any unnecessary labor by carelessness or indifference to the good order and cleanliness of the Premises. 9. Landlord will furnish Tenant, free of charge, with two keys to each entry door lock in the Premises. Landlord may make a reasonable charge for any additional keys. Tenant shall not make or have made additional keys, and Tenant shall not alter any lock or install any new additional lock or bolt on any door of the Premises. Tenant, upon the termination of its tenancy, will deliver to Landlord the keys to all doors which have been furnished to Tenant, and in the event of loss of any keys so furnished, will pay Landlord therefor. 10. If Tenant requires telegraphic, telephonic, burglar alarm, satellite dishes, antennae or similar services, it will first obtain Landlord's approval, and comply with, Landlord's reasonable rules and requirements applicable to such services, which may include separate licensing by, and fees paid to, Landlord. 11. Freight elevator(s) will be available for use by all tenants in the Building, subject to such reasonable scheduling as Landlord, in its discretion, deems appropriate. No equipment, materials, furniture, packages, supplies, merchandise or other property will be received in the Building or carried in the elevators except between such hours and in such elevators as may be designated by Landlord. Tenant's initial move in and subsequent deliveries of bulky items, such as furniture, safes and similar items will, unless otherwise agreed in writing by Landlord, be made during the hours of 6:00 p.m. to 6:00 a.m. or on Saturday or Sunday. Deliveries during normal office hours shall be limited to normal office supplies and other small items. No deliveries will be made which impede or interfere with other tenants or the operation of the Building. 12. Tenant will not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry and which is allowed by law. Landlord will have the right to reasonably prescribe the weight, size and position of all safes, heavy equipment, files, materials, furniture or other property brought into the Building. Heavy objects will, if considered necessary by Landlord, stand on such platforms as determined by Landlord to be necessary to properly distribute the weight, which platforms will be provided at Tenant's expense. Business machines and mechanical equipment belonging to Tenant, which cause noise or vibration that may be transmitted to the structure of the Building or to any space therein to such a degree as to be objectionable to any tenants in the Building or Landlord, are to be placed and maintained by Tenant, at Tenant's expense, on vibration eliminators or other devises sufficient to eliminate noise or vibration. Tenant will be responsible for all structural engineering required to determine structural load, as well as the expense thereof. The persons employed to move such equipment in or out of the Building must be reasonably acceptable to Landlord. Landlord will not be responsible for loss of, or damage to, any such equipment or other property from any cause, and all damage done to the Building by maintaining or moving such equipment or other property will be repaired at the expense of Tenant. 13. Tenant will not use or keep in the Premises any kerosene, gasoline or inflammable or combustible fluid or material other than those limited quantities necessary for the operation or maintenance of office equipment. Tenant will not use or permit to be used in the Premises any foul or noxious gas or substance, or permit or allow the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors or vibrations, nor will Tenant bring into or keep in or about the Premises any birds or animals. 14. Tenant will not use any method of heating or air conditioning other than that supplied by Landlord without Landlord's prior written consent. 15. Tenant will not waste electricity, water or air conditioning and agrees to cooperate fully with Landlord to assure the most effective operation of the Building's heating and air conditioning and to comply with any governmental energy-saving rules, laws or regulations of which Tenant has actual notice, and will refrain from attempting to adjust controls. Tenant will keep corridor doors closed, and shall keep all window coverings pulled down. 16. Landlord reserves the right, exercisable without notice and without liability to Tenant, to change the name and street address of the Building. Without the prior written consent of Landlord, which Landlord may deny with or without cause, Tenant will not use the name, photograph or likeness of the Building or the Development in connection with or in promoting or advertising the business of Tenant except as Tenant's address. 17. Tenant will close and lock the doors of its Premises and entirely shut off all water faucets or other water apparatus, and lighting or gas before Tenant and its employees leave the Premises. Tenant will be responsible for any damage or injuries sustained by other tenants or occupants of the Building or by Landlord for noncompliance with this rule. 18. The toilet rooms, toilets, urinals, wash bowls and other apparatus will not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting from any violation of this rule will be borne by the tenant who, or whose employees or invitees, break this rule. Cleaning of equipment of any type is prohibited. Shaving is prohibited. 19. Tenant will not sell, or permit the sale at retail of newspapers, magazines, periodicals, theater tickets or any other goods or merchandise to the general public in or on the Premises. Tenant will not use the Premises for any business or activity other than that specifically provided for in this Lease. Tenant will not conduct, nor permit to be conducted, either voluntarily or involuntarily, any auction upon the Premises without first having obtained Landlord's prior written consent, which consent Landlord may withhold in its sole and absolute discretion. 20. Tenant will not install any radio or television antenna, loudspeaker, satellite dishes or other devices on the roof(s) or exterior walls of the Building or the Development. Tenant will not interfere with radio or television broadcasting or reception from or in the Development or elsewhere. 21. Except for the ordinary hanging of pictures and wall decorations, Tenant will not mark, drive nails, screw or drill into the partitions, woodwork or plaster or in any way deface the Premises or any part thereof, except in accordance with the provisions of the Lease pertaining to alterations. Landlord reserves the right to direct electricians as to where and how telephone and telegraph wires are to be introduced to the Premises. Tenant will not cut or bore holes for wires. Tenant will not affix any floor covering to the floor of the Premises in any manner except as approved by Landlord. Tenant shall repair any damage resulting from noncompliance with this rule. 22. Tenant will not install, maintain or operate upon the Premises any vending machines without the written consent of Landlord. 23. Landlord reserves the right to exclude or expel from the Development any person who, in Landlord's judgment, is intoxicated or under the influence of liquor or drugs or who is in violation of any of the Rules and Regulations of the Building. 24. Tenant will store all its trash and garbage within its Premises or in other facilities provided by Landlord. Tenant will not place in any trash box or receptacle any material which cannot be disposed of in the ordinary and customary manner of trash and garbage disposal. All garbage and refuse disposal is to be made in accordance with directions issued from time to time by Landlord. 25. The Premises will not be used for lodging or for the storage of merchandise held for sale to the general public, or for lodging or for manufacturing of any kind, nor shall the Premises be used for any improper, immoral or objectionable purpose. No cooking will be done or permitted on the Premises without Landlord's consent, except the use by Tenant of Underwriters' Laboratory approved equipment for brewing coffee, tea, hot chocolate and similar beverages shall be permitted, and the use of a microwave oven for employees use will be permitted, provided that such equipment and use is in accordance with all applicable federal, state, county and city laws, codes, ordinances, rules and regulations. 26. Neither Tenant nor any of its employees, agents, customers and invitees may use in any space or in the public halls of the Building or the Development any hand truck except those equipped with rubber tires and side guards or such other material-handling equipment as Landlord may approve. Tenant will not bring any other vehicles of any kind into the Building. 27. Tenant agrees to comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency. 28. Tenant assumes any and all responsibility for protecting its Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed. 29. To the extent Landlord reasonably deems it necessary to exercise exclusive control over any portions of the Common Areas for the mutual benefit of the tenants in the Building or the Development, Landlord may do so subject to reasonable, non-discriminatory additional rules and regulations. 30. Landlord may prohibit smoking in the Building and may require Tenant and any of its employees, agents, clients, customers, invitees and guests who desire to smoke, to smoke within designated smoking areas within the Development. 31. Tenant's requirements will be attended to only upon appropriate application to Landlord's asset management office for the Development by an authorized individual of Tenant. Employees of Landlord will not perform any work or do anything outside of their regular duties unless under special instructions from Landlord, and no employee of Landlord will admit any person (Tenant or otherwise) to any office without specific instructions from Landlord. 32. These Rules and Regulations are in addition to, and will not be construed to in any way modify or amend, in whole or in part, the terms, covenants, agreements and conditions of the Lease. Landlord may waive any one or more of these Rules and Regulations for the benefit of Tenant or any other tenant, but no such waiver by Landlord will be construed as a waiver of such Rules and Regulations in favor of Tenant or any other tenant, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all of the tenants of the Development. 33. Landlord reserves the right to make such other and reasonable and non-discriminatory Rules and Regulations as, in its judgment, may from time to time be needed for safety and security, for care and cleanliness of the Development and for the preservation of good order therein. Tenant agrees to abide by all such Rules and Regulations herein above stated and any additional reasonable and non-discriminatory rules and regulations which are adopted. Tenant is responsible for the observance of all of the foregoing rules by Tenant's employees, agents, clients, customers, invitees and guests. B. Parking Rules and Regulations. The following rules and regulations govern the use of the parking facilities which serve the Building. Tenant will be bound by such rules and regulations and agrees to cause its employees, subtenants, assignees, contractors, suppliers, customers and invitees to observe the same: 1. Tenant will not permit or allow any vehicles that belong to or are controlled by Tenant or Tenant's employees, subtenants, customers or invitees to be loaded, unloaded or parked in areas other than those designated by Landlord for such activities. No vehicles are to be left in the parking areas overnight and no vehicles are to be parked in the parking areas other than normally sized passenger automobiles, motorcycles and pick-up trucks. No extended term storage of vehicles is permitted. 2. Vehicles must be parked entirely within painted stall lines of a single parking stall. 3. All directional signs and arrows must be observed. 4. The speed limit within all parking areas shall be five (5) miles per hour. 5. Parking is prohibited: (a) in areas not striped for parking; (b) in aisles or on ramps; (c) where "no parking" signs are posted; (d) in cross-hatched areas; and (e) in such other areas as may be designated from time to time by Landlord or Landlord's parking operator. 6. Landlord reserves the right, without cost or liability to Landlord, to tow any vehicle if such vehicle's audio theft alarm system remains engaged for an unreasonable period of time. 7. Washing, waxing, cleaning or servicing of any vehicle in any area not specifically reserved for such purpose is prohibited. 8. Landlord may refuse to permit any person to park in the parking facilities who violates these rules with unreasonable frequency, and any violation of these rules shall subject the violator's car to removal, at such car owner's expense. Tenant agrees to use its best efforts to acquaint its employees, subtenants, assignees, contractors, suppliers, customers and invitees with these parking provisions, rules and regulations. 9. Parking stickers, access cards, or any other device or form of identification supplied by Landlord as a condition of use of the parking facilities shall remain the property of Landlord. Parking identification devices, if utilized by Landlord, must be displayed as requested and may not be mutilated in any manner. The serial number of the parking identification device may not be obliterated. Parking identification devices, if any, are not transferable and any device in the possession of an unauthorized holder will be void. Landlord reserves the right to refuse the sale of monthly stickers or other parking identification devices to Tenant or any of its agents, employees or representatives who willfully refuse to comply with these rules and regulations and all unposted city, state or federal ordinances, laws or agreements. 10. Loss or theft of parking identification devices or access cards must be reported to the management office in the Development immediately, and a lost or stolen report must be filed by the Tenant or user of such parking identification device or access card at the time. Landlord has the right to exclude any vehicle from the parking facilities that does not have a parking identification device or valid access card. Any parking identification device or access card which is reported lost or stolen and which is subsequently found in the possession of an unauthorized person will be confiscated and the illegal holder will be subject to prosecution. 11. All damage or loss claimed to be the responsibility of Landlord must be reported, itemized in writing and delivered to the management office located within the Development within ten (10) business days after any claimed damage or loss occurs. Any claim not so made is waived. Landlord is not responsible for damage by water or fire, or for the acts or omissions of others, or for articles left in vehicles. In any event, the total liability of Landlord, if any, is limited to Two Hundred Fifty Dollars ($250.00) for all damages or loss to any car. Landlord is not responsible for loss of use. 12. The parking operators, managers or attendants are not authorized to make or allow any exceptions to these rules and regulations, without the express written consent of Landlord. Any exceptions to these rules and regulations made by the parking operators, managers or attendants without the express written consent of Landlord will not be deemed to have been approved by Landlord. 13. Landlord reserves the right, without cost or liability to Landlord, to tow any vehicles which are used or parked in violation of these rules and regulations. 14. Landlord reserves the right from time to time to modify and/or adopt such other reasonable and non-discriminatory rules and regulations for the parking facilities as it deems reasonably necessary for the operation of the parking facilities. EX-10 3 OPERATING AGREEMENT Exhibit 10.2 ------------ THE SECURITIES ISSUED PURSUANT TO OR REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION AND QUALIFICATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS REGISTERED AND QUALIFIED UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED. ANY TRANSFER OF SUCH SECURITIES IS SUBJECT TO OTHER RESTRICTIONS, TERMS AND CONDITIONS SET FORTH HEREIN. SUCH SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. OPERATING AGREEMENT FOR KEYBUILDER.COM, LLC A CALIFORNIA LIMITED LIABILITY COMPANY This Operating Agreement is made as of March 6, 2000, by and among Simpson Manufacturing Co., Inc., a Delaware corporation ("Simpson"), and Keymark Enterprises, Inc., an Illinois corporation ("Keymark"), with reference to the following facts: On March 6, 2000, Articles of Organization for the Company were filed with the California Secretary of State. The Members and the Directors desire to adopt and approve this Operating Agreement for the Company. NOW, THEREFORE, in consideration of the mutual covenants and conditions herein, the Members and Directors by this Agreement set forth the Operating Agreement for the Company under the laws of the State of California on the terms and subject to the conditions hereinafter provided. 1. Definitions. When used in this Agreement, the following capitalized terms have the following respective meanings: 1.1 "Act" means the Beverly-Killea Limited Liability Company Act, California Corporations Code sections 17000 and following, as the same may be amended from time to time. 1.2 "Affiliate" means, with reference to a specified Person, any Person directly or indirectly controlling, controlled by or under common control with the specified Person, any trust or foundation to which the specified Person has made a majority of the grants, donations or contributions received by that trust or foundation, a Person owning or controlling ten percent or more of the outstanding voting securities of the specified Person, a Person ten percent or more of whose outstanding voting securities are owned or controlled by the specified Person, any officer, director, manager, general partner or trustee of the specified Person, and if the specified Person is an officer, director, manager, general partner or trustee, any corporation, limited liability company, partnership or trust for which the specified Person acts in any such capacity. 1.3 "Articles" means the Articles of Organization for the Company filed or to be filed with the California Secretary of State, as the same may be amended from time to time. 1.4 "Assignee" means the owner of an Economic Interest who has not been admitted as a Member of the Company or has ceased to be a Member in accordance with section 7. 1.5 "Bankruptcy" of a Director or a Member means the occurrence of any of the following events: the Director or Member makes a general assignment for the benefit of creditors or admits his, her or its inability to pay his, her or its debts as they become due or an order for relief is entered against the Director or Member under any chapter of the United States Bankruptcy Code, as amended or superseded from time to time, or the Director or Member is adjudicated a bankrupt or insolvent or institutes any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt or similar proceeding relating to the Director or Member under the laws of any jurisdiction or any such proceeding is instituted against the Director or Member and remains undismissed for a period of sixty days. 1.6 "Call Option" has the meaning ascribed to that term in section 7.10. 1.7 "Capital Account" means: 1.7.1 The individual Capital Account that shall be established and maintained for each Member in accordance with the following provisions: (a) To the Capital Account of a Member there shall be credited such Member's Capital Contributions, such Member's share of Profits, any items in the nature of income or gain that are specially allocated thereto pursuant to subsection 6.2.1 and the amount of any Company liabilities that are personally assumed by such Member or that are secured by any Company property distributed to such Member with respect thereto; (b) From the Capital Account of a Member, there shall be debited the amount of cash and the fair market value of any Company property distributed to such Member pursuant to any provision of this Agreement, such Member's share of Losses, any items in the nature of expenses or losses that are specially allocated thereto pursuant to subsection 6.2.1 and the amount of any liabilities of such Member that are assumed by the Company or that are secured by any property contributed by such Member to the Company with respect thereto; and (c) In determining the amount of any liability, there shall be taken into account Code section 752(c) and any other applicable provisions of the Code and Regulations. 1.7.2 If any interest in the Company is transferred in accordance with this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent that it relates to the transferred interest. 1.7.3 The foregoing provisions and other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations section 1.704-1(b), and shall be interpreted and applied in a manner consistent therewith. If the Directors determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto, are computed in order to comply with Regulations section 1.704-1(b), the Directors may make such modification if it is not likely to have a materially adverse effect on amounts distributable to any Member pursuant hereto on the dissolution of the Company. The Directors shall adjust the amounts debited or credited to Capital Accounts with respect to any property contributed to the Company or distributed to a Member and any liabilities secured by such contributed or distributed property or assumed by the Company or Member in connection with such contribution or distribution if the Directors determine that such adjustments are necessary or appropriate under Regulations section 1.704- 1(b)(2)(iv). The Directors shall also make any appropriate modifications if unanticipated events might cause this Agreement not to comply with Regulations section 1.704-1(b), and the Directors shall make all elections provided for under such Regulations. 1.8 "Capital Contribution" of a Member means the total value of cash and the fair market value of property contributed to the Company by that Member. 1.9 "Code" means the Internal Revenue Code of 1986, as amended from time to time (or any corresponding provisions of succeeding law). 1.10 "Company" means Keybuilder.com, LLC, a California limited liability company. 1.11 "Derivative Work" means a work that is based on one or more pre-existing works, such as a revision, enhancement, modification, translation, abridgement, condensation, expansion, or any other form in which such pre-existing work may be recast, transformed or adapted, and which, if prepared without authorization of the owner of the intellectual property rights in such pre-existing work, including copyrights, patents, trade secrets and other proprietary rights, would constitute infringement. "Derivative Work" shall also include any compilation that incorporates such pre-existing work. 1.12 "Dissolution Event" means, with respect to a Director, one or more of the following: the death, insanity, resignation, removal or Bankruptcy of that Director. 1.13 "Director" means a natural person initially appointed or subsequently elected as a Director pursuant to section 5.4. A Director need not be a Member, a resident of the State of California or a citizen of the United States. 1.14 "Economic Interest" means a Member's or Assignee's right to share in one or more of the Profits, Losses, or similar items of, and to receive distributions from, the Company, pursuant to this Agreement and the Act, but does not include any other rights of a Member, including, without limitation, the right to vote or consent or participate in management, or, except as provided in section 9.2, any right to information concerning the business and affairs of the Company. 1.15 "Fiscal Year" means the period commencing on the date the Company commences business or commencing on any subsequent January 1, and ending on the succeeding December 31, or, if earlier, the date of dissolution and termination of the Company. 1.16 "Keymark License" has the meaning ascribed to that term in subsection 3.1.2. 1.17 "Keymark Technology" means the proprietary software program for designing and engineering roof trusses and systems, walls, floor systems, and take-offs for building construction, owned by Keymark and described more fully in Exhibit A attached hereto, and all intellectual property rights, including copyrights, patents, trade secrets and other proprietary rights, that are embodied in or used in connection with the Keymark Technology. Keymark also has an adaptation of the proprietary software program for use with light gauge steel construction ("Keymark Steel Technology"). The Keymark Steel Technology is included in the Keymark Technology and accordingly is included within the scope of the Keymark License, except that the Keymark License shall be non-exclusive to the Company with respect to the Keymark Steel Technology. Keymark shall have the continuing right to adapt and use the Keymark Technology, including future modifications and improvements thereof developed by or for the Company, for steel applications in both internet and non-internet environments, and such right shall be exclusive to Keymark with respect to non-internet applications and non-exclusive to Keymark with respect to internet applications. 1.18 "License Agreement" means the License Agreement between the Company and Keymark or an Affiliate of Keymark to which Keymark shall have contributed the Keymark Technology, in substantially the form of Exhibit B attached hereto. 1.19 "Majority in Interest" of the Members means Members whose Percentage Interests, on the date of determination, aggregate more than fifty percent of the Percentage Interests of all Members on that date. 1.20 "Member" means each Person who is an initial signatory to this Agreement, is subsequently admitted to the Company as a Member in accordance with this Agreement or is an Assignee that becomes a Member in accordance with section 7 and who, in any such case, shall not have ceased to be a Member. 1.21 "Membership Interest" of a Member means a Member's entire interest in the Company, including, without limitation, the Member's Economic Interest, the right to vote or consent or participate in the management of the Company and any right to information concerning the business and affairs of the Company provided hereby or by the Act. 1.22 "Option" and "Options" have the meanings ascribed to those terms in section 7.10. 1.23 "Percentage Interest" of a Member means the percentage set forth opposite the name of such Member under the heading "Percentage Interest" in Exhibit A attached hereto, as such percentage may be changed from time to time pursuant to this Agreement. 1.24 "Person" means a natural person, general partnership, limited partnership, trust, estate, association, corporation, limited liability company or other entity, whether domestic or foreign. 1.25 "Profits" and "Losses" mean, for each Fiscal Year or other period, an amount equal to the Company's taxable income or loss for such Fiscal Year or other period, determined in accordance with Code section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code section 703(a)(1) shall be included in taxable income or loss), with the following adjustments: 1.25.1 Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this section 1.25 shall be added to such taxable income or loss; 1.25.2 Any expenditures of the Company described in Code section 705(a)(2)(B) or treated as Code section 705(a)(2)(B) expenditures pursuant to Regulations section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits and Losses pursuant to this section 1.25 shall be subtracted from such taxable income or loss; and 1.25.3 Notwithstanding any other provision of this section 1.25, any items that are specially allocated pursuant to subsection 6.2.1 or 6.2.2 shall not be taken into account in computing Profits and Losses. 1.26 "Put Option" has the meaning ascribed to that term in section 7.10. 1.27 "Regulations" means the Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). 1.28 "Securities Act" means the Securities Act of 1933, as amended from time to time. 1.29 "Successor" of a Member means any transferee, successor, assign or legal representative of that Member. 1.30 "Tax Matters Partner" means Simpson or its successor designated pursuant to section 9.6. 1.31 "Transfer" means any sale, assignment, transfer, encumbrance, pledge, hypothecation, gift or other disposition or alienation, voluntarily, involuntarily, by operation of law or otherwise (including, but not limited to, on death, Bankruptcy or divorce of a Member), except a sale to the Company. 1.32 "Transferring Member" has the meaning ascribed to that term in section 7.4. 2. Organizational Matters. 2.1 Formation. Pursuant to the Act, the Members hereby agree to the formation and organization of the Company as a limited liability company under the Act by the filing of the Articles with the California Secretary of State and entering into this Agreement. The Members agree that the Directors shall promptly cause the Articles to be filed under the laws of each jurisdiction where such filing may be required and shall cause to be filed any certificate of amendment or any additional, supplemental or amended certificates, fictitious business name statements and other documents as the Directors may deem necessary or advisable in accordance herewith. The Company shall be deemed to have been formed on and as of the date of the initial filing of the Articles with the California Secretary of State. The rights, duties, obligations and liabilities of the Members shall be determined pursuant to, and the business, management and affairs of the Company shall be governed exclusively by, this Agreement and the Act. If and to the extent that any provision of this Agreement is inconsistent with any provision of the Act, this Agreement shall govern to the extent permitted by the Act. 2.2 Name. The name of the Company shall be "Keybuilder.com, LLC." The business of the Company may be conducted under that name or, on compliance with applicable laws, any other name that the Directors deem appropriate or advisable. 2.3 Term. The term of the Company shall be deemed to commence or to have commenced on the initial filing of the Articles with the California Secretary of State and shall continue until dissolved as provided in this Agreement. 2.4 Office and Agent. The Company shall continuously maintain an office and registered agent in the State of California as required by the Act. The principal office of the Company shall be at 4637 Chabot Drive, Suite 200, Pleasanton, CA 94588-0789, or at such other location as the Directors may determine. The registered agent shall be as stated in the Articles or as otherwise determined by the Directors. 2.5 Purpose of Company. The purpose of the Company is to engage in any lawful activity for which a limited liability company may be organized under the Act. Without limiting the generality of the foregoing, the Company is being formed in part for the specific purposes of designing, developing and marketing software relating to internet-based building design and engineering systems. In connection therewith, the Company will use its best reasonable efforts to develop and maintain service centers for the purpose of facilitating the conversion of design and engineering data of customers and third parties into formats that are compatible with the Company's systems. To these ends, the Company may enter into, make and perform all contracts and other undertakings and engage in all activities and transactions as the Directors or a duly authorized officer may consider necessary to carry out the foregoing purposes. The parties hereto intend that, at such time and on such terms as the Directors deem advisable and in the Company's best interests, the Company or its successor may participate directly or indirectly (through a Member other than Simpson or Keymark) in an initial public offering of the securities of the Company or its successor. 2.6 Addresses of Members and Directors. The respective addresses of the Members and the Directors shall be set forth on Exhibit A. Each Member or Director shall promptly notify the Company of any change in his, her or its address set forth on Exhibit A. 2.7 Changes in Exhibit A. The Directors shall cause Exhibit A to be revised from time to time to reflect changes in accordance with this Agreement in the information set forth in Exhibit A. 3. Capital Contributions and Admission of Additional Members. 3.1 Initial Capital Contributions. 3.1.1 Capital Contributions. Each Member has contributed, or shall have contributed not later than such time as the Directors may fix, to the capital of the Company the aggregate amount set forth opposite that Member's name on Exhibit A. If a contribution is other than in cash, the agreed value of such Capital Contribution shall be set forth in Exhibit A. 3.1.2 Keymark License. (a) In lieu of a cash Capital Contribution, Keymark agrees that Keymark or any Affiliate of Keymark to which Keymark shall have contributed the Keymark Technology shall grant to the Company a worldwide, royalty-free license (the "Keymark License") to use the Keymark Technology, or any part thereof (solely in connection with the establishment and operation of an internet-based business consisting of the processing and/or distribution over the internet of data pertaining to building design and engineering systems), to make, have made, use, sell, offer for sale, import, improve, modify, copy, adopt, create Derivative Works of, publicly display, publicly perform, publish, distribute and otherwise transfer, components and materials relating to internet-based building design and engineering systems, which may incorporate all or part of the Keymark Technology. The Keymark License shall include the right of the Company to grant sublicenses of the Keymark Technology or any part thereof and to assign the Keymark License, in whole or in part, if the Directors reasonably believe the same is in the best interests of the Company, all without Keymark's consent. The Keymark License shall not grant the Company any right to use the Keymark Technology in applications for the non-internet environment, and Keymark retains all right, title and interest in and to non-internet applications of the Keymark Technology, including future modifications and improvements thereof developed by or for the Company. The Keymark License shall be exclusive to the Company (except as it applies to the Keymark Steel Technology, with respect to which the Keymark License shall be non-exclusive to the Company) for as long as the Company makes monthly payments to Keymark pursuant to section 3.3. If the Company fails to timely make any such monthly payment with respect to any of the 24 consecutive months commencing with February 2000, and such failure is not remedied within ten days after written notice thereof from Keymark to the Company, the Keymark License shall become non-exclusive. If the Company fails to timely make any such monthly payment with respect to any month after January 2002, and such failure is not remedied within ten days after written notice thereof from Keymark to the Company, the Keymark License shall terminate. This Agreement shall become effective only upon the execution by Keymark and the Company of a License Agreement that sets forth in detail the terms of the Keymark License, which License Agreement shall be attached hereto as Exhibit B. (b) Keymark agrees to transfer to the Company (by license, assignment, contribution or otherwise), for no additional consideration, all such additional rights in and to the Keymark Technology for use in internet applications (except as otherwise noted below) as the Directors shall request, upon a determination by the Directors, subject to section 5.1.1, that such transfer is necessary in order for the Company to obtain financing from third parties on suitable terms. Keymark also agrees to transfer to the Company (by license, assignment, contribution or otherwise), for no additional consideration, on such date and in such manner as the Directors shall determine, subject to section 5.1.1, prior to any sale of the Company or its successor or parent entity or the initial public offering under the Securities Act of any securities of the Company or its successor or a Member (other than Simpson and Keymark), all such additional rights in and to the Keymark Technology for use in internet applications (except as otherwise noted below) as the Directors conclude is reasonably necessary in connection with such transaction. The Company agrees that any such transfer shall be made on terms consistent with Keymark's retaining exclusive rights in and to applications of the Keymark Technology in the non-internet environment. The Keymark Steel Technology shall not be included in the Keymark Technology that is transferred to the Company pursuant to the first two sentences of this section 3.1(b), and instead, concurrently with any such transfer, Keymark shall grant the Company a worldwide, perpetual, irrevocable, royalty-free, non-exclusive license to use the Keymark Steel Technology for applications in the internet environment (c) The parties contemplate that Keymark may contribute the Keymark Technology to an Affiliate of Keymark, in which case Keymark shall cause such Affiliate to grant the Keymark License to the Company or transfer the Keymark Technology to the Company on the terms set forth in sections 3.1.2(a) and (b). 3.2 Additional Capital Contributions by Members. No Member shall be required to make any additional Capital Contribution. The Directors, in accordance with section 5.1.1, may permit the Members to make additional Capital Contributions from time to time in amounts and on terms and conditions (including equitable adjustments in the Percentage Interests) deemed appropriate by the Directors; provided that, except as provided in section 3.4, if any Member is permitted to make an additional Capital Contribution, all Members shall be permitted to make at the same time additional Capital Contributions on the same terms and conditions in proportion to their Percentage Interests. 3.3 Software Support, Maintenance and Development. Beginning in February 2000, and continuing for the longer of 23 months thereafter or as long as the monthly payments described in this section 3.3 are timely made, Keymark shall provide to the Company such software support, maintenance and development services as the Directors may request from time to time. Such maintenance services shall consist at a minimum of Keymark's best efforts to promptly correct any defects, bugs or non- conformities in any software developed by Keymark and used by the Company or made available by the Company to its customers. All software developed by Keymark pursuant to this Agreement that consists of modifications and improvements to the Keymark Technology shall be deemed to be part of the Keymark Technology. The Company shall pay Keymark an amount equal to $100,000 per calendar month for the services described in this section 3.3, which amount shall be paid in advance on the first day of each month beginning on February 1, 2000, and shall be subject to all standard deductions and withholding required by tax authorities. The Company shall not be required to pay or reimburse Keymark any additional amount for any expenses Keymark incurs in performing the services described above in this section 3.3. The Company shall be responsible for establishing and operating customer support centers throughout the country and training and support of support center personnel (with Keymark providing software support for such centers and personnel), and performing data entry, web site development, and sales and marketing services. To the extent that Keymark, with the Company's prior approval, incurs expenses, including but not limited to personnel expenses, to perform functions that are the Company's responsibility as described in this section 3.3, the Company will reimburse Keymark for such reasonable and documented expenses, including any equitably burdened payroll expense. After January 2001, the Company may, at its option, discontinue the monthly $100,000 payments to Keymark, in which event the Keymark License will continue but become non-exclusive. Whether or not the Company continues the monthly payments after January 2001, however, Keymark will continue to be responsible, through January 2002, for the software support, maintenance and development services described in the first two sentences of this section 3.3. Beginning on February 1, 2002, the Keymark License and Keymark's software support, maintenance and development obligations will continue only as long as the Company continues to timely make the $100,000 monthly payments to Keymark and will terminate if the Company fails to timely make any such payment and such failure is not remedied within ten days after written notice thereof. 3.4 Key Employees. The Directors may, at any time or times, cause the Company to grant to any employee of the Company whom the Directors determine to be a key employee of the Company the right or option to purchase or otherwise acquire an Economic Interest and to be admitted to the Company as a Member, in each case on making such Capital Contribution or no Capital Contribution, with such Percentage Interest and on such other terms and conditions as the Directors may determine; provided that the aggregate Percentage Interests of all such employees who do not make corresponding Capital Contributions (that is, Capital Contributions in the same proportion to the total net market value of the Company immediately after such purchase or other acquisition, as such market value is determined by the Directors, in their exclusive discretion, as their Percentage Interests bear to 100 percent) shall not exceed five percent. 3.5 Additional Funds; Other Investors. If at any time or from time to time the Directors determine that additional funds are needed for the business of the Company, the Directors may cause the Company to (a) sell assets of the Company, (b) borrow all or part of the amount needed from one or more financial institutions, Members or others and encumber by pledge or otherwise some or all of the assets of the Company to secure repayment thereof, (c) invite Members to make additional Capital Contributions of the amount needed and accept such Capital Contributions as provided in section 3.2, or (d) admit additional Members on terms and conditions approved by the Directors providing for Capital Contributions by such additional Members constituting all or part of the amount needed. As of the date of this Agreement, Simpson and Keymark anticipate that the Company may solicit additional investments in the Company from developer- builders and other Persons, in the Directors' exclusive discretion, and admit such Persons as Members, although the Directors shall have no obligation to do so. Except as provided in section 3.4, any Person admitted to the Company as a Member shall make a Capital Contribution in an amount determined by the Directors and pay such Capital Contribution in the manner and at the time determined by the Directors. The Directors shall assign any Person admitted as a Member a Percentage Interest equal to such Person's Capital Contribution divided by the total net market value of the Company at the time of such Capital Contribution, as determined by the Directors in their exclusive discretion. Upon the admission of any additional Member, the Percentage Interests of the existing Members shall be reduced pro rata to reflect the Percentage Interest of the new Member; that is, the Percentage Interest of each existing Member shall be reduced by a percentage equal to the Percentage Interest of the new Member. As of the date of this Agreement, Simpson and Keymark anticipate that additional Members, if any, shall be admitted only on such terms as permit Simpson to retain voting and management control of the Company. 3.6 Provisions Applicable in All Cases. Anything herein to the contrary notwithstanding: (a) no Person shall be admitted to the Company as a Member unless and until such Person shall have agreed in writing (by signing a counterpart of this Agreement, or otherwise, as the Directors may approve) to become a party to this Agreement and to assume and perform all of the obligations and responsibilities of a Member hereunder and shall have paid or delivered to the Company such Person's agreed Capital Contribution, if any; (b) no admission of any Person as a Member shall require any consent or approval of any other Member, as such; (c) on the admission of any new Member pursuant to any provision of this Agreement, the Directors shall cause appropriate adjustments to be made for purposes of applying the accounting and allocation provisions of this Agreement; (d) on any change in the Percentage Interest of any Member or Assignee and on each admission of a new Member to the Company, pursuant to any provision of this Agreement, the Percentage Interests of all other Members and Assignees shall be adjusted proportionately so that the Percentage Interests at all times total 100 percent. 3.7 Capital Accounts. The Company shall establish and maintain an individual Capital Account for each Member in accordance with section 1.7 and Regulations section 1.704-1(b). 3.8 No Withdrawal; No Interest. Except as specifically provided in this Agreement or as approved by the Directors, (a) no Member may withdraw such Member's Capital Contribution from the Company, and (b) no Member shall be entitled to receive any interest, salary or drawing on such Member's Capital Contributions or with respect to its Capital Account, or for services rendered on behalf of the Company, or otherwise in its capacity as a Member, except as specifically provided in the New Software Technology Development and Marketing Agreement. 3.9 Company Records. On each contribution, distribution or withdrawal of capital as contemplated by this Agreement, the Directors shall cause the Company's records to reflect accurately such contribution, distribution or withdrawal. 3.10 No Other Contributions. Without the consent of the Directors, no Member shall contribute any funds or other property to the capital of the Company except as expressly required or permitted by this Agreement. 4. Members. 4.1 Limited Liability. Except as and to the extent required under the Act notwithstanding this Agreement and except as expressly provided in this Agreement, the debts, duties, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, duties, obligations and liabilities of the Company, and no Member, Director or officer of the Company shall be personally liable for any debt, duty, obligation or liability of the Company solely by reason of being a Member, Director or officer of the Company. 4.2 Meetings of Members. No regular, annual, special or other meetings of Members are required to be held. If held, any such meeting shall be noticed, held and conducted in the manner provided in the Act; provided that (a) any such meeting shall be held at the Company's principal executive office or at any other place selected by the Directors and set forth in the notice of meeting, (b) a meeting shall be held only when called by the Directors, and (c) the attendance of a Majority in Interest of the Members represented in person or by proxy shall be necessary to constitute a quorum at any meeting to consider a matter on which Members may take action. Any action that may be taken at a meeting of Members may be taken without a meeting by written consent as provided in section 17104(i) of the Act. 4.3 Members Have No Managerial Authority. The Members, as such, shall have no power to participate in the management of the Company except as expressly authorized by this Agreement or the Articles and except as and to the extent expressly required by the Act notwithstanding this Agreement. Unless expressly and duly authorized in writing to do so by the Directors, no Member, as such, shall have any power or authority to sign for, bind or act on behalf of the Company in any way, to pledge the Company's credit, or to render the Company liable for any purpose. 4.4 Voting Rights. Except as expressly provided in this Agreement or the Articles, Members shall have no voting, approval or consent rights. 4.5 Other Activities. 4.5.1 Insiders. Except as approved in advance by the Directors, neither Keymark nor Simpson shall, or shall permit its respective Affiliates to, and no employee of the Company shall, engage or participate in any capacity in any business competitive with any business or activity in which the Company is engaged or may be interested in engaging; provided that nothing herein shall prohibit Keymark from engaging in a business that applies the Keymark Technology in non-internet environments or from engaging in any business involving the Keymark Steel Technology, as long as Keymark keeps the Directors reasonably informed regarding the activities and scope of any such business and new business. 4.5.2 Others. Except as provided in subsection 4.5.1, any Member and such Member's Affiliates may engage in any activities, whether or not related to the business of the Company, the Members specifically recognizing that each of them and their Affiliates are engaged in various businesses, both for their own accounts and for others, and such Members may continue, or initiate further, such activities. Each Member agrees that, except as provided in subsection 4.5.1, any Member and any Affiliate of any Member (a) may engage in or possess an interest, direct or indirect, in any business venture of any nature or description for his, her or its own account, independently or with others, including, without limitation, any business, industry or activity in which the Company may be interested in engaging or may also be engaged and (b) may do so without any obligation to report the same to the Company or any other Member or Director or to afford the Company or any other Member any opportunity to participate therein. Neither the Company nor any other Member shall have any right in or to any such independent venture or activity or any revenues or profits derived therefrom. 4.6 Waiver of Conflicts. Subject to any express prohibition in this Agreement, the fact that any Member or Director, or any Affiliate of any Member or Director, or a member of his or her family, is employed by, or is directly or indirectly interested in or connected with, any Person employed or engaged by the Company to render or perform a service, or from whom the Company may make any purchase, or to whom the Company may make any sale, or from or to whom the Company may obtain or make any loan or enter into any contract or lease or other arrangement, shall not prohibit the Company from engaging in any transaction with such Member, Director or Person or create any additional duty of legal justification by such Member, Director or Person, beyond that of an unrelated party. Neither the Company nor any other Member or Director shall have any right in or to any revenues or profits derived from such transaction by such Member, Director, Affiliate or Person. 4.7 Expenses. The Company shall reimburse each Member and such Member's Affiliates for the cost of goods and materials paid by such Member or Affiliate and used for or by the Company. With respect to Keymark, such reimbursement shall be in addition to any amounts the Company pays to Keymark pursuant to section 3.3 for software support, maintenance and development services. The Company shall also pay or reimburse each Member and such Member's Affiliates for expenses incurred in the formation and organization of the Company, including, without limitation, the preparation of the Articles and this Agreement. 4.8 Costs of Special Services. Any costs incurred in connection with special services requested by a Member will be required to be paid by that Member. Such services would include, for example, those that would benefit the Member but would not benefit the Company, such as a special evaluation or financial accounting. 5. Management and Control of the Company. 5.1 Management of the Company by Directors. 5.1.1 In General. The Directors acting as such shall be deemed to be the "managers" of the Company, as that term is defined in section 17001(w) of the Act. Subject only to provisions of the Articles and this Agreement relating to matters required to be approved by the Members, the business, property and affairs of the Company shall be managed and all powers of the Company shall be exercised exclusively, by or under the direction of the Directors, acting as a board of directors by the vote or consent of a majority of the Directors; provided that, subject to subsection 5.1.2, only such Directors, officers of the Company or other Persons as are designated by the Directors shall have authority to endorse checks, drafts and other evidences of indebtedness made payable to the order of the Company, to sign checks, drafts and other instruments obligating the Company to pay money, and to sign contracts and obligations on behalf of the Company; and provided further that the consent of the both the Director elected by Keymark and the Directors elected by Simpson shall be required to (a) appoint the President of the Company, (b) approve the terms of any debt or equity financing for the Company, including any capital contributions by existing or new Members, (c) approve the terms of any sale of the Company or its successor or parent entity, or any initial public offering of the securities of the Company or its successor or Member (other than Simpson or Keymark), and (d) approve the terms of any transfer of the Keymark Technology to the Company pursuant to section 3.1(b). The Directors may delegate any such authority to any Person, as the Directors consider advisable. Any and all rights, powers, authority and discretion of the Directors under this Agreement or the Act shall be exercisable by the Directors, acting as a board of directors, in their absolute and exclusive discretion, and the Directors are authorized and empowered to grant or give any consent, approval or authorization, make any determination or do or perform any other act or thing conditionally or unconditionally, arbitrarily, or inconsistently in varying or similar circumstances, without any accountability to the Company or any Member, except only as otherwise specifically and expressly provided in this Agreement or provided by the Act notwithstanding this Agreement. 5.1.2 Limitations. Notwithstanding any provision of this Agreement to the contrary, the Directors shall not, without the written consent of a Majority in Interest of the Members, have authority hereunder to cause the Company (a) to sell, exchange or otherwise dispose of all or substantially all of the Company's assets as part of a single transaction or plan, except in the orderly liquidation and winding up of the business of the Company on its duly authorized dissolution, or (b) to be merged with another limited liability company or a limited partnership, corporation or general partnership. 5.2 Duties of Directors. 5.2.1 Matters to Be Addressed. The Directors shall consider and act on any matter specified in this Agreement for their consideration or action and any matter submitted to them by any officer of the Company, other than any matter expressly reserved hereby for consideration or action by all or a Majority in Interest of the Members or any class or group of Members; provided that the Directors may delegate to any officer or officers of the Company any power or authority reserved to the Directors in this Agreement. 5.2.2 Binding Effect. Any vote, consent or other action of the Directors that is authorized by this Agreement shall, in the absence of fraud and bad faith, be final, binding and conclusive on all Members for all purposes. 5.2.3 Fiduciary Duty. Each Director and each Person appointed to serve as an officer of the Company from time to time shall perform his or her duties hereunder in good faith, in a manner that he or she believes to be in the best interests of the Company and the Members generally and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. Each Director shall have fiduciary duties to the Company and the Members of like tenor to the fiduciary duties of a director of a California corporation to his or her corporation and its shareholders, and each Person appointed to serve as an officer of the Company shall have fiduciary duties to the Company and the Members of like tenor to the fiduciary duties of an officer of a California corporation to his or her corporation and its shareholders. 5.3 Number. The authorized number of Directors shall not be fewer than three or more than nine. The exact authorized number of Directors shall be fixed from time to time within those limits by the vote or consent of the Directors or a Majority in Interest of the Members; provided that no reduction in the authorized number of Directors shall reduce that number to a number that is fewer than the number of Persons then serving as Directors. Subject to the foregoing provisions for changing the authorized number of Directors, the authorized number of Directors is initially fixed at three. 5.4 Election. Two Directors shall be elected by Simpson, and one Director shall be elected by Keymark. At such time, if any, as more than three Directors are authorized, each Director in excess of three shall be elected by a Majority in Interest of the Members (without cumulative voting). Each Director shall be elected at each meeting of the Members called for that purpose, to hold office until the next meeting of Members called for that purpose. Each Director, including a Director elected to fill a vacancy, shall hold office until the next such meeting and until a successor is elected and qualifies. Initially, the Directors shall be Thomas J Fitzmyers and Stephen B. Lamson (who shall be deemed to have been elected by Simpson) and Keith Dietzen (who shall be deemed to have been elected by Keymark). 5.5 Vacancies. A vacancy or vacancies in the office of Director shall be deemed to exist in the event of the death, resignation or removal of any Director or in the event of an increase in the authorized number of Directors as provided in section 5.3 Such vacancies may be filled by a majority of the Directors then in office, whether or not less than a quorum, or by a sole remaining Director. A Majority in Interest of the Members may elect a Director at any time to fill any vacancy not filled by the Directors. If, after the filling of any vacancy by the Directors, the Directors then in office who have been elected by a Majority in Interest of the Members (other than the Directors elected by Simpson and Keymark, as provided in the first sentence of section 5.4) shall constitute less than a majority of the Directors then in office and not elected by Simpson and Keymark, one or more Members representing ten percent or more of the aggregate Percentage Interests held by Members may call a meeting of Members to elect all of the Directors (other than such Directors elected by Simpson and Keymark). The term of office of any Director shall terminate on election of such Director's successor as provided in this Agreement. 5.6 Resignation and Removal. A Director may resign as such at any time by notice to the remaining Directors, without prejudice to the rights, if any, of the Company under any contract to which the resigning Director is a party. The resignation of any Director shall take effect on receipt of the notice or at such later time as shall be specified in the notice, and, unless otherwise specified in the notice, acceptance of the resignation shall not be necessary to make it effective. Any one or more Directors (other than the Directors elected by Simpson and Keymark, as provided in the first sentence of section 5.4) may be removed (with or without cause) from office at any time by a Majority in Interest of the Members and shall be deemed to have been removed on the happening of a Dissolution Event with respect to such Director. The resignation or removal of a Director shall not affect that Director's rights or obligations, if any, as a Member and shall not constitute such Director's withdrawal as a Member. 5.7 Meetings. 5.7.1 Regular Meetings. Regular meetings of the Directors shall be held at least quarterly, without call, on such date and at such time and place as they may fix. No notice of regular meetings of the Directors need be given; provided that notice of any change in the time or place of a regular meeting shall be given to all of the Directors in the same manner as notice for special meetings of the Directors. 5.7.2 Special Meeting; Notice. A special meeting of the Directors for any purpose or purposes may be called at any time by any Director. Notice of the time and place of a special meeting shall be delivered in the manner provided in section 14 or by telephone. In case such notice is mailed, it shall be deposited with the United States Postal Service as first class mail at least four days prior to the time of the holding of the meeting. In case such notice is telegraphed or sent by facsimile or e-mail, it shall be delivered to a common carrier for transmission to the Director or actually transmitted by the Person giving the notice by electronic means to the Director at least forty-eight hours prior to the time of the holding of the meeting. In case such notice is delivered personally or by telephone, it shall be so delivered at least twenty-four hours prior to the time of the holding of the meeting. Any notice given personally or by telephone may be communicated either to the Director or to a Person at the office of the Director whom the Person giving the notice has reason to believe will promptly communicate it to the Director. Such deposit in the mail, delivery to a common carrier, transmission by electronic means or delivery, personally or by telephone, as above provided, shall be due, legal and personal notice to such Director. The notice need not specify the purpose of the meeting. 5.7.3 Waiver of Notice. Notice of a meeting need not be given to any Director who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or who attends the meeting without protesting in writing, prior thereto or at its commencement, the lack of notice to such Director. All such waivers, consents and approvals shall be filed with the Company's records or made a part of the minutes of the meeting. 5.7.4 Adjourned Meeting. A majority of the Directors present, whether or not a quorum is present, may adjourn any meeting to another time and place. If the meeting is adjourned for more than twenty- four hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the Directors who were not present at the time of the adjournment. 5.7.5 Telephone Meetings. Directors may participate in a meeting through use of conference telephone or similar communications equipment, so long as all Directors participating in such meeting can hear one another. Participation in a meeting pursuant to this paragraph constitutes presence in person at such meeting. 5.7.6 Quorum. A majority of the number of Persons serving as Directors constitutes a quorum of the Directors for the transaction of business. Every act or decision done or made by a majority of the Directors present at a meeting duly held at which a quorum is present is the act of the Directors, unless a greater number is required by this Agreement. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of Directors, if any action taken is approved by at least a majority of the required quorum for such meeting. 5.7.7 Action without a Meeting. Any action required or permitted to be taken by the Directors may be taken without a meeting, if a majority of the Directors shall individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Directors. Such action by written consent shall have the same force and effect as a vote of a majority of the Directors at a meeting at which a quorum is present. 5.8 Devotion of Time. A Director is not obligated to devote all of his or her time or business efforts to the affairs of the Company, but shall devote to the business and affairs of the Company such time, effort and skill as he or she reasonably deems appropriate. 5.9 Competing Activities. No Director shall, or shall permit any of that Director's agents or employees to, engage or participate in, independently or with others, any business activity of any type or description that might be the same as or similar to the Company's business or that might be in direct or indirect competition with the Company; provided that the foregoing shall apply to Keymark's designated director and such director's agents and employees only with respect to business activities that might compete directly with the Company by use of internet- based applications of the Keymark Technology. A Director shall present any investment or business opportunity to the Company that is of a character that could be taken by the Company, but if the Directors decline to cause the Company to pursue such opportunity, or do not determine to cause the Company to pursue such opportunity within thirty days of its presentation to the Company, the Director presenting such opportunity shall have no further duty or obligation to the Company with respect to such opportunity and shall have the right to hold or take such opportunity for that Director's own account and to recommend such opportunity to Persons other than the Company. The Members acknowledge that any Director and that Director's agents, employees and Affiliates may own or manage other businesses, and, except as provided in the first sentence of this section 5.9, the Members hereby waive any and all rights and claims that they may otherwise have against any Director and that Director's agents, employees and Affiliates as a result of any of such activities. 5.10 Transactions between Company and Directors. Notwithstanding that it may constitute a conflict of interest, the Directors may, and may cause their respective Affiliates to, engage in any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service, or the establishment of any salary or other compensation or other terms of employment) with the Company, so long as such transaction is not expressly prohibited by this Agreement, and so long as the terms and conditions of such transaction, on an overall basis, are fair and reasonable to the Company and are at least as favorable to the Company as those that are generally available from Persons capable of similarly performing them and in similar transactions between parties operating at arm's length. 5.11Expenses. The Company shall reimburse each Director and his or her Affiliates for the cost of goods and materials paid by such Director and used for or by the Company. With respect to Keymark, such reimbursement shall be in addition to any amounts the Company pays to Keymark pursuant to section 3.3 for software support, maintenance and development services. The Company shall also pay or reimburse each Director and his or her Affiliates for expenses incurred in the formation and organization of the Company, including, without limitation, the preparation of the Articles and this Agreement. 5.12 Officers. 5.12.1 Appointment of Officers. The Directors may appoint one or more officers at any time. The officers of the Company, if deemed necessary by the Directors, may include a president, one or more vice presidents, a secretary, one or more assistant secretaries, a chief financial officer, one or more deputy financial officers and such other officers as the Directors may designate. The officers, if any, shall serve at the pleasure of the Directors, subject to all rights, if any, of an officer under any contract of employment. Any natural person, including a Member or Director or any Affiliate of a Member or Director, may hold any number of offices. No officer need be a Member, a resident of the State of California or a citizen of the United States. The officers shall exercise such powers and perform such duties as are specified in this Agreement and as shall be determined from time to time by the Directors. Generally, each officer shall have the authority, powers, duties and responsibilities usually vested in like titled officers of a California corporation and shall perform such other duties and have such other responsibilities, authority and powers as the Directors may from time to time prescribe. 5.12.2 Removal, Resignation and Filling of Vacancy of Officers. Subject to the rights, if any, of an officer under a contract of employment, any officer may be removed, with or without cause, by the Directors at any time. Any officer may resign at any time by notice to the Company, and the resignation shall take effect on receipt of such notice by the Directors or at a later time specified in such notice. Unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Company under any contract to which the officer is a party. A vacancy in any office because of death, resignation, removal, disqualification or any other cause may be filled in the manner prescribed in this Agreement for regular appointments to that office. 5.12.3 Salaries of Officers. The salaries of officers and agents of the Company shall be fixed by the Directors. 5.12.4 President. The president, if any, shall be the chief executive officer of the Company and shall, subject to the control and supervision of the Directors, be responsible for the day-to-day management of the business of the Company and shall see that all orders and resolutions of the Directors are carried into effect. Anything herein to the contrary notwithstanding, no Person shall be appointed as the president without the approval of both the Director elected by Keymark, if any, and a majority of the Directors. 5.12.5 Vice President. The vice president, if any, or if there shall be more than one, the vice presidents in the order determined by the Directors, shall, in the absence or disability of the president, perform the duties and exercise the powers of the president. 5.12.6 Secretary. The secretary, if any, shall attend all meetings of the Directors and the Members and shall record all the proceedings of such meetings in a book to be kept for that purpose, and shall perform like duties for the standing committees, if any, when required. The secretary, if any, shall give, or cause to be given, notice of all meetings of the Members. The secretary, if any, shall keep, or cause to be kept, at the principal executive office of the Company, a register, or a duplicate register, showing the names of all Members and their addresses, Capital Contributions and Percentage Interests. 5.12.7 Chief Financial Officer. The chief financial officer, if any, shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the Company, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital and Economic Interests. The books of account shall at all times be open to inspection by the Directors. The chief financial officer, if any, shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Directors. 5.12.8 Acts of Officers as Conclusive Evidence of Authority. Any note, mortgage, evidence of indebtedness, contract, certificate, statement, conveyance or other instrument in writing, and any assignment or endorsement thereof, executed or entered into between the Company and any other Person, when signed by the president, any vice president, the secretary or the chief financial officer of the Company, is not invalidated as to the Company by any lack of authority of the signing officer in the absence of actual knowledge on the part of the other Person that the signing officer had no authority to execute the same. 5.13 Limited Liability. No Director and no Person serving as an officer of the Company shall be personally liable under any judgment of a court, or in any other manner, for any debt, duty, obligation or liability of the Company, whether arising in contract, tort or otherwise, solely by reason of being a Director or an officer of the Company. 5.14 Buy-Out of Noncontributing Member. Any Member other than Keymark who shall not have made a Capital Contribution that is, as a percentage of the total net market value of the Company as determined by the Directors at the time that such Member is admitted to the Company, equal to or greater than such Member's Percentage Interest, may be required by the Directors to withdraw from the Company as a Member, with or without cause, for any reason or no reason, at any time, effective at any time specified by the Directors; provided that no Member may be required so to withdraw more than five years after such Member is first admitted to the Company as a Member. In any such event, the withdrawing Person's Percentage Interest shall be reduced to zero, and the Percentage Interests of the other Members and Assignees shall be increased proportionately, so that all Percentage Interests continue to total 100 percent. From and after any such withdrawal, neither the Company nor any other Member shall have any further obligation to the withdrawn Person, and the withdrawn Person shall have no further rights under this Agreement, except that the Company shall promptly distribute to the withdrawn Person an amount in cash equal to such Person's Capital Account at the beginning of the Fiscal Year during which such withdrawal is effective after being adjusted as provided in section 6.2; provided that such distribution shall be subject to the provisions of sections 6.4, 6.5, 6.7, 6.8 and 6.9, and if the Company cannot make such distribution at that time in accordance with those provisions, the Company's obligation to make such distribution shall be deferred until such time as it is able to do so in accordance with those provisions, whereupon it shall make such distribution, without interest; and provided further that the Directors may adopt and implement such other or additional plans, procedures and programs for the payment or provision of other benefits to employees of the Company that are Members on their being required by the Directors to withdraw as Members. 5.15 Administrative Services. Beginning on the date of this Agreement and continuing for the first three full months after such date, Simpson shall provide to the Company such employee benefits, accounting, finance, billing, purchasing and other administrative services and sales and marketing services as the Directors may request from time to time. The Company shall pay Simpson an amount equal to $5,000 per month for such services, which amount shall be paid in advance on the first day of each month and shall be subject to all standard deductions and withholding required by tax authorities. If this Agreement is made as of a date other than the first day of a month, such amount shall be pro-rated for the first partial month. At the end of such three-month period, this arrangement shall terminate unless the Directors elect, in their exclusive discretion, to continue it, in which case it shall continue for such additional period and on such terms as Simpson and the Directors shall approve. 6. Allocations of Profits and Losses; Distributions and Withdrawals. 6.1 Allocations. Profits and Losses shall be allocated each Fiscal Year to the Members and Assignees as follows: 6.1.1 Losses. All Losses for each Fiscal Year shall be allocated to the Members in proportion to the Capital Account balances of the Members and, once all such Capital Account balances have been reduced to zero, then in proportion to Percentage Interests. 6.1.2 Profits. All Profits for each Fiscal Year shall be allocated first to any Members that theretofore shall have been allocated Losses, in proportion to and to the extent of the amount by which such Losses theretofore respectively allocated to such Members shall exceed all Profits theretofore respectively allocated to such Members under this clause, and then to the Members in proportion to their Percentage Interests. 6.2 Special Capital Account Allocations. Notwithstanding anything in section 6.1 to the contrary, the following special allocations shall be made in allocating Profits and Losses: 6.2.1 Section 704 Allocations. Any special allocations necessary to comply with the requirements in section 704 of the Code and the corresponding Regulations, including the qualified income offset and minimum gain chargeback provisions contained therein, shall be made. 6.2.2 Tax Allocations. Notwithstanding any provision in this section 6 to the contrary, in accordance with Code section 704(c) and the Regulations promulgated thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members and Assignees to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its fair market value on the date of contribution. Allocations pursuant to this subsection 6.2.2 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Capital Account or share of Profits, Losses or other items of any Member or Assignee, or distributions to any Member or Assignee, pursuant to any provision of this Agreement. 6.2.3 Other Allocation Rules. (a) Generally, all Profits and Losses shall be allocated among the Members and Assignees as provided in section 6.1 and this section 6.2. If Members are admitted to the Company on different dates during any Fiscal Year, the Profits or Losses allocated among the Members and Assignees for each such Fiscal Year shall be allocated in proportion to their respective Capital Accounts from time to time during such Fiscal Year in accordance with Code section 706, using any convention permitted by law and selected by the Directors. (b) For purposes of determining the Profits, Losses or any other items allocable to any period, Profits, Losses and any such other items shall be determined on a daily, monthly or other basis, as determined by the Directors, using any permissible method under Code section 706 and the Regulations thereunder. (c) The Members and Assignees acknowledge that they are aware of the income tax consequences of the allocations made by section 6.1 and this section 6.2 and hereby agree to be bound by section 6.1 and this section 6.2 in reporting their shares of Profits and Losses for income tax purposes. (d) Notwithstanding any of the foregoing provisions to the contrary, if taxable gain to be allocated includes income resulting from the sale or disposition of Company property or property of a limited partnership, limited liability company or joint venture in which the Company owns an interest that is treated as ordinary income, such gain so treated as ordinary income shall be allocated to and reported by each Member and Assignee in proportion to allocations to that Member or Assignee of the items that shall have given rise to such ordinary income, and the Company shall keep records of such allocations. In the event of the subsequent admission of any new Member, any item that would constitute "unrealized receivables" under Code section 751 and the Regulations thereunder shall not be shared by the newly admitted Members, but rather shall remain allocated to existing Members and Assignees. 6.2.4 Provisional Allocation. If any amount claimed by the Company to constitute a deductible expense in any Fiscal Year is treated by any federal, state or local taxing authority as a payment made to a Member in such Member's capacity as a Member of the Company for income tax purposes, with regard to such authority, items of income and gain of the Company for such Fiscal Year shall first be allocated to such Member to the extent of such payment. 6.3 Valuation. The value of the assets and liabilities of the Company shall be determined by the Directors in good faith, and such determination shall be conclusive and binding on all of the Members and all parties claiming through or under them. 6.4 Distributions. Subject to applicable law and any limitations elsewhere in this Agreement (including, without limitation, section 6.5), the Directors shall determine the amount and timing of all distributions by the Company and whether such distributions will be in cash or in kind or partly in cash and partly in kind. Except as otherwise provided herein, all distributions shall be made in proportion to the respective Percentage Interests of the Members and Assignees on the date of the distribution. All such distributions shall be made only to the Persons who, according to the books and records of the Company, are the owners of the Economic Interests in respect of which such distributions are made on the date of distribution. None of the Company, the Directors or the Members shall incur any liability for making distributions in accordance with this section 6.4. 6.5 Form of Distribution. No Member or Assignee has the right to demand and receive any distribution from the Company in any form other than money; provided that on dissolution of the Company prior to the sale of the Company or its successor or parent entity and prior to the initial public offering under the Securities Act of any securities of the Company or its successor or a Member (other than Simpson or Keymark), Keymark shall be entitled to distribution in kind, to the extent consistent with section 6.4, of all Company software developed by Keymark for the Company pursuant to section 3.3 of this Agreement. No Member or Assignee may be compelled to accept from the Company a distribution of any asset in kind in lieu of a proportionate distribution of money being made to other Members or Assignees except on the dissolution and winding up of the Company. 6.6 Capital Withdrawals by Members. No Member or Assignee shall have any right or power at any time to withdraw all or any part of such Member's or Assignee's Capital Account, except with the consent of the Directors. 6.7 Withholding. Each Member and Assignee acknowledges and agrees that the Company may be required to deduct and withhold tax or to fulfill other obligations of such Member or Assignee on any allocation, withdrawal or distribution under section 5.14, this section 6 or section 7. All amounts withheld with respect to any withdrawal or distribution to a Member or Assignee shall be treated as amounts withdrawn or distributed to such Member or Assignee for all purposes under this Agreement as of the effective date of the related withdrawal or distribution. 6.8 Restriction on Distributions and Withdrawals. No distribution or withdrawal shall be made if and to the extent prohibited by the Act notwithstanding this Agreement. 6.9 Return of Distributions. Except for distributions made in violation of the Act or this Agreement, no Member or Assignee shall be obligated to return any distribution to the Company or pay the amount of any distribution for the account of the Company or to any creditor of the Company. The amount of any distribution returned to the Company by a Member or Assignee or paid by a Member or Assignee for the account of the Company or to a creditor of the Company shall be added to the account or accounts from which it was subtracted when it shall have been distributed to the Member or Assignee. 7. Transfer and Assignment of Interests; Repurchases in Certain Events. 7.1 Transfer and Assignment of Interests. Except as provided in section 7.4 and 7.10, no Member shall Transfer all or any part of a Membership Interest except with the prior consent of the Directors. Any attempted or purported Transfer in violation of this section 7 shall be void. After the consummation of any Transfer of a Membership Interest, the Membership Interest so Transferred shall continue to be subject to the terms and conditions of this Agreement, and any further Transfers shall comply with all terms and conditions of this Agreement. 7.2 Further Restrictions on Transfer of Interests. In addition to other restrictions in this Agreement, no Member shall Transfer any Membership Interest or any interest in any Membership Interest (a) without compliance with section 12, and (b) if the Membership Interest or interest to be Transferred, when added to all other Membership Interests Transferred in the preceding twelve months, would cause the termination of the Company under the Code. 7.3 Substitution of Members. A Transferee of a Membership Interest shall have the right to become a substitute Member only if (a) the requirements of sections 7.1, 7.2 and 7.4 are met, (b) such Transferee executes an instrument satisfactory to the Directors accepting and adopting the terms and conditions of this Agreement and (c) such Transferee pays any reasonable expenses in connection with that Transferee's admission as a new Member. The admission of a substitute Member shall not result in the release from any liability of the Person who shall have assigned the Membership Interest. 7.4 Right of First Refusal. Without limiting any rights or obligations under any other provision of this section 7, each time a Member proposes to Transfer any interest in the Company other than pursuant to section 7.10, such Member (the "Transferring Member") shall first offer such interest to the Company in accordance with this section 7.4; provided, however, that if the Transferring Member is Simpson, Simpson shall first offer such interest to Keymark in accordance with this section 7.4, and if the Transferring Member is Keymark, Keymark shall first offer such interest to Simpson in accordance with this section 7.4, and if Keymark or Simpson, as the case may be, declines to purchase such interest in accordance with this section 7.4, the Transferring Member shall then offer such interest to the Company in accordance with this section 7.4. Notwithstanding the foregoing, Simpson shall be entitled to transfer portions of its Membership Interest without complying with the provisions of this section 7.4, provided that the aggregate Percentage Interest of the Membership Interests so transferred does not at any time exceed 15% of the total Percentage Interests in the Company. Notwithstanding the foregoing, Keymark shall be entitled to transfer to its key employees and consultants portions of its Membership Interest without complying with the provisions of this section 7.4, provided that the aggregate Percentage Interest of the Membership Interests so transferred does not at any time exceed 10% of the total Percentage Interests in the Company. 7.4.1 Sale Notice. The Transferring Member shall deliver a notice (the "Sale Notice") to the Company stating (a) the Transferring Member's bona fide intention to make such Transfer, (b) the name and address of the proposed transferee, (c) the interest to be transferred, (d) the purchase price, terms of payment and other terms and conditions of the proposed Transfer and (e) whether the proposed transferee is related to or affiliated with the Transferring Member, including but not limited to, as an Affiliate. 7.4.2 Election. Within thirty days after delivery of the Sale Notice, the Directors on behalf of the Company shall notify the Transferring Member of the Company's election to purchase or not to purchase all (but not less than all) of the interest being so transferred at the price and on the terms stated in the Sale Notice; provided that, if the Transfer is for no consideration or consideration other than cash or cash equivalents, the Sale Notice shall so state and the purchase price shall be an amount equal to the Capital Account balance of the Transferring Member insofar as it relates to the interest being transferred. The failure of the Directors to give such notice within such thirty-day period shall constitute an election by the Directors not to purchase such interest, but shall not constitute the prior consent of the Directors required by section 7.1. 7.4.3 onsummation. On the election of the Company to purchase the interest specified in the Sale Notice, the Directors shall cause the Company to pay the purchase price as provided in subsection 7.4.2 on the other terms and conditions stated in the Sale Notice. On any purchase by the Company under this section 7.4, the consideration to be paid shall be paid to the Transferring Member or such Member's Successor, if any. If the Transferring Member shall have died, the decedent's Successor shall apply for and obtain any necessary court approval or confirmation of the sale pursuant to this section 7.4 and, notwithstanding any other provision of this Agreement to the contrary, if such court approval is necessary to authorize the sale, the other rights and obligations of all parties under this section 7.4 shall be postponed until such approval is obtained. On the Company's exercise of its option under this section 7.4, the Company and the Transferring Member or the Transferring Member's Successor shall do all things and execute and deliver all papers as may be necessary to consummate fully such purchase and sale in accordance with this Agreement. 7.4.4 Nonexercise. If the Company elects not to purchase all of the interest specified in the Sale Notice, the Transferring Member may Transfer all of such interest to the transferee named in the Sale Notice on exactly the terms and conditions specified in the Sale Notice, within thirty days after the expiration of the Company's right to purchase such interest; provided that the requirements of section 7.1, 7.2 and 7.3 shall have been fully satisfied. If such interest is not so transferred within such time, any other or subsequent Transfer of such interest by such Transferring Member shall be subject to this section 7 as if no Sale Notice had ever been given. 7.4.5 Assignments. Any of the foregoing provisions of this section 7.4 to the contrary notwithstanding, the Company may, pursuant to the authority of the Directors, within the thirty-day period specified in subsection 7.4.2, assign the Company's rights and delegate its duties under this section 7.4 to any Person, in which event, such Person shall thereupon be substituted for the Company for all purposes of this section 7.4. 7.5 Transfer to Hold Co. At such time as the Directors may specify, each of Keymark and Simpson shall Transfer a portion of its Membership Interest to a corporation that the Directors may cause the Company to organize ("Hold Co."). Such portion so transferred by each of them shall be equivalent to a ten percent Percentage Interest and shall include the Transfer of the equivalent portion of such Member's Capital Account balance at the time of such Transfer. Hold Co. shall thereupon be substituted for Keymark and Simpson as Members with respect to the portions of their Membership Interests so Transferred. Such Transfers shall be effected in exchange for common stock issued by Hold Co. on its initial organization and Keymark and Simpson shall thereupon receive equal numbers of shares of such common stock. Such Transfers shall not be limited by or subject to any provision of sections 7.1 through 7.4, except for clause (b) of section 7.2, clause (b) of the first sentence of section 7.3 and the second sentence of section 7.3, all of which shall apply to the Transfers under this section 7.5. 7.6 Effective Date of Permitted Transfers. Any permitted Transfer of all or any portion of a Membership Interest other than pursuant to section 7.10 shall be effective as of midnight of the last day of the calendar month following the date on which the applicable requirements of either sections 7.1, 7.2, 7.3 and 7.4 or section 7.5, as the case may be, shall have been met. Any Transferee of a Membership Interest shall take and hold such Membership Interest subject to the restrictions on Transfer imposed by this Agreement. 7.7 Rights of Legal Representatives. Subject to the foregoing provisions of this section 7, (a) if a Member who is a natural person dies or is adjudged by a court of competent jurisdiction to be incompetent to manage such Member's person or property, such Member's executor, administrator, guardian, conservator or other legal representative may exercise all of such Member's rights for the purpose of settling such Member's estate or administering such Member's property, including any power such Member has under the Articles or this Agreement to give an Assignee the right to become a Member, and (b) if a Member is a corporation, trust or other entity and is dissolved or terminated, the powers of that Member may be exercised by its legal representative or Successor. 7.8 No Effect to Transfers in Violation of Agreement. Any attempted or purported Transfer of a Membership Interest without compliance with all provisions of this Agreement shall be void and of no effect, except only as and to the extent otherwise expressly required by applicable law. 7.9 Transfer of Economic Interest Only. On and contemporaneously with any Transfer (whether arising out of an attempted charge on a Member's Economic Interest by operation of law, judicial process, a foreclosure by a creditor of the Member or otherwise) of an Economic Interest that does not at the same time Transfer the other rights associated with the Membership Interest transferred by that Member (including, without limitation, the rights of that Member to vote, consent or participate in the management of the business, property and affairs of the Company), the Company shall purchase from that Member or Successor, and that Member or Successor shall sell to the Company, for a purchase price of $100, all remaining rights and interests retained by that Member or Successor that immediately before the Transfer shall have been associated with the transferred Economic Interest. Each Member acknowledges and agrees that the right of the Company to purchase such remaining rights and interests is reasonable under the circumstances existing as of the date hereof and represents a bona fide, good faith attempt to determine the fair market value of the interests retained by the transferring Member. 7.10 Simpson Purchase/Keymark Sale Option. 7.10.1 Call Option and Put Option. If by the fifth anniversary of the date of this Agreement, the Company or its successor or parent entity has not been sold and an initial public offering under the Securities Act of any securities of the Company or its successor or a Member (other than Keymark or Simpson) has not occurred, then Simpson shall have the option (the "Call Option") to purchase from Keymark all (but not less than all) of Keymark's Membership Interest, and Keymark shall have the option (the "Put Option") to cause Simpson to purchase all (but not less than all) of Keymark's Membership Interest. Each of the Call Option and the Put Option is sometimes referred to herein as an "Option," and collectively they are sometimes referred to as the "Options." Each Option shall be exercisable on the terms set forth below. 7.10.2 Exercise of Option. To exercise the Call Option, Simpson shall deliver written notice of exercise to Keymark within the thirty days beginning on the fifth anniversary of this Agreement. To exercise the Put Option, Keymark shall deliver written notice of exercise to Simpson within such thirty-day exercise period. Upon delivery of notice of exercise of one Option, the other Option shall terminate. If neither Option is exercised within the thirty-day exercise period, both Options shall terminate. 7.10.3 Exercise Price. The exercise price for either Option shall be the fair market value of Keymark's Membership Interest on the date of the notice of exercise, determined as follows. Within ten days following the date the notice of exercise is delivered, each of Simpson and Keymark shall designate one individual to serve as an appraiser. Within thirty days after being notified of and accepting his or her designation, each such appraiser shall deliver to the Company, Simpson and Keymark a written determination of the fair market value of Keymark's Membership Interest as of the date of the notice of exercise, together with the appraiser's opinion and the considerations on which such opinion is based. The appraised value of Keymark's Membership Interest shall be determined based on Keymark's Percentage Interest of the enterprise value of the entire Company and shall not be reduced by discounts based on Keymark's lack of control or the illiquidity of Keymark's Membership Interest. If the higher of the two appraisals is no more than ten percent greater than the lower appraisal, then the average of the two appraisals shall be deemed to be the fair market value of Keymark's Membership Interest for the purpose of this section 7.10. If the higher appraisal is more than ten percent higher than the lower appraisal, then the two appraisers shall jointly appoint a third appraiser (the "Independent Appraiser"). The Independent Appraiser shall be an investment banker, appraiser or certified public accountant who is neither affiliated with nor has had any prior business relationship with Simpson, Keymark or the Company and who is experienced in evaluating closely held businesses. The first two appraisals shall not be disclosed to the Independent Appraiser. Within thirty days after being notified of and accepting his or her appointment as Independent Appraiser, the Independent Appraiser shall deliver to the Company, Simpson and Keymark a written determination of the fair market value of Keymark's Membership Interest as of the date of the notice of exercise, together with the Independent Appraiser's opinion and the considerations on which such opinion is based. If the Independent Appraiser's appraisal falls between the first two appraisals, then the average of the Independent Appraiser's appraisal and the nearer of the first two appraisals shall be deemed to be the fair market value of Keymark's Membership Interest as of the date of the notice of exercise. If the Independent Appraiser's appraisal does not fall between the first two appraisals, then the nearer of the first two appraisals to the Independent Appraiser's appraisal shall be deemed to be the fair market value of Keymark's Membership Interest. The determination of the fair market value of Keymark's Membership Interest pursuant to this subsection 7.10.3 shall be final, binding and conclusive. Each of Keymark and Simpson shall pay the fees and expenses of the appraiser designated by such party, and one- half of the fees and expenses of the Independent Appraiser. 7.10.4 Effective Date of Transfer. The transfer of Keymark's Membership Interest from Keymark to Simpson pursuant to the exercise of either Option shall be deemed to have occurred as of the date of the notice of exercise of such Option, notwithstanding that the exercise price of such Option shall not have been determined and the exercise price shall not have been paid as of that date. Therefore, all of Keymark's rights as a Member of the Company shall terminate as of the date as of which either Option is exercised. 7.10.5 Payment of Exercise Price. Simpson shall pay the exercise price to Keymark or its legal representative within thirty days following the final determination of the exercise price pursuant to subsection 7.10.3. At least twenty percent of the exercise price shall be paid in cash, with the remainder evidenced by a promissory note secured by Keymark's Membership Interest and having such terms as are mutually agreeable to Simpson and Keymark. On the exercise of either Option, Simpson and Keymark shall do all things and execute and deliver all papers as may be necessary to consummate fully such exercise in accordance with this Agreement. 8. Consequences of Dissolution Event. On the occurrence of a Dissolution Event with respect to a sole remaining Director, the Company shall dissolve unless a Majority in Interest of the Members consent within ninety days of the Dissolution Event to the continuation of the business of the Company. The death, insanity, disability, withdrawal, resignation, expulsion, dissolution or Bankruptcy of a Member, or any event that terminates a Member's Membership Interest, shall not cause the Company to dissolve unless such Member is the sole remaining Director and such event is a Dissolution Event. 9. Accounting, Records, Reporting by Members. 9.1 Books and Records. The Directors shall cause to be maintained complete and accurate accounts in proper books of all transactions of or on behalf of the Company and shall cause to be entered therein a full and accurate account of all transactions on behalf of the Company. The Company's books and accounting records shall be kept in accordance with generally accepted accounting principles (which shall be consistently applied throughout each accounting period). The Company shall maintain at its office in the State of California all of the following: 9.1.1 A current list of the full name and last known business or residence address of each Member, Director and Assignee set forth in alphabetical order, together with the Capital Contributions, Capital Account balance and Percentage Interest of each Member or Assignee; 9.1.2 A copy of the Articles and any and all amendments thereto, together with executed copies of any powers of attorney pursuant to which the Articles or any amendments thereto shall have been executed; 9.1.3 Copies of the Company's federal, state and local income tax or information returns and reports, if any, for the six most recent taxable years; 9.1.4 A copy of this Agreement and any and all amendments hereto, together with executed copies of any powers of attorney pursuant to which this Agreement or any amendments hereto shall have been executed; 9.1.5 Copies of the financial statements of the Company, if any, for the six most recent Fiscal Years; and The Company's books and records as they relate to the internal affairs of the Company for at least the current and past four Fiscal Years. 9.2 Delivery to Members and Inspection. On the request of any Member or Assignee for purposes reasonably related to the interest of that Person as a Member or Assignee, the Directors shall promptly cause to be delivered to the requesting Member or Assignee, at the expense of the Company, a copy of the information required to be maintained by subsections 9.1.1, 9.1.3 and 9.1.4. Each Member, Director or Assignee has the right, on reasonable request for purposes reasonably related to the interest of the Person as a Member, Director or Assignee to: (a) inspect and copy during normal business hours any of the Company's records described in subsections 9.1.1 through 9.1.6; and (b) obtain from the Directors promptly after their becoming available, copies of the Company's federal, state and local income tax or information returns for each Fiscal Year. Any request, inspection or copying by a Member or Assignee under this section 9.2 may be made by that Member or Assignee or that Member's or Assignee's agent or attorney. 9.3 Accountings. As soon as is reasonably practicable after the close of each Fiscal Year, and in any event within ninety days after the end of such Fiscal Year, the Directors shall make or cause to be made a full and accurate inventory and accounting of the affairs of the Company as of the close of that Fiscal Year and shall prepare or cause to be prepared a balance sheet as at the end of such Fiscal Year, a profit and loss statement for that Fiscal Year and a statement of Members' equity showing the respective Capital Accounts of the Members as of the close of such Fiscal Year and the distributions, if any, to Members during such Fiscal Year, and any other statements and information necessary for a complete and fair presentation of the financial condition of the Company, all of which the Directors shall furnish to each Member. In addition, the Directors shall furnish to each Member information regarding the Company necessary for such Member to complete such Member's federal and state income tax returns. The Directors shall also furnish copies of the Company's federal and state income tax or information returns to any Member requesting the same. On such accounting being made, Profits and Losses during such Fiscal Year shall be ascertained and credited or debited, as the case may be, in the books of account of the Company to the respective Members as herein provided. All decisions as to accounting matters, except as otherwise specifically set forth herein, shall be made by the Directors. The Directors may rely on the advice of accountants whether such decisions are in accordance with the accounting principles employed by the Company. 9.4 Filings. The Directors shall cause the income tax or information returns for the Company to be prepared and timely filed with the appropriate authorities. The Directors shall also cause to be prepared and timely filed with appropriate federal and state regulatory and administrative bodies amendments to, or restatements of, the Articles and all reports required to be filed by the Company with those entities under the Act or other applicable laws, rules and regulations. The Company shall cause to be filed at least annually with the California Secretary of State the statement required under section 17060 of the Act. If the Directors are required by the Act to execute or file any document and fail, after demand, to do so within a reasonable time or refuse to do so, any Member may prepare, execute and file that document with the California Secretary of State. 9.5 Bank and Brokerage Accounts. The Directors shall maintain the funds of the Company in one or more separate bank or securities brokerage accounts in the name of the Company, and shall not permit the funds of the Company to be commingled in any fashion with the funds of any other Person. 9.6 Tax Matters Partner. The Directors may remove and replace the Tax Matters Partner at any time or times. The Directors shall from time to time cause the Company to make such tax elections as they deem to be in the interests of the Company and the Members generally. The Tax Matters Partner, as defined in Code section 6231, shall represent the Company (at the Company's expense) in connection with all examinations of the Company's affairs by tax authorities, including resulting judicial and administrative proceedings, and shall expend Company funds for professional services and costs associated therewith. 10 Dissolution and Winding Up. 10.1 Dissolution. The Company shall be dissolved, its assets shall be disposed of, and its affairs shall be wound up on the first to occur of (a) the vote or consent of a Majority in Interest of the Members to dissolve the Company, (b) the entry of a decree of judicial dissolution pursuant to section 17351 of the Act, (c) the occurrence of a Dissolution Event with respect to a sole remaining Director, unless a Majority in Interest of the Members consent within ninety days of such occurrence to continue the business of the Company, and (d) the determination by the Directors, in their exclusive discretion, that a sale of the Company or its successor or parent entity, or an initial public offering of the securities of the Company or its successor or a Member (other than Simpson or Keymark), on acceptable terms is not feasible within an acceptable time frame. 10.2 Certificate of Dissolution. As soon as practicable after the occurrence of an event specified in section 10.1, the Directors or, if none, the Members conducting the winding up of the affairs of the Company, shall execute or cause to be executed a Certificate of Dissolution in such form as shall be prescribed by the California Secretary of State and file such Certificate as required by the Act. 10.3 Winding Up. On the occurrence of an event specified in section 10.1, the Company shall continue solely for the purpose of winding up its affairs in an orderly manner, liquidating its assets and satisfying the claims of its creditors. The Directors or, if there is no remaining Director, a Person or Persons designated by the consent of a Majority in Interest of the Members (the "Liquidating Person") shall be responsible for overseeing the winding up and liquidation of Company, shall take full account of the assets and liabilities of Company, shall cause such assets to be sold or distributed, and shall cause the proceeds therefrom, to the extent sufficient therefor, to be applied and distributed as provided in section 10.5. The Directors or the Liquidating Person shall give notice of the commencement of winding up by mail to all known creditors and claimants whose addresses appear on the records of the Company. The Directors or the Liquidating Person shall be entitled to reasonable compensation for such services. 10.4 Distributions in Kind. Any noncash assets distributed to the Members shall first be valued at their fair market value to determine the Profit or Loss that would have resulted if such assets were sold for such value, pursuant to section 6.3. Such Profit or Loss shall then be allocated pursuant to section 6, and the Members' Capital Accounts shall be adjusted to reflect such allocations. The amount distributed and charged against the Capital Account of each Member receiving an interest in a distributed asset shall be the fair market value of such interest (net of any liability secured by such asset that such Member assumes or takes subject to). The fair market value of such asset shall be determined by the Directors or the Liquidating Person, or if any Member objects, by an independent appraiser (and any such appraiser must be recognized as an expert in valuing the type of asset involved) selected by the Directors or the Liquidating Person and approved by a Majority in Interest of the Members. 10.5 Order of Payment of Liabilities on Dissolution. After a determination that all known debts and liabilities of the Company in the process of winding up, including, without limitation, debts and liabilities to Members who are creditors of the Company, shall have been paid or adequately provided for, the remaining assets shall be distributed to the Members in proportion to their positive Capital Account balances, after taking into account income and loss allocations for the Company's taxable year during which liquidation occurs. The payment of a debt or liability, whether the whereabouts of the creditor is known or unknown, shall have been adequately provided for if payment thereof shall have been assumed or guaranteed in good faith by one or more financially responsible Persons or by the United States government or any agency thereof, and the provision, including the financial responsibility of the Person, shall have been determined in good faith and with reasonable care by the Members or Directors to be adequate at the time of any distribution of the assets pursuant to this section 10.5. This section 10.5 shall not prescribe the exclusive means of making adequate provision for debts and liabilities. 10.6 Compliance with Regulations. All payments to the Members on the winding up and dissolution of Company shall be strictly in accordance with the positive capital account balance limitation and other requirements of Regulations section 1.704-1(b)(2)(ii)(d). 10.7 Limitations on Payments. Except as otherwise specifically provided in this Agreement, each Member shall look solely to the assets of Company for the return of such Member's positive Capital Account balance and shall have no recourse for such Member's Capital Contribution or share of Profits (on dissolution or otherwise) against any other Member. 10.8 Certificate of Cancellation. The Directors or Members who file the Certificate of Dissolution shall cause to be filed in the office of, and on a form prescribed by, the California Secretary of State, a certificate of cancellation of the Articles on the completion of the winding up of the affairs of the Company. 10.9 No Action for Dissolution. Except as expressly permitted by this Agreement, no Member, as such, shall take any voluntary action with the purpose or effect of dissolving the Company. The Members acknowledge that irreparable damage would be done to the goodwill and reputation of the Company if any Member should initiate or seek to maintain an action to dissolve the Company under circumstances where dissolution is not required by section 10.1. This Agreement has been drawn carefully to provide fair treatment of all parties and equitable payment in liquidation of the Economic Interests. Accordingly, except in the case that the Company is not liquidated as required by this section 10, each Member hereby waives and renounces such Member's right to initiate or maintain any legal action or arbitration for the appointment of a receiver or trustee to liquidate the Company, for a decree of judicial dissolution of the Company or for partition, whether on the ground that it is not reasonably practicable to carry on the business of the Company in conformity with the Articles or this Agreement or the ground that dissolution is reasonably necessary for the protection of the rights or interests of the complaining Member or any other grounds. Damages for breach of this section 10.9 may be offset against distributions by the Company to which such Member would otherwise be entitled. 11. Indemnification and Insurance. 11.1 Indemnity and Limitation of Liability. Each Director or other Person acting on behalf of the Company pursuant to authority delegated by the Directors (each, an "Indemnified Person"), (a) shall be held harmless, defended and indemnified by the Company from and against any claim, liability, loss, damage or expense (including, without limitation, all attorneys' fees and expenses, expert witness fees and expenses and costs of investigation) suffered or incurred by an Indemnified Person by virtue of any action of such Indemnified Person as or on behalf of a Director or the Company in connection with the Company's activities and in substantial compliance with this Agreement, and (b) shall not be liable to the Company, the Directors or any Member for any claim, liability, loss, damage or expense; provided that, if such claim, liability, loss, damage or expense arises out of any action or inaction of any such Indemnified Person, such Indemnified Person must have reasonably believed at the time of such action or inaction that such action or inaction was in the best interests of the Company and such action or inaction must not have constituted fraud, deceit, gross negligence, recklessness or intentional misconduct by such Indemnified Person; and provided further that such indemnification or amounts recoverable under the foregoing agreement to hold harmless shall only be recoverable out of the assets of the Company, and no Director or Member shall be personally liable therefor. The Company shall advance funds for attorneys' fees and expenses, expert witnesses' fees and expenses and other costs incurred by an Indemnified Person in connection with any such claim, liability, loss, damage or expense if the following conditions are satisfied: (i) the legal action relates to the performance of duties or services for the Company by such Indemnified Person; and (ii) the Indemnified Person that is requesting such advance undertakes to repay, and provides security satisfactory to the Company for the repayment of, the advanced funds to the Company in cases in which that Indemnified Person would not be entitled to indemnification under this section 11.1. The rights granted under this section 11.1 shall not be affected by, and shall survive, any dissolution or termination of the Company and the death, disability, incapacity, resignation, withdrawal, insolvency or dissolution of any Director or Member. 11.2 Insurance. The Company shall have the power to purchase and maintain insurance on behalf of any Person who is or was a Director or an agent of the Company or the Directors against any liability asserted against such Person and incurred by such Person in any such capacity, or arising out of such Person's status as a Director or an agent of the Company, whether or not the Company would have the power to indemnify such Person against such liability under section 11.1 or under applicable law. 12 Investment Representations. Each Member hereby represents and warrants to, and agrees with, the Directors, the other Members and the Company, with respect to such Member and the Membership Interest of such Member, as follows: 12.1 No Advertising. The offer to sell the Membership Interest was directly communicated to the Member by the Company in a manner that the Member was able to ask questions of and receive answers from the Company concerning the terms and conditions of such transaction. At no time was the Member presented with or solicited by any leaflet, public promotional material, newspaper, magazine, radio or television article or advertisement, or any other form of advertising or general solicitation. 12.2 Investment Intent. The Membership Interest is being purchased by the Member and not by any other Person, with the Member's own funds and not with the funds of any other Person, and for the account of the Member, not as a nominee or agent and not for the account of any other Person. No other Person has or will have any interest, beneficial or otherwise, in the Membership Interest. The Member is purchasing the Membership Interest for investment for an indefinite period, not with a view to the sale or distribution of any part or all thereof by public or private sale or other disposition. The Member has no intention of selling, granting any participation in or otherwise distributing or disposing of the Membership Interest or any interest therein. The Member does not intend to subdivide the Member's purchase of the Membership Interest with any Person. 12.3 Accredited Investor. The Member is an "accredited investor" as defined in Rule 501 promulgated by the Securities and Exchange Commission under the Securities Act. 12.4 Economic Risk. Understanding that investment in the Membership Interest is highly speculative, the Member is able to bear the economic risk of such investment, including the total loss thereof, for an indefinite period. 12.5 No Registration of Membership Interests. The Member understands that the Membership Interest has not been registered under the Securities Act, or registered or qualified under any other securities law, on the grounds, among others, that no distribution or public offering of Membership Interests is to be effected and that Membership Interests are being issued by the Company in transactions that do not involve any public offering within the meaning of section 4(2) of the Securities Act, under the rules and regulations of the Securities and Exchange Commission thereunder and under comparable exemptive provisions of other applicable securities laws, rules and regulations. The Member understands that the Company is relying in part on the Member's representations as set forth herein for purposes of claiming such exemptions and that the basis for such exemptions may not be present if, notwithstanding the Member's representations, the Member has in mind merely acquiring the Membership Interest for resale on the occurrence or nonoccurrence of some predetermined event. The Member has no such intention. 12.6 Membership Interest Is Restricted Security. The Member understands that the Membership Interest is a "restricted security" under the Securities Act and, accordingly, that the Membership Interest must be held indefinitely unless it is subsequently registered under the Securities Act and registered or qualified under any other applicable securities law or exemptions from such registration and qualification are available. The Member understands that the Company is under no obligation so to register or qualify the Membership Interest under the Securities Act or under any other securities law, or to comply with the Regulation A or any other exemption under the Securities Act or any other law. The Member understands that Rule 144 is not available for any sale of the Membership Interest and will not be available for a substantial period of time. 12.7 Company May Refuse to Transfer. If, in the opinion of counsel for the Company, the Member at any time hereafter acts in a manner inconsistent with such Member's representations, warranties and agreements in this Agreement, the Company may, without limiting any other remedy or relief available to the Company, refuse to Transfer the Member's Membership Interest until such time as counsel for the Company is of the opinion that such Transfer will not require registration of any Membership Interest under the Securities Act or registration or qualification of any Membership Interest under any other securities law. The Member understands and agrees that the Company may refuse to acknowledge or permit any disposition that is not in all respects in compliance with this Agreement and that the Company intends to make an appropriate notation in its records to that effect. 12.8 No Disposition in Violation of Law. Without limiting the representations set forth herein, and without limiting section 7, the Member shall not Transfer any Membership Interest or any interest therein, or receive any consideration therefor, unless and until, prior to any proposed Transfer, the Member shall comply with all requirements and conditions in this Agreement and: (a) a registration statement on Form S-1 under the Securities Act (or any other form appropriate for the purpose under the Securities Act or any form replacing any such form) with respect to the Membership Interest or any part thereof proposed to be so disposed of shall be then effective, and such disposition shall have been appropriately registered or qualified in accordance with any other applicable securities law; or (b) (1) the Member shall have furnished the Company with a detailed explanation of the proposed disposition; (2) the Member shall have furnished the Company with an opinion of the Member's counsel in form and substance satisfactory to the Company to the effect that the proposed Transfer (i) complies with applicable provisions of the Securities Act and any other securities laws and will not require registration of the Member's Membership Interest or any part thereof under the Securities Act or registration or qualification thereof under any other securities law, and (ii) except as otherwise permitted by section 7, will not result in the termination of the Company for federal income tax purposes; and (3) counsel for the Company shall have concurred in such opinion and the Directors shall have advised the Member of such concurrence. 12.9 Legends. The Member understands and agrees that any instrument or certificate representing or relating to the Membership Interest may bear such legends as the Directors may consider necessary or advisable to facilitate compliance with the Securities Act and any other securities law, including, without limitation, legends stating that the Membership Interest has not been registered under the Securities Act and setting forth the limitations on dispositions imposed by this Agreement. 12.10 Investment Experience. The Member, either alone or with the Member's professional advisers who are unaffiliated with, have no equity interest in and are not compensated by the Company or a Director or any affiliate or selling agent of the Company or a Director, directly or indirectly, has such knowledge and experience in financial and business matters that the Member is capable of evaluating the merits and risks of an investment in the Membership Interest and has the capacity to protect the Member's own interests in connection with the Member's investment in the Membership Interest. 12.11 Information Reviewed. The Member has received and reviewed all information the Member considers necessary or appropriate for deciding whether to acquire the Membership Interest. The Member has carefully reviewed all such information and is thoroughly familiar with the existing and proposed management, business, operations, properties and financial condition of the Company and has discussed with the Directors any questions the Member may have had with respect thereto. The Member understands: (a) the risks involved in this offering, including the speculative nature of the investment; (b) the financial hazards involved in this offering, including the risk of losing the Member's entire investment; (c) the lack of liquidity and restrictions on Transfers of the Membership Interest; and (d) the tax consequences of this investment. The Member has consulted with the Member's own legal, accounting, tax, investment and other advisers with respect to the tax treatment of an investment by the Member in the Membership Interest and the merits and risks of an investment in the Membership Interest. 12.12 No Representations. No Director, no agent or employee of the Company or of a Director, and no other Person has at any time expressly or implicitly represented, guaranteed or warranted to the Member that the Member may freely Transfer the Membership Interest, that a percentage of profit or amount or type of consideration will be realized as a result of an investment in the Membership Interest, that past performance or experience on the part of the Member or the Member's Affiliates or any other Person in any way indicates the predictable results of the ownership of the Membership Interest or of the overall Company business, that any cash distributions from the Company will be made to the Members by any specific date or will be made at all or that any tax benefits will accrue as a result of an investment in the Company. 12.13 Authority. This Agreement constitutes a legal, valid and binding agreement of the Member, enforceable against the Member in accordance with its terms. The Member, if not a natural person, is empowered and duly authorized to enter into this Agreement under every applicable governing document, partnership agreement, operating agreement, trust instrument, pension plan, charter, certificate or articles of incorporation, bylaw provision or the like. The Person, if any, signing this Agreement on behalf of the Member is empowered and duly authorized to do so by the governing document, partnership agreement, operating agreement, trust instrument, pension plan, charter, certificate or articles of incorporation, bylaw provision, board of directors or stockholder resolution or the like. 12.14 Indemnification. The Member hereby agrees to indemnify and defend the Company, the Directors and their respective Affiliates, employees, agents, partners, members, shareholders, officers and directors and hold them harmless from and against any and all claims, liabilities, damages, costs and expenses (including, without limitation, court costs and attorneys' fees and expenses) suffered or incurred on account of or arising out of: (a) any breach of or inaccuracy in the Member's representations, warranties or agreements herein, including, without limitation, the defense of any claim based on any allegation of fact inconsistent with any of such representations, warranties or agreements; (b) any Transfer of the Membership Interest contrary to any of such representations, warranties or agreements; or (c) any action, suit or proceeding based on (i) a claim that any of such representations, warranties or agreements were inaccurate or misleading or otherwise cause for obtaining damages or redress under the Securities Act or any other securities law, or (ii) any Transfer of any part or all of the Membership Interest. 13 Legal Counsel. Each Member acknowledges and understands that this Agreement and related documents have been prepared by counsel for Simpson and that such counsel has not represented or been engaged to provide services to the Company or any other Member. Such Member acknowledges and understands that such counsel or other counsel may hereafter be engaged by the Company or by the Directors to provide legal services and representation as the Directors may determine, and in such event, such counsel or other counsel may concurrently represent one or more of the Members, the Directors and the Company, and the Directors may execute on behalf of the Company and the Members any consent to such concurrent representation that such counsel or other counsel may request pursuant to the applicable rules of professional conduct for lawyers. Each Member acknowledges and understands that counsel for the Company or any other Member does not represent any Member in the absence of a clear and explicit agreement to that effect between such Member and such counsel, and in the absence of such agreement, such counsel shall owe no duties to any Member. Each Member agrees that in the event of any dispute between any of the Members and the Company, or between any of the Members or the Company, on the one hand, and a Director or any of his or her Affiliates represented by counsel for the Company, on the other hand, counsel for the Company may represent the Company or the Directors or such Affiliates, or both, in such dispute to the extent permitted by such rules, and such Member hereby consents to such representation. Each Member further acknowledges that counsel for Simpson has not represented the interest of any Member other than Simpson in the preparation and negotiation of this Agreement and that, while communications with such counsel concerning the Company, the Directors and the Members may be confidential with respect to third parties, such Member has no expectation that such communications are confidential with respect to other Members. Each Member represents and warrants that such Member has consulted with such Member's own counsel regarding this Agreement, to the extent that such Member considered advisable or appropriate. 14 Notices. Except as otherwise expressly provided herein, any notice, consent, authorization or other communication to be given hereunder shall be in writing and shall be deemed duly given and received when delivered personally, when transmitted by facsimile, one business day after being deposited for next-day delivery with a nationally recognized overnight delivery service, or three business days after being mailed by first class mail, charges and postage prepaid, properly addressed to the party to receive such notice at the last address or facsimile number furnished for such purpose by the party to whom notice is directed. 15 Severability. If any provision of this Agreement, or the application of such provision to any Person or circumstance, shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement, or the application of such provision to Persons or circumstances other than those to which it is held to be invalid or unenforceable, shall not be affected thereby. 16 Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of California. 17 Binding Effect. Subject to section 7, this Agreement shall bind and inure to the benefit of the parties and their respective Successors. 18 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. 19 Entire Agreement. This Agreement (which includes the exhibits hereto) contains the entire agreement of the parties and supersedes all prior or contemporaneous written or oral negotiations, correspondence, understandings and agreements between or among the parties, regarding the subject matter hereof. 20 Further Assurances. Each Member shall provide such further information with respect to that Member and any of its beneficial owners as the Company may request, and shall do or perform such acts and things and execute and deliver such other and further certificates, instruments and other documents, as may be necessary and proper to implement, complete and perfect the transactions contemplated by this Agreement. 21 Headings; Gender; Number; References. The headings of the sections hereof are solely for convenience of reference and are not part of this Agreement. As used herein, each gender includes each other gender, and the singular includes the plural and vice versa, as the context may require. All references to sections and subsections are intended to refer to sections and subsections of this Agreement, except as otherwise indicated. 22 Arbitration. THE MEMBERS AND THE DIRECTORS WAIVE THEIR RIGHTS TO SEEK REMEDIES IN COURT, INCLUDING ANY RIGHT TO A JURY TRIAL. The Members and the Directors agree that in the event of any dispute between or among any of them or any of their Affiliates arising out of, relating to or in connection with this Agreement or the Company or its organization, formation, business or management, such dispute shall be resolved exclusively by arbitration to be conducted only in the county and state of the principal office of the Company at the time of such dispute in accordance with the rules of JAMS ("JAMS") applying the laws of California. The Members and the Directors agree that such arbitration shall be conducted by a retired judge, that discovery shall be permitted as required by the rules of JAMS, that the arbitration award shall include factual findings and conclusions of law, and that no punitive damages shall be awarded. The Members and the Directors understand that any party's right to appeal or to seek modification of any ruling or award of the arbitrator is severely limited. Any award rendered by the arbitrator shall be final and binding, and judgment may be entered on it in any court of competent jurisdiction in the county and state of the principal office of the Company at the time such award is rendered or as otherwise provided by law. 23 Parties in Interest. Except as expressly provided in the Act, nothing in this Agreement shall confer any rights or remedies under or by reason of this Agreement on any Person other than the Members and the Directors and their respective Successors nor shall anything in this Agreement relieve or discharge the obligation or liability of any third Person to any party to this Agreement, nor shall any provision give any third Person any right of subrogation or action over or against any party to this Agreement. 24 Amendments. All amendments to this Agreement or the Articles shall be in writing, approved by the Directors and signed or otherwise adopted or approved in writing by a Majority in Interest of the Members. 25 Attorneys' Fees. If any dispute between or among any of the Company, the Members and the Directors or any of their respective Affiliates should result in litigation or arbitration, the prevailing party or parties in such dispute shall be entitled to recover from the other party or parties all reasonable fees, costs and expenses of enforcing any right of the prevailing party or parties, including, without limitation, reasonable attorneys' fees and expenses, all of which shall be deemed to have accrued on the commencement of such action and shall be paid whether or not such action is prosecuted to judgment. Any arbitration award, judgment or order entered in such action shall contain a specific provision providing for the recovery of attorneys' fees and costs incurred in enforcing such award or judgment and an award of prejudgment interest from the date of the breach at the maximum rate allowed by law. For the purposes of this section 25, (a) attorneys' fees shall include, without limitation, fees incurred in postaward or postjudgment motions, contempt proceedings, garnishment, levy, and debtor and third party examinations, discovery, and bankruptcy litigation, and (b) prevailing party shall mean the party that is determined in the arbitration or proceeding to have prevailed or who prevails by dismissal, default or otherwise. 26 Power of Attorney. Each Member irrevocably constitutes and appoints each Director, with full power of substitution and resubstitution, such Member's true and lawful attorney, for such Member and in such Member's name, place and stead, and for such Member's use and benefit, to sign, execute, deliver, certify, acknowledge, swear to, file, record and publish (a) the Articles and any amendment thereto or to this Agreement as provided herein, (b) any other certificates, instruments, agreements and documents necessary to qualify or continue the Company as a limited liability company that is taxed as a partnership in the states or other jurisdictions where the Directors deem necessary or desirable, (c) all conveyances, assignments, documents of transfer or other instruments and documents necessary to effect the assignment of an interest in the Company, the substitution of a Member or the dissolution and termination of the Company in accordance with this Agreement and (d) all filings and submissions pursuant to any applicable law, regulation, rule, order, decree or judgment which, in the reasonable opinion of the Directors, may be necessary or advisable in connection with the business of the Company; provided that such action shall be in accordance with this Agreement and authorized by the Directors. The power of attorney granted herein is coupled with an interest, shall be irrevocable, shall survive the death, disability or incapacity of any Person, shall be deemed given by each and every assignee and successor of each Member and may be exercised by any Director by listing, or attaching a list of, any or all of the names of the Members and signing such amendments, certificates, instruments and other documents with the single signature of such Director as attorney-in-fact for all of the persons whose names are so listed. 27 Remedies Cumulative. The remedies under this Agreement are cumulative and shall not exclude any other remedies to which any Person may be lawfully entitled. IN WITNESS WHEREOF, this Operating Agreement has been duly executed by or on behalf of the parties hereto as of the date first above written. SIMPSON MANUFACTURING CO., INC. By: /s/THOMAS J FITZMYERS ---------------------------------- Thomas J Fitzmyers, President KEYMARK ENTERPRISES, INC. By: /s/KEITH DIETZEN ---------------------------------- Keith Dietzen, President EXHIBIT A
KEYBUILDER.COM, LLC NAMES, ADDRESSES, CAPITAL CONTRIBUTIONS, AGREED VALUES AND PERCENTAGE INTERESTS OF MEMBERS AS OF March 6, 2000 Agreed Value of Capital Noncash Capital Percentage Member Address Contributions Contributions Interest - ------------- ----------------------- --------------- --------------- ---------- Simpson 4637 Chabot Drive, $3,000,000 60.0% Manufacturing Suite 200, Pleasanton, Co., Inc. CA 94588-0789 Keymark Keymark $0 40.0% Enterprises, License Inc.
EXHIBIT B LICENSE AGREEMENT This License Agreement (the "Agreement") is made and entered into as of March 6, 2000 (the "Effective Date"), by and between Keybuilder.com, a California limited liability company (the "Company"), and Keymark Enterprises, Inc., an Illinois corporation ("Keymark"), with reference to the following facts: RECITALS A. Keymark has developed and owns a proprietary software program for designing and engineering roof trusses and systems, walls, floor systems, and take-offs for building construction (the "Keymark Technology"). The Keymark Technology includes specialized software programs developed pursuant to specifications of Simpson Manufacturing Co., Inc., a Dealware corporation ("Simpson"), under the First Amended and Restated Software Development and Marketing Agreement dated as of May 1, 1997, between Keymark and Simpson (the "Development Agreement"). B. Keymark has the right to grant licenses of the Keymark Technology, and the Company desires to obtain a license to the Keymark Technology on the terms and conditions herein. The Keymark Technology is defined in the LLC Agreement and described in more detail in Exhibit A hereto. C. Keymark is a Member of the Company and, as contemplated by the Company's LLC Operating Agreement dated as of March 6, 2000 (the "LLC Agreement"), to which this Agreement is attached as Exhibit B. Keymark desires to make a capital contribution to the Company in the form of a license to the Company of the Keymark Technology. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and conditions herein, the parties agree as follows: 1. Definitions. Capitalized terms used in this Agreement and not otherwise defined herein have the meanings ascribed to them in the LLC Agreement. For the purposes of this Agreement, the following words and phrases have the following meanings: 1.1 Change in Control of a corporation means: (a) a consolidation or merger with any other Person, in which all voting securities of such corporation outstanding immediately prior thereto represent (either by remaining outstanding or being converted into voting securities of the surviving corporation) less than fifty percent of the voting power of such corporation or the surviving entity outstanding immediately thereafter; (b) the sale or disposition by such corporation (in one transaction or a series of related transactions) of all or substantially all of its assets; (c) the approval by the stockholders of such corporation of a plan of liquidation or dissolution; (d) the acquisition, directly or indirectly, by any Person (other than a trustee or other fiduciary holding securities under an employee benefit plan of such corporation or an entity that is owned directly or indirectly by the stockholders of such corporation in substantially the same proportions as their ownership of stock of such corporation) of voting securities of such corporation representing more than fifty percent of the voting power of such corporation; or (e) any share exchange, extraordinary dividend, acquisition, disposition or recapitalization (or series of related transactions of such nature, other than a merger or consolidation) in which the holders of voting securities of such corporation immediately before such event own less than fifty percent of the voting power of such corporation or any successor entity immediately thereafter. 1.2 Company Business means the business of designing, developing and marketing an internet-based building design and engineering service. 1.3 Effective Date means the date first written above. 1.4 Force Majeure Event means any decree of a Governmental Authority, natural disaster, such as storms, floods or earthquakes, other acts of God, fires, explosions, riots, war or civil disturbances, strikes or other labor unrest, governmental actions or regulations, delays in transportation, or inability to obtain necessary labor, governmental permits, supplies or manufacturing facilities, which in any such case would delay or preclude either Party from performing its obligations under this Agreement. 1.5 Governmental Authority means any court, public or private arbitral tribunal, administrative agency, commission or other governmental or regulatory authority or agency. 1.6 Intellectual Property or IP means patents, patent applications, patent rights, utility models, inventions (whether patentable or not), trademarks, trademark applications, trademark rights, service marks, business marks, trade names, brand names, all other names and slogans embodying business or product good will, copyright registrations, copyrights (including those in computer programs), software, including all source code and object code, development documentation, circuit board layouts, printed circuit boards or cards or logic diagrams or schematics, programming tools, drawings, specifications and data, trade secrets, know-how, mask works, industrial designs, blueprints, formulae, processes and technical information, and documentation thereof and any rights under licenses to any of the foregoing, whether or not subject to statutory registration or protection. 1.7 License is defined in section 2.1. 1.8 Party means the Company or Keymark, excluding their Affiliates. 1.9 Person means any natural person, corporation, partnership, trust, joint venture, limited liability company or other entity. 2. Grant of License. 2.1 License of Keymark Technology to the Company. Subject to the terms and conditions in this Agreement, Keymark hereby grants to the Company a worldwide, royalty-free license and right (the "License") to use the Keymark Technology to develop, make, have made, use, sell, offer for sale, import, improve, modify, copy, adopt, create Derivative Works of, publicly display, publicly perform, publish, distribute and otherwise transfer, components and materials relating to the Company Business, which components and materials may incorporate all or part of the Keymark Technology, and to use the Keymark Technology for all other purposes concerning the Company Business. The License further includes the Company's right and license to grant sublicenses of the Keymark Technology to any other Person, provided that such sublicenses shall terminate concurrently with the License unless Keymark's express written consent is obtained, and to disclose and make available to sublicensees the Keymark Technology to enable such sublicensees to develop, make, have made, use, sell, offer for sale, import, improve, modify, copy, adopt, create Derivative Works of, publicly display, publicly perform, publish, distribute and otherwise transfer, components and materials relating to the Company Business. 2.2 Restriction on Scope. The License applies only to applications of the Keymark Technology in the internet environment and does not grant the Company any license or right to use the Keymark Technology in applications for the non-internet environment. 2.3 Exclusivity. The License is exclusive to the Company except with respect to the Keymark Steel Technology, with respect to which the License is non-exclusive to the Company; provided that if the Company fails to make any monthly payment to Keymark in accordance with section 3.3 of the LLC Agreement with respect to any of the twenty-four consecutive months commencing with February 2000, and such failure is not remedied within ten days after written notice thereof from Keymark to the Company, the License shall become non-exclusive for all applications, both in the internet and the non-internet environments, and otherwise shall continue in effect unchanged. 2.4 Sublicenses. The Company's right to grant sublicenses to third Persons pursuant to the License, and the right to determine the terms and conditions thereof, shall be exercisable by the Company at the Company's sole and exclusive discretion without the need for any further or additional consent or approval of Keymark. Any such sublicense shall terminate concurrently with the License unless Keymark's prior written approval is obtained. 2.5 Title. Title to the Keymark Technology shall remain in the name of Keymark, except as otherwise provided in section 3.1 of the LLC Agreement. 2.6 Acknowledgement of Consideration. Keymark hereby represents, warrants and agrees that the Company's issuance of Membership Interests to Keymark constitutes good and valuable consideration, the adequacy and sufficiency of which are hereby acknowledged, for the rights, licenses, agreements and other covenants granted or included in this Agreement, and further acknowledges that it is in the best interests of Keymark to enter into this Agreement. 3. Obligations and Rights of Keymark. 3.1 Additional Development. Except for proprietary development or changes made pursuant to restriction in other agreements, Keymark agrees promptly to disclose and make available to the Company any IP relating to, derived from or based on the Keymark Technology, including, but not limited to, any modifications or improvements thereto, developed, discovered or acquired by Keymark during the term of this Agreement, either alone or with the participation of the Company, and agrees that all such IP shall become subject to the License, without further compensation to Keymark of any kind, whether in the form of fee, royalty or equity participation, or otherwise. 3.2 Maintenance of IP Rights. Keymark shall secure, maintain and defend, at its own expense, all IP rights (such as patents, copyrights and trademarks) relating to the Keymark Technology during the term of this Agreement. 3.3 Source Code. Keymark shall provide the Company with one copy of the source code of the Keymark Technology upon execution of this Agreement. During the term of this Agreement, Keymark shall promptly provide the Company with one copy of the source code of all modifications, improvements and Derivative Works of the Keymark Technology. The Company agrees that such source code shall be confidential information of Keymark, subject to section 5. In lieu of providing source code to the Company as required by this section 3.3, Keymark may deposit such source code with an escrow agent acceptable to the Company pursuant to a source code escrow agreement the terms of which have been agreed to by Keymark and the Company. 4. Representations and Warranties. 4.1 Authority. Keymark represents and warrants to the Company that (a) Keymark has the power and authority to enter into and perform its obligations under this Agreement, (b) the signatory hereto on Keymark's behalf is authorized to execute this Agreement and bind Keymark to the terms and conditions of this Agreement, and (c) this Agreement is the legal, valid and binding agreement of Keymark, enforceable against Keymark in accordance with its terms. 4.2 Rights to Keymark Technology. Keymark represents and warrants that it has, and will have at all times while this Agreement is in effect, good title to the Keymark Technology and the full power and right to grant the License and other rights to the Company contemplated in this Agreement in accordance with the terms hereof. Keymark represents and warrants that to its best knowledge as of the Effective Date or, if later, the date it furnishes such Keymark Technology to the Company, (a) none of the Keymark Technology that it uses or allows the Company to use in connection with this Agreement infringes the IP rights or other proprietary rights of any other Person, and (b) all registrations or patents that Keymark holds with respect to the Keymark Technology are valid and enforceable. 4.3 No Conflict with Rights of Third Persons. To the best knowledge of Keymark as of the Effective Date, the execution, delivery and performance of this Agreement by Keymark will not violate the rights of any other Person, violate, conflict with or constitute a default under or a breach of any agreement with any Person, require the consent or approval of any other Person, or result in the creation of any right that may adversely affect the Company, the Company Business or the Company's use of the License. Keymark represents and warrants that it does not have any knowledge of any pending or threatened claims, suits, challenges or similar legal actions relating to the Keymark Technology and agrees that Keymark will promptly notify the Company if Keymark becomes aware of any such claim, suit, challenge, or similar action. Keymark represents, warrants and agrees that it has not used and shall not use any IP of any other Person that is not available for use by Keymark in accordance with the terms and conditions of this Agreement without such other Person's prior approval. 4.4 Employees. All current and future officers, employees and consultants of Keymark have signed or will be required to sign and deliver to Keymark agreements regarding the nondisclosure of confidential information and assigning such individual's rights to inventions, innovations, copyrights and other IP to Keymark before such individual gains access to any confidential information of the Company, or works on development projects pursuant to this Agreement or the LLC Agreement. 4.5 Inconsistent Grants of Rights. Keymark has not granted and shall not grant any rights to any other Person that would conflict or be inconsistent with the rights granted by Keymark to the Company by this Agreement. 5. Term and Termination. 5.1 Term. This Agreement shall become effective on the Effective Date and shall continue in effect until terminated by a Party in accordance with this section 5. 5.2 Termination. (a) Either Party may terminate this Agreement immediately by written notice to the other Party on the occurrence of any of the following events: (i) any material breach or default by the other Party; provided that the nonbreaching Party shall have notified the breaching Party specifying the nature of the breach or default and within thirty days after the breaching Party's receipt of such notice, such breach or default has not been remedied and the Parties have not agreed to a plan for curing the breach or default; and provided further that in the case of a breach of section 5, the foregoing cure period shall not apply, and the nonbreaching Party may terminate this Agreement immediately on notice to the breaching Party; or (ii) if the other Party is adjudicated a bankrupt, becomes insolvent or has a receiver of its assets or property appointed because of insolvency, makes a general assignment for the benefit of creditors, institutes any proceeding for the reorganization of its affairs, or if any such proceeding is instituted against such other Party and not dismissed within ninety days; or (iii) if the other Party ceases to do business or otherwise terminates its business operations. (b) The Company may terminate this Agreement at any time with or without cause on thirty days' notice to Keymark. (c) The Company may terminate this Agreement at any time immediately on notice to Keymark if Keymark undergoes a Change in Control. (d) Keymark may terminate this Agreement if the Company fails to make any monthly payment due to Keymark pursuant to section 3.3 of the LLC Agreement with respect to any month after January 2002, and such failure is not remedied within ten days after written notice thereof from Keymark to the Company. 5.3 Effects of Termination. Except for those representations, warranties and covenants that expressly survive the termination of this Agreement, all licenses and rights granted herein and all obligations of the Parties hereunder shall terminate on the effective date of termination of this Agreement; provided that the termination of this Agreement shall not release either Party from any liability that at the time of termination has already accrued to the other Party or that thereafter may accrue in respect of any act or omission prior to termination or from any obligation that is expressly stated herein to survive termination. The rights and obligations provided in sections 2.6, 4, 5, 6, and 7 shall not be affected by, and shall survive, any termination of this Agreement. On termination or expiration of this Agreement, each Party shall immediately return to the other Party all confidential information of the other Party in its possession. The termination rights provided in this Agreement shall be in addition to and not in lieu of any other rights and remedies, whether at law or in equity, available to the terminating Party. 6. Indemnification. 6.1 General Indemnification. Each Party (the "Indemnitor") shall indemnify and hold harmless the other Party and such other Party's Affiliates, customers and suppliers (each, an "Indemnitee") from and against any and all losses, liabilities, costs, expenses, judgments, assessments, penalties, damages, deficiencies, suits, settlements, actions, claims, proceedings, demands or causes of action, including but not limited to reasonable attorneys' fees and expenses, expert witnesses' fees and expenses and court costs and costs of appeal ("Claims") that were caused by, or arose as a result of, with respect to or in connection with any of the following: (a) Any inaccuracy in any representation or warranty or any breach of any representation, warranty or covenant of the Indemnitor under this Agreement, or any certificate, agreement, instrument or other document delivered pursuant to this Agreement; or (b) Any failure of the Indemnitor duly to perform or observe any term, provision, covenant, or agreement to be performed or observed by such Indemnitor pursuant to this Agreement, and any certificate, agreement, instrument or other document entered into or delivered pursuant to this Agreement; provided that the Indemnitee shall not be entitled to indemnification under this section 7.1 with respect to any Claim that is based on or arises out of or is caused by any willful misconduct, negligence or fraudulent act or omission of the Indemnitee. 6.2 IP Indemnification. Keymark shall indemnify and hold harmless the Company and the Company's Affiliates, customers and suppliers (each, an "Indemnitee") from and against any Claim resulting from alleged infringement of an IP right relating to the Keymark Technology that Keymark provided to the Indemnitee or other Persons under this Agreement; provided that Keymark's obligations under this section 6.2 are conditioned on the Indemnitee's agreement that if any of such IP that Keymark provided is likely to become the subject of a Claim, the Indemnitee will permit Keymark, at Keymark's option and expense within thirty days of notifying the Indemnitee of such likelihood, either to procure the right for the Indemnitee to continue using such IP, or to replace or modify such IP so that it becomes non-infringing; and provided further that Keymark shall not have any indemnification obligation under this section 6.2 with respect to a Claim to the extent that (a) the Indemnitee continues allegedly infringing activity after being notified thereof or being informed of modifications that would have avoided the alleged infringement, or (b) the Indemnitee's use of the Keymark Technology is not strictly in accordance with the License granted hereunder. For purposes of sections 6.3 and 6.4 as they relate to Claims under this section 6.2, "Indemnitor" shall mean Keymark. 6.3 Notification and Control of Defense or Settlement. (a) The Indemnitee shall notify the Indemnitor in writing of any Claim for which the Indemnitor may be responsible under this Agreement, within ten days of receiving notice of such Claim, and shall furnish to the Indemnitor a copy of all correspondence relating to such Claim (and shall promptly furnish to the Indemnitor all subsequent correspondence relating to such Claim). (b) The Indemnitor may choose whether to defend or settle any Claim, and the Indemnitee shall cooperate with the Indemnitor (at the Indemnitor's expense) in every reasonable way to facilitate such defense or settlement. At the Indemnitee's request, the Indemnitor shall give the Indemnitee, at the Indemnitee's expense, the opportunity to participate with the Indemnitor in the defense or settlement of such claim; provided that the Indemnitor shall control any such defense or settlement. 6.4 Forfeiture of Indemnification. Any indemnification pursuant to section 6.1 or section 6.2 shall not apply (a) if the Indemnitee fails to give the Indemnitor notice of any Claim it receives within ten days of receiving such Claim and such failure materially prejudices the Indemnitor, (b) unless the Indemnitor is given the opportunity to solely control the defense of such Claim, or (c) with respect to amounts in settlement of a Claim, unless the Indemnitor approves such settlement, which approval shall not be unreasonably withheld. 7. Miscellaneous. 7.1 Governing Law and Venue. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of California, without reference to any choice of law principles of such State. With respect to any suit, action or other proceeding arising out of this Agreement, the Parties (a) expressly waive any right they may have to a jury trial and agree that any such proceeding shall be tried by a judge without a jury, (b) agree to non-exclusive personal jurisdiction and venue of the United States District Court for the Northern District of California (and any California State Court within that District) for that purpose, and (c) appoint the persons set forth in Section 7.5 as their respective agents for service of process in such jurisdiction. 7.2 Entire Agreement. This Agreement, together with the LLC Agreement, contains the entire agreement of the Parties regarding the activities described herein and therein and supersedes all prior negotiations, correspondence, understandings and agreements between the Parties regarding the subject matter hereof and thereof. 7.3 Relationship of the Parties. None of Keymark's employees, consultants, contractors, agents or Affiliates are agents, employees, partners or joint venturers of the Company for any purpose whatsoever, nor shall they represent to the contrary, either expressly, implicitly, by appearance or otherwise; nor shall they make any warranties or representations on the Company's behalf, or assume or create any obligation on the Company's behalf. 7.4 No Third-Party Beneficiaries. Except as otherwise provided in this Agreement, the provisions of this Agreement are for the benefit of the Parties and not for any other Person. 7.5 Notices. Notices required or permitted hereunder shall be in writing and shall be deemed duly given and received (a) when delivered personally; (b) when sent by confirmed facsimile; (c) five days after having been sent by first class mail, postage prepaid; or (d) one business day after deposit for next day delivery with a commercial overnight carrier with tracking capabilities and confirmation of receipt or United States Express Mail, with written verification of receipt. Receipt shall be rebuttably presumed in accordance with the foregoing sentence if the communication is addressed as follows: If to the Company: Tom Fitzmyers Keybuilder.com, LLC. 4637 Chabot Drive, Suite 200 Pleasanton, California 94588-0789 with a copy to: Shartsis, Friese & Ginsburg LLP One Maritime Plaza, 18th Floor San Francisco, CA 94114 Attn: Carolyn S. Reiser, Esq. If to Keymark: Keith Dietzen Keymark Enterprises, Inc. 2905 Wilderness Place, #202 Boulder, Colorado 80301 or to such other address or addressee as a Party may hereafter specify by notice to the other. 7.6 Amendment; Waiver. This Agreement may be amended, changed, waived, discharged or terminated only by an instrument in writing signed by an officer of the Party against which enforcement thereof is sought. Any waiver of any term or condition of this Agreement or any breach hereof shall not operate as a waiver of any other such term or condition or breach, nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof. 7.7 Attorneys' Fees. In the event of any controversy, claim or dispute between the Parties arising out of or relating to this Agreement, or the alleged breach thereof, the prevailing Party shall, in addition to any other relief or award, be entitled to recover its attorneys' fees and all of the costs incurred in connection therewith. 7.8 Construction. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law. If any provision of this Agreement shall be invalid under applicable law, such provision shall be ineffective only to the extent of such invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement, unless the Agreement, so construed, fails to meet the essential business purposes of the Parties as manifested by this Agreement. 7.9 Successors. This Agreement and its terms and conditions shall bind and inure to the benefit of the respective successors and assigns of the Parties; provided that Keymark may not assign its rights or delegate its obligations under this Agreement either as a whole or in part without the prior written consent of the Company, except that no such consent shall be required for an assignment by Keymark to one or more of its wholly owned Affiliates. Any attempted assignment in violation of this section 7.9 shall be void. 7.10 Counterparts. This Agreement may be executed by the Parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 7.11 Heading and References. The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. executed this Agreement effective as of the date first written above. KEYBUILDER.COM, LLC. KEYMARK ENTERPRISES, INC. By: /s/Thomas J Fitzmyers By: /s/Keith Dietzen ---------------------------- ---------------------------- Title: Director Title: President ------------------------- ------------------------- Date: March 9, 2000 Date: March 9, 2000 -------------------------- -------------------------- By: /s/Steve Lamson ---------------------------- Title: Director ------------------------- Date: March 9, 2000 -------------------------- EXHIBIT A DESCRIPTION OF KEYMARK TECHNOLOGY The following brochures describe the Keymark Technology: KeyBuild Brochure Form F-KBSPEC 12/99 KeyLat Brochure EX-11 4 COMPUTATION RE EARNINGS PER SHARE
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE (UNAUDITED) EXHIBIT 11 -------------- Basic Earnings per Share Three Months Ended March 31, ---------------------------- 2000 1999 ------------ ------------ Weighted average number of common shares outstanding 12,020,446 11,580,828 ============ ============ Net income $ 9,275,764 $ 7,648,403 ============ ============ Basic net income per share $ 0.77 $ 0.66 ============ ============
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE (UNAUDITED) EXHIBIT 11 -------------- DILUTED EARNINGS PER SHARE Three Months Ended March 31, ---------------------------- 2000 1999 ------------ ------------ Weighted average number of common shares outstanding 12,020,446 11,580,828 Shares issuable pursuant to employee stock option plans, less shares assumed repurchased at the average fair value during the period 253,381 509,039 Shares issuable pursuant to the independent director stock option plan, less shares assumed repurchased at the average fair value during the period 3,626 3,358 ------------ ------------ Number of shares for computation of diluted net income per share 12,277,453 12,093,225 ============ ============ Net income $ 9,275,764 $ 7,648,403 ============ ============ Diluted net income per share $ 0.76 $ 0.63 ============ ============
EX-27 5 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Condensed Consolidated Balance Sheet at March 31, 2000, (Unaudited) and the Condensed Consolidated Statement of Operations for the three months ended March 31, 2000, (Unaudited) and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 45,551,211 0 54,461,542 1,568,062 78,380,347 184,083,653 122,445,540 61,783,333 257,365,176 32,989,346 2,886,200 0 0 44,901,418 175,733,364 257,365,176 84,615,539 84,615,539 50,800,161 50,800,161 19,201,449 0 0 15,257,804 6,178,000 9,275,764 0 0 0 9,275,764 0.77 0.76 Interest income for the three months ended March 31, 2000, was $643,875.
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