SIMPSON MANUFACTURING CO., INC.

5956 W. Las Positas Blvd.

Pleasanton, California 94588

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To the Stockholders of Simpson Manufacturing Co., Inc.:

We will hold the annual meeting of our stockholders at 2:00 p.m., Pacific Daylight Time, on Friday, April 17, 2009, at our home office located at 5956 W. Las Positas Blvd., Pleasanton, California.   The matters that you will address at this meeting are:

1.               A proposal to elect as directors the 3 persons nominated by a committee of independent members of our Board of Directors, each to hold office for a 3-year term and until his or her successor is elected and qualifies or until his or her earlier resignation or removal.

2.               A proposal to ratify correction of a clerical error in the previously approved Simpson Manufacturing Co., Inc. 1994 Stock Option Plan.

3.               A proposal to ratify our Board of Directors’ selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the current fiscal year.

4.               Any other business that properly comes before the meeting.

Only stockholders of record as of February 23, 2009, are entitled to notice of and will be entitled to vote at this meeting or any adjournment of this meeting.

TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, WE URGE YOU TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED, OR VOTE BY TELEPHONE OR THE INTERNET AS INSTRUCTED ON THE PROXY, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.  YOU CAN REVOKE YOUR PROXY AT ANY TIME BEFORE THE PROXIES YOU APPOINT CAST YOUR VOTES.

SIMPSON MANUFACTURING CO., INC.

5956 W. Las Positas Blvd.

Pleasanton, California 94588

March 3, 2009

PROXY STATEMENT

Solicitation and Voting of Proxies

On behalf of the Board of Directors of Simpson Manufacturing Co., Inc., a Delaware corporation, we are soliciting from you a proxy in the enclosed form for use at our Annual Meeting of Stockholders.  We will hold this meeting at our home office located at 5956 W. Las Positas Blvd., Pleasanton, California, on Friday, April 17, 2009, at 2:00 p.m., Pacific Daylight Time. Your proxy will be used at this meeting or at any adjournment of this meeting. Only holders of record of our common stock at the close of business on February 23, 2009, may vote at this meeting.  At the close of business on that date, we had 48,986,689 shares of our common stock outstanding and entitled to vote.  A majority, or 24,493,345, of these shares, present in person or represented by proxy at this meeting, will constitute a quorum for the transaction of business.  We are distributing this Proxy Statement and our Annual Report to Stockholders for the year ended December 31, 2008, to each of our stockholders on or about March 3, 2009.

Revocability of Proxy

If you give a proxy, you may revoke it, at any time before the proxy holders vote it at the meeting, in any of the 3 following ways:

·                  deliver a written notice to our Secretary by any means, including facsimile, stating that the proxy is revoked;

·                  sign a proxy bearing a later date and deliver it to our Secretary; or

·                  attend the meeting and vote in person, although your attendance at the meeting will not, by itself, revoke your proxy.

If, however, your shares are held of record by a broker, bank or other nominee and you desire to vote at the meeting, you must bring to the meeting a letter from the broker, bank or other nominee confirming your beneficial ownership of the shares you desire to vote.

Expenses of Proxy Solicitation

We are paying the expenses of this solicitation of proxies.  After we mail this Proxy Statement and other soliciting materials, we or our agents may also solicit proxies by mail, telephone, electronic mail or facsimile or in person.

Voting Rights

As a holder of our common stock, you are entitled to one vote per share on any matter submitted to a vote of the stockholders.  Our Bylaws permit stockholders to cumulate their votes in the election of directors at an annual meeting if, at least 65 days before the meeting, a stockholder notifies our Secretary in writing of the stockholder’s intention to cumulate votes.  Cumulative voting would entitle each stockholder to give one properly nominated candidate a number of votes equal to the number of directors to be elected multiplied by the number of shares the stockholder holds or to distribute those votes on the same principle among as many properly nominated candidates as the stockholder thinks fit.  Our Secretary has not, however, received a cumulative voting notice for this meeting, and as a result cumulative voting will not be available at this meeting.

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Our Board of Directors expects all nominees named below to be available for election.  If any nominee is not available, the proxy holders may vote for a substitute whom the Governance and Nominating Committee of our Board of Directors may nominate.  We are not aware of any specific matter to be brought before the meeting that is not identified in the notice of the meeting and this Proxy Statement.  If, however, stockholders present proposals at the meeting that are not included in this Proxy Statement, the proxy holders will have discretion to vote on those proposals as they see fit.  The proxies solicited by this Proxy Statement will confer discretionary authority on matters of which we are not aware a reasonable time before the meeting.  Accordingly, the proxy holders may use their discretionary authority to vote on any such matter pursuant to the proxies in the enclosed form.

Our stockholders may cast votes personally at the meeting or the proxy holders may cast the votes of stockholders who provide proxies in the enclosed form.  Our stockholders will elect directors at the meeting by a plurality of the votes cast at the meeting.  In the election of directors, that is, the nominees receiving the highest numbers of affirmative votes of the shares entitled to be voted for them up to the number of directors to be elected by such shares are elected.  Votes against a nominee and votes withheld have no legal effect.  Approval of Proposal Nos. 2 and 3 will require the affirmative vote of a majority of the votes cast at the meeting.  Abstentions and broker nonvotes count as shares present for determination of a quorum but do not count as affirmative or negative votes on any item to be voted on and do not count in determining the number of shares voted on any item.

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SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT

The following table provides information, as of February 23, 2009, unless otherwise indicated, about the beneficial ownership of our common stock by

·                  each stockholder known by us to be the beneficial owner of more than 5% of our common stock,

·                  each director and director nominee,

·                  each person currently serving as one of our executive officers named in the Summary Compensation Table – see “Executive Compensation” below, and

·                  all of our current executive officers and directors as a group.

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*                 Less than 0.5%

(1)           We based the information in this table on information that our officers and directors provided to us and on statements on Schedule 13D or 13G that stockholders filed with the Securities and Exchange Commission and sent to us.  Unless otherwise indicated below, the persons named in the table had sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable.

(2)           Includes 1,750 shares subject to options that we granted under the 1994 Stock Option Plan and that are exercisable within 60 days.

(3)           As of December 31, 2008, Royce & Associates, LLC had sole power to vote or direct the vote and to dispose or direct the disposition of these shares.

(4)           Neuberger Berman, LLC is deemed to be a beneficial owner since it has shared power to make decisions whether to retain or dispose, and in some cases the sole power to vote, the securities of many unrelated clients. Neuberger Berman, LLC does not, however, have any economic interest in the securities of those clients. The clients are the actual owners of the securities and have the sole right to receive and the power to direct the receipt of dividends from or proceeds from the sale of such securities. As of December 31, 2008, Neuberger Berman, LLC had shared power to dispose of 3,948,472 shares, sole voting power with respect to 2,200 shares and shared voting power with respect to 3,369,400 shares.

With regard to the shares set forth in the table, Neuberger Berman, LLC and Neuberger Berman Management LLC are deemed to be beneficial owners since they both have shared power to make decisions whether to retain or dispose and vote the securities. Neuberger Berman, LLC and Neuberger Berman Management LLC serve as a sub-adviser and investment manager, respectively, of Neuberger Berman’s various Mutual Funds which hold such shares in the ordinary course of their business and not with the purpose nor with the effect of changing or influencing the control of the issuer. The holdings of Lehman Brothers Asset Management LLC and Lehman Brothers Asset Management Inc, affiliates of Neuberger Berman LLC, are also aggregated to comprise the holdings referenced herein.

(5)           As of December 31, 2008, Bank of America Corporation and its affiliates, NB Holdings Corporation, BAC North America Holding Company, BANA Holding Corporation, Bank of America N.A., Columbia Management Group, LLC, Columbia Management Advisors, LLC, Banc of America Securities Holdings Corporation, Banc of America Securities LLC, Banc of America Investment Advisors, Inc. and U.S. Trust Company of Delaware, in its capacity as investment

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adviser, collectively beneficially owned these shares, of which:  Bank of America Corporation had shared power to vote 2,696,660 shares and shared power to dispose of 3,007,086 shares; NB Holdings Corporation had shared power to vote 2,696,660 shares and shared power to dispose of 3,007,086 shares; BAC North America Holding Company had shared power to vote 2,695,803 shares and shared power to dispose of 3,006,229 shares; BANA Holding Corporation had shared power to vote 2,695,803 shares and shared power to dispose of 3,006,229 shares; Bank of America, N.A. had sole power to vote 155,920, sole power to dispose 231,370 shares, shared power to vote 2,539,883 shares and shared power to dispose of 2,774,859 shares; Columbia Management Group, LLC had shared power to vote 2,440,025 shares and shared power to dispose of 2,674,035 shares; Columbia Management Advisors, LLC had sole power to vote 2,413,745, sole power to dispose of 2,613,870 shares, shared power to vote 26,280 shares and shared power to dispose of 60,165 shares; Banc of America Securities Holdings Corporation had shared power to vote 857 shares and shared power to dispose of 857 shares; Banc of America Securities LLC had sole power to vote 857 shares and sole power to dispose of 857 shares; Banc of America Investment Advisors, Inc. had shared power to vote 21,748 shares; and United States Trust Company, N.A. had sole power to vote 13,065 shares, shared power to vote 3,670 shares, sole power to dispose of 13,065 shares and shared power to dispose of 3,670 shares.

(6)           As of December 31, 2008, Columbia Wagner Asset Management L.P. had sole power to vote or direct the vote and to dispose or direct the disposition of these shares.

(7)           As of December 31, 2008, Synder Capital Management L.P. and Synder Capital Management, Inc. had shared power to vote 2,284,023 shares and shared power to dispose 2,549,723 shares.

(8)           As of December 31, 2008, Barclay’s Global Investors, N.A. and its affiliates, Barclay’s Global Fund Advisors, Barclay’s Global Investors Ltd., Barclay’s Global Investors Japan Limited, Barclay’s Global Investors Canada Limited, Barclay’s Global Investors Australia Limited and Barclay’s Global Investors (Deutschland) AG collectively beneficially owned these shares. Barclay’s Global Investors, N.A. and its affiliates had sole power to vote or direct the vote of 1,886,645 shares and to dispose or direct the disposition of 2,436,677 shares.

(9)           Includes 51,750 shares subject to options that we granted under our 1994 Stock Option Plan and that are exercisable within 60 days. Mr. Fitzmyers has a revolving line of credit in the maximum amount of approximately $1.0 million that is secured, in part, by 150,000 shares of our common stock that he owns. There is currently no balance due on this line of credit.

(10)         Includes 52,793 shares subject to options that we granted under our 1994 Stock Option Plan and that are exercisable within 60 days.

(11)         Includes 117,000 shares subject to options that we granted under our 1994 Stock Option Plan and that are exercisable within 60 days.

(12)         Includes 36,000 shares subject to options that we granted under our 1994 Stock Option Plan and that are exercisable within 60 days.

(13)         Includes 5,000 shares subject to options that we granted under our 1995 Independent Director Stock Option Plan and that are exercisable within 60 days.

(14)         Includes 7,000 shares subject to options that we granted under our 1995 Independent Director Stock Option Plan and that are exercisable within 60 days.

(15)         Includes 357,918 shares subject to options that are exercisable within 60 days, including the options described in the above notes.

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PROPOSAL NO. 1

ELECTION OF DIRECTORS

Nominee

We have nominated for re-election at the meeting Barclay Simpson, Jennifer Chatman and Robin MacGillivray, whose terms as directors expire in 2009.  Below are the names of our directors and information about them.  The persons authorized to vote the shares represented by proxies in the enclosed form intend to vote for Mr. Simpson, Ms. Chatman and Ms. MacGillivray. Under our Bylaws, the stockholders will not be permitted to nominate anyone at the meeting.  If stockholders cast any votes at the meeting for any candidates other than those that we have nominated, the persons authorized to vote shares represented by proxies in the enclosed form, except for proxies withholding authority to vote for the election of directors or for any particular nominees, will have full discretion and authority to vote for any or all of the nominees in such order as those persons may determine.

(1)          Member of the Compensation Committee

(2)          Member of the Audit Committee

(3)          Member of the Governance and Nominating Committee

(4)          Member of the Growth Committee

Executive Officers

Our executive officers include Barclay Simpson and Thomas J Fitzmyers.  They are also executive officers and directors of some of our subsidiaries.  Michael J. Herbert, age 50, is our Chief Financial Officer, Treasurer and Secretary and serves some of our subsidiaries in similar capacities. In February 2009, our Board of Directors appointed Mr. Herbert as one of our Vice Presidents, effective May 11, 2009. In this new role, Mr. Herbert will manage our international activities outside of North America.  In February 2009, our Board of Directors also appointed Karen W. Colonias, age 51, as our Chief Financial Officer, Treasurer and Secretary, effective May 11, 2009.  Jeffrey E. Mackenzie, age 47, is also one of our Vice Presidents.  Phillip T. Kingsfather, age 62, is a director and the President and Chief Executive Officer of our subsidiary, Simpson Strong-Tie Company Inc.  Stephen P. Eberhard, age 55, is a director and the Chief Executive Officer of our subsidiary, Simpson Dura-Vent Company, Inc.  We regard Mr. Kingsfather and Mr. Eberhard as executive officers, because they both perform management policy-making functions for us.

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Biographical Information

Barclay Simpson has been the Chairman of our Board of Directors since 1994.  He has been with our management since our inception in 1956.  Mr. Simpson also is a member of the Boards of Directors of the University Art Museum of the University of California, Berkeley, and the California College of the Arts.  He is also active in other charitable and educational institutions.

Thomas J Fitzmyers has served as our President and as a director since 1978.  He has served as our Chief Executive Officer since 1994.  He has served as the Chief Executive Officer and a director of our subsidiary, Simpson Strong-Tie Company Inc., since 1983.  He has served as a director of our subsidiary, Simpson Dura-Vent Company, Inc., since 1982.  Mr. Fitzmyers was employed by Union Bank from 1971 to 1978.  He was a Regional Vice President when he left Union Bank to join us in 1978.

Jennifer A. Chatman is the Paul J. Cortese Distinguished Professor of Management, Haas School of Business, University of California, Berkeley.  Before joining the Berkeley faculty in 1993, she was a professor at the Kellogg Graduate School of Management, Northwestern University.  She received her Ph.D. from University of California, Berkeley in 1988.  She is a member of the Board of Trustees of Prospect Sierra School.  In addition to her research and teaching at University of California, Berkeley, she consults with a wide range of organizations and teaches in executive development programs at the Haas School of Business, Stanford University and Columbia University.

Earl F. Cheit is Dean and Edgar F. Kaiser Professor Emeritus, Haas School of Business, University of California, Berkeley.  Until 2001, he was Chairman of the Board of YCI, a consumer products company, and Senior Advisor, Asia Pacific Economic Affairs, The Asia Foundation.  He is a member of the Audit Committee of the Evelyn and Walter Haas, Jr. Fund, a Trustee of Mills College, a Trustee of the University of California, Berkeley, Foundation and founding Chairman of Cal Performances, the performing arts presenter and commissioner at the University of California, Berkeley. He is a member of the Bay Area Council’s Business Hall of Fame selection committee.

Gary M. Cusumano has over 35 years of experience with The Newhall Land and Farming Company, most recently as its Chairman.  He retired from Newhall Land and Farming Company in January 2006.  He is a director of Granite Construction, Inc. and Forest Lawn Memorial Park, was formerly a director of Sunkist Growers, Inc., Watkins-Johnson Company and Zero Corporation and has served on the boards of many not-for-profit and community service organizations.

Peter N. Louras, Jr. is a retired corporate executive.  He served as Interim President at John F. Kennedy University in Pleasant Hill, California, from October 2003 to May 2004.  He joined The Clorox Company in 1980 and was Group Vice President from May 1992 until his retirement in July 2000. In this position, he served on The Clorox Company’s Executive Committee with overall responsibility for its international business activities and business development function, including acquisitions and divestitures.  Before joining The Clorox Company, Mr. Louras, a certified public accountant, worked at Price Waterhouse in both their San Francisco, California, and Philadelphia, Pennsylvania, offices. Mr. Louras is a member of the American Institute of CPAs and the Pennsylvania Institute of CPAs. He is currently a member of the Board of Directors of Dealer Fusion, a privately owned company. Mr. Louras actively participates in civic projects and serves on the boards of various not-for-profit organizations.

Robin G. MacGillivray became Senior Vice President of Local and Regional Markets for AT&T West in November 2008. She is responsible for service and sales to AT&T’s small business customers nationwide. Previously, she led Business Communications Services where she was responsible for business market sales and customer service in California and Nevada.  She previously served as Senior Vice President – Strategic Process Improvement, where she oversaw that company’s call center transformation, DSL improvement, and sales and marketing process standardization efforts.  Ms. MacGillivray joined SBC West Business Communications Services in 1979, after receiving her bachelor’s degree in journalism from the School of Journalism and her master’s degree in telecommunications management from the Annenberg School of Communications, both at the University of Southern California.  She completed the Stanford Executive Program at Stanford University in 1997.  She has worked in numerous SBC company

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organizations and functions, including Engineering, Operations, Finance, Human Resources, Marketing, Customer Service and Sales.  She is a Regent of John F. Kennedy University and is President of the Board of Directors of the Girl Scouts of Northern California.

Barry Lawson Williams is the retired General Partner of Williams Pacific Ventures Inc., a venture capital and real estate consulting firm.  He is a director of PG&E Corporation, CH2M HILL Companies, Ltd., SLM Corp., Northwestern Mutual Life Insurance Co. and R.H. Donnelly & Co.  Mr. Williams was also a General Partner of WDG Ventures Inc., a California limited partnership, until 2002.  He was interim President and Chief Executive Officer of the American Management Association International during 2000 and 2001.

Karen W. Colonias has held the position of Vice President and Branch Manager of Simpson Strong-Tie’s Stockton, California, manufacturing facility since 2004. She joined Simpson Strong-Tie in 1984 as an engineer in the research and development department, where she was responsible for the design and testing of new products and code development. In 1998, she was promoted to Vice President of Engineering, where she was responsible for Simpson Strong-Tie’s research and development efforts. Prior to joining Simpson Strong-Tie, she worked as a civil engineer for the Bechtel Corporation. Ms. Colonias has a BS in Engineering and an MBA and is also a licensed professional engineer.

Michael J. Herbert has served as our and our subsidiaries’ Chief Financial Officer, Treasurer and Secretary since 2000.  From 1988 to 2000 he held various financial management positions, with his last position as Director of Finance, with Sun Microsystems, Inc.

Jeffrey E. Mackenzie was appointed Vice President in December 2008. From November 2000 to December 2008, he served as our Financial Reporting Manager, overseeing our external reporting and managing various other accounting and finance functions.

Phillip T. Kingsfather has served as the President and Chief Executive Officer of Simpson Strong-Tie Company Inc. since February 2009. From August 2006, to February 2009, he served as President and Chief Operating Officer of Simpson Strong-Tie Company Inc.  His career with us started in 1979 as an Outside Sales Representative in the Pacific Northwest for Simpson Strong-Tie Company Inc.  In 1985, he became Regional Sales Manager. He joined our Anchor Systems sales team in 1997 and was instrumental in the launch of this product line.  In 2003, he was promoted to Vice President in charge of our Anchor Systems product line, where he served until August 2006.

Stephen P. Eberhard has served as the President of Simpson Dura-Vent Company, Inc. since November 2003 and Chief Executive Officer and a director of Simpson Dura-Vent Company, Inc. since January 2004.  From 1994 to 2003, he served as Vice President of Information Systems for Simpson Strong-Tie Company Inc.  From 1983 to 1994 he served in various capacities with us and our subsidiaries, including cost accountant, controller, purchasing manager, and Director of Information Systems.  From 1977 to 1982, Mr. Eberhard was general manager of a family-owned retail industrial equipment dealership.  Mr. Eberhard was an auditor with Price Waterhouse from 1975 to 1977.

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Independence

The New York Stock Exchange corporate governance rules require that the board of directors of a listed company consist of a majority of independent directors.  A majority of our directors are independent under those rules.

Pursuant to the New York Stock Exchange corporate governance rules, our Board of Directors has adopted categorical independence standards to assist in determining director independence.  The categorical standards provide that a director will not be independent of a listed company if:

·                  the director is, or has been within the last 3 years, an employee of the listed company, or an immediate family member is, or has been within the last 3 years, an executive officer, of the listed company;

·                  the director has received, or has an immediate family member who has received, during any 12-month period within the last 3 years, more than $120,000 in direct compensation from the listed company, other than director and committee fees and pension or other forms of deferred compensation for prior service, provided such compensation is not contingent in any way on continued service;

·                  (a) the director is a current partner or employee of a firm that is the company’s internal or external auditor; (b) the director has an immediate family member who is a current partner of such a firm; (c) the director has an immediate family member who is a current employee of such a firm and personally works on the listed company’s audit; or (d) the director or an immediate family member was within the last 3 years a partner or employee of such a firm and personally worked on the listed company’s audit within that time;

·                  the director or an immediate family member is, or has been within the last 3 years, employed as an executive officer of another company where any of the listed company’s present executive officers at the same time serves or served on the other company’s compensation committee; or

·                  the director is a current employee, or an immediate family member is a current executive officer, of another company that has made payments to, or received payments from, the listed company for property or services in an amount that, in any of the last 3 fiscal years, exceeded the greater of $1,000,000 or 2% of the other company’s consolidated gross revenues.

For purposes of the categorical standards, “immediate family member” includes a director’s spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and anyone, other than any domestic employee, who shares the director’s home.

Applying the categorical independence standards, our Board of Directors has affirmatively determined that each of Mr. Cheit, Mr. Cusumano, Mr. Louras, Mr. Williams, Ms. Chatman and Ms. MacGillivray is independent under the New York Stock Exchange corporate governance rules, in that none of them has a material relationship with us, either directly or as a partner, shareholder, officer or employee of an organization that has a relationship with us.  Our other directors, Mr. Simpson and Mr. Fitzmyers, are not independent.  In making its determination, our Board of Directors considered all relevant facts and circumstances, including commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, and considered the issue not merely from the standpoint of a director, but also from that of persons or organizations with which a director has an affiliation.

Attendance at Meetings

Our Board of Directors held 12 meetings in 2008.  Its committees held a total of 16 meetings in 2008, including 6 meetings of the Audit Committee, 6 meetings of the Compensation Committee and 4 meetings of the Governance and Nominating Committee.  Each director attended at least 75% of the meetings of our Board of Directors, except for Barclay Simpson who attended 8 of the meetings of the Board of Directors, and at least 75% of the meetings of the committees on which he or she served in 2008.  All of our directors, except for Earl Cheit, attended the annual meeting of our stockholders in 2008, although we do not have a policy that requires our directors to attend the annual meeting of stockholders.

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Meetings of Independent Directors

Our independent directors meet at regularly scheduled executive sessions without other members of management.  The independent directors rotate the role of chairperson among themselves for each such meeting to allow each of them an opportunity to preside.

Communications with our Board of Directors

We encourage stockholders and interested parties to communicate any concerns or suggestions directly to the independent members of our Board of Directors, by writing to:

Board of Directors

Simpson Manufacturing Co., Inc.

P.O. Box 1394

Alamo, CA 94507-7394

OUR BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF BARCLAY SIMPSON, JENNIFER A. CHATMAN AND ROBIN G. MACGILLIVRAY, THE THREE NOMINEES FOR DIRECTOR AT THIS MEETING.

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PROPOSAL NO. 2

RATIFICATION OF CORRECTION OF A CLERICAL ERROR IN THE PREVIOUSLY
APPROVED SIMPSON MANUFACTURING CO., INC. 1994 STOCK OPTION PLAN

At the annual meeting, we will ask our stockholders to ratify last year’s amendment to the Simpson Manufacturing Co., Inc. 1994 Stock Option Plan.  In Exhibit B of our 2008 proxy statement, there was an inadvertent clerical error in section 4, Shares Subject to the Plan, that stated, “Subject to the provisions of section 10 relating to adjustments on changes in stock, the stock that may be sold pursuant to Options shall not exceed the aggregate of 8,000,000 shares of Common Stock.” This statement should have read, “Subject to the provisions of section 10 relating to adjustments on changes in stock, the stock that may be sold pursuant to Options shall not exceed the aggregate of 16,000,000 shares of Common Stock.” Our Board of Directors and the stockholders had already approved the aggregate limit of 16,000,000 shares of Common Stock in the amendment dated July 29, 2002, adjusted for subsequent 2-for-1 stock splits effected in August 2002 and November 2004 in accordance with section 10 of the Simpson Manufacturing Co., Inc. 1994 Stock Option Plan.  The 1994 Stock Option Plan was last amended on February 13, 2008, and was last approved by our stockholders on April 23, 2008.  Our Board of Directors believes that ratifying the correction of this clerical error is in the best interests of your Company.

By affording our qualified employees, directors and consultants the opportunity to buy shares of our common stock, we intend the 1994 Stock Option Plan to enhance our ability to retain the services of persons who are now employees, directors or consultants, to secure and retain the services of new employees, directors and consultants, and to provide incentives for such persons to exert maximum efforts for our success.

Our Board of Directors has delegated the administration of the 1994 Stock Option Plan to the Compensation Committee.  The Compensation Committee administers the 1994 Stock Option Plan (as its manager and not as its trustee) and determines —

·              who will be granted options,

·              when and how each option will be granted,

·              whether an option will be an incentive stock option or a nonstatutory stock option,

·              the provisions of each option, including the time or times the option may be exercised, and

·              the number of shares for which an option is granted.

The Compensation Committee also construes and interprets the 1994 Stock Option Plan and the options granted under it and establishes, amends and revokes rules and regulations concerning the administration of the 1994 Stock Option Plan.

Participation in the 1994 Stock Option Plan is open to our employees, directors and consultants selected by the Compensation Committee on the basis of their past and anticipated future contributions.  We may grant a participant incentive stock options only if the participant is an employee, but we may grant any participant a nonstatutory stock option.  The exercise price per share of each option (whether an incentive stock option or a nonstatutory option) must be at least 100% of the fair market value of a share of our common stock when we grant the option.  In addition, we cannot grant a participant who owns stock representing more than 10% of the voting power of all classes of our stock an option under the 1994 Stock Option Plan, unless the per-share exercise price of that option is at least 110% of the fair market value of a share of our common stock when we grant the option and the period when the option is exercisable is within 5 years after we grant the option.

The Compensation Committee determines the terms of each option that we grant to a participant under our 1994 Stock Option Plan.  The date or dates on which an option becomes exercisable may be based on performance or other criteria, but no option may be exercised more than 10 years from its grant.  The Compensation Committee may divide the number of shares of our common stock subject to an option under the 1994 Stock Option Plan into periodic installments, with the option becoming exercisable (“vesting”) during each installment period with respect to the shares allotted to that period.  The vesting provisions may vary among options.  At the discretion of the Compensation Committee, we may give an

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optionee the right to exercise the option before it vests.  In that case, we will have the right to repurchase from the optionee, at the exercise price, any shares that the optionee purchases by exercising an unvested option.  This repurchase right lapses at a rate equivalent to the vesting rate, starting when we grant the option.  In general, if we allow an optionee to purchase shares under an unvested option and the optionee later ceases to be one of our employees, directors or consultants, we have 90 days from the date of such cessation to exercise our repurchase right.

Generally, options that the Compensation Committee grants under the 1994 Stock Option Plan vest (become exercisable) in increments over 4 years.  Our Board of Directors has, however, resolved to accelerate the vesting of options in 2 situations.  First, when an employee who has reached age 60 ceases to be employed by us, the employee’s option will fully vest at that time.  Second, all outstanding options under the 1994 Stock Option Plan will fully vest, and must be exercised, on a change in control of Simpson Manufacturing Co., Inc.  For this purpose, we define a “change in control” as one of the following:

·                  a merger or consolidation in which we are not the surviving corporation, if the surviving corporation refuses to assume or continue our options, or to substitute similar options, or our options do not otherwise continue in effect,

·                  a reverse merger in which we are the surviving corporation, but as part of the merger the outstanding shares of our common stock convert into other securities, cash or other property, if the surviving corporation refuses to assume or continue our options, or to substitute similar options, or our options do not otherwise continue in effect, or

·                  the dissolution or liquidation of Simpson Manufacturing Co., Inc.

Both of these acceleration provisions apply to all participants in our 1994 Stock Option Plan, including our Named Executive Officers.

Several conditions apply to incentive stock options generally, in accordance with the Internal Revenue Code.  If we grant an incentive stock option, the special federal income tax treatment accorded to incentive stock options (discussed below) is available only if —

·                  the optionee does not sell the shares received on exercise of the option until at least 2 years after we grant the option and 1 year after its exercise, and

·                  we employ the optionee at all times from the date the option is granted to 3 months before the exercise of the option.

In addition, to the extent that incentive stock options granted under the 1994 Stock Option Plan that vest in any year allow an optionee to acquire our common stock with a fair market value of more than $100,000, those incentive stock options are treated as nonstatutory stock options.

We have granted the following options under the 1994 Stock Option Plan, all nonstatutory stock options, to the following persons in the amounts and at the exercise prices indicated:

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*                 Our independent directors do not participate in our 1994 Stock Option Plan, but instead participate in our 1995 Independent Director Stock Option Plan.  See “Executive Compensation — Director Compensation — 1995 Independent Director Stock Option Plan.”

The closing market price of a share of our common stock, as reported by the New York Stock Exchange on February 23, 2009, was $15.40.

In general, on exercising an option granted under the 1994 Stock Option Plan, the optionee must pay us the exercise price in cash.  The Compensation Committee has discretion to allow the optionee to pay the exercise price, either at the time the option is granted or when the optionee exercises it, by delivering shares of our common stock to us, or according to a deferred payment arrangement, or in some other manner.  If the Compensation Committee allows the optionee to defer payment for the exercise of an option, we charge the optionee interest at least annually on the deferred amount at the minimum rate that avoids characterization of any of the exercise price as interest under the Internal Revenue Code or, if less, at the maximum rate permitted by law.

The grant of a nonstatutory stock option under the 1994 Stock Option Plan should not have any federal income tax consequences.  On exercising a nonstatutory stock option, the optionee generally recognizes taxable ordinary income equal to the excess of (a) the fair market value of the shares of our common stock purchased on such exercise, over (b) the option exercise price for those shares.  We generally must withhold tax from the optionee’s regular or supplemental wages based on the amount of ordinary income that the optionee recognizes and we are generally entitled to a business expense deduction

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in that amount.  To the extent provided in an option, the optionee may satisfy the withholding obligation by paying cash, by authorizing us to withhold shares from the shares the optionee would otherwise receive on exercising the option, or by delivering to us shares of our common stock that the optionee already owns.

When an optionee sells shares acquired by exercising a nonstatutory stock option, the optionee recognizes capital gain or loss equal to the difference between the selling price for those shares and the fair market value of the shares when the optionee exercises the option.  If the optionee holds the shares for a year or more after exercising the nonstatutory option (not including the time the optionee holds the option before exercising it), any gain on the sale of those shares is long-term capital gain.  An optionee’s sale of shares acquired on exercise of a nonstatutory stock option has no tax consequences to us.

The grant of an incentive stock option under the 1994 Stock Option Plan generally has no federal income tax consequences to the optionee.  Similarly, the optionee should not recognize any income on exercising an incentive stock option.  The optionee recognizes income with respect to an incentive stock option when the optionee sells the shares acquired on exercise of the option, and the optionee then generally recognizes capital gain or loss equal to the difference between the selling price and the option exercise price for those shares.  This federal income tax treatment is available, however, only if the optionee does not sell the shares acquired on exercise of an incentive stock option until at least 2 years after the option grant and at least 1 year after the option exercise.  If an optionee sells the shares before holding them for the required period (a disqualifying disposition), the shares are treated similarly to shares acquired through the exercise of a nonstatutory stock option — the optionee generally recognizes as ordinary income in the year of the sale the excess of the fair market value of the shares when the optionee exercises the option over the option exercise price for those shares, and recognizes as capital gain the excess, if any, of the selling price over the fair market value of the shares when the optionee exercises the option.  If an optionee sells the shares before holding them for the required period at a price less than fair market value of the shares when the optionee exercises the option, the optionee recognizes ordinary income equal to the excess, if any, of the amount realized on the sale over the exercise price.  In case of a disqualifying disposition, we generally can take a business expense deduction in an amount equal to the amount the optionee recognizes as ordinary income.

Exercise of an incentive stock option may have implications with respect to alternative minimum tax.  After calculating regular tax liability, a taxpayer must determine whether he or she owes alternative minimum tax by recalculating his or her tax by disallowing certain deductions and adding certain items to income.  The alternative minimum tax calculation requires an optionee to include in income the excess of the fair market value of the shares at the time of exercise over the option exercise price, potentially resulting in federal tax of up to 28% on such amount.

Currently, the maximum marginal federal income tax rate on an individual’s net long-term capital gains is 15% and on an individual’s ordinary income is 35%.  Because an individual may deduct up to $3,000 of net capital losses in any year, it may be advantageous to characterize gain as long-term capital gain if the optionee has capital losses from other investments.

If an optionee under the 1994 Stock Option Plan ceases to be our employee, director or consultant for a reason other than disability or death, the optionee may exercise an option he or she holds under the 1994 Stock Option Plan, to the extent that such option is vested on the date of such cessation, at any time during the period ending on the earlier of (a) the 90th day after such cessation (or such longer or shorter period as is specified in the option, which must be at least 30 days), and (b) the date that the option expires.  If the optionee does not exercise the option within that time, the option terminates and the optionee forfeits the right to exercise it.  Any option or portion of an option that is not vested when the optionee ceases to be our employee, director or consultant terminates on that date and cannot be exercised thereafter.

If an optionee ceases to be our employee, director or consultant because the optionee becomes disabled, the optionee may exercise an option granted to the optionee under the 1994 Stock Option Plan, to the extent that such option is vested on the date of such cessation, within the period ending on the earlier of (a) the first anniversary of such cessation (or such longer or shorter period as is specified in the option, which must be at least 6 months), and (b) the date that the option expires. If the optionee does not exercise

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the option within that time, the option terminates and the optionee forfeits the right to exercise it.  Any option or portion of an option that is not vested when the optionee ceases to be our employee, director or consultant terminates on that date and may not be exercised thereafter.

If an optionee under the 1994 Stock Option Plan dies while serving as our employee, director or consultant or within a period specified in the option after ceasing to be our employee, director or consultant, the optionee’s estate or the person who inherits the option may exercise it, to the extent that the option is vested at the time of death, within the period ending on the earlier of (a) the 180th day after the first anniversary of the optionee’s death (or such longer or shorter period as is specified in the option, which must be at least 6 months), and (b) the date that the option expires.  If the option is not exercised within that time, it terminates and may not be exercised.  Any option or portion of an option that has not vested at the date of death terminates on that date and may not be exercised.

Notwithstanding the termination, disability or death of an optionee, the Compensation Committee may extend the expiration date of any outstanding option as the Compensation Committee considers appropriate, but not beyond the expiration date of the option as set forth in the option agreement.

An optionee may not, during his or her lifetime, sell, assign, transfer, pledge, hypothecate or otherwise dispose of an option granted under the 1994 Stock Option Plan, whether by operation of law or otherwise, except by will or the laws of descent and distribution applicable to the optionee.  An option granted under the 1994 Stock Option Plan also may not be made subject to execution, attachment or similar process.  Nevertheless, the Compensation Committee has discretion when granting an option or thereafter to permit the optionee to transfer the option to a trust or other entity established by the optionee for estate planning purposes.  The Compensation Committee also has discretion to permit other transfers or impose conditions or limitations on any permitted transfer.  Otherwise, only the person to whom we grant an option may exercise it during his or her lifetime.

The Compensation Committee may suspend or terminate the 1994 Stock Option Plan at any time.  Unless the Compensation Committee terminates it earlier, the 1994 Stock Option Plan will terminate on May 28, 2012.  We will not grant any options under the 1994 Stock Option Plan after it is terminated.  Options outstanding when the 1994 Stock Option Plan is terminated, however, may be exercised after the termination of the 1994 Stock Option Plan, according to the vesting schedules of the options, until the end of the exercise period of the options as determined under the options.  The Compensation Committee may amend the 1994 Stock Option Plan at any time, subject in some cases to the approval of our stockholders.

The 1994 Stock Option Plan is not subject to any provisions of the Employee Retirement Income Security Act of 1974, as amended, and is not qualified under Internal Revenue Code section 401(a).

For an optionee under the 1994 Stock Option Plan who is not our affiliate (that is, a director, executive officer or other person controlling, controlled by or under common control with us), there are no restrictions on the optionee’s sale of the shares purchased on exercising an option under the 1994 Stock Option Plan.  An optionee who is our affiliate may not sell shares of our common stock that the optionee acquires on exercise of an option, unless the resale is registered under the Securities Act of 1933, as amended, or the sale is made pursuant to an applicable exemption from registration, including pursuant to Rule 144 under the Securities Act of 1933.  In general, under Rule 144 as currently in effect, an affiliate would be entitled to sell shares of our common stock in brokers’ transactions, transactions with “market makers” or in qualifying riskless principal transactions within any 3 month period in an amount that does not exceed the greater of (a) 1 percent of the then outstanding shares of our common stock and (b) the average weekly trading volume of our common stock on the New York Stock Exchange during the 4 calendar weeks preceding the date on which notice of the sale is filed with the Securities and Exchange Commission.  Sales under Rule 144 are also subject to notice requirements and the availability of current public information about Simpson Manufacturing Co., Inc.  We may, in our discretion, register for resale the shares of our common stock that are subject to the 1994 Stock Option Plan by filing a post-effective amendment to the registration statement on Form S-8 relating to the 1994 Stock Option Plan to add a reoffer prospectus on Form S-3, after which resales of shares acquired on exercise of options under the 1994 Stock Option Plan would no longer be subject to the limitations of Rule 144.

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A copy of the 1994 Stock Option Plan, as amended, is attached to this Proxy Statement as Exhibit A and is incorporated herein by this reference.  The foregoing description of the 1994 Stock Option Plan is qualified in its entirety by reference to Exhibit A attached hereto.

OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF CORRECTION OF THE CLERICAL ERROR IN THE PREVIOUSLY APPROVED SIMPSON MANUFACTURING CO., INC. 1994 STOCK OPTION PLAN, AS AMENDED AND ATTACHED AS EXHIBIT A.

PROPOSAL NO. 3

RATIFICATION OF SELECTION OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

Our Board of Directors has selected PricewaterhouseCoopers LLP as the principal independent registered public accounting firm to audit our internal controls over financial reporting and financial statements for 2009.  You will be asked to ratify that selection.  PricewaterhouseCoopers LLP has audited our financial statements since before our initial public offering in 1994.  A PricewaterhouseCoopers LLP representative will be present at the meeting, will be given an opportunity to make a statement at the meeting if he or she desires to do so, and will be available to respond to appropriate questions.

OUR BOARD RECOMMENDS THAT YOU VOTE “FOR” RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The overall philosophy of our compensation program is to provide a high degree of incentive to employees by creating programs that reward achievement of specific profit goals.  We believe that these incentive programs, based on profit targets, align the interests of employees and stockholders, allow us to attract high performing employees and help us retain the services of employees whose contributions are instrumental in achieving our goals.  Historically, as a means of creating a sense of unity and cooperation among our employees, we have not had any special compensation plans exclusively for executive officers.  Our Named Executive Officers are at-will employees.  We do not have a written employment contract with any of them and we generally do not offer any severance benefits.  We or the officer can terminate the employment relationship at any time, for any reason, with or without cause.

The primary objective of our overall compensation program is to motivate our Named Executive Officers and other officers and employees to increase stockholder value and fairly compensate them relative to our achievement of that objective.  To retain their services, some portion of their compensation, in the form of salary and profit sharing trust contributions, should compensate them for their own investment of time, regardless of the performance of our businesses.  Each element of the compensation of our Principal Executive Officer, our Principal Financial Officer and our 3 other most highly compensated executive officers (who we call our “Named Executive Officers”) and other officers and employees possesses characteristics intended to motivate them in different ways.  We believe that coordinating the compensation elements helps us to retain the services of our Named Executive Officers, other officers and other key employees and to motivate them to achieve results that increase the value of our common stock.  The following is an analysis of the basic elements of our compensation program.

The Compensation Committee of our Board of Directors believes that the forms of compensation for our Named Executive Officers generally should match those of all of our salaried employees.  Our compensation program comprises 4 basic elements:

·                  salary,

·                  payments to our defined contribution profit sharing plan,

·                  cash profit sharing, and

·                  stock options.

Comparative Market Information

While the Compensation Committee did not use the services of an external compensation consultant to perform an analysis or our compensation policies for 2008, the Compensation Committee did engage Semler Brossy Consulting Group, LLC in 2007 to perform an analysis of our compensation policies and to identify benchmarks against which to compare our Named Executive Officers’ 2007 compensation.  Semler Brossy Consulting Group, LLC issued a report in April 2007, using data from two general industry surveys as benchmarks: a 2006 Confidential Survey of Executive Compensation and the 2006 Mercer Benchmark Database — Executive Positions. Semler Brossy Consulting Group, LLC represented to the Compensation Committee that participants in both surveys reflected a broad group of general industries ranging in size from less than $500 million to more than $10 billion in revenue, and that the data were size-adjusted to be comparable to our size using statistical analyses. The Compensation Committee did not consider the component companies underlying the survey data, because the Compensation Committee believes that the surveys provided a fair representation of market trends and general comparative information.  For 2009, as in 2008, the Compensation Committee did not specifically target, or benchmark, any of the elements of compensation to any particular percentile or level within the comparative market survey information from 2007.

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Salary and Profit Sharing Trust Contributions

Base salary is a guaranteed minimum amount for performing the functions of the job, but salary alone provides no additional performance opportunity or motivation to increase value over the long term.  The Compensation Committee determines the salaries for all of our Named Executive Officers using historical salary levels for their positions and adjustments for changes in cost of living and responsibilities. We consider our salary levels sufficient to motivate our Named Executive Officers to perform the basic functions of their jobs. We believe that our salary levels are generally set below those of comparable companies because we believe that it is more effective to have a higher proportion of our compensation in the form of incentives.

The Compensation Committee was concerned that we could lose key employees who might be enticed by higher salaries at comparable jobs. For 2009, the Compensation Committee decided that the salaries of some of our Named Executive Officers were substantially below the levels that those individuals would likely be paid by others for comparable services given the breadth of their responsibility and experience.  Therefore, the Compensation Committee increased the salary of our Chief Financial Officer by 25%, increased the salary of the President and Chief Operating Officer of Simpson Strong-Tie Company Inc. by 48% and increased the salary of the President and Chief Executive Officer of Simpson Dura-Vent Company, Inc. by 25%.  We will offset those salary increases by reducing amounts, if any, that would otherwise be paid to the respective officers for 2009 under our Executive Officer Cash Profit Sharing Plan, up to the amount of the respective officers’ salary increases.  Thus, the total cash compensation that we pay to each of those officers will not change, except that it should increase to the extent, if any, that the amount paid to such officer under our Executive Officer Cash Profit Sharing Plan is less then the amount of such officer’s salary increase.  In April 2008, we made similar adjustments for most of our other U.S.-based salaried employees.  Our Chairman and our President and Chief Executive Officer did not receive an increase in salary for 2009.  A comparison of our Chief Executive Officer’s 2008 salary with the benchmarks identified in the 2007 Semler Brossy Consulting Group, LLC report is as follows:

The 2008 salaries for the other Named Executive Officers were substantially below the 25th percentile of the general industry survey mentioned above, except that the salary of the President and Chief Executive Officer of Simpson Dura-Vent Company, Inc. was slightly above the 25th percentile.  As a result, the Compensation Committee believes that our Chief Executive Officer’s and the other Named Executive Officers’ salaries are fair relative to salaries of their peers, given the other elements of our compensation program, even though these salaries are generally lower than those paid by companies in the general industry survey.  With the exception of Barclay Simpson’s salary, which has not increased since before our initial public offering in 1994, and except as described above, our Named Executive Officers’ salaries have historically increased an average of about 3% per year.

For all years through 2008, we made contributions to our profit sharing trust for our Named Executive Officers in amounts equal to 15% of their base salaries, up to the amounts that we were allowed to deduct from income under Internal Revenue Code section 404(a).  In addition, all employees are entitled to a proportionate share of forfeited contributions from employees who terminate their employment before fully vesting in the profit sharing plan.  The Compensation Committee views these contributions and forfeitures as serving a similar objective as salaries. In February 2009, the Compensation Committee established a contribution amount equal to 10% of base salaries to our profit sharing trust for the 2009 contribution that is to be made in 2010, up to the amounts that we are allowed to deduct from income under Internal Revenue Code section 404(a) for all U.S. based salaried employees of Simpson Manufacturing Co., Inc. and our subsidiaries.

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Executive Officer Cash Profit Sharing Plan

To achieve the goal of long-term stock price appreciation, the Compensation Committee believes that compensation that is based on profitability needs to incorporate both short-term and long-term elements.  The short-term element is our Executive Officer Cash Profit Sharing Plan.  Under our Executive Officer Cash Profit Sharing Plan we pay incentive compensation out of the portion of our profits that exceeds a specified return on qualified assets.  At the beginning of each year, the Compensation Committee reviews and approves the quarterly operating profit goals for the year, the rate of return on qualified assets, and the percentage participation of each of our Named Executive Officers.  The Compensation Committee generally defines the quarterly operating profit goal for the relevant profit center, which may be Simpson Manufacturing Co., Inc. as a whole or one of our subsidiaries, as:

Income from operations of the relevant profit center

Equals:  Operating profit

The adjustments to income from operations are excluded  because they are not specifically within our officers’ control.

The Compensation Committee bases qualifying levels on the value of the relevant profit center’s net operating assets, multiplied by a rate of return on those assets.  We generally determine the return on assets as follows:

Average assets, net of specified liabilities, for the 3 months ended on the last day of the second month of the quarter

The Compensation Committee bases individual percentages of participation on job function.  The Compensation Committee has discretion to increase, reduce or eliminate any award under our Executive Officer Cash Profit Sharing Plan, but the percentage of the qualifying level that each officer receives generally does not change during the year, except for minor changes when other participants enter or leave the pool during the year.  We do not guarantee any minimum payments to our Named Executive Officers under our Executive Officer Cash Profit Sharing Plan.  We may not pay more than $2.5 million per year to a Named Executive Officer under our Executive Officer Cash Profit Sharing Plan.  We believe that our Executive Officer Cash Profit Sharing Plan motivates our Named Executive Officers to maximize our short-term profits and rewards them when those profits are realized.

In 2007, the Compensation Committee approved the profitability goals for our Executive Officer Cash Profit Sharing Plan before we received the results of the Semler Brossy Consulting Group, LLC report. Therefore, the Compensation Committee did not specifically target, or benchmark, the amount of short-term incentive compensation to be paid to our Named Executive Officers for achieving our profitability goals to any particular percentile or level within the general industry survey.

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In 2009, as in 2008, the Compensation Committee did not specifically target, or benchmark, the amount of short-term incentive compensation to be paid to our Named Executive Officers to any particular percentile or level within the general industry survey.  The total cash compensation that the Compensation Committee set for meeting our profitability goals for 2009 is lower than the total cash compensation set for 2008 to correspond to the lower profitability goals for 2009 than for 2008, because the Compensation Committee expects the softness in the construction and home-building industry to continue in 2009.

Based on our operating profit goal for each of the 4 quarters of 2009, our officers may receive a payout after our quarterly earnings are announced to the public.  If the operating profit is lower or higher than the targeted operating profit, the payout will be correspondingly lower or higher, but we generally do not make any payment when the operating profit for the quarter is less than the qualifying level for the quarter.

For the full year 2009, the annual operating profit goals, qualifying levels and targeted payouts for each of the following executive officers are as follows:

{1}         Amounts expected to be paid for the full year of 2009 if operating profit goals established at the beginning of the year are met and qualifying levels are as projected at the beginning of the year.

{2}         Amounts represent estimated annualized operating profit goal and targeted payout.

We use these parameters only to provide incentive to our officers and employees who participate in our Executive Officer Cash Profit Sharing Plan and our Cash Profit Sharing Plan.  You should not draw any inference whatsoever from these parameters about our future financial performance.  You should not take these parameters as projections or guidance of any kind.

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For 2008, the operating profit goals, the qualifying level and the targeted payout that we presented in last year’s proxy statement are reprinted below, along with the amounts that we paid to our Named Executive Officers for 2008.

{1}         Amounts were expected to be paid for the full year of 2008 if operating profit goals established at the beginning of the year were met and qualifying levels were as projected at the beginning of the year.

Stock Options

The Simpson Manufacturing Co., Inc. 1994 Stock Option Plan affords selected employees, directors and consultants the opportunity to own shares of our common stock, by which we intend:

·               to enhance our ability to retain the services of persons who are now employees, directors or consultants,

·               to secure and retain the services of new employees, directors and consultants, and

·               to provide incentives for them to exert maximum efforts for our success.

While the purpose of our Executive Officer Cash Profit Sharing Plan is to motivate our officers to achieve short-term profit goals, we believe that compensation through the grant of stock options motivates our key employees to pursue long-term stock price appreciation.

The terms of the stock option grants were established, and have generally been consistently applied, since the 1994 Stock Option Plan was adopted, and we believe that they generally fall below the range of comparable compensation plans as indicated by the 2007 Semler Brossy Consulting Group, LLC report.  Under our 1994 Stock Option Plan, we grant non-qualified stock options that have 7-year terms, except for those we grant to Barclay Simpson, which have 5-year terms.  Each stock option has an exercise price equal to the contemporaneous closing market price, except for options we grant to Barclay Simpson, which have exercise prices that are 110% of the contemporaneous closing market prices.  Stock options granted to Named Executive Officers vest annually over the first 4 years at a rate of 25% per year.  Stock option grants for every employee, including a Named Executive Officer, will become fully vested if the employee ceases to be employed by us after reaching age 60 or in the event of a change in control.  We believe that this allows employees, who have made substantial contributions during their careers, to retire without having to give up any of the value that they have earned on their previously granted stock options.  We also believe that it is appropriate to accelerate the vesting of outstanding stock options on a change in control, because we do not afford other significant termination benefits to our employees.  The 1994 Stock Option Plan is qualified under section 162(m) of the Internal Revenue Code of 1986.

We believe that stock options align the interests of our Named Executive Officers with the interests of our stockholders, because the Named Executive Officers realize value from stock options only to the extent that the price of our common stock appreciates over the terms of the options.  We make an annual stock option grant to a Named Executive Officer only when the profit center for which he or she is responsible, which may be one of our branches or subsidiaries or may be Simpson Manufacturing Co., Inc.

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as a whole, achieves its profitability goals for the preceding year.  If we meet all applicable operating profit goals for 2009, computed as income from operations of the relevant business plus stock option charges, certain incentive compensation and commissions, salaried pension contributions and self-insured workers’ compensation costs, we anticipate granting stock options to the following executive officers for the following numbers of shares of our common stock:

{1}      Each Operating Profit Goal relates to Simpson Manufacturing Co., Inc., except that the $61,876,000 Operating Profit Goal for each of Phillip Terry Kingsfather and Karen W. Colonias relates to Simpson Strong-Tie Company Inc., the $19,245,000 Operating Profit Goal for Karen W. Colonias relates to the Simpson Strong-Tie Company Inc. branch in Stockton, California, and the Operating Profit Goal for Stephen P. Eberhard relates to Simpson Dura-Vent Company, Inc.

We use these parameters only to provide incentive to our officers and employees who participate in our 1994 Stock Option Plan.  You should not draw any inference whatsoever from these parameters about our future financial performance.  You should not take these parameters as projections or guidance of any kind.

The Compensation Committee generally targets the number of shares subject to stock option grants to all employees, including our Named Executive Officers, to approximate 1.0% to 1.3% of our total outstanding stock each year.  In 2009, we granted options to purchase 53,000 shares, about 0.1% of our outstanding common stock, out of a possible 696,500 shares that were approved by our Compensation Committee for operating profit performance during 2008.  Our Chief Executive Officer and the other Named Executive Officers did not meet their operating profit goals for 2008, and we therefore did not grant any stock options to any of them in 2009.  For 2009, the Compensation Committee targeted a number of shares equal to approximately 3.3% of the outstanding shares of our common stock for possible stock option grants in 2010. This target percentage increased for 2009 as a result of granting so few stock options over the past three years as well as an increase in the number of participants in the plan.

The number of shares subject to stock options that we grant to each of our officers is determined by our Compensation Committee based on several factors, including position, length of service, prior stock option grants and shares of our stock owned.  For example, when an employee becomes an officer, the Compensation Committee may grant to the officer an option for a number of shares that the Compensation Committee believes will afford the officer enough of an investment in our common stock to align the officer’s interests with the interests of our stockholders.  After the officer achieves that level of investment, the Compensation Committee generally grants stock options for fewer shares to the officer.  The intent of the 1994 Stock Option Plan is to reward performance achievements with future value.  The Compensation Committee does not use competitive pay benchmarks to set long-term incentives and believes that our long-

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term incentives are lower than competitive practice, based on the general industry survey of long-term incentives from the 2007 Semler Brossy Consulting Group, LLC report. As a result, the Compensation Committee does not directly utilize total direct compensation, salary plus short-term and long-term incentive opportunities, in the context of competitive survey pay data.

Timing of Stock Option Grants

The Compensation Committee approves the number of shares to be granted under our 1994 Stock Option Plan and the general terms of the grant on achieving the profitability goal set at the beginning of the year.  The only variable that remains after the end of the year is the determination of whether we have achieved our goals.  The Compensation Committee cannot make this determination until the financial statements are prepared and the financial statement audit by our independent registered public accounting firm is substantially complete.  The Compensation Committee ordinarily meets to finalize the option grants within a few days of announcing our financial results for the year.  It is our policy that the exercise price of each such option equals the closing price of our common stock reported by the New York Stock Exchange at the close of trading on the day before the meeting, which may or may not be the day of the announcement.  In 2009, the Compensation Committee granted options to purchase 29,000 shares on the day before the announcement and therefore set the exercise price at the closing price two days before the announcement of our fourth quarter 2008 earnings (February 5, 2009).  The Compensation Committee also met approximately two weeks later and granted options to purchase an additional 24,000 shares at an exercise price at the closing price on February 20, 2009, to 7 employees at a branch that had met its goals for 2008 but had been inadvertently omitted from consideration at the earlier meeting. We follow this practice for all stock option grants under the 1994 Stock Option Plan, not just grants to our officers.  We generally grant stock options only once each year, and do not ordinarily grant stock options at other times, such as when employees are newly hired or promoted, although the Compensation Committee has the discretion to do so.

Under our 1995 Independent Director Stock Option Plan, our Board of Directors grants options to our independent directors as of the February 15th following each year in which we achieve our company-wide operating goals.  Our Board of Directors did not choose this date to coincide with the release of information and has consistently applied this procedure since we adopted the 1995 Independent Director Stock Option Plan.  We did not achieve our profitability goals for 2008, and we therefore did not grant options to any of our independent Directors in 2009.

Compensation and the Achievement of Operating Goals

Before the beginning of each year, our managers and employees propose budgets for the coming year for their respective profit centers.  Our senior managers, including our Named Executive Officers, review the proposed budgets, adjust these budgets as they consider appropriate, and present the budgets to our Board of Directors.  Our Board of Directors then considers and approves a budget that it considers appropriate for each profit center.  Based on the approved budgets, the Compensation Committee determines:

·                  the return on asset goals for the coming year, on which the Compensation Committee bases the qualifying income levels for both our Executive Officer Cash Profit Sharing Plan and our Cash Profit Sharing Plan; and

·                  the profitability goals for the coming year, on which the Compensation Committee bases stock option grants under our 1994 Stock Option Plan.

Our Board of Directors also bases stock option grants under our 1995 Independent Director Stock Option Plan on the company-wide profitability goals.  Our Named Executive Officers are subject to the same standards as our other officers and employees for purposes of stock option grants under our 1994 Stock Option Plan and payments under our Executive Officer Cash Profit Sharing Plan.  With the few exceptions noted below in the Summary Compensation Table, we have no special programs for any of our Named Executive Officers.  Our Board of Directors and its Compensation Committee aim to design the goals to be achievable, but only with considerable effort, effort the Compensation Committee believes will promote the growth and profitability of our businesses.  The Compensation Committee, according to its guidelines, has

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discretion to increase or decrease the size of the stock option award based on factors that it deems relevant.  For example, the Compensation Committee may grant an additional stock option to an employee who is promoted during the year, if the employee’s profitability goal for that year is achieved.  The Compensation Committee also has discretion to award stock options when the relevant goal is not achieved, but has never done so.

Wealth Accumulation

Our compensation programs for our Named Executive Officers, as well as other high-performing employees, are predominately based on quarterly and annual operating results.  We believe that we should award above-average compensation for above-average performance and that we should closely tie the reward to that performance.  As a result, our compensation structure allows high-performing employees the opportunity to accumulate significant wealth.  A feature of our 1994 Stock Option Plan, however, allows us to limit excess grants of stock options to certain individuals.  When an employee is promoted into a key role, such as an officer of Simpson Manufacturing Co., Inc. or one of our subsidiaries, we may give the employee an opportunity to earn a grant of an option for a substantial number of shares if the employee meets his or her operating goals.  The Compensation Committee sets limits for these employees that, when reached, are removed from their annual grant targets.  For example, our Chief Financial Officer, Michael J. Herbert, earned a grant of an option to purchase 110,000 shares for each of 2002 and 2003.  After Mr. Herbert achieved his goals for those 2 years and we granted the options to him for each of those 2 years, the Compensation Committee reduced his subsequent grant targets to 4,000 shares per year for the following 3 years.  Mr. Herbert is now eligible for grant of an option for 40,000 shares if we achieve our operating profit goals for 2009.  The Compensation Committee believes that this provides appropriate incentive for selected key employees to continue to perform at a high level, while avoiding excessive option grants.

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Summary Compensation Table

The table below provides information on compensation for the year ended December 31, 2008, for our Principal Executive Officer, our Principal Financial Officer and our 3 other most highly compensated executive officers.  We refer to these officers as “Named Executive Officers.”  The amounts shown include all compensation for services to us and our subsidiaries in all capacities.